SEMI-ANNUAL REPORT
[Graphic]
RICHARD B. FISHER
President
Federated Municipal Opportunities Fund, Inc.
President's Message
Dear Fellow Shareholder:
Federated Municipal Opportunities Fund, Inc. was created in 1987, and I am
pleased to present its 12th Semi-Annual Report. At the end of the reporting
period, this $483 million fund was invested across 173 issues, had an average
maturity of slightly more than 10 years, and an average coupon rate of 6.35%.
This report covers the first half of the fund's fiscal year, which is the
six-month period from September 1, 1998 through February 28, 1999. It begins
with an interview with Mary Jo Ochson, Senior Vice President, who co-manages the
fund with J. Scott Albrecht, Vice President, both of Federated Invest ment
Management Company. Following their discussion covering the fund's performance
and investment strategy are three additional items of share holder 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 state ments.
This fund pursues monthly tax-free income from a broadly diversified portfo lio
of long-term municipal bonds. 1 The fund is carefully managed to be as tax
efficient as possible by avoiding taxable gains. In fact, the fund has a
long-standing record of never making a taxable distribution to shareholders.
The yield generated by the fund during the reporting period substantially
exceeded that of its peer group, and the fund's total return was competitive
with the returns of the 264 general municipal funds as tracked by the Lipper
General Municipal Funds Average. 2
1 State, local, and federal alternative minimum taxes may apply.
2 The Lipper General Municipal Funds Average figure represents the average of
the total returns reported by all of the mutual funds designated by Lipper
Analytical Services, Inc. as falling in the category. This figure does not take
sales charges into account.
Individual share class total return performance for the six-month reporting
period, including income distributions, follows. 3
TOTAL RETURN INCOME DISTRIBUTIONS NET ASSET VALUE CHANGE
Class A Shares 1.34% $0.28 $11.04 to $10.91= (1%)
Class B Shares 0.95% $0.23 $11.03 to $10.90= (1%)
Class C Shares 1.03% $0.23 $11.03 to $10.91= (1%)
Class F Shares 1.34% $0.28 $11.04 to $10.91= (1%)
Thank you for selecting Federated Municipal Opportunities Fund, Inc. as a
convenient, diversified way to pursue tax-free income. 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
April 15, 1999
3 Performance quoted is based on net asset value, represents past perfor mance,
and is not indicative of future results. Investment return and prin cipal 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 (i.e., less any applicable sales charge), for Class A, B, C and F
Shares were (3.22%), (4.48%), 0.05% and (0.64%), respectively.
[Graphic]
Mary Jo Ochson
Senior Vice President
Federated Investment Management Company
[Graphic]
J. Scott Albrecht
Vice President
Federated Investment Management Company
Investment Review
WHAT IS YOUR VIEW OF THE MUNICIPAL BOND MARKET OVER THE REPORTING PERIOD?
The municipal bond market offered investors remarkable relative value during the
six-month reporting period ended February 28, 1999. Municipal bond issu ance was
extremely heavy for most of 1998, due largely to a low interest rate
environment. Because of the attractive rates, municipal entities sold a record
number of bonds to refinance existing debt and build new projects.
As for the other side of the supply/demand coin, demand for municipal bonds was
impacted by the "rate shock" from individual investors which occurred when
long-term yields on municipal bonds were at or below the 5.00% thresh old. As a
result of this supply/demand imbalance, the yield on municipal securities surged
to over 104% of Treasuries in October 1998. The average spread in the fourth
quarter of 1998 was 96% of Treasuries, while the histor ical average spread is
closer to 85%.
Year-to-date municipal bond issuance has slowed, at least in comparison to that
in January and February of 1998. Although the average spread between municipal
bonds and Treasuries had declined to approximately 90% by February 28, 1999,
municipal bond yields are still at very attractive lev els.
HOW DID FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. PERFORM WITH RESPECT TO
TOTAL RETURN DURING THE REPORTING PERIOD?
For the six-month period ended February 28, 1999, the Class A Shares of the fund
produced a total return that was competitive with the returns of the 264 general
municipal funds tracked by Lipper Analytical Services, Inc. The fund's Class A
Shares returned 1.34%, based on net asset value, 1 while the Lipper General
Municipal Funds Average returned 1.76%. The income generated by the fund,
however, substantially exceeded that of its peer group.
The fund's total return was affected by spread widening between BBB- and AAA-
rated bonds. When credit spreads widened, lower rated bonds underperformed
higher rated bonds. The portfolio maintained a greater percentage of assets in
BBB-rated securities than other funds in its peer group.
WHAT WERE THE FUND'S TOP FIVE HOLDINGS AS OF FEBRUARY 28, 1999?
<TABLE>
<CAPTION>
COUPON PERCENTAGE
ISSUER MATURITY RATE OF NET ASSETS
<S> <C> <C> <C>
Indianapolis, IN Airport Authority
(FDX Corp.) 01/15/2017 7.100% 4.0%
District of Columbia
Revenue Bonds
(American University) 10/1/2026 5.625% 3.7%
Illinois Health
Facilities Authority
(Edgewater Hospital & Medical Center) 7/01/2024 9.250% 2.6%
Springfield, TN
Hospital Revenue Bonds
(Northcrest Medical Center) 04/01/2024 8.500% 2.1%
Pennsylvania
Wastewater
Treatment Revenue Bonds 12/01/2024 7.600% 1.9%
</TABLE>
These five holdings comprised 14.3% of the fund's total net assets.
HOW WERE THE FUND'S ASSETS ALLOCATED IN TERMS OF CREDIT QUALITY AT THE END OF
THE REPORTING PERIOD?
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS
<S> <C>
AAA 20.4%
AA 6.5%
A 5.6%
BBB 34.4%
BB or lower 3.5%
Non-rated 29.6%
</TABLE>
HOW DID THE FUND PERFORM IN TERMS OF INCOME AND YIELD?
Federated Municipal Opportunities Fund, Inc. produced more federal tax-exempt
income than the average long-term general municipal fund. As of February 28,
1999, the Class A Shares of the fund produced a 30-day SEC yield of 4.30%, based
on net asset value, 2 which beat the average yield of 3.79% for its Lipper peer
group. The fund's core position in lower rated bonds (BBB and below)3 with
attractive coupons was the driving force behind the fund's excellent income
performance. This performance is even more impressive on a tax equivalent basis,
with yields ranging from 5.97% for an investor in the 28% tax bracket to 7.12%
for an investor in the 39.6% tax bracket.
