1933 Act File No. 33-11410
1940 Act File No. 811-4533
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ...................
Post-Effective Amendment No. 17 .................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 16 .......................................... X
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FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i) on _________________
pursuant to paragraph (a) (i) 75 days after filing pursuant to paragraph
(a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
_ filed the Notice required by that Rule on _____________; or intends to file
the Notice required by that Rule on or about ____________; or
X during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant
to Rule 24f-2(b)(2), need not file the Notice.
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Copies to: Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., which is comprised of four classes of shares, Class A
Shares (1); Class B Shares (2); Class C Shares (3); and Class F Shares (4), is
comprised of the following:
PART A. FORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page.....................(1-4) Cover Page.
Item 2. Synopsis.......................(1-4) Summary of Fund Expenses.
Item 3. Condensed Financial
Information...................(4) Financial Highlights; (1-4)
Performance Information.
Item 4. General Description of
Registrant....................(1-3) Synopsis;
(4) General
Information; (1-4)
Investment
Information; (1-4)
Investment
Objective; (1-4)
Investment
Policies; (1-4)
Portfolio
Turnover; (1-4)
Municipal Bonds;
(1-4) Investment
Risks; (1-4)
Investment
Limitations.
Item 5. Management of the Fund.........(1-4) Fund Information; (1-4) Management
of the Fund; (1-3) Distribution of Fund
Shares; (4) Distribution of Class F
Shares; (1-4)
Administration of the Fund.
Item 6. Capital Stock and Other
Securities....................(1-3) Dividends and Distributions; (4)
Dividends; (1-4) Shareholder
Information; (1-4) Voting Rights;
(1-4) Tax Information; (1-4) Federal
Income Tax; (1-4) State and Local Taxes.
Item 7. Purchase of Securities Being
Offered.......................(1-4) Net Asset
Value; (1-3)
Investing in the
Fund; (4)
Investing in Class
F Shares; (4)
Share Purchases;
(4) Minimum
Investment
Required; (4) What
Shares Cost; (1-3)
Reducing or
Eliminating the
Sales Charge; (4)
Eliminating the
Sales Charge;
(1-4) Systematic
Investment
Program; (1-4)
Exchange
Privilege; (1-4)
Certificates and
Confirmations.
Item 8. Redemption or Repurchase.......(1-3) How to Redeem Shares; (4)
Redeeming Class F Shares; (1-3)
Redeeming Shares through your Financial
Institution; (4) Through a Financial
Institution; (1-3) Redeeming Shares by
Mail; (4) Directly By Mail; (1-4)
Contingent Deferred Sales Charge; (1-4)
Systematic Withdrawal Program;
(1-4) Accounts With Low Balances.
Item 9. Pending Legal Proceedings......None.
<PAGE>
PART B. FORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page.........................(1-4) Cover Page.
Item 11. Table of Contents..................(1-4) Table of Contents.
Item 12. General Information and
History...........................(1-4) General Information About the
Fund.
Item 13. Investment Objectives and
Policies..........................(1-4) Investment Objectives and
Policies; (1-4) Investment
Limitations.
Item 14. Management of the Fund.............(1-4) Federated Municipal
Opportunities Fund, Inc.
Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and
Other Services....................(1-4) Investment Advisory Services;
(1-4) Other Services.
Item 17. Brokerage Allocation...............(1-4) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.....................(1-4) Purchasing Shares; (1-4)
Determining Net Asset Value; (4)
Exchange Privilege (Class F Shares
Only); (1-4) Redeeming Shares.
Item 20. Tax Status.........................(1-4) Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data..............................(1-4) Total Return; (1-4) Yield;
(1-4) Tax-Equivalent (1-4) Yield;
(1-4) Performance Comparisons.
Item 23. Financial Statements...............To be filed by Amendment.
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Class A Shares, Class B Shares, Class C Shares
Prospectus
The shares of Federated Municipal Opportunities Fund, Inc. (the "Fund")
respresent interests in an open-end, diversified management investment company
(a mutual fund) that seeks a high level of current income exempt from the
federal regular income tax by investing primarily in a professionally managed,
diversified portfolio of municipal bonds.
The shares offered by this prospectus are not deposits or obligations of any
Bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal deposit insurance corporation, the federal reserve board, or any other
Government agency. Investment in these shares involves investment risks,
Including the possible loss of principal.
This prospectus contains the information you should read and know before you
invest in Class A Shares, Class B Shares, and Class C Shares of the Fund. Keep
this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares and Class F Shares dated September 1,
1996, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 1, 1996
<PAGE>
Summary of Fund Expenses.............................. 1
General Information................................... 4
Investment Information................................ 5
Investment Objective............................... 5
Investment Policies................................ 5
Portfolio Turnover................................. 6
Municipal Bonds.................................... 6
Investment Risks................................... 7
Investment Limitations............................. 8
Net Asset Value....................................... 9
Investing in the Fund................................. 9
How to Purchase Shares................................ 10
Investing in Class A Shares........................ 10
Reducing or Eliminating the Sales Charge........... 11
Investing in Class B Shares........................ 13
Investing in Class C Shares........................ 13
Special Purchase Features.......................... 14
Exchange Privilege................................. 14
How to Redeem Shares.................................. 16
Special Redemption Features........................ 17
Contingent Deferred Sales Charge................... 18
Account and Share Information...................... 19
Fund Information...................................... 20
Management of the Fund............................. 20
Distribution of Fund Shares........................ 21
Administration of the Fund......................... 23
Brokerage Transactions............................. 23
Expenses of the Fund and Shares.................... 23
Shareholder Information............................... 24
Voting Rights...................................... 24
Tax Information....................................... 25
Federal Income Tax................................. 25
State and Local Taxes.............................. 25
Performance Information............................... 26
Other Classes of Shares............................... 27
Appendix.............................................. 27
<PAGE>
The Corporation was established under the laws of the State of Maryland on
November 26, 1986. The Corporation's address is Liberty Center, Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate classes of shares. As of
March 31, 1996, the Corporation changed its name from Fortress Municipal Income
Fund, Inc. to Federated Municipal Opportunities Fund, Inc. With respect to this
Fund, as of the date of this prospectus, the Directors have established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares, and
Class F Shares. This prospectus relates only to the Class A Shares, Class B
Shares, and Class C Shares of the Fund (individually and collectively as the
context requires, "Shares").
Shares of the Fund are designed for individuals seeking high current income
through a professionally managed, diversified portfolio of municipal bonds.
For information on how to purchase the Shares offered by this prospectus, please
refer to "How to Purchase Shares." The minimum initial investment for Class A
Shares is $500. The minimum initial investment for Class B Shares and Class C
Shares is $1,500. Subsequent investments in any class must be in amounts of at
least $100.
Class A Shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value. However, a contingent deferred sales charge is
imposed under certain circumstances. For a more complete description, see "How
to Redeem Shares."
Class B Shares are sold at net asset value and are redeemed at net asset value.
However, a contingent deferred sales charge is imposed on certain Shares which
are redeemed within six full years of purchase. See "How to Redeem Shares."
Class C Shares are sold at net asset value. However, a contingent deferred sales
charge of 1.00% is imposed on certain shares which are redeemed within the first
12 months following purchase. See "How to Redeem Shares."
Investment Objective
The investment objective of the Fund is to provide a high level of current
income which is generally exempt from the federal regular income tax (federal
regular income tax does not include the federal alternative minimum tax). The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of municipal bonds. The Fund invests its assets so that at
least 80% of its annual interest income is exempt from federal regular income
tax. The Fund may invest up to but less than 35% of its net assets in lower
quality municipal bonds. These bonds will usually offer higher yields than
higher-rated bonds but involve greater investment risk at the time of issue.
(See "Investment Risks.")
Investment Policies
Unless otherwise designated, the investment policies described below may be
changed by the Directors without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
Acceptable Investments
The Fund invests primarily in municipal bonds. Municipal bonds are debt
obligations issued by or on behalf of states, territories and possessions of the
United States, including the District of Columbia, and their political
subdivisions, agencies and instrumentalities, the interest from which is exempt
from the federal regular income tax. It is likely, however, that shareholders
will be required to include interest from a portion of the municipal bonds owned
by the Fund in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.
Characteristics
The municipal bonds which the Fund buys are rated Ba or higher by Moody's
Investors Service, Inc. ("Moody's") or rated BB or higher by Standard & Poor's
Ratings Group ("S&P"). The Fund will limit its purchases of municipal bonds
rated Ba and BB (commonly known as "junk bonds") to up to but less than 35% of
its net assets. The Fund may buy bonds which are unrated but which the adviser
judges to be similar in quality to those rated bonds which it purchases. A
description of the ratings categories is contained in the Appendix to this
prospectus.
When-Issued and Delayed Delivery Transactions
The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more/less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
Inverse Floaters
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. These obligations pay interest rates that
vary inversely with changes in the interest rates of specified short-term
municipal securities or an index of short-term municipal securities. The
interest rates on inverse floaters will typically decline as short-term market
interest rates increase and increase as short-term market rates decline. Inverse
floaters will generally respond to changes in market interest rates more rapidly
than fixed-rate long-term securities (typically twice as fast). As a result, the
market values of inverse floaters will generally be more volatile than the
market values of fixed-rate municipal securities.
Financial Futures
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of cash or cash
equivalents, equal to the underlying commodity value of the futures contracts
(less any related margin deposits), will be deposited in a segregated account
with the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the use of such futures contract is
unleveraged.
Risks
When the Fund uses financial futures, there is a risk that the prices of
the securities subject to the futures contracts may not correlate
perfectly with the prices of the securities in the Fund's portfolio. This
may cause the futures contract to react differently than the portfolio
securities to market changes. In addition, the Fund's investment adviser
could be incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In these events, the Fund
may lose money on the futures contract. It is not certain that a
secondary market for positions in futures contracts will exist at all
times. Although the investment adviser will consider liquidity before
entering into futures transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any
particular futures contract at any particular time. The Fund's ability to
establish and close out futures positions depends on this secondary
market.
Temporary Investments
The Fund invests its assets so that at least 80% of its annual interest income
is exempt from the federal regular income tax, except when investing for
"defensive" purposes as described below. This policy cannot be changed without
approval of shareholders. From time to time on a temporary basis, or when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term tax-exempt or taxable
temporary investments. These temporary investments include: fixed or variable
rate notes issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
other debt securities; commercial paper; certificates of deposit of banks; and
repurchase agreements (arrangements in which the organization selling the Fund a
bond or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality.
Other Investment Techniques
The Fund may purchase a right to sell a security held by it back to the issuer
or to another party at an agreed upon price at any time during a stated period
or on a certain date. These rights may be referred to as "liquidity puts" or
"standby commitments."
The Fund may also hedge all or a portion of its investments by entering into
futures contracts or options on them. Any gains realized on futures contracts
and options thereon are taxable. The Fund will notify shareholders before it
engages in these futures transactions.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held.
Municipal Bonds
Municipal bonds are generally issued to finance public works such as airports,
bridges, highways, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. Municipal bonds are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities. Certain types of
"private activity" municipal bonds are issued to obtain funding for privately
operated facilities. There are two categories of municipal bonds: general
obligation and revenue. General obligation bonds are backed by the taxing power
of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Payment of principal and interest on such bonds is
dependent solely on the revenue generated by the facility financed by the bond
or other specified sources of revenue or collateral. Private activity bonds are
typically one type of "revenue" bonds.
