FEDERATED MUNICIPAL OPPORTUNITIES FUND INC, 485APOS, 1999-08-30

FEDERATED MUNICIPAL OPPORTUNITIES FUND INC
485APOS, 1999-08-30

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1933 Act File No. 33-11410
1940 Act File No. 811-4533

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----

Pre-Effective Amendment No. _____
--------

Post-Effective Amendment No. 23 __X__

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__

Amendment No. 22 ..__X__

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive

Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

John W. McGonigle, Esquire
Federated Investors Tower

1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) on _________________,
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a)(i)

X on OCTOBER 31, 1999, pursuant to paragraph (a)(i) 75 days after filing
pursuant to paragraph (a)(ii) on _________________, pursuant to paragraph
(a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to: Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP

2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CLASS A SHARES, CLASS B SHARES, CLASS C SHARES

A mutual fund seeking to provide a high level of current income which is
generally exempt from the federal regular income tax by investing in a portfolio
of long term, tax exempt securities.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

CONTENTS

Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

october 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide a high level of current income
which is generally exempt from the federal regular income tax. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its objective by investing in a portfolio of tax exempt
securities so that at least 80% of its annual interest income is exempt from
federal regular income tax. Interest income from the Fund's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). The Fund will invest primarily in noninvestment grade securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o defaults or an increase in the risk of defaults on portfolio securities;

o a change in prevailing interest rates;

o limited trading opportunities for unrated or noninvestment grade
securities; and

o issuer calls of portfolio securities.

In addition, noninvestment grade securities generally entail greater credit,
interest rate and liquidity risks than investment grade securities.

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Federated Municipal Opportunities
Fund, Inc. as of the calendar year-end for each of two years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1.00% up to 10.00%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended 1998. The light gray shaded chart features two distinct vertical bars,
each shaded in charcoal, and each visually representing by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class A Shares of Federated Municipal
Opportunities Fund, Inc. for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1997 through 1998. The percentages
noted are: 9.72% and 5.47%.

The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.

The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.

The Fund's Class A Shares total return for the six-month period from January 1,
1999 to June 30, 1999 was (2.01%).

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 3.38% (quarter ended June 30, 1997). Its lowest quarterly
return was 0.04% (quarter ended March 31, 1997).

<PAGE>

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Class A Shares, Class B Shares and
Class C Shares Average Annual Total Returns, reduced to reflect applicable sales
charges, for the calendar periods ended December 31, 1998. The table shows the
Fund's Class A Shares, Class B Shares and Class C Shares total returns averaged
over a period of years relative to the Lehman Brothers Municipal Bond Index
(LBMBI), a broad-based market index. The LBMBI is a total return performance
benchmark for the long-term, investment grade bond market. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance.

Indexes are unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD CLASS A CLASS B CLASS C LBMBI
1 Year 0.68% (0.93%) 3.60% __%
Start of 5.40% 5.06% 6.61% __%
Performance1

1 THE FUND'S CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES START OF
PERFORMANCE DATE WAS AUGUST 5, 1996.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Class A Share, Class B Shares, and Class C Shares.
<TABLE>
<CAPTION>

SHAREHOLDER FEES CLASS CLASS B CLASS C

A
<S> <C> <C> <C>
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.50% None None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of 0.00% 5.50% 1.00%
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None
(and other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)
Exchange Fee None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (Before Waiver)(1) EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee 0.60%
0.60% 0.60% Distribution (12b-1) Fee(2) 0.25% 0.75% 0.75% Shareholder Services
Fee 0.25% 0.25% 0.25% Other Expenses 0.23% 0.23% 0.23% Total Annual Fund
Operating Expenses 1.33% 1.83%(3)1.83% 1 Although not contractually obligated to
do so, the distributor waived certain amounts.

These are shown below along with the net expenses the Fund ACTUALLY PAID for
the fiscal year ended August 31, 1999.

Total Waiver of Fund Expenses 0.25% 0.00% 0.00%
Total Actual Annual Fund Operating Expenses
(after waiver) 1.08% 1.83% 1.83%
2 Class A Shares did not pay or accrue the distribution (12b-1) fee during the
year ended August 31, 1999. Class A Shares has not present intention of paying
or accruing the distribution (12b-1) fee during the year ended August 31,
2000.

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

<PAGE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the
Fund's Class A, B and C Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A, B and C
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, B and C Shares operating expenses are BEFORE WAIVERS as shown in
the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A
Expenses assuming redemption $579 $852 $1,146 $1,979
Expenses assuming no $579 $852 $1,146 $1,979
redemption
CLASS B
Expenses assuming redemption $736 $976 $1,190 $2,017
Expenses assuming no $186 $576 $990 $2,017
redemption
CLASS C
Expenses assuming redemption $286 $576 $990 $2,148
Expenses assuming no $186 $576 $990 $2,148
redemption

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in tax exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax. Interest from the
Fund's investments may be subject to AMT. The Fund's investment adviser
(Adviser) actively manages the Fund's portfolio, seeking to manage credit risk
assumed by the Fund and provide superior levels of income. The Adviser attempts
to provide superior levels of income by investing primarily in long-term tax
exempt securities, and allocating a portion of the Fund's portfolio to
noninvestment grade tax exempt securities.

The Adviser manages credit risk by performing a fundamental credit analysis on
all tax exempt securities before the Fund purchases such securities. The Adviser
considers various factors, including the economic feasibility of revenue bond
financings and general purpose financings; the financial condition of the issuer
or guarantor; and political developments that may affect credit quality. The
Adviser monitors the credit risks of all tax exempt securities on an ongoing
basis by reviewing periodic financial data and ratings of nationally recognized
ratings services.

The Adviser performs a more intensive credit analysis on noninvestment grade tax
exempt securities. In addition to the review process described above, the
Adviser generally visits the site that the issuer is developing with the
proceeds of the offering; and engages in detailed discussions with the issuer
regarding the offering. The Adviser also retains internal or external legal
counsel to assist it with the review of noninvestment grade securities.

The Adviser will manage the duration of the Fund's portfolio securities.
"Duration" measures the sensitivity of a security's price to changes in interest
rates. The greater a portfolio's duration, the greater the change in the
portfolio's value in response to a change in market interest rates. The Adviser
increases or reduces the Fund's portfolio duration based on its interest rate
outlook. When the Adviser expects interest rates to fall, it maintains a longer
portfolio duration. When the Adviser expects interest rates to increase, it
shortens the portfolio duration. The Adviser considers a variety of factors in
formulating its interest rate outlook, including current and expected U.S.
economic growth; current and expected interest rates and inflation; the Federal
Reserve's monetary policy; and supply and demand factors related to the
municipal market and the effect they may have on the returns offered for various
bond maturities. Duration management will become less important as the portion
of the Fund allocated to noninvestment grade tax exempt securities increases,
because such securities are less sensitive to interest rates.

