Federated Municipal Opportunities Fund, Inc.
11TH ANNUAL REPORT
AUGUST 31, 1997
ESTABLISHED 1987
PRESIDENT'S MESSAGE
[graphic]
Dear Fellow Shareholder:
Federated Municipal Opportunities Fund, Inc. was created in 1987, and
I am pleased to present the 11th annual report for the fund. This
report covers the twelve-month reporting period from September 1,
1996, through August 31, 1997. The fund's net assets total $443.4
million serving 12,000 shareholders.
It begins with a discussion with J. Scott Albrecht, Vice President,
Federated Advisers, who co-manages the fund with Mary Jo Ochson,
Senior Vice President, Federated Advisers.
Scott's comments cover the municipal market, the fund's performance,
and investment strategy. Following his discussion are three additional
items of shareholder interest. First is a series of graphs that
display the results of both lump sum and systematic investments in the
fund with dividends reinvested. Second is a complete listing of the
fund's municipal bond holdings. Third is the fund's financial
statements.
While federal tax reform proposals come and go, municipal bonds remain
the only practical way to protect your investment income from taxes.
Federated Municipal Opportunities Fund, Inc. has been providing
tax-free income* from a broadly diversified portfolio of long-term
municipal bonds since 1987. The fund's 30-day current net yield for
Class A Shares on August 31, 1997, was 4.30%** based on offering
price--free of federal regular income tax. This is the equivalent of a
7.12% yield on a taxable investment for an investor in the 39.60%
federal income tax bracket--and equivalent to taxable yields of 6.23%
and 6.71% for investors in the 31% and 36% tax brackets,
respectively.+
* State, local, and federal alternative minimum taxes may apply.
** Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
+ The 30-day current net yield on 8/31/97 for Class B, Class C, and
Class F Shares are 3.75%, 3.75%, and 4.46%, respectively. The taxable
yield equivalents, based on offering price, for investors in 39.6%,
36%, and 31% federal tax brackets, are as follows: Class B
Shares--6.21%, 5.86%, and 5.43%, respectively; Class C Shares--6.21%,
5.86%, and 5.43%, respectively; and Class F Shares--7.38%, 6.97%, and
6.46%, respectively.
Performance for the fund's share classes based on net asset value for the
year ended 8/31/97 follow.++
DISTRIBUTIONS
TOTAL FROM
RETURN INCOME SHARE PRICE GROWTH
Class A Shares 9.07% $0.570 $10.33 to $10.67 = 3.3%
Class B Shares 8.17% $0.493 $10.33 to $10.66 = 3.2%
Class C Shares 8.17% $0.493 $10.33 to $10.66 = 3.2%
Class F Shares 9.07% $0.570 $10.33 to $10.67 = 3.3%
At the end of the period, the fund's portfolio was invested across 141
tax-free securities issued by municipalities across 32 states and the
District of Columbia. The fund's top five holdings and their market
value were:
1. Indiana--Indianapolis Airport Authority $19.1 million
2. Utah--Intermountain Power Agency $18.3 million
3. District of Columbia Revenue Bonds $17.1 million
4. Illinois--Chicago O'Hare International Airport $15.3 million
5. Illinois Health Facilities Authority $11.4 million
Thank you for joining other shareholders of Federated Municipal
Opportunities Fund, Inc. in seeking monthly investment income free of
federal tax. Of course, you have the option of receiving income from
the fund or building your account by reinvesting your dividends and
compounding tax free.
Sincerely,
[Graphic]
Richard B. Fisher
President
October 15, 1997
++ Performance quoted reflects past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the period (based on offering price) for Class A, B, C,
and F Shares were 4.13%, 2.39%, 7.16%, and 7.01%, respectively.
INVESTMENT REVIEW
[Graphic]
J. Scott Albrecht
Vice President
Federated Advisers
[Graphic]
Mary Jo Ochson
Senior Vice President
Federated Advisers
[Graphic]
WHAT IS YOUR REVIEW OF THE MUNICIPAL BOND MARKET ENVIRONMENT DURING
THE FUND'S FISCAL YEAR?
The market environment for fixed-income investments in general and
municipal bonds, in particular, over the previous year has been
relatively favorable. Inflation and inflation expectations, which are
the major determinants of nominal interest rates, have continued to be
very well behaved. In fact, several inflation indicators have actually
suggested a deflationary environment for some markets. Municipal bond
yields, as represented by the Bond Buyer 40 Index,* peaked at 6.06%
early in the fiscal year (September 1996) and then began to trend
lower, ending the period at 5.55% on August 31, 1997. The potentially
biggest threat to the municipal bond market over the fiscal year was
the Taxpayer Relief Act of 1997. The impact on the municipal bond
market from the new tax legislation is much more benign than was
originally anticipated. Municipal bonds emerged essentially unscathed.
This favorable legislative treatment, combined with lower interest
rates, stable demand and a relatively limited supply of municipal
bonds, provided a firm market environment.
[Graphic]
WHY HAVE MUNICIPAL BONDS BEEN AMONG THE BETTER PERFORMING FIXED-INCOME
MARKETS?
There are several reasons for the municipal bond markets strong
relative performance this year. They have to do primarily with the
municipal markets technical position, or the supply of and demand for
municipal bonds. The demand for municipal bonds has been relatively
stable, mostly due to strong institutional demand from commercial
banks, property and casualty insurers, and arbitrageurs. Retail
buyers, or individuals, are the primary component of municipal bond
demand. Their participation in the market over the year has been mixed
but has been stable enough to provide an important foundation for
municipal bond prices.
* The Bond Buyer Index is a standard against which municipal bonds are
measured.
[Graphic]
IN THIS ENVIRONMENT, HOW DID FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PERFORM WITH RESPECT TO INVESTMENT RETURN OVER ITS FISCAL YEAR?
For the twelve-month period ended August 31, 1997, investors in
Federated Municipal Opportunities Fund, Inc. Class A, B, C, and F
Shares received competitive total returns of 9.07%, 8.17%, 8.17%, and
9.07%, respectively, based on net asset value.* In comparison, the
Lipper General Municipal Debt Fund Average total return based on net
asset value for the year was 8.83%.**
The fund's performance over the reporting period was driven by its
neutral duration target relative to its benchmark. The fund's core
position in premium, high coupon securities also provided positive
incremental return over the period. Also, sector selection was a very
important factor which had a positive impact on performance. Bonds
from the electric utility, health care, and transportation sectors
provided the best relative performance over the period.
[Graphic]
MONTHLY INCOME IS A PRIMARY CONSIDERATION FOR MANY INVESTORS. HOW DID THE
FUND PERFORM IN TERMS OF INCOME AND YIELD?
Tax-free dividends were above-average, totaling $0.570 per share for
Class A and F Shares, and $0.493 per share for Class B and C Shares.
The 30-day current net yield on August 31, 1997, was 4.30% for Class A
Shares, 3.75% for Class B Shares, 3.75% for Class C Shares, and 4.46%
for Class F Shares based offering price.+
The fund's Class A Shares' yield of 4.30% has taxable yield
equivalents of 7.12%, 6.71% and 6.23%, respectively, for investors in
the 39.6%, 36%, and 31% federal tax brackets.++
* Performance quoted reflects past performance and is not indicative
of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Total returns for the period
(based on offering price) for Class A, B, C, and F Shares were 4.13%,
2.39%, 7.16%, and 7.01%, respectively.
** Lipper figures represent the average of the total returns reported
by all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the category indicated. These figures do not
reflect sales charges.
+ Performance quoted represents past performance and is not indicative
of future results. Yield will vary. The 30-day current net yield is
calculated by dividing the net investment income per share for the 30
days ended on the date specified by the maximum offering price per
share on that date. Then, the figure is compounded and annualized.
++ The taxable yield equivalents, based on offering price, for
investors in 39.6%, 36%, and 31% federal tax brackets, are as follows:
Class B Shares--6.21%, 5.86%, and 5.43%, respectively; Class C
Shares--6.21%, 5.86%, and 5.43%, respectively; and Class F
Shares--7.38%, 6.97%, and 6.46%, respectively.
[Graphic]
AS WE NEAR THE END OF 1997, DO YOU FORESEE A FAVORABLE ENVIRONMENT
AHEAD FOR MUNICIPAL BOND INVESTORS?
