485BPOS 1 0001.txt 1933 Act File No. 33-11410 1940 Act File No. 811-4533 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X Pre-Effective Amendment No. _____ Post-Effective Amendment No. 25 X and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__ Amendment No. 24 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) X on _OCTOBER 31, 2000__, pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a)(i) _ on _____________, pursuant to paragraph (a)(i) 75 days after filing pursuant to paragraph (a)(ii) on _________________, pursuant to paragraph (a)(ii) of Rule 485 If appropriate, check the following box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Copies to: Matthew G. Maloney, Esquire Dickstein Shapiro Morin & Oshinsky, LLP 2101 L Street, N.W. Washington, DC 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 primarily in a portfolio of long-term, noninvestment grade tax exempt securities. As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. 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 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE October 31, 2000 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 invests primarily in long-term, noninvestment grade tax exempt 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 CREDIT RISKS There is a possibility that issuers of securities in which the Fund may invest may default in the payment of interest or principal on the securities when due, which would cause the Fund to lose money. o INTEREST RATE RISKS Prices of fixed income securities generally fall when interest rates rise. o RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES The Fund may invest a portion of its assets in securities rated below investment grade which may be subject to greater interest rate, credit and liquidity risks than investment grade securities. o CALL RISKS The Fund's performance may be adversely affected by the possibility that an issuer of a security held by the Fund may redeem the security prior to maturity at a price below its current market value. 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. RISK/RETURN BAR CHART AND TABLE (TO BE PROVIDED BY SSB) WHAT ARE THE FUND'S FEES AND EXPENSES? (TO BE PROVIDED BY SSB) WHAT ARE THE FUND'S INVESTMENT STRATEGIES? The Fund invests 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 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, 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 may also retain legal counsel to assist it with the review of offerings of noninvestment grade tax exempt securities. The Adviser attempts to provide superior levels of income by investing in long-term tax exempt securities and managing the duration of the Fund. "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 is less important when a greater portion of the Fund is allocated to noninvestment grade tax exempt securities, because such securities are less sensitive to interest rate changes. The Adviser also attempts to provide superior levels of income by investing primarily in noninvestment grade tax exempt securities, which generally provide higher yields. The percentage that the Adviser allocates to noninvestment grade securities will vary depending on the supply of noninvestment grade tax exempt 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 increase its allocation to investment grade securities without limitation; if the credit spread broadens, the Adviser may increase its allocation to noninvestment grade securities without limitation. 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 federal regular 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. 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. 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 transactions 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. 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 Investors Service, 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. 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 Adviser may invest up to 100% of the Fund's assets in noninvestment grade bonds. SECTOR RISKS A substantial part of the Fund's portfolio may be comprised of securities credit enhanced by banks, insurance companies 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 this 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 generally values fixed income securities according to the mean between bid and asked prices as furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized 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. 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 INITIAL/ CONTINGENT SUBSEQUENT FRONT-END DEFERRED INVESTMENT SALES SALES SHARES OFFERED AMOUNTS1 CHARGE2 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. AFTER CLASS B SHARES HAVE BEEN HELD FOR EIGHT YEARS FROM THE DATE OF PURCHASE, THEY WILL AUTOMATICALLY CONVERT TO CLASS A SHARES ON THE 15TH OF THE FOLLOWING MONTH. 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." SALES CHARGE WHEN YOU PURCHASE CLASS A SHARES Sales Charge as a Percentage Sales Charge of Public as a Percentage Purchase Amount Offering Price of NAV Less than $100,000 4.50% 4.71% $100,000 but less than 3.75% 3.90% $250,000 $250,000 but less than 2.50% 2.56% $500,000 $500,000 but less than $1 2.00% 2.04% million $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. ------------------------------------------------------------------------- If your investment qualifies for a reduction or elimination of the sales charge as described below, 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. 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. 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. ------------------------------------------------------------------------- If your investment qualifies for a reduction or elimination of the CDSC as described below, you or your investment professional should notify the Distributor at the time of redemption. If the Distributor is not notified, the CDSC will apply. 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 if 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. 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 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. 