Federated Municipal Opportunities Fund Inc. N-30D 4/26/01

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lcs+mZbrZbzH1sVvj/fwxx1bFrQ//MGK3s8487TDCo1OOJVGheDNbayPxn/h/rfY yYgQzu2C97LQEwl8/o6rVw== 0001020450-01-500018.txt : 20010427 0001020450-01-500018.hdr.sgml : 20010427 ACCESSION NUMBER: 0001020450-01-500018 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010228 FILED AS OF DATE: 20010426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED MUNICIPAL OPPORTUNITIES FUND INC CENTRAL INDEX KEY: 0000807607 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251542736 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04533 FILM NUMBER: 1611129 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TWR CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 BUSINESS PHONE: 8003417400 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWERS CITY: PITTSBURG STATE: PA ZIP: 15222-3779 FORMER COMPANY: FORMER CONFORMED NAME: FORTRESS MUNICIPAL INCOME FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FORTRESS HIGH YIELD MUNICIPAL FUND INC DATE OF NAME CHANGE: 19900814 FORMER COMPANY: FORMER CONFORMED NAME: FORTRESS HIGH YIELD TAX FREE FUND INC DATE OF NAME CHANGE: 19881024 N-30D 1 form.htm Federated Municipal Opportunities Fund Inc. N-30D 4/26/01

Federated Investors
World-Class Investment Manager

Federated Municipal Opportunities Fund, Inc.

14TH SEMI-ANNUAL REPORT

February 28, 2001

Established 1987

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

Richard B. Fisher

President

Federated Municipal Opportunities Fund, Inc.

President's Message

Dear Fellow Shareholder:

Federated Municipal Opportunities Fund, Inc. was created in 1987, and I am pleased to present its 14th Semi-Annual Report. This report covers the six-month reporting period from September 1, 2000 through February 28, 2001.

Over the past six months, the fund has continued its transition from a general municipal bond fund to a high-yield municipal bond fund. Management's strategy is to provide a high level of tax-exempt income to shareholders by structuring a well-diversified portfolio of medium and lower quality, long-term municipal bonds.¹ These bonds can potentially generate more income but may have more credit risk.

At the end of the six-month reporting period, the fund's $377 million portfolio was invested across 171 tax-free securities issued by municipalities in 42 states, and the District of Columbia and Puerto Rico. The portfolio is fully diversified across sectors, states, credit quality categories and individual borrowers.

This report begins with an interview with Mary Jo Ochson, Senior Vice President, who co-manages the fund with J. Scott Albrecht, Vice President, both of Federated Investment Management Company. Following their discussion covering the fund's performance and investment strategy are three additional items of shareholder interest. First is a series of graphs showing the fund's long-term investment results. Second is a complete listing of the fund's municipal bond holdings, and third is the publication of the fund's financial statements.

1 State, local and federal alternative minimum taxes may apply.

Due to its high coupon bond holdings, the fund was able to deliver a yield advantage over the average municipal bond fund. The fund's 30-day SEC yield for Class A Shares on February 28, 2001 was 5.05%, based on offering price.² This was the equivalent of a 8.36% yield on a taxable bond investment for an investor in the 39.6% federal income tax bracket and equivalent to taxable yields of 7.32% and 7.89% for investors in the 31% and 36% federal tax brackets, respectively.

Individual share class total return performance for the six-month reporting period, including income distributions, follows.³

	Net Asset Value Change	Income	Total Return
Class A Shares	$9.78 to $9.76 = (0.20%)	$0.286	2.78%
Class B Shares	$9.77 to $9.75 = (0.20%)	$0.249	2.39%
Class C Shares	$9.77 to $9.75 = (0.20%)	$0.248	2.38%
Class F Shares	$9.78 to $9.76 = (0.20%)	$0.286	2.78%

Thank you for investing a portion of your wealth in Federated Municipal Opportunities Fund, Inc. You are one of approximately 12,000 shareholders who earn monthly investment income free from federal regular income tax.¹ Of course, you have the option of receiving income from the fund or building your account by reinvesting your dividends to compound tax-free.

As always, we welcome your comments.

Sincerely,

Richard B. Fisher

Richard B. Fisher
President
April 15, 2001

2 The 30-day current SEC net yield is calculated by dividing the investment income per share for the prior 30 days by the maximum offering price per share on that date. The figure is compounded and annualized. The 30-day current SEC yield as of February 28, 2001 for Class B, C, and F Shares were 4.54%, 4.54% and 5.24%, respectively, based on offering price. The taxable equivalents, based on offering price, for investors in the 39.6%, 36.0%, and 31.0% federal tax brackets were as follows: Class B Shares: 7.52%, 7.09% and 6.58%, respectively; Class C Shares: 7.52%, 7.09% and 6.58%, respectively; and Class F Shares: 8.68%, 8.19% and 7.59%, respectively.

3 Performance quoted is based on net asset value, represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns for the period, based on offering price (i.e., less any applicable sales charge), for Class A, B, C and F Shares were (1.84%), (3.10%), 1.38% and 0.75%, respectively.

Mary Jo Ochson

Senior Vice President

Federated Investment Management
Company

Scott Albrecht

Vice President

Federated Investment Management
Company

Investment Review

How would you describe the market environment over the first half of the fund's fiscal year?

The municipal market has been a strong performer for the six-month reporting period ended February 28, 2001. Three factors accounted for the fund's performance. First, there was a reallocation of assets by high net worth individuals and other tax-sensitive investors into the municipal bond market due to poor returns and increased volatility in the equity market. Second, the supply of new issues was low for most of the period with volume in year 2000, as a whole, down 12.5% from 1999 levels. This was primarily the result of a 50% decline in refunding volume. Finally, the downturn in the U.S. economy witnessed over the reporting period resulted in an easing policy by the Federal Reserve Board. Interest rates on long-term municipal bonds declined by 35 basis points, resulting in a rise in bond prices.

How did Federated Municipal Opportunities Fund, Inc. perform with respect to total return during the reporting period?

For the six-month reporting period ended February 28, 2001, the Class A Shares of the fund produced a total return that significantly exceeded the returns of the 70 high yield municipal funds tracked by Lipper Analytical Services, Inc.¹ The fund's Class A Shares returned 2.78%, based on net asset value, while the Lipper High Yield Municipal Debt Funds Average returned 0.99%.²

1 Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Analytical Services, Inc. as falling into the respective category indicated. Lipper figures do not take sales charges into account.

2 Performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns for the period for Class B, C and F Shares, based on net asset value, were 2.39%, 2.38% and 2.78%, respectively. Current performance information is available at our web site, www.federatedinvestors.com, or by calling 1-800-341-7400.

How did the fund perform in terms of income and yield?

As of February 28, 2001, the Class A Shares of the fund produced a 30-day SEC yield of 5.05%, based on offering price. This performance is even more impressive on a tax equivalent basis, with Class A Shares yields ranging from 7.32% for an investor in the 31% tax bracket to 8.36% for an investor in the 39.6% bracket.

Why did the fund perform so well?

Three reasons accounted for the fund's recent strong performance. First, the fund's underweight in non-rated, high-yield securities aided performance as that sector traded lower than higher quality bonds. Secondly, the fund concentrated purchases in the 20-30 year range to maximize duration in a falling rate environment.³ Finally, the fund benefited from good security selection during the reporting period, as deteriorating credit situations were minimized.

What about credit quality in the municipal market?

Credit quality continues to be quite strong in the municipal market with upgrades greatly exceeding downgrades in ratings. However, two areas remain under pressure--health care bonds and corporate-backed municipal debt. After years of poor operating results, hospital bonds may finally be at a turning point as Medicare reimbursements and HMO payments are expected to increase. We anticipate corporate-backed municipal bonds to remain weak due to the slow economy and weak stock markets.

The big news was the energy crisis in California and its credit impact on two investor-owned utilities in the state, Southern California Electric (EIX) and Pacific Gas & Electric (PCG). We are pleased to report the fund did not hold any bonds issued by either utility company.

3 Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

What were the fund's top five holdings as of February 28, 2001?

Issuer	Maturity	Coupon Rate	Percentage of Net Assets
District of Columbia Revenue Bonds (AMBAC Insured)	10/01/2026	5.625%	3.74%
Indianapolis, IN Airport Authority (FedEx Corp.)	01/15/2017	7.100%	3.33%
Illinois Health Facilities Authority (Series A) (Edgewater Hospital & Medical Center) (Pre-refunded)	07/01/2024	9.250%	2.98%
Springfield, TN Hospital Revenue Bonds (Northcrest Medical Center) (Pre-refunded)	04/01/2024	8.500%	2.50%
Pennsylvania EDFA Waste Water Treatment Revenue Bonds (Series A) (Sun Co., Inc.)	12/01/2024	7.600%	2.24%
TOTAL			14.79%

How are the fund's assets currently allocated in terms of credit quality?

