Federated Investors
[GRAPHIC]
Federated Municipal Opportunities Fund, Inc.
12TH ANNUAL REPORT
AUGUST 31, 1998
ESTABLISHED 1987
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated Municipal Opportunities Fund, Inc. was created in 1987, and I am
pleased to present its 12th annual report. As of August 31, 1998, the fund's
assets totaled $480 million, and were invested across 170 tax-free securities
issued by municipalities in 33 states.
This report covers the 12-month reporting period from September 1, 1997 through
August 31, 1998. It begins with a discussion with Mary Jo Ochson, Senior Vice
President, Federated Advisers, who co- manages the fund with J. Scott Albrecht,
Vice President, Federated Advisers. Their comments cover the municipal market,
the fund's performance and investment strategy.
Following the discussion are three additional items of shareholder interest.
First is a series of graphs showing the fund's long-term investment performance.
Second is a complete listing of the fund's municipal bond holdings, and third is
the publication of the fund's financial statements.
It has been a good environment for the municipal bond market and for Federated
Municipal Opportunities Fund, Inc. shareholders. Inflation remains low, and
municipal bond yields are at historically high levels as compared to Treasury
bonds. Considering the fund's federal tax-free advantage, this environment
offers tax-sensitive investors a considerable yield.* The fund's 30- day current
SEC yield for Class A Shares on August 31, 1998 was 4.33%, based on offering
price.** This is the equivalent of a 7.17% yield on a taxable bond investment
for someone in the 39.60% federal income tax bracket, and equivalent to taxable
yields of 6.28% and 6.77% for investors in the 31% and 36% tax brackets,
respectively.***
* State, local, and federal alternative minimum taxes may apply.
** The 30-day current SEC net yield is calculated by dividing the investment
income per share for the prior 30 days by the maximum offering price per share
on that date. The figure is compounded and annualized. The 30-day current SEC
yield as of August 31, 1998 for Class B, C, and F Shares were 3.79%, 3.79%, and
4.49%, respectively, based on offering price.
*** The taxable yield equivalents, based on offering price, for investors in
the 31%, 36%, and 39.60% federal tax brackets were as follows: Class B
Shares-5.49%, 5.92%, and 6.27%, respectively; Class C Shares-5.49%, 5.92%, and
6.27%, respectively; and Class F Shares-6.51%, 7.02%, and 7.43%, respectively.
Over the past 12 months, the fund produced a competitive total return due to a
healthy monthly income stream and an increase in share price. Individual share
class total return performance including income dividends follows.+
TOTAL INCOME NET ASSET
RETURN DISTRIBUTIONS VALUE INCREASE
Class A Shares 8.91% $0.56 $10.67 to $11.04 = 3.47%
Class B Shares 8.08% $0.47 $10.66 to $11.03 = 3.47%
Class C Shares 8.11% $0.48 $10.66 to $11.03 = 3.47%
Class F Shares 8.91% $0.56 $10.67 to $11.04 = 3.47%
Thank you for entrusting a portion of your wealth in Federated Municipal
Opportunities Fund, Inc. You are one of approximately 12,000 shareholders who
earn monthly investment income free from federal tax. Of course, you have the
option of receiving income from the fund or building your account by reinvesting
your dividends to compound tax-free. As always, we welcome your comments and
suggestions. Sincerely, [GRAPHIC]
Richard B. Fisher
President
October 15, 1998
+ Performance quoted is based on net asset value, represents past performance,
and is not indicative of future results. Investment return and principal value
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than their original cost. Total returns, based on offering price, for the
12-month period for Class A, B, C, and F Shares were 4.04%, 2.30%, 7.03%, and
6.73%, respectively.
INVESTMENT REVIEW
[GRAPHIC]
Mary Jo Ochson
Senior Vice President
Federated Advisers
[GRAPHIC]
J. Scott Albrecht
Vice President
Federated Advisers
[GRAPHIC]
WHAT IS YOUR REVIEW OF THE MUNICIPAL BOND MARKETPLACE OVER THE 12-MONTH
REPORTING PERIOD ENDED AUGUST 31, 1998?
The municipal bond market generated solid returns over the previous year thanks
to modest price appreciation and attractive coupon income. The Lehman Brothers
Municipal Bond Index,* a good measure of the overall municipal market, produced
an 8.65% total return over the 12-month period ended August 31, 1998. Two-thirds
of this return was generated from coupon income with the remainder from price
appreciation. Municipal interest rates, as represented by the Bond Buyer 40
Index,* dropped from 5.53% to 5.12% over the reporting period.
[GRAPHIC]
WHY DIDN'T MUNICIPAL YIELDS DECLINE AS MUCH AS TAXABLE YIELDS?
There are two main reasons. First, there was a tremendous increase in the supply
of municipal securities during the first eight months of 1998. Market
strategists believe that municipal issuance for 1998 could exceed $300 billion,
which would be an all-time record. Second, the turmoil in the international
markets, particularly the problems in the Asian, Russian, and Latin American
economies, have contributed to a global "flight to quality" that has benefited
Treasuries. Although municipal bonds are of very high credit quality, the flight
to quality demand is from foreign buyers who are exempt from U.S. taxation. As
of August 31, 1998, municipal bonds were trading at historically high values as
compared to the Treasury market, with the long AAA-rated municipal bond trading
at more than 95% of Treasury bond yields.
* The Lehman Brothers Municipal Bond Index is a broad-based total return
performance benchmark for the long-term, investment grade bond market. The Bond
Buyer 40 Index is a standard against which municipal bonds are measured. These
indexes are unmanaged, and investments cannot be made in an index.
[GRAPHIC]
HOW HAS FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. PERFORMED WITH
RESPECT TO TOTAL RETURN AND INCOME FOR THE 12-MONTH REPORTING PERIOD
ENDED AUGUST 31, 1998?
The fund performed very well over the reporting period. For the 12-month period
ended August 31, 1998, the fund's Class A Shares produced a total return of
8.91%, based on net asset value.+ This return surpassed both the Lehman Brothers
Municipal Bond Index and the Lipper General Municipal Funds Average++ total
returns of 8.65% and 8.20%, respectively. The income on this fund was also very
competitive during the reporting period. The fund's current 30-day SEC yield on
August 31, 1998 was 4.33% for Class A Shares, based on offering price.+++
[GRAPHIC]
WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE?
Several factors were attributable to the competitive performance of the fund.
First, the core position in low investment- grade bonds (BBB-rated) with
attractive coupons provided a big part of the fund's total return performance.
These securities provided both substantial income plus price appreciation. The
price gain was due to the narrowing of credit spreads between AAA- rated bonds
and BBB-rated bonds over the period from 0.36% to 0.30%. The fund's share price
also benefited from its allocation to zero coupon securities. These securities
generally outperform when interest rates decline because of their call
protection and duration characteristics.
+ Performance quoted is based on net asset value, represents 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 net
asset value, for Class B, C and F Shares were 8.08%, 8.11%, and 8.91%,
respectively. Total returns for the period, based on offering price, for Class
A, B, C, and F Shares were 4.04%, 2.30%, 7.03%, and 6.73%, respectively.
++ The Lipper figure represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the the category indicated. Lipper figures do not reflect sales
charges.
+++ The current 30-day SEC yield is calculated by dividing the investment
income per share for the prior 30 days by the offering price on that date.
Thirty-day SEC yields are compounded and annualized.
[GRAPHIC]
WHAT WERE THE FUND'S TOP FIVE HOLDINGS AS OF AUGUST 31, 1998?