In general, yes. Inflation should continue to be negligible as a
result of a high level of productivity in the U.S. economy,
international competition, new technology, and the assistance provided
by a relatively strong dollar. This reality should continue to provide
a relatively favorable environment for fixed-income investments. Also,
the supply of municipal bonds will continue to be somewhat constrained
by historical standards, which will provide a favorable technical
situation for the municipal market. Low inflation, stable demand and a
constrained supply of municipal bonds should provide a favorable
environment for municipal bonds going forward.
[Graphic]
WHAT CAUSED THE FUND'S MONTHLY DIVIDEND TO DECLINE?
During the last twelve months, the fund's net asset value per share
has increased from $10.33 to $10.67. As the price of tax-free bonds
increases, their yield declines. For example, the fund's Class F
Shares' 30-day yield has declined from 5.79% on August 31, 1996, to
4.46% on August 31, 1997. As a consequence of the reduced yield of its
portfolio, the fund's Class F Shares' monthly dividend was reduced
from $0.053 per share to $0.047 per share over the same period. The
annual dividend per share for each class of shares is contained in the
Financial Highlights tables.
The acquisition of two other mutual funds in December 1996 also
reduced the fund's yield. The average yield of the approximately $100
million of higher quality municipal bonds held by the acquired funds
was less than the average yield of the fund's portfolio prior to the
acquisition. Further, a restructuring of the fund was begun in the
third quarter of 1996. As a result, the proceeds from the sale of
several securities were reinvested in lower yielding bonds.
Finally, two bonds backed by office wastepaper to pulp recycling
projects were deemed non-income producing after the underlying
recycling facilities were shut down. The loss of income from these
bonds, which represents 2.3% of the fund's net assets at August 31,
1997, contributed to the reduction in the fund's tax-exempt income.
Both projects are in the process of being transferred to new owners
pursuant to bankruptcy court orders. We anticipate issuance of a
reduced principal amount of replacement bonds for these issues during
the next twelve months, at which time the fund will again accrue
income on these issues.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
INITIAL INVESTMENT:
IF YOU MADE AN INITIAL INVESTMENT OF $11,000 IN FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., CLASS F SHARES ON 4/10/87, REINVESTED YOUR
DIVIDENDS AND CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR
ACCOUNT WOULD BE WORTH $22,693 ON 8/31/97. YOU WOULD HAVE EARNED A
7.22% AVERAGE ANNUAL TOTAL RETURN FOR THE TEN-YEAR INVESTMENT LIFE
SPAN.*
One key to investing wisely is to reinvest all tax-free distributions
in fund shares. This increases the number of shares on which you can
earn future tax-free dividends, and you gain the benefit of
compounding tax free.
As of 9/30/97, the Class A Shares' average annual one-year and since
inception (8/5/96) total returns were 3.99% and 4.35%, respectively.
Class B Shares' average annual one-year and since inception (8/5/96)
total returns were 2.18% and 3.48%, respectively. Class C Shares'
average annual one-year and since inception (8/5/96) total returns
were 6.91% and 7.76%, respectively. Class F Shares' average annual
one-year, five-year, and ten-year total returns were 6.74%, 5.67%, and
7.56%, respectively.
[Graphic] - See Appendix (A)
* Total return represents the change in the value of an investment
after reinvesting all income and capital gains, and takes into account
the 1% sales charge and the 1% contingent deferred sales charge for
Class F Shares.
Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR ELEVEN YEARS (REINVESTING ALL DIVIDENDS AND
CAPITAL GAINS) GREW TO $16,009.
With this approach, the key is consistency.
If you had started investing $1,000 annually in Federated Municipal
Opportunities Fund, Inc., Class F Shares on 4/10/87, reinvested your
dividends and capital gains, and didn't redeem any shares, you would
have invested only $11,000, but your account would have reached a
total value of $16,009* by 8/31/97. You would have earned an average
annual total return of 6.84%.
A practical investment plan helps you pursue a high level of income
through tax-free municipal bonds. Through systematic investing, you
buy shares on a regular basis and reinvest all tax-free earnings. An
investment plan works for you even if you invest only $1,000 annually.
You can take it one step at a time. Put time, money, and compounding
to work!
[Graphic] - See Appendix (B)
* This chart assumes that the subsequent annual investments are made
on the last day of each anniversary month. No method of investing can
guarantee a profit or protect against loss in down markets. However,
by investing regularly over time and buying shares at various prices,
investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of
changing price levels, the investor should consider whether or not to
continue purchases through periods of low price levels.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
INVESTING FOR TAX-FREE MONTHLY INCOME
Fred and Margie Potter both work, and have no children. At the peak of
their careers, this tax-sensitive couple was seeking a way to keep
more of what they earn. On April 10, 1987, they invested $5,000 in
Federated Municipal Opportunities Fund, Inc., Class F Shares and
continue to invest $500 in the fund on the first of every month.
As this chart shows, since that time, their investment has grown -- on
a tax-free basis -- to $98,421 by August 31, 1997.* This represents a
6.80% average annual total return.+ For the Potters, the decision to
invest tax-free has made the future worth waiting for.
[Graphic] - See Appendix (C)
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
+ This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PORTFOLIO UPDATE
[Graphic] - See Appendix (D)
* Represents the credit quality of the fund's portfolio of investments
as rated by Standard & Poor's. These figures are reflected as a
percentage of total portfolio market value.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in
the Federated Municipal Opportunities Fund, Inc. (Class A Shares) from
8/5/96 (start of performance) to 8/31/97 compared to the Lehman
Brothers Revenue Bond Index (LBRBI).+
[Graphic] - See Appendix (E)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED,
THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY
INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus
$450 sales charge = $9,550). The fund's performance assumes the
reinvestment of all dividends and distributions. The LBRBI has been
adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges.
+ The LBRBI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. This
index is unmanaged.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000 in
the Federated Municipal Opportunities Fund, Inc. (Class B Shares) from
8/5/96 (start of performance) to 8/31/97 compared to the Lehman
Brothers Revenue Bond Index (LBRBI).+
[Graphic] - See Appendix (F)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED,
THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY
INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The
ending value of the fund reflects a 4.75% contingent deferred sales
charge on any redemption less than two years from the purchase date.
The maximum contingent deferred sales charge is 5.50% on any
redemption less than one year from the purchase date. The fund's
performance assumes the reinvestment of all dividends and
distributions. The LBRBI has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LBRBI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. This
index is unmanaged.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in
the Federated Municipal Opportunities Fund, Inc. (Class C Shares) from
8/5/96 (start of performance) to 8/31/97 compared to the Lehman
Brothers Revenue Bond Index (LBRBI).+
[Graphic] - See Appendix (G)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED,
THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY
INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The
ending value of the fund reflects a 1.00% contingent deferred sales
charge on any redemption less than one year from the purchase date.
The fund's performance assumes the reinvestment of all dividends and
distributions. The LBRBI has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LBRBI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. This
index is unmanaged.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS F SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(CLASS F SHARES)
The graph below illustrates the hypothetical investment of $10,000 in
the Federated Municipal Opportunities Fund, Inc. (Class F Shares) from
8/31/87 to 8/31/97 compared to the Lehman Brothers Revenue Bond Index
(LBRBI).+
[Graphic] - See Appendix (H)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED,
THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY
INSURED.