The portfolio's average quality is BBB, with the allocation as follows:

		Percentage of Net Assets
AAA		17.7%
AA		2.8%
A		4.5%
BBB		28.8%
BB		5.4%
B		0.4%
Non-Rated		38.8%

You have discussed the tax-efficiency of this fund in the past. How do you manage a fund for tax-efficiency?

We make every effort to avoid transactions in the fund that would result in a capital gain that is not offset by a capital loss. The fund accomplishes this by primarily carrying over losses from previous tax years or from tax-loss swaps in the current year. In fact, the fund has a long-standing record of never making a taxable distribution.

What role does credit analysis play in managing the fund?

The fund uses a very credit intensive approach to selecting securities. We have pulled together a team of experienced analysts who do extensive research on every issue. The analysts who work on this fund have an average of 10 years of analytical experience, and each analyst also has relevant work experience in some of the sectors that they follow.

Each issue is independently reviewed by our analysts regardless of whether or not it has received a rating from one of the rating agencies. This review involves discussions with the issuer, borrower, investment bankers and other involved parties. When appropriate, the analyst makes an on-site visit. After the research is complete, the analyst's recommendation is reviewed by our credit committee, which consists of senior department personnel including portfolio managers and other analysts. If the committee agrees that the security meets our standards, we buy it.

After we purchase an issue, we continue to follow it. In addition to following broad sector trends, the credit staff reviews all of our securities on at least an annual basis; many are reviewed more frequently--quarterly or even monthly. When we see signs of changing situations, we alter our holdings accordingly.

What is your outlook for the municipal bond market for the balance of 2001?

We continue to be very optimistic about the municipal bond market. First of all, we feel investors will continue to allocate more money to fixed-income securities. Compared to other fixed-income investments, municipal bonds have become very appealing. Long-term municipal bond yields started the reporting period at 91% of Treasury yields and ended at 98%. Long-term municipal bond yields could provide almost as much yield as Treasury securities--even before you account for exemption from federal tax.

Two Ways You May Seek to Invest for Success:

RESULTS OF A $14,000 INVESTMENT

If you made an initial investment of $14,000 in Class F Shares of Federated Municipal Opportunities Fund, Inc. on 4/10/87, reinvested your dividends and capital gains, and did not redeem any shares, your account would have been worth $31,930 on 2/28/01. You would have earned a 6.12% average annual total return for the investment life span.¹

One key to investing wisely is to reinvest all tax-free distributions in fund shares. This increases the number of shares on which you can earn future tax-free dividends, and you gain the benefit of compounding tax-free.

[Graphic Representation Omitted - See Appendix]

As of 2/28/01, the Class A Shares' average annual 1-year and since inception (8/5/96) total returns were 2.68% and 2.93%, respectively. Class B Shares' average annual 1-year and since inception (8/5/96) total returns were 1.06% and 2.81%, respectively. Class C Shares' average annual 1-year and since inception (8/5/96) total returns were 5.55% and 3.17%, respectively. Class F Shares' average annual 1-year, 5-year, and 10-year total returns were 5.38%, 3.22%, and 5.30%, respectively.²

1 Total return represents the change in the value of an investment after reinvesting all income and capital gains, and takes into account the 1.00% sales charge for Class F Shares. A contingent deferred sales charge of 1.00% would be applied on any redemption of Class F Shares less than four years from the purchase date. Data quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

2 The total returns stated take into account the 4.50% sales charge for Class A Shares, the 5.50% contingent deferred sales charge for Class B Shares, the 1.00% contingent deferred sales charge for Class C Shares, and the 1.00% sales charge and 1.00% contingent deferred sales charge for Class F Shares.

ONE STEP AT A TIME

$1,000 initial investment and subsequent investments of $1,000 each year for 14 years (reinvesting all dividends and capital gains) grew to $20,774.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class F Shares of Federated Municipal Opportunities Fund, Inc. on 4/10/87, reinvested your dividends and capital gains and did not redeem any shares, you would have invested only $14,000, but your account would have reached a total value of $20,774¹ by 2/28/01. You would have earned an average annual total return of 5.22%.

A practical investment plan helps you pursue a high level of income through tax-free municipal bonds. Through systematic investing, you buy shares on a regular basis and reinvest all tax-free earnings. An investment plan works for you even if you invest only $1,000 annually. You can take it one step at a time. Put time, money and compounding to work.

[Graphic Representation Omitted - See Appendix]

1 This chart assumes that the subsequent annual investments are made on the last day of each anniversary month. No method of investing can guarantee a profit or protect against loss in down markets.

Hypothetical Profile: Investing Tax-Free Monthly Income

Fred and Margie Potter both work and have no children. At the peak of their careers, this tax-sensitive couple was seeking a way to keep more of what they earn. On April 10, 1987, they invested $5,000 in the Class F Shares of Federated Municipal Opportunities Fund, Inc. and continue to invest $500 in the fund on the last day of every month.

As this chart shows, since that time, their investment has grown--on a tax-free basis--to $130,363.¹ For the Potters, the decision to invest tax-free has made the future worth waiting for.²

[Graphic Representation Omitted - See Appendix]

1 This chart assumes that the subsequent investments are made on the last day of each month. Income may be subject to the federal alternative minimum tax and state and local taxes.

2 This hypothetical scenario is provided for illustrative purposes only and does not represent the results obtained by any particular shareholder. Past performance does not guarantee future results.

Portfolio of Investments

February 28, 2001 (unaudited)

Principal
Amount

Credit
Rating

Value

CORPORATE BONDS--1.0%

1,500,000

Charter Mac Equity Issuer Trust, Pfd. (Series B), 7.60%, 11/30/2010

1,544,460

2,000,000

Muni Mae TE Bond Subsidiary, LLC, Pfd. (Series B), 7.75%, 11/1/2010

2,079,660

TOTAL CORPORATE BONDS (IDENTIFIED COST $3,500,000)

3,624,120

LONG-TERM MUNICIPALS--96.3%

Alabama--3.0%

8,750,000

Jefferson County, AL Sewer, Capital Improvement Warrants Revenue Bonds (Series A), 5.00% (Original Issue Yield: 5.23%), 2/1/2033

AAA

8,419,163

2,000,000

Mobile County, AL IDA, Industrial Development Revenue Bonds (Series 2000), 6.875% TOBs (Ipsco Inc.), Mandatory Tender 5/1/2010

2,014,600

1,000,000

Selma, AL IDB, Revenue Bonds (Series A), 5.50% TOBs (International Paper Co.), Optional Tender 7/15/2001

BBB+

1,004,480

250,000

West Jefferson Amusement & Public Park Authority, AL, First Mortgage Revenue Bonds, 6.375% (Visionland, AL Project)/(Original Issue Yield: 6.528%), 2/1/2029

125,150

TOTAL

11,563,393

Alaska--0.4%

1,440,000

Alaska Industrial Development and Export Authority, Power Revenue Bonds, 5.875% (Upper Lynn Canal Regional Power Supply System)/(Original Issue Yield: 6.00%), 1/1/2032

BB+

1,162,210

205,000

Alaska State Housing Finance Corp., COL Home Mortgage Revenue Bonds (Series B-1), 6.90% (GNMA LOC), 6/1/2032

AAA

211,015

TOTAL

1,373,225

Arizona--1.8%

4,985,000

Gilbert, AZ IDA, Revenue Bonds (Series 1999A), 5.85% (Southwest Student Services Corp.)/(Original Issue Yield: 5.90%), 2/1/2019

4,687,246

2,400,000

Maricopa County, AZ, IDA, Solid Waste Disposal Revenue Bonds (Series 1999A), 7.50% (Rainbow Valley Landfill Project), 12/1/2020

2,230,368

TOTAL

6,917,614

Arkansas--1.6%

2,000,000

Arkansas State Development Finance Authority, Hospital Revenue Bonds, 7.375% (Washington Regional Medical Center)/(Original Issue Yield: 7.50%), 2/1/2029

BBB-

2,011,500

2,920,000

Conway, AR Hospital Authority, Revenue Bonds, 7.125% (Conway Regional Hospital), 2/1/2013