PERCENTAGE
ISSUER VALUE OF NET ASSETS
Indiana--Indianapolis
Airport Authority $19.4 MILLION 4.02%
District of Columbia
Revenue Bonds $18.0 MILLION 3.73%
Illinois Health
Facilities Authority $12.7 MILLION 2.62%
Tennessee--Springfield
Health &
Educational Facility $10.1 MILLION 2.10%
University of Minnesota $9.8 million 2.03%
TOTAL 14.50%
[GRAPHIC]
HOW WERE THE FUND'S ASSETS ALLOCATED IN TERMS OF CREDIT QUALITY AT THE END OF
THE REPORTING PERIOD?
As of August 31, 1998, the quality breakdown of the fund was:
PERCENTAGE OF
NET ASSETS
AAA 18.1%
AA 11.7%
A 9.2%
BBB 31.3%
BB or lower 8.8%
NR 21.4%
[GRAPHIC]
WHAT KIND OF ENVIRONMENT DO YOU SEE AHEAD FOR MUNICIPAL BONDS?
Our outlook for the balance of 1998 and into 1999 remains optimistic for
municipal securities. We believe that economic growth (Gross Domestic Product)
will slow to a point nearer to the Federal Reserve Board's non- inflationary
growth rate of 2.50% from a very strong real rate of 3.50% for the first half of
1998. Inflation should continue to remain in check, and interest rates should
remain low due to a slower economy, overseas economic problems, and a federal
budget surplus.
We also believe that the combination of rising demand and expectations that new
municipal issuance will begin to decrease later this year should drive municipal
yields back to a more normal alignment against Treasuries. If this happens
against a backdrop of lower rates, municipal bonds may generate not only
attractive tax-free yields but some price appreciation.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS INFEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
INITIAL INVESTMENT:
IF YOU MADE AN INITIAL INVESTMENT OF $12,000 IN THE CLASS F SHARES OF FEDERATED
MUNICIPAL OPPORTUNITIES FUND, INC. ON 4/10/87, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$26,620 ON 8/31/98. YOU WOULD HAVE EARNED A 7.25%* AVERAGE ANNUAL TOTAL RETURN
FOR THE 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 9/30/98, the Class A Shares' average annual 1-year and since inception
(8/5/96) total returns were 6.40% and 7.39%, respectively. Class B Shares'
average annual 1-year and since inception (8/5/96) total returns were 2.10% and
5.59%, respectively. Class C Shares' average annual 1-year and since inception
(8/5/96) total returns were 6.78% and 7.51%, respectively. Class F Shares'
average annual 1-year, 5-year, and 10-year total returns were 6.40%, 5.15%, and
7.45%, 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 1.00% sales
charge and the 1.00% 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.
** The total returns stated take into account the 4.50% sales charge for Class
A Shares, the 5.50% contingent deferred sales charge for Class B Shares, the
1.00% contingent deferred sales charge for Class C Shares and the 1.00% sales
charge and 1.00% contingent deferred sales charge for Class F Shares.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
ONE STEP AT A TIME:
$1,000 initial investment and subsequent investments of $1,000 each year for
eleven years (reinvesting all dividends and capital gains) grew to $18,228.
With this approach, the key is consistency.
If you had started investing $1,000 annually in Class F Shares of Federated
Municipal Opportunities Fund, Inc. on 4/ 10/87, reinvested your dividends and
capital gains, and did not redeem any shares, you would have invested only
$12,000, but your account would have reached a total value of $18,228* by
8/31/98. You would have earned an average annual
total return of 6.93%.
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 when 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. 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 the Class F Shares of Federated
Municipal Opportunities Fund, Inc. and continue to invest $500 in the fund on
the first of every month. As this chart shows, since that time, their investment
has grown-on a tax-free basis-to $111,920.* This represents a 6.88% average
annual total return for investors in the 36% federal tax bracket.+ 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. Upon redemption, any capital gains are subject to 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.
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 Federated
Municipal Opportunities Fund, Inc. (Class A Shares) (the "Fund") from August 5,
1996 (start of performance) to August 31, 1998 compared to the Lehman Brothers
Revenue Bond Index (LBRBI) and the Lehman Brothers Municipal Bond Index
(LBMBI).+
[GRAPHIC]
SEE APPENDIX D
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 and LBMBI have been adjusted to reflect reinvestment of
dividends on securities in the indexes.
** Total return quoted reflects all applicable sales charges.
+ The LBRBI and LBMBI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance. The
Investment Adviser has elected to add a secondary index, the Lehman Brothers
Municipal Bond Index (LBMBI), for the purpose of performance comparisons to the
Fund. The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market, and is representative of the
performance of the types of securities in the Fund's portfolio. The LBRBI will
be removed from the next annual report. Indexes are unmanaged and investments
cannot be made in an index.
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 Federated
Municipal Opportunities Fund, Inc. (Class B Shares) (the "Fund") from August 5,
1996 (start of performance) to August 31, 1998 compared to the Lehman Brothers
Revenue Bond Index (LBRBI) and the Lehman Brothers Municipal Bond index
(LBMBI).+
[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. The ending value
of the Fund reflects a 4.00% contingent deferred sales charge on any redemption
less than three years from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The LBRBI and LBMBI have been
adjusted to reflect reinvestment of dividends on securities in the indexes.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBRBI and LBMBI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance. The
Investment Adviser has elected to add a secondary index, the Lehman Brothers
Municipal Bond Index (LBMBI), for the purpose of performance comparisons to the
Fund. The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market, and is representative of the
performance of the types of securities in the Fund's portfolio. The LBRBI will
be removed from the next annual report. Indexes are unmanaged and investments
cannot be made in an index.
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 Federated
Municipal Opportunities Fund, Inc. (Class C Shares) (the "Fund") from August 5,
1996 (start of performance) to August 31, 1998 compared to the Lehman Brothers
Revenue Bond Index (LBRBI) and the Lehman Brothers Municipal Bond Index
(LBMBI).+
[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 Fund's
performance assumes the reinvestment of all dividends and distributions. The
LBRBI and LBMBI have been adjusted to reflect reinvestment of dividends on
securities in the indexes.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBRBI and LBMBI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance. The
Investment Adviser has elected to add a secondary index, the Lehman Brothers
Municipal Bond Index (LBMBI), for the purpose of performance comparisons to the
Fund. The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market, and is representative of the
performance of the types of securities in the Fund's portfolio. The LBRBI will
be removed from the next annual report. Indexes are unmanaged and investments
cannot be made in an index.