1 Performance quoted 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 for Class B, C, and F Shares, based on net
asset value, were 0.95%, 1.03%, and 1.34%, respec tively. Total returns for the
period, based on offering price (i.e., less any applicable sales charge), for
Class A, B, C and F Shares were (3.22%), (4.48%), 0.05%, and (0.64%),
respectively.
2 The 30-day SEC yields as of February 28, 1999 for Class B, C, and F Shares,
were 3.55%, 3.55%, and 4.30%, based on net asset value, respectively. Based on
offering price, the SEC yields were 4.10%, 3.55%, 3.55%, and 4.26% for Class A,
B, C, and F Shares, respectively.
3 Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield potential.
YOU HAVE DISCUSSED THE TAX EFFICIENCY OF THIS FUND IN THE PAST. HOW DO YOU
MANAGE A FUND FOR TAX EFFICIENCY?
We make every effort to avoid transactions in the fund that would result in a
capital gain not offset by capital losses. The fund accomplishes this by pri
marily carrying over losses from previous tax years or tax-loss swaps in the
current year. In fact, the fund has a long-standing record of never making a
taxable distribution.
DURING THE YEAR, THE FUND'S BOARD OF DIRECTORS VOTED TO ALLOW THE FUND TO INVEST
A GREATER PERCENTAGE OF ITS ASSETS IN HIGHER YIELDING, LOWER RATED MUNICIPAL
BONDS. TO WHAT EXTENT HAVE YOU USED THIS FLEXIBILITY, AND WHAT IS THE AVERAGE
CREDIT QUALITY OF THE FUND'S PORTFOLIO?
Though the policy is in place to allow us to invest in lower rated municipal
bonds, we have done so on a limited basis, and the flexibility has not resulted
in a significantly lower overall credit quality. The average quality of the
fund's portfolio was BBB as of the end of the reporting period. We will continue
to selectively participate in the income opportunities that can be found in the
below-investment-grade area of the market, where investors can be rewarded with
added yield for assuming incremental risk. We believe that this is an ongoing
process that can benefit shareholders who want to pursue a higher level of
tax-free income.
WHAT ROLE DOES CREDIT ANALYSIS PLAY IN MANAGING THE FUND?
The fund uses a very credit intensive approach to selecting securities. We have
pulled together a team of experienced analysts who do extensive research on
every issue. The analysts who work on this fund have an average of 13 years of
analytical experience. Each analyst also has relevant work experi ence in some
of the sectors that they follow.
Each issue is independently reviewed by our analysts regardless of whether or
not it has received a rating from one of the rating agencies. This review
involves discussions with the issuer, borrower, investment bankers, and other
involved parties. When appropriate, our analyst makes an on-site visit. After
the research is complete, the analyst's recommendation is reviewed by our credit
committee, which consists of senior department personnel, includ ing portfolio
managers and other analysts. If the committee agrees that the security meets our
standards, we buy it.
After we purchase an issue, we continue to follow it. In addition to follow ing
broad sector trends, the credit staff reviews all of our securities on at least
an annual basis; many are reviewed more frequently-quarterly or even monthly.
When we see signs of changing situations, we alter our holdings accordingly.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET FOR THE BALANCE OF 1999?
We continue to be very optimistic about the municipal bond market. The U.S.
economy remains strong, which has contributed to the fiscal health of state and
local governments and other municipal bond issuers. Although the economy is
steaming, we do not expect to see any Federal Reserve Board tight ening moves
any time soon. Inflation continues to be barely noticeable, there is less
government borrowing, and the global economy remains relatively weak. This
should keep interest rates in a narrow trading range. In an environment of
stable interest rates, credits that have higher yields-such as those you see in
Federated Municipal Opportunities Fund, Inc.-have an advantage for total return.
Two Ways You May Seek to Invest for Success:
RESULTS OF A $12,000 INVESTMENT
IF YOU MADE AN INITIAL INVESTMENT OF $12,000 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, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$27,211 ON 2/28/99. YOU WOULD HAVE EARNED A 7.17% AVERAGE ANNUAL TOTAL RETURN
FOR THE INVESTMENT LIFE SPAN. 1
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 3/31/99, the Class A Shares' average annual 1-year and since inception
(8/5/96) total returns were (0.15)% and 5.06%, respectively. Class B Shares'
average annual 1-year and since inception (8/5/96) total returns were (1.67)%,
and 4.68%, respectively. Class C Shares' average annual 1-year and since
inception (8/5/96) total returns were 2.80% and 6.07%, respectively. Class F
Shares' average annual 1-year, 5-year, and 10-year total returns were 2.57%,
6.25%, and 7.05%, respectively. 2
[Graphic]
See Appendix A
1 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.
2 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.
ONE STEP AT A TIME
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 11
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $18,629.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class F Shares of Feder ated
Municipal Opportunities Fund, Inc. on 4/10/87, reinvested your divi dends 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 $18,629 1 by
2/28/99. You would have earned an average annual total return of 6.76%.
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
1 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 reg ularly over time
and buying shares at various prices, investors can pur chase 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 pur chases
through periods of low price levels.
Hypothetical Profile: Investing 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 last day of every month.
As this chart shows, since that time, their investment has grown-on a tax-free
basis-to $118,484. 1 This represents a 6.72% average annual total return for
investors in the 36% federal tax bracket.2 For the Potters, the decision to
invest tax-free has made the future worth waiting for.
[Graphic]
See Appendix C
1 This chart assumes that the subsequent investments are made on the last day of
each month. Income may be subject to the federal alternative minimum tax and
state and local taxes.
2 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.
Portfolio of Investments
FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
100.5%
ALASKA-1.2%
$ 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+ $ 1,433,635
390,000 Alaska State Housing
Finance Corp.,
Collateralized Home
Mortgage Revenue Bonds,
Series B-1, 6.90% (GNMA
LOC), 6/1/2032 AAA 412,554
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 4,162,520
TOTAL 6,008,709
ARIZONA-1.0%
4,985,000 Gilbert, AZ IDA, Revenue
Bonds (Series 1999A),
5.85% (Southwest Student
Services
Corp.)/(Original Issue
Yield: 5.90%), 2/1/2019 NR 4,935,599
ARKANSAS-1.6%
2,920,000 Conway, AR Hospital
Authority, Revenue Bonds,
7.125% (Conway Regional
Hospital), 2/1/2013 BBB+ 3,125,597
2,500,000 Conway, AR Hospital
Authority, Revenue
Refunding Bonds, 8.125%
(Conway Regional
Hospital), 7/1/2005 BBB+ 2,646,075
1,000,000 Conway, AR Hospital
Authority, Revenue
Refunding Bonds, 8.375%
(Conway Regional
Hospital), 7/1/2011 BBB+ 1,061,650
1,000,000 Little Rock, AR Health
Facilities Board,
Revenue Refunding Bonds,
7.00% (Baptist Medical
Center, AR), 10/1/2017 A 1,082,990
TOTAL 7,916,312
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 Baa2 6,146,460
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- 1,178,850
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 2,277,161
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 6,369,120
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 6,370,076
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
CALIFORNIA-CONTINUED
$ 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 $ 2,035,980
1,250,000 Temecula, CA Community
Facilities District No.