The Adviser attempts to provide superior levels of income by investing primarily
in noninvestment grade tax exempt securities, which generally provide higher
yields, to help the Fund achieve superior levels of income. The percentage that
the Adviser allocates to noninvestment grade securities will vary depending on
the supply of noninvestment grade securities and the credit spread between
investment grade tax exempt securities and noninvestment grade tax exempt
securities. If the credit spread narrows, the Adviser may reduce its allocation
to noninvestment grade securities; if the credit spread broadens, the Adviser
may increase that allocation.

Finally, the Adviser may allocate a portion of the Fund to sectors that by
nature have higher yields. The Adviser may also allocate a portion of the Fund's
portfolio to a sector that it expects will offer the highest returns.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term, higher-quality debt securities
and similar obligations. It may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to distribute taxable income to investors.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Fixed income securities pay interest,
dividends or distributions of a specified rate. The rate may be a fixed
percentage of the principal or adjusted periodically.

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

GENERAL OBLIGATION BONDS

General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.

SPECIAL REVENUE BONDS

Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls, or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls normally would result in a
default on the bonds.

PRIVATE ACTIVITY BONDS

Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds.

The interest on many types of private activity bonds is subject to AMT. The Fund
may invest in bonds subject to AMT.

MUNICIPAL LEASES

Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale.

The Fund may invest in securities supported by pools of municipal leases. The
most common type of lease backed securities are certificates of participation
(COPs). However, the Fund may also invest directly in individual leases.

INVERSE FLOATERS

An inverse floater has a floating or variable interest rate that moves in the
opposite direction of market interest rates. When market interest rates go up,
the interest rate paid on the inverse floater goes down; when market interest
rates go down, the interest rate paid on the inverse floater goes up. Inverse
floaters generally respond more rapidly to market interest rate changes than
fixed rate, tax exempt securities. Inverse floaters are subject to interest rate
risks and leverage risks.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate risks and credit risks of a zero coupon security.

TAX INCREMENT FINANCING BONDS

Tax increment financing (TIF) bonds are payable from increases in taxes or other
revenues attributable to projects financed by the bonds. For example, a
municipality may issue TIF bonds to redevelop a commercial area. The TIF bonds
would be payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and related
tax collections, failed to increase as anticipated.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

LIQUIDITY RISKS

Trading opportunities are more limited for fixed income securities that have not
received any credit ratings, have received ratings below investment grade or are
not widely held.

Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.

CALL RISKS

Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.

If a fixed income security is called, the Fund may have to reinvest the proceeds
in other fixed income securities with lower interest rates, higher credit risks,
or other less favorable characteristics.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally
entail greater credit, interest rate and liquidity risks than investment grade
securities. For example, their prices are more volatile, economic downturns and
financial setbacks may affect their prices more negatively, and their trading
market may be more limited. The Fund may invest up to 100% of its assets in
noninvestment grade bonds.

SECTOR RISKS

A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political, or other
developments which generally affect these entities.

LEVERAGE RISKS

Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.

Investments can have these same results if their returns are based on a multiple
of a specified index, security, or other benchmark.

WHAT DO SHARES COST?

You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in the prospectus) it is processed at the next calculated net
asset value (NAV) plus any applicable front-end sales charge (public offering
price).

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.

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

The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

MAXIMUM SALES CHARGE
MINIMUM FRONT-END CONTINGENT
SHARES OFFERED INITIAL/SUBSEQUENT SALES CHARGE2 DEFERRED SALES
INVESTMENT AMOUNTS1 CHARGE3

Class A $1,500/$100 4.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%
1 THE MINIMUM SUBSEQUENT INVESTMENT AMOUNTS FOR SYSTEMATIC INVESTMENT PROGRAMS
IS $50. INVESTMENT PROFESSIONALS MAY IMPOSE HIGHER OR LOWER MINIMUM INVESTMENT
REQUIREMENTS ON THEIR CUSTOMERS THAN THOSE IMPOSED BY THE FUND. ORDERS FOR
$250,000 OR MORE WILL BE INVESTED IN CLASS A SHARES INSTEAD OF CLASS B SHARES TO
MAXIMIZE YOUR RETURN AND MINIMIZE THE SALES CHARGES AND MARKETING FEES. ACCOUNTS
HELD IN THE NAME OF AN INVESTMENT PROFESSIONAL MAY BE TREATED DIFFERENTLY. CLASS
B SHARES WILL AUTOMATICALLY CONVERT INTO CLASS A SHARES AFTER EIGHT FULL YEARS
FROM THE PURCHASE DATE. THIS CONVERSION IS A NON-TAXABLE EVENT. 2 FRONT-END
SALES CHARGE IS EXPRESSED AS A PERCENTAGE OF PUBLIC OFFERING PRICE. SEE "SALES
CHARGE WHEN YOU PURCHASE." 3 SEE "SALES CHARGE WHEN YOU REDEEM."

<PAGE>

SALES CHARGE WHEN YOU PURCHASE

CLASS A SHARES

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price

Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater1 0.00% 0.00%

1 A CONTINGENT DEFERRED SALES CHARGE OF 0.75% OF THE REDEMPTION AMOUNT APPLIES
TO CLASS A SHARES REDEEMED UP TO 24 MONTHS AFTER PURCHASE UNDER CERTAIN
INVESTMENT PROGRAMS WHERE AN INVESTMENT PROFESSIONAL RECEIVED AN ADVANCE PAYMENT
ON THE TRANSACTION.

THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- by you, your spouse, and your children under age 21; or

- of the same share class of two or more Federated Funds (other than money
market funds);

o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:

o within 120 days of redeeming Shares of an equal or lesser amount;

O by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate
family members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales charge,
you or your investment professional should notify the Fund's Distributor at the
time of purchase. If the Distributor is not notified, you will receive the
reduced sales charge only on additional purchases, and not retroactively on
previous purchases.

<PAGE>

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

CLASS A SHARES

A CDSC of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction. CLASS B
SHARES Shares Held Up To: CDSC 1 year 5.50% 2 years 4.75% 3 years 4.00% 4 years
3.00% 5 years 2.00% 6 years 1.00% 7 years or more 0.00% CLASS C SHARES You will
pay a 1% CDSC if you redeem Shares within one year of the purchase date.

YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:

o purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser
amount;

o that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other than a
money market fund);

o purchased through investment professionals who did not receive advanced
sales payments;

O if, after you purchase Shares, you become disabled as defined by the IRS;

o if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;

o if your redemption is a required retirement plan distribution; or

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your Shares
have been held, include the time you held shares of other Federated Funds that
have been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase
or redemption, whichever is lower.

<PAGE>

HOW IS THE FUND SOLD?

The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class A Shares, Class B Shares and
Class C Shares. Each share class has different sales charges and other expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other class.

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to individuals, directly or through investment professionals.
The Fund may not be a suitable investment for retirement plans because it
invests in municipal securities.

When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class A Shares, Class B Shares and Class C
Shares. Because these Shares pay marketing fees on an ongoing basis, your
investment cost may be higher over time than other shares with different sales
charges and marketing fees.