* Represents a hypothetical investment of $10,000 in the fund after
deducting the maximum sales charge of 1.00% ($10,000 investment minus
$100 sales charge = $9,900). The ending value of the fund reflects a
contingent deferred sales charge of 1.00% on any redemption less than
4 years from the purchase date. The fund's performance assumes the
reinvestment of all dividends and distributions. The LBRBI has been
adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LBRBI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. This
index is unmanaged.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--0.3%
VIRGINIA--0.3%
$ 1,500,000 Virginia Peninsula Port Authority, (Series 1997)
Daily VRDNs (Ziegler Coal Holding Co.)/
(Bank of America NT and SA, San Francisco LOC) A-1+ $1,500,000
TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) 1,500,000
LONG-TERM MUNICIPALS--98.7%
ALABAMA--1.4%
6,000,000 Courtland, AL IDB, Solid Waste Disposal Revenue
Bonds (Series A), 6.375% (Champion International
Corp.)/(Original Issue Yield: 6.52%), 3/1/2029 BBB 6,255,660
ALASKA--0.2%
250,000 Alaska State Housing Finance Corp., Collateralized
Home Mortgage Revenue Bonds, Series A-1, 7.625%,
12/1/2013 AAA 258,190
600,000 Alaska State Housing Finance Corp., Collateralized
Home Mortgage Revenue Bonds, Series B-1, 6.90%
(GNMA LOC), 6/1/2032 AAA 631,896
Total 890,086
ARKANSAS--1.9%
2,920,000 Conway, AR Hospital Authority, Revenue Bonds,
7.125%
(Conway Regional Hospital), 2/1/2013 BBB+ 3,132,518
2,770,000 Conway, AR Hospital Authority, Revenue Refunding
Bonds, 8.125% (Conway Regional Hospital), 7/1/2005 BBB+ 2,998,663
1,000,000 Conway, AR Hospital Authority, Revenue Refunding
Bonds, 8.375% (Conway Regional Hospital), 7/1/2011 BBB+ 1,087,640
1,000,000 Little Rock, AR Health Facilities Board, Revenue
Refunding Bonds, 7.00% (Baptist Medical Center,
AR), 10/1/2017 A 1,084,540
Total 8,303,361
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
CALIFORNIA--1.4%
$ 36,205,000 Anaheim, CA Public Financing Authority, Capital
Appreciation Lease Revenue Bonds (Series C) (FSA
INS)/(Original Issue Yield: 6.05%), 9/1/2031 AAA $ 5,301,860
5,000,000 Foothill/Eastern Transportation Corridor Agency,
CA, Sr. Lien Toll Road Capital Appreciation Revenue
Bonds (Series A)/(Original Issue Yield: 7.30%),
1/1/2026 BBB- 929,800
Total 6,231,660
COLORADO--0.8%
570,000 Colorado HFA, SFM Revenue Bonds (Series A-2),
7.70% (FHA GTD), 2/1/2023 AA 601,960
2,460,000 Colorado HFA, SFM Revenue Bonds (Series C-2),
7.375% (FHA GTD), 8/1/2023 AA 2,598,719
170,000 Colorado HFA, SFM Revenue Bonds (Series A), 8.00%
(Original Issue Yield: 8.133%), 3/1/2017 A 172,832
230,000 El Paso County, CO HFA, SFM Revenue Bonds, 8.00%
(GNMA COL), 9/1/2022 AAA 243,853
Total 3,617,364
DISTRICT OF COLUMBIA--3.8%
17,000,000 District of Columbia, Revenue Bonds, 5.625%
(American University)/(AMBAC INS)/(Original Issue
Yield: 5.90%), 10/1/2026 AAA 17,061,710
FLORIDA--0.7%
2,780,000 Lee County, FL HFA, SFM Step Coupon Revenue
Bonds, 5.60% (GNMA COL), 3/1/2029 Aaa 3,056,999
IDAHO--0.8%
920,000 Idaho Housing Agency, SFM Revenue Bonds (Series A),
7.50% (FHA GTD), 7/1/2024 AA 974,933
2,385,000 Idaho Housing Agency, SFM Revenue Bonds (Series F-2),
7.80% (FHA GTD), 1/1/2023 AA 2,522,114
Total 3,497,047
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
ILLINOIS--10.0%
$ 15,400,000 Chicago O'Hare International Airport, Revenue
Bonds (Series A), 5.50% (AMBAC INS)/(Original
Issue Yield: 6.00%), 1/1/2016 AAA $ 15,275,876
2,500,000 Chicago, IL, Collateralized SFM Revenue Bonds
(Series A), 7.25% (GNMA COL), 9/1/2028 Aaa 2,766,950
1,100,000 Chicago, IL, Gas Supply Revenue Bonds, 7.50%
(Peoples Gas Light & Coke Company), 3/1/2015 AA- 1,190,904
1,480,000 Chicago, IL, Gas Supply Revenue Bonds, 7.50%
(Peoples Gas Light & Coke Company), 3/1/2015 AA- 1,602,307
2,000,000 Chicago, IL, Water Revenue Bond, 7.20%
(PRF)/(Original Issue Yield: 7.35%), 11/15/2016 A1 2,166,400
3,315,000 Granite City, IL Hospital Facilities Authority,
Revenue Refunding Bonds (Series A), 8.125% (St.
Elizabeth Medical Center)/(Original Issue Yield:
8.167%), 6/1/2008 BB+ 3,498,982
3,000,000 Illinois Development Finance Authority, Housing
Revenue Bonds, 6.10% (Catholic Charities Housing
Development Corp.), 1/1/2020 NR 2,981,970
10,000,000 Illinois Health Facilities Authority, Hospital
Revenue Bonds (Series A), 9.25% (Edgewater Hospital
& Medical Center, IL), 7/1/2024 NR 11,435,400
1,050,000 Illinois State University, Auxiliary Facilities
System Revenue Bonds, 7.40% (PRF)/(Original Issue
Yield: 7.444%), 4/1/2014 Aaa 1,138,484
2,000,000 Rolling Meadows, IL, Multifamily Mortgage Revenue
Refunding Bonds, 7.75% (Woodfield Garden
Apartments)/(Banque Paribas, Paris LOC), 2/1/2004 A- 2,115,460
Total 44,172,733
INDIANA--8.1%
550,000 Beech Grove, IN, Economic Development Revenue Bond,
8.75% (Westvaco Corp.), 7/1/2010 A 557,287
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
INDIANA--CONTINUED
$ 1,000,000 Highland, IN School Building Corporation, First
Mortgage Revenue Bonds, 6.75% (PRF), 7/15/2012 AAA $ 1,108,060
3,000,000 Indiana Port Commission, Port Facility Revenue
Refunding Bonds, 6.875% (Cargill, Inc.), 5/1/2012 Aa3 3,264,090
725,000 Indiana State HFA, SFM Revenue Bonds (Series A),
8.20% (GNMA COL), 7/1/2020 Aaa 762,301
2,785,000 Indiana State HFA, SFM Revenue Home Mortgage
Program (Series F-2), 7.75% (GNMA COL), 7/1/2022 Aaa 2,947,226
17,100,000 Indianapolis, IN Airport Authority, Special
Facilities Revenue Bonds, 7.10% (Federal Express
Corp.)/(Original Issue Yield: 7.178%), 1/15/2017 BBB 19,073,169
5,000,000 LaPorte County, IN Hospital Authority, Hospital
Facility Revenue Refunding Bonds, 6.00% (LaPorte
Hospital, Inc., IN)/(Original Issue Yield: 6.35%),
3/1/2023 Baa1 5,055,600
3,000,000 LaPorte County, IN Hospital Authority, Hospital
Facility Revenue Refunding Bonds, 6.25% (LaPorte
Hospital, Inc., IN)/(Original Issue Yield: 6.35%),
3/1/2012 Baa1 3,087,630
Total 35,855,363
IOWA--0.2%
1,000,000 Davenport, IA PCA, PCR Refunding Bonds, Nicols-
Homeshield Project, 8.375% (Quanex Corp.), 12/1/2005 NR 1,029,040
KENTUCKY--0.9%
3,500,000 Kenton County, KY Airport Board, Special
Facilities Revenue Bonds (Series A), 7.50% (Delta
Air Lines, Inc.)/(Original Issue Yield: 7.60%),
2/1/2020 BB+ 3,858,995
LOUISIANA--6.2%
3,000,000 De Soto Parish, LA Environmental Improvement
Authority, Revenue Bonds, 7.70% (International
Paper Co.), 11/1/2018 A- 3,505,740
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
LOUISIANA--CONTINUED
$ 5,000,000 Lake Charles, LA Harbor & Terminal District, Port
Facilities Revenue Refunding Bond, Trunkline Lining
Co. Project, 7.75% (Panhandle Eastern Corp.),
8/15/2022 A3 $ 5,717,900
750,000 Rapides Parish, LA Housing & Mortgage Finance
Authority, SFM Revenue Bonds, 7.25% (United States
Treasury PRF), 8/1/2010 Aaa 856,358
5,645,000 St. Charles Parish, LA, PCR Bonds, 7.50%
(Louisiana Power & Light Co.)/(Original Issue
Yield: 7.542%), 6/1/2021 BBB 6,193,920
1,400,000 St. Charles Parish, LA, PCR Bonds, 8.00%
(Louisiana Power & Light Co.), 12/1/2014 Baa3 1,529,038
2,100,000 St. Charles Parish, LA, PCR Bonds, 8.25%
(Louisiana Power & Light Co.)/(Original Issue
Yield: 8.273%), 6/1/2014 Baa3 2,274,027
3,650,000 St. Charles Parish, LA, Solid Waste Disposal
Revenue Bonds (Series A), 7.00% (Louisiana Power
& Light Co.)/(Original Issue Yield: 7.04%),
12/1/2022 BBB 3,936,306
3,000,000 St. James Parish, LA, Solid Waste Disposal Revenue