88-12, Special Tax
Refunding Bonds (Series
1998A), 5.625%, 9/1/2017 NR 1,265,850
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 998,270
TOTAL 26,641,767
COLORADO-3.1%
325,000 Colorado HFA, SFM
Revenue Bonds (Series A-
2), 7.70% (FHA GTD),
2/1/2023 AA+ 341,474
1,595,000 Colorado HFA, SFM
Revenue Bonds (Series C-
2), 7.375% (FHA GTD),
8/1/2023 AA+ 1,634,907
5,000,000 Colorado HFA, Single
Family Mortgage Revenue
Bonds (Series 1997C-2),
6.875%, 11/1/2028 Aa2 5,621,350
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 3,152,300
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 2,900,882
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 1,418,450
115,000 El Paso County, CO HFA,
SFM Revenue Bonds, 8.00%
(GNMA COL), 9/1/2022 AAA 120,282
TOTAL 15,189,645
CONNECTICUT-0.6%
3,000,000 Connecticut Development
Authority, PCR Refunding
Revenue Bonds (Series
A), 5.85% (Connecticut
Light & Power Co.),
9/1/2028 Ba3 3,010,980
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 17,885,360
FLORIDA-1.7%
2,500,000 Florida Housing Finance
Corp., Multifamily
Housing Revenue Bonds
(Series 1998 T-1), 6.50%
(Whistler's Cove
Apartments), 1/1/2039 NR 2,485,600
2,475,000 Lee County, FL HFA,
Single Family Mortgage
Step Coupon Revenue
Bonds, 5.60% (GNMA
Collateralized Home
Mortgage Program COL),
3/1/2029 Aaa 2,808,283
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
FLORIDA-CONTINUED
$ 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 $ 2,914,316
TOTAL 8,208,199
GEORGIA-0.3%
1,640,000 Forsyth County, GA
Hospital Authority,
Revenue Anticipation
Certificates (Series
1998), 6.375% (Georgia
Baptist Health Care
System)/(Original Issue
Yield: 6.45%), 10/1/2028 NR 1,600,460
IDAHO-0.5%
685,000 Idaho Housing Agency,
SFM Revenue Bonds
(Series A), 7.50% (FHA
GTD), 7/1/2024 AA 724,689
1,735,000 Idaho Housing Agency,
SFM Revenue Bonds
(Series F-2), 7.80% (FHA
GTD), 1/1/2023 AA 1,808,790
TOTAL 2,533,479
ILLINOIS-6.0%
2,360,000 Chicago, IL,
Collateralized SFM
Revenue Bonds (Series
A), 7.25% (GNMA COL),
9/1/2028 Aaa 2,683,745
2,000,000 Chicago, IL, Water
Revenue Bonds, 7.20%
(PRF)/(Original Issue
Yield: 7.35%),
11/15/2016 AA- 2,098,740
1,100,000 Chicago, IL, Gas Supply
Revenue Bonds, 7.50%
(Peoples Gas Light & Coke
Co.), 3/1/2015 AA- 1,160,192
1,480,000 Chicago, IL, Gas Supply
Revenue Bonds, 7.50%
(Peoples Gas Light & Coke
Co.), 3/1/2015 AA- 1,560,986
3,000,000 Illinois Development
Finance Authority,
Housing Revenue Bonds,
6.10% (Catholic
Charities Housing
Development Corp.),
1/1/2020 NR 3,052,860
2,500,000 Illinois Development
Finance Authority,
Mortgage Revenue
Refunding Bonds, Series
A, 5.80% (MBIA INS)/(FHA
LOC), 7/1/2028 AAA 2,618,675
9,900,000 Illinois Health
Facilities Authority,
Hospital Revenue Bonds
(Series A), 9.25%
(Edgewater Hospital &
Medical Center, IL),
7/1/2024 NR 12,563,496
1,050,000 Illinois State
University, Auxilary
Facilities System
Revenue Bonds, 7.40%
(PRF)/(Original Issue
Yield: 7.444%), 4/1/2014 Aaa 1,098,184
2,000,000 Rolling Meadows, IL,
Multifamily Mortgage
Revenue Refunding Bonds,
7.75% (Woodfield Garden
Apartments)/(Banque
Paribas, Paris LOC),
2/1/2004 A 2,142,960
TOTAL 28,979,838
INDIANA-5.9%
550,000 Beech Grove, IN,
Economic Development
Revenue Bond, 8.75%
(Westvaco Corp.),
7/1/2010 A 558,211
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
INDIANA-CONTINUED
$ 1,000,000 Goshen, IN, Revenue
Bonds (Series 1998),
5.75% (Greencroft
Obligated
Group)/(Original Issue
Yield: 5.87%), 8/15/2028 NR $ 963,600
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 1,966,840
3,000,000 2 Indiana Port Commission,
Port Facility Revenue
Refunding Bonds, 6.875%
(Cargill, Inc.),
5/1/2012 Aa3 3,265,440
480,000 Indiana State HFA, SFM
Revenue Bonds (Series
A), 8.20% (GNMA COL),
7/1/2020 Aaa 496,877
2,025,000 Indiana State HFA, SFM
Revenue Home Mortgage
Program
(Series F-2), 7.75%
(GNMA COL), 7/1/2022 Aaa 2,130,907
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 19,167,561
TOTAL 28,549,436
IOWA-0.2%
1,000,000 Davenport, IA PCA, PCR
Refunding Bonds, Nicols-
Homeshield Project,
8.375% (Quanex Corp.),
12/1/2005 NR 1,020,230
KANSAS-0.8%
1,500,000 2 Kansas Development
Finance Authority,
Multifamily Housing
Revenue Bonds, Series
1998K, 6.375% (Pioneer
Olde Town Apartments),
10/1/2017 NR 1,496,640
2,260,000 Sedgwick & Shawnee
Counties, KS, Single
Family Mortgage Revenue
Bonds (Series 1997A-1),
5.50% (GNMA
Collateralized Home
Mortgage Program COL),
6/1/2029 Aaa 2,517,098
TOTAL 4,013,738
KENTUCKY-1.6%
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 BBB- 3,822,770
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 4,098,080
TOTAL 7,920,850
LOUISIANA-6.1%
3,000,000 De Soto Parish, LA
Environmental
Improvement Authority,
Revenue Bonds, 7.70%
(International Paper
Co.), 11/1/2018 BBB+ 3,444,510
1,000,000 Iberville Parish, LA,
Pollution Control
Revenue Refunding Bonds,
Series 1998, 5.70%
(Entergy Gulf States,
Inc.)/(Original Issue
Yield: 5.699%), 1/1/2014 BB+ 990,740
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
$ 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 $ 3,166,072
3,900,000 Louisiana HFA, Single
Family Mortgage Revenue
Bonds (Series C-1),
5.75% (GNMA
Collateralized Home
Mortgage Program COL),