In most cases, lower quality bonds are private activity bonds or other revenue
bonds which are not payable from general tax revenues. The Fund may invest more
than 25% of the value of its assets in private activity bonds which may result
in more than 25% of the Fund's assets being invested in one industry. It is also
possible that the Fund may from time to time invest more than 25% of its assets
in health care facilities revenue obligations, housing agency revenue
obligations or electric utility obligations. Economic, business, political and
other developments generally affecting the revenues of issuers in such a market
segment (for example, proposed legislation or pending court decisions affecting
the financing of projects and market factors affecting the demand for their
services or products) may have a general adverse impact on all municipal bonds
in the segment.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its total assets would be invested in
the securities of governmental subdivisions located in any one state, territory
or possession of the United States.
Investment Risks
The value of Shares will fluctuate. The amount of this fluctuation is dependent
upon the quality and maturity of the municipal bonds in the Fund's portfolio as
well as on market conditions. Generally speaking, the lower quality, long-term
bonds in which the Fund invests have greater fluctuation in value than high
quality, shorter-term bonds.
Municipal bond prices are interest rate sensitive, which means that their value
varies inversely with market interest rates. Thus, if market interest rates have
increased from the time a bond was purchased, the bond, if sold, might be sold
at a price less than its cost. Similarly, if market interest rates have declined
from the time a bond was purchased, the bond, if sold, might be sold at a price
greater than its cost.
(In either instance, if the bond was held to maturity, no loss or gain normally
would be realized as a result of interim market fluctuations.)
Prices of lower grade bonds also fluctuate with changes in the perceived quality
of the credit of their issuers. Consequently, shares may not be suitable for
persons who cannot assume the somewhat greater risks of capital depreciation
associated with higher tax-exempt income yields. In addition, bonds rated "BBB"
by S& P or "Baa" by Moody's have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated bonds.
A large portion of the Fund's portfolio may be invested in bonds whose interest
payments are from revenues of similar projects (such as housing or hospitals) or
where issuers share the same geographic location. As a result, the Fund may be
more susceptible to similar economic, political or regulatory developments than
would a portfolio of bonds with a greater geographic and project variety. This
susceptibility may result in greater fluctuations in share price.
Many issuers of municipal bonds which have characteristics of rated bonds choose
to not have their obligations rated. Unrated bonds may carry a greater risk and
a higher yield than rated securities. Although unrated bonds are not necessarily
of lower quality, the market for them may not be as broad as that for rated
bonds since many investors rely solely on the major rating agencies for credit
appraisal. Further, the lower rated or unrated municipal bonds which the Fund
may purchase are frequently traded only in markets where the number of potential
purchasers and sellers is limited. This consideration may have the effect of
limiting the availability of such bonds for the Fund to purchase and may also
have the effect of limiting the ability of the Fund to sell such bonds at their
fair value either to meet redemption requests or to respond to changes in the
economy or the financial markets. The Fund will not invest more than 10% of its
total assets in securities which are not readily marketable.
As A Percentage Of
Total Market
Value of Security
Holdings As Of
Credit Rating August 12, 1996
BB 4.89%
B 0
CCC 0
Unrated 6.11
11.00%
Reducing Risks of Lower-Rated Securities
The Fund's investment adviser believes that the risks of investing in lower
rated securities can be reduced. The professional portfolio management
techniques used by the Fund to attempt to reduce these risks include:
Credit Research
When purchasing bonds, rated or unrated, the Fund's investment adviser
performs its own credit analysis in addition to using recognized rating
agencies. This credit analysis considers the economic feasibility of revenue
bond project financing and general purpose borrowings, the financial
condition of the issuer or guarantor with respect to liquidity, cash flow and
ability to meet anticipated debt service requirements, and political
developments that may affect credit quality.
Diversification
The Fund invests in securities of many different issuers to reduce portfolio
risks.
Economic Analysis
The Fund's adviser also considers trends in the overall economy, in
geographic areas, in various industries, and in the financial markets.
Investment Limitations
The Fund will not:
borrow money directly or through reverse repurchase agreements (arrangements in
which the Fund sells a portfolio instrument for a percentage of its cash value
with an arrangement to buy it back on a set date) or pledge securities except,
under certain circumstances, the Fund may, exclusive of custodian intra-day cash
advances and the collateralization of such advances, borrow up to one-third of
the value of its total assets and pledge up to 10% of the value of those assets
to secure such borrowings; or invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities Act of 1933,
except for certain restricted securities which meet the criteria for liquidity
as established by the directors.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Fund will not:
n invest more than 5% of its total assets in securities of one issuer (except
cash and cash items and U.S. government obligations) ; or
n invest more than 5% of its total assets in industrial development bonds of
issuers that have a record of less than three years of continuous
operations.
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.
The net asset value of each class of Shares of the Fund is determined as of the
close of trading, (normally 4:00 p.m., Eastern time), on the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no Shares are
tendered for redemption and no orders to purchase Shares are received; or (iii)
the following holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
This prospectus offers investors three classes of Shares that carry sales
charges and contingent deferred sales charges in different forms and amounts and
which bear different levels of expenses. Class A Shares An investor who
purchases Class A Shares pays a maximum sales charge of 4.50% at the time of
purchase. As a result, Class A Shares are not subject to any charges when they
are redeemed (except for special programs offered under "Purchases with Proceeds
From Redemptions of Unaffiliated Investment Companies.") Certain purchases of
Class A Shares qualify for reduced sales charges. See "Reducing the Sales
Charge--Class A Shares."
Class A Shares have no conversion feature.
Class B Shares
Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares also bear a higher 12b-1 fee than Class
A Shares. Class B Shares will automatically convert into Class A Shares, based
on relative net asset value, on or around the fifteenth of the month eight full
years after the purchase date. Class B Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion) will have a higher expense ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee.
Class C Shares
Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to the higher 12b-1 fee. Class C Shares have no conversion feature.
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. (Financial institutions may impose different minimum investment
requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.
Investing in Class A Shares
Class A Shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
Sales Charge Dealer
as a Percentage of Concession as
Public Net a Percentage of
Offering Amount Public Offering
Amount of TransactionPrice Invested Price
Less than
$100,000 4.50% 4.71% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 or
greater 0.00% 0.00% 0.25%*
* See sub-section entitled "Dealer Concession."
No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of the sales charge. However,
investors who purchase Shares through a trust department, investment adviser, or
other financial intermediary may be charged a service fee or other fee by the
financial intermediary. Additionally, no sales charge is imposed for Class A
Shares purchased through "wrap accounts" or similar programs, under which
clients pay a fee for services, or for shareholders designated as Liberty Life
Members.
Dealer Concession
For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor, may offer
to pay dealers up to 100% of the sales charge retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end.
The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.
Reducing or Eliminating the Sales Charge
The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:
n quantity discounts and accumulated purchases;
n concurrent purchases;
n signing a 13-month letter of intent;
n using the reinvestment privilege; or
n purchases with proceeds from redemptions of unaffiliated investment company
shares.
Quantity Discounts and Accumulated Purchases
As shown in the table above, larger purchases reduce the sales charge paid. The
Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge. In addition, the sales charge, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary for a single
trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.
Concurrent Purchases
For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of Class A Shares of two or more of
certain of the funds advised by subsidiaries of Federated Investors (the
"Federated Funds"), the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in Class A Shares of
certain of the other Federated Funds with a sales charge, and $70,000 in Class A
Shares of this Fund, the sales charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.
Letter of Intent
If a shareholder intends to purchase at least $100,000 of Class A Shares of
certain of the Federated Funds (excluding money market funds) over the next 13
months, the sales charge may be reduced by signing a letter of intent to that
effect. This letter of intent includes a provision for a sales charge adjustment
depending on the amount actually purchased within the 13-month period and a
provision for the custodian to hold up to 4.50% of the total amount intended to
be purchased in escrow (in shares) until such purchase is completed.
The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.
While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of certain of
the Federated Funds, excluding money market accounts, will be aggregated to
provide a purchase credit towards fulfillment of the letter of intent. Prior
trade prices will not be adjusted.
Reinvestment Privilege
If Class A Shares in the Fund have been redeemed, the shareholder has a right,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his Class A Shares in the Fund, there may be tax consequences.
Purchases with Proceeds from Redemptions of Unaffiliated Investment Companies
Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or redeemed with a sales charge or
commission and were not distributed by Federated Securities Corp. The purchase
must be made within 60 days of the redemption, and Federated Securities Corp.
must be notified by the investor in writing, or by his financial institution, at
the time the purchase is made. From time to time, the Fund may offer dealers a
payment of 0.50 of 1.00% for Shares purchased under this program. If Shares are
purchased in this manner, Fund purchases will be subject to a contingent
deferred sales charge for one year from the date of purchase.
Investing in Class B Shares
Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales
Charge--Class B Shares," a contingent deferred sales charge may be applied by
the distributor at the time Class B Shares are redeemed.
Conversion of Class B Shares
Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and will no longer be subject to a distribution services fee (see
"Distribution of Shares"). Such conversion will be on the basis of the relative
net asset values per share, without the imposition of any sales charge, fee or
other charge. Class B Shares acquired by exchange from Class B Shares of certain
of the Federated Funds will convert into Class A Shares based on the time of the
initial purchase. For purposes of conversion to Class A Shares, Shares purchased
through the reinvestment of dividends and distributions paid on Class B Shares
will be considered to be held in a separate sub-account. Each time any Class B
Shares in the shareholder's account (other than those in the sub-account)
convert to Class A Shares, an equal pro rata portion of the Class B Shares in
the sub-account will also convert to Class A Shares. The conversion of Class B
Shares to Class A Shares is subject to the continuing availability of a ruling
from the Internal Revenue Service or an opinion of counsel that such conversions
will not constitute taxable events for federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the conversion of
Class B Shares to Class A Shares will not occur if such ruling or opinion is not
available. In such event, Class B Shares would continue to be subject to higher
expenses than Class A Shares for an indefinite period.
Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.
Investing in Class C Shares
Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on assets
redeemed within the first full 12 months following purchase. For a complete
description of this charge see "Contingent Deferred Sales Charge--Class C
Shares."
Purchasing Shares through a Financial Institution
An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when payment is converted into federal funds. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services. The financial
institution which maintains investor accounts in Class B Shares or Class C
Shares with the Fund must do so on a fully disclosed basis unless it accounts
for share ownership periods used in calculating the contingent deferred sales
charge (see "Contingent Deferred Sales Charge"). In addition, advance payments
made to financial institutions may be subject to reclaim by the distributor for
accounts transferred to financial institutions which do not maintain investor
accounts on a fully disclosed basis and do not account for share ownership
periods.
Purchasing Shares by Wire
Once an account has been established, Shares may be purchased by wire by calling
the Fund. All information needed will be taken over the telephone, and the order
is considered received when the transfer agent's bank receives payment by wire.
Federal funds should be wired as follows: Federated Shareholder Services
Company, c/o State Street Bank and Trust Company, Boston, MA; Attn; EDGEWIRE;
For Credit to: (Fund Name) (Fund Class); (Fund Number); Account Number; Trade
Date and Order Number; Group Number or Dealer Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
Purchasing Shares by Check
Shares may be purchased by sending a check to: Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600. The check should be made payable
to the name of the Fund (designate class of Shares and account number). Orders
by mail are considered received when payment by check is converted into federal
funds (normally the business day after the check is received), and Shares begin
earning dividends the next day.
Special Purchase Features
Systematic Investment Program
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales charge, if applicable. Shareholders should contact their financial
institution or the Fund to participate in this program.
Exchange Privilege
Class A Shares
Class A shareholders may exchange all or some of their Shares for Class A Shares
of certain of the Federated Funds at net asset value. Neither the Fund nor any
of the Federated Funds imposes any additional fees on qualifying exchanges.
