FEDERATED MUNICIPAL OPPORTUNITIES FUND INC, 485BPOS, 1997-10-31

FEDERATED MUNICIPAL OPPORTUNITIES FUND INC
485BPOS, 1997-10-31

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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

Pre-Effective Amendment No. ...._____

Post-Effective Amendment No. 18 ...__X__

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__

Amendment No. 17 ...__X__

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)
X on October 31, 1997, pursuant to paragraph (b)
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>

Copies to: Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
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. NFORMATION 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...................(1-4) Financial Highlights; (1-4) Performance Information.
Item 4. General Description of
Registrant....................(1-3) Synopsis; (1-4) 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) Reducing Risks of
Lower-Rated Securities;(1-4) Investment Limitations; (1-4)
Other Classes of Shares.
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) Distribution
Plan and Shareholder Services; (1-4) Supplemental Payments to Financial
Institutions; (1-4) Administration of the Fund.
Item 6. Capital Stock and Other
Securities....................(1-4) Dividends and Distributions; (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; (1-4)
Investing in the
Fund; (1-4)
Purchasing Shares;
(1-4) Purchasing
Shares Through a
Financial
Intermediary;
(1-4) Purchasing
Shares by Wire;
(1-4) Purchasing
Shares by Check;
(1-4) Eliminating
the Sales
Charge;(1-4)
Systematic
Investment
Program; (1) Class
A Shares; (2)
Class B Shares;
(3) Class C
Shares; (1-4)
Confirmations and
Account
Statements.
Item 8. Redemption or Repurchase.......(1-4) Redeeming and Exchanging Shares; (1-4) Redeeming Shares through
a Financial Intermediary; (1-4) Redeeming or Exchanging Shares by
Telephone; (1-4) Redeeming or Exchanging Shares by Mail; (1-4)
Requirements for Redemption; (1-4) Requirements for Exchange; (1-4) Systematic
Withdrawal Program; (1-4) Contingent Deferred Sales Charge; (1-4) Account and
Share Information;(1-4) Accounts With Low Balances.
Item 9. Pending Legal Proceedings......None.

<PAGE>

PART B. NFORMATION 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; (1-4) About Federated
Investors.
Item 13. Investment Objectives and
Policies.......................(1-4) Investment Objective and Policies; (1-4) Investment Limitations.
Item 14. Management of the Fund (1-4) Federated Municipal Opportunities Fund, Inc. Management;
(1-4) Directors Compensation.
Item 15. Control Persons and Principal
Holders of Securities (1-4) Fund Ownership.
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; (1-4)
Redeeming Shares.
Item 20. Tax Status......................(1-4) Shareholders' Tax Status.
Item 21. Underwriters....................Filed in Part A, Item 5 (1-3 Distribution of Fund Shares; (4)
Distribution of Class F Shares.
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............Financial Statements incorporated by reference to Registrant's Annual
Report dated August 31, 1997. (File Nos. 33-11410 and 811-4533)

</TABLE>

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

The shares of Federated Municipal Opportunities Fund, Inc. (the "Fund")
represent interests in a diversified, open-end, 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
October 31, 1997, 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 NOR HAS THE SECURITIES AND EXCHANGE PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated October 31, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1

Financial Highlights -- Class A Shares 2

Financial Highlights -- Class B Shares 3

Financial Highlights -- Class C Shares 4

General Information 5
Calling the Fund 5

Investment Information 5
Investment Objective 5
Investment Policies 5
Investment Risks 7
Reducing Risks of Lower-Rated Securities 7

Investment Limitations 8

Net Asset Value 8

Investing in the Fund 8

Purchasing Shares 9
Purchasing Shares Through a
Financial Intermediary 9
Purchasing Shares by Wire 9
Purchasing Shares by Check 9
Systematic Investment Program 9
Class A Shares 10
Class B Shares 10
Class C Shares 10

Redeeming and Exchanging Shares 10
Redeeming or Exchanging Shares Through a

Financial Intermediary 10
Redeeming or Exchanging Shares by Telephone 11
Redeeming or Exchanging Shares by Mail 11
Requirements for Redemption 11
Requirements for Exchange 11

Systematic Withdrawal Program 11
Contingent Deferred Sales Charge 12

Account and Share Information 12
Confirmations and Account Statements 12
Dividends and Distributions 12

Accounts with Low Balances 12/R>

Fund Information 13
Management of the Fund 13
Distribution of Fund Shares 13
Distribution Plan and Shareholder Services 14
Supplemental Payments to Financial Institutions 14

Administration of the Fund 14

Administrative Services 14

Shareholder Information 15

Tax Information 15
Federal Income Tax 15
State and Local Taxes 15

Performance Information 16

Other Classes of Shares 16

Appendix 16

SUMMARY OF FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>

CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage
of offering price) None None None
Contingent Deferred Sales Charge (as a percentage of original
purchaseprice or redemption proceeds, as applicable) None 5.50%(2) 1.00%(4)
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)

Management Fee 0.60% 0.60% 0.60%
12b-1 Fee 0.00%(1) 0.75% 0.75%
Total Other Expenses 0.49% 0.49% 0.51%
Shareholder Services Fee 0.25% 0.25% 0.25%
Total Operating Expenses 1.09% 1.84%(3) 1.86%

</TABLE>

(1) The Class A Shares has no present intention of paying or accruing
the 12b-1 fee during the fiscal year ending August 31, 1998. If
the Fund were paying or accruing the 12b-1 fee, the Fund would be
able to pay up to 0.25% of its average daily net assets for the
12b-1 fee. See "Fund Information."

(2) The contingent deferred sales charge is 5.50% in the first year
declining to 1.00% in the sixth year and 0.00%
thereafter. (See "Contingent Deferred Sales Charge").

(3) Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase.

(4) The contingent deferred sales charge assessed is 1.00% of the
lesser of the original purchase price or the net asset
value of shares redeemed within one year of their purchase
date. For a more complete description, see "Redeeming
Class C Shares".

The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of
Class A Shares of the Fund will bear, either directly or indirectly.
For more complete descriptions of the various costs
and expenses, see "Investing in Class A Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000
may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT
OF THE MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER
THE RULES OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.

EXAMPLE CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------- -------- -------- --------
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual
return, (2) redemption at the end of each time period, and (3) payment of the maximum
sales charge.
<S> <C> <C> <C>
1 year $ 56 $ 75 $ 29
3 years $ 78 $102 $ 58
5 years $102 $123 $100
10 years $172 $195 $216

You would pay the following expenses on the same investment, assuming no redemption.

1 year $ 19 $ 19
3 years $ 58 $ 58
5 years $100 $100
10 years $195 $216

</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS -- CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP,
the Fund's independent auditors. Their report dated October 13, 1997,
on the Fund's financial statements for the year ended
August 31, 1997, and on the following table for each of the periods
presented, is included in the Annual Report dated August 31, 1997,
which is incorporated by reference. This table should be read in
conjunction with the fund's financial statements and notes thereto, which
may be obtained from the Fund.

YEAR ENDED
AUGUST 31,
-----------------------
1997 1996(A)
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.33 $10.42
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.58 0.08
- -------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.33 (0.12)
- ------------------------------------------------------------------- ------- -------
Total from investment operations 0.91 (0.04)
- ------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Distributions from net investment income (0.57) (0.05)
- -------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.67 $10.33
- ------------------------------------------------------------------- ------- -------
TOTAL RETURN(B) 9.07% (0.36%)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 1.09% 0.84%*
- -------------------------------------------------------------------
Net investment income 5.29% 6.15%*
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $94,941 $296
- -------------------------------------------------------------------
Portfolio turnover 20% 22%
- -------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of
initial public offering) to August 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED
IN THE FUND'S ANNUAL REPORT, DATED AUGUST 31, 1997, WHICH CAN BE
OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS -- CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the
Fund's independent auditors. Their report dated October 13, 1997, on
the Fund's financial statements for the year ended August 31, 1997,
and on the following table for each of the periods
presented, is included in the Annual Report dated August 31, 1997,
which is incorporated by reference. This table should be read in
conjunction with the fund's financial statements and notes thereto,
which may be obtained from the Fund.

YEAR ENDED
AUGUST 31,
-----------------------
1997 1996(A)
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.33 $10.42
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.51 0.08
- -------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.31 (0.12)
- ------------------------------------------------------------------- ------- -------
Total from investment operations 0.82 (0.04)
- ------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Distributions from net investment income (0.49) (0.05)
- ------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.66 $10.33
- ------------------------------------------------------------------- ------- -------
TOTAL RETURN(B) 8.17% (0.36%)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 1.84% 0.84%*
- -------------------------------------------------------------------
Net investment income 4.55% 6.15%*
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $14,997 $296
- -------------------------------------------------------------------
Portfolio turnover 20% 22%
- -------------------------------------------------------------------

</TABLE>

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED AUGUST 31, 1997, WHICH CAN BE OBTAINED
FREE OF CHARGE.