BBB+

3,070,526

1,000,000

Little Rock, AR Health Facilities Board, Revenue Refunding Bonds, 7.00% (Baptist Medical Center, AR), 10/1/2017

1,049,350

TOTAL

6,131,376

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

California--1.4%

2,000,000

California Statewide Communities Development Authority, Multifamily Housing Revenue Bonds (Series 1999X), 6.65% (Magnolia City Lights Project), 7/1/2039

1,818,880

2,300,000

San Dimas, CA Housing Authority, Mobile Home Park Revenue Bonds (Series 1998A), 5.70% (Charter Oak Mobile Home Estates Acquisition Project)/(Original Issue Yield: 5.90%), 7/1/2028

2,055,211

1,000,000

Vista, CA Mobile Home Park, Revenue Bonds (Series 1999A), 5.75% (Vista Manor Mobile Home)/(Original Issue Yield: 5.821%), 3/15/2029

903,760

800,000

Vista, CA Mobile Home Park, Revenue Bonds, (Series A), 5.875% (Estrella De Oro Mobile Home)/(Original Issue Yield: 5.947%), 2/1/2028

740,584

TOTAL

5,518,435

Colorado--2.2%

1,500,000

Aspen Grove, CO Business Improvement District, LT GO Bonds (Series 2001), 7.625%, 12/1/2025

1,503,885

115,000

Colorado HFA, SFM Revenue Bonds (Series A-2), 7.70% (FHA INS), 2/1/2023

AAA

117,415

925,000

Colorado HFA, SFM Revenue Bonds (Series C-2), 7.375% (FHA INS), 8/1/2023

AAA

961,649

4,675,000

Colorado HFA, SFM Revenue Bonds (Series 1997C-2), 6.875%, 11/1/2028

Aa2

5,061,108

600,000

Deer Creek Metropolitan District, CO, UT GO Bonds, 7.625%, 12/1/2019

613,584

TOTAL

8,257,641

Connecticut--0.8%

3,000,000

Connecticut Development Authority, PCR Refunding Revenue Bonds (Series A), 5.85% (Connecticut Light & Power Co.), 9/1/2028

BBB

2,981,700

District of Columbia--3.7%

14,000,000

District of Columbia, Revenue Bonds, 5.625% (American University)/(AMBAC INS)/(Original Issue Yield: 5.90%), 10/1/2026

AAA

14,311,360

Florida--2.9%

2,500,000

Florida Housing Finance Corp., Multifamily Housing Revenue Bonds (Series 1998 T-1), 6.50% (Whistler's Cove Apartments), 1/1/2039

2,318,825

2,475,000

Lee County, FL HFA, SFM Step Coupon Revenue Bonds, 6.85% (GNMA COL), 3/1/2029

Aaa

2,710,620

15,925,000

Miami-Dade County, FL, Special Obligation Capital Appreciation Revenue Bonds (Series B) (MBIA INS)/(Original Issue Yield: 5.65%), 10/1/2031

AAA

2,829,076

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Florida--continued

1,460,000

Orange County, FL HFA, Multifamily Housing Revenue Bonds (Series 1999B), 6.50% (Palm West Apartments Project), 3/1/2034

1,354,165

2,000,000

St. Johns County, FL IDA, Health Care Revenue Bonds (Series 1999), 8.00% (Glenmoor at St. Johns Project)/(Original Issue Yield: 8.10%), 1/1/2030

1,968,700

TOTAL

11,181,386

Georgia--1.5%

4,200,000

Augusta, GA HFA, Multifamily Housing Refunding Revenue Bonds, 6.55% (Forest Brook Apartments), 12/1/2030

4,150,650

1,640,000

Forsyth County, GA Hospital Authority, Revenue Anticipation Certificates (Series 1998), 6.375% (Georgia Baptist Health Care System)/(Original Issue Yield: 6.45%), 10/1/2028

1,421,027

TOTAL

5,571,677

Hawaii--0.1%

500,000

Hawaii State Department of Transportation, Special Facility Refunding Revenue Bonds (Series 2000), 7.00% (Continental Airlines, Inc.)/(Original Issue Yield: 7.20%), 6/1/2020

499,665

Idaho--0.9%

2,000,000

Idaho Health Facilities Authority, Refunding Revenue Bonds (Series 1999A), 7.875% (Valley Vista Care Corp. Obligated Group)/(Original Issue Yield: 8.10%), 11/15/2029

1,941,100

430,000

Idaho Housing Agency, SFM Revenue Bonds (Series A), 7.50% (FHA INS), 7/1/2024

442,384

1,160,000

Idaho Housing Agency, SFM Revenue Bonds (Series F-2), 7.80% (FHA INS), 1/1/2023

1,182,527

TOTAL

3,566,011

Illinois--4.0%

1,700,000

Chicago, IL SFM COL, SFM Revenue Bonds (Series A), 7.25% (GNMA COL), 9/1/2028

Aaa

1,896,979

9,715,000

Illinois Health Facilities Authority, Hospital Revenue Bonds (Series A), 9.25% (Edgewater Hospital & Medical Center, IL)/(State & Local Government Securities PRF), 7/1/2024

Aaa

11,406,382

2,000,000

Rolling Meadows, IL, Multifamily Mortgage Revenue Refunding Bonds, 7.75% (Woodfield Garden Apartments)/(Banque Paribas LOC), 2/1/2004

A+

2,100,120

TOTAL

15,403,481

Indiana--5.4%

540,000

Beech Grove, IN, Economic Development Revenue Bond, 8.75% (Westvaco Corp.), 7/1/2010

BBB+

548,154

1,000,000

Goshen, IN, Revenue Bonds (Series 1998), 5.75% (Greencroft Obligated Group)/(Original Issue Yield: 5.87%), 8/15/2028

762,020

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Indiana--continued

2,000,000

Indiana Health Facilities Finance Authority Rehabilitation Center, Revenue Refunding Bonds (Series 1998), 5.625% (Greenwood Village South Project)/(Original Issue Yield: 5.802%), 5/15/2028

BBB-

1,576,740

3,000,000

Indiana Port Commission, Port Facility Revenue Refunding Bonds, 6.875% (Cargill, Inc.), 5/1/2012

3,159,570

12,000,000

Indianapolis, IN Airport Authority, Special Facilities Revenue Bonds, 7.10% (FedEx Corp.)/(Original Issue Yield: 7.178%), 1/15/2017

BBB

12,751,200

2,000,000

South Bend, IN, Economic Development Revenue Bonds (Series 1999A), 6.25% (Southfield Village)/(Original Issue Yield: 6.375%), 11/15/2029

1,692,260

TOTAL

20,489,944

Iowa--0.3%

1,000,000

Davenport, IA PCA, PCR Refunding Bonds, Nicols-Homeshield Project, 8.375% (Quanex Corp.), 12/1/2005

1,007,720

Kansas--2.3%

1,500,000

Kansas Development Finance Authority, Multifamily Housing Revenue Bonds (Series 1998K), 6.375% (Pioneer Olde Town Apartments), 10/1/2017

1,415,730

50,000

Manhattan, KS, Industrial Revenue Bonds (Series 1999), 6.25% (Farrar Corporation Project), 8/1/2006

50,696

1,625,000

Manhattan, KS, Industrial Revenue Bonds (Series 1999), 7.00% (Farrar Corporation Project), 8/1/2014

1,665,853

1,000,000

Olathe, KS, Senior Living Facility Revenue Bonds (Series 2000A), 8.00% (Aberdeen Village, Inc.)/(Original Issue Yield: 8.25%), 5/15/2030

1,010,490

2,000,000

Overland Park, KS Development Corp., First Tier Revenue Bonds (Series 2000A), 7.375% (Overland Park Convention Center Hotel Project)/(Original Issue Yield: 7.50%), 1/1/2032

BBB-

2,009,780

2,260,000

Sedgwick & Shawnee Counties, KS, SFM Revenue Bonds (Series 1997A-1), 6.95% (GNMA COL), 6/1/2029

Aaa

2,627,521

TOTAL

8,780,070

Kentucky--1.7%

3,500,000

Kenton County, KY Airport Board, Special Facilities Revenue Bonds (Series A), 7.50% (Delta Air Lines, Inc.)/(Original Issue Yield: 7.60%), 2/1/2020

BBB-

3,615,955

4,000,000

Kentucky EDFA, Hospital System Refunding Revenue Bonds, 5.875% (Appalachian Regional Health Center)/(Original Issue Yield: 5.92%), 10/1/2022

BB-

2,707,360

TOTAL

6,323,315

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Louisiana--6.0%

3,000,000

De Soto Parish, LA Environmental Improvement Authority, Revenue Bonds, 7.70% (International Paper Co.), 11/1/2018