Bonds, 7.70% (Freeport McMoRan, Inc.)/(Original
Issue Yield: 7.75%), 10/1/2022 NR 3,236,880
Total 27,250,169
MASSACHUSETTS--2.0%
21,000,000 (a)Massachusetts IFA, Solid Waste Disposal Sr. Lien
Revenue Bonds (Series A), 9.00% (Massachusetts
Recycling Association), 8/1/2016 NR 8,032,500
1,000,000 Massachusetts State HFA, Revenue Refunding Bonds
(Series A), 6.30%, 10/1/2013 A+ 1,050,290
Total 9,082,790
MICHIGAN--0.6%
145,000 Michigan State Housing Development Authority,
Single Family Housing Revenue Bonds (Series A)
7.55% (FHA GTD), 12/1/2014 AA+ 146,230
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
MICHIGAN--CONTINUED
$ 935,000 Michigan State Housing Development Authority, SFM
Revenue Bonds (Series B), 6.95%, 12/1/2020 AA+ $ 986,818
1,500,000 Western Townships MI, Utilities Authority, LT GO
SewerDisposal System Bonds, 8.20%, 1/1/2018 BBB+ 1,598,025
Total 2,731,073
MINNESOTA--8.6%
900,000 Burnsville, MN, Multifamily Housing Revenue
Refunding Bonds, Coventry Court Apartments, 7.50%
(FHA COL)/(Original Issue Yield: 7.56%), 9/1/2027 AAA 939,231
250,000 Centennial Independent School District No. 012,
MN, UT GO Bonds (Series A), 7.15% (FSA INS)/(PRF),
2/1/2011 AAA 266,995
140,000 Dakota County, MN Housing & Redevelopment
Authority, SFM Revenue Bonds, 7.20% (GNMA
GTD),
12/1/2009 AAA 143,182
100,000 Eden Prairie, MN Multifamily Housing, Multifamily
Mortgage Revenue Bonds, 7.875% (Preserve Place
Apartments)/(FHA GTD), 7/1/2017 AAA 103,360
165,000 Hennepin Co. MN, Lease Revenue Certificates of
Participation (Series A), 6.80%, 5/15/2017 AA 179,264
200,000 Minneapolis, MN Multifamily Housing Authority,
Multifamily Housing Revenue Bonds, 7.125% (Seward
Towers)/(GNMA COL), 12/20/2010 AAA 211,532
300,000 Minneapolis, MN Multifamily Housing Authority,
Multifamily Housing Revenue Bonds, Churchill
Project,
7.05% (FHA GTD), 10/1/2022 AAA 319,845
250,000 Minnesota Public Facilities Authority, Water
Pollution Control Revenue Bonds (Series A), 6.95%
(PRF), 3/1/2013 AAA 275,945
1,535,000 Minnesota State HFA, SFM Revenue Bonds (Series A),
7.95% (FHA GTD), 7/1/2022 AA+ 1,626,271
475,000 Minnesota State HFA, SFM Revenue Bonds (Series D),
8.05% (FHA GTD), 8/1/2018 AA+ 489,222
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
MINNESOTA--CONTINUED
$ 3,000,000 Minnesota State HFA, SFM Revenue Bonds (Series E),
6.85%, 1/1/2024 AA+ $ 3,156,450
35,000 Minnesota State HFA, SFM Revenue Bonds (Series B),
7.25% (Original Issue Yield: 7.311%), 7/1/2016 AA+ 35,445
210,000 Minnesota State HFA, SFM Revenue Bonds (Series B),
7.30% (FHA LOC)/(Original Issue Yield: 7.342%), AA+ 220,229
1/1/2017
195,000 Minnesota State HFA, SFM Revenue Bonds (Series C),
7.10% (FHA COL), 7/1/2011 AA+ 205,797
85,000 Minnesota State HFA, SFM Revenue Bonds (Series C),
7.65% (FHA/VA Mortgages COL), 7/1/2008 AA+ 89,676
1,245,000 Minnesota State HFA, SFM Revenue Bonds (Series I),
6.25%, 1/1/2015 AA+ 1,293,045
100,000 Minnetonka, MN, Multifamily Housing Revenue Bonds,
Cedare Hills East Project, 7.50% (FHA COL),
12/1/2017 A+ 103,835
800,000 Minnetonka, MN, Multifamily Mortgage Revenue Bonds,
7.25% (Minnetonka Hills Apartments)/(Midwest Fed
Minneapolis LOC), 12/1/2002 AAA 819,424
10,000,000 Southern Minnesota Municipal Power Agency, Supply
System Revenue Bonds (Series A), 4.75% (MBIA INS)/
(Original Issue Yield: 5.52%), 1/1/2016 AAA 9,183,100
9,000,000 St. Paul, MN Housing & Redevelopment Authority,
Hospital Revenue Refunding Bonds (Series A),
6.625% (Healtheast, MN)/(Original Issue Yield:
6.687%), 11/1/2017 BBB 9,527,850
8,000,000 VRDC/IVRC Trust, GO Inverse Variable Rate
Certificates, 7.673% (Regents of University of
Minnesota), 5/18/2012 AA 8,830,000
200,000 Western Minnesota Municipal Power Agency, MN,
Transmission Revenue Refunding Bonds, 6.75%
(AMBAC INS)/(Original Issue Yield: 7.00%), AAA 216,784
1/1/2016
Total 38,236,482
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
MONTANA--0.3%
$ 1,115,000 Montana State Board of Housing, SFM Revenue Bonds
(Series B-2), 7.50% (FHA GTD), 4/1/2023 Aa2 $ 1,178,455
NEVADA--0.3%
1,000,000 Humboldt County, NV, PCR Bonds, 8.30% (Idaho Power
Co.), 12/1/2014 A+ 1,189,710
NEW HAMPSHIRE--5.1%
9,000,000 New Hampshire Higher Educational & Health
Facilities Authority, Hospital Revenue Bonds, 6.00%
(Nashua Memorial Hospital, NH)/(Original Issue
Yield: 6.40%), 10/1/2023 A- 9,102,780
1,080,000 New Hampshire Municipal Bond Bank, UT GO
Bonds (Series J), 6.90% (PRF)/(Original Issue
Yield:
6.95%), 1/15/2012 A+ 1,186,121
1,210,000 New Hampshire State HFA, SFM Revenue Bonds
(Series B), 7.75%, 7/1/2023 A+ 1,293,054
6,105,000 New Hampshire State HFA, SFM Revenue Bonds
(Series D), 7.25%, 7/1/2015 A+ 6,425,451
2,865,000 New Hampshire State IDA, PCR Bonds (Series A),
8.00% (United Illuminating Co.), 12/1/2014 BBB- 3,068,644
1,500,000 New Hampshire State IDA, PCR Bonds (Series B),
10.75% (United Illuminating Co.), 10/1/2012 BBB- 1,553,730
Total 22,629,780
NEW MEXICO--0.5%
2,000,000 Farmington, NM, PCR Refunding Bonds (Series 1997),
6.375% (Public Service Co. New Mexico), 4/1/2022 BB+ 2,085,300
NEW YORK--3.7%
5,000,000 New York City, NY, Residual Interest Tax-Exempt
Securities (Series PA-147), 7.259%, 2/1/2005 NR 5,362,500
2,500,000 New York State Energy Research & Development
Authority, Electric Facilities Revenue Bonds
(Series A), 7.50% (Consolidated Edison Co.)/
(Original Issue Yield: 7.65%), 1/1/2026 A+ 2,672,550
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
NEW YORK--CONTINUED
$ 2,900,000 New York State Environmental Facilities Corp., PCR
State Water Revolving Fund, 7.25% (Original Issue
Yield: 7.344%), 6/15/2010 A $ 3,221,900
5,000,000 New York State Environmental Facilities
Corp., Solid Waste Disposal Revenue Bonds,
6.10% (Occidental Petroleum Corp.)/(Original
Issue Yield:
6.214%), 11/1/2030 BBB 5,097,000
Total 16,353,950
NORTH CAROLINA--0.7%
3,000,000 Martin County, NC IFA, (Series 1995) Solid Waste
Disposal Revenue Bonds, 6.00% (Weyerhaeuser Co.),
11/1/2025 A 3,092,070
NORTH DAKOTA--0.9%
2,420,000 North Dakota State HFA, SFM Revenue Bonds (Series
C), 7.30%, 7/1/2024 A+ 2,553,366
1,420,000 North Dakota State HFA, SFM Revenue Bonds, Series
A, 6.75% (FHA COL), 7/1/2012 A+ 1,495,942
Total 4,049,308
OHIO--0.7%
500,000 Ohio State Water Development Authority, PCR Bonds
(Series A), 8.10% (Ohio Edison Co.)/(Original
Issue Yield: 8.142%), 10/1/2023 BB- 533,915
1,250,000 Ohio State Water Development Authority, PCR Bonds
(Series A-1), 9.75% (Cleveland Electric
Illuminating Co.), 11/1/2022 BB+ 1,262,175
1,500,000 Ohio State Water Development Authority, PCR
Refunding Revenue Bonds (Series 1997A), 6.10%
(Cleveland Electric Illuminating Co.), 8/1/2020 BB+ 1,509,375
Total 3,305,465
OKLAHOMA--2.9%
4,585,000 Jackson County, OK Hospital Authority, Hospital
Revenue Refunding Bonds, 7.30% (Jackson County
Memorial Hospital, OK)/(Original Issue Yield: 7.40%),
8/1/2015 BB 4,764,365
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
OKLAHOMA--CONTINUED
$ 1,250,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.375%
(American Airlines), 12/1/2020 BBB- $ 1,352,063
6,200,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.60%
(American Airlines)/(Original Issue Yield:
7.931%), 12/1/2030 BBB- 6,793,898
Total 12,910,326
PENNSYLVANIA--12.5%
3,000,000 Allegheny County, PA HDA, Health & Education
Revenue Bonds, 7.00% (Rehabilitation Institute of
Pittsburgh)/(Original Issue Yield: 7.049%),
6/1/2010 BBB 3,209,280