12/1/2028 Aaa 4,022,811
5,645,000 St. Charles Parish, LA,
PCR Bonds, 7.50%
(Louisiana Power & Light
Co.)/(Original Issue
Yield: 7.542%), 6/1/2021 BBB 6,056,464
1,400,000 St. Charles Parish, LA,
PCR Bonds, 8.00%
(Louisiana Power & Light
Co.), 12/1/2014 BBB 1,475,936
2,100,000 St. Charles Parish, LA,
PCR Bonds, 8.25%
(Louisiana Power & Light
Co.)/(Original Issue
Yield: 8.273%), 6/1/2014 BBB 2,180,283
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 3,936,050
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 3,223,980
1,000,000 West Feliciana Parish,
LA, PCR Bonds, 5.80%
(Entergy Gulf States,
Inc.), 12/1/2015 BB+ 1,000,940
TOTAL 29,497,786
MASSACHUSETTS-3.0%
5,000,000 Massachusetts HEFA,
Revenue Bonds (Series
1999A), 5.75% (Caritas
Christi Obligated
Group)/(Original Issue
Yield: 5.80%), 7/1/2028 BBB 4,964,500
7,128,654 Massachusetts IFA,
8.50%, 11/1/2012 NR 7,110,832
2,300,000 Massachusetts IFA,
Refunding Revenue Bonds
(Series 1998A), 5.625%
(Chestnut Knoll at
Glenmeadow)/(Original
Issue Yield: 5.70%),
2/15/2025 NR 2,255,334
TOTAL 14,330,666
MICHIGAN-2.3%
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 977,380
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 2,168,775
590,000 Michigan State Housing
Development Authority,
Single Family Mortgage
Revenue Bonds (Series
B), 6.95%, 12/1/2020 AA+ 621,594
5,000,000 Michigan Strategic Fund,
Limited Obligation
Revenue Refunding Bonds,
Series A, 5.55% (Detroit
Edison Co.)/(MBIA INS),
9/1/2029 AAA 5,073,750
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
MICHIGAN-CONTINUED
$ 1,000,000 Michigan Strategic Fund,
Resource Recovery
Limited Obligation
Revenue Bonds, 6.90%
(Central Wayne Energy
Recovery Limited
Partnership), 7/1/2019 NR $ 1,026,880
1,000,000 Michigan Strategic Fund,
Resource Recovery
Limited Obligation
Revenue Bonds, 7.00%
(Central Wayne Energy
Recovery Limited
Partnership), 7/1/2027 NR 1,034,790
TOTAL 10,903,169
MINNESOTA-5.2%
900,000 Burnsville, MN,
Multifamily Housing
Revenue Refunding Bonds,
Coventry Court
Apartments, 7.50%
(FHA/VA Mtgs
COL)/(Original Issue
Yield: 7.56%), 9/1/2027 AAA 926,865
250,000 Centennial Independent
School District No. 012,
MN, UT GO Bonds, Series
A, 7.15% (FSA
INS)/(Prerefunded PRF),
2/1/2011 AAA 259,207
95,000 Dakota County, MN
Housing & Redevelopment
Authority, SFM Revenue
Bonds, 7.20% (GNMA GTD),
12/1/2009 AAA 96,144
165,000 Hennepin Co. MN, Lease
Revenue Certificates of
Participation, Series A,
6.80%, 5/15/2017 AA 179,376
200,000 Minneapolis, MN
Multifamily Housing
Authority, Multifamily
Housing Revenue Bonds,
7.125% (Seward
Towers)/(GNMA COL),
12/20/2010 AAA 209,432
300,000 Minneapolis, MN
Multifamily Housing
Authority, Multifamily
Housing Revenue Bonds,
Churchill Project, 7.05%
(FHA GTD), 10/1/2022 AAA 322,179
320,000 Minnesota State HFA, SFM
Revenue Bonds (Series
D), 8.05% (FHA GTD),
8/1/2018 AA+ 326,922
3,000,000 Minnesota State HFA, SFM
Revenue Bonds (Series
E), 6.85%, 1/1/2024 AA+ 3,174,870
170,000 Minnesota State HFA,
Single Family Mortgage
Revenue Bonds, Series B,
7.30% (FHA/VA Mtgs
LOC)/(Original Issue
Yield: 7.342%), 1/1/2017 AA+ 174,520
185,000 Minnesota State HFA,
Single Family Mortgage
Revenue Bonds, Series C,
7.10% (FHA/VA mtgs COL),
7/1/2011 AA+ 194,798
100,000 Minnetonka, MN,
Multifamily Housing
Revenue Bonds, Cedare
Hills East Project,
7.50% (FHA COL),
12/1/2017 A+ 104,380
8,770,000 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 9,091,420
8,000,000 2 VRDC/IVRC Trust, GO
Inverse Variable Rate
Certificates, 8.023%
(University of
Minnesota), 5/18/2012 AA 9,850,000
TOTAL 24,910,113
MISSISSIPPI-0.5%
2,500,000 Mississippi Business
Finance Corp., PCR
Bonds, 5.875% (System
Energy Resources,
Inc.)/(Original Issue
Yield: 5.934%), 4/1/2022 BBB- 2,497,000
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
MONTANA-0.2%
$ 950,000 Montana State Board of
Housing, SFM Revenue
Bonds (Series B-2),
7.50% (FHA GTD),
4/1/2023 Aa2 $ 998,041
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- 3,003,180
5,110,000 Clark County, NV,
Industrial Development
Revenue Bonds
(Series 1997A), 5.90%
(Nevada Power Co.),
11/1/2032 BBB- 5,122,673
TOTAL 8,125,853
NEW HAMPSHIRE-2.0%
600,000 New Hampshire Higher
Educational & Health
Facilities Authority,
Revenue Bonds (Series
1998), 5.75% (RiverMead
at Peterborough),
7/1/2028 NR 594,486
875,000 New Hampshire State HFA,
SFM Revenue Bonds
(Series B), 7.75%,
7/1/2023 A+ 926,949
4,735,000 New Hampshire State HFA,
SFM Revenue Bonds
(Series D), 7.25%,
7/1/2015 A+ 4,964,884
2,865,000 New Hampshire State IDA,
PCR Bonds ( Series A),
8.00% (United
Illuminating Co.),
12/1/2014 BBB- 3,002,663
TOTAL 9,488,982
NEW MEXICO-0.7%
2,000,000 Farmington, NM, PCR
Refunding Bonds (Series
1997), 6.375% (Public
Service Co. New Mexico),
4/1/2022 BB+ 2,140,480
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 1,216,488
TOTAL 3,356,968
NEW YORK-5.8%
2,500,000 Brookhaven, NY IDA,
Senior Residential
Housing Revenue Bonds,
6.25% (Woodcrest
Estates), 12/1/2023 NR 2,490,350
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 488,615
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- 3,084,240
1,500,000 New York City, NY IDA,
Industrial Development
Revenue Refunding Bonds