BBB+

3,257,880

2,800,000

Lake Charles, LA Harbor & Terminal District, Port Facilities Revenue Refunding Bond, Trunkline Lining Co Project, 7.75% (Panhandle Eastern Corp.), 8/15/2022

2,988,972

2,000,000

Louisiana Public Facilities Authority Hospital Revenue, Revenue Bonds, 8.625% (Lake Charles Memorial Hospital)/(Original Issue Yield: 8.75%), 12/1/2030

1,981,560

5,645,000

St. Charles Parish, LA, PCR Bonds, 7.50% (Louisiana Power & Light Co.)/(Original Issue Yield: 7.542%), 6/1/2021

BBB

5,775,682

3,650,000

St. Charles Parish, LA, Solid Waste Disposal Revenue Bonds (Series A), 7.00% (Louisiana Power & Light Co.)/(Original Issue Yield: 7.04%), 12/1/2022

BBB

3,766,289

3,000,000

St. James Parish, LA, Solid Waste Disposal Revenue Bonds, 7.70% (IMC Agrico)/(Original Issue Yield: 7.75%), 10/1/2022

3,091,590

2,000,000

West Feliciana Parish, LA, PCR Refunding Bonds (Series 1999B), 6.60% (Entergy Gulf States, Inc.), 9/1/2028

BB+

2,023,380

TOTAL

22,885,353

Maine--0.5%

1,000,000

Maine Health & Higher Educational Facilities Authority, Health Facilities Revenue Bonds (Series A), 7.50% (Piper Shores), 1/1/2019

982,520

1,000,000

Maine Health & Higher Educational Facilities Authority, Health Facilities Revenue Bonds (Series A), 7.55% (Piper Shores), 1/1/2029

979,040

TOTAL

1,961,560

Maryland--0.8%

1,000,000

Maryland Economic Development Corp., Health and Mental Hygiene Providers Facilities Acquisition Program Revenue Bonds (Series 2000A), 7.75% (Baltimore Association for Retarded Citizens, Inc. Project)/(Original Issue Yield: 7.85%), 3/1/2025

1,004,390

2,000,000

Maryland Economic Development Corp., Senior Lien Revenue Bonds (Series 1999B), 7.75% (Chesapeake Bay Conference Center Project), 12/1/2031

2,009,320

TOTAL

3,013,710

Massachusetts--0.9%

4,000,000

Massachusetts HEFA, Revenue Bonds (Series 1999A), 5.75% (Caritas Christi Obligated Group)/(Original Issue Yield: 5.80%), 7/1/2028

BBB

3,294,120

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Michigan--2.1%

1,000,000

Chelsea, MI Economic Development Corp., Revenue Refunding Bonds (Series 1998), 5.40% (United Methodist Retirement Communities, Inc.)/(Original Issue Yield: 5.52%), 11/15/2018

BBB

830,020

2,250,000

Chelsea, MI Economic Development Corp., Revenue Refunding Bonds (Series 1998), 5.40% (United Methodist Retirement Communities, Inc.)/(Original Issue Yield: 5.58%), 11/15/2027

BBB

1,743,885

1,755,000

Island City Academy, MI, COP, 7.25%, 8/1/2029

1,757,597

290,000

Michigan State Housing Development Authority, SFM Revenue Bonds (Series B), 6.95%, 12/1/2020

AA+

299,805

1,000,000

Michigan Strategic Fund, Resource Recovery Limited Obligation Revenue Bonds, 6.90% (Central Wayne Energy Recovery Limited Partnership), 7/1/2019

767,260

1,000,000

Michigan Strategic Fund, Resource Recovery Limited Obligation Revenue Bonds, 7.00% (Central Wayne Energy Recovery Limited Partnership), 7/1/2027

750,770

2,100,000

Mosaica Academy of Saginaw, MI, COP, 7.00%, 6/1/2029

2,048,004

TOTAL

8,197,341

Minnesota--3.2%

75,000

Dakota County, MN Housing & Redevelopment Authority, SFM Revenue Bonds, 7.20% (GNMA COL), 12/1/2009

AAA

75,212

165,000

Hennepin Co. MN, Lease Revenue COP (Series A), 6.80%, 5/15/2017

168,945

200,000

Minneapolis, MN Multifamily Housing Authority, Multifamily Housing Revenue Bonds, 7.125% (Seward Towers)/(GNMA COL), 12/20/2010

AAA

204,932

300,000

Minneapolis, MN Multifamily Housing Authority, Multifamily Housing Revenue Bonds, Churchill Project, 7.05% (FHA INS), 10/1/2022

AAA

309,222

2,795,000

Minnesota State HFA, SFM Revenue Bonds (Series E), 6.85%, 1/1/2024

AA+

2,886,033

15,000

Minnesota State HFA, SFM Revenue Bonds (Series C), 7.10% (FHA/VA COL), 7/1/2011

AA+

15,315

8,265,000

St. Paul, MN Housing & Redevelopment Authority, Hospital Revenue Refunding Bonds (Series A), 6.625% (Healtheast, MN)/(Original Issue Yield: 6.687%), 11/1/2017

BB+

7,196,501

1,500,000

Winona, MN Port Authority, Lease Revenue Bonds (Series 1999A), 8.00% (Bluffview Montessori School Project), 12/1/2024

1,579,185

TOTAL

12,435,345

Mississippi--0.6%

2,500,000

Mississippi Business Finance Corp., PCR Bonds, 5.875% (System Energy Resources, Inc.)/(Original Issue Yield: 5.934%), 4/1/2022

BBB-

2,400,675

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Missouri--0.7%

2,445,000

Kansas City, MO IDA, Multifamily Housing Revenue Bonds, 6.90% (Woodbridge Apartments Project), 8/1/2030

2,366,369

500,000

West Plains, MO IDA, Hospital Revenue Bonds, 6.75% (Ozarks Medical Center)/(Original Issue Yield: 6.78%), 11/15/2024

BB+

458,645

TOTAL

2,825,014

Montana--0.2%

710,000

Montana State Board of Housing, SFM Revenue Bonds (Series B-2), 7.50% (FHA INS), 4/1/2023

Aa2

724,875

Nevada--2.1%

2,000,000

Clark County, NV Improvement District, Revenue Bonds, 7.50% (Southern Highlands Area #121), 12/1/2019

2,073,620

5,110,000

Clark County, NV, Industrial Development Revenue Bonds (Series 1997A), 5.90% (Nevada Power Co.), 11/1/2032

BBB

4,599,511

1,300,000

Director of the State of Nevada Department of Business and Industry, 2nd Tier Revenue Bonds (Series 2000), 7.375% (Las Vegas Monorail Project)/(Original Issue Yield: 7.75%), 1/1/2040

1,274,559

TOTAL

7,947,690

New Hampshire--0.1%

600,000

New Hampshire Higher Educational & Health Facilities Authority, Revenue Bonds (Series 1998), 5.75% (RiverMead at Peterborough), 7/1/2028

471,744

New Jersey--1.7%

2,100,000

New Jersey EDA, Kapkowski Road Landfill Revenue Bonds, 6.50% (New Jersey Metromall Urban Renewal, Inc.)/(Original Issue Yield: 6.55%), 4/1/2018

2,114,154

1,250,000

New Jersey EDA, Retirement Community Revenue Bonds (Series A), 8.25% (Seabrook Village)/(Original Issue Yield: 8.50%), 11/15/2030

1,237,038

2,550,000

New Jersey EDA, Revenue Bonds (Series 1997A), 5.875% (Host Marriott Corp.), 12/1/2027

2,094,264

1,000,000

New Jersey EDA, Special Facilities Revenue Bonds (Series 2000), 7.20% (Continental Airlines, Inc.)/(Original Issue Yield: 7.25%), 11/15/2030

1,031,090

TOTAL

6,476,546

New Mexico--1.4%

2,490,000

Dona Ana County, NM, Multifamily Housing Revenue Bonds (Series 1999A), 6.75% (Montana Meadows Apartments), 8/1/2029

2,398,642

2,000,000

Farmington, NM, PCR Refunding Bonds (Series 1997), 6.375% (Public Service Co. New Mexico), 4/1/2022

BBB-

1,995,020

1,250,000

Santa Fe County, NM, Project Revenue Bonds (Series 1998A), 5.625% (El Castillo Retirement Residences)/(Original Issue Yield: 5.828%), 5/15/2025