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 Federated
Municipal Opportunities Fund, Inc. (Class F Shares) (the "Fund") from August 31,
1988 to August 31, 1998 compared to the Lehman Brothers Revenue Bond Index
(LBRBI) and the Lehman Brothers Municipal Bond Index (LBMBI).+
[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 after deducting
the maximum sales charge of 1.00% ($10,000 investment minus $100 sales charge =
$9,900). The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBRBI and LBMBI have been adjusted to reflect reinvestment of
dividends on securities in the indexes.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBRBI and LBMBI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance. The
Investment Adviser has elected to add a secondary index, the Lehman Brothers
Municipal Bond Index (LBMBI), for the purpose of performance comparisons to the
Fund. The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market, and is representative of the
performance of the types of securities in the Fund's portfolio. The LBRBI will
be removed from the next annual report. Indexes are unmanaged and investments
cannot be made in an index.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--99.8%
ALASKA--1.3%
<C> <S> <S> <C>
$ 1,440,000 Alaska Industrial Development and Export Authority, Power
Revenue Bonds, 5.875% (Upper Lynn Canal Regional Power
Supply System)/(Original Issue Yield: 6.00%), 1/1/2032 BB+ $ 1,462,622
95,000 Alaska State Housing Finance Corp., Collateralized Home
Mortgage Revenue Bonds (Series A-l), 7.625%, 12/1/2013 AAA 97,173
505,000 Alaska State Housing Finance Corp., Collateralized Home
Mortgage Revenue Bonds (Series B-1), 6.90% (GNMA LOC),
6/1/2032 AAA 537,143
4,000,000 Alaska State Housing Finance Corp., Mortgage Revenue Bonds
(Series 1997 A-2), 5.75% (Original Issue Yield: 5.778%),
6/1/2024 AAA 4,167,920
Total 6,264,858
ARKANSAS--1.7%
2,920,000 Conway, AR Hospital Authority, Revenue Bonds, 7.125% (Conway
Regional Hospital), 2/1/2013 BBB+ 3,162,798
2,500,000 Conway, AR Hospital Authority, Revenue Refunding Bonds,
8.125% (Conway Regional Hospital), 7/1/2005 BBB+ 2,686,375
1,000,000 Conway, AR Hospital Authority, Revenue Refunding Bonds,
8.375% (Conway Regional Hospital), 7/1/2011 BBB+ 1,078,880
1,000,000 Little Rock, AR Health Facilities Board, Revenue Refunding
Bonds, 7.00% (Baptist Medical Center, AR), 10/1/2017 A 1,091,750
Total 8,019,803
CALIFORNIA--5.5%
6,000,000 California Statewide Communities Development Authority,
Special Facilities Revenue Bonds, 5.625% (United Air Lines)/
(Original Issue Yield: 5.75%), 10/1/2034 BB+ 6,161,580
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- 1,203,150
2,300,000 San Dimas, CA Housing Authority, Mobile Home Park Revenue
Bonds (Series 1998A), 5.70% (Charter Oak Mobile Home Estates
Acquisition Project)/(Original Issue Yield: 5.90%), 7/1/2028 NR 2,267,340
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
CALIFORNIA--CONTINUED
<C> <S> <S> <C>
$ 24,000,000 San Joaquin Hills, CA Transportation Corridor Agency, Toll
Road Capital Appreciation Refunding Revenue Bonds (MBIA
INS)/(Original Issue Yield: 5.625%), 1/15/2025 AAA $ 6,436,800
21,625,000 San Joaquin Hills, CA Transportation Corridor Agency, Toll
Road Capital Appreciation Refunding Revenue Bonds (Series A)
(MBIA INS)/(Original Issue Yield: 5.60%),
1/15/2023 AAA 6,414,624
2,000,000 Stockton, CA Public Financing Authority, Reassessment
Revenue Bonds (Series 1998), 5.80% (Arch Road & Stockton
Business Park Ads)/(Original Issue Yield: 5.80%), 9/2/2020 NR 2,040,560
1,250,000 Temecula, CA Community Facilities District No. 88-12,
Special Tax Refunding Bonds (Series 1998A), 5.625%,
9/1/2017 NR 1,260,863
1,000,000 West Sacramento, CA, Limited Obligation Refunding
Improvement Bonds, 5.60% (West Sacramento Reassessment
District of 1998)/(Original Issue Yield: 5.70%), 9/2/2017 NR 1,002,900
Total 26,787,817
COLORADO--3.9%
420,000 Colorado HFA, SFM Revenue Bonds (Series A-2), 7.70% (FHA
GTD), 2/1/2023 AA 444,221
1,980,000 Colorado HFA, SFM Revenue Bonds (Series C-2), 7.375% (FHA
GTD), 8/1/2023 AA 2,100,344
5,000,000 Colorado HFA, SFM Revenue Bonds (Series 1997C-2), 6.875%,
11/1/2028 Aa 5,633,550
2,500,000 Colorado HFA, Single Family Program Senior Bonds
(Series 1998A-2), 6.60%, 5/1/2028 Aa 2,779,825
10,000,000 E-470 Public Highway Authority, CO, Capital Appreciation
Revenue Bonds (Series B) (MBIA INS)/(Original Issue Yield:
5.50%), 9/1/2021 AAA 3,225,200
9,700,000 E-470 Public Highway Authority, CO, Capital Appreciation Revenue
Bonds (Series B) (MBIA INS)/(Original Issue Yield:
5.52%), 9/1/2022 AAA 2,976,833
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
COLORADO--CONTINUED
<C> <S> <S> <C>
$ 5,000,000 E-470 Public Highway Authority, CO, Capital Appreciation
Revenue Bonds (Series B) (MBIA INS)/(Original Issue Yield:
5.52%), 9/1/2023 AAA $ 1,460,050
160,000 El Paso County, CO HFA, SFM Revenue Bonds, 8.00% (GNMA COL),
9/1/2022 AAA 168,546
Total 18,788,569
DISTRICT OF COLUMBIA--3.7%
17,000,000 District of Columbia, Revenue Bonds, 5.625% (American
University)/(AMBAC INS)/(Original Issue Yield: 5.90%),
10/1/2026 AAA 18,016,260
FLORIDA--1.2%
2,475,000 Lee County, FL HFA, SFM Step Coupon Revenue Bonds, 6.85%
(GNMA COL), 3/1/2029 Aaa 2,813,828
16,925,000 Miami-Dade County, FL, Special Obligation Capital
Appreciation Revenue Bonds (Series B) (MBIA INS)/(Original
Issue Yield: 5.65%), 10/1/2031 AAA 2,912,116
Total 5,725,944
IDAHO--0.6%
780,000 Idaho Housing Agency, SFM Revenue Bonds (Series A), 7.50%
FHA GTD), 7/1/2024 AA 829,538
1,960,000 Idaho Housing Agency, SFM Revenue Bonds (Series F-2), 7.80%
(FHA GTD), 1/1/2023 AA 2,058,529
Total 2,888,067
ILLINOIS--7.3%
2,380,000 Chicago, IL, Collateralized SFM Revenue Bonds (Series A),
7.25% (GNMA COL), 9/1/2028 Aaa 2,711,986
2,500,000 Chicago, IL, Collateralized SFM Reveue Bonds (Series A-1),
6.45% (GNMA COL), 9/1/2029 Aaa 2,765,075
1,480,000 Chicago, IL, Gas Supply Revenue Bonds, 7.50% (Peoples Gas
Light & Coke Company), 3/1/2015 AA- 1,583,141
1,100,000 Chicago, IL, Gas Supply Revenue Bonds, 7.50% (Peoples Gas
Light & Coke Company), 3/1/2015 AA- 1,176,659
2,000,000 Chicago, IL, Water Revenue Bond, 7.20% (PRF)/(Original Issue
Yield: 7.35%), 11/15/2016 AA- 2,125,240
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
ILLINOIS--CONTINUED
<C> <S> <S> <C>
$ 3,115,000 Granite City, IL HFA, Revenue Refunding Bonds (Series A),
8.125% (St. Elizabeth Medical Center)/(Original Issue Yield:
8.167%), 6/1/2008 BB $ 3,238,946
3,000,000 Illinois Development Finance Authority, Housing Revenue