HOW TO PURCHASE SHARES

You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

Where the Fund offers more than one share class and you do not specify the class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL

o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within three
business days. You will become the owner of Shares and receive dividends when
the Fund receives your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New
Account Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days;

o a redemption is payable to someone other than the shareholder(s) of
record; or

o IF EXCHANGING (TRANSFERRING) into another fund with a different
shareholder registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.

Generally, it is not advisable to continue to purchase Class A Shares subject to
a sales charge while redeeming Shares using this program.

<PAGE>

SYSTEMATIC WITHDRAWAL PROGRAM (SWP) ON CLASS B SHARES You will not be charged a
CDSC on SWP redemptions if:

o you redeem 12% or less of your account value in a single year;

o you reinvest all dividends and capital gains distributions; and

o your account has at least a $10,000 balance when you establish the SWP.
(You cannot aggregate multiple Class B Share accounts to meet this minimum
balance.)

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly, or semi-annually.

For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges except for
systematic transactions. In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays any dividends monthly to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when capital
gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions or exchanges cause the account balance to fall below the
minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state and local tax
liability.

WHO MANAGES THE FUND?

The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.

More than 4,000 investment professionals make Federated Funds available to their
customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

MARY JO OCHSON

Mary Jo Ochson has been the Fund's portfolio manager since May 1996. She is
Vice President of the Fund. Ms. Ochson joined Federated in 1982 and has been a
Senior Portfolio Manager and a Senior Vice President of the Fund's Adviser since
1996. From 1988 through 1995, Ms. Ochson served as a Portfolio Manager and a
Vice President of the Fund's Adviser. Ms. Ochson is a Chartered Financial
Analyst and received her M.B.A. in Finance from the University of Pittsburgh.

J. SCOTT ALBRECHT

J. Scott Albrecht has been the Fund's portfolio manager since May 1996. Mr.
Albrecht joined Federated in 1989. He has been a Senior Portfolio Manager since
1997 and a Vice President of the Fund's Adviser since 1994. He was a Portfolio
Manager from 1994 to 1996. Mr. Albrecht is a Chartered Financial Analyst and
received his M.S. in Public Management from Carnegie Mellon University.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CLASS A SHARES, CLASS B SHARES, CLASS C SHARES

A Statement of Additional Information (SAI) dated October 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report, Semi-Annual Report and other information without charge, and
make inquiries, call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

INVESTMENT COMPANY ACT FILE NO. 811-4533
CUSIP 313910200

CUSIP 313910309

CUSIP 313910408

G00570-03 (10/99)

PROSPECTUS

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CLASS F SHARES

A mutual fund seeking to provide a high level of current income which is
generally exempt from the federal regular income tax by investing in a portfolio
of long-term, tax
exempt securities.

CONTENTS

october 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o defaults or an increase in the risk of defaults on portfolio securities; o a
change in prevailing interest rates; o limited trading opportunities for unrated
or noninvestment grade securities; and o issuer calls of portfolio securities.

In addition, noninvestment grade securities generally entail greater credit,
interest rate and liquidity risks than investment grade securities.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Class F Shares of the Fund as of the
calendar year-end for each of ten years.

The `y' axis reflects the "% Total Return" beginning with "-10.00" and
increasing in increments of 5.00% up to 20.00%.

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Class F
Shares of the Fund for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1989 through 1998, The percentages noted
are: 10.77%, 6.57%, 10.94%, 7.97%, 11.08% -5.75%, 15.86%, 1.91%, 9.72% and
5.47%.

The bar chart shows the variability of the Fund's Class F Shares total returns
on a calendar year-end basis.

The total returns displayed for the Fund's Class F Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.]

The Fund's Class F Shares total return for the nine-month period from January 1,
1999 to September 30, 1999 was xx%.

Within the period shown in the Chart, the Fund's Class F Shares highest
quarterly return was 6.60% (quarter ended March 31, 1995). Its lowest quarterly
return was 5.39% (quarter ended March 31, 1994).

<PAGE>

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Class F Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar periods
ended December 31, 1998. The table shows the Fund's Class F Shares total returns
averaged over a period of years relative to the Lehman Brothers Municipal Bond
Index (LBMBI), a broad-based market index. The LBMBI is a total return
performance benchmark for the long-term, investment grade bond market. Total
returns for the index shown do not reflect sales charges, expenses or other fees
that the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD CLASS F LBMBI
SHARES

1 Year 3.43% %
5 Years 5.00% %
10 Years 7.20% %
Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Class F Shares.

SHAREHOLDER FEES

FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a 1.00%
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of 1.00%
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (Before Waiver(1) EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee 0.60%
Distribution (12b-1) Fee2 0.25% Shareholder Services Fee 0.25% Other Expenses %
Total Annual Fund Operating Expenses % 1 Although not contractually obligated to
do so, the distributor waived

certain amounts. These are shown below along with the net expenses the
Fund ACTUALLY PAID for the fiscal year ended August 31, 1999.
Total Waiver of Fund Expenses %
Total Actual Annual Fund Operating Expenses (after waivers) %

2 Class F Shares did not pay or accrue the distribution (12b-1) fee during the
year ended August 31, 1999. Class F Shares have no present intention of paying
or accruing the distribution (12b-1) fee during the year ended August 31,
2000.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Class F Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Class F Shares for the
time periods indicated and then redeem all of your Shares at the end of those
periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
F Shares operating expenses are BEFORE WAIVERS as shown in the table and remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:

CLASS F SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Expenses assuming redemption $334 $617 $821 $1,685
Expenses assuming no $234 $517 $821 $1,685
redemption

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Adviser attempts to provide superior levels of income by investing primarily
in noninvestment grade tax exempt securities, which generally provide higher
yields, to help the Fund achieve superior levels of income. The percentage that
the Adviser allocates to noninvestment grade securities will vary depending on
the supply of noninvestment grade securities and the credit spread between
investment grade tax exempt securities and noninvestment grade tax exempt
securities. If the credit spread narrows, the Adviser may reduce its allocation
to nonnvestment grade securities; if the credit spread broadens, the Adviser may
increase that allocation.

PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact on the Fund's performance.

TEMPORARY DEFENSIVE INVESTMENTS

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX-EXEMPT SECURITIES

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

GENERAL OBLIGATION BONDS

SPECIAL REVENUE BONDS

PRIVATE ACTIVITY BONDS

The interest on many types of private activity bonds is subject to AMT. The Fund
may invest in bonds subject to AMT.

MUNICIPAL LEASES

INVERSE FLOATERS

ZERO COUPON SECURITIES

TAX INCREMENT FINANCING BONDS

CREDIT ENHANCEMENT

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

INTEREST RATE RISKS

LIQUIDITY RISKS

Trading opportunities are more limited for fixed income securities that have not
received any credit ratings, have received ratings below investment grade or are
not widely held.