972,688

TOTAL

5,366,350

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

New York--2.4%

2,500,000

Brookhaven, NY IDA, Senior Residential Housing Revenue Bonds, 6.25% (Woodcrest Estates), 12/1/2023

2,320,125

1,500,000

New York City, NY IDA, Industrial Development Revenue Refunding Bonds (Series 1998), 6.00% (Field Hotel Associates LP- JFK Project), 11/1/2028

1,299,510

2,500,000

New York City, NY, UT GO Bonds (Series D), 5.125% (Original Issue Yield: 5.21%), 8/1/2019

2,475,500

280,000

New York State Environmental Facilities Corp., PCR State Water Revolving Fund, 7.25% (Original Issue Yield: 7.334%), 6/15/2010

AAA

288,596

2,620,000

New York State Environmental Facilities Corp., PCR State Water Revolving Fund, 7.25% (United States Treasury PRF), 6/15/2001 (@102)

AAA

2,702,425

TOTAL

9,086,156

North Carolina--0.5%

2,000,000

North Carolina Medical Care Commission, Health Care Facilities First Mortgage Revenue Bonds, 7.625% (Depaul Community Facilities)/(Original Issue Yield: 7.625%), 11/1/2029

1,936,280

North Dakota--0.2%

910,000

North Dakota State HFA, SFM Revenue Bonds, Series A, 6.75% (FHA/VA COL), 7/1/2012

A+

934,170

Ohio--0.8%

1,680,000

Franklin County, OH, Multifamily Housing Revenue Refunding Bonds (Series 1998B), 6.25% (Jefferson Chase Apartments Project), 11/1/2015

1,588,894

1,500,000

Ohio State Air Quality Development Authority, PCR Refunding Revenue Bonds (Series 1997A), 6.10% (Cleveland Electric Illuminating Co.), 8/1/2020

BB+

1,500,795

TOTAL

3,089,689

Oklahoma--3.3%

4,585,000

Jackson County, OK Hospital Authority, Hospital Revenue Refunding Bonds, 7.30% (Jackson County Memorial Hospital, OK)/(Original Issue Yield: 7.40%), 8/1/2015

4,285,003

2,000,000

Langston, OK EDA, Student Housing Revenue Bonds (Series 2000A), 7.75% (Langston Community Development Corp.)/(Original Issue Yield: 7.90%), 8/1/2030

1,935,860

6,200,000

Tulsa, OK Municipal Airport, Revenue Bonds, 7.60% (American Airlines, Inc.)/(Original Issue Yield: 7.931%), 12/1/2030

BBB-

6,343,530

TOTAL

12,564,393

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Pennsylvania--14.3%

2,330,000

Allegheny County, PA HDA, Health Care Facilities Revenue Bonds (Series 1998), 5.875% (Villa St. Joseph of Baden, Inc.)/(Original Issue Yield: 6.02%), 8/15/2018

1,963,631

3,000,000

Allegheny County, PA HDA, Health & Education Revenue Bonds, 7.00% (Rehabilitation Institute of Pittsburgh)/(United States Treasury PRF)/(Original Issue Yield: 7.049%), 6/1/2010

3,182,610

2,500,000

Allegheny County, PA HDA, Health & Education Revenue Bonds, 7.00% (Rehabilitation Institute of Pittsburgh)/(United States Treasury PRF)/(Original Issue Yield: 7.132%), 6/1/2002 (@102)

2,652,175

1,500,000

Allegheny County, PA HDA, Health System Revenue Bonds (Series 2000), 9.25% (West Penn Allegheny Health System)/(Original Issue Yield: 9.70%), 11/15/2030

B+

1,423,065

1,000,000

Allegheny County, PA HDA, Revenue Bonds,(Series A), 8.75% (Covenant at South Hills)/(Original Issue Yield: 8.80%), 2/1/2031

998,830

4,540,000

Allegheny County, PA Higher Education, Building Authority Revenue Bonds, 7.375% (La Roche College), 7/15/2012

4,766,228

2,000,000

Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.625% (AFCO Cargo PIT LLC Project)/(Original Issue Yield: 6.75%), 9/1/2024

1,813,060

1,000,000

Bucks County, PA IDA, First Mortgage Health Care Facilities Revenue Bonds (Series 1999), 6.30% (Chandler Hall Health Services Obligated Group)/(Original Issue Yield: 6.40%), 5/1/2029

848,710

2,000,000

Carbon County, PA IDA, Refunding Revenue Bonds, 6.70% (Panther Creek Partners Project)/(Union Bank of California LOC), 5/1/2012

BBB-

2,061,640

1,500,000

Chartiers Valley, PA Industrial & Commercial Development Authority, First Mortgage Revenue Refunding Bonds (Series 1999), 6.375% (Asbury Health Center)/(Original Issue Yield: 6.52%), 12/1/2024

1,290,330

3,000,000

Delaware County, PA Authority, College Revenue Bonds, 7.25% (Eastern College)/(United States Treasury PRF)/(Original Issue Yield: 7.875%), 3/1/2012

3,294,720

2,055,000

Erie County, PA Hospital Authority, Revenue Bonds, 7.50% (Erie Infants & Youth Home, Inc.)/(Marine Midland, NY LOC), 10/1/2011

2,082,558

1,000,000

Lancaster, PA IDA, Revenue Bonds (Series 2000A), 7.625% (Garden Spot Villiage Project)/(Original Issue Yield: 7.84%), 5/1/2031

1,010,540

2,000,000

Montgomery County, PA Higher Education and Health Authority, Revenue Bonds, 7.375% (Philadelphia Geriatric Center)/(Original Issue Yield: 7.50%), 12/1/2030

1,900,080

6,000,000

Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 1997B), 6.125% (National Gypsum Co.), 11/1/2027

4,281,540

4,000,000

Pennsylvania EDFA, Exempt Facilities Revenue Bonds, 6.25% (National Gypsum Co.), 11/1/2027

2,904,760

3,500,000

Pennsylvania EDFA, Resource Recovery Revenue Bonds (Series A), 6.40% (Northampton Generating), 1/1/2009

BBB-

3,480,505

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Pennsylvania--continued

8,000,000

Pennsylvania EDFA, Wastewater Treatment Revenue Bonds (Series A), 7.60% (Sun Co., Inc.)/(Original Issue Yield: 7.653%), 12/1/2024

BBB

8,572,960

1,160,000

Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 1996), 7.15% (Thiel College), 5/15/2015

1,343,540

1,000,000

Philadelphia, PA Authority for Industrial Development, Special Facilities Revenue Bonds (Series 2000), 8.125% (US Airways, Inc.)/(Original Issue Yield: 8.50%), 5/1/2030

1,018,710

550,000

Philadelphia Authority for Industrial Development, Special Facilities Revenue Bonds, 7.50% (US Airways, Inc.)/(Original Issue Yield: 8.20%), 5/1/2010

553,570

1,500,000

Scranton, PA, UT GO Bonds (Series 2001C), 7.10% (Original Issue Yield: 7.35%), 9/1/2031

1,454,520

2,000,000

Westmoreland County, PA IDA, Health Care Facility Revenue Bonds (Series 2000B), 8.00% (Redstone Presbyterian Seniorcare Obligated Group)/(Original Issue Yield: 8.25%), 11/15/2023

1,968,800

TOTAL

54,867,082

Puerto Rico--0.6%

1,000,000

Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 8.568% (AMBAC INS), 7/1/2013

1,218,750

1,000,000

Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331B), 8.568% (AMBAC INS), 7/1/2014

1,212,650

TOTAL

2,431,400

South Carolina--1.5%

2,000,000

Charleston, SC, Industrial Refunding Revenue Bonds, 6.95% (AEI Resources, Inc.), 8/10/2028

690,000

6,000,000

Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 1998B) (Original Issue Yield: 5.80%), 1/1/2025

BBB-

996,180

15,550,000

Connector 2000 Association, Inc., SC, Toll Road Capital Appreciation Revenue Bonds (Series 1998A) (Original Issue Yield: 5.85%), 1/1/2034

BBB-

1,310,710

1,500,000

South Carolina Jobs EDA, Hospital Facilities Improvement Revenue Bonds (Series 2000A), 7.375% (Palmetto Health Alliance)/(Original Issue Yield: 7.55%), 12/15/2021

BBB

1,533,555

1,500,000

South Carolina Jobs-EDA, First Mortgage Health Facilities Revenue Refunding Bonds (Series 1998), 5.70% (The Lutheran Homes of South Carolina, Inc.)/(Original Issue Yield: 5.80%), 5/1/2026