(Series 1998), 6.00%
(Field Hotel Associates,
LP-JFK Project),
11/1/2028 NR 1,484,250
5,000,000 2 New York City, NY,
Residual Interest Tax-
Exempt Securities
(Series PA-147), 8.537%,
8/1/2007 NR 5,976,600
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
NEW YORK-CONTINUED
$ 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+ $ 2,603,975
3,300,000 New York State Energy
Research & Development
Authority, PCR Bonds
(Series B) Daily VRDNs
(Niagara Mohawk Power
Corp.)/(Morgan Guaranty
Trust Co., New York LOC) AA+ 3,300,000
280,000 New York State
Environmental Facilities
Corp., PCR State Water
Revolving Fund, 7.25%
(Original Issue Yield:
7.334%), 6/15/2010 NR 306,611
2,620,000 New York State
Environmental Facilities
Corp., PCR State Water
Revolving Fund, 7.25%
(United States Treasury
PRF), 6/15/2001 (@102) NR 2,890,227
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 5,224,400
TOTAL 27,849,268
NORTH CAROLINA-1.1%
3,000,000 Martin County, NC IFA,
(Series 1995) Solid
Waste Disposal Revenue
Bonds, 6.00%
(Weyerhaeuser Co.),
11/1/2025 A 3,134,790
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 2,353,488
TOTAL 5,488,278
NORTH DAKOTA-0.7%
1,835,000 North Dakota State HFA,
SFM Revenue Bonds
(Series C), 7.30%,
7/1/2024 A+ 1,923,300
1,205,000 North Dakota State HFA,
SFM Revenue Bonds,
Series A, 6.75% (FHA/VA
Mtgs COL), 7/1/2012 A+ 1,272,251
TOTAL 3,195,551
OHIO-1.2%
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 1,950,120
1,680,000 2 Franklin County, OH,
Multifamily Housing
Revenue Refunding Bonds
(Series 1998B), 6.25%
(Jefferson Chase
Apartments Project),
11/1/2015 NR 1,678,085
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+ 522,175
1,500,000 Ohio State Water
Development Authority,
PCR Refunding Revenue
Bonds (Series 1997A),
6.10% (Cleveland
Electric Illuminating
Co.), 8/1/2020 BB+ 1,519,545
TOTAL 5,669,925
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
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 $ 4,947,261
1,250,000 Tulsa, OK Municipal
Airport, Revenue Bonds,
7.375% (American
Airlines), 12/1/2020 BBB- 1,338,363
6,200,000 Tulsa, OK Municipal
Airport, Revenue Bonds,
7.60% (American
Airlines)/(Original
Issue Yield: 7.931%),
12/1/2030 BBB- 6,732,022
TOTAL 13,017,646
PENNSYLVANIA-10.2%
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 NR 3,349,320
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%), 6/1/2002
(@102) NR 2,791,100
2,330,000 Allegheny County, PA
HDA, Health Care
Facilities Revenue Bonds
(Series 1998), 5.875%
(Villa St. Joseph of
Baden, Inc.)/(Original
Issue Yield: 6.02%),
8/15/2018 NR 2,257,793
4,985,000 Allegheny County, PA
Higher Education, Bldg.
Auth. Revenue Bonds,
7.375% (La Roche
College), 7/15/2012 NR 5,326,024
1,480,000 Allegheny County, PA
IDA, Revenue Bonds,
8.75% (United Parcel
Service), 2/15/2009 NR 1,517,947
3,000,000 Delaware County, PA
Authority, College
Revenue Bonds, 7.25%
(Eastern
College)/(United States
Treasury PRF)/(Original
Issue Yield: 7.875%),
3/1/2012 NR 3,444,120
2,055,000 Erie County, PA Hospital
Authority, Revenue
Bonds, 7.50% (Erie
Infants & Youth Home,
Inc.), 10/1/2011 NR 2,165,991
400,000 Erie County, PA IDA,
Pollution Control
Revenue Refunding Bonds,
7.15% (International
Paper Co.), 9/1/2013 BBB+ 427,684
6,000,000 2 Pennsylvania EDFA,
Exempt Facilities
Revenue Bonds (Series
1997B), 6.125% (National
Gypsum Co.), 11/1/2027 NR 5,905,380
3,500,000 2 Pennsylvania EDFA,
Resource Recovery
Revenue Bonds (Series
A), 6.40% (Northampton
Generating), 1/1/2009 BBB- 3,679,445
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 9,093,840
1,740,000 Pennsylvania State
Higher Education
Facilities Authority,
College & University
Revenue Bonds, 6.75%
(Thiel College),
9/1/2017 NR 1,847,741
1,200,000 Pennsylvania State
Higher Education
Facilities Authority,
Revenue Bonds (Series
1996), 7.15% (Thiel
College), 5/15/2015 NR 1,327,824
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
PENNSYLVANIA-CONTINUED
$ 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 $ 4,241,420
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%), 3/1/1999
(@102) AAA 1,786,278
TOTAL 49,161,907
PUERTO RICO-0.5%
1,000,000 2 Puerto Rico Highway and
Transportation
Authority, Residual
Interest Tax-Exempt
Securites (Series PA
331A), 8.76% (AMBAC
INS), 7/1/2013 NR 1,201,800
1,000,000 2 Puerto Rico Highway and
Transportation
Authority, Residual
Interest Tax-Exempt
Securities (Series PA
331B), 8.76% (AMBAC
INS), 7/1/2014 NR 1,190,680
TOTAL 2,392,480
SOUTH CAROLINA-0.8%
15,550,000 Connector 2000
Association, Inc., SC, Toll Road Capital Appreciation Revenue
Bonds (Series 1998A) (Original Issue Yield:
5.85%), 1/1/2034 BBB- 1,874,242
2,000,000 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 1,999,820
TOTAL 3,874,062
TENNESSEE-3.6%
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 1,131,684
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 1,018,930
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 3,822,703
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 10,028,148
1,255,000 Tennessee Housing
Development Agency,
Homeownership Program,
Issue V Revenue Bonds,
7.65%, 7/1/2022 AA 1,307,258
TOTAL 17,308,723
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