2,500,000 Allegheny County, PA HDA, Health & Education
Revenue Bonds, 7.00% (Rehabilitation Institute of
Pittsburgh)/(Original Issue Yield: 7.132%),
6/1/2022 BBB 2,669,000
5,185,000 Allegheny County, PA Higher Education, Building
Authority Revenue Bonds, 7.375% (La Roche College),
7/15/2012 NR 5,370,208
1,625,000 Allegheny County, PA IDA, Revenue Bonds, 8.75%
(United Parcel Service), 2/15/2009 NR 1,706,364
665,000 Allegheny County, PA Residential Finance Agency,
Mortgage Revenue Bonds (Series G), 9.50% (GNMA
COL), 12/1/2018 Aaa 682,549
3,000,000 Delaware County Authority, PA, College Revenue
Bonds, 7.25% (Eastern College)/(United States
Treasury PRF)/(Original Issue Yield: 7.875%),
3/1/2012 NR 3,425,430
2,055,000 Erie County, PA Hospital Authority, Revenue Bonds,
7.50% (Erie Infants & Youth Home, Inc.), 10/1/2011 NR 2,167,100
400,000 Erie County, PA IDA, Pollution Control Revenue
Refunding Bonds, 7.15% (International Paper Co.),
9/1/2013 A3 433,180
1,730,000 Northeastern, PA Hospital & Education Authority,
College Revenue Refunding Bonds (Series B),
6.00% (Kings College, PA)/(Original Issue
Yield:
6.174%), 7/15/2018 BBB 1,743,892
3,500,000 Pennsylvania EDFA, Resource Recovery Revenue Bonds
(Series A), 6.40% (Northampton Generating),
1/1/2009 NR 3,591,595
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
PENNSYLVANIA--CONTINUED
$ 8,000,000 Pennsylvania EDFA, Wastewater Treatment Revenue
Bonds (Series A), 7.60% (Sun Co., Inc.)/(Original
Issue Yield: 7.653%), 12/1/2024 BBB $ 9,196,000
6,000,000 Pennsylvania Housing Finance Authority, SFM
Revenue Bonds (Series 34-B), 7.00% (FHA GTD),
4/1/2024 AA+ 6,358,380
2,160,000 Pennsylvania Housing Finance Authority, SFM
Revenue Bonds (Series 28), 7.65% (FHA GTD),
10/1/2023 AA+ 2,277,439
1,740,000 Pennsylvania State Higher Education Facilities
Authority, College & University Revenue Bonds,
6.75% (Thiel College), 9/1/2017 NR 1,825,382
3,250,000 Pennsylvania State Higher Education Facilities
Authority, College & University Revenue Refunding
Bonds (Series A), 6.10% (Allegheny College,
Meadville, PA)/(Original Issue Yield: 6.23%),
11/1/2008 BBB+ 3,337,945
1,200,000 Pennsylvania State Higher Education Facilities
Authority, Revenue Bonds (Series 1996), 7.15%
(Thiel College), 5/15/2015 NR 1,242,960
3,875,000 Pennsylvania State Higher Education Facilities
Authority, Revenue Bonds (Series A), 7.375% (Medical
College of Pennsylvania)/(United States Treasury
PRF)/(Original Issue Yield: 7.45%), 3/1/2021 AAA 4,324,888
1,750,000 Pennsylvania State Higher Education Facilities
Authority, Revenue Bonds (Series A), 8.375%
(Medical College of Pennsylvania)/(United States
Treasury PRF)/(Original Issue Yield: 8.448%),
3/1/2011 AAA 1,893,150
Total 55,454,742
TENNESSEE--3.3%
3,100,000 Springfield, TN Health & Educational Facilities
Board, Hospital Revenue Bonds, 8.25% (NorthCrest
Medical Center)/(Original Issue Yield: 8.50%),
4/1/2012 NR 3,390,284
7,800,000 Springfield, TN Health & Educational Facilities
Board, Hospital Revenue Bonds, 8.50% (NorthCrest
Medical Center)/(Original Issue Yield: 8.875%),
4/1/2024 NR 8,591,934
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
TENNESSEE--CONTINUED
$ 2,695,000 Tennessee Housing Development Agency, Homeowner-
ship Program, Issue V Revenue Bonds, 7.65%, AA $ 2,856,646
7/1/2022
Total 14,838,864
TEXAS--10.7%
2,500,000 Brazos River Authority, TX, PCR Revenue Bonds
(Series A), 7.875% (Texas Utilities Electric Co.), BBB+ 2,761,450
3/1/2021
1,800,000 Brazos River Authority, TX, PCR Revenue Bonds
(Series A), 8.125% (Texas Utilities Electric Co.), BBB+ 1,960,956
2/1/2020
1,000,000 Brownsville, TX Utility System, Revenue
Bonds, 6.875% (AMBAC INS)/(PRF)/(Original
Issue Yield:
7.10%), 9/1/2020 AAA 1,091,700
7,320,000 Dallas-Fort Worth, TX International Airport
Facilities, Revenue Bonds, 7.125% (Delta Air Lines,
Inc.)/(Original Issue Yield: 7.55%), 11/1/2026 BB+ 7,820,468
3,000,000 Dallas-Fort Worth, TX International Airport
Facilities, Revenue Bonds, 7.25% (American
Airlines)/(Original Issue Yield: 7.428%),
11/1/2030 BBB- 3,301,080
2,370,000 Dallas-Fort Worth, TX International Airport
Facilities, Revenue Bonds, 7.50% (American
Airlines)/(Original Issue Yield: 8.20%), 11/1/2025 BBB- 2,564,506
2,500,000 Dallas-Fort Worth, TX International Airport
Facilities, Revenue Bonds, 7.625% (Delta Air Lines,
Inc.)/(Original Issue Yield: 7.65%), 11/1/2021 BB+ 2,762,375
1,000,000 Guadalupe-Blanco River Authority TX, Industrial
Development Corp. PCR Bonds, 8.60% (A.P. Green
Industries), 4/1/2009 NR 1,059,620
2,500,000 Guadalupe-Blanco River Authority TX, Industrial
Development Corp., PCR Bonds, 8.60% (A.P. Green
Industries), 4/1/2009 NR 2,787,550
5,000,000 Gulf Coast, TX Waste Disposal Authority, Revenue
Bonds (Series A), 6.875% (Champion International
Corp.)/(Original Issue Yield: 7.15%), 12/1/2028 BBB 5,435,950
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
TEXAS--CONTINUED
$ 7,630,000 Richardson, TX Hospital Authority, Hospital
Refunding & Improvement Bonds, 6.75% (Richardson
Medical Center, TX)/(Original Issue Yield: 6.82%),
12/1/2023 BBB- $ 8,091,615
7,500,000 West Side Calhoun County, TX Navigation District,
Solid Waste Revenue Bond, 6.40% (Union Carbide
Corp.)/(Original Issue Yield: 6.437%), 5/1/2023 BBB 7,764,900
Total 47,402,170
UTAH--5.3%
1,000,000 Hildale, UT, Electric Revenue Bonds (Series 1995),
7.00%, 9/1/2002 NR 1,019,920
20,000,000 Intermountain Power Agency, UT, Refunding
Revenue Bonds (Series A), 5.00% (Original
Issue Yield:
5.687%), 7/1/2023 A+ 18,344,400
820,000 Utah State HFA, SFM Revenue Bonds (Series B-3),
7.10%, 7/1/2024 AA 862,402
1,120,000 Utah State HFA, SFM Revenue Bonds (Series E-2),
7.15% (FHA GTD)/(Original Issue Yield: 7.169%),
7/1/2024 AA 1,177,938
1,595,000 Utah State HFA, SFM Revenue Bonds, 7.55% (FHA GTD),
7/1/2023 AA 1,685,309
355,000 Utah State HFA, SFM Revenue Bonds, 7.75% (FHA GTD),
1/1/2023 AA 370,808
Total 23,460,777
VIRGINIA--0.1%
500,000 Virginia State Housing Development Authority,
Commonwealth Mortgage (Series C, Subseries C-10),
6.50%, 7/1/2007 AA+ 528,050
WASHINGTON--3.3%
4,250,000 Pierce County, WA Economic Development Corp.,
Solid Waste Revenue Bond, 5.80% (Occidental
Petroleum Corp.)/(Original Issue Yield: 5.90%),
9/1/2029 BBB 4,242,605
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS--CONTINUED
WASHINGTON--CONTINUED
$ 4,300,000 Port of Camas-Washougal, WA, PCR Refunding Bonds
(Series 1993), 6.70% (James River Project,
WA)/(Original Issue Yield: 6.75%), 4/1/2023 BBB- $ 4,492,468
6,000,000 Washington State, UT GO (Series A), 5.375%
(Original Issue Yield: 6.00%), 7/1/2021 AAA 5,908,380
Total 14,643,453
WEST VIRGINIA--0.5%
5,000,000 (a)Marion County, WV County Commission, Solid Waste
Facility Revenue Bonds (Series 1993), 7.75%
(American Power Paper Recycling), 12/1/2011 NR 2,250,000
WISCONSIN--0.3%
945,000 Wisconsin Housing & Economic Development Authority,
Homeownership Revenue Bond (Series A), 7.10%,
3/1/2023 AA 999,716
285,000 Wisconsin Housing & Economic Development Authority,
Homeownership Revenue Bonds (Series E), 8.00%
(FHA GTD)/(Original Issue Yield: 8.044%), 3/1/2021 AA 293,598
Total 1,293,314
TOTAL LONG-TERM MUNICIPALS
(IDENTIFIED COST $424,824,868) 437,796,266
TOTAL INVESTMENTS (IDENTIFIED COST $426,324,868)(B) $ 439,296,266
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 45.2%
of the portfolio as calculated based upon total portfolio market
value.
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to