Class B Shares
Class B shareholders may exchange all or some of their Shares for Class B Shares
of certain of the Federated Funds. (Not all of the Federated Funds currently
offer Class B Shares. Contact your financial institution regarding the
availability of other Class B Shares in the Federated Funds). Exchanges are made
at net asset value without being assessed a contingent deferred sales charge on
the exchanged Shares. To the extent that a shareholder exchanges Shares for
Class B Shares in other of the Federated Funds, the time for which the
exchanged-for Shares are to be held will be added to the time for which
exchanged-from Shares were held for purposes of satisfying the applicable
holding period. For more information, see "Contingent Deferred Sales Charge."
Class C Shares
Class C shareholders may exchange all or some of their Shares for Class C Shares
of certain of the Federated Funds at net asset value without a contingent
deferred sales charge. (Not all funds in the Federated Funds currently offer
Class C Shares. Contact your financial institution regarding the availability of
other Class C Shares in the Federated Funds.) To the extent that a shareholder
exchanges Shares for Class C Shares in other of the Federated Funds, the time
for which the exchanged-for Shares are to be held will be added to the time for
which exchanged-from Shares were held for purposes of satisfying the applicable
holding period. For more information, see "Contingent Deferred Sales Charge."
The Fund has exchange privileges among like classes with the following Federated
Funds:
Federated American Leaders Fund, Inc.; Federated Asia Pacific Growth Fund;
Federated Bond Fund; Federated Capital Appreciation Fund; Federated Emerging
Markets Fund; Federated European Growth Fund; Federated Small Cap Strategies
Fund; Federated Fund for U.S. Government Securities, Inc.; Federated
Government Income Securities, Inc.; Federated Growth Strategies Fund;
Federated International Equity Fund; Federated International Income Fund;
Federated Equity Income Fund, Inc.; Federated High Income Bond Fund, Inc.;
Federated International Small Company Fund; Federated Latin America Growth
Fund; Federated Municipal Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Federated Utility Fund, Inc.; Federated Limited Term
Fund; Federated Limited Term Municipal Fund; Federated Michigan Intermediate
Municipal Trust; Federated Pennsylvania Municipal Income Fund; Federated
Strategic Income Fund; Tax-Free Instruments Trust; and Federated World
Utility Fund.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Requirements for Exchange
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Federated
Funds are available by contacting the Fund.
Tax Consequences
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.
Making an Exchange
Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. Written instructions may require a signature guarantee. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other financial institutions during times of drastic economic or market
changes. If a shareholder cannot contact his broker or financial institution by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Federated Shareholder Services Company, 500 Victory
Road-2nd Floor, North Quincy, Massachusetts 02171.
Telephone Instructions
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Shares may be exchanged between two funds by telephone only if the two funds
have identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600 and deposited to the shareholder's account before being
exchanged. Telephone exchange instructions are recorded and will be binding upon
the shareholder. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Fund before that time for Shares to be
exchanged the same day. Shareholders exchanging into a Fund will begin receiving
dividends the following business day. This privilege may be modified or
terminated at any time.
Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
as described below.
Redeeming Shares through your Financial Institution Shares of the Fund may be
redeemed by calling your financial institution to request the redemption. Shares
will be redeemed at the net asset value, less any applicable contingent deferred
sales charge next determined after the Fund receives the redemption request from
the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions (such as banks) must be received
by the financial institution and transmitted to the Fund before 4:00 p.m.
(Eastern time) in order for Shares to be redeemed at that day's net asset value.
The financial institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions. Customary fees
and commissions may be charged by the financial institution for this service.
Redeeming Shares by Telephone
Shares may be redeemed in any amount by calling the Fund, provided the Fund has
a properly completed authorization form. These forms can be obtained from
Federated Securities Corp.
Proceeds will be mailed in the form of a check, to the shareholder's address of
record or by wire transfer to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. The minimum amount for a
wire transfer is $1,000. Proceeds from redeemed Shares purchased by check or
through ACH will not be wired until that method of payment has cleared. Proceeds
from redemption requests received on holidays when wire transfers are restricted
should be directed to your shareholder services representative at the telephone
number listed on your account statement. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares by Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
Redeeming Shares by Mail
Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, Fund Name, Fund Class, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
Special Redemption Features
Systematic Withdrawal Program
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through his financial
institution. Due to the fact that Class A Shares are sold with a sales charge,
it is not advisable for shareholders to continue to purchase Class A Shares
while participating in this program. A contingent deferred sales charge may be
imposed on Class B and C Shares.
Contingent Deferred Sales Charge
Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:
Class A Shares
Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of Shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of 0.50 of 1.00% for
redemptions made within one full year of purchase. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.
Class B Shares
Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
Year of Redemption Contingent Deferred
After Purchase Sales Charge
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
Class C Shares
Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor of 1.00%. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.
Class A Shares, Class B Shares, and Class C Shares
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than six
full years from the date of purchase with respect to Class B Shares and one full
year from the date of purchase with respect to Class C Shares and applicable
Class A Shares. Redemptions will be processed in a manner intended to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge. In computing the amount of the applicable contingent deferred
sales charge, redemptions are deemed to have occurred in the following order:
(1) Shares acquired through the reinvestment of dividends and long-term capital
gains; (2) Shares held for more than six full years from the date of purchase
with respect to Class B Shares and one full year from the date of purchase with
respect to Class C Shares and applicable Class A Shares; (3) Shares held for
fewer than six years with respect to Class B Shares and one full year from the
date of purchase with respect to Class C Shares and applicable Class A Shares on
a first-in, first-out basis. A contingent deferred sales charge is not assessed
in connection with an exchange of Fund Shares for Shares of certain of the
Federated Funds in the same class (see "Exchange Privilege"). Any contingent
deferred sales charge imposed at the time the exchanged for Shares are redeemed
is calculated as if the shareholder had held the Shares from the date on which
he became a shareholder of the exchanged-from Shares. Moreover, the contingent
deferred sales charge will be eliminated with respect to certain redemptions
(see "Elimination of Contingent Deferred Sales Charge").
Elimination of Contingent Deferred Sales Charge
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other retirement plan to a shareholder who has
attained the age of 70-1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on redemptions
of Shares held by Directors, employees and sales representatives of the Fund,
the distributor, or affiliates of the Fund or distributor; employees of any
financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers Act
of 1940, or any other financial institution, to the extent that no payments were
advanced for purchases made through such entities. The Directors reserve the
right to discontinue elimination of the contingent deferred sales charge.
Shareholders will be notified of such elimination. Any Shares purchased prior to
the termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Shares. If a shareholder making a redemption qualifies for an elimination of
the contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that he is entitled to such
elimination.
Account and Share Information
Certificates and Confirmations
As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
Dividends
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Dividends and distributions are automatically reinvested in
additional Shares of the Fund on payment dates at the ex-dividend date net asset
value without a sales charge, unless shareholders request cash payments on the
new account form or by contacting the transfer agent. All shareholders on the
record date are entitled to the dividend. If Shares are redeemed or exchanged
prior to the record date or purchased after the record date, those Shares are
not entitled to that month's dividend.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, and pay the proceeds to the shareholder if the
account balance falls below the Class A Share required minimum value of $500 or
the required minimum value of $1,500 for Class B Shares and Class C Shares. This
requirement does not apply, however, if the balance falls below the required
minimum value because of changes in the net asset value of the respective Share
Class. Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to meet
the minimum requirement.
Management of the Fund
Directors
The Fund is managed by the Directors. The Directors are responsible for managing
the Fund's business affairs and for exercising all the Fund's powers except
those reserved for the shareholders. An Executive Committee of the Directors
handles the Director's responsibilities between meetings of the Directors.
Investment Adviser
Investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser (the "Adviser"), subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.
Advisory Fees
The Adviser receives an annual investment advisory fee equal to .60 of 1% of the
Fund's average daily net assets. The Adviser may voluntarily choose to waive a
portion of its fee or reimburse the fund for certain operating expenses. The
Adviser can terminate this voluntary waiver of its advisory fee at any time at
its sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
Adviser's Background
Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the Trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of December 31,
1995, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,800 employees, Federated continues to be
led by the management who founded the company in 1955. The Federated Funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected the Federated Funds for
their clients.
Mary Jo Ochson has been the Fund's portfolio manager since May 1996. Ms. Ochson
joined Federated Investors in 1982 and has been a Senior Vice President of the
Fund's investment adviser since January 1996. From 1988 through 1995, Ms. Ochson
served as a Vice President of the Fund's investment adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in Finance from the
University of Pittsburgh.
J. Scott Albrecht has been the Fund's portfolio manager since May 1996 Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President of the
Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht served as
an Assistant Vice President of the Fund's investment adviser. In 1991, Mr.
Albrecht acted as an investment analyst. Mr. Albrecht is a Chartered Financial
Analyst and received his M.S. in Public Management from Carnegie Mellon
University.
Jonathan C. Conley has been the Fund's portfolio manager since July 1987. Mr.
Conley joined Federated Investors in 1979 and has been a Senior Vice President
of the Fund's Adviser since 1995. Mr. Conley was a Vice President of the Fund's
Adviser from 1982 to 1995. Mr. Conley is a Chartered Financial Analyst and
received his M.B.A. in Finance from the University of Virginia.
Distribution of Fund Shares Federated Securities Corp. is the principal
distributor for Shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the principal distributor for a number of
investment companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
Distribution Plan and Shareholder Services
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), Class A Shares, Class B Shares and Class C
Shares will pay a fee to the distributor in an amount computed at an annual rate
of .25%, .75% and .75%, respectively, of the average daily net assets of each
class of Shares to finance any activity which is principally intended to result
in the sale of Shares subject to the Distribution Plan. For Class C Shares, the
distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales services or distribution-related support services as agents for their
clients or customers. With respect to Class B Shares, because distribution fees
to be paid by the Fund to the distributor may not exceed an annual rate of .75%
of each class of Shares' average daily net assets, it will take the distributor
a number of years to recoup the expenses it has incurred for its sales services
and distribution-related support services pursuant to the Plan. The Fund is not
currently making payments for Class A Shares under the Distribution Plan, nor
does it anticipate doing so in the immediate future.
The Distribution Plan is a compensation type Plan. As such, the Fund makes no
payments to the distributor, except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25 of 1% of the average daily net asset value
of Class A Shares, Class B Shares, and Class C Shares to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of sales services, distribution-related support
services, or shareholder services. Supplemental Payments to Financial
Institutions In addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, the distributor may pay a supplemental fee from
its own assets to financial institutions as financial assistance for providing
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars at recreational-type facilities for their employees, providing
sales literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's Adviser or its
affiliates.
Administration of the Fund
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all of the Federated Funds as specified below:
Maximum Average Aggregate
Fee Daily Net Assets
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1%on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
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. In working with dealers, the adviser will generally utilize 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
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.
Expenses of the Fund and Shares
Holders of Class A Shares, Class B Shares, and Class C Shares pay their
allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Class A Shares, Class B Shares, and Class
C Shares pay their allocable portion include, but are not limited to: the cost
of organizing the Fund and continuing its existence; registering the Fund with
federal and state securities authorities; Directors' fees; auditors' fees; the
cost of meetings of Directors; legal fees of the Fund; association membership
dues; and such non-recurring and extraordinary items as may arise from time to
time.
The portfolio expenses for which holders of Class A Shares, Class B Shares, and
Class C Shares pay their allocable portion include, but are not limited to:
registering the portfolio and Shares of the portfolio; investment advisory
services; taxes and commissions; custodian fees; insurance premiums; auditors'
fees; and such non-recurring and extraordinary items as may arise from time to
time.
At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are expenses under the
Fund's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares, and Class C Shares as it deems appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class A Shares, Class B Shares, and Class C Shares;
fees for Shareholder Services; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Class A Shares, Class B Shares, and Class C
Shares; legal fees relating solely to Class A Shares, Class B Shares, and Class
C Shares and Directors' fees incurred as a result of issues relating solely to
Class A Shares, Class B Shares, and Class C Shares.