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, B and 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 incurred by the Fund or Federated Shareholder Services Company, the Fund's transfer agent. 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 (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) 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 at 1-800-341-7400 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 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 PRIVILEGE 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. 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 dividends and 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 176 mutual funds and separate accounts, which totaled approximately $125 billion in assets as of December 31, 1999. 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. 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. FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. CLASS A SHARES CLASS B SHARES CLASS C SHARES A Statement of Additional Information (SAI) dated October 31, 2000, 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's Management Discussion and Analysis discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To obtain the SAI, 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 writing to or visiting the Public Reference Room in Washington, DC. You may also access fund information from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room's operations and copying fees. INVESTMENT COMPANY ACT FILE NO. 811-4533 CUSIP 313910200 CUSIP 313910309 CUSIP 313910408 G00570-03 (10/00) 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, 2000. 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, 2000 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 8092709B (10/00) 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 Board of Directors (Board) has established four classes of shares of the Fund, known as Class A Shares, Class B Shares, Class C Shares and Class F Shares. This SAI relates to all classes of Shares. The Fund's investment adviser is Federated Investment Management Company (Adviser). SECURITIES IN WHICH THE FUND INVESTS The Fund's principal securities are described in its prospectus. Additional securities, and further details 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. Tax Exempt Securities Tax exempt securities are fixed income securities that pay interest that is not subject to federal regular 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. 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. 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. 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. 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. Depending upon how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset, derivative contracts may increase or decrease the Fund's exposure to interest rate risks, and may also expose the Fund to liquidity and leverage risks. The Fund may trade in the following types of derivative contracts. Futures Contracts Futures 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 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 portfolio securities and municipal bond or U.S. Treasury futures contracts in anticipation of an increase in the value of the underlying asset; o buy put options on portfolio securities and municipal bond or U.S. Treasury futures contracts in anticipation of a decrease in the value of the underlying asset; and o buy or write options to close out existing options. The Fund may not buy or sell futures contracts or related options if the margin deposits and premiums paid for these securities would exceed 5% of the market value of the Fund's total assets. 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. 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. 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. 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. 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. SPECIAL TRANSACTIONS INTER-FUND BORROWING AND LENDING ARRANGEMENTS The Securities and Exchange Commission (SEC) has granted an exemption that permits the Fund and all other Funds and all other funds advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend and borrow money for certain temporary purposes directly to and from other Federated funds. Participation in this inter-fund lending program is voluntary for both borrowing and lending funds, and an inter-fund loan is only made if it benefits each participating fund. Federated administers the program according to procedures approved by the Fund's Board, and the Board monitors the operation of the program. Any inter-fund loan must comply with certain conditions set out in the exemption, which are designed to assure fairness and protect all participating funds. For example, inter-fund lending is permitted only (a) to meet shareholder redemption requests, and (b) to meet commitments arising from "failed" trades. All inter-fund loans must be repaid in seven days or less. The Fund's participation in this program must be consistent with its investment policies and limitations, and must meet certain percentage tests. Inter-fund loans may be made only when the rate of interest to be charged is more attractive to the borrowing fund than the rate of interest that would be charged by an unaffiliated bank for short-term borrowings (the Bank Loan Rate), as determined by the Board. The interest rate imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan Rate. DELAYED DELIVERY TRANSACTIONS The Fund does not intend to engage in delayed delivery transactions to an extent that would cause the segregation of more than 20% of the total value of its assets. ASSET COVERAGE In order to secure its obligations in connection with derivatives contracts or special transactions, including delayed delivery 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 derivatives contract or terminating a special transaction. This may cause the Fund to miss favorable trading opportunities or to realize losses on derivatives contracts or special transactions. 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 & 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. 