CALL RISKS

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

SECTOR RISKS

LEVERAGE RISKS

Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.

Investments can have these same results if their returns are based on a multiple
of a specified index, security, or other benchmark.

WHAT DO SHARES COST?

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

MAXIMUM SALES CHARGE
MINIMUM FRONT-END CONTINGENT
SHARES OFFERED INITIAL/SUBSEQUENT SALES CHARGE2 DEFERRED SALES
INVESTMENT AMOUNTS1 CHARGE3

Class F $1,500/$100 1.00% 1.00%
1 THE MINIMUM SUBSEQUENT INVESTMENT AMOUNTS FOR SYSTEMATIC INVESTMENT PROGRAMS
IS $50. INVESTMENT PROFESSIONALS MAY IMPOSE HIGHER OR LOWER MINIMUM INVESTMENT
REQUIREMENTS ON THEIR CUSTOMERS THAN THOSE IMPOSED BY THE FUND.

2 FRONT-END SALES CHARGE IS EXPRESSED AS A PERCENTAGE OF PUBLIC OFFERING PRICE.
SEE "SALES CHARGE WHEN YOU PURCHASE." 3 SEE "SALES CHARGE WHEN YOU REDEEM."

SALES CHARGE WHEN YOU PURCHASE

CLASS F SHARES

<PAGE>

Sales Charge as a Sales Charge as a

Purchase Amount Percentage of Public Percentage of NAV
Offering Price

Less than $1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%

THE SALES CHARGE AT PURCHASE MAY BE ELIMINATED BY:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- by you, your spouse, and your children under age 21; or

- of the same share class of two or more Federated Funds (other than money
market funds);

o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:

o within 120 days of redeeming Shares of an equal or lesser amount;

o when the Fund's Distributor does not advance payment to the investment
professional for your purchase;

o by exchanging shares from the same share class of another Federated Fund;

o for trusts or pension or profit-sharing plans where the third-party
administrator has an arrangement with the Fund's Distributor or its affiliates
to purchase shares without a sales charge; or

o through investment professionals that receive no portion of the sales
charge.

If your investment qualifies for an elimination of the sales charge, you or your
investment professional should notify the Fund's Distributor at the time of
purchase. If the Distributor is not notified, you will receive the reduced sales
charge only on additional purchases, and not retroactively on previous
purchases.

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

CLASS F SHARES

Purchase Amount Shares Held CDSC
Up to $2 million 4 years or 1.00%

less

$2 - $5 million 2 years or 0.50%
less

$5 million or more 1 year or less 0.25%

YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:

o purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser
amount;

o that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other than a
money market fund);

o purchased through investment professionals who did not receive advanced
sales payments;

O if, after you purchase Shares, you become disabled as defined by the IRS;

o if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;

o if your redemption is a required retirement plan distribution; or

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should
notify the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your Shares
have been held, include the time you held shares of other Federated Funds that
have been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW IS THE FUND SOLD?

The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class F Shares. Each share class has
different sales charges and other expenses, which affect their performance.
Contact your investment professional or call 1-800-341-7400 for more information
concerning the other classes.

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class F Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.

HOW TO PURCHASE SHARES

THROUGH AN INVESTMENT PROFESSIONAL

o Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New Account
Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).

THROUGH AN EXCHANGE

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.

BY AUTOMATED CLEARING HOUSE (ACH)

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time)
you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days;

o a redemption is payable to someone other than the shareholder(s) of record;
or

o IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

PAYMENT METHODS FOR REDEMPTIONS

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income. Generally, it is not
advisable to continue to purchase Shares subject to a sales charge while
redeeming Shares using this program.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a capital
gain. Contact your investment professional or the Fund for information
concerning when capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Please consult your tax adviser regarding your federal, state and local tax
liability.

WHO MANAGES THE FUND?

More than 4,000 investment professionals make Federated Funds available to their
customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

MARY JO OCHSON

J. SCOTT ALBRECHT

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.60% of the
Fund's average daily net assets. The Adviser may voluntarily waive a portion of
its fee or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The Fund's service providers are making changes to their computer systems
to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000 readiness.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CLASS F SHARES

INVESTMENT COMPANY ACT FILE NO. 811-4453
CUSIP 313910101

G00570-02-F (10/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CLASS A SHARES

CLASS B SHARES

CLASS C SHARES

CLASS F SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Class A Shares, Class B Shares and
Class C Shares and the prospectus for Class F Shares for Federated Municipal
Opportunities Fund, Inc. (Fund), dated October 31, 1999. This SAI incorporates
by reference the Fund's Annual Report. Obtain the prospectuses or the Annual
Report without charge by calling 1-800-341-7400.

October 31, 1999

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses

CUSIP 313910200

CUSIP 313910309

CUSIP 313910408

CUSIP 313910101

00000000 (10/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified open-end, management investment company that was
established under the laws of the State of Maryland on November 26, 1986. The
Fund changed its name from Fortress Municipal Income Fund, Inc. to Federated
Municipal Opportunities Fund, Inc. on March 31, 1996. The Fund's investment
adviser is Federated Investment Management Company (Adviser). The Adviser,
formerly known as Federated Advisers, changed its name effective March 31, 1999.

SECURITIES IN WHICH THE FUND INVESTS

The Fund's principal securities are described in its prospectus. Additional
securities and further information regarding the principal securities are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities, in addition to
those described in the prospectus, in which the Fund invests.

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.

VARIABLE RATE DEMAND INSTRUMENTS

Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 13 months.

MUNICIPAL NOTES

Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

FUTURES CONTRACTS

Futures contracts, which are a form of derivative contracts, provide for the
future sale by one party and purchase by another party of a specified amount of
an underlying asset at a specified price, date, and time. Entering into a
contract to buy an underlying asset is commonly referred to as buying a contract
or holding a long position in the asset. Entering into a contract to sell an
underlying asset is commonly referred to as selling a contract or holding a
short position in the asset. Futures contracts are considered to be commodity
contracts.

The Fund may buy and sell interest rate and index financial futures contracts.
Depending upon how the Fund uses futures contracts and the relationships between
the market value of a futures contract and the underlying asset, futures
contracts may increase or decrease the Fund's exposure to interest rate risks,
and may also expose the Fund to liquidity and leverage risks.

Derivative Contracts

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges.
In this case, the exchange sets all the terms of the contract except for the
price. Investors make payments due under their contracts through the exchange.
Most exchanges require investors to maintain margin accounts through their
brokers to cover their potential obligations to the exchange. Parties to the
contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.

The types of derivative contracts in which the Fund may invest include futures
contracts.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option.

The Fund may:

o buy call options on municipal bond or U.S. Treasury futures contracts in
anticipation of an increase in the value of the underlying asset; and

o buy put options on municipal bond or U.S. Treasury futures contracts in
anticipation of a decrease in the value of the underlying asset.

<PAGE>

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may make temporary defensive investments in the following taxable
securities:

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

Commercial Paper

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.