Voting Rights
Each share of the Fund is entitled to one vote at all meetings of shareholders.
As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith (as owner of record
holding shares for its clients), Jacksonville, Florida, owned 27.05% of the
voting securities of Class F Shares of the Fund, and, therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. Shareholders are
not required to pay the federal regular income tax on any dividends received
from the Fund that represent net interest on tax-exempt municipal bonds.
However, under the Tax Reform Act of 1986, dividends representing net interest
earned on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternate minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
State and Local Taxes
Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield for each class of Shares including Class F Shares as
described under "Other Classes of Shares."
Total return represents the change, over a specific period of time, in the value
of an investment in each class of Shares after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each class of Shares over a thirty day period by the maximum offering price
per share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The tax-equivalent yield of each class
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that each class would have had to earn to equal its actual yield,
assuming a specific tax rate. The yield and the tax-equivalent yield do not
necessarily reflect income actually earned by each class of Shares and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of the maximum sales charge and
other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return, yield, and tax-
equivalent yield.
Total return, yield, and tax-equivalent yield will be calculated separately for
Class A Shares, Class B Shares, Class C Shares, and Class F Shares.
From time to time, advertisements for Class A Shares, Class B Shares, and Class
C Shares may refer to ratings, rankings, and other information in certain
financial publications and/or compare the performance of Class A Shares, Class B
Shares, and Class C Shares to certain indices.
The Fund also offers another class of shares called Class F Shares. Class F
Shares are sold primarily to customers of financial institutions subject to a
front-end sales charge, a contingent deferred sales charge and a minimum initial
investment of $1,500.
Shares and Class F Shares are subject to certain of the same expenses. Expense
differences, however, between Shares and Class F Shares may affect the
performance of each class.
To obtain more information and a prospectus for Class F Shares, investors may
call 1-800-341-7400 or contact their financial institution.
<PAGE>
Municipal Bond Rating Definitions
Standard and Poor's Ratings Group
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group ("S&P"). 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 effect 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.
Moody's Investors Service, Inc.
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 rated "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.
<PAGE>
Federated Municipal Opportunities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent
and Dividend
Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Class A Shares, Class B Shares, Class C Shares
Prospectus
September 1, 1996An Open-End, Diversified
Management Investment Company
Federated Securities Corp., Distributors
Cusip 313910200
Cusip 313910309
Cusip 313910408
G00570-03 (9/96)
Federated Municipal Opportunities Fund, Inc.
Class F Shares
Prospectus
The Class F Shares of Federated Municipal Opportunities Fund, Inc. (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) that seeks a high level of current income exempt from the federal
regular income tax by investing primarily in a professionally managed,
diversified portfolio of municipal bonds.
The shares offered by this prospectus are not deposits or obligations of any
Bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these shares involves investment risks,
Including the possible loss of principal.
This prospectus contains the information you should read and know before you
invest in Class F Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares, and Class F Shares dated September 1,
1996, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 1, 1996
<PAGE>
Summary of Fund Expenses.............................. 1
Financial Highlights.................................. 2
General Information................................... 3
Investment Information................................ 3
Investment Objective............................... 3
Investment Policies................................ 3
Portfolio Turnover................................. 5
Municipal Bonds.................................... 5
Investment Risks................................... 5
Investment Limitations............................. 7
Net Asset Value....................................... 7
Investing in Class F Shares........................... 8
Share Purchases.................................... 8
Minimum Investment Required........................ 8
What Shares Cost................................... 8
Eliminating the Sales Charge....................... 9
Systematic Investment Program...................... 10
Exchange Privilege................................. 11
Certificates and Confirmations..................... 11
Dividends and Distributions........................ 11
Redeeming Class F Shares.............................. 12
Through a Financial Institution....................... 12
Directly by Mail................................... 13
Contingent Deferred Sales Charge................... 13
Systematic Withdrawal Program...................... 14
Accounts with Low Balances......................... 14
Fund Information...................................... 15
Management of the Fund............................. 15
Distribution of Class F Shares..................... 16
Administration of the Fund......................... 18
Shareholder Information............................... 18
Voting Rights......................................... 18
Tax Information....................................... 19
Federal Income Tax................................. 19
State and Local Taxes.............................. 19
Performance Information............................... 20
Other Classes of Shares............................... 21
Appendix.............................................. 21
<PAGE>
The Fund was incorporated under the laws of the State of Maryland on November
26, 1986.
The Articles of Incorporation permit the Fund to offer separate classes of
shares. As of March 31, 1995, the Corporation changed its name from Fortress
Municipal Income Fund, Inc. to Federated Municipal Opportunities Fund, Inc. With
respect to this Fund, as of the date of this prospectus, the Board of Directors
("Directors") has established four classes of shares known as Class A Shares,
Class B Shares, Class C Shares, and Class F Shares. This prospectus relates only
to the Class F Shares ("Shares") of the Fund.
The Fund is designed primarily for individuals seeking high current income
through a professionally managed, diversified portfolio of municipal bonds. A
minimum initial investment of $1,500 is required. Class F Shares are sold at net
asset value plus an applicable sales charge and are redeemed at net asset value.
However, a contingent deferred sales charge is imposed on certain Shares, other
than Shares purchased through reinvestment of dividends, which are redeemed
within one to four years of their purchase dates.
Investment Objective
The investment objective of the Fund is to provide a high level of current
income which is generally exempt from the federal regular income tax (federal
regular income tax does not include the federal alternative minimum tax). The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of municipal bonds. The Fund invests its assets so that at
least 80% of its annual interest income is exempt from federal regular income
tax. The Fund may invest up to but less than 35% of its net assets in lower
quality municipal bonds. These bonds will usually offer higher yields than
higher-rated bonds but involve greater investment risk at the time of issue.
(See "Investment Risks.")
Investment Policies
Unless otherwise designated, the investment policies described below may be
changed by the Directors without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
Acceptable Investments
The Fund invests primarily in municipal bonds. Municipal bonds are debt
obligations issued by or on behalf of states, territories and possessions of the
United States, including the District of Columbia, and their political
subdivisions, agencies and instrumentalities, the interest from which is exempt
from the federal regular income
tax. It is likely, however, that shareholders will be required to include
interest from a portion of the municipal bonds owned by the Fund in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
Characteristics
The municipal bonds which the Fund buys are rated Ba or higher by Moody's
Investors Service, Inc. ("Moody's") or rated BB or higher by Standard & Poor's
Ratings Group ("S&P"). The Fund will limit its purchases of municipal bonds
rated Ba and BB (commonly known as "junk bonds") to up to but less than 35% of
its net assets. The Fund may buy bonds which are unrated but which the adviser
judges to be similar in quality to those rated bonds which it purchases. A
description of the ratings categories is contained in the Appendix to this
prospectus.
When-Issued and Delayed Delivery Transactions
The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more/less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
Inverse Floaters
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. These obligations pay interest rates that
vary inversely with changes in the interest rates of specified short-term
municipal securities or an index of short-term municipal securities. The
interest rates on inverse floaters will typically decline as short-term market
interest rates increase and increase as short-term market rates decline. Inverse
floaters will generally respond to changes in market interest rates more rapidly
than fixed-rate long-term securities (typically twice as fast). As a result, the
market values of inverse floaters will generally be more volatile than the
market values of fixed-rate municipal securities.
Financial Futures
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of cash or cash
equivalents, equal to the underlying commodity value of the futures contracts
(less any related margin deposits), will be deposited in a segregated account
with the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the use of such futures contract is
unleveraged.
Risks
When the Fund uses financial futures, there is a risk that the prices of
the securities subject to the futures contracts may not correlate
perfectly with the prices of the securities in the Fund's portfolio. This
may cause the futures contract to react differently than the portfolio
securities to market changes. In addition, the Fund's investment adviser
could be incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In these events, the Fund
may lose money on the futures contract. It is not certain that a
secondary market for positions in futures contracts will exist at all
times. Although the investment adviser will consider liquidity before
entering into futures transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any
particular futures contract at any particular time. The Fund's ability to
establish and close out futures positions depends on this secondary
market.
Temporary Investments
The Fund invests its assets so that at least 80% of its annual interest income
is exempt from the federal regular income tax, except when investing for
"defensive" purposes as described below. This policy cannot be changed without
approval of shareholders. From time to time on a temporary basis, or when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term tax-exempt or taxable
temporary investments. These temporary investments include: fixed or variable
rate notes issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
other debt securities; commercial paper; certificates of deposit of banks; and
repurchase agreements (arrangements in which the organization selling the Fund a
bond or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality.
Other Investment Techniques
The Fund may purchase a right to sell a security held by it back to the issuer
or to another party at an agreed upon price at any time during a stated period
or on a certain date. These rights may be referred to as "liquidity puts" or
"standby commitments."
The Fund may also hedge all or a portion of its investments by entering into
futures contracts or options on them. Any gains realized on futures contracts
and options thereon are taxable. The Fund will notify shareholders before it
engages in these futures transactions.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held.
Municipal Bonds
Municipal bonds are generally issued to finance public works such as airports,
bridges, highways, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. Municipal bonds are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities. Certain types of
"private activity" municipal bonds are issued to obtain funding for privately
operated facilities.
There are two categories of municipal bonds: general obligation and revenue.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility.
Payment of principal and interest on such bonds is dependent solely on the
revenue generated by the facility financed by the bond or other specified
sources of revenue or collateral. Private activity bonds are typically one type
of "revenue" bonds.
In most cases, lower quality bonds are private activity bonds or other revenue
bonds which are not payable from general tax revenues. The Fund may invest more
than 25% of the value of its assets in private activity bonds which may result
in more than 25% of the Fund's assets being invested in one industry. It is also
possible that the Fund may from time to time invest more than 25% of its assets
in health care facilities revenue obligations, housing agency revenue
obligations or electric utility obligations. Economic, business, political and
other developments generally affecting the revenues of issuers in such a market
segment (for example, proposed legislation or pending court decisions affecting
the financing of projects and market factors affecting the demand for their
services or products) may have a general adverse impact on all municipal bonds
in the segment.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its total assets would be invested in
the securities of governmental subdivisions located in any one state, territory
or possession of the United States.
Investment Risks
The value of Shares will fluctuate. The amount of this fluctuation is dependent
upon the quality and maturity of the municipal bonds in the Fund's portfolio as
well as on market conditions. Generally speaking, the lower quality, long-term
bonds in which the Fund invests have greater fluctuation in value than high
quality, shorter-term bonds.
Municipal bond prices are interest rate sensitive, which means that their value
varies inversely with market interest rates. Thus, if market interest rates have
increased from the time a bond was purchased, the bond, if sold, might be sold
at a price less than its cost. Similarly, if market interest rates have declined
from the time a bond was purchased, the bond, if sold, might be sold at a price
greater than its cost.
(In either instance, if the bond was held to maturity, no loss or gain normally
would be realized as a result of interim market fluctuations.)
Prices of lower grade bonds also fluctuate with changes in the perceived quality
of the credit of their issuers. Consequently, shares may not be suitable for
persons who cannot assume the somewhat greater risks of capital depreciation
associated with higher tax-exempt income yields. In addition, bonds rated "BBB"
by S&P or "Baa" by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than higher rated bonds.
A large portion of the Fund's portfolio may be invested in bonds whose interest
payments are from revenues of similar projects (such as housing or hospitals) or
where issuers share the same geographic location. As a result, the Fund may be
more susceptible to similar economic, political or regulatory developments than
would a portfolio of bonds with a greater geographic and project variety. This
susceptibility may result in greater fluctuations in share price.