1,220,730

TOTAL

5,751,175

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Tennessee--5.0%

1,280,000

Chattanooga, TN IDB, Industrial Development Refunding Revenue Bonds (Series 1999), 7.00% (Market Street, Ltd. Project), 12/15/2012

1,239,386

1,185,000

Chattanooga, TN IDB, Industrial Development Refunding Revenue Bonds (Series 1999), 7.00% (Warehouse Row, Ltd. Project), 12/15/2012

1,147,400

3,000,000

Elizabethton, TN Health & Educational Facilities Board, First Mortgage Hospital Revenue Refunding & Improvement Bonds (Series 2000B), 8.00% (Mountain States Health Alliance), 7/1/2033

Baa2

3,070,560

1,000,000

Shelby County, TN Health Education & Housing Facilities Board, Health Care Facilities Revenue Bonds (Series 1997A), 6.375% (Kirby Pines Retirement Community)/(Original Issue Yield: 6.50%), 11/15/2025

798,990

2,900,000

Springfield, TN Health & Educational Facilities Board, Hospital Revenue Bonds, 8.25% (NorthCrest Medical Center)/(Original Issue Yield: 8.50%), 4/1/2012

Aaa

3,428,612

7,800,000

Springfield, TN Health & Educational Facilities Board, Hospital Revenue Bonds, 8.50% (NorthCrest Medical Center)/(Original Issue Yield: 8.875%), 4/1/2024

Aaa

9,559,992

5,000

Tennessee Housing Development Agency, Homeownership Program, Issue V Revenue Bonds, 7.65%, 7/1/2022

5,083

TOTAL

19,250,023

Texas--7.9%

2,000,000

ABIA Development Corp., TX, Airport Facilities Revenue Bonds (Series 1999), 7.25% (Aero Austin LP)/(Original Issue Yield: 7.50%), 1/1/2025

1,903,160

2,500,000

Brazos River Authority, TX, PCR Revenue Bonds (Series A), 7.875% (Texas Utilities Electric Co.), 3/1/2021

BBB+

2,554,600

2,320,000

Dallas-Fort Worth, TX International Airport Facility Improvement Corporation, Revenue Bonds, 7.125% (Delta Air Lines, Inc.)/(Original Issue Yield: 7.55%), 11/1/2026

BBB-

2,355,264

3,000,000

Dallas-Fort Worth, TX International Airport Facility Improvement Corporation, Revenue Bonds, 7.25% (American Airlines, Inc.)/(Original Issue Yield: 7.428%), 11/1/2030

BBB-

3,114,120

2,500,000

Dallas-Fort Worth, TX International Airport Facility Improvement Corporation, Revenue Bonds, 7.625% (Delta Air Lines, Inc.)/(Original Issue Yield: 7.65%), 11/1/2021

BBB-

2,573,950

1,000,000

Guadalupe-Blanco River Authority TX, Industrial Development Corp., PCR Bonds, 8.60% (A.P. Green Industries), 4/1/2009

1,025,990

2,500,000

Guadalupe-Blanco River Authority TX, Industrial Development Corp., PCR Bonds, 8.60% (A.P. Green Industries), 4/1/2009

2,562,850

5,000,000

Gulf Coast, TX Waste Disposal Authority, Revenue Bonds (Series A), 6.875% (Champion International Corp.)/(Original Issue Yield: 7.15%), 12/1/2028

BBB+

5,172,950

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Texas--continued

1,000,000

Mesquite, TX HFDC, Retirement Facility Revenue Bonds, 7.625% (Christian Care Centers, Inc.- Greenway Village)/(Original Issue Yield: 7.75%), 2/15/2028

BBB-

1,003,410

2,000,000

North Central Texas HFDC, Retirement Facility Revenue Bonds (Series 1999), 7.50% (Northwest Senior Housing Corp. Edgemere Project)/(Original Issue Yield: 7.75%), 11/15/2029

1,974,140

4,200,000

North Central, TX Housing Finance Corp., Housing Revenue Bonds (Series 1999A), 7.00% (Tiffany Square Apartments), 12/1/2031

4,218,270

1,000,000

Tarrant County, TX HFDC, Revenue Bonds (Series 1998C), 5.75% (Bethesda Living Center)/(Original Issue Yield: 5.89%), 8/15/2018

831,980

1,000,000

Tarrant County, TX HFDC, Revenue Bonds (Series 1998C), 5.75% (Bethesda Living Center)/(Original Issue Yield: 5.97%), 8/15/2028

786,030

TOTAL

30,076,714

Utah--0.2%

390,000

Hildale, UT, Electric Revenue Bonds (Series 1995), 7.00%, 9/1/2002

379,431

380,000

Utah State HFA, SFM Revenue Bonds (Series E-2), 7.15% (FHA INS)/(Original Issue Yield: 7.169%), 7/1/2024

AAA

389,527

TOTAL

768,958

Virginia--1.2%

7,500,000

Pocahontas Parkway Association, VA, Toll Road Capital Appreciation Revenue Bonds (Series B) (Original Issue Yield: 5.75%), 8/15/2017

BBB-

2,368,500

16,000,000

Pocahontas Parkway Association, VA, Toll Road Revenue Bonds (Series 1998B) (Original Issue Yield: 5.90%), 8/15/2029

BBB-

2,151,360

TOTAL

4,519,860

Washington--2.6%

11,000,000

Chelan County, WA Public Utility District No. 1, Refunding Capital Appreciation Revenue Bonds (Series A) (Original Issue Yield: 6.05%), 6/1/2025

AAA

2,949,650

10,000,000

Chelan County, WA Public Utility District No. 1, Refunding Capital Appreciation Revenue Bonds (Series A) (Original Issue Yield: 6.05%), 6/1/2026

AAA

2,533,700

4,300,000

Port of Camas-Washougal, WA, PCR Refunding Bonds (Series 1993), 6.70% (James River Project, WA)/(Original Issue Yield: 6.75%), 4/1/2023

BBB-

4,331,820

TOTAL

9,815,170

Wisconsin--1.5%

1,250,000

Wisconsin HEFA, Revenue Bonds (Series 1998), 5.70% (United Lutheran Program For The Aging, Inc.)/(Original Issue Yield: 5.778%), 3/1/2028

974,475

2,000,000

Wisconsin HEFA, Revenue Bonds (Series B), 6.75% (Grant Regional Health Center, Inc.)/(Original Issue Yield: 6.90%), 10/1/2022

1,813,760

Principal
Amount

Credit
Rating

Value

LONG-TERM MUNICIPALS--continued

Wisconsin--continued

1,750,000

Wisconsin HEFA, Revenue Bonds, 5.80% (Beaver Dam Community Hospitals, Inc.), 8/15/2028

1,387,225

2,000,000

Wisconsin HEFA, Revenue Bonds (Series 1998), 5.75% (Attic Angel Obligated Group)/(Original Issue Yield: 6.00%), 11/15/2027

1,586,860

TOTAL

5,762,320

TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST $375,863,731)

368,731,726

SHORT-TERM MUNICIPALS--1.2%

Indiana--0.2%

700,000

Spencer County, IN, PCR Revenue Bonds Weekly VRDNs (American Iron Oxide Co. Project)/(Bank of Tokyo-Mitsubishi Ltd. LOC)

700,000

Montana--1.0%

3,900,000

Forsyth, Rosebud County MT, PCR Daily VRDNs (Pacificorp)

A-

3,900,000

Texas--0.0%

100,000

Harris County, TX HFDC, (Series 1997A) Daily VRDNs (St. Luke's Episcopal Hospital)/(Bank of America, N.A., Morgan Guaranty Trust Co., New York and Toronto Dominion Bank LIQs)

100,000

TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST)

4,700,000

TOTAL INVESTMENTS (IDENTIFIED COST $384,063,731)³

377,055,846

Securities that are subject to the alternative minimum tax represent 37.7% of the portfolio as calculated upon total portfolio market value.

1 Please refer to the "Investment Ratings" in the Statement of Additional Information for an explanation of the credit ratings. Current credit ratings are unaudited.

2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Directors. At February 28, 2001, these securities amounted to $29,494,621 which represents 7.7% of net assets.

3 The cost of investments for federal tax purposes amounts to $384,063,731. The net unrealized depreciation of investments on a federal tax basis amounts to $7,007,885 which is comprised of $12,056,073 appreciation and $19,063,958 depreciation at February 28, 2001.

Note: The categories of investments are shown as a percentage of net assets ($382,868,728) at February 28, 2001.