TEXAS-12.0%
$ 2,500,000 Brazos River Authority,
TX, PCR Revenue Bonds
(Series A), 7.875%
(Texas Utilities
Electric Co.), 3/1/2021 BBB+ $ 2,703,375
1,800,000 Brazos River Authority,
TX, PCR Revenue Bonds
(Series A), 8.125%
(Texas Utilities
Electric Co.), 2/1/2020 BBB+ 1,891,116
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 BBB- 7,767,179
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- 3,298,590
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- 2,536,824
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 BBB- 2,731,375
1,000,000 Guadalupe-Blanco River
Authority TX, Industrial
Development Corp., PCR
Bonds, 8.60% (A.P. Green
Industries), 4/1/2009 NR 1,053,490
2,500,000 Guadalupe-Blanco River
Authority TX, Industrial
Development Corp., PCR
Bonds, 8.60% (A.P. Green
Industries), 4/1/2009 NR 2,633,725
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 5,438,250
3,000,000 Gulf Coast, TX Waste
Disposal Authority,
Revenue Bonds, 5.60%
(Valero Energy Corp.),
4/1/2032 BBB- 2,926,590
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 1,857,000
4,000,000 2 Matagorda County, TX
Navigation District
Number One, Residual
Interest Tax-Exempt
Securities (Series PA-
427), 7.761% (Houston
Industries, Inc.)/(MBIA
INS), 11/1/2029 NR 4,013,360
7,630,000 Richardson, TX Hospital
Authority, Hospital
Refunding & Improvement
Bonds, 6.75%
(Baylor/Richardson
Medical Center,
TX)/(Original Issue
Yield: 6.82%), 12/1/2023 BBB+ 8,519,887
500,000 Sabine River Authority,
TX, PCR Bonds (Series B)
Daily VRDNs (Texas
Utilities Electric
Co.)/(UBS AG LOC) AA+ 500,000
1,000,000 Tarrant County, TX HFDC,
Revenue Bonds (Series
1998C), 5.75% (Bethesda
Living Center)/(Original
Issue Yield: 5.89%),
8/15/2018 NR 990,850
1,000,000 Tarrant County, TX HFDC,
Revenue Bonds (Series
1998C), 5.75% (Bethesda
Living Center)/(Original
Issue Yield: 5.97%),
8/15/2028 NR 975,050
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 7,880,550
TOTAL 57,717,211
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
UTAH-1.4%
$ 715,000 Hildale, UT, Electric
Revenue Bonds (Series
1995), 7.00%, 9/1/2002 NR $ 708,122
4,000,000 Tooele County, UT,
Hazardous Waste
Treatment Revenue Bonds
(Series 1998A), 5.70%
(Union Pacific Corp.),
11/1/2026 BBB- 3,966,600
540,000 Utah State HFA, SFM
Revenue Bonds (Series B-
3), 7.10%, 7/1/2024 AAA 569,776
675,000 Utah State HFA, SFM Revenue Bonds (Series E- 2), 7.15% (FHA
GTD)/(Original Issue
Yield: 7.169%), 7/1/2024 AAA 709,823
780,000 Utah State HFA, Single
Family Mortgage Revenue
Bonds, 7.55% (FHA GTD),
7/1/2023 AAA 821,176
105,000 Utah State HFA, Single
Family Mortgage Revenue
Bonds, 7.75% (FHA GTD),
1/1/2023 AAA 107,796
TOTAL 6,883,293
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- 2,611,200
16,000,000 Pocohontas Parkway
Association, VA, Toll
Road Revenue Bonds
(Series 1998B) (Original
Issue Yield: 5.90%),
8/15/2029 BBB- 2,728,320
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 1,781,064
TOTAL 7,120,584
WASHINGTON-0.9%
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- 4,557,656
WEST VIRGINIA-0.4%
287,469 Marion County, WV County
Commission, Refunding
Revenue Bonds, 10.00%
(Adirondack Recycling),
12/1/2025 NR 235,724
2,056,897 Marion County, WV County
Commission, Refunding
Revenue Bonds, 8.00%
(Adirondack Recycling),
12/1/2025 NR 1,748,363
TOTAL 1,984,087
WISCONSIN-2.3%
1,250,000 Wisconsin Health and
Educational Facilities
Authority, Revenue Bonds
(Series 1998), 5.70%
(United Lutheran Program
For The Aging,
Inc.)/(Original Issue
Yield: 5.778%), 3/1/2028 NR 1,224,800
2,000,000 Wisconsin Health and
Educational Facilities
Authority, Revenue Bonds
(Series B), 6.75% (Grant
Regional Health Center,
Inc.)/(Original Issue
Yield: 6.90%), 10/1/2022 NR 2,042,420
1,750,000 Wisconsin Health and
Educational Facilities
Authority, Revenue
Bonds, 5.80% (Beaver Dam
Community Hospitals,
Inc.), 8/15/2028 NR 1,695,260
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPALS-
continued
WISCONSIN-CONTINUED
$ 2,300,000 Wisconsin Health and
Educational Facilities
Authority, Revenue
Bonds, Series 1998,
5.75% (Attic Angel
Obligated
Group)/(Original Issue
Yield: 6.00%),
11/15/2027 NR $ 2,194,269
3,595,000 Wisconsin Housing &
Economic Development
Authority, Home
Ownership Revenue Bonds
(Series H), 5.75%,
9/1/2028 Aa2 3,700,729
TOTAL 10,857,478
TOTAL INVESTMENTS
(IDENTIFIED COST
$456,632,081) 3 $ 485,601,329
</TABLE>
Securities that are subject to the Alternative Minimum Tax represent 43.5% of
the portfolio as calculated upon total portfolio market value.
1 Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
2 Securities exempt from registration under the Securities Act of 1933, as
amended and may only be sold to dealers and other exempt investors. These
securities have been determined to be liquid according to guidelines estab
lished by the Board of Directors. At February 28, 1999, these securities
amounted to $38,257,430 which represents 7.9% of net assets.
3 The cost of investments for federal tax purposes amounts to $456,244,581. The
net unrealized appreciation of investments on a federal tax basis amounts to
$29,356,748 which is comprised of $30,801,905 appreciation and $1,445,157
depreciation at February 28, 1999.