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 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. Changes or proposed changes in federal tax laws may cause the prices of municipal securities to fall. LIQUIDITY RISKS 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. FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY 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 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 investment objective and policy may not be changed by the Fund's Board 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. 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 AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT (1940 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 1940 Act. 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." 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 limitation. 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. PORTFOLIO TURNOVER For the fiscal years ended August 31, 2000 and 1999, the Fund's portfolio turnover rates were 18% and 25%, respectively. DETERMINING MARKET VALUE OF SECURITIES Market values of the Fund's portfolio securities are determined as follows: o futures contracts and options are generally 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 generally 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; o for fixed income securities, according to the mean between bid and asked prices as furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost; and o 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 (CLASS A SHARES AND CLASS F SHARES) 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 Share redemption proceeds at the next determined NAV without any sales charge. 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 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; 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. 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 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. 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 (such as broker-dealers or banks) may be paid fees, in significant amounts, out of the assets of the Distributor and/or Federated Shareholder Services Company (these fees do not come 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 and/or shareholder services, such as advertising, providing incentives to their sales personnel, sponsoring other activities intended to promote sales, and maintaining shareholder accounts These payments may be based upon such factors as the number or value of Shares the investment professional sells or may sell; the value of client assets invested; and/or 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: ADVANCE PAYMENTS AMOUNT 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 1940 Act, 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 6, 2000, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class A Shares: Edward Jones & Co, Maryland Hts, MO, owned approximately 1,782,419.511 shares (18.89%). As of October 6, 2000, there were no shareholders owning 5% or more of the Class B Shares of the Fund. As of October 6, 2000, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class C Shares:Edward Jones & Co, Maryland Hts, MO, owned approximately 227,862.315 shares (22.86%), MLPF&S, Jacksonville, FL, for the sole benefit of its customers, owned approximately 158,748.488 shares (15.93%), Pauline R Farris TTEE, Reno, NV, owned approximately 90,991.811 shares (9.13%), Paine-Webber, Monsey, NY, for the benefit of Haim Weissman, owned approximately 71,738.281 shares (7.20%), and NFSC FEBO # AFB-960896, West Jefferson, NC, owned approximately 54,744.526 shares (5.49%). As of October 6, 2000, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class F Shares: MLPF&S, Jacksonville, FL, for the sole benefit of its customers, owned approximately 5,228,017.658 shares (23.96%). 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 43 investment companies, whose investment advisers are affiliated with the Fund's Adviser. As of October 6, 2000, the Fund's Board and Officers as a group owned less than 1% of the Fund's outstanding Class A, B, C and F Shares.
NAME TOTAL BIRTH DATE ----------- COMPENSATION ADDRESS PRINCIPAL OCCUPATIONS AGGREGATE FROM FUND AND POSITION WITH FUND FOR PAST FIVE YEARS COMPENSATION FUND COMPLEX FROM FUND JOHN F. DONAHUE*+# Chief Executive Officer and Director $0 $0 for the Fund Birth Date: July or Trustee of the Federated Fund and 43 other 28, 1924 Complex; Chairman and Director, investment Federated Investors Federated Investors, Inc.; Chairman, companies in Tower Federated Investment Management the 1001 Liberty Avenue Company, Federated Global Investment Fund Complex Pittsburgh, PA Management Corp. and Passport CHAIRMAN AND Research, Ltd. ; formerly: Trustee, DIRECTOR Federated Investment Management Company and Chairman and Director, Federated Investment Counseling. -------------------- Director or Trustee of the Federated -------------$116,760.63 for THOMAS G. BIGLEY Fund Complex; Director, Member of $1,380.24 the Fund Birth Date: Executive Committee, Children's and 43 other February 3, 1934 Hospital of Pittsburgh; Director and investment 15 Old Timber Trail Chairman of Audit Committee, Robroy companies in Pittsburgh, PA Industries, Inc. (coated steel the DIRECTOR conduits/computer storage equipment); Fund Complex formerly: Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc. (physician practice management); Director, Member of Executive Committee, University of Pittsburgh. -------------------- Director or Trustee of the Federated -------------$128,455.37 for JOHN T. CONROY, JR. Fund Complex; Chairman of the Board, $1,413.02 the Fund and 43 Birth Date: June Investment Properties Corporation; other 23, 1937 Partner or Trustee in private real investment Grubb & estate ventures in Southwest Florida; companies in Ellis/Investment formerly: President, Investment the Properties Properties Corporation; Senior Vice Fund Complex Corporation President, John R. Wood and 3201 Tamiami Trail Associates, Inc., Realtors; President, North Naples Property Management, Inc. and Naples, FL Northgate Village Development DIRECTOR Corporation. -------------------- Director or Trustee of the Federated -------------$73,191.21 for NICHOLAS P. Fund Complex; Director and Chairman of $1,380.24 the Fund CONSTANTAKIS the Audit Committee, Michael Baker and 37 other Birth Date: Corporation (engineering, investment September 3, 1939 construction, operations and technical companies in 175 Woodshire Drive services); formerly: Partner, Andersen the Pittsburgh, PA Worldwide SC. Fund Complex DIRECTOR -------------------- Director or Trustee of some of the ----------- ---------------- JOHN F. CUNNINGHAM Federated Fund Complex; Chairman, $1,284.38 $93,190.48 for Birth Date: March President and Chief Executive Officer, the Fund 5, 1943 Cunningham & Co., Inc. (strategic and 37 other 353 El Brillo Way business consulting); Trustee investment Palm Beach, FL Associate, Boston College; Director, companies in DIRECTOR Iperia Corp. the (communications/software); formerly: Fund Complex Director, Redgate Communications and EMC Corporation (computer storage systems). 