Treasury Securities

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

Bank Instruments

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when-issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default. These transactions create leverage
risks.

ASSET COVERAGE

In order to secure its obligations in connection with futures contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting futures contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on futures contracts or special
transactions.

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

TAX RISKS

n In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by the Fund to shareholders to be taxable.

n Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.

FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide a high level of current
income which is generally exempt from the federal regular income tax. The
investment objective may not be changed by the Fund's Directors without
shareholder approval.

The Fund invests its assets so that at least 80% of its annual interest income
is exempt from the federal regular income tax, except when investing for
"defensive" purposes. This policy may not be changed by the Fund's Directors
without shareholder approval.

INVESTMENT LIMITATIONS

BUYING ON MARGIN

The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions. The deposit
or payment by the Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.

The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. During the period any reverse repurchase
agreements are outstanding, but only to the extent necessary to assure
completion of the reverse repurchase agreements, the Fund will restrict the
purchase of portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements.

<PAGE>

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the value of
total assets at the time of the borrowing. Neither the deposit of underlying
securities and other assets in escrow in connection with the writing of put or
call options on municipal bonds nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a pledge.

INVESTING IN REAL ESTATE

The Fund will not buy or sell real estate, although it may invest in securities
of companies whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.

UNDERWRITING

The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the purchase
or holding of municipal bonds, repurchase agreements, or other transactions
which are permitted by the Fund's investment objective and policies.

SELLING SHORT

The Fund will not sell securities short.

THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
DIRECTORS (BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities that are subject to restrictions on resale under federal securities
law. Under criteria established by the Directors, certain restricted securities
are determined to be liquid. To the extent that restricted securities are not
determined to be liquid, the Fund will limit their purchase, together with other
illiquid securities, to 15% of its net assets.

DIVERSIFICATION OF INVESTMENTS

The Fund will not invest more than 5% of its total assets in the securities of
any one issuer (except cash and cash instruments, securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities or
instruments secured by money market instruments such as repurchase agreements).

Under this limitation, each governmental subdivision, including states and the
District of Columbia, territories, possessions of the United States or their
political subdivisions, agencies, authorities, instrumentalities, or similar
entities, will be considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and the security is
backed only by its own assets and revenues. Industrial development bonds backed
only by the assets and revenues of a non-governmental user are considered to be
issued solely by that user.

Private activity bonds backed only by the assets and revenues of a
non-governmental user are considered to be issued solely by that user. If, in
the case of a private activity bond or government-issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of the investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.

The preceding limitations regarding buying on margin, borrowing money, and
pledging assets do not apply to intra-day cash advances made by the Fund's
custodian, or the grant of a security interest in securities by the Fund to its
custodian to collateralize such intra-day cash advances, in order to enable the
Fund to settle securities purchases or to redeem Shares of the Fund.

For purposes of its diversification limitation, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings and loan having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash instruments."

PORTFOLIO TURNOVER

In 1998 and 1997, the Fund's portfolio turnover rates were 41% and 20%,
respectively. The increased portfolio turnover rate in 1998 resulted from the
Fund's increased allocation in non-investment grade tax exempt securities.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the-counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

WHAT DO SHARES COST?

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

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE

You can reduce or eliminate the applicable front-end sales charge, as follows:

QUANTITY DISCOUNTS

Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.

ACCUMULATED PURCHASES

If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

CONCURRENT PURCHASES

You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.

LETTER OF INTENT

You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.

REINVESTMENT PRIVILEGE

You may reinvest, within 120 days, your Class A Share, Class C Share and Class F
Share redemption proceeds at the next determined NAV without any sales charge.

You may reinvest your Class B Shares within 120 days of redemption; however,
those Shares will be reinvested in Class A Shares. Although you will not be
reimbursed any contingent deferred sales charge if you paid one at the time of
redemption, your reinvested Shares would not be subject to any applicable
contingent deferred sales charge upon a later redemption.

PURCHASES BY AFFILIATES OF THE FUND

The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:

o the Directors, employees and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;

o any associated person of an investment dealer who has a sales agreement
with the Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

FEDERATED LIFE MEMBERS [CLASS A SHARES ONLY]

Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:

o through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family
of Funds are no longer marketed); or

o as Liberty Account shareholders by investing through an affinity group
prior to August 1, 1987.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:

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

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age
of 70 1/2;

o of Shares that represent a reinvestment within 120 days of a previous
redemption;

o of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons;

o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator
has entered into certain arrangements with the Distributor or its affiliates,
or any other investment professional, to the extent that no payments were
advanced for purchases made through these entities;

o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements;

CLASS B SHARES ONLY

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

CLASS F SHARES ONLY

o representing a total or partial distribution from a qualified plan. A total
or partial distribution does not include an account transfer, rollover or
other redemption made for purposes of reinvestment. A qualified plan does not
include an Individual Retirement Account, Keogh Plan, or a custodial account,
following retirement.

O If you purchase Shares in combination with Shares already owned, or if you
sign a Letter of intent committing to purchase a certain amount of Class F
Shares within a 13-month period, the Fund may combine such purchases to
reduce the contingent deferred sales charge.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

FRONT-END SALES CHARGE REALLOWANCES [CLASS A SHARES, CLASS F SHARES ONLY]

The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.

RULE 12B-1 PLAN

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.

<PAGE>

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

When an investment professional's customer purchases shares, the investment
professional may receive:

o an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.

o an amount on the NAV of Class F Shares purchased as follows: up to 1% on
purchases below $2 million; 0.50% on purchases from $2 million but below $5
million; and 0.25% on purchases of $5 million or more.

In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A and Class F Shares that its
customer has not redeemed over the first year.

CLASS A SHARES

Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:

AMOUNT ADVANCE PAYMENTS AS A PERCENTAGE OF PUBLIC
OFFERING PRICE

First $1 - $5 0.75%
million
Next $5 - $20 0.50%
million
Over $20 million 0.25%

For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.

CLASS F SHARES

Investment professionals purchasing Class F Shares for their customers are
eligible to receive an advance payment from the distributor of 0.25% of the
purchase price.

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

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

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

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

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

As of October __, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: (To be filed by
amendment.)

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF DIRECTORS

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Director from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year . The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of October ___, 1999, the Fund's Board and Officers as a group owned _____ of
the Fund's outstanding [Class A, B, C, F] Shares. (to be filed by amendment)

An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.