FINANCIAL HIGHLIGHTS -- CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the
Fund's independent auditors. Their report dated October 13, 1997, on
the Fund's financial statements for the year ended August 31, 1997,
and on the following table for each of the periods presented, is
included in the Annual Report dated August 31, 1997, which is
incorporated by reference. This table should be read in conjunction
with the fund's financial statements and notes thereto, which may
be obtained from the Fund.

YEAR ENDED
AUGUST 31,
-----------------------
1997 1996(A)
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.33 $10.42
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.50 0.08
- -------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.32 (0.12)
- ------------------------------------------------------------------- ------- -------
Total from investment operations 0.82 (0.04)
- ------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Distributions from net investment income (0.49) (0.05)
- ------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.66 $10.33
- ------------------------------------------------------------------- ------- -------
TOTAL RETURN(B) 8.17% (0.36%)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 1.86% 0.84%*
- -------------------------------------------------------------------
Net investment income 4.51% 6.15%*
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,950 $296
- -------------------------------------------------------------------
Portfolio turnover 20% 22%
- -------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of
initial public offering) to August 31, 1996.
(b) Based on net asset value, which does not reflect the sales
charge or contingent deferred sales charge, if applicable.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN
THE FUND'S ANNUAL REPORT, DATED AUGUST 31, 1997, WHICH CAN BE
OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on
November 26, 1986.

Class A Shares, Class B Shares and Class C Shares of the Fund ("Shares")
are designed for individuals as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio of municipal
bonds.

The Fund's current net asset value and offering price may be found in
the mutual funds section of local newspapers under "Federated" and the
appropriate class designation listing.

CALLING THE FUND

Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

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 ("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.

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. The Fund intends to
purchase inverse floaters to assist in duration management and to seek
current income. 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. Typically, the portion of the portfolio invested
in inverse floaters will be subject to additional volatility.

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 municipal securities, 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.

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.

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 invest more than 5% of its total assets in securities
of one issuer (except cash and cash items and U.S. government
obligations).

NET ASSET VALUE

The Fund's net asset value ("NAV") per Share fluctuates and is based on
the market value of all securities and other assets of the Fund. The NAV
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.

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund.
The NAV is determined as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) every day the New York Stock
Exchange is open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the
characteristics described below.

CLASS A CLASS B CLASS C
---------- ------------ ------------
Minimum and Subsequent $500/$100 $1500/$100 $1500/$100
Investment Amounts
Minimum and Subsequent NA NA NA
Investment Amount
for Retirement Plans
Maximum Sales Charge 4.50%* None None
Maximum Contingent None 5.50% 1.00%#
Deferred Sales
Charge**
Conversion Feature*** No Yes No

* Class A Shares are sold at NAV, plus a sales charge as follows:

SALES CHARGE
AS A PERCENTAGE OF DEALER
----------------------- CONCESSION AS
PUBLIC NET A PERCENTAGE OF
OFFERING AMOUNT PUBLIC OFFERING
AMOUNT OF TRANSACTION PRICE 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 million 2.00% 2.04% 1.80%
$1 million or greater 0.00% 0.00% 0.25%

** Computed on the lesser of the NAV of the redeemed Shares at the time
of purchase or the NAV of the redeemed Shares at the time of
redemption.

The following contingent deferred sales charge schedule applies to
Class B Shares:

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 B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase. See "Conversion
of Class B Shares."

# The contingent deferred sales charge is assessed on Shares redeemed
within one year of their purchase date.

PURCHASING SHARES

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 intermediary (such as a bank or broker/dealer) or by
sending a wire or check directly to the Fund. Financial intermediaries
may impose different minimum investment requirements on their customers.
An account must be established with a financial intermediary or by
completing, signing, and returning the new account form available from
the Fund before Shares can be purchased. Shareholders in certain other
funds advised and distributed by affiliates of Federated Investors
("Federated Funds") may exchange their Shares for Shares of the
corresponding class of the Fund. The Fund reserves the right to reject
any purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time
to time, offer certain items of nominal value to any shareholder or
investor.

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY

Orders placed through a financial intermediary are considered received
when the Fund is notified of the purchase order or when payment is
converted into federal funds. Purchase orders through a 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 intermediaries must be received by the financial
intermediary 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 intermediary's responsibility to transmit orders promptly.
Financial intermediaries may charge fees for their services.

The financial intermediary 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 intermediaries
may be subject to reclaim by the distributor for accounts transferred to
financial intermediaries which do not maintain investor accounts on a
fully disclosed basis and do not account for share ownership periods.

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is
considered received when State Street 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 02266-8600;
Attention; EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund
Number -- this number can be found on the account statement or by
contacting the Fund); 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.

PURCHASING SHARES BY CHECK

Shares may be purchased by mailing a check made payable to the name of
the Fund (designate class of Shares and account number) to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check
is received).

SYSTEMATIC INVESTMENT PROGRAM

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. Shareholders should contact
their financial intermediary or the Fund to participate in this program.

CLASS A SHARES

Class A Shares are sold at NAV, plus a sales charge. However:

NO SALES CHARGE IS IMPOSED FOR CLASS A SHARES PURCHASED:

* through financial intermediaries that do not receive sales charge
dealer concessions;

* by Federated Life Members who maintain a $500 minimum balance in at
least one of the Federated Funds; or

* through "wrap accounts" or similar programs under which clients pay a
fee for services.

IN ADDITION, THE SALES CHARGE CAN BE REDUCED OR ELIMINATED BY:

* purchasing in quantity and accumulating purchases at the levels in the
table under "Investing in the Fund";

* combining concurrent purchases of two or more funds;

* signing a letter of intent to purchase a specific quantity of shares
within 13 months; or

* using the reinvestment privilege.

Consult a financial intermediary or Federated Securities Corp. for
details on these programs. In order to eliminate the sales charge or
receive sales charge reductions, Federated Securities Corp. must be
notified by the shareholder in writing or by a financial intermediary at
the time of purchase.

DEALER CONCESSION

For sales of Class A Shares, the distributor will normally offer to pay
a dealer 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. 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 establishment of customer accounts and
purchases of Shares.

CLASS B SHARES

Class B Shares are sold at NAV. Under certain circumstances, a
contingent deferred sales charge will be assessed at the time of a
redemption. Orders for $250,000 or more of Class B Shares will
automatically be invested in Class A Shares.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares after
eight full years from the purchase date. Such conversion will be on the
basis of the relative NAVs per Share, without the imposition of any
charges. Class B Shares acquired by exchange from Class B Shares of
another Federated Fund will convert into Class A Shares based on the
time of the initial purchase.

CLASS C SHARES

Class C Shares are sold at NAV. A contingent deferred sales charge of
1.00% will be charged on assets redeemed within the first full 12 months
following purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of
the same class of other Federated Funds on days on which the Fund
computes its NAV. Shares are redeemed at NAV less any applicable
contingent deferred sales charge. Exchanges are made at NAV.
Shareholders who desire to automatically exchange Shares, of a like
class, in a pre-determined amount on a monthly, quarterly, or annual
basis may take advantage of a systematic exchange privilege. Information
on this privilege is available from the Fund or your financial
intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

REDEEMING OR EXCHANGING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of the Fund may be redeemed or exchanged by contacting your
financial intermediary before 4:00 p.m. (Eastern time). In order for
these transactions to be processed at that day's NAV, financial
intermediaries (other than broker/dealers) must transmit the request to
the Fund before 4:00 p.m. (Eastern time), while broker/dealers must
transmit the request to the Fund before 5:00 p.m. (Eastern time). The
financial intermediary is responsible for promptly submitting
transaction requests and providing proper written instructions.
Customary fees and commissions may be charged by the financial
intermediary for this service. Appropriate authorization forms for these
transactions must be on file with the Fund.

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms
for these transactions must be on file with the Fund. Shares held in
certificate form must first be returned to the Fund as described in the
instructions under "Redeeming or Exchanging Shares by Mail." Redemption
proceeds will either be mailed in the form of a check to the
shareholder's address of record or wire-transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal
Reserve System, normally within one business day, but in no event more
than seven days, after the redemption request. 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.

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 or
Exchanging Shares By Mail" should be considered. The telephone
transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

REDEEMING OR EXCHANGING SHARES BY MAIL

Shares may be redeemed in any amount, or exchanged, by mailing a written
request to: Federated Shareholder Services Company, Fund Name, Share
Class, P.O. Box 8600, Boston, MA 02266-8600. If share certificates have
been issued, they must accompany the written request. It is recommended
that certificates be sent unendorsed by registered or certified mail.