Many issuers of municipal bonds which have characteristics of rated bonds choose
to not have their obligations rated. Unrated bonds may carry a greater risk and
a higher yield than rated securities. Although unrated bonds are not necessarily
of lower quality, the market for them may not be as broad as that for rated
bonds since many investors rely solely on the major rating agencies for credit
appraisal.
Further, the lower rated or unrated municipal bonds which the Fund may purchase
are frequently traded only in markets where the number of potential purchasers
and sellers is limited. This consideration may have the effect of limiting the
availability of such bonds for the Fund to purchase and may also have the effect
of limiting the ability of the Fund to sell such bonds at their fair value
either to meet redemption requests or to respond to changes in the economy or
the financial markets. The Fund will not invest more than 10% of its total
assets in securities which are not readily marketable.
As a Percentage of
Total Market Value
of Security
Holdings as of
Credit Rating August 12, 1996
BB 4.89%
B 0
CCC 0
Unrated 6.11 11.00%
Reducing Risks of Lower-Rated Securities
The Fund's investment adviser believes that the risks of investing in lower
rated securities can be reduced. The professional portfolio management
techniques used by the Fund to attempt to reduce these risks include:
Credit Research
When purchasing bonds, rated or unrated, the Fund's investment adviser performs
its own credit analysis in addition to using recognized rating agencies. This
credit analysis considers the economic feasibility of revenue bond project
financing and general purpose borrowings, the financial condition of the issuer
or guarantor with respect to liquidity, cash flow and ability to meet
anticipated debt service requirements, and political developments that may
affect credit quality.
Diversification
The Fund invests in securities of many different issuers to reduce portfolio
risks.
Economic Analysis
The Fund's adviser also considers trends in the overall economy, in geographic
areas, in various industries, and in the financial markets.
The Fund will not:
n borrow money directly or through reverse repurchase agreements (arrangements
in which the Fund sells a portfolio instrument for a percentage of its cash
value with an arrangement to buy it back on a set date) or pledge securities
except, under certain circumstances, the Fund may, exclusive of custodian
intra-day cash advances and the collateralization of such advances, borrow up
to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; or
n invest more than 10% of its net assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for certain
restricted securities which meet the criteria for liquidity as established
by the directors.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Fund will not:
n invest more than 5% of its total assets in securities of one issuer (except
cash and cash items and U.S. government obligations); or
n invest more than 5% of its total assets in industrial development bonds of
issuers that have a record of less than three years of continuous
operations.
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class F Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class F Shares in the liabilities of the Fund and those attributable to the
Class F Shares, and dividing the remainder by the total number of Class F Shares
outstanding. The net asset value for Class F Shares may differ from that of
Class A Shares, Class B Shares, and Class C Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
Share Purchases
Shares are sold on days on which the New York Stock Exchange is open. Shares of
the Fund may be purchased through an investment dealer who has a sales agreement
with the distributor, Federated Securities Corp., or directly from Federated
Securities Corp. either by mail or wire. The Fund reserves the right to reject
any purchase request.
Through a Financial Institution
An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 P.M.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
P.M. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 P.M. (Eastern
time) in order for Shares to be purchased at that day's price. Orders through a
financial institution are considered received when the Fund is notified of the
purchase order. It is the financial institution's responsibility to transmit
orders promptly.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Supplemental Payments to Financial Institutions").
Directly by Mail
To purchase Shares directly from Federated Securities Corp.:
n complete and sign the application available from the Fund;
n enclose a check made payable to Federated Municipal Opportunities Fund, Inc.;
and
n send both to the Fund's transfer agent, Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600.
Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank, into federal funds. This is
generally the next business day after State Street Bank receives the check.
Directly by Wire
To purchase Shares directly from Federated Securities Corp. by Federal Reserve
wire, call the Fund. All information needed will be taken over the telephone,
and the order is considered received when the transfer agent's bank receives
payment by wire. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
Minimum Investment Required
The minimum initial investment in the Fund is $1,500. Subsequent investments
must be in amounts of at least $100.
What Shares Cost
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales charge for purchases of $1 million or
more. However, those unaffiliated institutions through whom Shares are purchased
may charge fees for services provided which may be related to the ownership of
Shares. This prospectus should, therefore, be read together with any agreement
between the customer and the institution with regard to services provided, the
fees charged for these services, and any restrictions and limitations imposed.
No sales charge is imposed for Shares purchased through bank trust departments
or investment advisers registered under the Investment Advisers Act of 1940
purchasing on behalf of their clients.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; or (iii) the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
Dealer Concession
For sales of Shares of the Fund, the distributor will normally receive up to
100% of the sales charge retained by it. The sales charge for Shares sold other
than through registered broker/dealers will be retained by Federated Securities
Corp. Federated Securities Corp. may pay fees to banks out of the sales charge
in exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of Shares.
Eliminating the Sales Charge
The sales charge can be eliminated on the purchase of Shares through:
n quantity discounts and accumulated purchases;
n signing a 13-month letter of intent;
n using the reinvestment privilege; or
n concurrent purchases.
Quantity Discounts and Accumulated Purchases
There is no sales charge for purchases of $1 million or more. The Fund will
combine purchases made on the same day by the investor, his spouse, and his
children under age 21 when it calculates the sales charge. In addition, the
sales charge is eliminated for purchases of $1 million or more made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in Shares. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000, and he
purchases $100,000 or more at the current public offering price, there will be
no sales charge on the additional purchase.
The Fund will also combine purchases for the purpose of reducing the contingent
deferred sales charge imposed on some Share redemptions. For example, if a
shareholder already owns Shares having a current value at public offering price
of $1 million and purchases an additional $1 million at the current public
offering price, the applicable contingent deferred sales charge would be reduced
to 0.50% of those additional Shares. For more information on the levels of
contingent deferred sales charges and holding periods, see the section entitled
"Contingent Deferred Sales Charge."
To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by their financial institution at the time the purchase is made
that Shares are already owned or that purchases are being combined. The Fund
will eliminate the sales charge and/or reduce the contingent deferred sales
charge after it confirms the purchases.
Letter of Intent
If a shareholder intends to purchase at least $1 million of Shares over the next
13 months, the sales charge may be eliminated by signing a letter of intent to
that effect. This letter of intent includes a provision for a sales charge
elimination depending on the amount actually purchased within the 13-month
period and a provision for the Fund's custodian to hold 1.00% of the total
amount intended to be purchased in escrow (in Shares of the Fund) until such
purchase is completed.
The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more of Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales charge.
This letter of intent also includes a provision for reductions in the contingent
deferred sales charge and holding period depending on the amount actually
purchased within the 13-month period. For more information on the various levels
of contingent deferred sales charges and holding periods, see the section
entitled "Contingent Deferred Sales Charge." This letter of intent will not
obligate the shareholder to purchase Shares. The letter may be dated as of a
prior date to include any purchases made within the past 90 days.
Reinvestment Privilege
If Shares in the Fund have been redeemed, the shareholder has a one-time right,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to receive this elimination of the sales charge. If the
shareholder redeems his Shares, there may be tax consequences.
Concurrent Purchases
For purposes of qualifying for a sales charge elimination, a shareholder has the
privilege of combining concurrent purchases of two or more funds offering Class
F Shares, the purchase price of which includes a sales charge. For example, if a
shareholder concurrently invested $400,000 in Class F Shares of certain of the
funds advised by subsidiaries of Federated Investors ("the Federated Funds") and
$600,000 in Shares, the sales charge would be eliminated.
To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will eliminate the sales charge
after it confirms the purchases. Systematic Investment Program
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
monthly from the shareholder's checking account and invested in Shares at the
net asset value next determined after an order is received by State Street Bank,
plus the 1.00% sales charge for purchases under $1 million. A shareholder may
apply for participation in this program through Federated Securities Corp.
Exchange Privilege
The Fund has exchange privileges with the Class F Shares of the following
Federated Funds:
Federated American Leaders Fund, Inc.; Federated California Municipal Income
Fund; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated Bond Fund;
Federated Government Income Securities, Inc.; Federated Equity Income Fund,
Inc.; Federated Limited Term Fund; Federated Limited Term Municipal Fund;
Federated New York Municipal Income Fund; Federated Ohio Municipal Income Fund;
Federated Strategic Income Fund; Federated Utility Fund; and Federated World
Utility Fund.
Shares in Federated Municipal Opportunities Fund, Inc. or in the Federated Funds
may be exchanged at net asset value without a sales charge (if previously paid)
or a contingent deferred sales charge. The exchange privilege is available to
shareholders residing in any state in which the Shares being acquired may be
legally sold.
Shares of certain of the Federated Funds which are advised by subsidiaries or
affiliates of Federated Investors may also be exchanged for Shares at net asset
value (plus a sales charge, if applicable). With the exception of exchanges into
other Federated Funds, such exchanges may be subject to a contingent deferred
sales charge and possibly a sales charge.
Shareholders using the exchange privilege must exchange Shares having a net
asset value which at least meets the minimum investment for the fund into which
the exchange is being made. Shareholders who desire to automatically exchange
Shares of a pre-determined amount on a monthly, quarterly, annual or other
periodic basis may take advantage of a systematic exchange privilege. Further
information on these exchange privileges is available by calling Federated
Securities Corp. or the shareholder's financial institution.
Before a financial institution may request exchange by telephone on behalf of a
shareholder, an authorization form permitting the Fund to accept exchange by
telephone must first be completed. Exchange instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Exercise of the exchange privilege is treated as a sale for federal income tax
purposes. Depending on the circumstances, a short or long-term capital gain or
loss may be realized. Before making any exchange, a shareholder must receive a
prospectus of the fund for which the exchange is being made.
Certificates and Confirmations
As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested on the application or by contacting the transfer agent.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
Dividends and Distributions
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Distributions of any net realized long-term capital gains
will be made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares on payment dates at the
ex-dividend date net asset value without a sales charge unless cash payments are
requested by shareholders on the application or by writing to Federated
Shareholder Services Company.
Redeeming Class F Shares
The Fund redeems Shares at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Fund computes its net asset value. Redemption
requests must be received in proper form and can be made through a financial
institution or directly from the Fund by written request.
Through a Financial Institution
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 P.M. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 P.M. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service. If, at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept redemption
requests by telephone must first be completed. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Directly by Mail," should be considered.
Directly by Mail
Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.
The written request should state: the Fund name and the Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
Receiving Payment
A check for the proceeds is mailed within seven days after receipt of proper
written redemption instructions from a broker or from the shareholder.
Contingent Deferred Sales Charge
Shareholders redeeming Shares from their Fund accounts within certain time
periods of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
price or the net asset value of the Shares redeemed as follows:
Contingent Amount of
Deferred Purchase Shares Held Sales Charge Up to $1,999,999 4 years or less
1.00% $2,000,000 to $4,999,9992 years or less 0.50% $5,000,000 or more 1 year or
less 0.25%
In instances in which Shares have been acquired in exchange for Class F Shares
of other Federated Funds, (i) the purchase price is the price of the Shares when
originally purchased and (ii) the time period during which the Shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on Shares acquired through: (i) the reinvestment of
dividends or distributions of long-term capital gains; or (ii) the exchange of
Shares of Federated Government Income Securities, Inc. where those Shares were
purchased during that fund's Charter Offering Period. In computing the amount of
contingent deferred sales charge for accounts with Shares subject to a single
holding period, if any, redemptions are deemed to have occurred first of Shares
acquired through the reinvestment of dividends and long-term capital gains,
second of purchases of Shares occurring prior to the number of years necessary
to satisfy the applicable hold period, and finally of purchases of Shares
occurring within the current hold period. For accounts with Shares subject to
multiple holding periods, the redemption sequence will be determined first, with
reinvested dividends and long-term capital gains, and second, on a first-in,
first-out basis.