Bonds, 6.10% (Catholic Charities Housing Development Corp),
1/1/2020 NR 3,085,650
2,500,000 Illinois Development Finance Authority, Mortgage Revenue
Refunding Bonds (Series A), 5.80% (MBIA INS)/(FHA LOC),
7/1/2028 AAA 2,624,950
9,900,000 Illinois Health Facilities Authority, Hospital Revenue Bonds
(Series A), 9.25% (Edgewater Hospital & Medical Center, IL),
7/1/2024 NR 12,658,833
1,050,000 Illinois State University, Auxilary Facilities System
Revenue Bonds, 7.40% (PRF)/(Original Issue Yield: 7.444%),
4/1/2014 Aaa 1,113,851
2,000,000 Rolling Meadows, IL, Multifamily Mortgage Revenue Refunding
Bonds, 7.75% (Woodfield Garden Apartments)/(Banque Paribas,
Paris LOC), 2/1/2004 A- 2,134,960
Total 35,219,291
INDIANA--5.9%
550,000 Beech Grove, IN, Economic Development Revenue Bond, 8.75%
(Westvaco Corp.), 7/1/2010 A 558,278
2,000,000 Indiana Health Facilities Finance Authority Rehabilitation
Center, Revenue Refunding Bonds (Series 1998), 5.625% (Greenwood
Village South Project)/(Original Issue Yield:
5.802%), 5/15/2028 NR 2,006,280
3,000,000 Indiana Port Commission, Port Facility Revenue Refunding
Bonds, 6.875% (Cargill, Inc.), 5/1/2012 Aa3 3,294,450
600,000 Indiana State HFA, SFM Revenue Bonds (Series A), 8.20% (GNMA
COL), 7/1/2020 Aaa 625,488
2,400,000 Indiana State HFA, SFM Revenue Home Mortgage Program (Series
F-2), 7.75% (GNMA COL), 7/1/2022 Aaa 2,543,568
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 19,382,508
Total 28,410,572
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
IOWA--0.2%
<C> <S> <S> <C>
$ 1,000,000 Davenport, IA PCA, PCR Refunding Bonds, Nicols-Homeshield
Project, 8.375% (Quanex Corp.), 12/1/2005 NR $ 1,020,200
KANSAS--0.6%
2,500,000 Sedgwick & Shawnee Counties, KS, SFM Revenue Bonds (Series
1997A-1), 5.50% (GNMA Collateralized Home Mortgage Program
COL), 6/1/2029 NR 2,794,400
KENTUCKY--1.7%
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+ 3,867,885
4,000,000 Kentucky Economic Development Finance Authority, Hospital
System Refunding Revenue Bonds, 5.875% (Appalachian Regional
Health Center)/(Original Issue Yield: 5.92%), 10/1/2022 BBB 4,149,600
Total 8,017,485
LOUISIANA--6.2%
3,000,000 De Soto Parish, LA Environmental Improvement Authority,
Revenue Bonds, 7.70% (International Paper Co.), 11/1/2018 BBB+ 3,515,580
1,000,000 Iberville Parish, LA, PCR Refunding Bonds, Series 1998,
5.70% (Entergy Gulf States, Inc.)/(Original Issue Yield:
5.699%), 1/1/2014 BB+ 1,009,590
2,800,000 Lake Charles, LA Harbor & Terminal District, Port Facilities
Revenue Refunding Bond, Trunkline Lining Co Project, 7.75%
(Panhandle Eastern Corp.), 8/15/2022 A3 3,219,412
3,900,000 Louisiana HFA, SFM Revenue Bonds (Series C-1), 5.75% (GNMA
Collateralized Home Mortgage Program COL), 12/1/2028 NR 4,020,237
5,645,000 St. Charles Parish, LA, PCR Bonds, 7.50% (Louisiana Power &
Light Co.)/(Original Issue Yield: 7.542%), 6/1/2021 BBB 6,168,856
1,400,000 St. Charles Parish, LA, PCR Bonds, 8.00% (Louisiana Power &
Light Co.), 12/1/2014 Baa3 1,501,136
2,100,000 St. Charles Parish, LA, PCR Bonds, 8.25% (Louisiana Power &
Light Co.)/(Original Issue Yield: 8.273%), 6/1/2014 Baa3 2,216,193
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 3,994,487
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
LOUISIANA--CONTINUED
<C> <S> <S> <C>
$ 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 $ 3,266,430
1,000,000 West Feliciana Parish, LA, PCR Bonds, 5.80% (Entergy Gulf
States, Inc.), 12/1/2015 BB+ 1,027,400
Total 29,939,321
MASSACHUSETTS--2.1%
2,300,000(a)Massachusetts IFA, Refunding Revenue Bonds (Series 1998A),
5.625% (Chestnut Knoll at Glenmeadow)/(Original Issue Yield:
5.70%), 2/15/2025 NR 2,312,466
21,000,000 Massachusetts IFA, Solid Waste Disposal Sr. Lien Revenue
Bonds (Series A), 9.00% (Massachusetts Recycling
Association), 8/1/2016 A 7,875,000
Total 10,187,466
MICHIGAN--2.6%
1,000,000 Chelsea, MI Economic Development Corp., Revenue Refunding
Bonds (Series 1998), 5.40% (United Methodist Retirement
Communities, Inc.)/(Original Issue Yield: 5.52%), 11/15/2018 NR 1,006,050
2,250,000 Chelsea, MI Economic Development Corp., Revenue Refunding
Bonds (Series 1998), 5.40% (United Methodist Retirement
Communities, Inc.)/(Original Issue Yield: 5.58%), 11/15/2027 NR 2,233,463
785,000 Michigan State Housing Development Authority, SFM Revenue
Bonds (Series B), 6.95%, 12/1/2020 AA+ 831,048
5,000,000 Michigan Strategic Fund, Limited Obligation Revenue
Refunding Bonds, Series A, 5.55% (Detroit Edison Co.)/(MBIA
INS), 8/1/2029 AAA 5,008,400
1,000,000 Michigan Strategic Fund, Resource Recovery Limited
Obligation Revenue Bonds, 6.90% (Central Wayne Energy
Recovery Limited Partnership), 7/1/2019 NR 1,012,450
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
MICHIGAN--CONTINUED
<C> <S> <S> <C>
$ 1,000,000 Michigan Strategic Fund, Resource Recovery Limited
Obligation Revenue Bonds, 7.00% (Central Wayne Energy
Recovery Limited Partnership), 7/1/2027 NR $ 1,012,380
1,500,000 Western Townships MI, Utilities Authority, LT GO Sewer
Disposal System Bonds, 8.20%, 1/1/2018 BBB+ 1,550,790
Total 12,654,581
MINNESOTA--5.6%
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 934,965
250,000 Centennial Independent School District No. 012, MN, UT GO
Bonds (Series A), 7.15% (FSA INS)/(PRF), 2/1/2011 AAA 262,090
105,000 Dakota County, MN Housing & Redevelopment Authority, SFM
Revenue Bonds, 7.20% (GNMA GTD), 12/1/2009 AAA 106,433
165,000 Hennepin Co. MN, Lease Revenue Certificates of Participation
(Series A), 6.80%, 5/15/2017 AA 179,977
200,000 Minneapolis, MN Multifamily Housing Authority, Multifamily
Housing Revenue Bonds, 7.125% (Seward Towers)/(GNMA COL),
12/20/2010 AAA 210,760
300,000 Minneapolis, MN Multifamily Housing Authority, Multifamily
Housing Revenue Bonds, Churchill Project, 7.05% (FHA GTD),
10/1/2022 AAA 324,912
1,495,000 Minnesota State HFA, SFM Revenue Bonds (Series A), 7.95%
(FHA GTD), 7/1/2022 AA+ 1,571,828
320,000 Minnesota State HFA, SFM Revenue Bonds (Series D), 8.05%
(FHA GTD), 8/1/2018 AA+ 329,146
3,000,000 Minnesota State HFA, SFM Revenue Bonds (Series E), 6.85%, 1/
1/2024 AA+ 3,188,850
30,000 Minnesota State HFA, SMF Revenue Bonds (Series B), 7.25%
(Original Issue Yield: 7.311%), 7/1/2016 AA+ 30,893
205,000 Minnesota State HFA, SFM Revenue Bonds (Series B), 7.30%
(FHA LOC)/(Original Issue Yield: 7.342%), 1/1/2017 AA+ 212,345
195,000 Minnesota State HFA, SFM Revenue Bonds (Series C), 7.10%
(FHA COL), 7/1/2011 AA+ 206,881
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
MINNESOTA--CONTINUED
<C> <S> <S> <C>
$ 80,000 Minnesota State HFA, SFM Revenue Bonds (Series C), 7.65%