All written requests should state: Fund Name and the Share Class name;
the account name as registered with the Fund; the account number; and
the number of Shares to be redeemed or the dollar amount of the
transaction. An exchange request should also state the name of the Fund
into which the exchange is to be made. All owners of the account must
sign the request exactly as the Shares are registered. A check for
redemption proceeds is normally mailed within one business day, but in
no event more than seven days, after receipt of a proper written
redemption request. Dividends are paid up to and including the day that
a redemption or exchange request is processed.

REQUIREMENTS FOR REDEMPTION

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.

REQUIREMENTS FOR EXCHANGE

Shareholders must exchange Shares having an NAV equal to the minimum
investment requirements of the fund into which the exchange is being
made. Contact your financial intermediary directly or the Fund for free
information on and prospectuses for the Federated Funds into which your
Shares may be exchanged. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.

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. Signature guarantees will be
required to exchange between fund accounts not having identical
shareholder registrations. The exchange privilege may be modified or
terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder.

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 intermediary or by
calling the Fund.

Because participation in this program may reduce, and eventually deplete
the shareholder's investment in the Fund, payments under this program
should not be considered as yield or income. It is not advisable for
shareholders to continue to purchase Class A Shares subject to a sales
charge while participating in this program. A contingent deferred sales
charge may be imposed on Class B and C Shares.

CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be deducted from the
redemption proceeds otherwise payable to the shareholder and will be
retained by the distributor. 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. The contingent deferred sales
charge will not be imposed with respect to Shares acquired through the
reinvestment of dividends or distributions of long-term capital gains.
In determining the applicability of the contingent deferred sales
charge, the required holding period for your new Shares received through
an exchange will include the period for which your original Shares were
held.

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

Upon written notification to Federated Securities Corp. or the transfer
agent, no contingent deferred sales charge will be imposed on
redemptions:

* following the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, of the last surviving shareholder;

* 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;

* which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;

* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;

* which are reinvested in the Fund under the reinvestment privilege;

* 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 intermediary that sells Shares of the Fund
pursuant to a sales agreement with the distributor, and their immediate
family members to the extent that no payments were advanced for
purchases made by these persons; and

* of Shares originally purchased through a bank trust department, an
investment adviser registered under the Investment Advisers Act of 1940
or retirement plans where the third party administrator has entered into
certain arrangements with Federated Securities Corp. or its affiliates,
or any other financial intermediary, to the extent that no payments were
advanced for purchases made through such entities.

For more information regarding the elimination of the contingent
deferred sales charge through a Systematic Withdrawal Program, or any of
the above provisions, contact your financial intermediary or the Fund.
The Fund reserves the right to discontinue or modify these provisions.
Shareholders will be notified of such action.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

Shareholders will receive detailed confirmations of transactions (except
for systematic program transactions). In addition, shareholders will
receive periodic statements reporting all account activity, including
dividends paid. The Fund will not issue share certificates.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid monthly to all shareholders invested in
the Fund on the record date. Net long-term capital gains realized by the
Fund, if any, will be distributed at least once every twelve months.
Dividends and distributions are automatically reinvested in additional
Shares of the Fund on payment dates at the ex-dividend date without a
sales charge, unless shareholders request cash payments on the new
account form or by contacting the transfer agent.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund
may close an account by redeeming all Shares and paying the proceeds to
the shareholder if the account balance falls below the applicable
minimum investment amount. Retirement plan accounts and accounts where
the balance falls below the minimum due to NAV changes will not be
closed in this manner. Before an account is closed, the shareholder will
be notified and allowed 30 days to purchase additional Shares to meet
the minimum.

FUND INFORMATION

MANAGEMENT OF THE FUND

DIRECTORS

The Fund is managed by the Board of 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
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.

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 $110 billion
invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 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 4,500 financial institutions
nationwide.

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.

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.

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 0.25%, 0.75% and 0.75%, 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 0.75% 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 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 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
- ---------- ------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% 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.

SHAREHOLDER INFORMATION

Each Share of the Fund gives the shareholder one vote in Director
elections and other matters submitted to shareholders for vote. All
Shares of each portfolio or class in the Fund have equal voting rights,
except that in matters affecting only a particular portfolio or class,
only Shares of that portfolio or class are entitled to vote.

Directors may be removed by the Directors or shareholders at a special
meeting. A special meeting of shareholders shall be called by the
Directors upon the written request of shareholders owning at least 10%
of the Fund's outstanding Shares of all series entitled to vote.

As of October 6, 1997, the following shareholders of record owned 25% or
more of the outstanding Shares of the Fund: BHC Securities, Inc.,
Philadelphia, PA, owned approximately 137,433 Class C Shares (76.31%)
and Merrill Lynch Pierce, Fenner & Smith (as record owner holding Class
F Shares for its clients), Jacksonville, FL, owned approximately
8,038,548 Class F Shares (26.32%) 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.

TAX INFORMATION

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.

PERFORMANCE INFORMATION

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 SEC) 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.

OTHER CLASSES OF SHARES

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.

APPENDIX

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.

[LOGO OMITTED] FEDERATED INVESTORS

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

Class A Shares, Class B Shares,
Class C Shares

PROSPECTUS
OCTOBER 31, 1997

An Open-End, Diversified
Management Investment Company

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 Securities Corp., Distributor

Federated Investors Tower
Pittsburgh, PA 15222-3779

1-800-341-7400

WWW.federatedinvestors.com

Cusip 313910200
Cusip 313910309
Cusip 313910408

G00570-03 (10/97)

[RECYCLE LOGO]
RECYCLED PAPER

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

Class F Shares

PROSPECTUS

The Class F Shares of Federated Municipal Opportunities Fund, Inc. (the
"Fund") represent interests in a diversified, open-end, 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.

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
October 31, 1997, 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated October 31, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1

Financial Highlights -- Class F Shares 2

General Information 3
Calling the Fund 3

Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Risks 5
Reducing Risks of Lower-Rated Securities 5

Investment Limitations 6

Net Asset Value 6

Investing in the Fund 6

Purchasing Shares 7
Purchasing Shares Through a Financial Intermediary 7
Purchasing Shares by Wire 7
Purchasing Shares by Check 7
Systematic Investment Program 7

Eliminating the Sales Charge 7

Redeeming and Exchanging Shares 8
Redeeming or Exchanging Shares Through a
Financial Intermediary 8
Redeeming or Exchanging Shares by Telephone 8
Redeeming or Exchanging Shares by Mail 8
Requirements for Redemption 9
Requirements for Exchange 9
Systematic Withdrawal Program 9
Contingent Deferred Sales Charge 9

Account and Share Information 10
Confirmations and Account Statements 10
Dividends and Distributions 10
Accounts with Low Balances 10

Fund Information 10
Management of the Fund 10
Investment Adviser 10
Advisory Fees 10

Adviser's Background 10
Distribution of Class F Shares 11
Distribution Plan and Shareholder Services 11
Supplemental Payments to Financial Institutions 11

Administration of the Fund 12

Shareholder Information 12

Tax Information 12
Federal Income Tax 12
State and Local Taxes 13

Performance Information 13

Other Classes of Shares 13

Appendix 14

SUMMARY OF FUND EXPENSES -- CLASS F SHARES
<TABLE>
<CAPTION>

SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)(1) 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)

Management Fee 0.60%
12b-1 Fee(2) 0.00%
Total Other Expenses 0.48%
Shareholder Services Fee (after waiver)(3) 0.24%
Total Operating Expenses(4) 1.08%

</TABLE>

(1) The contingent deferred sales charge is 1.00% of the lesser of
the original purchase price or the net asset value of shares
redeemed within four years of their purchase date. For a more
complete description see "Contingent Deferred Sales Charge."

(2) The Fund has no present intention of paying or accruing the
12b-1 fee during the fiscal year ending August 31, 1998. If
the Fund were paying or accruing the 12b-1 fee, the Fund would
be able to pay up to 0.25% of its average daily net assets for
the 12b-1 fee. See "Fund Information."

(3) The shareholder services fee has been reduced to reflect the
voluntary waiver of a portion of the shareholders services fee.
The shareholder services provider can terminate the voluntary
waiver at any time at its sole discretion. The maximum
shareholder services fee is 0.25%.

(4) The total operating expenses would have been 1.09% absent the
voluntary waiver of a portion of the shareholder services fee.

The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of Class F Shares
of the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see
"Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT
OF THE MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER
THE RULES OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.

EXAMPLE
- ---------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return, redemption
at the end of each time period, and payment of the maximum sales charge.

<S> <C>
1 year $ 31
3 years $ 55
5 year $ 69
10 years $140

You would pay the following expenses on the same investment, assuming no redemption.

1 year $ 21
3 years $ 44
5 year $ 69
10 years $140

</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.