Note: The categories of investments are shown as a percentage of net assets
($483,151,969) at February 28, 1999.
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 FHA/VA -Federal Housing
Administration/Veterans 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 HFDC -Health Facility Development
Corporation IDA -Industrial Development Authority IFA -Industrial Finance
Authority INS -Insured LOC -Letter of Credit 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
Statement of Assets and Liabilities
FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$456,632,081) $ 485,601,329
Income receivable 8,478,512
Receivable for
investments sold 655,000
Receivable for shares sold 1,271,234
TOTAL ASSETS 496,006,075
LIABILITIES:
Payable for investments
purchased $ 11,947,219
Payable for shares redeemed 448,785
Payable to Bank 287,621
Accrued expenses 170,481
TOTAL LIABILITIES 12,854,106
Net Assets for 44,299,418
shares outstanding $ 483,151,969
NET ASSETS CONSIST OF:
Paid in capital $ 470,354,835
Net unrealized
appreciation of investments 28,969,248
Accumulated net realized
loss on investments (15,576,157)
Distributions in excess
of net investment income (595,957)
TOTAL NET ASSETS $ 483,151,969
NET ASSET VALUE,
OFFERING PRICE, AND
REDEMPTION PROCEEDS PER SHARE
CLASS A SHARES:
Net Asset Value Per Share
($110,240,437 / 10,107,606
shares outstanding) $10.91
Offering Price Per Share
(100/95.50 of $10.91) 1 $11.42
Redemption Proceeds Per
Share (100/100 of $10.91) 2 $10.91
CLASS B SHARES:
Net Asset Value Per Share
($65,307,854 / 5,989,480
shares outstanding) $10.90
Offering Price Per Share
(100/100 of $10.90) 1 $10.90
Redemption Proceeds Per
Share (94.50/100 of $10.90) 2 $10.30
CLASS C SHARES:
Net Asset Value Per Share
($8,443,485 / 774,221
shares outstanding) $10.91
Offering Price Per Share
(100/100 of $10.91) 1 $10.91
Redemption Proceeds Per
Share (99/100 of $10.91) 2 $10.80
CLASS F SHARES:
Net Asset Value Per Share
($299,160,193 /
27,428,111 shares
outstanding) $10.91
Offering Price Per Share
(100/99 of $10.91) 1 $11.02
Redemption Proceeds Per
Share (99/100 of $10.91) 2 $10.80
</TABLE>
1 See "Investing in the Fund" in the Prospectus.
2 See "Contingent Deferred Sales Charge" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 14,898,986
EXPENSES:
Investment advisory fee $ 1,441,081
Administrative personnel
and services fee 181,096
Custodian fees 18,493
Transfer and dividend
disbursing agent fees
and expenses 133,540
Directors'/Trustees' fees 8,869
Auditing fees 9,412
Legal fees 2,896
Portfolio accounting fees 74,456
Distribution services
fee-Class B Shares 207,421
Distribution services
fee-Class C Shares 27,540
Shareholder services
fee-Class A Shares 138,738
Shareholder services
fee-Class B Shares 69,140
Shareholder services
fee-Class C Shares 9,180
Shareholder services
fee-Class F Shares 383,392
Share registration costs 33,847
Printing and postage 24,797
Insurance premiums 3,439
Taxes 17,919
Miscellaneous 3,982
TOTAL EXPENSES 2,789,238
Net investment income 12,109,748
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on
investments (10,250,115)
Net change in unrealized
appreciation of investments 4,308,875
Net realized and unrealized
loss on investments (5,941,240)
Change in net assets
resulting from operations $ 6,168,508
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(unaudited) ENDED
FEBRUARY 28, AUGUST 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS:
Net investment income $ 12,109,748 $ 22,471,420
Net realized gain (loss)
on investments ($(10,637,615)
and $4,375,593, respectively,
as computed for federal tax
purposes) (10,250,115) 4,375,593
Net change in unrealized
appreciation of investments 4,308,875 11,688,975
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 6,168,508 38,535,988
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Class A Shares (2,817,577) (5,141,911)
Class B Shares (1,171,825) (1,241,221)
Class C Shares (154,481) (144,720)
Class F Shares (7,787,064) (16,533,742)
CHANGE IN NET ASSETS
RESULTING FROM DISTRIBUTIONS
TO SHAREHOLDERS (11,930,947) (23,061,594)
SHARE TRANSACTIONS:
Proceeds from sale of shares 42,345,886 75,194,657
Net asset value of shares
issued to shareholders
in payment of
distributions declared 7,164,082 13,981,416
Cost of shares redeemed (43,248,746) (65,472,597)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 6,261,222 23,703,476
Change in net assets 498,783 39,177,870
NET ASSETS:
Beginning of period 482,653,186 443,475,316
End of period $ 483,151,969 $ 482,653,186
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.04 $10.67 $10.33 $10.42
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.28 0.54 0.58 0.08
Net realized and
unrealized gain (loss)
on investments (0.13) 0.39 0.33 (0.12)
Total from investment
operations 0.15 0.93 0.91 (0.04)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.28) (0.56) (0.57) (0.05)
NET ASSET VALUE, END OF
PERIOD $10.91 $11.04 $10.67 $10.33
TOTAL RETURN 2 1.34% 8.91% 9.07% (0.36%)
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.06% 3 1.08% 1.09% 0.84% 3
Net investment income 5.14% 3 4.98% 5.29% 6.15% 3
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $110,240 $112,179 $94,941 $296
Portfolio turnover 14% 41% 20% 22%
</TABLE>
1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to August 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or con
tingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class B Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.03 $10.66 $10.33 $10.42
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.23 0.44 0.51 0.08
Net realized and
unrealized gain (loss)
on investments (0.13) 0.40 0.31 (0.12)
Total from investment
operations 0.10 0.84 0.82 (0.04)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.23) (0.47) (0.49) (0.05)
NET ASSET VALUE, END OF
PERIOD $10.90 $11.03 $10.66 $10.33
TOTAL RETURN 2 0.95% 8.08% 8.17% (0.36%)
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.82% 3 1.83% 1.84% 0.84% 3
Net investment income 4.42% 3 4.25% 4.55% 6.15% 3
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $65,308 $47,028 $14,997 $296
Portfolio turnover 14% 41% 20% 22%
</TABLE>
1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to August 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or con
tingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class C Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.03 $10.66 $10.33 $10.42
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.24 0.45 0.50 0.08
Net realized and
unrealized gain (loss)
on investments (0.13) 0.40 0.32 (0.12)
Total from investment
operations 0.11 0.85 0.82 (0.04)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.23) (0.48) (0.49) (0.05)
NET ASSET VALUE, END OF
PERIOD $10.91 $11.03 $10.66 $10.33
TOTAL RETURN 2 1.03% 8.11% 8.17% (0.36%)
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.81% 3 1.83% 1.86% 0.84% 3
Net investment income 4.40% 3 4.24% 4.51% 6.15% 3
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $8,444 $6,269 $1,950 $296
Portfolio turnover 14% 41% 20% 22%
</TABLE>
1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to August 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or con
tingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class F Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.04 $10.67 $10.33 $10.71 $10.56 $11.28
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.28 0.55 0.54 0.69 0.63 0.61
Net realized and
unrealized gain (loss)
on investments (0.13) 0.38 0.37 (0.42) 0.15 (0.73)
Total from
investment operations 0.15 0.93 0.91 0.27 0.78 (0.12)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.28) (0.56) (0.57) (0.65) (0.63) (0.60)
NET ASSET VALUE,
END OF PERIOD $10.91 $11.04 $10.67 $10.33 $10.71 $10.56
TOTAL RETURN 1 1.34% 8.91% 9.07% 2.47% 7.73% (1.06%)
RATIOS TO AVERAGE
NET ASSETS:
Expenses 1.06% 2 1.08% 1.08% 1.08% 1.08% 1.09%
Net investment income 5.13% 2 4.98% 5.23% 5.91% 6.18% 5.56%
Expense
waiver/reimbursement 3 0.00% 2 0.00% 0.01% 0.01% 0.00% 0.00%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $299,160 $317,178 $331,588 $383,028 $426,010 $472,232
Portfolio turnover 14% 41% 20% 22% 13% 27%
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or con
tingent deferred sales charge, if applicable.