(FHA COL), 7/1/2008 AA+ $ 83,874
100,000 Minnetonka, MN, Multifamily Housing Revenue Bonds, Cedare
Hills East Project, 7.50% (FHA COL), 12/1/2017 A+ 105,225
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 9,722,430
8,000,000 VRDC/IVRC Trust, GO Inverse Variable Rate Certificates,
7.523% (Regents of University of Minnesota), 5/18/2012 AA 9,800,000
Total 27,270,609
MONTANA--0.2%
1,045,000 Montana State Board of Housing, SFM Revenue Bonds
(Series B-2), 7.50% (FHA GTD), 4/1/2023 Aa2 1,104,753
NEVADA--1.7%
3,000,000 Clark County, NV, Industrial Development Refunding Revenue
Bonds (Series 1995B), 5.90% (Nevada Power Co.), 10/1/2030 BBB- 3,069,090
5,110,000 Clark County, NV, Industrial Development Revenue Bonds
(Series 1997A), 5.90% (Nevada Power Co.), 11/1/2032 BBB- 5,228,603
Total 8,297,693
NEW HAMPSHIRE--2.2%
600,000 New Hampshire Higher Educational & Health Facilities
Authority, Revenue Bonds (Series 1998), 5.75% (RiverMead at
Peterborough), 7/1/2028 NR 605,592
1,070,000 New Hampshire State HFA, SFM Revenue Bonds (Series B),
7.75%, 7/1/2023 A+ 1,141,294
5,445,000 New Hampshire State HFA, SFM Revenue Bonds
(Series D), 7.25%, 7/1/2015 A+ 5,737,669
2,865,000 New Hampshire State IDA, PCR Bonds (Series A), 8.00% (United
Illuminating Co.), 12/1/2014 BBB- 3,043,031
Total 10,527,586
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
NEW MEXICO--0.7%
<C> <S> <S> <C>
$ 2,000,000 Farmington, NM, PCR Refunding Bonds (Series 1997), 6.375%
(Public Service Co. New Mexico), 4/1/2022 BB+ $ 2,187,420
1,250,000 Santa Fe County, NM, Project Revenue Bonds
(Series 1998A), 5.625% (El Castillo Retirement Residences)/
(Original Issue Yield: 5.828%), 5/15/2025 NR 1,246,288
Total 3,433,708
NEW YORK--4.6%
500,000 Monroe County, NY IDA, Civic Facility Revenue Bonds, 5.70%
(Volunteers of America of Western New York)/(Original Issue
Yield: 5.80%), 8/1/2018 NR 500,015
3,000,000 New York City, NY IDA, Industrial Development Revenue Bonds
(Series 1997), 5.75% (Brooklyn Navy Yard Cogeneration
Partners, L.P. Project)/(Original Issue Yield: 5.81%),
10/1/2036 BBB- 3,090,810
1,500,000 New York City, NY IDA, Industrial Development Revenue
Refunding Bonds (Series 1998), 6.00% (Field Hotel
Associates, L.P.- JFK Project), 11/1/2028 NR 1,502,940
5,000,000 New York City, NY, Residual Interest Tax-Exempt Securities
(Series PA-147), 6.675%, 2/1/2005 NR 5,859,500
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+ 2,630,175
280,000 New York State Environmental Facilities Corp., PCR State
Water Revolving Fund, 7.25% (Original Issue Yield: 7.334%),
6/15/2010 A 308,468
2,620,000 New York State Environmental Facilities Corp., PCR State
Water Revolving Fund, 7.25% (United States Treasury PRF),
6/15/2010 Aaa 2,910,296
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 5,319,500
Total 22,121,704
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
NORTH CAROLINA--1.1%
<C> <S> <S> <C>
$ 3,000,000 Martin County, NC IFA, (Series 1995) Solid Waste Disposal
Revenue Bonds, 6.00% (Weyerhaeuser Co.), 11/1/2025 A $ 3,195,510
2,400,000 North Carolina Medical Care Commission, Health Care
Facilities First Mortgage Revenue Refunding Bonds
(Series 1998), 5.625% (United Church Retirement Homes)/
(Original Issue Yield: 5.80%), 9/1/2024 NR 2,372,544
Total 5,568,054
NORTH DAKOTA--0.7%
2,135,000 North Dakota State HFA, SFM Revenue Bonds (Series C), 7.30%,
7/1/2024 A+ 2,252,105
1,260,000 North Dakota State HFA, SFM Revenue Bonds (Series A), 6.75%
(FHA COL), 7/1/2012 A+ 1,336,999
Total 3,589,104
OHIO--0.9%
2,000,000 Cleveland, OH, Airport Special Refunding Revenue Bonds
(Series 1999), 5.70% (Continental Airlines, Inc.)/(Original
Issue Yield: 5.80%), 12/1/2019 BB- 2,006,940
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- 530,230
1,500,000 Ohio State Water Development Authority, PCR Refunding
Revenue Bonds (Series 1997A), 6.10% (Cleveland Electric
Illuminating Co.), 8/1/2020 BB+ 1,573,050
Total 4,110,220
OKLAHOMA--2.7%
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 5,004,848
1,250,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.375% (American
Airlines), 12/1/2020 BBB- 1,346,338
6,200,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.60% (American
Airlines)/(Original Issue Yield: 7.931%),
12/1/2030 BBB- 6,770,586
Total 13,121,772
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
PENNSYLVANIA--11.2%
<C> <S> <S> <C>
$ 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 $ 3,370,410
2,500,000 Allegheny County, PA HDA, Health & Education Revenue Bonds,
7.00% (Rehabilitation Institute of Pittsburgh)/(United
States Treasury PRF)/(Original Issue Yield: 7.132%),
6/1/2022 BBB 2,808,675
4,985,000 Allegheny County, PA Higher Education, Building Authority
Revenue Bonds, 7.375% (La Roche College),
7/15/2012 NR 5,377,619
3,000,000 Allegheny County, PA IDA, Environmental Improvement
Refunding Revenue Bonds (Series 1998), 5.60% (USX Corp.),
9/1/2030 BBB- 3,056,310
1,555,000 Allegheny County, PA IDA, Revenue Bonds, 8.75% (United
Parcel Service), 2/15/2009 NR 1,610,591
620,000 Allegheny County, PA Residential Finance Agency, Mortgage
Revenue Bonds (Series G), 9.50% (GNMA COL), 12/1/2018 Aaa 634,055
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 3,460,320
2,055,000 Erie County, PA Hospital Authority, Revenue Bonds, 7.50%
(Erie Infants & Youth Home, Inc.), 10/1/2011 NR 2,183,355
400,000 Erie County, PA IDA, PCR Refunding Bonds, 7.15%
(International Paper Co.), 9/1/2013 A3 434,084
3,500,000 Pennsylvania EDFA, Resource Recovery Revenue Bonds
(Series A), 6.40% (Northampton Generating), 1/1/2009 NR 3,736,215
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 9,393,680
6,000,000 Pennsylvania HFA, SFM Revenue Bonds (Series 34-B), 7.00%
(FHA GTD), 4/1/2024 AA+ 6,444,360
2,005,000 Pennsylvania HFA, SFM Revenue Bonds (Series 28), 7.65% (FHA
GTD), 10/1/2023 AA+ 2,104,588
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
PENNSYLVANIA--CONTINUED
<C> <S> <S> <C>
$ 1,740,000 Pennsylvania State Higher Education Facilities Authority,
College & University Revenue Bonds, 6.75% (Thiel College),
9/1/2017 NR $ 1,861,678
1,200,000 Pennsylvania State Higher Education Facilities Authority,
Revenue Bonds (Series 1996), 7.15% (Thiel College),
5/15/2015 NR 1,340,676
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 4,273,931
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 1,827,088
Total 53,917,635
PUERTO RICO--0.5%
1,000,000 Puerto Rico Highway and Transportation Authority, Residual
Interest Tax-Exempt Securites (Series PA 331A), 7.019%
(AMBAC INS), 7/1/2013 NR 1,205,420
1,000,000 Puerto Rico Highway and Transportation Authority, Residual