<PAGE>

NAME AGGREGATE TOTAL
BIRTH DATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FUND FROM FUND AND FUND
POSITION WITH FUND FOR PAST FIVE YEARS COMPLEX

JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0 $0 for the Fund and
Birth Date: July 28, Trustee of the Federated Fund Complex; 54 other investment
1924 Chairman and Director, Federated Investors, companies in the
Federated Investors Inc.; Chairman and Trustee, Federated Fund Complex
Tower Investment Management Company; Chairman and
1001 Liberty Avenue Director, Federated Investment Counseling,
Pittsburgh, PA and Federated Global Investment Management
CHAIRMAN AND DIRECTOR Corp.; Chairman, Passport Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,327.69 $113,860.22 for the
Birth Date: February 3, Complex; Director, Member of Executive Fund and
1934 Committee, Children's Hospital of Pittsburgh; 54 other investment
15 Old Timber Trail Director, Robroy Industries, Inc. (coated companies in the
Pittsburgh, PA steel conduits/computer storage equipment); Fund Complex
DIRECTOR formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,460.66 $125,264.48 for the
Birth Date: June 23, Complex; President, Investment Properties Fund and
1937 Corporation; Senior Vice President, 54 other investment
Wood/Commercial Dept. John R. Wood and Associates, Inc., Realtors; companies in the
John R. Wood Partner or Trustee in private real estate Fund Complex

Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trail and Northgate Village Development Corporation.
North

Naples, FL

DIRECTOR

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $__ $47,958.02for the
Birth Date: September Complex; formerly: Partner, Andersen Fund and

3, 1939 Worldwide SC. 29 other investment
175 Woodshire Drive companies in the
Pittsburgh, PA Fund Complex

DIRECTOR

JOHN F. CUNNINGHAM Director or Trustee of some of the Federated $__ $0 for the Fund and
Birth Date: March 5, Fund Complex; Chairman, President and Chief 40 other investment
1943 Executive Officer, Cunningham & Co., Inc. companies in the
353 El Brillo Way (strategic business consulting) ; Trustee Fund Complex
Palm Beach, FL Associate, Boston College; Director, EMC
DIRECTOR Corporation (computer storage systems);
formerly: Director, Redgate Communications.

Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,

Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1,327.69 $113,860.22 for the
Birth Date: October 11, Complex; Professor of Medicine, University of Fund and
1932 Pittsburgh; Medical Director, University of 54 other investment
3471 Fifth Avenue Pittsburgh Medical Center - Downtown; companies in the
Suite 1111 Hematologist, Oncologist, and Internist, Fund Complex
Pittsburgh, PA University of Pittsburgh Medical Center;
DIRECTOR Member, National Board of Trustees, Leukemia
Society of America.

PETER E. MADDEN Director or Trustee of the Federated Fund $1,327.69 $113,860.22 for the
Birth Date: March 16, Complex; formerly: Representative, Fund and
1942 Commonwealth of Massachusetts General Court; 54 other investment
One Royal Palm Way President, State Street Bank and Trust companies in the
100 Royal Palm Way Company and State Street Corporation. Fund Complex

Palm Beach, FL

DIRECTOR Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.

CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $__ $0 for the Fund and
JR. Fund Complex; Management Consultant. 43 other investment
Birth Date: April 10, companies in the
1945 Previous Positions: Chief Executive Officer, Fund Complex
80 South Road PBTC International Bank; Partner, Arthur

Westhampton Beach, NY Young & Company (now Ernst & Young LLP);
DIRECTOR Chief Financial Officer of Retail Banking

Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.

JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $1,327.69 $113,860.22 for the
J.D., S.J.D.# Complex; President, Law Professor, Duquesne Fund and

Birth Date: December University; Consulting Partner, Mollica & 54 other investment
20, 1932 Murray; Director, Michael Baker Corp. companies in the
President, Duquesne (engineering, construction, operations, and Fund Complex

University technical services).
Pittsburgh, PA

DIRECTOR Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1,327.69 $113,860.22 for the
Birth Date: June 21, Complex; Public Fund and
1935 Relations/Marketing/Conference Planning. 54 other investment
4905 Bayard Street companies in the
Pittsburgh, PA Previous Positions: National Spokesperson, Fund Complex
DIRECTOR Aluminum Company of America; television
producer; business owner.

JOHN S. WALSH Director or Trustee of some of the Federated $__ $0 for the Fund and
Birth Date: November Fund Complex; President and Director, Heat 41 other
28, 1957 Wagon, Inc. (manufacturer of construction investment companies
2007 Sherwood Drive temporary heaters); President and Director, in the Fund Complex
Valparaiso, IN Manufacturers Products, Inc. (distributor of
DIRECTOR portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.

J. CHRISTOPHER DONAHUE*+ President or Executive Vice President of the $0 $0 for the Fund and
Birth Date: April 11, Federated Fund Complex; Director or Trustee 16 other investment
1949 of some of the Funds in the Federated Fund companies
Federated Investors Complex; President and Director, Federated in the Fund Complex
Tower Investors, Inc.; President and Trustee,
1001 Liberty Avenue Federated Investment Management Company;
Pittsburgh, PA President and Director, Federated Investment
EXECUTIVE VICE Counseling and Federated Global Investment
PRESIDENT AND DIRECTOR Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.

<PAGE>

EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the Fund and
the Federated Fund Complex; President, 1 other investment
Birth Date: October 22, Executive Vice President and Treasurer of company
1930 some of the Funds in the Federated Fund in the Fund Complex

Federated Investors Complex; Vice Chairman, Federated Investors,
Tower Inc.; Vice President, Federated Investment
1001 Liberty Avenue Management Company and Federated Investment
Pittsburgh, PA Counseling, Federated Global Investment
EXECUTIVE VICE PRESIDENT Management Corp. and Passport Research, Ltd.;

Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Fund and
Birth Date: October 26, Federated Fund Complex; Executive Vice 54 other investment
1938 President, Secretary, and Director, Federated companies in the
Federated Investors Investors, Inc.; Trustee, Federated Fund Complex
Tower Investment Management Company; Director,
1001 Liberty Avenue Federated Investment Counseling and Federated
Pittsburgh, PA Global Investment Management Corp.; Director,
EXECUTIVE VICE PRESIDENT Federated Services Company; Director,

Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Fund and
Birth Date: June 17, President - Funds Financial Services 54 other investment
1954 Division, Federated Investors, Inc.; companies in the
Federated Investors formerly: various management positions within Fund Complex
Tower Funds Financial Services Division of

1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA

TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the Fund and
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director 6 other investment
Federated Investors or Trustee of some of the Funds in the companies
Tower Federated Fund Complex; Executive Vice in the Fund Complex
1001 Liberty Avenue President, Federated Investors, Inc.;
Pittsburgh, PA Chairman and Director, Federated Securities
PRESIDENT Corp.

WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the Fund and
Birth Date: March 3, various other Funds in the Federated Fund 41 other investment
1949 Complex; Executive Vice President, Federated companies
Federated Investors Investment Counseling, Federated Global in the Fund Complex
Tower Investment Management Corp., Federated

1001 Liberty Avenue Investment Management Company and Passport
Pittsburgh, PA Research, Ltd.; Registered Representative,
CHIEF INVESTMENT OFFICER Federated Securities Corp.; Portfolio

Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd.