FINANCIAL HIGHLIGHTS -- CLASS F SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP,
the Fund's independent auditors. Their report dated October
13, 1997 on the Fund's financial statements for the year ended
August 31, 1997, and on the following table for each of the
periods presented, is included in the Annual Report dated August 31, 1997,
which is incorporated by reference. This table should be read in
conjunction with the fund's financial statements and notes thereto,
which may be obtained from the Fund.

YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.33 $10.71 $10.56 $11.28 $10.78 $10.39 $10.00 $10.23 $9.76 $10.07
- ---------------------
INCOME FROM
INVESTMENT OPERATIONS
- ---------------------
Net investment
income 0.54 0.69 0.63 0.61 0.62 0.66 0.70 0.72 0.74 0.78
- ---------------------
Net realized and
unrealized gain
(loss) on investments 0.37 (0.42) 0.15 (0.73) 0.51 0.39 0.40 (0.23) 0.49 (0.36)
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations 0.91 0.27 0.78 (0.12) 1.13 1.05 1.10 0.49 1.23 0.42
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------
Distributions from net
investment income (0.57) (0.65) (0.63) (0.60) (0.63) (0.66) (0.71) (0.72) (0.76) (0.73)
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $10.67 $10.33 $10.71 $10.56 $11.28 $10.78 $10.39 $10.00 $10.23 $9.76
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN(A) 9.07% 2.47% 7.73% (1.06%) 10.86% 10.45% 11.37% 4.98% 13.09% 4.43%
- ---------------------
RATIOS TO AVERAGE
NET ASSETS
- ---------------------
Expenses 1.08% 1.08% 1.08% 1.09% 1.09% 1.05% 1.02% 1.01% 0.90% 1.02%
- ---------------------
Net investment
income 5.23% 5.91% 6.18% 5.56% 5.65% 6.18% 6.86% 7.07% 7.27% 8.03%
- ---------------------
Expense waiver/
reimbursement(b) 0.01% 0.01% 0.00% 0.00% 0.00% 0.14% 0.33% 0.39% 0.83% 0.70%
- ---------------------
SUPPLEMENTAL DATA
- ---------------------
Net assets, end of
period (000 omitted) $331,588 $383,028 $426,010 $472,232 $458,331 $248,768 $135,628 $89,907 $62,501 $25,151
- ---------------------
Portfolio turnover 20% 22% 13% 27% 7% 14% 18% 24% 24% 34%
- ---------------------

</TABLE>

(a) Based on net asset value, which does not reflect the sales
charge or contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED
IN THE FUND'S ANNUAL REPORT, DATED AUGUST 31, 1997, WHICH CAN
BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on
November 26, 1986. Class F Shares of the Fund ("Shares") are designed
for individuals as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio of municipal bonds.

The Fund's current net asset value and offering price may be found in
the mutual funds section of local newspapers under "Federated" and the
appropriate class designation listing.

CALLING THE FUND

Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

CHARACTERISTICS

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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

FINANCIAL FUTURES

RISKS

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

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

PORTFOLIO TURNOVER

MUNICIPAL BONDS

INVESTMENT RISKS

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.

REDUCING RISKS OF LOWER-RATED SECURITIES

CREDIT RESEARCH

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:

The Fund will not invest more than 5% of its total assets in securities
of one issuer (except cash and cash items and U.S. government
obligations).

NET ASSET VALUE

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The
NAV is determined as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) every day the New York Stock
Exchange is open.

INVESTING IN THE FUND

This prospectus offers Class F Shares with the characteristics described
below.

CLASS F
--------------
Minimum and Subsequent Investment Amount $1,500/$100
Minimum and Subsequent Investment Amount for NA
Retirement Plans
Maximum Sales Charge* 1.00%
Maximum Contingent Deferred Sales Charge** 1.00%

* This is 1.01% of the net amount invested. There is no sales charge
for purchases of $1 million or more. In addition, no sales charge is
imposed for Shares purchased through certain entities or programs.
Please see the section entitled "Eliminating the Sales Charge."

** Computed on the lesser of the NAV of the redeemed Shares at the time
of purchase or the NAV of the redeemed Shares at the time of redemption.

The following contingent deferred sales charge schedule applies to Class
F Shares:

CONTINGENT
DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
- ------------------------ ---------------- ------------
Up to $1,999,999 Four Years or less 1.00%
$2,000,000 to $4,999,999 Two Years or less 0.50%
$5,000,000 or more One Year or less 0.25%

PURCHASING SHARES

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 intermediary (such as a bank or broker/dealer) or by
sending a wire or check directly to the Fund. Financial intermediaries
may impose different minimum investment requirements on their customers.
An account must be established with a financial intermediary or by
completing, signing, and returning the new account form available from
the Fund before Shares can be purchased. Shareholders in Class F Shares
of certain other funds advised and distributed by affiliates of
Federated Investors ("Federated Funds") may exchange their Shares for
Class F Shares of the Fund. The Fund reserves the right to reject any
purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time
to time, offer certain items of nominal value to any shareholder or
investor.

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY

The financial intermediary which maintains investor accounts in Class F
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 intermediaries may be
subject to reclaim by the distributor for accounts transferred to
financial intermediaries which do not maintain investor accounts on a
fully disclosed basis and do not account for share ownership periods.

PURCHASING SHARES BY WIRE

PURCHASING SHARES BY CHECK

SYSTEMATIC INVESTMENT PROGRAM

ELIMINATING THE SALES CHARGE

Class F Shares are sold at NAV, plus a sales charge. However:

NO SALES CHARGE IS IMPOSED FOR CLASS F SHARES PURCHASED:

* through bank trust departments or investment advisers
registered under the Investment Advisers Act of 1940 purchasing on
behalf of their clients;

by sales representatives, Directors, and employees of the Fund, Federated
Advisers, Federated Securities Corp. or their affiliates and their immediate
family members;

* by any investment dealer who has a sales agreement with Federated
Securities Corp. and their immediate family members, or by any trusts or
pension or profit-sharing plans for these persons.

IN ADDITION, THE SALES CHARGE CAN BE ELIMINATED BY:

* purchasing in quantity and accumulating purchases;

* combining concurrent purchases of two or more funds;

* signing a letter of intent to purchase a specific quantity of
shares within 13 months; or

* using the reinvestment privilege.

DEALER CONCESSION

For sales of Shares, the distributor will normally offer to pay dealers
up to 100% of the sales charge. Any portion of the sales charge which is
not paid to a dealer will be retained by the distributor.

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 establishment of customer
accounts and purchases of Shares.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Class F
Shares of other Federated Funds on days on which the Fund computes its
NAV. Shares are redeemed at NAV less any applicable contingent deferred
sales charge. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like Share class, in a pre-
determined amount on a monthly, quarterly, or annual basis may take
advantage of a systematic exchange privilege. Information on this
privilege is available from the Fund or your financial intermediary.
Depending upon the circumstances, a capital gain or loss may be realized
when Shares are redeemed or exchanged.

REDEEMING OR EXCHANGING SHARES THROUGH A FINANCIAL INTERMEDIARY

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

REDEEMING OR EXCHANGING SHARES BY MAIL

REQUIREMENTS FOR REDEMPTION

REQUIREMENTS FOR EXCHANGE

Shareholders must exchange Shares having a NAV equal to the minimum
investment requirements of the fund into which the exchange is being
made. Contact your financial intermediary directly or the Fund for free
information on, and prospectuses for, the Federated Funds into which
your Shares may be exchanged. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder. 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 intermediary or by
calling the Fund.

Because participation in this program may reduce, and eventually
deplete, the shareholder's investment in the Fund, payments under this
program should not be considered as yield or income. It is not advisable
for shareholders to continue to purchase Class F Shares subject to a
sales charge while participating in this program. A contingent deferred
sales charge will be imposed on Shares redeemed through this program
within four years of their purchase dates.

CONTINGENT DEFERRED SALES CHARGE

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

Upon written notification to Federated Securities Corp. or the transfer
agent, no contingent deferred sales charge will be imposed on
redemptions:

* following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;

* representing a total or partial distribution from an Individual
Retirement Account, Keogh Plan, or a custodial account to a shareholder
who has attained the age of 70 1/2;

* representing a total or partial distribution from a qualified
plan, other than an individual Retirement Account, Keogh Plan, or a
custodial account following retirement;

* which are involuntary redemptions of shareholder accounts that
do not comply with the minimum balance requirements;

* which are reinvested in the Fund under the reinvestment privilege;

* 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 intermediary that sells Shares of the Fund pursuant to a
sales agreement with the distributor, and their immediate family members
to the extent that no payments were advanced for purchases made by these
persons; and

* of Shares originally purchased through a bank trust department, an
investment adviser registered under the Investment Advisers Act of 1940
or retirement plans where the third party administrator has entered
into certain arrangements with Federated Securities Corp. or its
affiliates, or any other financial intermediary, to the extent that no
payments were advanced for purchases made through such entities.