The following acronyms are used throughout this portfolio:

AMBAC	- --American Municipal Bond Assurance Corporation
COL	- --Collateralized
COP	- --Certificates of Participation
EDA	- --Economic Development Authority
EDFA	- --Economic Development Financing Authority
FHA	- --Federal Housing Administration
FHA/VA	- --Federal Housing Administration/Veterans Administration
GNMA	- --Government National Mortgage Association
GO	- --General Obligation
HDA	- --Hospital Development Authority
HEFA	- --Health and Education Facilities Authority
HFA	- --Housing Finance Authority
HFDC	- --Health Facility Development Corporation
IDA	- --Industrial Development Authority
IDB	- --Industrial Development Bond
INS	- --Insured
LOC	- --Letter of Credit
LT	- --Limited Tax
MBIA	- --Municipal Bond Investors Assurance
PCA	- --Pollution Control Authority
PCR	- --Pollution Control Revenue
PRF	- --Prerefunded
SFM	- --Single Family Mortgage
TOBs	- --Tender Option Bonds
UT	- --Unlimited Tax
VRDNs	- --Variable Rate Demand Notes

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

February 28, 2001 (unaudited)

Assets:

Total investments in securities, at value (identified cost $384,063,731)

377,055,846

Income receivable

6,602,329

Receivable for investments sold

235,000

Receivable for shares sold

627,848

TOTAL ASSETS

384,521,023

Liabilities:

Payable for investments purchased

1,462,508

Payable for shares redeemed

59,361

Accrued expenses

130,426

TOTAL LIABILITIES

1,652,295

Net assets for 39,246,552 shares outstanding

382,868,728

Net Assets Consist of:

Paid in capital

422,103,367

Net unrealized depreciation of investments

(7,007,885

)

Accumulated net realized loss on investments

(33,785,581

)

Undistributed net investment income

1,558,827

TOTAL NET ASSETS

382,868,728

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($95,048,971 ÷ 9,742,079 shares outstanding)

$9.76

Offering price per share (100/95.50 of $9.76)¹

$10.22

Redemption proceeds per share

$9.76

Class B Shares:

Net asset value per share ($78,682,253 ÷ 8,068,551 shares outstanding)

$9.75

Offering price per share

$9.75

Redemption proceeds per share (94.50/100 of $9.75)¹

$9.21

Class C Shares:

Net asset value per share ($9,542,855 ÷ 978,641 shares outstanding)

$9.75

Offering price per share

$9.75

Redemption proceeds per share (99.00/100 of $9.75)¹

$9.65

Class F Shares:

Net asset value per share ($199,594,649 ÷ 20,457,281 shares outstanding)

$9.76

Offering price per share (100/99.00 of $9.76)¹

$9.86

Redemption proceeds per share (99.00/100 of $9.76)¹

$9.66

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

Six Months Ended February 28, 2001 (unaudited)

Investment Income:

Interest

13,208,164

Expenses:

Investment adviser fee

1,134,337

Administrative personnel and services fee

142,359

Custodian fees

18,737

Transfer and dividend disbursing agent fees and expenses

154,551

Directors'/Trustees' fees

6,244

Auditing fees

6,145

Legal fees

8,696

Portfolio accounting fees

68,258

Distribution services fee--Class B Shares

273,776

Distribution services fee--Class C Shares

35,317

Shareholder services fee--Class A Shares

114,771

Shareholder services fee--Class B Shares

91,259

Shareholder services fee--Class C Shares

11,772

Shareholder services fee--Class F Shares

254,839

Share registration costs

35,546

Printing and postage

24,576

Insurance premiums

763

Taxes

14,179

Miscellaneous

6,133

TOTAL EXPENSES

2,402,258

Waiver:

Waiver of investment adviser fee

(38,504

)

Net expenses

2,363,754

Net investment income

10,844,410

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(707,114

)

Net change in unrealized depreciation of investments

(46,290

)

Net realized and unrealized loss on investments

(753,404

)

Change in net assets resulting from operations

$10,091,006

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
2/28/2001

Year Ended
8/31/2000

Increase (Decrease) in Net Assets

Operations:

Net investment income

10,844,410

22,744,312

Net realized loss on investments and futures contracts

(707,114

)

(9,212,625

)

Net change in unrealized depreciation of investments and futures contracts

(46,290

)

(10,822,213

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

10,091,006

2,709,474

Distributions to Shareholders:

Distributions from net investment income

Class A Shares

(2,722,103

)

(5,545,498

)

Class B Shares

(1,882,043

)

(3,600,698

)

Class C Shares

(244,247

)

(419,960

)

Class F Shares

(6,074,150

)

(13,346,234

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(10,922,543

)

(22,912,390

)

Share Transactions:

Proceeds from sale of shares

38,615,994

95,743,962

Net asset value of shares issued to shareholders in payment of distributions declared

6,600,823

13,836,526

Cost of shares redeemed

(49,681,687

)

(165,219,045

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

(4,464,870

)

(55,638,557

)

Change in net assets

(5,296,407

)

(75,841,473

)

Net Assets:

Beginning of period

388,165,135

464,006,608

End of period (including undistributed net investment income of $1,558,827 and $1,636,960, respectively)

382,868,728

388,165,135

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class A Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended August 31,

2/28/2001

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$9.78

$10.22

$11.04

$10.67

$10.33

$10.42

Income From Investment Operations:

Net investment income

0.28

0.56

0.55

0.54

0.58

0.08

Net realized and unrealized gain (loss) on investments and futures contracts

(0.01

)

(0.44

)

(0.82

)

0.39

0.33

(0.12

)

TOTAL FROM INVESTMENT OPERATIONS

0.27

0.12

(0.27

)

0.93

0.91

(0.04

)

Less Distributions:

Distributions from net investment income

(0.29

)

(0.56

)

(0.55

)

(0.56

)

(0.57

)

(0.05

)

Net Asset Value, End of Period

$9.76

$ 9.78

$10.22

$11.04

$10.67

$10.33

Total Return³

2.78

1.37

(2.58

8.91

9.07

(0.36

Ratios to Average Net Assets:

Expenses

1.09

%⁴

1.09

1.07

1.08

1.09

0.84

%⁴

Net investment income

5.90

%⁴

5.74

5.14

4.98

5.29

6.15

%⁴

Expense waiver/reimbursement⁵

0.02

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$95,049

$92,883

$109,297

$112,179

$94,941

$296

Portfolio turnover

1 For the year ended August 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the period from August 5, 1996 (date of initial public investment) to August 31, 1996.

3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class B Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended August 31,

2/28/2001

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$9.77

$10.22

$11.03

$10.66

$10.33

$10.42

Income From Investment Operations:

Net investment income

0.24

0.49

0.47

0.44

0.51

0.08

Net realized and unrealized gain (loss) on investments and futures contracts

(0.01

)

(0.45

)

(0.81

)

0.40

0.31

(0.12

)

TOTAL FROM INVESTMENT OPERATIONS

0.23

0.04

(0.34

)

0.84

0.82

(0.04

)

Less Distributions:

Distributions from net investment income

(0.25

)

(0.49

)

(0.47

)

(0.47

)

(0.49

)

(0.05

)

Net Asset Value, End of Period

$9.75

$ 9.77

$10.22

$11.03

$10.66

$10.33

Total Return³

2.39

0.51

(3.23

8.08

8.17

(0.36

Ratios to Average Net Assets:

Expenses

1.84

%⁴

1.84

1.82

1.83

1.84

0.84

%⁴

Net investment income

5.16

%⁴

4.99

4.39

4.25

4.55

6.15

%⁴

Expense waiver/reimbursement⁵

0.02

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$78,682

$71,512

$77,440

$47,028

$14,997

$296

Portfolio turnover

1 For the year ended August 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the period from August 5, 1996 (date of initial public investment) to August 31, 1996.

3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class C Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended August 31,

2/28/2001

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$9.77

$10.22

$11.03

$10.66

$10.33

$10.42

Income From Investment Operations:

Net investment income

0.24

0.48

0.47

0.45

0.50

0.08

Net realized and unrealized gain (loss) on investments and futures contracts

(0.01

)

(0.44

)

(0.81

)

0.40

0.32

(0.12

)

TOTAL FROM INVESTMENT OPERATIONS

0.23

0.04

(0.34

)

0.85

0.82

(0.04

)

Less Distributions:

Distributions from net investment income

(0.25

)

(0.49

)

(0.47

)

(0.48

)

(0.49

)

(0.05

)

Net Asset Value, End of Period

$9.75

$ 9.77

$10.22

$11.03

$10.66

$10.33

Total Return³

2.38

0.51

(3.24

8.11

8.17

(0.36

Ratios to Average Net Assets:

Expenses

1.84

%⁴

1.84

1.82

1.83

1.86

0.84

%⁴

Net investment income

5.15

%⁴

4.99

4.39

4.24

4.51

6.15

%⁴

Expense waiver/reimbursement⁵

0.02

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$9,543

$8,858

$7,603

$6,269

$1,950

$296

Portfolio turnover

1 For the year ended August 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the period from August 5, 1996 (date of initial public investment) to August 31, 1996.