$428,602,368. The net unrealized appreciation of investments on a
federal tax basis amounts to $10,693,898 which is comprised of
$26,672,896 appreciation and $15,978,998 depreciation at August 31,
1997.
* Please refer to the Appendix of the Prospectus for an explanation of the
credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($443,475,316) at August 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation COL
- --Collateralized EDFA --Economic Development Financing Authority FHA
- --Federal Housing Administration FSA --Financial Security Assurance
GNMA --Government National Mortgage Association GO --General
Obligation GTD --Guaranty HDA --Hospital Development Authority HFA
- --Housing Finance Authority IDA --Industrial Development Authority IDB
- --Industrial Development Bond IFA --Industrial Finance Authority INS
- --Insured IVRC --Inverse Variable Rate Certificate LOC --Letter of
Credit LT --Limited Tax MBIA --Municipal Bond Investors Assurance PCA
- --Pollution Control Authority PCR --Pollution Control Revenue PRF
- --Prerefunded SFM --Single Family Mortgage UT --Unlimited Tax VRDC
- --Variable Rate Demand Certificate VRDNs --Variable Rate Demand Notes
MASSACHUSETTS IFA, SOLID WASTE DISPOSAL SR. LIEN REVENUE BONDS (SERIES A),
9.00% (MASSACHUSETTS RECYCLING ASSOCIATION)
There are $173 million face amount of these Senior Lien Revenue Bonds
currently outstanding. On August 12, 1997, the obligor filed a
petition for relief under Chapter 11 of the Federal Bankruptcy Code.
On September 30, 1997, the Bankruptcy Court approved the terms of a
settlement under which a new owner would acquire the facility subject
to a portion of the Senior Lien Revenue Bonds. The new owner will then
enter into a fifteen-year lease guaranteed by the company that built
the facility and will pledge the lease and guarantee as additional
collateral for the Senior Lien Revenue Bonds. The settlement calls for
the transfer and lease to take place before October 31, 1997. The
settlement also anticipates that the Senior Lien Revenue Bonds may be
replaced with refunding bonds in the face amount of $56.3 million by
July 31, 1998. The Senior Lien Revenue Bonds will not produce any
income until exchanged for such refunding bonds.
MARION COUNTY, WV COUNTY COMMISSION, SOLID WASTE FACILITY REVENUE BONDS
(SERIES 1993), 7.75% (AMERICAN POWER PAPER RECYCLING)
There are $210.4 million face amount of these Revenue Bonds currently
outstanding. On March 27, 1997, certain holders of the Revenue Bonds
entered into a settlement agreement with the obligor, its partners and
certain of their affiliates. In accordance with the settlement
agreement, on May 30, 1997, the obligor filed a petition for relief
under Chapter 7 of the Federal Bankruptcy Code. On July 1, 1997, the
Bankruptcy Court approved the transfer of the facility to the
obligor's majority limited partner subject to the Revenue Bonds. The
transfer took place on September 29, 1997, and, on the same day, the
majority limited partner filed for relief under Chapter 11 of the
Federal Bankruptcy Code. The settlement agreement anticipates that the
Revenue Bonds will be refunded with refunding bonds in the aggregate
face amount of $92 million by the end of 1997. The Revenue Bonds will
not produce any income until exchanged for such refunding bonds.
Following the issuance of the refunding bonds, all equity in the
majority limited partner will be transferred to a new owner that will
complete and operate the facility.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $ 439,296,266
$426,324,868 and tax cost $428,602,368)
Cash 54,061
Income receivable 7,623,109
Receivable for shares sold 472,357
Total assets 447,445,793
LIABILITIES:
Payable for investments purchased $3,041,320
Payable for shares redeemed 741,275
Accrued expenses 187,882
Total liabilities 3,970,477
NET ASSETS for 41,567,229 shares outstanding $ 443,475,316
NET ASSETS CONSIST OF:
Paid in capital $ 440,354,246
Net unrealized appreciation of investments 12,971,398
Accumulated net realized loss on investments (9,645,293)
Distributions in excess of net investment income (205,035)
Total Net Assets $ 443,475,316
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($94,940,632 / 8,898,734 shares $10.67
outstanding)
Offering Price Per Share (100/95.50 of $10.67)* $11.17
Redemption Proceeds Per Share $10.67
CLASS B SHARES:
Net Asset Value Per Share ($14,996,896 / 1,406,348 shares $10.66
outstanding)
Offering Price Per Share $10.66
Redemption Proceeds Per Share (94.50/100 of $10.66)** $10.07
CLASS C SHARES:
Net Asset Value Per Share ($1,949,849 / 182,884 shares $10.66
outstanding)
Offering Price Per Share $10.66
Redemption Proceeds Per Share (99.00/100 of $10.66)** $10.55
CLASS F SHARES:
Net Asset Value Per Share ($331,587,939 / 31,079,263 shares $10.67
outstanding)
Offering Price Per Share (100/99.00 of $10.67)* $10.78
Redemption Proceeds Per Share (99.00/100 of $10.67)** $10.56
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $27,505,683
EXPENSES:
Investment advisory fee $2,610,540
Administrative personnel and services fee 328,575
Custodian fees 47,347
Transfer and dividend disbursing agent fees and expenses 315,943
Directors'/Trustees' fees 15,385
Auditing fees 20,188
Legal fees 22,169
Portfolio accounting fees 153,201
Distribution services fee--Class B Shares 60,402
Distribution services fee--Class C Shares 10,616
Shareholder services fee--Class A Shares 170,894
Shareholder services fee--Class B Shares 20,118
Shareholder services fee--Class C Shares 3,539
Shareholder services fee--Class F Shares 893,271
Share registration costs 62,034
Printing and postage 57,306
Insurance premiums 6,550
Taxes 3,460
Miscellaneous 16,432
Total expenses 4,817,970
Waiver--
Waiver of shareholder services fee--Class F Shares (26,976)
Net expenses 4,790,994
Net investment income 22,714,689
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,206,486
Net change in unrealized appreciation of investments 16,489,543
Net realized and unrealized gain on investments 18,696,029
Change in net assets resulting from operations $41,410,718
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 22,714,689 $ 24,378,361
Net realized gain (loss) on investments
($2,206,486 and ($3,794,684),
respectively, as computed for federal tax 2,206,486 (116,813)
purposes)
Net change in unrealized 16,489,543 (13,721,871)
appreciation/depreciation
Change in net assets resulting from operations 41,410,718 10,539,677
NET EQUALIZATION CREDITS (DEBITS)-- 21,898 (42,870)
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (3,383,555) --
Class B Shares (342,071) --
Class C Shares (63,260) --
Class F Shares (19,546,786) (24,971,054)
Change in net assets resulting from
distributions to shareholders (23,335,672) (24,971,054)
SHARE TRANSACTIONS--
Proceeds from sale of shares 37,024,060 20,142,447
Proceeds from shares issued in connection with 93,815,812 --
the acquisitions
Net asset value of shares issued to shareholders
in payment of distributions declared 14,141,468 14,912,188
Cost of shares redeemed (102,632,146) (63,560,851)
Change in net assets resulting from share 42,349,194 (28,506,216)
transactions
Change in net assets 60,446,138 (42,980,463)
NET ASSETS:
Beginning of period 383,029,178 426,009,641
End of period (including undistributed net
investment income
of $0 and $773,562, respectively) $ 443,475,316 $ 383,029,178
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 43.