For more information regarding the contingent deferred sales charge or
any of the above provisions, contact your financial intermediary or the
Fund. The Fund reserves the right to discontinue or modify these
provisions. Shareholders will be notified of such action.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid monthly to all shareholders invested in
the Fund on the record date. Net long-term capital gains realized by the
Fund, if any, will be distributed at least once every twelve months.
Dividends and distributions are automatically reinvested in additional
Shares of the Fund on payment dates at the ex-dividend date NAV without
a sales charge, unless shareholders request cash payments on the new
account form or by contacting the transfer agent.

ACCOUNTS WITH LOW BALANCES

FUND INFORMATION

MANAGEMENT OF THE FUND

DIRECTORS

INVESTMENT ADVISER

Both the Fund 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
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.

ADVISER'S BACKGROUND

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.

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.

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 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 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%.
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 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

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
---------- --------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

Directors may be removed by the Directors or by shareholders at a
special meeting. A special meeting of shareholders shall be called by
the Directors upon the written request of shareholders owning at least
10% of the Fund's outstanding shares of all series entitled to vote.

As of October 6, 1997, the following shareholders of record owned 25% or
more of the outstanding Shares of the Fund: BHC Securities, Inc.,
Philadelphia, PA, owned approximately 137,433 Class C Shares (76.31%);
and Merrill Lynch Pierce Fenner & Smith (as record owner holding Class F
Shares for its clients), Jacksonville, Florida, owned approximately
8,038,548 Class C Shares (26.32%) 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.

TAX INFORMATION

FEDERAL INCOME 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

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return, yield, and tax-
equivalent yield for Class F Shares including Class A Shares, Class B
Shares, and Class C 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 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 SEC) 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.

APPENDIX

MUNICIPAL BOND RATING DEFINITIONS

STANDARD & POOR'S

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.

MOODY'S INVESTORS SERVICE, INC.

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.

[LOGO OMITTED] FEDERATED INVESTORS

FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.

Class F Shares

PROSPECTUS
OCTOBER 31, 1997

A Diversified, Open-End,

Management Investment Company

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class F 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 Securities Corp., Distributor

Federated Investors Tower
Pittsburgh, PA 15222-3779

1-800-341-7400

WWW.federatedinvestors.com

Cusip 313910101

G00570-02-F (10/97)

[RECYCLE LOGO]
RECYCLED PAPER

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 October 31, 1997. 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 October 31, 1997

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.

Cusips 313910200
313910309
313910408
313910101
8092709B (10/97)

<PAGE>

Table of Contents

<PAGE>

General Information About the Fund 1

Investment Objective and Policies 1

Acceptable Investments 1
When-Issued and Delayed Delivery Transactions 1
Futures Transactions 1
Temporary Investments 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Portfolio Turnover 2
Investment Limitations 3

Federated Municipal Opportunities Fund, Inc.
Management 6
Fund Ownership 10
Directors Compensation 10
Director Liability 11
Investment Advisory Services 11

Adviser to the Fund 11
Advisory Fees 11
Brokerage Transactions 11

Other Services 11

Fund Administration 11
Custodian and Portfolio Accountant 12
Transfer Agent 12
Independent Auditors 12
Purchasing Shares 12

Quantity Discounts and Accumulated
Purchases 12
Concurrent Purchases 12
Letter of Intent 13
Reinvestment Privilege 13
Conversion of Class B Shares 13
Distribution Plan and Shareholder Services 13
Conversion to Federal Funds 14
Purchases by Sales Representatives, Fund
Directors, and Employees 14

Determining Net Asset Value 14

Valuing Municipal Bonds 14
Use of Amortized Cost 14
Redeeming Shares 15

Redemption in Kind 15
Contingent Deferred Sales Charge 15
Tax Status 16

The Fund's Tax Status 16
Shareholders' Tax Status 16
Total Return 16

Yield 16

Tax-Equivalent Yield 17

Tax-Equivalency Table 17
Performance Comparisons 19

Economic and Market Information 19
About Federated Investors 19

Financial Statements 20

<PAGE>

General Information About the Fund

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. As of March 31, 1996, the Fund changed its name 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.

Investment Objective and Policies

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 ("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
municipal securities, 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. 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, 1997, and
August 31, 1996, the portfolio turnover rates were 20% and 22%, respectively.

<PAGE>

Investment Limitations

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. Industrial development bonds backed only by
the assets and revenues of a non-governmental user are considered to be
issued solely by that user.

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.

Criteria for Liquidity of Restricted Securities

The ability of the 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>

Federated Municipal Opportunities Fund, Inc. Management
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
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934

Director

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

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; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Funds.

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

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, 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.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924

Director

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942

Director

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA
Birthdate: October 6, 1926

Director

Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Retired from
the law firm of Miller, Ament, Henny & Kochuba; 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; 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; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Director

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

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 , Secretary and Treasurer

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; 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; 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; 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; WesMark Funds; and World Investment Series, Inc.

<PAGE>

Fund Ownership

Officers and Directors own less than 1% of the Fund's outstanding shares.

As of October 6, 1997, there were no Class A shareholders owning 5% or more of
the Fund.

As of October 6, 1997, the following shareholders of record owned 5% or more of
the outstanding Class B Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, owned
approximately 79,533 shares (5.11%).

As of October 6, 1997, the following shareholders of record owned 5% or more of
the outstanding Class C Shares of the Fund: BHC Securities, Inc. owned
approximately 137,434 shares (76.31%), Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, owned
approximately 11,465 shares (6.37%).

As of October 6, 1997, the following shareholders of record owned 5% or more of
the outstanding Class F Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, owned
approximately 8,038,549 shares (26.32%).

Directors Compensation

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +

John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 56 other investment companies in the Fund Complex
Thomas G. Bigley $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1496.00 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
William J. Copeland $1496.00 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
James E. Dowd $1496.00 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1360.00 $108,725 for the Corporation and
Director 56 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. $1496.00 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
Peter E. Madden $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Gregor F. Meyer $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
John E. Murray, Jr. $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Wesley W. Posvar $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1360.00 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex

</TABLE>

*Information is furnished for the fiscal year ended August 31, 1997.

#The aggregate compensation is provided for the Corporation which is comprised
of one portfolio.

+The information is provided for the last calendar year.

<PAGE>

Director Liability

The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.

Investment Advisory Services

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, 1997, 1996, and 1995, the Fund's Adviser earned $2,610,540,
$2,475,132, and $2,576,669, respectively.

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 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, 1997, 1996, and 1995, 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.

Other Services

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 and Federated
Administrative Services may hereinafter collectively be referred to as the
"Administrators." For the fiscal years ended August 31, 1997, 1996, and 1995,
the Administrators earned $328,575, $311,976, and $325,090. 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.

Purchasing Shares

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 "Investing in the Fund" and "Purchasing Shares."

Quantity Discounts and Accumulated Purchases

As described in the prospectuses, larger purchases reduce or eliminate the sales
charge paid. The Fund will combine purchases of Class A Shares and Class F
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 and Class F 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%.

In addition, the Fund will also combine purchases for the purpose of reducing
the contingent deferred sales charge imposed on Class F Share redemptions. For
example, if a shareholder already owns Class F Shares having current value at
the 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 Class F Shares.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the purchase is made that Class A Shares or Class F Shares are already
owned or that purchases are being combined. The Fund will reduce or eliminate
the sales charge after it confirms the purchases.

Concurrent Purchases

For purposes of qualifying for a sales charge reduction or elimination, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares or Class F Shares of two or more funds for which affiliates of Federated
Investors serve as investment adviser and principal underwriter (the "Federated
Funds"), the purchase prices of which include a sales charge. For example, if a
shareholder concurrently invested $30,000 in the Class A Shares of one 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 or elimination, Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
intermediary at the time the concurrent purchases are made. The Fund will reduce
or eliminate 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 or at
least $1 million of Class F Shares of 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% (in the
case of Class A Shares) or 1.00% (in the case of Class F Shares) 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
sales charge.

The letter of intent for Class F Shares 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.

While this letter of intent will not obligate the shareholder to purchase Class
A Shares or Class F 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 or Class F Shares of any Federated Funds, excluding money market
accounts, will be aggregated to provide a purchase credit towards fulfillment of
the letter of intent. The letter may be dated as of a prior date to include any
purchase made within the past 90 days. Prior trade prices will not be adjusted.

Reinvestment Privilege

The reinvestment privilege is available for all Shares of the Fund. If Class A
Shares in the Fund have been redeemed, the shareholder has the privilege, within
120 days, to reinvest the redemption proceeds at the next-determined net asset
value without any sales charge. Similarly, shareholders who redeem Class B
Shares, Class C Shares or Class F Shares may be reinvested in the same Share
class within 120 days but would not be entitled to a reimbursement of the
contingent deferred sales charge if paid at the time of redemption. However,
such reinvested shares would not be subject to a contingent deferred sales
charge upon later redemption. In addition, if the Class B, Class C or Class F
Shares were reinvested through a financial intermediary, the financial
intermediary would not be entitled to an advanced payment from Federated
Securities Corp. on the reinvested Shares. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary of the
reinvestment in order to eliminate a sales charge or a contingent deferred sales
charge. If the shareholder redeems Shares in the Fund, there may be tax
consequences.