The contingent deferred sales charge will not be imposed when a redemption
results from a return under the following circumstances: (i) a total or partial
distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or disability of the beneficial
owner. The exemption from the contingent deferred sales charge for qualified
plans, an IRA, Keogh Plan or a custodial account does not extend to account
transfers, rollovers, and other redemptions made for purposes of reinvestment.
Contingent deferred sales charges are not charged in connection with exchanges
of Shares for shares of certain of the Federated Funds or in connection with
redemptions by the Fund of accounts with low balances. Shares originally
purchased through a bank trust department or investment adviser registered under
the Investment Advisers Act of 1940, to the extent that no advanced payments are
made for purchases made through such entities. In addition, Shares held in the
Fund by a financial institution for its own account which were originally
purchased by the financial institution directly from the Fund's distributor
without a sales charge may be redeemed without a contingent deferred sales
charge. For more information, see "Supplemental Payments to Financial
Institutions."
Systematic Withdrawal Program
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. Depending upon the amount of
the withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Shares, and the fluctuation of the net asset value
of Shares redeemed under this program, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have invested at least $10,000 in the Fund (at
current offering price).
A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge, it is
not advisable for shareholders to purchase Shares while participating in this
program.
Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,500. This requirement
does not apply, however, if the balance falls below $1,500 because of changes in
the Share's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
Management of the Fund
Directors
The Fund is managed by the Directors. The Directors are responsible for managing
the Fund's business affairs and for exercising all the Fund's powers except
those reserved for the shareholders. An Executive Committee of the Directors
handles the Director's responsibilities between meetings of the Directors.
Investment Adviser
Investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser (the "Adviser"), subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund. Both the Corporation and the Adviser
have adopted strict codes of ethics governing the conduct of all employees who
manage the Fund and its portfolio securities. These codes recognize that such
persons owe a fiduciary duty to the Fund's shareholders and must place the
interests of shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of personal
securities transactions; prohibit personal transactions in securities being
purchased or sold, or being considered for purchase or sale, by the Fund;
prohibit purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days.
Violations of the codes are subject to review by the Directors, and could result
in severe penalties.
Advisory Fees
The Adviser receives an annual investment advisory fee equal to 0.60 of 1% of
the Fund's average daily net assets. The Adviser may voluntarily choose to
waive a portion of its fee or reimburse the fund for certain operating
expenses. The Adviser can terminate this voluntary waiver of its advisory fee
at any time at its sole discretion. The Adviser has also undertaken to
reimburse the Fund for operating expenses in excess of limitations
established by certain states.
Adviser's Background
Federated Advisers, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It
is a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the Trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number
of investment companies. With over $80 billion invested across more than 250
funds under management and/or administration by its subsidiaries, as of
December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in
1955. The Federated Funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment professionals
have selected the Federated Funds for their clients.
Mary Jo Ochson has been the Fund's portfolio manager since May 1996. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's
investment adviser. Ms. Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the University of Pittsburgh.
J. Scott Albrecht has been the Fund's portfolio manager since May 1996. Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President
of the Fund's investment adviser since 1994. From 1992 to 1994, Mr.
Albrecht served as an Assistant Vice President of the Fund's investment
adviser. In 1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht
is a Chartered Financial Analyst and received his M.S. in Public Management
from Carnegie Mellon University.
Jonathan C. Conley has been the Fund's portfolio manager since July 1987.
Mr. Conley joined Federated Investors in 1979 and has been a Senior Vice
President of the Fund's Adviser since 1995. Mr. Conley was a Vice President
of the Fund's Adviser from 1982 to 1995. Mr. Conley is a Chartered
Financial Analyst and received his M.B.A. in Finance from the University of
Virginia.
Distribution of Class F Shares Federated Securities Corp. is the principal
distributor for shares of the Fund. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a
number of investment companies. Federated Securities Corp. is a subsidiary
of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
Distribution Plan and Shareholder Services
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Plan"), the distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers and
brokers/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. The Fund is not currently
making payments for Class F Shares under the Distribution Plan, nor does it
anticipate doing so in the immediate future.
The distributor will pay financial institutions a fee based upon Shares subject
to the Plan and owned by their clients or customers. The schedules of such fees
and the basis upon which such fees will be paid will be determined from time to
time by the Board of Directors of the Fund provided that for any period the
total amount of these fees shall not exceed an annual rate of 0.25 of 1% of the
average net asset value of shares subject to the Plan held during the period by
clients or customers of financial institutions. The current annual rate of such
fees is 0.25 of 1%. Any fees paid by the distributor under the Plan, will be
reimbursed from the assets of the Fund.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25 of 1% of the average daily net asset value
of the Fund to obtain certain personal services for shareholders and to provide
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholder Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. Financial institutions will receive fees based upon shares owned by
their clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.
Supplemental Payments to Financial Institutions
The distributor will pay brokers and financial institutions, for distribution
and/or administrative services, an amount equal to 1% of the offering price of
the shares acquired by their clients or customers on purchases up to $1,999,999,
0.50% of the offering price on purchases of $2,000,000 to $4,999,999, and 0.25%
of the offering price on purchases of $5,000,000 or more. (This fee is in
addition to the 1% sales charge on purchases of less than $1 million.) Any fees
paid by the distributor pursuant to these administrative arrangements will be
reimbursed by the Adviser. The administrator may elect to receive amounts less
than those stated, which would reduce the stated contingent deferred sales
charge and/or the holding period used to calculate the fee.
Furthermore, in addition to payments made pursuant to the Plan and Shareholder
Services Agreement, the distributor may pay a supplemental fee from its own
assets to financial institutions as financial assistance for providing
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars at recreational-type facilities for their employees, providing
sales literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's Adviser or its
affiliates.
Administration of the Fund
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all of the Federated Funds as specified below:
Average Aggregate Maximum Daily Net Administrative Assets of the Fee Federated
Funds .150 of 1% on the first $250 million .125 of 1% on the next $250 million
.100 of 1% on the next $250 million .075 of 1%on assets in excess of $750
million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
Voting Rights
Each share of the Fund is entitled to one vote at all meetings of shareholders.
As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith (as owner of record
holding shares for its clients), Jacksonville, Florida, owned 27.05% of the
voting securities of Class F Shares of the Fund, and, therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. Shareholders are
not required to pay the federal regular income tax on any dividends received
from the Fund that represent net interest on tax-exempt municipal bonds.
However, under the Tax Reform Act of 1986, dividends representing net interest
earned on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternate minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
State and Local Taxes
Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield for Class F Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of Shares is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that Shares would have had
to earn to equal its actual yield, assuming a specific tax rate. The yield and
the tax-equivalent yield do not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
The performance information reflects the effect of the maximum sales charge and
other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return, yield, and tax-
equivalent yield.
Total return, yield and tax-equivalent yield will be calculated separately for
Class A Shares, Class B Shares, Class C Shares and Class F Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
Other Classes of Shares
The Fund also offers other classes of shares called Class A Shares, Class B
Shares and Class C Shares which are all sold primarily to customers of financial
institutions subject to certain differences.
Class A Shares are sold at net asset value subject to a front-end sales charge,
and a shareholder services fee, and are distributed pursuant to a Rule 12b-1
Plan. Investments in Class A Shares are subject to a minimum initial investment
of $500.
Class B Shares are sold at net asset value subject to a contingent deferred
sales charge, a shareholder services fee, and are distributed pursuant to a Rule
12b-1 Plan. Investments in Class B Shares are subject to a minimum initial
investment of $1,500. Class C Shares are sold at net asset value subject to a
contingent deferred sales charge, a shareholder services fee, and are
distributed pursuant to a Rule 12b-1 Plan.
Investments in Class C Shares are subject to a minimum investment of $1,500.
Class A Shares, Class B Shares, Class C Shares and Class F Shares are subject to
certain of the same expenses. Expense differences, however, between Class A
Shares, Class B Shares, Class C Shares and Class F Shares may affect the
performance of each class.
To obtain more information and a combined prospectus for Class A Shares, Class B
Shares and Class C Shares, investors may call 1-800-341-7400 or contact their
financial institution.
<PAGE>
Municipal Bond Rating Definitions
Standard & Poor's Ratings Group
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group ("S&P"). 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 effect 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.
Moody's Investors Service, Inc.
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.
<PAGE>
Federated Municipal Opportunities Fund, Inc.
Class F Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
Distributor
Federated Securities Corp.
Federated Investors Tower
Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Deloitte & Touche LLP 2500
One PPG Place
Pittsburgh, PA 15222-5401
Federated Municipal
Opportunities Fund, Inc.
Class F Shares
Prospectus
September 1, 1996
An Open-End, Diversified
Management Investment Company
Federated Securities Corp., Distributors
Cusip 313910101
G00570-02-F (9/96)
Federated Municipal Opportunities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Statement of Additional Information
This Statement of Additional Information should be read with the prospectuses of
Federated Municipal Opportunities Fund, Inc. (the "Fund'), dated September 1,
1996. This Statement is not a prospectus. You may request a copy of a prospectus
or a paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-341-7400.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated September 1, 1996 Cusip 313910200 Cusip 313910309 Cusip
313910408 Cusip 313910101 8092709B (9/96)
<PAGE>
General Information About the Fund...................1
Investment Objective and Policies....................1
Acceptable Investments............................1
When-Issued and Delayed Delivery Transactions.....1
Temporary Investments.............................1
Repurchase Agreements.............................1
Reverse Repurchase Agreements.....................2
Portfolio Turnover................................2
Investment Limitations...............................2
Federated Municipal Opportunities
Fund, Inc. Management.............................5
Fund Ownership....................................9
Directors Compensation...........................10
Investment Advisory Services........................10
Adviser to the Fund..............................10
Advisory Fees....................................11
Brokerage Transactions..............................11
Other Services......................................12
Fund Administration..............................12
Custodian and Portfolio Accountant...............12
Transfer Agent...................................12
Independent Auditors.............................12
Purchasing Shares...................................12
Distribution Plan and Shareholder Services.......12
Conversion to Federal Funds......................13
Purchases by Sales Representatives,
Fund Directors, and Employees.................13
Determining Net Asset Value.........................13
Valuing Municipal Bonds..........................13
Use of Amortized Cost............................13
Exchange Privilege (Class F Shares Only)............13
Reduced Sales Charge.............................13
Requirements for Exchange........................14
Tax Consequences.................................14
Making an Exchange...............................14
Redeeming Shares....................................14
Redemption in Kind...............................14
Tax Status..........................................14
The Fund's Tax Status............................14
Shareholders' Tax Status.........................15
Total Return........................................15
Yield...............................................15
Tax-Equivalent Yield................................15
Tax-Equivalency Table............................16
Performance Comparisons.............................16
Economic and Market Information..................17
About Federated Investors...........................17
Financial Statements................................18
<PAGE>
The Fund was incorporated under the laws of the State of Maryland on November
26, 1986. It is qualified to do business as a foreign corporation in
Pennsylvania. Effective March 31, 1996, the name of the Fund changed from
Fortress Municipal Income Fund, Inc. to Federated Municipal Opportunities Fund,
Inc.
Shares of the Fund are offered in four classes, known as Class A Shares, Class B
Shares, Class C Shares and Class F Shares (individually and collectively
referred to as `Shares" as the context may require.) This Statement of
Additional Information relates to all four of the above- mentioned classes of
Shares.
The Fund's investment objective is to provide a high level of current income
which is generally exempt from federal regular income tax. The objective cannot
be changed without approval of shareholders.
Acceptable Investments
The Fund invests primarily in municipal bonds.
Characteristics
The municipal bonds in which the Fund invests have the characteristics set
forth in the prospectus.