<TABLE>
<CAPTION>
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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 43.
<TABLE>
<CAPTION>
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>
* 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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 43.
<TABLE>
<CAPTION>
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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 43.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.33 $10.71 $10.56 $11.28 $10.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.69 0.63 0.61 0.62
Net realized and unrealized gain (loss)
on investments 0.37 (0.42) 0.15 (0.73) 0.51
Total from investment operations 0.91 0.27 0.78 (0.12) 1.13
LESS DISTRIBUTIONS
Distributions from net investment income (0.57) (0.65) (0.63) (0.60) (0.63)
NET ASSET VALUE, END OF PERIOD $10.67 $10.33 $10.71 $10.56 $11.28
TOTAL RETURN(A) 9.07% 2.47% 7.73% (1.06%) 10.86%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.08% 1.08% 1.08% 1.09% 1.09%
Net investment income 5.23% 5.91% 6.18% 5.56% 5.65%
Expense waiver/reimbursement(b) 0.01% 0.01% 0.00% 0.00% 0.00%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $331,588 $383,028 $426,010 $472,232 $458,331
Portfolio turnover 20% 22% 13% 27% 7%
</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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
1. ORGANIZATION
Federated Municipal Opportunities Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended (the
"Act"), as a diversified, open-end management investment company. The
investment objective is to provide a high level of current income
which is generally exempt from federal regular income tax.
The Fund offers four classes of shares: Class A Shares, Class B
Shares, Class C Shares, and Class F Shares.
On December 13, 1996, the Fund acquired all the net assets of State
Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Fund
pursuant to a plan of reorganization approved by State Bond Minnesota
Tax-Free Income Fund and State Bond Tax-Exempt Fund shareholders on
December 12, 1996. The acquisition was accomplished by a tax-free
exchange of 9,405,099 of the Fund's Class A Shares (valued at
$93,815,812) for 1,733,291 shares of State Bond Minnesota Tax-Free
Income Fund and 7,388,723 shares of State Bond Tax-Exempt Fund. State
Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Fund net
assets at that date ($18,351,963 and $79,930,763, respectively),
including unrealized appreciation of $584,534 and $3,882,941,
respectively, were combined with those of the Fund. The aggregate net
assets at that date of the Fund, State Bond Minnesota Tax-Free Income
Fund, and State Bond Tax-Exempt Fund immediately before acquisition
were $384,839,379, $18,351,963, and $79,930,763, respectively.
Immediately after the acquisition, the combined aggregate net assets
of the Fund were $483,122,105.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. These policies are in conformity with
generally accepted accounting principles.
INVESTMENT VALUATIONS-- Municipal bonds are valued by an independent
pricing service, taking into consideration yield, liquidity, risk,
credit quality, coupon, maturity, type of issue, and any other
factors or market data the pricing service deems relevant.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase
may be valued at amortized cost, which approximates fair market
value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-- Interest income and
expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Distributions to shareholders are recorded
on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for accumulated equalization and limitations on
capital loss carryforwards created prior to fund mergers. The
following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET ACCUMULATED
PAID-IN CAPITAL INVESTMENT INCOME NET REALIZED LOSS
$1,890,841 ($379,512) ($1,511,329)
Net investment income, net realized gains, and net assets were not
affected by this reclassification.
FEDERAL TAXES-- It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment companies
and to distribute to shareholders each year substantially all of its
income. Accordingly, no provisions for federal tax are necessary. At
August 31, 1997, the Fund, for federal tax purposes, had a capital
loss carryforward of $9,645,293, which will reduce the Fund's
taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Code, and thus will reduce
the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward
will expire as follows:
EXPIRATION EXPIRATION
YEAR AMOUNT
2002 $ 944,580
2003 4,906,029
2004 3,794,684
EQUALIZATION-- The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from
sales and costs of redemptions of fund shares equivalent (on a per
share basis) to the amount of undistributed net investment income on
the date of the transaction is credited or charged to undistributed
net investment income. As a result, undistributed net investment
income per share is unaffected by sales or redemptions of fund
shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-- The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked to market daily and
begin earning interest on the settlement date.
USE OF ESTIMATES-- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimated.
OTHER-- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At August 31, 1997, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
SHARE CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 500,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
Class F Shares 500,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 654,338 $ 6,738,299 28.662 $ 299.97
Shares issued in connection with the
acquisition 9,405,099 93,815,812 -- --
Shares issued to shareholders in
payment of distributions declared 226,565 2,371,090 0.049 0.51
Shares redeemed (1,387,296) (14,487,278) (0.048) (0.50)
Net change resulting from Class A
Share transactions 8,898,706 $ 88,437,923 28.663 $ 299.98
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996(A)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,566,410 $ 16,385,580 28.662 $ 299.97
Shares issued to shareholders in
payment of distributions declared 16,534 172,989 0.049 0.51
Shares redeemed (176,625) (1,853,974) (0.048) (0.50)
Net change resulting from Class B
Share transactions 1,406,319 $ 14,704,595 28.663 $ 299.98
(a) For the period from August 5, 1996, to August 31, 1996.
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996(A)
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 183,002 $ 1,913,194 28.662 $ 299.97
Shares issued to shareholders in
payment of distributions declared 5,466 57,137 0.049 0.51
Shares redeemed (5,613) (58,379) (0.048) (0.50)
Net change resulting from Class C
Share transactions 182,855 $ 1,911,952 28.663 $ 299.98
(a) For the period from August 5, 1996, to August 31, 1996.
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,147,025 $ 11,986,987 1,882,962 $ 20,141,547
Shares issued to
shareholders in
payment of distributions 1,104,524 11,540,252 1,401,501 14,912,186
declared
Shares redeemed (8,247,527) (86,232,515) (5,975,778) (63,560,849)
Net change resulting from
Class F
Share transactions (5,995,978) $ (62,705,276) (2,691,315) $ (28,507,116)
Net change resulting from
Fund share transactions 4,491,902 $ 42,349,194 (2,691,229.011) $ (28,506,216)
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-- Federated Advisers, the Fund's investment
adviser, receives for its services an annual investment advisory fee
equal to 0.60% of the Fund's average daily net assets.
ADMINISTRATIVE FEE-- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is
based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period.
The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE-- The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms
of the Plan, the Fund will reimburse Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund
to finance activities intended to result in the sale of the Fund's
shares. The Plan provides that the Fund may incur distribution
expenses of the average daily net assets of each class as follows:
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class F Shares 0.25%
For the period ended August 31, 1997, Class A Shares and Class F
Shares did not incur a distribution services fee.