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. -------------------- Director or Trustee of the Federated -------------$116,760.63 for LAWRENCE D. ELLIS, Fund Complex; Professor of Medicine, $1,284.38 the Fund M.D.* University of Pittsburgh; Medical and 43 other Birth Date: October Director, University of Pittsburgh investment 11, 1932 Medical Center - Downtown; companies in 3471 Fifth Avenue Hematologist, Oncologist and the Suite 1111 Internist, University of Pittsburgh Fund Complex Pittsburgh, PA Medical Center; Member, National Board DIRECTOR of Trustees, Leukemia Society of America. -------------------- Director or Trustee of the Federated -------------$109,153.60 for PETER E. MADDEN Fund Complex; formerly: $1,317.16 the Fund Birth Date: March Representative, Commonwealth of and 43 other 16, 1942 Massachusetts General Court; investment One Royal Palm Way President, State Street Bank and Trust companies in 100 Royal Palm Way Company and State Street Corporation. the Palm Beach, FL Fund Complex DIRECTOR Previous Positions: Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange. -------------------- Director or Trustee of some of the -------------$102,573.91 for CHARLES F. Federated Fund Complex; Management $1,413.02 the Fund MANSFIELD, JR. Consultant; formerly: Executive Vice and 40 other Birth Date: April President, Legal and External investment 10, 1945 Affairs, DVC Group, Inc. (formerly, companies in 80 South Road Dugan Valva Contess, Inc.) (marketing, the Westhampton Beach, communications, technology and Fund Complex NY DIRECTOR consulting). Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University. -------------------- Director or Trustee of the Federated ----------------------------- JOHN E. MURRAY, Fund Complex; President, Law $1,317.16 $128,455.37 for JR., J.D., S.J.D.# Professor, Duquesne University; the Fund Birth Date: Consulting Partner, Mollica & Murray; and 43 other December 20, 1932 Director, Michael Baker Corp. investment President, Duquesne (engineering, construction, operations companies in University and technical services). the Pittsburgh, PA Fund Complex DIRECTOR Previous Positions: Dean and Professor of Law, University of Pittsburgh School of Law; Dean and Professor of Law, Villanova University School of Law. -------------------- Director or Trustee of the Federated -------------$116,760.63 for MARJORIE P. SMUTS Fund Complex; Public $1,284.38 the Fund Birth Date: June Relations/Marketing/Conference and 43 other 21, 1935 Planning. investment 4905 Bayard Street companies in Pittsburgh, PA Previous Positions: National the DIRECTOR Spokesperson, Aluminum Company of Fund Complex America; television producer; business owner; conference coordinator. -------------------- Director or Trustee of some of the -------------$94,536.85 for JOHN S. WALSH Federated Fund Complex; President and $1,284.38 the Fund Birth Date: Director, Heat Wagon, Inc. and 39 other November 28, 1957 (manufacturer of construction investment 2604 William Drive temporary heaters); President and companies in Valparaiso, IN Director, Manufacturers Products, Inc. the DIRECTOR (distributor of portable construction Fund Complex heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.; Director, Walsh & Kelly, Inc. (heavy highway contractor); formerly: Vice President, Walsh & Kelly, Inc. -------------------- President or Executive Vice President -------------$0 for the Fund J. CHRISTOPHER of the Federated Fund Complex; $0 and 30 other DONAHUE+* Director or Trustee of some of the investment Funds in the Federated Fund Complex; companies in Birth Date: April President, Chief Executive Officer and the 11, 1949 Director, Federated Investors, Inc.; Fund Complex Federated Investors President, Chief Executive Officer and Tower Trustee, Federated Investment 1001 Liberty Avenue Management Company; Trustee, Federated Pittsburgh, PA Investment Counseling; President, EXECUTIVE VICE Chief Executive Officer and Director, PRESIDENT AND Federated Global Investment Management DIRECTOR Corp.; President and Chief Executive Officer, Passport Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated Services Company; formerly: President, Federated Investment Counseling. -------------------- President, Executive Vice President -------------$0 for the Fund EDWARD C. GONZALES and Treasurer of some of the Funds in $0 and 42 other Birth Date: October the Federated Fund Complex; Vice investment 22, 1930 Chairman, Federated Investors, Inc.; companies in Federated Investors Trustee, Federated Administrative the Tower Services; formerly: Trustee or Fund Complex 1001 Liberty Avenue Director of some of the Funds in the Pittsburgh, PA Federated Fund Complex; CEO and EXECUTIVE VICE Chairman, Federated Administrative PRESIDENT Services; Vice President, Federated Investment Management Company, Federated Investment Counseling, Federated Global Investment Management Corp. and Passport Research, Ltd.; Director and Executive Vice President, Federated Securities Corp.; Director, Federated Services Company; Trustee, Federated Shareholder Services Company. -------------------- Executive Vice President and Secretary -------------$0 for the Fund JOHN W. MCGONIGLE of the Federated Fund Complex; $0 and 43 other Birth Date: October Executive Vice President, Secretary investment 26, 1938 and Director, Federated Investors, companies in Federated Investors Inc.; formerly: Trustee, Federated the Tower Investment Management Company and Fund Complex 1001 Liberty Avenue Federated Investment