If a bond loses its rating or has its rating reduced after the Fund has
purchased it, the Fund is not required to drop the bond from the portfolio,
but may consider doing so. If ratings made by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P") change because of
changes in those organizations or in their rating systems, the Fund will try
to use comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Futures Transactions
A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. In the fixed income securities
market, price moves inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the prices of
its fixed income securities may decline during the Fund's anticipated holding
period. The Fund would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or cash equivalents
with its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not
involve the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good faith deposit
on the contract which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily change
in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the Fund
but is instead settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In computing its daily
net asset value, the Fund will mark-to-market its open futures positions.
Temporary Investments
The Fund may also invest in temporary investments from time to time for
defensive purposes. The Fund does not presently intend to invest in temporary
investments other than repurchase agreements.
The Fund might invest in temporary investments:
o as a reaction to market conditions;
o while waiting to invest proceeds of sales of shares or portfolio
securities, although generally proceeds from sales of shares will
be invested in municipal bonds as quickly as possible; or
o in anticipation of redemption requests.
The Fund will not purchase temporary investments (other than securities of the
U.S. government, its agencies or instrumentalities) if, as a result of the
purchase, 25% or more of the value of its total assets would be invested in any
one industry. However, the Fund may, for temporary defensive purposes, invest
25% or more of the value of its assets in cash or cash items, U.S. Treasury
bills or securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by these
money market instruments, such as repurchase agreements.
Repurchase Agreements
Repurchase agreements are arrangements in which banks, broker/dealers and other
recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked-to-market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund may only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are found by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Board of
Directors ("Directors"). From time to time, such as when suitable municipal
bonds are not available, the Fund may retain a portion of its assets in cash.
Any portion of the Fund's assets maintained in cash will reduce the amount of
assets in municipal bonds and thereby reduce the Fund's yield.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction is settled.
Portfolio Turnover
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended August 31, 1995 and
August 31, 1994, the portfolio turnover rates were 13% and 27%, respectively.
Buying on Margin
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions. The
deposit or payment by the Fund of initial or variation margin in connection
with financial futures contracts or related options transactions is not
considered the purchase of a security on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings are outstanding. During the period any reverse
repurchase agreements are outstanding, but only to the extent necessary to
assure completion of the reverse repurchase agreements, the Fund will
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 10%
of the value of total assets at the time of the borrowing. Neither the
deposit of underlying securities and other assets in escrow in connection
with the writing of put or call options on municipal bonds nor margin
deposits for the purchase and sale of financial futures contracts and related
options are deemed to be a pledge.
The preceding limitations regarding buying on margin, borrowing money, and
pledging assets do not apply to intra-day cash advances made by the Fund's
custodian, or the grant of a security interest in securities by the Fund to
its custodian to collateralize such intra-day cash advances, in order to
enable the Fund to settle securities purchases or to redeem shares of the
Fund.
Investing in Real Estate
The Fund will not buy or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in
real estate.
Investing in Commodities
The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.
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 restricted securities which the Fund may purchase
pursuant to its investment objective, policies, and limitations.
Lending Cash or Securities
The Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the purchase
or holding of municipal bonds, repurchase agreements, or other
transactions which are permitted by the Fund's investment objective and
policies.
Selling Short
The Fund will not sell securities short.
Restricted Securities
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933, except
for certain restricted securities which meet the criteria for liquidity
as established by the Directors.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies except as
part of a merger, consolidation, or other acquisition. The above investment
limitations cannot be changed without shareholder approval. The following
limitations, however, may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in these
limitations becomes effective.
Diversification of Investments
The Fund will not invest more than 5% of its total assets in the securities
of any one issuer (except cash and cash instruments, securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities or
instruments secured by money market instruments such as repurchase
agreements).
Under this limitation, each governmental subdivision, including states and
the District of Columbia, territories, possessions of the United States or
their political subdivisions, agencies, authorities, instrumentalities, or
similar entities, will be considered a separate issuer if its assets and
revenues are separate from those of the governmental body creating it and the
security is backed only by its own assets and revenues.
Private activity bonds backed only by the assets and revenues of a
non-governmental user are considered to be issued solely by that user.
If, in the case of a private activity bond or government-issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act
of 1940.
Investing in New Issuers
The Fund will not invest more than 5% of its total assets in industrial
development bonds where the payment of principal and interest is the
responsibility of companies with less than three years of operating history.
Investing in Minerals
The Fund will not purchase or sell oil, gas, or other mineral exploration or
development programs or leases.
Investing in Issuers whose Securities are owned by Officers of the Fund
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
Criteria for Liquidity of Restricted Securities
The ability of the Board of Directors (`Directors") to determine the
liquidity of certain restricted securities is permitted under a Securities
and Exchange Commission (`SEC") Staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the `Rule"). The Rule
is a non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The secondary market transactions involving securities
subject to restrictions on resale under federal securities laws. The Rule
provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to
further enhance the liquidity of the secondary market for securities eligible
for resale under the Rule. The Fund believes that the Staff of the SEC has
left the question of determining the liquidity of all restricted securities
to the Directors. The Directors may consider the following criteria in
determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
During the past fiscal year, the Fund did not (1) purchase or sell options on
securities, as permitted by the investment limitations, without first
notifying shareholders; (2) purchase "liquidity puts" or "standby
commitments" as described in the prospectus, engage in reverse repurchase
agreements, or borrow money in excess of 5% of the value of its total assets;
or (3) lend portfolio securities. The Fund does not expect to engage in any
of the above activities during the coming fiscal year. For purposes of its
policies and limitations, the Fund considers certificates of deposit and
demand and time deposits issued by a U.S. branch of a domestic bank or
savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
<PAGE>
Officers and Directors are listed with their addresses, birthdates, present
positions with Federated Municipal Opportunities Fund, Inc., and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Company .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director or Trustee of the Funds; formerly, Senior Partner, Ernst &
Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director or Trustee of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; Director or
Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A., and
PNC Bank Corp. and Director, Ryan Homes, Inc.
<PAGE>
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director or Trustee of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director or
Trustee of the Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
New port, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust Company
and State Street Boston Corporation.
<PAGE>
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of Pittsburgh;
founding Chairman, National Advisory Council for Environmental Policy and
Technology and Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.
<PAGE>
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Director of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research
Corp. and Passport Research, Ltd.; Executive Vice President
and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of
the Funds; President, Executive Vice President and Treasurer
of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated Securities
Corp.; Treasurer of some of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund; 3-5 Years; Federated U.S. Government
Securities Fund; 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash
Trust; Federated Insurance Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
<PAGE>
Fund Ownership
Officers and Directors own less than 1% of the Fund's outstanding shares.
As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida,
as record owner holding Class F Shares for its clients, owned approximately
10,450,200 (27.05%) Class F Shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
Trust Trust*# FROM FUND COMPLEX
John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 54 other investment companies in the Fund Complex
Thomas G. Bigley $1,453 $86,331 for the Corporation and
Director 54 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex
William J. Copeland $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex
James E. Dowd $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
Richard B. Fisher $-0- $-0- for the Corporation and
President and Director 6 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex
Peter E. Madden $1,231 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
Gregor F. Meyer $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
John E. Murray, Jr. $1,083 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
Wesley W. Posvar $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
Marjorie P. Smuts $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended August 31, 1995.
# The aggregate compensation is provided for the Corporation which is
comprised of one portfolio.
The information is provided for the last calendar year.
Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was appointed
a Trustee on 15 additional Federated Funds.
Adviser to the Fund
The Fund's investment adviser is Federated Advisers (the "Adviser").
It is a subsidiary of Federated Investors. All of the voting securities of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund or any 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.
Advisory Fees
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
August 31, 1995, 1994, and 1993, the Fund's Adviser earned $2,576,669,
$2,908,854, and $2,017,241, respectively.
State Expense Limitation
The Adviser has undertaken to comply with the expense limitations established
by certain states for investment companies whose shares are registered for
sale in those states. If the Fund's normal operating expenses (including the
investment advisory fee, but not including brokerage commissions, interest,
taxes, and extraordinary expenses) exceed 2-1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million of average
net assets, and 1-1/2% per year of the remaining average net assets, the
Adviser will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the amount of
the excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the Adviser will be limited, in any
single fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
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. In working with dealers, 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. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Directors. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal years
ended August 31, 1995, 1994 and 1993, the Fund paid no brokerage commissions on
brokerage transactions. Although investment decisions for the Fund are made
independently from those of the other accounts managed by the adviser,
investments of the type the Fund may make may also be made by those other
accounts. When the Fund and one or more other accounts managed by the adviser
are prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed by
the adviser to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained or disposed of by the Fund. In other cases, however, it is believed
that coordination and the ability to participate in volume transactions will be
to the benefit of the Fund.
Fund Administration
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the `Administrators." For the fiscal
years ended August 31, 1995, 1994 and 1993, the Administrators earned $325,090,
$458,072 and $395,122. Dr. Henry J. Gailliot, an officer of Federated Advisers
the adviser to the Fund, holds approximately 20% of the outstanding common stock
and serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Services Company.
Custodian and Portfolio Accountant
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of- pocket expenses.
Transfer Agent
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records.
For its services, the transfer agent receives a fee based on the size,
type and number of accounts and transactions made by shareholders.
Independent Auditors
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
Except under certain circumstances described in the respective Prospectuses,
Shares are sold at their net asset value (plus a sales charge on Class A Shares
and Class F Shares only) on days the New York Stock Exchange is open for
business. The procedure for purchasing shares is explained in the respective
prospectuses under "How to Purchase Shares" and "Investing in Class F Shares."
Distribution of Shares
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Distribution Plan and Shareholder Services
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in rates
of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts. For the fiscal period ending August 31,
1995, no payments were made pursuant to the Distribution Plan. In addition, for
this period, the Fund paid shareholder services fees on behalf of Class F Shares
in the amount of $1,073,612, of which $16,649 was waived. Class A Shares, Class
B Shares, and Class C Shares did not exist prior to May 3, 1996.
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the shareholder's
agent in depositing checks and converting them to federal funds.
Purchases by Sales Representatives, Fund Directors, and Employees
Directors, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., and their spouses and
children under 21, may buy Shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.
Valuing Municipal Bonds
The Directors use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issuer, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities and does not rely exclusively on quoted
prices.
Use of Amortized Cost
The Directors have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less at the
time of purchase shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Fund's
portfolio instruments are valued at their fair value as determined in good faith
by the Directors.
This section relates only to Class F Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares, Class B Shares, and
Class C Shares of the Fund, please see the prospectus for these classes of
Shares.
The Securities and Exchange Commission has issued an order exempting the Fund
from certain provisions of the Investment Company Act of 1940. As a result, Fund
shareholders are allowed to exchange all or some of their Class F Shares for
shares in other Federated Funds (which are sold with a sales charge different
from that of the Fund or with no sales charge and which are advised by
subsidiaries or affiliates of Federated Investors) without the assessment of a
contingent deferred sales charge on the exchanged Shares.
The order also allows certain other funds, including funds that are not advised
by subsidiaries or affiliates of Federated Investors, which do not have a sales
charge, to exchange their shares for Class F Shares on a basis other than the
current offering price. These exchanges may be made to extent that such shares
were acquired in a prior exchange at net asset value, for shares of a Federated
fund carrying a sales charge.
Reduced Sales Charge
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.
Requirements for Exchange
Shareholders using this privilege must exchange Class F Shares having a net
asset value equal to the minimum investment requirements of the fund into which
the exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made. This privilege is
available to shareholders resident in any state in which the fund shares being
acquired may be sold. Upon receipt of proper instructions and required
supporting documents, Class F Shares submitted for exchange are redeemed and the
proceeds invested in Class F shares of the other fund.