Conversion of Class B Shares

Class B Shares will automatically convert into Class A Shares on or around the
15th of the month eight full years from the purchase date and will no longer be
subject to a fee under the distribution plan. 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 a 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.

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, 1997, the Fund paid distribution fees on
behalf of Class B and Class C Shares in the amounts of $60,402 and $10,616,
respectively. In addition, for this period, the Fund paid shareholder services
fees on behalf of Class A Shares, Class B Shares, Class C Shares, and Class F
Shares in the amounts of $170,894, $20,118, $3,539, and $893,271, respectively.
The Fund waived shareholder services fees in the amount of $26,976 for Class F
Shares.

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 Shareholders Services acts as the shareholder's agent
in depositing checks and converting them to federal funds.

Purchases by Sales Representatives, Fund Directors, and Employees

The following individuals and their immediate family members may buy Class A
Shares and Class F Shares at net asset value without a sales charge:

o Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. and its affiliates;

o Federated Life Members (Class A Shares only); and

o any associated person of an investment dealer who has a sales agreement
with Federated Securities Corp. Shares may also be sold without a sales
charge to trusts, pensions, or profit-sharing plans for these individuals.

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.

Determining Net Asset Value

The Fund's net asset value per Share fluctuates and is based on the market value
of all securities and other assets of the Fund. The net asset value for each
class of Shares may differ due to the variance in daily net income realized by
each class.

Net asset value is not determined 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, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

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.

Redeeming Shares

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 "Redeeming and Exchanging 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.

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.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.

Contingent Deferred Sales Charge

In computing the amount of the applicable contingent deferred sales charge for
shares subject to a holding period, 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, one full year from the date
of purchase with respect to Class C Shares, and four full years from the date of
purchase with respect to Class F Shares; (3) Shares held for fewer than six
years with respect to Class B Shares, for less than one full year from the date
of purchase with respect to Class C Shares, and less than four full years from
the date of purchase with respect to Class F Shares, on a first-in, first-out
basis.

Elimination of the Contingent Deferred Sales Charge--Class B Shares

To qualify for elimination of the contingent deferred sales charge
through a Systematic Withdrawal Program, the redemptions of Class B
Shares must be from an account that is at least 12 months old, has all
Fund distributions reinvested in Fund Shares, and has an account value
of at least $10,000 when the Systematic Withdrawal Program is
established. Qualifying redemptions may not exceed 1.00% monthly of the
account value as periodically determined by the Fund. The amounts that
a shareholder may withdraw under a Systematic Withdrawal Program that
qualify for elimination of the contingent deferred sales charge may not
exceed 12% annually with reference initially to the value of the Class
B Shares upon establishment of the Systematic Withdrawal Program and
then as calculated at the annual valuation date. Redemptions on a
qualifying Systematic Withdrawal Program can be made at a rate of 1.00%
monthly, 3.00% quarterly, or 6.00% semi-annually with reference to the
applicable account valuation amount. Amounts that exceed the 12.00%
annual limit for redemption, as described, may be subject to the
contingent deferred sales charge. To the extent that a shareholder
exchanges Shares for Class B Shares of other 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 12-month holding requirement. However, for purposes of
meeting the $10,000 minimum account value requirement, Class B Share
accounts will be not be aggregated. Any Shares purchased prior to the
termination of this program would have the contingent deferred sales
charge eliminated as provided in the Fund's prospectus at the time of
the purchase of the Shares.

Tax Status

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 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.

Total Return

The Fund's average annual total returns based on offering price for the
following periods ended August 31, 1997 were:

Date of Initial
Public
Share Class Investment One-Year Five-Years Ten-Years Since Inception

Class A 8/5/96 4.13% -- -- 3.54%
Class B 8/5/96 2.39% -- -- 2.64%
Class C 8/5/96 7.16% -- -- 7.26%
Class F 4/10/87 7.01% 5.50% 7.14% 7.22%

</TABLE>

The average annual total return for all classes 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 offering price 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 a quarterly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investments based
on the lesser of the original purchase price or the offering price of Shares
redeemed.

Yield

The Fund's yields for the thirty-day period ended August 31, 1997, were:

Share Class Yield

Class A 4.30%
Class B 3.75%
Class C 3.75%
Class F 4.46%

The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the SEC) earned by any class of
Shares over a thirty-day period by the maximum offering price per Share of any
class of Shares on the last day of the period. This value is then 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
twelve-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by any class of Shares 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 any class
of Shares, the performance will be reduced for those shareholders paying those
fees.

Tax-Equivalent Yield

The Fund's tax-equivalent yields for the thirty-day period ended August 31,
1997, were:

Share Class Yield

Class A 5.97%
Class B 5.21%
Class C 5.21%
Class F 6.19%

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 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.

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:

15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $41,201- $99,601- $151,751- OVER

RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER

RETURN 24,650 59,750 124,650 271,050 $271,050

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% 12.42%

8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
</TABLE>

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.

<PAGE>

Performance Comparisons

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.

About Federated Investors

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.

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. These traders handle trillions of dollars
in annual trading volume.

In the municipal sector, as of December 31, 1996, Federated Investors managed 12
bond funds with approximately $2.0 billion in assets and 21 money market funds
with approximately $9.5 billion in total assets. In 1976, Federated introduced
one of the first municipal bond mutual funds in the industry and is now one of
the largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

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.

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 Timothy C. Pillion, Senior 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.

Financial Statements

The Financial Statements for the fiscal year ended August 31, 1997, are
incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1997 (File Nos. 33-11410 and 811-4533). A copy of this
report may be obtained without charge by contacting the Fund.

*Source: Investment Company Institute

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:

(a) Financial Statements incorporated by reference to Registrant's Annual
Report dated August 31, 1997. (File Nos. 33-11410 and 811-4533);
(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) copy of
Specimen Certificate for Class A Shares
(10);
(ii) copy of Specimen Certificate for Class B Shares
(10);
(iii) copy of Specimen Certificate for Class
C Shares (10);
(iv) copy of 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;

+ 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)

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>

(8) (i) Conformed copy of Custodian Agreement
of the Registrant (8); (ii) Conformed copy
of Custodian Fee Schedule(+);
(9) (i) Conformed copy of Agreement for Fund
Accounting Services, Administrative
Services, Transfer Agency Services, and
Custody Services Procurement (9); (ii)
Conformed copy of Amended and Restated
Shareholder Services Agreement (+);
(iii) The responses described in Item 24(b)(6)(iii)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 Auditors (+);
(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)(iii)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); and
(19) Conformed copy of Power of Attorney (11).

+ All exhibits have been filed electronically.

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)

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 filed September 10, 1997. (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 October 6, 1997

Shares of capital stock
($0.001 per Share par value)

Class A Shares 2,721
Class B Shares 685
Class C Shares 324
Class F Shares 8,353

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

Robert J. Ostrowski

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)

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

Edward C. Gonzales

James E. Grefenstette

Susan R. Hill

Stephen A. Keen

Robert K. Kinsey

Robert M. Kowit

Jeff A. Kozemchak

Steven Lehman

Marian R. Marinack

Sandra L. McInerney

Charles A. Ritter

Scott B. Schermerhorn

Frank Semack

Aash M. Shah

Christopher Smith

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

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.

(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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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>

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., certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 28th day of October, 1997.

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
October 28, 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 October 28, 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

John E. Murray, Jr.* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

* By Power of Attorney

Exhibit 8(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. s-k

STATE STREET
DOMESTIC CUSTODY

FEE SCHEDULE

Federated Funds

I. Custody Services

Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate actions.

ANNUAL FEES

ASSET

Per Fund .25 Basis Points

Wire Fees $3.00 per wire

Settlements:

oEach DTC Transaction $5.00
oEach Federal Reserve Book Entry Transaction $3.75
oEach Repo Transaction (All Repo) $3.75
oEach Physical Transaction (NY/Boston, Private Placement) $15.00
oEach Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
oGovernment Paydowns $5.00
oMaturity Collections $8.00
oPTC Transactions $6.00

II. Special Services

Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.

III. Balance Credit

Municipal Funds

A balance credit equal to 75% of the average demand deposit account balance
in the custodian account for the month billed times the 30 day T-Bill Rate
on the last Monday of the month billed, will be applied against the month's
custodian bill.

Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.

IV. Payment

The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.

V. Term of Contract

The parties agree that this fee schedule shall become effective January
1, 1997.