Counseling; Pittsburgh, PA Director, Federated Global Investment EXECUTIVE VICE Management Corp., Federated Services PRESIDENT AND Company and Federated Securities Corp. SECRETARY -------------------- Treasurer of the Federated Fund -------------$0 for the Fund RICHARD J. THOMAS Complex; Senior Vice President, $0 and 43 other Birth Date: June Federated Administrative Services; investment 17, 1954 formerly: Vice President, Federated companies in Federated Investors Administrative Services; held various the Tower management positions within Funds Fund Complex 1001 Liberty Avenue Financial Services Division of Pittsburgh, PA Federated Investors, Inc. TREASURER -------------------- President or Vice President of some of -------------$0 for the Fund RICHARD B. FISHER the Funds in the Federated Fund $0 and 41 other Birth Date: May 17, Complex; Vice Chairman, Federated investment 1923 Investors, Inc.; Chairman, Federated companies in Federated Investors Securities Corp.; formerly: Director the Tower or Trustee of some of the Funds in the Fund Complex 1001 Liberty Avenue Federated Fund Complex,; Executive Pittsburgh, PA Vice President, Federated Investors, PRESIDENT Inc. and Director and Chief Executive Officer, Federated Securities Corp. -------------------- Chief Investment Officer of this Fund -------------$0 for the Fund WILLIAM D. DAWSON, and various other Funds in the $0 and 27 other III Federated Fund Complex; Executive Vice investment Birth Date: March President, Federated Investment companies in 3, 1949 Counseling, Federated Global the Federated Investors Investment Management Corp., Federated Fund Complex Tower Investment Management Company and 1001 Liberty Avenue Passport Research, Ltd.; Director, Pittsburgh, PA Federated Global Investment Management CHIEF INVESTMENT Corp. and Federated Investment OFFICER Management Company; Registered Representative, 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 has been the Fund's ----------- ---------------- MARY JO OCHSON Portfolio Manager since May 1996. She $0 $0 for the Fund Birth Date: is Vice President of the Fund. Ms. and 4 other September 12, 1953 Ochson joined Federated in 1982 and investment Federated Investors has been a Senior Portfolio Manager companies in Tower and a Senior Vice President of the the 1001 Liberty Avenue Fund's Adviser since 1996. From 1988 Fund Complex Pittsburgh, PA through 1995, Ms. Ochson served as a VICE PRESIDENT 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.
------------------------------------------------------------------------- * AN ASTERISK DENOTES A DIRECTOR WHO IS DEEMED TO BE AN INTERESTED PERSON AS DEFINED IN THE 1940 ACT. ------------------------------------------------------------------------- # A POUND SIGN DENOTES A MEMBER OF THE BOARD'S EXECUTIVE COMMITTEE, WHICH HANDLES THE BOARD'S RESPONSIBILITIES BETWEEN ITS MEETINGS. + MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE PRESIDENT AND DIRECTOR OF THE FUND. 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. CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING As required by SEC rules, the Fund, its Adviser, and its Distributor have adopted codes of ethics. These codes govern securities trading activities of investment personnel, Fund Directors, and certain other employees. Although they do permit these people to trade in securities, including those that the Fund could buy, they also contain significant safeguards designed to protect the Fund and its shareholders from abuses in this area, such as requirements to obtain prior approval for, and to report, particular transactions. 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. RESEARCH SERVICES Research services may include advice as to the advisability of investing in securities; security analysis and reports; economic studies; industry studies; receipt of quotations for portfolio evaluations; and similar services. Research services may be used by the Adviser or by affiliates of Federated in advising other accounts. To the extent that receipt of these services may replace services for which the Adviser or its affiliates might otherwise have paid, it would tend to reduce their expenses. The Adviser and its affiliates exercise reasonable business judgment in selecting those brokers who offer brokerage and research services to execute securities transactions. They determine in good faith that commissions charged by such persons are reasonable in relationship to the value of the brokerage and research services provided. 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: AVERAGE AGGREGATE DAILY MAXIMUM NET ASSETS OF THE ADMINISTRATIVE FEE FEDERATED 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. 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, Ernst & Young 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 -------------------------- ------------ 1999 1998 FOR THE YEAR ENDED AUGUST 2000 31 Advisory Fee Earned $2,442,245 $2,898,235 $2,736,122 Advisory Fee Reduction $0 $0 $0 Brokerage Commissions $0 $0 $0 Administrative Fee $306,616 $364,212 $343,950 12b-1 Fee Class B Shares $539,057 -- -- Class C Shares $63,399 -- -- Shareholder Services Fee Class A Shares $239,525 -- -- Class B Shares $179,686 -- -- Class C Shares $21,133 -- -- Class F Shares $577,249 -- -- 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 SEC's 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 are given for the one-year, five-year and ten-year or Start of Performance periods ended August 31, 2000. Yield and Tax-Equivalent Yield are given for the 30-day period ended August 31, 2000. START OF ---------------- 30-DAY PERIOD 1 YEAR 5 YEARS 10 PERFORMANCE ON SHARE CLASS YEARS AUGUST 5, 1996 CLASS A: Total Return N/A (3.18%) N/A N/A 2.60% Yield 5.28% N/A N/A N/A N/A Tax-Equivalent 9.17% N/A N/A N/A N/A Yield CLASS B: Total Return N/A (4.75%) N/A N/A 2.55% Yield 4.79% N/A N/A N/A N/A Tax-Equivalent 8.32% N/A N/A N/A N/A Yield CLASS C: Total Return N/A (0.44%) N/A N/A 2.97% Yield 4.79% N/A N/A N/A N/A Tax-Equivalent 8.32% N/A N/A N/A N/A Yield CLASS F: Total Return N/A (0.56%) 3.54% 5.63% Yield 5.48 N/A N/A N/A Tax-Equivalent 9.51 N/A N/A N/A Yield ------------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 AND TAX-EQUIVALENT 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 the maximum combined federal and state 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. 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. TAXABLE YIELD EQUIVALENT FOR 2000 MULTISTATE MUNICIPAL FUND