MARY JO OCHSON Mary Jo Ochson has been the Fund's portfolio $0 $0 for the Fund and
Birth Date: September manager since May 1996. She is Vice President 7 other investment
12, 1953 of the Fund. Ms. Ochson joined Federated in companies
Federated Investors 1982 and has been a Senior Portfolio Manager in the Fund Complex
Tower and a Senior Vice President of the Fund's
1001 Liberty Avenue Adviser since 1996. From 1988 through 1995,
Pittsburgh, PA Ms. Ochson served as a Portfolio Manager and
VICE PRESIDENT a Vice President of the Fund's Adviser. Ms.
Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the
University of Pittsburgh.
</TABLE>

+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT AND DIRECTOR OF THE FUND.

++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON NOVEMBER 17, 1998. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR YEAR.

<PAGE>

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Fund.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.

For the fiscal year ended August 31, 1999, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. The
total amount of these transactions was $_______ for which the Fund paid $_______
in brokerage commissions.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS

The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

NOTE: 12b-1 Fees and Shareholder Services fees are after waivers.

FOR THE YEAR ENDED AUGUST 31 1999 1998 1997
Advisory Fee Earned $ $2,736,122 $2,610,540
Advisory Fee Reduction $ $0 $0
Brokerage Commissions $ $0 $0
Administrative Fee $ $343,950 $328,575
12b-1 Fee
Class A Shares $ -- --
Class B Shares $ -- --
Class C Shares $ -- --
Class F Shares $ -- --
Shareholder Services Fee

Class A Shares $ -- --
Class B Shares $ -- --
Class C Shares $ -- --
Class F Shares $ -- --

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year, ten-year or Start of
Performance periods ended August 31, 1999.

Yield and Tax-Equivalent Yield given for the 30-day period ended August 31,
1999.

30-DAY PERIOD 1 Year 5 Years 10 Years Start of Performance
on

August 5, 1996
<S> <C> <C> <C> <C> <C>
CLASS A SHARES

Total Return N/A N/A

N/A

Yield N/A N/A N/A N/A
Tax-Equivalent Yield N/A N/A N/A N/A

30-DAY PERIOD 1 Year 5 Years 10 Years Start of Performance
on

August 5, 1996

CLASS B SHARES

Total Return N/A N/A

N/A

Yield N/A N/A N/A N/A
Tax-Equivalent Yield N/A N/A N/A N/A

30-DAY PERIOD 1 Year 5 Years 10 Years Start of Performance
on

August 5, 1996

CLASS C SHARES

Total Return N/A N/A

N/A

Yield N/A N/A N/A N/A
Tax-Equivalent Yield N/A N/A N/A N/A

30-DAY PERIOD 1 Year 5 Years 10 Years

CLASS F SHARES
Total Return

N/A

Yield N/A N/A N/A
Tax-Equivalent Yield N/A N/A N/A

- ------------------------------------------------------------------------------

</TABLE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The tax-equivalent yield of Shares is
calculated similarly to the yield, but is adjusted to reflect the taxable yield
that Shares would have had to earn to equal the actual yield, assuming a
specific tax rate. The yield and tax-equivalent yield do not necessarily reflect
income actually earned by Shares because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

<PAGE>

TAX EQUIVALENCY TABLE

Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.

TAX EQUIVALENCY TABLE

TAXABLE YIELD EQUIVALENT FOR 1999 MULTISTATE MUNICIPAL FUND

FEDERAL INCOME TAX BRACKET: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,050 $43,051-104,05$104,051-158,550$158,551-283,150 Over
283,150
Single Return $1-25,750 $25,751-62,450$62,451-130,250 $130,251-283,150 Over
283,150
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
<S> <C> <C> <C> <C> <C>
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

</TABLE>

NOTE:THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING THE
TAXABLE YIELD EQUIVALENT.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

<PAGE>

o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specific period of
time. From time to time, the Fund will quote its Lipper ranking in the high
yield municipal bond funds category in advertising and sales literature.

o LEHMAN BROTHERS MUNICIPAL BOND INDEX is a broad-based market performance
benchmark for the tax-exempt bond market.

o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated

advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax exempt entities, foundations/endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended August 31, 1999,
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Municipal Opportunities Fund, Inc. dated August 31, 1999.

(To be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS

A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.

SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.

SP-2--Satisfactory capacity to pay principal and interest.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS

S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)

COMMERCIAL PAPER (CP) RATINGS

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

LONG-TERM DEBT RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

MOODY'S INVESTORS SERVICE, INC., SHORT-TERM MUNICIPAL OBLIGATION RATINGS

Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.

MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.

MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS

Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.

COMMERCIAL PAPER (CP) RATINGS

P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.

P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

LONG-TERM DEBT RATINGS

AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.

NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.

NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.

NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.

FITCH INVESTORS SERVICE, L.P. SHORT-TERM DEBT RATING DEFINITIONS

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+.

F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.

BAA--Bonds which are rated BAA are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

<PAGE>

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

o Leading market positions in well-established industries;

o High rates of return on funds employed;

o Conservative capitalization structure with moderate reliance on debt and
ample asset protection;

o Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and

o Well-established access to a range of financial markets and assured sources
of alternate liquidity.

PRIME-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS

FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

Class A Shares

Class B Shares

Class C Shares

Class F Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:

(a) (i) Conformed copy of Amended and Restated
Articles of Incorporation of the Registrant; (10)
(ii) Conformed copy of Certificate of Correction
dated October 21, 1996; (10)

(iii) Conformed copy of Certificate of Correction
dated April 11, 1997; + (b) (i) Copy of Amended and
Restated By-Laws of the Registrant; (10)

(ii) Copy of Amendment #6 to the By-Laws of the
Registrant; (13) (iii) Copy of Amendment #7 to the
By-Laws of the Registrant; (13)

(iv) Copy of Amendment #8 to the By-Laws of the
Registrant; (13) (c) (i) Copy of Specimen Certificate for
Class A Shares; (10)

(ii) Copy of Specimen Certificate for Class B
Shares; (10) (iii) Copy of Specimen Certificate
for Class C Shares; (10)

(iv) Copy of Specimen Certificate for Class F
Shares; (10) (d) Conformed copy of the Investment Advisory
Contract of the Registrant; (4) (e) (i) Conformed copy of
Distributor's Contract of the Registrant; (10)

(ii) Conformed copy of Exhibit A to the
Distributor's Contract of the Registrant; (10)
(iii) Conformed copy of Exhibit C to the
Distributor's Contract of the Registrant; (10)

(iv) Conformed copy of Exhibit D to the
Distributor's Contract of the Registrant; (13)
(v) Conformed copy of Distributor's Contract for

Class B Shares of the Registrant, and Schedule
A thereto; (13)

- ------------------------
+ All exhibits have been filed electronically.

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 filed August 25, 1989. (File Nos. 33-11410 and 811-4533)

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed October 25, 1996. (File Nos. 33-11410 and 811-4533)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed October 1, 1998. (File Nos. 33-11410 and 811-4533)

<PAGE>

(vi) The Registrant hereby incorporates the
conformed copy of the specimen Mutual Funds
Sales and Service Agreement; Mutual Funds
Service Agreement; and Plan Trustee/Mutual
Funds Service Agreement from Item 24(b)(6)
of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos.
33-38550 and 811-6269).