Further information on the exchange privilege and prospectuses for Class F
Shares or other Federated Funds available by calling the Fund.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the circumstances, a short-term or long-term capital
gain or loss may be realized.
Making an Exchange
Instructions for exchanges for certain Federated Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee.
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
respective prospectuses under "How to Redeem Shares" or "Redeeming Class F
Shares." Although the transfer agent does not charge for telephone redemptions,
it reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000. Class B Shares redeemed within six years of
purchase, Class C Shares redeemed within one year of purchase, and Class F
Shares redeemed within four years of purchase may be subject to a contingent
deferred sales charge. The amount of the contingent deferred sales charge is
based upon the amount of the administrative fee paid at the time of purchase by
the distributor to the financial institutions for services rendered, and the
length of time the investor remains a shareholder in the Fund. Should financial
institutions elect to receive an amount less than the administrative fee that is
stated in the prospectus for servicing a particular shareholder, the contingent
deferred sales charge and/or holding period for that particular shareholder will
be reduced accordingly.
Redemption in Kind
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Directors determine to
be fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem Shares
for any shareholder in cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities; o derive less than 30% of its gross
income from the sale of securities held less than three months; o invest in
securities within certain statutory limits; and o distribute to its
shareholders at least 90% of its net income earned during the year.
Shareholders' Tax Status
No portion of any income dividend paid by the Fund is eligible for the dividends
received deduction available to corporations.
Capital Gains
Capital gains or losses may be realized on the sale of portfolio securities
and as a result of discounts from par value on securities held to maturity.
Sales would generally be made because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested and regardless of the length of time the shareholder
has owned the shares. Any loss by a shareholder on Shares held for less than six
months and sold after a capital gains distribution will be treated as a
long-term capital loss to the extent of the capital gains distribution.
The Class F Shares' average annual total returns for the one-year and five-year
periods ended August 31, 1995 and the period from April 10, 1987 (effective date
of the Fund's registration statement) to August 31, 1995 were 5.53%, 7.55% and
7.58%, respectively. Class A Shares, Class B Shares and Class C Shares did not
exist prior to May 3, 1996.
The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the net asset value per share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
charge, adjusted over the period by any additional Shares, assuming the monthly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the net asset value of Shares
redeemed.
The yield for Class F Shares for the thirty-day period ended August 31, 1995 was
5.76%. Class A Shares, Class B Shares and Class C Shares did not exist prior to
May 3, 1996.
The yield for each class of Shares is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by the class of Shares over a thirty-day period by the maximum offering price
per share of the respective class on the last day of the period. This value is
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a 12-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of certain
adjustments required by the Securities and Exchange Commission and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a class
of Shares, performance will be reduced for those shareholders paying those fees.
The tax-equivalent yield for Class F Shares for the thirty-day period ended
August 31, 1995 was 8.00%.
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 28% tax rate (the maximum effective federal
rate for individuals) and assuming that income is 100% tax-exempt.
Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free from
state and local taxes as well. As the table below indicates, a "tax-exempt"
investment is an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1996
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
Joint $1- $40,101- $96,901- $147,701- OVER
Return 40,10096,900 147,700 263,750 $263,750
Single $1- $24,001- $58,151- $121,301- OVER
Return 24,000 58,150 121,300 263,750 $263,750
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45%1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25%7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 1 2.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local income taxes.
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested; o changes in
interest rates and market value of portfolio securities; o changes in Fund
expenses; and o various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the high yield municipal bond funds category in
advertising and sales literature.
o Lehman Brothers Revenue Bond Index is a total return performance
benchmark for the long-term, investment grade, revenue bond market. Returns
and attributes for the index are calculated semi-monthly. o Morningstar,
Inc., an independent rating service, is the publisher of the bi-weekly
Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-listed
mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute (`ICI"). For example, according to the ICI,
twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3 trillion to the more than 5,500 funds available.
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers. These traders handle trillions of dollars in annual trading
volume.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international portfolios.
In the municipal sector, as of December 31, 1995, Federated Investors managed 12
bond funds with approximately $2.0 billion in assets and 20 money market funds
with approximately $7.8 billion in total assets. In 1976, Federated introduced
one of the first municipal bond mutual funds in the industry and is now one of
the largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional Clients
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
The financial statements for the Fund for the fiscal year ended August 31, 1995,
relating to the predecessor for Class F Shares, are incorporated herein by
reference to the Annual Report to Shareholders of the Fund dated August 31,
1995.
* Source: Investment Company Institute
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (To be filed by amendment)
(b) Exhibits:
(1) (i) Conformed copy of Articles of Incorporation of the
Registrant (1);
(ii) Conformed copy of Amendment to Articles of
Incorporation (6);
(iii) Conformed copy of Amended and Restated Articles
of Incorporation of Federated Municipal
Opportunities Fund, Inc. (10);
(iv) Conformed copy of Federated Municipal Opportunities
Fund, Inc. Certificate of Correction (10);
(2) Copy of Amended and Restated By-Laws of the Registrant (10);
(3) Not applicable;
(4) (i) Specimen Certificate for Class A Shares (10);
(ii) Specimen Certificate for Class B
Shares (10); (iii) Specimen Certificate for
Class C Shares (10);
(iv) Specimen Certificate for Class F Shares (10);
(5) Conformed copy of the Investment Advisory Contract of the
Registrant (4);
(6) (i) Conformed copy of Distributor's Contract of the
Registrant (10);
(ii) Conformed copy of Exhibits A through C to the
Distributor's Contract (10);
(iii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual Funds
Sales and Service Agreement; Mutual Funds
Service Agreement and Plan Trustee/Mutual
Funds Service Agreement from Item 24(b)6 of
the Cash Trust Series II Registration
Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos.
33-38550 and 811-6269);
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant (8);
+ All exhibits have been filed electronically.
........
1. Response is incorporated by reference to Registrant's Initial Registration
Amendment No. 1 filed January 21, 1987. (File Nos. 33-11410 and 811-4533)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 filed August 25, 1989. (File Nos. 33-11410 and 811-4533)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 filed October 24, 1990. (File Nos. 33-11410 and 811-4533)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-4533)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed October 25, 1996. (File Nos. 33-11410 and 811-4533)
<PAGE>
(9) (i) Conformed copy of Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services, and
Custody Services Procurement (9);
(ii) Conformed copy of Shareholder Services Agreement (7);
(iii) The responses described in Item 24(b)6 are hereby incorporated
by reference;
(10) Conformed copy of Opinion and Consent of Counsel as to legality of
shares being registered (8);
(11) Conformed copy of Consent of Independent Auditor (10);
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (8);
(14) Not applicable;
(15) (i) Conformed copy of Distribution Plan as amended (10);
(ii)...The responses described in Item 24(b)6 are hereby incorporated
by reference;
(16) Copy of Schedule for Computation of Yield Calculation (8);
(17) Copy of Financial Data Schedules (+);
(18) The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment
Series, Inc. Registration Statement on Form N-1A,
filed with the Commission on January 26, 1996.(File Nos. 33-52149 and
811-07141);
(19) Conformed copy of Power of Attorney (+).
+ All exhibits have been filed electronically.
........
7. Repsonse incorporated by reference to Registrant's Post-Effective Amendment
No. 10 filed October 26, 1994. (File Nos. 33-11410 and 811-4533)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-4533)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 filed May 3, 1996. (File Nos. 33-11410 and 811-4533)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed October 25, 1996. (File Nos. 33-11410 and 811-4533)
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of September 8, 1997
-------------- ------------------------
Shares of capital stock
($0.001 per Share par value)
Class A Shares 2,686
Class B Shares 664
Class C Shares 324
Class F Shares 8,270
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled "Fund Information -
Management of the Fund" in Part A. The affiliations with the
Registrant of four of the Directors and four of the Officers
of the investment adviser and their business addresses are
included in Part B of this Registration Statement under
"Federated Municipal Opportunities Fund, Inc. Management". The
remaining Director of the investment adviser, his position
with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson,
Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware
19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Peter R. Anderson
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Randall S. Bauer
David F. Belton
David A. Briggs
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
1. Response is incorporated by reference to Registrant's Initial Registration
Amendment No. 1 filed January 21, 1987. (File Nos. 33-11410 and 811-4533)
<PAGE>
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Marian R. Marinack
Sandra L. McInerney
Robert J. Ostrowski
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Assistant Vice Presidents: Todd A. Abraham
Stefanie L. Bachhuber
Arthur J. Barry
Micheal W. Casey
Robert E. Cauley
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Robert M. Marsh
Joseph M. Natoli
Keith J. Sabol
Michael W. Sirianni
Gregg S. Tenser
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment
adviser is Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority
of the investment advisers to the Funds listed in Part B of
this Registration Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the Registrant,
also acts as principal underwriter for the following open-end investment
companies: 111 Corcoran Funds; Arrow Funds; Automated Government Money
Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government
Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund;
Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund
for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; SouthTrust
Vulcan Funds; Star Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Planters Funds; The Virtus Funds; The Wachovia Funds; The
Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Director and
Federated Investors Tower Executive Officer, Chief Vice President
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not applicable.
<PAGE>
Item 30. 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.................................. Federated Investors Tower
..............Pittsburgh, PA 15222-3779
Federated Shareholder
Services Company.......................... Federated Investors Tower
("Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent")
Federated Services.......................... Federated Investors Tower
Company Pittsburgh, PA 15222-3779
("Administrator")
Federated Advisers.......................... Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust................. P.O. Box 8600
Company Boston, MA 02266-8600
("Custodian")
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of Directors and the
calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., has duly caused this Amendment to its 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
10th day of September, 1997.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
September 10, 1997
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Matthew S. Hardin
Matthew S. Hardin Attorney In Fact September 10, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
John W. McGonigle* Executive Vice President,Treasurer
and Secretary
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC. and the Deputy General Counsel of Federated Services
Company, and each of them, their true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for them and in their names,
place and stead, in any and all capacities, to sign any and all documents to be
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of
1940, by means of the Securities and Exchange Commission's electronic disclosure
system known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director September 9, 1997
- ---------------------------
John F. Donahue (Chief Executive
Officer)
/s/Richard B. Fisher President and September 9, 1997
- ---------------------------
Richard B. Fisher Director
/s/John W. McGonigle Treasurer, Executive September 9, 1997
- ---------------------------
John W. McGonigle Vice President and
Secretary (Principal
Financial and
Accounting Officer)
/s/Thomas G. Bigley Director September 9, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Director September 9, 1997
- ---------------------------
John T. Conroy, Jr.
<PAGE>
SIGNATURES TITLE DATE
/s/William J. Copeland Director September 9, 1997
William J. Copeland
/s/Jamed E. Dowd Director September 9, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director September 9, 1997
- ---------------------------
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director September 9, 1997
- ---------------------------
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director September 9, 1997
Peter E. Madden
/s/Gregor F. Meyer Director September 9, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Director September 9, 1997
- ---------------------------
John E. Murray, Jr.
/s/Wesley W. Posvar Director September 9, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Director September 9, 1997
Marjorie P. Smuts
Sworn to and subscribed before me this 9th day of September, 1997
/s/Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
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<SERIES>
<NUMBER> 001
<NAME> Federated Municipal Opportunities Fund, Inc.
Class A Shares
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-END> Aug-31-1996
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</TABLE>
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<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> Federated Municipal Opportunities Fund, Inc.
Class B Shares
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 379,738,281
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<NET-CHANGE-IN-ASSETS> (42,980,463)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> Federated Municipal Opportunities Fund, Inc.
Class C Shares
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<INVESTMENTS-AT-COST> 379,738,281
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<NAME> Federated Municipal Opportunities Fund, Inc.
Class F Shares
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