FEDERATED SERVICES COMPANY STATE STREET

BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty

TITLE: Senior Vice President TITLE: Vice President

DATE: April 15, 1997 DATE: April 8, 1997

Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. s-k

Amended and Restated
SHAREHOLDER SERVICES AGREEMENT

THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved this
form of Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").

1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of
accounts of shareholders of the Funds ("Services"). In addition to
providing Services directly to shareholders of the Funds, FSS is hereby
appointed the Funds' agent to select, negotiate and subcontract for the
performance of Services. FSS hereby accepts such appointments. FSS
agrees to provide or cause to be provided Services which, in its best
judgment (subject to supervision and control of the Funds' Boards of
Trustees or Directors, as applicable), are necessary or desirable for
shareholders of the Funds. FSS further agrees to provide the Funds,
upon request, a written description of the Services which FSS is
providing hereunder.

2. During the term of this Agreement, each Fund will pay FSS and FSS
agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable
monthly, up to 0.25% of 1% of average net assets of each Fund.

For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that
this Agreement is in effect with respect to such Fund during the month.

3. This Agreement shall continue in effect for one year from the date of
its execution, and thereafter for successive periods of one year only
if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund ("Independent Board
Members") cast in person at a meeting called for that purpose.

4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:

(a) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;

(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940; and

(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to
terminate.

5. FSS agrees to obtain any taxpayer identification number certification
from each shareholder of the Funds to which it provides Services that
is required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Fund or its
designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.

6. FSS shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or
agent of any Fund, shall be deemed, when rendering services to such
Fund or acting on any business of such Fund (other than services or
business in connection with the duties of FSS hereunder) to be
rendering such services to or acting solely for such Fund and not as an
officer, trustee, partner, employee or agent or one under the control
or direction of FSS even though paid by FSS.

This Section 6 shall survive termination of this Agreement.

7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.

8. FSS is expressly put on notice of the limitation of liability as set
forth in the Declaration of Trust of each Fund that is a Massachusetts
business trust and agrees that the obligations assumed by each such
Fund pursuant to this Agreement shall be limited in any case to such
Fund and its assets and that FSS shall not seek satisfaction of any
such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.

9. The execution and delivery of this Agreement have been authorized by
the Trustees of FSS and signed by an authorized officer of FSS, acting
as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the
trust property of FSS as provided in the Declaration of Trust of FSS.

10. Notices of any kind to be given hereunder shall be in writing
(including facsimile communication) and shall be duly given if
delivered to any Fund and to such Fund at the following address:
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President and if delivered to FSS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.

11. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written. If any provision of this Agreement
shall be held or made invalid by a court or regulatory agency decision,
statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. Subject to the provisions of Sections 3 and 4,
hereof, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall
be governed by Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the Investment Company
Act of 1940 or any rule or regulation promulgated by the Securities and
Exchange Commission thereunder.

12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.

13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may
assign to a successor all of or a substantial portion of its business
to a party controlling, controlled by, or under common control with
such party. Nothing in this Section 14 shall prevent FSS from
delegating its responsibilities to another entity to the extent
provided herein.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.

Investment Companies
(listed on Exhibit 1)

Attest: /s/John W. McGonigle By: /s/ John F. Donahue
John W. McGonigle John F. Donahue
Secretary Chairman

Federated Shareholder Services

Attest: /s/ Joseph M Huber By: /s/ John W. McGonigle
Secretary President

<PAGE>

Exhibit 1 Exhibit 1

Amended and Restated Shareholder Services Agreement
Automated Government Money Trust
Cash Trust Series, Inc.:
Government Cash Series
Municipal Cash Series
Prime Cash Series
Treasury Cash Series
Federated Adjustable Rate U.S. Government Fund, Inc.
Federated American Leaders Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated ARMs Fund
Institutional Service Shares
Institutional Shares
Federated Equity Funds:
Federated Aggressive Growth Fund
Class A Shares
Class B Shares
Class C Shares
Federated Capital Appreciation Fund
Class A Shares
Class B Shares
Class C Shares
Federated Growth Strategies Fund
Class A Shares
Class B Shares
Class C Shares
Federated Small Cap Strategies Fund
Class A Shares
Class B Shares
Class C Shares

Amended and Restated Shareholder Services Agreement
Federated Equity Income Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated Fund for U.S. Government Securities, Inc.
Class A Shares
Class B Shares
Class C Shares
Federated GNMA Trust
Institutional Service Shares
Institutional Shares
Federated Government Income Securities, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated Government Trust"
Automated Government Cash Reserves
Automated Treasury Cash Reserves
U.S. Treasury Cash Reserves
Institutional Service Shares
Institutional Shares
Federated High Income Bond Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Federated High Yield Trust
Federated Income Securities Trust:
Federated Short-Term Income Fund
Institutional Service Shares
Institutional Shares
Federated Intermediate Income Fund
Institutional Service Shares
Institutional Shares
Amended and Restated Shareholder Services Agreement
Federated Income Trust
Institutional Service Shares
Institutional Shares
Federated Index Trust:
Federated Max-Cap Fund
Class C Shares
Institutional Service Shares
Institutional Shares
Federated Mid-Cap Fund
Federated Mini-Cap Fund
Class C shares
Institutional Shares
Federated Institutional Trust:
Federated Institutional Short-Term Government Fund
Federated Investment Trust:
Federated Bond Index Fund
Institutional Shares
Institutional Service Shares
Federated Master Trust
Federated Municipal Opportunities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares

<PAGE>

Amended and Restated Shareholder Services Agreement
Federated Municipal Trust:
Alabama Municipal Cash Trust
California Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Connecticut Municipal Cash Trust
Institutional Service Shares
Florida Municipal Cash Trust
Cash II Shares
Institutional Shares
Georgia Municipal Cash Trust
Maryland Municipal Cash Trust
Massachusetts Municipal Cash Trust
Institutional Service Shares
Boston 1784 Funds Shares
Michigan Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Minnesota Municipal Cash Trust
Cash Series Shares
Institutional Shares
New Jersey Municipal Cash Trust
Institutional Service Shares
Institutional Shares
New York Municipal Cash Trust
Cash II Shares
Institutional Service Shares
North Carolina Municipal Cash Trust
Ohio Municipal Cash Trust
Cash II Shares
Institutional Shares
Institutional Service Shares

Amended and Restated Shareholder Services Agreement

Pennsylvania Municipal Cash Trust
Cash Series Shares
Institutional Service Shares
Institutional Shares
Tennessee Municipal Cash Trust
Institutional Shares
Institutional Service Shares
Virginia Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Federated Short-Term Municipal Trust
Institutional Service Shares
Institutional Shares
Federated Short-Term U.S. Government Trust
Federated Stock and Bond Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Federated Stock Trust
Federated Tax-Free Trust
Amended and Restated Shareholder Services Agreement
Federated U.S. Government Bond Fund
Federated U.S. Government Securities Fund: 1-3 Years
Institutional Service Shares
Institutional Shares
Federated U.S. Government Securities Fund: 2-5 Years
Institutional Service Shares
Institutional Shares
Federated U. S. Government Securities Fund: 5-10 Years
Institutional Service Shares
Institutional Shares

Amended and Restated Shareholder Services Agreement

Fixed Income Securities, Inc.:
Federated Limited Term Fund
Class A Shares
Class F Shares
Federated Limited Term Municipal Fund
Class A Shares
Class F Shares
Federated Strategic Income Fund
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated Total Return Series, Inc.:
Federated Limited Duration Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Bond Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Limited Duration Fund
Institutional Shares
Institutional Service Shares
Federated Utility Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Intermediate Municipal Trust:
Federated Intermediate Municipal Trust
Federated Ohio Intermediate Municipal Trust
Federated Pennsylvania Intermediate Municipal Trust
Amended and Restated Shareholder Services Agreement
International Series, Inc.:
Federated International Equity Fund
Class A Shares
Class B Shares
Class C Shares
Federated International Income Fund
Class A Shares
Class B Shares
Class C Shares
Investment Series Funds, Inc.:
Federated Bond Fund
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Edward D. Jones & Co. Daily Passport Cash Trust
Liberty Term Trust, Inc. -- 1999
Liberty U.S. Government Money Market Trust
Class A Shares
Class B Shares
Liquid Cash Trust
Managed Series Trust:
Federated Aggressive Growth Fund
Institutional Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Shares
Select Shares
Federated Managed Growth Fund
Institutional Shares
Select Shares
Federated Managed Income Fund
Institutional Shares
Select Shares
Money Market Management, Inc.
Amended and Restated Shareholder Services Agreement
Money Market Obligations Trust:
Automated Cash Management Trust
Cash II Shares
Institutional Shares
Government Obligations Fund
Institutional Shares
Institutional Service Shares
Government Obligations Tax-Managed Fund
Institutional Shares
Institutional Service Shares
Prime Obligations Fund
Institutional Shares
Institutional Service Shares
Tax-Free Obligations Fund
Institutional Shares
Institutional Service Shares
Treasury Obligations Fund
Institutional Capital Shares
Institutional Shares
Institutional Service Shares
Money Market Obligations Trust II:
Municipal Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Cash Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Value Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Money Market Trust