COMBINED FEDERAL AND STATE INCOME 17.80% 30.80% 33.80% 38.80% 42.40% TAX BRACKET: $1-42,35$42,351-102,$102,301-155$155,951-278,OVER ---------------------------------- -- -- -- --- $278,450 Joint Return $1-25,350 $61,401-128,$128,101-278,OVER ---------------------------------- -------------- -- --- $278,450 Single Return $25,351-61,400 TAX-EXEMPT YIELD: TAXABLE YIELD EQUIVALENT: 1.50% 1.82% 2.17% 2.27% 2.45% 2.60% 2.00% 2.43% 2.89% 3.02% 3.27% 3.47% 2.50% 3.04% 3.61% 3.78% 4.08% 4.34% 3.00% 3.65% 4.34% 4.53% 4.90% 5.21% 3.50% 4.26% 5.06% 5.29% 5.72% 6.08% 4.00% 4.87% 5.78% 6.04% 6.54% 6.94% 4.50% 5.47% 6.50% 6.80% 7.35% 7.81% 5.00% 6.08% 7.23% 7.55% 8.17% 8.68% 5.50% 6.69% 7.95% 8.31% 8.99% 9.55% 6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
Note: The maximum marginal tax rate for each bracket was used in calculating the taxable yield equivalent. Furthermore, additional state and local taxes paid on comparable taxable investments were not used to increase federal deductions. ------------------------------------------------------------------------- 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 Fund; 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: LIPPER ANALYTICAL SERVICES, INC. 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. LEHMAN BROTHERS MUNICIPAL BOND INDEX Lehman Brothers Municipal Bond Index is a broad-based market performance benchmark for the tax-exempt bond market. MORNINGSTAR, INC. 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. LIPPER HIGH YIELD MUNICIPAL DEBT FUNDS AVERAGE Lipper figures represent the average total returns reported by all mutual funds designated by Lipper Analytical Services as falling into the respective categories indicated. They do not reflect sales charges. 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, 1999, Federated managed 12 bond funds with approximately $2.0 billion in assets and 24 money market funds with approximately $13.1 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 29 years' experience. As of December 31, 1999, Federated managed 53 equity funds totaling approximately $18.3 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, 1999, Federated managed 13 money market funds and 29 bond funds with assets approximating $35.7 billion and $7.7 billion, respectively. Federated's corporate bond decision making--based on intensive, diligent credit analysis--is backed by over 27 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, 1999, Federated managed 9 mortgage backed, 11 government/agency and 16 government money market mutual funds, with assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively. Federated trades approximately $450 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 $43.8 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, 1999, Federated managed more than $83.0 billion in assets across 54 money market funds, including 16 government, 13 prime, 24 municipal and 1 euro-denominated with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115 million, 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 1,160 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, 2000 are incorporated herein by reference to the Annual Report to Shareholders of Federated Municipal Opportunities Fund, Inc. dated August 31, 2000. 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 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 IBCA, INC. 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. 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. 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 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. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA--Bonds which are rated BAA are considered as medium-grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA--Bonds which are 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. 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 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-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. 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. 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 Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 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 primarily in a portfolio of long-term, noninvestment grade tax exempt securities. As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. 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 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE october 31, 2000 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 invests primarily in long-term, noninvestment grade tax exempt 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 CREDIT RISKS There is a possibility that issuers of securities in which the Fund may invest may default in the payment of interest or principal on the securities when due, which would cause the Fund to lose money. o INTEREST RATE RISKS Prices of fixed income securities generally fall when interest rates rise. o RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES The Fund may invest a portion of its assets in securities rated below investment grade which may be subject to greater interest rate, credit and liquidity risks than investment grade securities. o CALL RISKS The Fund's performance may be adversely affected by the possibility that an issuer of a security held by the Fund may redeem the security prior to maturity at a price below its current market value. 