Interest Tax-Exempt Securities (Series PA 331B), 7.019%
(AMBAC INS), 7/1/2014 NR 1,203,040
Total 2,408,460
SOUTH CAROLINA--0.6%
15,550,000 Connector 2000 Association, Inc., SC, Toll Road Capital
Appreciation Revenue Bonds (Series 1998B) (Original Issue
Yield: 5.85%), 1/1/2034 BBB- 1,909,229
1,000,000 South Carolina Jobs-EDA, First Mortgage Health Facilities
Revenue Refunding Bonds (Series 1998), 5.70% (The Lutheran Homes
of South Carolina, Inc.)/(Original Issue Yield:
5.80%), 5/1/2026 NR 995,910
Total 2,905,139
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
TENNESSEE--3.7%
<C> <S> <S> <C>
$ 1,160,000 Metropolitan Government Nashville & Davidson County, TN
HEFA, Refunding Revenue Bonds (Series 1998), 5.65% (The
Blakeford at Green Hills)/(Original Issue Yield: 5.75%),
7/1/2024 NR $ 1,161,879
1,000,000 Shelby County, TN Health Education & Housing Facilities
Board, Health Care Facilities Revenue Bonds (Series 1997A),
6.375% (Kirby Pines Retirement Community)/(Original Issue
Yield: 6.50%), 11/15/2025 NR 1,032,220
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 Aaa 3,969,829
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 Aaa 10,113,870
1,380,000 Tennessee Housing Development Agency, Homeownership Program,
Issue V Revenue Bonds, 7.65%, 7/1/2022 AA 1,462,814
Total 17,740,612
TEXAS--10.7%
2,500,000 Brazos River Authority, TX, PCR Revenue Bonds (Series A),
7.875% (Texas Utilities Electric Co.), 3/1/2021 BBB+ 2,738,600
1,800,000 Brazos River Authority, TX, PCR Revenue Bonds (Series A),
8.125% (Texas Utilities Electric Co.), 2/1/2020 BBB+ 1,924,938
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+ 7,838,256
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- 3,336,810
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- 2,553,438
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+ 2,760,425
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
TEXAS--CONTINUED
<C> <S> <S> <C>
$ 3,500,000 Guadalupe-Blanco River Authority TX, Industrial Development
Corp., PCR Bonds, 8.60% (A.P. Green Industries), 4/1/2009 NR $ 3,733,030
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 5,514,650
3,000,000 Gulf Coast, TX Waste Disposal Authority, Revenue Bonds,
5.60% (Valero Energy Corp.), 4/1/2032 BBB- 3,025,800
5,000,000 Harris County-Houston, TX Sports Authority, Special Revenue
Jr. Lien Capital Appreciation Revenue Bonds (Series B) (MBIA
INS)/(Original Issue Yield: 5.45%),
11/15/2017 AAA 1,815,950
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- 8,299,533
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 7,988,925
Total 51,530,355
UTAH--2.9%
715,000 Hildale, UT, Electric Revenue Bonds (Series 1995), 7.00%, 9/
1/2002 NR 755,247
7,000,000 Intermountain Power Agency, UT, Refunding Revenue Bonds
(Series A), 5.00% (Original Issue Yield: 5.687%),
7/1/2023 A+ 6,829,340
4,000,000 Tooele County, UT, Hazardous Waste Treatment Revenue Bonds
(Series 1998A), 5.70% (Union Pacific Corp.),
11/1/2026 BBB- 4,060,800
625,000 Utah State HFA, SFM Revenue Bonds (Series B-3), 7.10%,
7/1/2024 AA 662,100
795,000 Utah State HFA, SFM Revenue Bonds (Series E-2), 7.15% (FHA
GTD)/(Original Issue Yield: 7.169%), 7/1/2024 AA 839,663
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
UTAH--CONTINUED
<C> <S> <S> <C>
$ 1,060,000 Utah State HFA, SFM Revenue Bonds, 7.55% (FHA GTD),
7/1/2023 AA $ 1,122,307
185,000 Utah State HFA, SFM Revenue Bonds, 7.75% (FHA GTD),
1/1/2023 AA 193,099
Total 14,462,556
VIRGINIA--1.5%
7,500,000 Pocohontas Parkway Association, VA, Toll Road Capital
Appreciation Revenue Bonds (Series B) (Original Issue Yield:
5.75%), 8/15/2017 BBB- 2,592,300
16,000,000 Pocohontas Parkway Association, VA, Toll Road Revenue Bonds
(Series 1998B) (Original Issue Yield: 5.90%),
8/15/2029 BBB- 2,686,720
1,800,000 Rockingham County, VA IDA, Residential Care Facility First
Mortgage Revenue Bonds, 5.75% (Virginia Mennonite Retirement
Community)/(Original Issue Yield: 5.90%),
4/1/2028 NR 1,814,400
Total 7,093,420
WASHINGTON--1.0%
4,300,000 Public Industrial Corporation, 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- 4,617,383
WEST VIRGINIA--0.5%
287,469 Marion County, WV County Commission, Refunding Revenue
Bonds, 10.00% (Adirondack Recycling), 12/1/2025 NR 267,346
2,056,897 Marion County, WV County Commission, Refunding Revenue
Bonds, 8.00% (Adirondack Recycling), 12/1/2025 NR 1,912,914
Total 2,180,260
WISCONSIN--2.3%
1,250,000 Wisconsin HEFA, Revenue Bonds (Series 1998), 5.70% (United
Lutheran Program For The Aging, Inc.)/(Original Issue Yield:
5.778%), 3/1/2028 NR 1,253,138
2,000,000 Wisconsin HEFA, Revenue Bonds (Series B), 6.75% (Grant Regional
Health Center, Inc)/(Original Issue Yield: 6.90%),
10/1/2022 NR 2,062,720
</TABLE>
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--CONTINUED
WISCONSIN--CONTINUED
<S> <C> <C> <C>
$ 6,595,000 Wisconsin Housing & Economic Development Authority,
Homeownership Revenue Bonds (Series H), 5.75%, 9/1/2028 NR $ 6,790,080
770,000 Wisconsin Housing & Economic Development Authority,
Homeownership Revenue Bond, Series A, 7.10%, 3/1/2023 AA 822,240
120,000 Wisconsin Housing & Economic Development Authority,
Homeownership Revenue Bonds (Series E), 8.00% (FHA GTD)/
(Original Issue Yield: 8.044%), 3/1/2021 AA 123,244
Total 11,051,422
TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST $457,514,206) 481,787,079
SHORT TERM MUNICIPALS--0.6%
NORTH CAROLINA--0.1%
400,000 Person County, NC Industrial Facilities & Pollution Control
Financing Authority Daily VRDNs (Carolina Power & Light
Co.)/(SunTrust Bank, Atlanta LOC) NR 400,000
PENNSYLVANIA--0.4%
1,700,000 Philadelphia, PA Hospitals & Higher Education Facilities
Authority, Hospital Revenue Bonds (Series A of 1996) Daily
VRDNs (Children's Hospital of Philadelphia)/(Morgan Guaranty
Trust Co., New York LIQ) AA 1,700,000
PUERTO RICO--0.1%
700,000 Government Development Bank for Puerto Rico (GDB) Weekly
VRDNs (MBIA Insurance Corporation INS)/(Credit Suisse First
Boston LIQ) AA 700,000
TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) 2,800,000
TOTAL INVESTMENTS (IDENTIFIED COST $459,926,706)(B) $484,587,079
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 45.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Prospectus for an explanation of
the credit ratings. Current credit ratings are unaudited.
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $459,926,706.
The net unrealized appreciation of investments on a federal tax basis amounts to
$24,660,373 which is comprised of $35,790,301 appreciation and $11,129,928
depreciation at August 31, 1998.