Amended and Restated Shareholder Services Agreement

Municipal Securities Income Trust:
Federated California Municipal Income Fund
Class F Shares
Federated Michigan IntermediateMunicipal Trust
Federated New York Municipal Income Fund
Class F Shares
Federated Ohio Municipal Income Fund
Class F Shares
Federated Pennsylvania Municipal Income Fund
Class A Shares
Class B Shares
Tax-Free Instruments Trust
Institutional Service Shares
Investment Shares
Trust for Government Cash Reserves
Trust for Short-Term U.S. Government Securities
Trust for U.S. Treasury Obligations
Amended and Restated Shareholder Services Agreement
World Investment Series, Inc.:
Federated Asia Pacific Growth Fund
Class A Shares
Class B Shares
Class C Shares
Federated Emerging Markets Fund
Class A Shares
Class B Shares
Class C Shares
Federated European Growth Fund
Class A Shares
Class B Shares
Class C Shares

Amended and Restated Shareholder Services Agreement

Federated International Growth Fund
Class A Shares
Class B Shares
Class C Shares
Federated International High Income Fund
Class A Shares
Class B Shares
Class C Shares
Federated International Small Company Fund
Class A Shares
Class B Shares
Class C Shares
Federated Latin American Growth Fund
Class A Shares
Class B Shares
Class C Shares
Federated World Utility Fund
Class A Shares
Class B Shares
Class C Shares
Class F Shares

<PAGE>

Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. s-k

DELOITTE & TOUCHE LLP

INDEPENDENT AUDITOR'S CONSENT

To the Board of Trustees and Shareholders of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.:

We consent to the use in Post-Effective Amendment No. 18 to Registration
Statement (No. 33-11410) of Federated Municipal Opportunities Fund, Inc. of our
report dated October 13, 1997, incorporated by reference in the Prospectus,
which is a part of such Registration Statement, and to the reference to us under
the heading "Financial Highlights" in such Prospectus.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
October 28, 1997

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated Municipal Opportunity Fund, Inc.
Class A Shares

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 426,324,868
<INVESTMENTS-AT-VALUE> 439,296,266
<RECEIVABLES> 8,095,466
<ASSETS-OTHER> 54,061
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 447,445,793
<PAYABLE-FOR-SECURITIES> 3,041,320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 929,157
<TOTAL-LIABILITIES> 3,970,477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,354,246
<SHARES-COMMON-STOCK> 8,898,734
<SHARES-COMMON-PRIOR> 29
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 205,035
<ACCUMULATED-NET-GAINS> (9,645,293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,971,398
<NET-ASSETS> 94,940,632
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,505,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,790,994
<NET-INVESTMENT-INCOME> 22,714,689
<REALIZED-GAINS-CURRENT> 2,206,486
<APPREC-INCREASE-CURRENT> 16,489,543
<NET-CHANGE-FROM-OPS> 41,410,718
<EQUALIZATION> 21,898
<DISTRIBUTIONS-OF-INCOME> 3,383,555
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,958,171
<NUMBER-OF-SHARES-REDEEMED> 1,387,296
<SHARES-REINVESTED> 226,565
<NET-CHANGE-IN-ASSETS> 60,446,138
<ACCUMULATED-NII-PRIOR> 773,562
<ACCUMULATED-GAINS-PRIOR> (10,340,450)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,610,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,817,970
<AVERAGE-NET-ASSETS> 433,656,848
<PER-SHARE-NAV-BEGIN> 10.330
<PER-SHARE-NII> 0.580
<PER-SHARE-GAIN-APPREC> 0.330
<PER-SHARE-DIVIDEND> 0.570
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.670
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> Federated Municipal Opportunity Fund, Inc.
Class B Shares

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 426,324,868
<INVESTMENTS-AT-VALUE> 439,296,266
<RECEIVABLES> 8,095,466
<ASSETS-OTHER> 54,061
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 447,445,793
<PAYABLE-FOR-SECURITIES> 3,041,320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 929,157
<TOTAL-LIABILITIES> 3,970,477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,354,246
<SHARES-COMMON-STOCK> 1,406,348
<SHARES-COMMON-PRIOR> 29
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 205,035
<ACCUMULATED-NET-GAINS> (9,645,293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,971,398
<NET-ASSETS> 14,996,896
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,505,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,790,994
<NET-INVESTMENT-INCOME> 22,714,689
<REALIZED-GAINS-CURRENT> 2,206,486
<APPREC-INCREASE-CURRENT> 16,489,543
<NET-CHANGE-FROM-OPS> 41,410,718
<EQUALIZATION> 21,898
<DISTRIBUTIONS-OF-INCOME> 342,071
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,566,410
<NUMBER-OF-SHARES-REDEEMED> 176,625
<SHARES-REINVESTED> 16,534
<NET-CHANGE-IN-ASSETS> 60,446,138
<ACCUMULATED-NII-PRIOR> 773,562
<ACCUMULATED-GAINS-PRIOR> (10,340,450)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,610,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,817,970
<AVERAGE-NET-ASSETS> 433,656,848
<PER-SHARE-NAV-BEGIN> 10.330
<PER-SHARE-NII> 0.510
<PER-SHARE-GAIN-APPREC> 0.310
<PER-SHARE-DIVIDEND> 0.490
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.660
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> Federated Municipal Opportunity Fund, Inc.
Class C Shares

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 426,324,868
<INVESTMENTS-AT-VALUE> 439,296,266
<RECEIVABLES> 8,095,466
<ASSETS-OTHER> 54,061
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 447,445,793
<PAYABLE-FOR-SECURITIES> 3,041,320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 929,157
<TOTAL-LIABILITIES> 3,970,477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,354,246
<SHARES-COMMON-STOCK> 182,884
<SHARES-COMMON-PRIOR> 29
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 205,035
<ACCUMULATED-NET-GAINS> (9,645,293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,971,398
<NET-ASSETS> 1,949,849
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,505,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,790,994
<NET-INVESTMENT-INCOME> 22,714,689
<REALIZED-GAINS-CURRENT> 2,206,486
<APPREC-INCREASE-CURRENT> 16,489,543
<NET-CHANGE-FROM-OPS> 41,410,718
<EQUALIZATION> 21,898
<DISTRIBUTIONS-OF-INCOME> 63,260
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 183,002
<NUMBER-OF-SHARES-REDEEMED> 5,613
<SHARES-REINVESTED> 5,466
<NET-CHANGE-IN-ASSETS> 60,446,138
<ACCUMULATED-NII-PRIOR> 773,562
<ACCUMULATED-GAINS-PRIOR> (10,340,450)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,610,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,817,970
<AVERAGE-NET-ASSETS> 433,656,848
<PER-SHARE-NAV-BEGIN> 10.330
<PER-SHARE-NII> 0.500
<PER-SHARE-GAIN-APPREC> 0.320
<PER-SHARE-DIVIDEND> 0.490
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.660
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> Federated Municipal Opportunity Fund, Inc.
Class F Shares

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 426,324,868
<INVESTMENTS-AT-VALUE> 439,296,266
<RECEIVABLES> 8,095,466
<ASSETS-OTHER> 54,061
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 447,445,793
<PAYABLE-FOR-SECURITIES> 3,041,320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 929,157
<TOTAL-LIABILITIES> 3,970,477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,354,246
<SHARES-COMMON-STOCK> 31,079,263
<SHARES-COMMON-PRIOR> 37,075,241
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 205,035
<ACCUMULATED-NET-GAINS> (9,645,293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,971,398
<NET-ASSETS> 331,587,939
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,505,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,790,994
<NET-INVESTMENT-INCOME> 22,714,689
<REALIZED-GAINS-CURRENT> 2,206,486
<APPREC-INCREASE-CURRENT> 16,489,543
<NET-CHANGE-FROM-OPS> 41,410,718
<EQUALIZATION> 21,898
<DISTRIBUTIONS-OF-INCOME> 19,546,786
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,147,025
<NUMBER-OF-SHARES-REDEEMED> 8,247,527
<SHARES-REINVESTED> 1,104,524
<NET-CHANGE-IN-ASSETS> 60,446,138
<ACCUMULATED-NII-PRIOR> 773,562
<ACCUMULATED-GAINS-PRIOR> (10,340,450)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,610,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,817,970
<AVERAGE-NET-ASSETS> 433,656,848
<PER-SHARE-NAV-BEGIN> 10.330
<PER-SHARE-NII> 0.540
<PER-SHARE-GAIN-APPREC> 0.370
<PER-SHARE-DIVIDEND> 0.570
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.670
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>