3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class F Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended August 31,

2/28/2001

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$9.78

$10.22

$11.04

$10.67

$10.33

$10.71

Income From Investment Operations:

Net investment income

0.28

0.56

0.55

0.54

0.69

Net realized and unrealized gain (loss) on investments and futures contracts

(0.01

)

(0.44

)

(0.82

)

0.38

0.37

(0.42

)

TOTAL FROM INVESTMENT OPERATIONS

0.27

0.12

(0.27

)

0.93

0.91

0.27

Less Distributions:

Distributions from net investment income

(0.29

)

(0.56

)

(0.55

)

(0.56

)

(0.57

)

(0.65

)

Net Asset Value, End of Period

$9.76

$ 9.78

$10.22

$11.04

$10.67

$10.33

Total Return²

2.78

1.37

(2.58

8.91

9.07

2.47

Ratios to Average Net Assets:

Expenses

1.09

%³

1.09

1.07

1.08

Net investment income

5.90

%³

5.73

5.14

4.98

5.23

5.91

Expense waiver/reimbursement⁴

0.02

%³

0.01

Supplemental Data:

Net assets, end of period (000 omitted)

$199,595

$214,913

$269,667

$317,178

$331,558

$383,028

Portfolio turnover

1 For the year ended August 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

February 28, 2001 (unaudited)

ORGANIZATION

Federated Municipal Opportunities Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The investment objective is to provide a high level of current income which is generally exempt from federal regular income tax. The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class F Shares.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles.

Investment Valuations

Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotation are readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors (the "Directors").

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differs in their respective distribution and service fees. All shareholders bear the common expenses on the Fund based on average daily net assets of each class without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

The Fund will adopt the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. As required, the Fund will begin amortizing discounts on debt securities effective January 1, 2001. Prior to this date, the Fund did not amortize discounts on debt securities. The cumulative effect of this accounting change will have no impact on the total net assets of the Fund.

Federal Taxes

It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary.

At August 31, 2000, the Fund, for federal tax purposes, had a capital loss carryforward of $28,474,682, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:

Expiration Year

Expiration Amount

2002

$ 566,748

2004

3,648,712

2008

24,259,222

When-Issued and Delayed Delivery Transactions

The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Restricted Securities

Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the Fund's pricing committee.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.

Other

Investment transactions are accounted for on a trade date basis.

CAPITAL STOCK

At February 28, 2001, par value shares ($0.001 per share) authorized were as follows:

Share Class Name		Number of Par Value Capital Stock Authorized
Class A Shares		500,000,000
Class B Shares		500,000,000
Class C Shares		500,000,000
Class F Shares		500,000,000
TOTAL		2,000,000,000

Transactions in capital stock were as follows:

Six Months Ended
2/28/2001

Year Ended
8/31/2000

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

1,059,571

10,287,842

2,703,088

26,239,518

Shares issued to shareholders in payment of distributions declared

205,129

1,987,293

400,376

3,898,761

Shares redeemed

(1,023,815

)

(9,935,980

)

(4,293,682

)

(41,769,571

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

240,885

2,339,155

(1,190,218

)

(11,631,292

)

Six Months Ended
2/28/2001

Year Ended
8/31/2000

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

1,319,297

12,799,297

1,988,555

19,401,226

Shares issued to shareholders in payment of distributions declared

86,538

838,352

173,452

1,689,503

Shares redeemed

(655,605

)

(6,358,109

)

(2,423,266

)

(23,627,267

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

750,230

7,279,540

(261,259

)

(2,536,538

)

Six Months Ended
2/28/2001

Year Ended
8/31/2000

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

1,218,991

11,814,414

1,483,047

14,399,404

Shares issued to shareholders in payment of distributions declared

15,052

145,821

26,305

255,688

Shares redeemed

(1,161,868

)

(11,256,881

)

(1,346,954

)

(13,028,464

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

72,175

703,354

162,398

1,626,628

Six Months Ended
2/28/2001

Year Ended
8/31/2000

Class F Shares:

Shares

Amount

Shares

Amount

Shares sold

383,068

3,714,441

3,707,479

35,703,814

Shares issued to shareholders in payment of distributions declared

374,627

3,629,357

820,597

7,992,574

Shares redeemed

(2,282,614

)

(22,130,717

)

(8,924,130

)

(86,793,743

)

NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS

(1,524,919

)

(14,786,919

)

(4,396,054

)

(43,097,355

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

(461,629

)

(4,464,870

)

(5,685,133

)

(55,638,557

)

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.60% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on a scale that ranges from 0.150% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp., ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to reimburse FSC.

Share Class Name		Percent of Average Daily Net Assets
Class A Shares		0.25%
Class B Shares		0.75%
Class C Shares		0.75%
Class F Shares		0.25%

For the six months ended February 28, 2001, Class A Shares and Class F Shares did not incur a distribution services fee.

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts.

Transfer and Dividend Disbursing Agent Fees and Expenses

FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses.

Interfund Transactions

During the six months ended February 28, 2001, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $68,955,000 and $82,102,825, respectively.

General

Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees of the above companies.

INVESTMENT RISK

Although the Fund has a diversified portfolio, the Fund has 45% of its portfolio invested in lower rated and comparable quality unrated high-yield securities. Investments in higher yield securities are accomplished by greater degree of credit risk and the risk tends to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and often subordinated to other creditors of the issuer.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind contributions), for the six months ended February 28, 2001, were as follows:

Purchases	$	32,957,414

Sales	$	35,869,458

Directors

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

RICHARD B. FISHER

President

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD J. THOMAS

Treasurer

LESLIE K. ROSS

Assistant Secretary

Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information.

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY

In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called "householding"), as permitted by applicable rules. The Fund's "householding" program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the householding program. The Fund is also permitted to treat a shareholder as having given consent ("implied consent") if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to "household" at least sixty (60) days before it begins "householding" and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to "opt out" of householding. Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of householding at any time by calling 1-800-341-7400.

Federated
World-Class Investment Manager
Federated Municipal Opportunities Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor

Cusip 313910200
Cusip 313910309
Cusip 313910408
Cusip 313910101

8040407 (4/01)



                     FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
                                       APPENDIX


The  graphic  presentation  here  displayed  consists  of a legend  in the  upper  left
quadrant  indicating  the components of the  corresponding  mountain  chart.  The color
coded  mountain  chart is a visual  representation  of the narrative text above it. The
"x"  axis  reflects  computation  periods  from  4/10/87  to  2/28/01.  The "y" axis is
measured in  increments  of $5,000  ranging from $0 to $35,000 and  indicates  that the
ending  value of  hypothetical  initial  investment  of $14,000  in the fund's  Class F
Shares,  assuming the reinvestment of capital gains and dividends,  would have grown to
$31,930 on 2/28/01.

The  graphic  presentation  here  displayed  consists  of a legend  in the  upper  left
quadrant  indicating  the components of the  corresponding  mountain  chart.  The color
coded  mountain  chart is a visual  representation  of the narrative text above it. The
"x"  axis  reflects  computation  periods  from  4/10/87  to  2/28/01.  The "y" axis is
measured in  increments  of $5,000  ranging from $0 to $25,000 and  indicates  that the
ending  value of  hypothetical  yearly  investments  of  $1,000 in the  fund's  Class F
Shares,  assuming the  reinvestment  of capital gains and  dividends,  would have grown
to $20,774 on 2/28/01.

The  graphic  presentation  here  displayed  consists  of a legend  in the  upper  left
quadrant   indicating  the  components  of  the   corresponding   mountain  chart.  The
color-coded  mountain  chart is a visual  representation  of the narrative text beneath
it. The "x" axis  reflects  computation  periods from 4/10/87 to 2/28/01.  The "y" axis
is measured in  increments of $30,000  ranging from $0 to $150,000 and  indicates  that
the  ending  value of a  hypothetical  initial  investment  of  $5,000  and  subsequent
monthly  investments  of $500 over 14 years in the  fund's  Class F Shares  would  have
grown to $130,363 on 2/28/01.

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