2 Computed on an annualized basis.
3 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
Notes to Financial Statements
FEBRUARY 28, 1999 (UNAUDITED)
ORGANIZATION
Federated Municipal Opportunities Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diver sified,
open-end management investment company. The investment objective is to provide a
high level of current income which is generally exempt from fed eral regular
income tax.
The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C
Shares, and Class F Shares.
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 inde pendent
pricing service. However, short-term securities with remaining matu rities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary. At February 28, 1999, the Fund, for federal tax purposes, had a
capital loss carryforward of $5,326,042, which will reduce the Fund's tax able
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 dis
tributions 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 YEAR EXPIRATION AMOUNT
2002 $ 755,664
2003 775,694
2004 3,794,684
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 posi
tions 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 rev enues 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 February 28, 1999, 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
TOTAL 2,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 823,146 $ 9,033,399 2,396,950 $ 26,115,990
Shares issued to
shareholders in payment
of distributions
declared 176,550 1,934,434 325,421 3,526,334
Shares redeemed (1,055,962) (11,565,485) (1,457,233) (15,845,507)
NET CHANGE RESULTING
FROM CLASS A SHARE
TRANSACTIONS (56,266) $ (597,652) 1,265,138 $ 13,796,817
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,235,031 $24,514,072 3,100,694 $ 33,768,993
Shares issued to
shareholders in payment
of distributions
declared 51,001 558,620 54,169 587,226
Shares redeemed (559,170) (6,133,216) (298,593) (3,262,688)
NET CHANGE RESULTING
FROM CLASS B SHARE
TRANSACTIONS 1,726,862 $ 18,939,476 2,856,270 $ 31,093,531
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 366,646 $ 4,023,151 419,685 $ 4,574,972
Shares issued to
shareholders in payment
of distributions declared 10,339 113,293 11,298 122,567
Shares redeemed (170,927) (1,869,930) (45,704) (497,848)
NET CHANGE RESULTING
FROM CLASS C SHARE
TRANSACTIONS 206,058 $ 2,266,514 385,279 $ 4,199,691
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 435,028 $4,775,264 985,428 $ 10,734,702
Shares issued to
shareholders in payment
of distributions declared 415,922 4,557,735 899,119 9,745,289
Shares redeemed (2,159,414) (23,680,115) (4,227,235) (45,866,554)
NET CHANGE RESULTING
FROM CLASS F SHARE
TRANSACTIONS (1,308,464) $ (14,347,116) (2,342,688) $ (25,386,563)
NET CHANGE RESULTING
FROM SHARE TRANSACTIONS 568,190 $ 6,261,222 2,163,999 $ 23,703,476
</TABLE>
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 Administra tive 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., the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Fund's Class B and
Class C 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 February 28, 1999, 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 Share holder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of aver age daily
net assets of the Fund for the period. The fee paid to FSSC 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 FSSC, serves as transfer and dividend disburs ing
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 TRANSACTION
During the period ended February 28, 1999, the Fund engaged in purchase and
sales 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 $48,400,000 and $78,100,000,
respectively.
GENERAL
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended February 28, 1999, were as follows:
Purchases $72,611,688
Sales $67,121,665
INVESTMENT RISK
Although the Fund has a diversified portfolio, the Fund has 15.1% of its
portfolio investment in lower rated and comparable quality unrated high-yield
securities. Invesments in higher yield securities are accomplished by greater
degree of credit risk and the risk tends to be more sensitive to eco nomic
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. At February 28, 1999, the Fund had no defaulted
securities.
YEAR 2000
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 mea sures 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.
SUBSEQUENT EVENT
The Adviser, formerly known as Federated Advisers, changed its name to Feder
ated Investment Management Company effective March 31, 1999.
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 and Secretary
RICHARD J. THOMAS
Treasurer
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 gov
ernment agency. Investment in mutual funds involves investment risk, includ ing
the 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 con
cerning its objective and policies, management fees, expenses, and other
information.
AS OF FEBRUARY 28, 1999
[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT
Federated Municipal Opportunities Fund, Inc.
Established 1987
12TH SEMI-ANNUAL REPORT
[Graphic]
Federated
Federated Municipal Opportunities Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 313910200
Cusip 313910309
Cusip 313910408
Cusip 313910101
8040407 (4/99)
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APPENDIX
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
A. The graphic representation here displayed entitled "Initial Investment"
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 $12,000/1,089 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 $12,000 in the Fund on
4/10/87, would have a reinvested total worth of $27,211/2,494 Shares on 2/28/99.
The "x" axis reflects computation periods from 4/10/87 to 2/28/99. 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 2/28/99). 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 $18,629/1,708
Shares on 2/28/99. The "x" axis reflects computation periods from 4/10/87 to
2/28/99. 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
$5,000 ranging from $0 to $20,000.
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 $118,484/10,860 Shares by
2/28/99). 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 $118,484/10,860 Shares
on 2/28/99. The "x" axis reflects computation periods from 4/10/87 to 2/28/99.
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.