Note: The categories of investments are shown as a percentage of net
assets ($482,653,186) at August 31, 1998.
The following acronyms are used throughout this portfolio: AMBAC--American
Municipal Bond Assurance Corporation COL --Collateralized EDA --Economic
Development Authority EDFA --Economic Development Financing Authority FHA
- --Federal Housing Administration FSA --Financial Security Assurance GNMA
- --Government National Mortgage Association GO --General Obligation GTD
- --Guaranteed HDA --Hospital Development Authority HEFA --Health and Education
Facilities Authority HFA --Housing Finance Authority IDA --Industrial
Development Authority IFA --Industrial Finance Authority INS --Insured LIQ
- --Liquidity Agreement 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 VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
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. Pursuant to a settlement approved by
the bankruptcy Court, a new owner acquired the facility subject to a portion of
the Senior Lien Revenue Bonds. The new owner entered into a fifteen-year lease
guaranteed by the company that built the facility and pledged the lease and the
guarantee as additional collateral for the Senior Lien Revenue Bonds. The Senior
Lien Revenue Bonds are expected to be replaced with refunding bonds in the face
amount of $56.3 million by December 31, 1998. The Senior Lien Revenue Bonds will
not produce income until exchange for such refunding bonds.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost
$459,926,706) $484,587,079
Income receivable 8,145,641
Receivable for investments sold 485,000
Receivable for shares sold 1,108,049
Total assets 494,325,769
LIABILITIES:
Payable for investments purchased $10,271,740
Payable for shares redeemed 876,467
Payable to Bank 255,778
Accrued expenses 268,598
Total liabilities 11,672,583
NET ASSETS for 43,731,228 shares outstanding $482,653,186
NET ASSETS CONSIST OF:
Paid in capital $464,093,613
Net unrealized appreciation of investments 24,660,373
Accumulated net realized loss on investments (5,326,042)
Distributions in excess of net investment income (774,758)
Total Net Assets $482,653,186
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($112,178,616 / 10,163,872 shares outstanding) $11.04
Offering Price Per Share (100/95.50 of $11.04)* $11.56
Redemption Proceeds Per Share (100.00/100 of $11.04)** $11.04
CLASS B SHARES:
Net Asset Value Per Share ($47,027,622 / 4,262,618 shares outstanding) $11.03
Offering Price Per Share (100/100.00 of $11.03)* $11.03
Redemption Proceeds Per Share (94.50/100 of $11.03)** $10.42
CLASS C SHARES:
Net Asset Value Per Share ($6,269,411 / 568,163 shares outstanding) $11.03
Offering Price Per Share (100/100.00 of $11.03)* $11.03
Redemption Proceeds Per Share (99.00/100 of $11.03)** $10.92
CLASS F SHARES:
Net Asset Value Per Share ($317,177,537 / 28,736,575 shares outstanding) $11.04
Offering Price Per Share (100/99.00 of $11.04)* $11.15
Redemption Proceeds Per Share (99.00/100 of $11.04)** $10.93
</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,
1998
INVESTMENT INCOME: Interest $27,632,695 EXPENSES:
Investment advisory fee $2,736,122 Administrative personnel and services fee
343,950 Custodian fees 36,516 Transfer and dividend disbursing agent fees and
expenses 339,562 Directors'/Trustees' fees 16,850 Auditing fees 17,606 Legal
fees 3,975 Portfolio accounting fees 145,139 Distribution services fee--Class B
Shares 220,744 Distribution services fee--Class C Shares 25,747 Shareholder
services fee--Class A Shares 252,181 Shareholder services fee--Class B Shares
73,581 Shareholder services fee--Class C Shares 8,582 Shareholder services
fee--Class F Shares 805,707 Share registration costs 48,612 Printing and postage
43,756 Insurance premiums 6,161 Taxes 30,825 Miscellaneous 5,659 Total expenses
5,161,275 NET INVESTMENT INCOME 22,471,420 REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS: Net realized gain on investments 4,375,593 Net change in
unrealized appreciation of investments 11,688,975 Net realized and unrealized
gain on investments 16,064,568 Change in net assets resulting from operations $
38,535,988
(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,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 22,471,420 $ 22,714,689
Net realized gain on investments ($4,375,593 and $2,206,486,
respectively, as computed for federal tax purposes) 4,375,593 2,206,486
Net change in unrealized appreciation/depreciation 11,688,975 16,489,543
Change in net assets resulting from operations 38,535,988 41,410,718
NET EQUALIZATION CREDITS (DEBITS)-- -- 21,898
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (5,141,911) (3,383,555)
Class B Shares (1,241,221) (342,071)
Class C Shares (144,720) (63,260)
Class F Shares (16,533,742) (19,546,786)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO
SHAREHOLDERS (23,061,594) (23,335,672)
SHARE TRANSACTIONS--
Proceeds from sale of shares 75,194,657 37,024,060
Proceeds from shares issued in connection with the
acquisitions -- 93,815,812
Net asset value of shares issued to shareholders in payment
of distributions declared 13,981,416 14,141,468
Cost of shares redeemed (65,472,597) (102,632,146)
Change in net assets resulting from share transactions 23,703,476 42,349,194
Change in net assets 39,177,870 60,446,138
NET ASSETS:
Beginning of period 443,475,316 383,029,178
End of period $482,653,186 $ 443,475,316
</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 45.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.67 $10.33 $10.42
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.58 0.08
Net realized and unrealized gain (loss) on investments 0.39 0.33 (0.12 )
Total from investment operations 0.93 0.91 (0.04 )
LESS DISTRIBUTIONS
Distributions from net investment income (0.56 ) (0.57 ) (0.05 )
Net asset value, end of period $11.04 $10.67 $10.33
Total return(b) 8.91% 9.07% (0.36%)
Ratios to average net assets
Expenses 1.08% 1.09% 0.84 %*
Net investment income 4.98% 5.29% 6.15 %*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $112,179 $94,941 $296
Portfolio turnover 41% 20% 22 %
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of initial
public investment) 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 45.
<TABLE>
<CAPTION>
Year Ended August 31,
1998 1997 1996(a)
<S> <C> <C> <C>
Net asset value, beginning of period $10.66 $10.33 $10.42
Income from investment operations
Net investment income 0.44 0.51 0.08
Net realized and unrealized gain (loss) on investments 0.40 0.31 (0.12 )
Total from investment operations 0.84 0.82 (0.04 )
Less distributions
Distributions from net investment income (0.47) (0.49 ) (0.05 )
NET ASSET VALUE, END OF PERIOD $11.03 $10.66 $10.33
TOTAL RETURN(B) 8.08% 8.17% (0.36%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.83% 1.84% 0.84 %*
Net investment income 4.25% 4.55% 6.15 %*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $47,028 $14,997 $296
Portfolio turnover 41% 20% 22 %
</TABLE>
* Computed on an annualized basis.
(a)Reflects operations for the period from August 5, 1996 (date of initial
public investment) 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 45.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.66 $10.33 $10.42
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.50 0.08
Net realized and unrealized gain (loss) on investments 0.40 0.32 (0.12 )
Total from investment operations 0.85 0.82 (0.04 )
LESS DISTRIBUTIONS
Distributions from net investment income (0.48) (0.49 ) (0.05 )
NET ASSET VALUE, END OF PERIOD $11.03 $10.66 $10.33
TOTAL RETURN(B) 8.11% 8.17% (0.36%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.83% 1.86% 0.84 %*
Net investment income 4.24% 4.51% 6.15 %*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $6,269 $1,950 $296
Portfolio turnover 41% 20% 22 %
</TABLE>
* Computed on an annualized basis.