SHAREHOLDER SERVICES FEE-- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will
pay FSS up to 0.25% of average daily net assets of the Fund for the
period. The fee paid to FSS is used to finance certain services for
shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-- FServ,
through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES-- FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level
of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
INTERFUND TRANSACTIONS-- During the period ended August 31, 1997,
the Corporation engaged in purchase and sale transactions with funds
that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees, and/or common Officers. These
purchase and sale transactions were made at current market value
pursuant to Rule 17a-7 under the Act amounting to $86,970,000 and
$87,262,500, respectively.
GENERAL-- Certain of the Officers and Directors of the Corporation
are Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities
for the period ended August 31, 1997, were as follows:
PURCHASES $ 95,919,852
SALES $ 76,264,374
6. INVESTMENT RISK
INVESTMENT RISK-- Although the Fund has a diversified portfolio, the
Fund has 22% of its portfolio invested in lower rated and comparable
quality unrated high-yield securities. Investments in higher yield
securities are accomplished by a greater degree of credit risk and
the risk tends to be more sensitive to economic conditions than
higher rated securities. The risk of loss due to default by the
issuer may be significantly greater for the holders of high yielding
securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. The Fund held
defaulted securities with a value aggregating $10,282,500,
representing 2.3% of the Fund's net assets at August 31, 1997.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Municipal
Opportunities Fund, Inc. as of August 31, 1997, the related statement
of operations for the year then ended, the statements of changes in
net assets for the years ended August 31, 1997 and 1996, and the
financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at August 31, 1997, by
correspondence with the custodian and brokers; where replies were not
received, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Federated Municipal Opportunities Fund, Inc. as of August 31, 1997,
the results of its operations, the changes in its net assets and its
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 13, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus, which
contains facts concerning its objective and policies, management fees,
expenses and other information.
[Graphic}
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 313910200
Cusip 313910309
Cusip 313910408
Cusip 313910101
G01091-01 (10/97)
[Graphic}
APPENDIX
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
A. The graphic representation here displayed entitled "Initial
Investment of $11000," consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain
chart. The lighter-shaded portion represents the value of Reinvested
Income for the Class F shares of Federated Municipal Opportunities
Fund, Inc. (the "Fund"). The darker-shaded portion reflects the
Principal Value of a $11,000/1,089 Shares investment in the Fund. The
color-coded mountain chart is a visual representation of the narrative
text above it, which shows that an initial investment of $11,000 in
the Fund on 4/10/87, would have a reinvested total worth of
$22,693/2,127 on 8/31/97. The "x" axis reflects computation periods
from 4/10/87 to 8/31/97. The right margin of the chart reflects the
ending values of a hypothetical investment of $11,000 in the Fund
measured in increments of $5,000 ranging from $0 to $25,000.
B. The graphic representation here displayed, entitled "Yearly
Investments of $1,000," consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain
chart. The lighter-shaded portion represents the value of Reinvested
Income for the Class F Shares of Federated Municipal Opportunities
Fund, Inc. (the "Fund"). The darker-shaded portion reflects the
Principal Value of a $1,000 investment in the Fund (totaling $11,000
by 8/31/97). The color-coded mountain chart is a visual representation
of the narrative text above it, which shows that $1,000 annual
investments in the Class F Shares of Federated Municipal Opportunities
Fund, Inc. beginning on 4/10/87 would have a reinvested total value of
$16,009/1,500 shares on 8/31/97. The "x" axis reflects computation
periods from 4/10/87 to 8/31/97. The right margin of the chart
reflects the ending values of a hypothetical annual investment of
$1,000 in the Fund measured in increments of $2,000 ranging from $0 to
$18,000.
C. The graphic representation here displayed, entitled "Income Over
Time," consists of a boxed legend in the upper left quadrant
indicating the components of the corresponding mountain chart. The
lighter-shaded portion represents the value of Reinvested Income for
the Class F Shares of Federated Municipal Opportunities Fund, Inc.
(the "Fund") the darker-shaded portion represents the Principal Value
of Continuing Investments (totaling $98,421 by 8/31/97). The
color-coded mountain is a visual representation of the narrative text
above it, which shows that an original $5,000/495 Shares investment in
the Fund on 4/10/87 and additional investments of $500 on the first of
every month following would have grown to a reinvested total value of
$98,421/9,224 Shares on 8/31/97. The "x" axis reflects computation
periods from 4/10/87 to 8/31/97. The right margin of the chart
reflects the ending values of a hypothetical original investment and
subsequent annual investments in the Fund measured in increments of
$20,000 ranging from $0 to $120,000.
D. The graphic representation here displayed consists of a list
entitled "Rating Distribution." The list includes the credit quality
of Federated Municipal Opportunities Fund, Inc.'s portfolio of
investments as rated by Standard & Poor's as of 8/31/97:
Cash Equivalents 0.3%
BB 6.4%
AA 11.1%
A 15.4%
Non-Rated 16.0%
AAA 17.7%
BBB 33.1%
E. The graphic representation here displayed consists of a boxed
legend in the bottom center indicating the components of the
corresponding line graph. Federated Municipal Opportunities Fund, Inc.
(Class A Shares) (the "Fund") is represented by a solid black line.
The Lehman Brothers Revenue Bond Index (LBRBI) is represented by a
broken line. The line graph is a visual representation of a comparison
of a change in value of a hypothetical $10,000 investment in the Fund
and the LBRBI. The "x" axis reflects computation periods from 8/5/96
to 8/31/97. The "y" axis reflects the cost of investment in $1,000
increments ranging from $9,000 to $12,000. The right margin reflects
the ending value of the hypothetical investment in the Fund as
compared to the LBRBI; the ending values are $10,327 and $10,979,
respectively. Below the legend is the Average Annual Total Returns for
the one-year and Start of Performance (8/5/96) for the period ended
August 31,1997; the Average Annual Total Returns are 4.13% and 3.54 %,
respectively.
F. The graphic representation here displayed consists of a boxed
legend in the bottom center indicating the components of the
corresponding line graph. Federated Municipal Opportunities Fund, Inc.
(Class B Shares) (the "Fund") is represented by a solid black line.
The Lehman Brothers Revenue Bond Index (LBRBI) is represented by a
broken line. The line graph is a visual representation of a comparison
of a change in value of a hypothetical $10,000 investment in the Fund
and the LBRBI. The "x" axis reflects computation periods from 8/5/96
to 8/31/97. The "y" axis reflects the cost of investment in $1,000
increments ranging from $9,000 to $12,000. The right margin reflects
the ending value of the hypothetical investment in the Fund as
compared to the LBRBI; the ending values are $10,232 and $10,979,
respectively. Below the legend is the Average Annual Total Returns for
the one-year and Start of Performance (8/5/96) for the period ended
August 31,1997; the Average Annual Total Returns are 2.39% and 2.64 %,
respectively.
G. The graphic representation here displayed consists of a boxed
legend in the bottom center indicating the components of the
corresponding line graph. Federated Municipal Opportunities Fund, Inc.
(Class C Shares) (the "Fund") is represented by a solid black line.
The Lehman Brothers Revenue Bond Index (LBRBI) is represented by a
broken line. The line graph is a visual representation of a comparison
of a change in value of a hypothetical $10,000 investment in the Fund
and the LBRBI. The "x" axis reflects computation periods from 8/5/96
to 8/31/97. The "y" axis reflects the cost of investment in $1,000
increments ranging from $9,000 to $12,000. The right margin reflects
the ending value of the hypothetical investment in the Fund as
compared to the LBRBI; the ending values are $10,724 and $10,979,
respectively. Below the legend is the Average Annual Total Returns for
the one-year and Start of Performance (8/5/96) for the period ended
August 31,1997; the Average Annual Total Returns are 7.16% and 7.26 %,
respectively.
H. The graphic representation here displayed consists of a boxed
legend in the bottom center indicating the components of the
corresponding line graph. Federated Municipal Opportunities Fund, Inc.
(Class C Shares) (the "Fund") is represented by a solid black line.
The Lehman Brothers Revenue Bond Index (LBRBI) is represented by a
broken line. The line graph is a visual representation of a comparison
of a change in value of a hypothetical $10,000 investment in the Fund
and the LBRBI. The "x" axis reflects computation periods from 8/31/87
to 8/31/97. The "y" axis reflects the cost of investment in $3,000
increments ranging from $9,000 to $24,000. The right margin reflects
the ending value of the hypothetical investment in the Fund as
compared to the LBRBI; the ending values are $19,939 and $23,346,
respectively. Below the legend is the Average Annual Total Returns for
the one-year, five-year, ten-year and Start of Performance (4/10/87)
for the period ended August 31,1997; the Average Annual Total Returns
are 7.01%, 5.50%, 7.14%, and 7.22%, respectively.