(f) Not applicable;

(g) (i) Conformed copy of Custodian Agreement of the
Registrant; (8) (ii) Conformed copy of Custodian
Fee Schedule; (12)

(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency
Services, and Custody Services
Procurement; (13)

(ii) Conformed copy of Amended and Restated
Shareholder Services Agreement; (12) (iii)
Conformed copy of Principal Shareholder Servicer's
Agreement; (13)

(iv) Conformed copy of Exhibit 1 to the Principal
Shareholder Servicer's Agreement and Schedule A
thereto; (13) (v) Conformed copy of Shareholder
Services Agreement for Class B Shares; (13)

(vi) Conformed copy of Exhibit 1 to the
Shareholder Services Agreement for Class B Shares,
and Schedule A thereto; (13) (vii) The responses
described in Item 23(e)(vi) are hereby
incorporated by reference.

(i) Conformed copy of Opinion and Consent of Counsel
as to legality of shares being registered; (8)
(j) Conformed copy of Consent of Independent
Auditors; (14)
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (8)
(m) (i) Conformed copy of Distribution Plan of the
Registrant; (10)

- ------------------------

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-4533)

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed October 25, 1996. (File Nos. 33-11410 and 811-4533)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 filed October 31, 1997. (File Nos. 33-11410 and 811-4533)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed October 1, 1998. (File Nos. 33-11410 and 811-4533)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed November 25, 1998. (File Nos. 33-11410 and 811-4533)

<PAGE>

(ii) Conformed copy of Exhibit 1 Amendment to
Distribution Plan of the Registrant; (13) (iii)
The responses described in Item 23(e)(vi) are
hereby incorporated by reference;

(n) The Registrant hereby incorporates the conformed
copy of the specimen Multiple Class Plan from Item
24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996.(File Nos. 33-52149
and 811-07141).

(o) Conformed copy of Power of Attorney of the
Registrant. (14)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:

None.

Item 25. INDEMNIFICATION: (1)

Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:

For a description of the other business of the investment adviser,
see the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one of
the Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to
the Fund?" The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

- ------------------------

1. Response is incorporated by reference to Registrant's Initial Registration
Amendment No. 1 filed January 21, 1987. (File Nos. 33-11410 and 811-4533)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed October 1, 1998. (File Nos. 33-11410 and 811-4533)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed November 25, 1998. (File Nos. 33-11410 and 811-4533)

<PAGE>

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
William M. Painter
Jeffrey A. Petro
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Peter Vutz
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka

Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
Ihab Salib
James W. Schaub
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff

<PAGE>

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.

Item 27. PRINCIPAL UNDERWRITERS:

(a) Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant:

Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S.
Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated
U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Planters Funds; The Wachovia Funds;
The Wachovia Municipal Funds; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment
Series Trust; Star Funds; Targeted Duration Trust; The Virtus Funds;
Trust for Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

<PAGE>

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Chairman, Chief ExecutivePresident
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer, Asst. Secretary
Pittsburgh, PA 15222-3779 and Asst. Treasurer,

Federated Securities Corp.

Arthur L. Cherry Director --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward C. Gonzales Executive Vice President Executive Vice President
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, Assistant Secretary
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant.......................... Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(Notices should be sent to the Agent for Service at the above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Federated Shareholder............... P.O. Box 8600
Services Company.................... Boston, MA 02266-8600
("Transfer Agent and Dividend

Disbursing Agent")

<PAGE>

Federated Services Company Federated Investors Tower
("Administrator")................... 1001 Liberty Avenue

Pittsburgh, PA 15222-3779

Federated Investment................ Federated Investors Tower
Management Company.................. 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

State Street Bank and Trust......... P.O. Box 8600
Company Boston, MA 02266-8600

("Custodian")

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30. UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of Section 16(c)
of the 1940 Act with respect to the removal of Directors and the calling of
special shareholder meetings by shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
30th day of August, 1999.

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue

August 30, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Leslie K. Ross Attorney In Fact August 30, 1999
Leslie K. Ross For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

John F. Donahue* Chairman and Director
(Chief Executive Officer)

Richard B. Fisher* President

William D. Dawson, III* Chief Investment Officer

Richard J. Thomas* Treasurer (Principal Financial and
Accounting Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

John F. Cunningham* Director

J. Christopher Donahue* Executive Vice President and Director

Lawrence D. Ellis, M.D.* Director

Peter E. Madden* Director

Charles F. Mansfield, Jr.* Director

John E. Murray, Jr., J.D.,S.J.D.* Director

Marjorie P. Smuts* Director

John S. Walsh* Director

* By Power of Attorney

Exhibit (a)(iii) under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K

FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.

CERTIFICATE OF CORRECTION

Federated Municipal Opportunities Fund, Inc., a Maryland corporation
(the "Corporation"), hereby certifies that:

FIRST: The title of the document being corrected is:
"CERTIFICATE OF CORRECTION"

SECOND: The only party to the document being corrected is Federated
Municipal Opportunities Fund, Inc.

THIRD: The document being corrected was filed with the State
Department of Assessments and Taxation of Maryland on
October 21, 1996.

FOURTH: A. Article FOURTH B of the Certificate of Correction as
filed on October 21, 1996, reads as follows:

"FORTH: (a) The Corporation is authorized to issue shares of
common stock, par value $0.001 per share. The aggregate par
value of all shares which the Corporation is authorized to
issue is $2,000,000. Subject to the following paragraph, the
authorized shares are classified as 500,000,000 shares of the
Class A Shares, 500,000,000 share of the Class B Shares,
500,000,000 shares of the Class C Shares, and 500,000,000
shares of the Class F Shares."

B. As corrected, Article Fourth B of the Certificate of
Correction reads as follows:

"FOURTH: (a) The Corporation is authorized to issue two
billion (2,000,000,000) shares of common stock, par value
$0.001 per share. The aggregate par value of all shares which
the Corporation is authorized to issue is $2,000,000. Subject
to the following paragraph, the authorized shares are
classified as 500,000,000 shares of the Class A Shares,
500,000,000 shares of the Class B Shares, 500,000,000 of the
Class C Shares, and 500,000,000 shares of the Class F Shares.

IN WITNESS WHEREOF, Federated Municipal Opportunities Fund, Inc. has caused
these presents to be signed in its name and on its behalf, as of April 11, 1997,
by its duly authorized officers who acknowledge that this Certificate of
Correction is the act of the Corporation, that to the best of their knowledge,
information, and belief, all matters and facts set forth herein that are
required to be executed under oath are true in all materials respects, and that
this statement is made under the penalties of perjury.

<PAGE>

WITNESS: FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.

/S/ S. ELLIOTT COHAN BY: /S/ JOHN W. MCGONIGLE
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President