(a)Reflects operations for the period from August 5, 1996 (date of initial
public investment) 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 45.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.67 $10.33 $10.71 $10.56 $11.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.55 0.54 0.69 0.63 0.61
Net realized and unrealized
gain (loss) on investments 0.38 0.37 (0.42) 0.15 (0.73 )
Total from investment
operations 0.93 0.91 0.27 0.78 (0.12 )
LESS DISTRIBUTIONS
Distributions from net
investment income (0.56) (0.57) (0.65) (0.63) (0.60 )
NET ASSET VALUE, END OF PERIOD $11.04 $10.67 $10.33 $10.71 $10.56
TOTAL RETURN(A) 8.91 % 9.07% 2.47% 7.73 % (1.06%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.08% 1.08% 1.08% 1.08% 1.09 %
Net investment income 4.98% 5.23% 5.91% 6.18 % 5.56 %
Expense waiver/reimbursement(b) 0.00 % 0.01% 0.01% 0.00 % 0.00 %
Supplemental data
Net assets, end of period
(000 omitted) $317,178 $331,588 $383,028 $426,010 $472,232
Portfolio turnover 41 % 20% 22% 13 % 27 %
</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, 1998
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.
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 31,1998, the Fund, for federal tax
purposes, had a capital loss carryforward of $5,326,042, 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
carry forward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2002 $ 755,664
2003 775,694
2004 3,794,684
EQUALIZATION--Effective September 1, 1997 the Fund discontinued its use of
equalization. Equalization is an accounting practice whereby a portion of the
proceeds of sales and cost of redemptions of Funds shares is credited or charged
to undistributed net investment income on a per share basis, as determined on
the date of the transaction. This change in accounting policy does not effect
the Fund's net assets, net value per share, or net investment income.
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.
CAPITAL STOCK
At August 31, 1998, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
SHARE CLASS NAME CAPITAL STOCK AUTHORIZED
CLASS A SHARE 500,000,000
CLASS B SHARE 500,000,000
CLASS C SHARE 500,000,000
CLASS F SHARE 500,000,000
TOTAL 2,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2,396,950 $ 26,115,990 654,338 $ 6,738,299
Shares issued in connection with the acquisition 9,405,099 93,815,812
Shares issued to shareholders in payment of distributions
declared 325,421 3,526,334 226,565 2,371,090
Shares redeemed (1,457,233) (15,845,507) (1,387,296) (14,487,278)
Net change resulting from Class A Share transactions 1,265,138 $ 13,796,817 8,898,706 $ 88,437,923
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 3,100,694 $ 33,768,993 1,566,410 $ 16,385,580
Shares issued to shareholders in payment of distributions
declared 54,169 587,226 16,534 172,989
Shares redeemed (298,593) (3,262,688) (176,625) (1,853,974)
Net change resulting from Class B Share transactions 2,856,270 $ 31,093,531 1,406,319 $ 14,704,595
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 419,685 $ 4,574,972 183,002 $ 1,913,194
Shares issued to shareholders in payment of distributions
declared 11,298 122,567 5,466 57,137
Shares redeemed (45,704) (497,848) (5,613) (58,379)
Net change resulting from Class C Share transactions 385,279 $ 4,199,691 182,855 $ 1,911,952
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 985,428 $ 10,734,702 1,147,025 $ 11,986,987
Shares issued to shareholders in payment of distributions
declared 899,119 9,745,289 1,104,524 11,540,252
Shares redeemed (4,227,235) (45,866,554) (8,247,527) (86,232,515)
Net change resulting from Class F Share transactions (2,342,688) $(25,386,563) (5,995,978) $(62,705,276)
Net change resulting from share transactions 2,163,999 $ 23,703,476 4,491,902 $ 42,349,194
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.60% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors, Inc. 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:
PERCENT 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, 1998, Class A Shares and Class F Shares did not
incur a distribution service 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, 1998, the Fund
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 $88,180,000 and $121,591,960, respectively.
GENERAL--Certain of the Officers and Directors of the Fund 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, 1998, were as follows:
PURCHASES $210,365,005
SALES $183,286,933
6. INVESTMENT RISK
INVESTMENT RISK--Although the Fund has a diversified portfolio, the Fund has
21.3% of its portfolio investment in lower rated and comparable quality unrated
high-yield securities. Investments in higher yield securities are accomplished
by 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 often
subordinated to other creditors of the issuer. The Fund held default securities
with a value aggregating $2,312,466, representing 4.8% of the Fund's net assets
at August 31, 1998.
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
INDEPENDENT AUDITORS' REPORT To the Board of Directors 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, 1998, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended August 31, 1998 and
1997, 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 as of
August 31, 1998, 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, 1998, 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 9, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
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 Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 313910200
Cusip 313910309
Cusip 313910408
Cusip 313910101
G01091-01 (10/98)
[GRAPHIC]
APPENDIX
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
A. The graphic representation here displayed entitled "Initial Investment of
$12,000," 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 $12,000/1,188 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 $12,000 in the Fund on
4/10/87, would have a reinvested total worth of $22,620/2,442 Shares on 8/31/98.
The "x" axis reflects computation periods from 4/10/87 to 8/31/98. The right
margin of the chart reflects the ending values of a hypothetical investment of
$12,000 in the Fund measured in increments of $5,000 ranging from $0 to $30,000.
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 $1,000/99 Shares investment in the Fund
(totaling $12,000 by 8/31/98). 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 $18,228/1,672
Shares on 8/31/98. The "x" axis reflects computation periods from 4/10/87 to
8/31/98. 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
$3,500 ranging from $0 to $21,000.
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 $111,920 by 8/31/98). 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 $111,920/10,268 Shares on 8/31/98. The
"x" axis reflects computation periods from 4/10/87 to 8/31/98. 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 $25,000
ranging from $0 to $125,000.
D. 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 dotted line and the Lehman Brothers Municipal Bond
Index (LBMBI)
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,
the LBRBI and the LBMBI. The "x" axis reflects computation periods from 8/5/96
to 8/31/98. 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 and the LBMBI;
the ending values are $11,247 $11,947, and $11,868, 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 31,1998; the Average Annual
Total Returns are 4.04% and 5.81 %, respectively.
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 B Shares) (the "Fund") is
represented by a solid black line. The Lehman Brothers Revenue Bond Index
(LBRBI) is represented by a
dotted line and the Lehman Brothers Municipal Bond Index (LBMBI) 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,
the LBRBI and the LBMBI. The "x" axis reflects computation periods from 8/5/96
to 8/31/98. The "y" axis reflects the cost of investment in $500 increments
ranging from $9,500 to $12,000. The right margin reflects the ending value of
the hypothetical investment in the Fund as compared to the LBRBI and the LBMBI;
the ending values are $11,190, $11,947, and $11,868, 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 31,1998; the Average Annual
Total Returns are 2.30% and 5.35%, 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 C Shares) (the "Fund") is
represented by a solid black line. The Lehman Brothers Revenue Bond Index
(LBRBI) is represented by a
dotted line and the Lehman Brothers Municipal Bond Index (LBMBI) 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, the LBRBI, and
the LBMBI. The "x" axis reflects computation periods from 8/5/96 to 8/31/98. 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 and the LBMBI; the ending values are $11,594, $11,947, and
$11,868, 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
31,1998; the Average Annual Total Returns are 7.03% and 7.36 %, 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 F Shares) (the "Fund") is
represented by a solid black line. The Lehman Brothers Revenue Bond Index
(LBRBI) is represented by a
dotted line and the Lehman Brothers Municipal Bond Index (LBMBI) is represened
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, the LBRBI, and
the LBMBI. The "x" axis reflects computation periods from
8/31/87
to 8/31/98. 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 and the LBMBI; the ending values are $20,795, $23,406, and
$22,426, 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 31,1998; the Average Annual Total Returns are 6.73%, 5.14%,
7.59%, and 7.37%, respectively.