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. RISK/RETURN BAR CHART AND TABLE (TO BE PROVIDED BY SSB) WHAT ARE THE FUND'S FEES AND EXPENSES? (TO BE PROVIDED BY SSB) WHAT ARE THE FUND'S INVESTMENT STRATEGIES? The Fund invests 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 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, 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 may also retain legal counsel to assist it with the review of offerings of noninvestment grade tax exempt securities. The Adviser attempts to provide superior levels of income by investing in long-term tax exempt securities and managing the duration of the Fund. "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 is less important when a greater portion of the Fund is allocated to noninvestment grade tax exempt securities, because such securities are less sensitive to interest rate changes. The Adviser also attempts to provide superior levels of income by investing primarily in noninvestment grade tax exempt securities, which generally provide higher yields. The percentage that the Adviser allocates to noninvestment grade securities will vary depending on the supply of noninvestment grade tax exempt 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 increase its allocation to investment grade securities without limitation; if the credit spread broadens, the Adviser may increase its allocation to noninvestment grade securities without limitation. 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 federal regular 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. 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. 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. 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 Investors Service, 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. 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 Adviser may invest up to 100% of the Fund's assets in noninvestment grade bonds. SECTOR RISKS A substantial part of the Fund's portfolio may be comprised of securities credit enhanced by banks, insurance companies 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 this 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 generally values fixed income securities according to the mean between bid and asked prices as furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized 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. 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 INITIAL/ CONTINGENT SUBSEQUENT FRONT-END DEFERRED INVESTMENT SALES SALES SHARES OFFERED AMOUNTS1 CHARGE2 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 Sales Charge as a Percentage Sales Charge of Public as a Percentage Purchase Amount Offering Price of NAV Less than $1 million 1.00% 1.01% $1 million or greater 0.00% 0.00% If your investment qualifies for an elimination of the sales charge as described below, 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. ------------------------------------------------------------------------- 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. 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 1 year or 0.25% more less If your investment qualifies for an elimination of the sales charge as described below, 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. ------------------------------------------------------------------------- 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 if 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. 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. 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. 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 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 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 incurred by the Fund or Federated Shareholder Services Company, the Fund's transfer agent. 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 at 1-800-341-7400 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; 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 PRIVILEGE 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 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 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 dividends and 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 176 mutual funds and seperate accounts, which totaled approximately $125 billion in assets as of December 31, 1999. 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. 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. FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. CLASS F SHARES A Statement of Additional Information (SAI) dated October 31, 2000, 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's Management Discussion and Analysis discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To obtain the SAI, 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 writing to or visiting the Public Reference Room in Washington, DC. You may also access fund information from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room's operations and copying fees. INVESTMENT COMPANY ACT FILE NO. 811-4533 CUSIP 313910101 G00570-02-F (10/00) 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; (15) (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) ------------------------ 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) 15. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 23 filed August 30, 1999. (File Nos. 33-11410 and 811-4533) (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; + (k) Not applicable; (l) Conformed copy of Initial Capital Understanding;(8) (m) (i) Conformed copy of Distribution Plan of the Registrant; (10) (ii) Conformed copy of Exhibit 1 Amendment to Distribution Plan of the Registrant; (13) ------------------------ + All exhibits have been filed electronically. 8. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-4533) 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) (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; + (i)Conformed copy of Power of Attorney of the Chief Investment Officer. (p) The Registrant hereby incorporates the conformed copy of the Code of Ethics for Access Persons from Item 23(p) of the Money Market Obligations Trust Registration Statement on Form N-1A filed with the Commission on February 25, 2000. (File Nos. 33-31602 and 811-5950). Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND: ----------------------------------------------------------- None. Item 25. INDEMNIFICATION: (1) --------------- ------------------------ + All exhibits have been filed electronically. 1. Response is incorporated by reference to Registrant's Initial Registration Amendment No. 1 filed January 21, 1987. (File Nos. 33-11410 and 811-4533) 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) 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) 16. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 23 filed October 28, 1999. (File Nos 33-11410 and 811-4533) Item 26. Business and Other Connections of 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 Trustees of the investment adviser and, in parentheses, their principal occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark D. Olson (a principal of the firm Mark D. Olson & Company, L.L.C. and Partner, Wilson, Halbrook & Bayard), Suite 301 Little Falls Center Two, 2751 Centerville Road, Wilmington, DE 19808. The remaining Officers of the investment adviser are: Executive Vice Presidents: William D. Dawson, III Henry A. Frantzen J. Thomas Madden Senior Vice Presidents: Stephen F. Auth Joseph M. Balestrino David A. Briggs Jonathan C. Conley Deborah A. Cunningham Michael P. Donnelly Linda A. Duessel Mark E. Durbiano James E. Grefenstette Jeffrey A. Kozemchak Sandra L. McInerney Susan M. Nason Mary Jo Ochson Robert J. Ostrowski Bernard A. Picchi Peter Vutz Vice Presidents: Todd A. Abraham J. Scott Albrecht Arthur J. Barry Randall S. Bauer G. Andrew Bonnewell Micheal W. Casey Robert E. Cauley Lee R. Cunningham, II Alexandre de Bethmann B. Anthony Delserone, Jr. Donald T. Ellenberger Eamonn G. Folan Kathleen M. Foody-Malus Thomas M. Franks Marc Halperin John W. Harris Patricia L. Heagy Susan R. Hill William R. Jamison Constantine J. Kartsonas Robert M. Kowit Richard J. Lazarchic Steven J. Lehman Marian R. Marinack Christopher Matyszewski Joseph M. Natoli Item 26. Business and Other Connections of Investment Adviser (continued): Vice Presidents Jeffrey A. Petro John Quartarolo Keith J. Sabol Ihab Salib Frank Semack Aash M. Shah Michael W. Sirianni, Jr. Christopher Smith Edward J. Tiedge Timothy G. Trebilcock Leonardo A. Vila Paige M. Wilhelm Richard Winkowski Lori A. Wolff George B. Wright Assistant Vice Presidents: Catherine A. Arendas Angela Auchey Nancy J. Belz Regina Chi James R. Crea, Jr. Karol M. Krummie Fred B. Crutchfield James H. Davis, II Joseph DelVecchio Paul S. Drotch Salvatore A. Esposito John T. Gentry David Gilmore Nikola A. Ivanov Carol Kayworth Nathan H. Kehm John C. Kerber J. Andrew Kirschler Ted T. Lietz, Sr. Monica Lugani Natalie F. Metz Theresa Miller Thomas Mitchell Bob Nolte Mary Kay Pavuk Rae Ann Rice Roberto Sanchez-Dahl, Sr. Sarath Sathkumara James W. Schaub John Sidawi Diane R. Startari Diane Tolby Michael R. Tucker Steven J. Wagner Secretary: G. Andrew Bonnewell Treasurer: Thomas R. Donahue Assistant Secretaries: C. Grant Anderson Leslie K. Ross Assistant Treasurer: Denis McAuley, III 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 Fixed Income Securities, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.; 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 International Series, Inc.; Federated Investment Series Funds, Inc.; Federated Managed Allocation Portfolios; Federated Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal Securities Income Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock 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.; Federated World Investment Series, Inc.; FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds; Intermediate Municipal Trust; Marshall Funds, Inc.; Money Market Obligations Trust; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia Municipal Funds; and Vision Group of Funds, Inc. (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT ------------------ ------------------------ ----------------- Richard B. Fisher Chairman, President Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 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, Executive Vice -- Federated Investors Tower Vice President and Assistant 1001 Liberty Avenue Secretary, Pittsburgh, PA 15222-3779 Federated Securities Corp. James F. Getz President-Broker/Dealer and -- Federated Investors Tower Director, 1001 Liberty Avenue Federated Securities Corp. 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 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 Ronald M. Petnuch 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 John M. Albert 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 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 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 William C. Doyle 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 Timothy Franklin 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 G. Tad Gullickson Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Scott Gundersen 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 Anthony J. Harper 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 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 Ed Koontz Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Dennis M. Laffey 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 Amy Michalisyn 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. Peter III Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Raleigh Peters 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 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 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 Richard B. Watts Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Terence Wiles 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 Charles L. Davis, Jr. 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 Donald C. Edwards Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 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 Lynn Sherwood-Long Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Kirk A. Montgomery Secretary, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Denis McAuley, III Treasurer, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Timothy S. Johnson Assistant Secretary, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Victor R. Siclari Assistant Secretary, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 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") 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. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. ,certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the 24th day of October, 2000. FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. BY: /s/ Leslie K. Ross Leslie K. Ross, Assistant Secretary Attorney in Fact for John F. Donahue October 24, 2000 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 October 24, 2000 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