FEDERATED TOTAL RETURN SERIES INC, 485BPOS, 1997-03-31

FEDERATED TOTAL RETURN SERIES INC
485BPOS, 1997-03-31

Previous: BERGER INVESTMENT PORTFOLIO TRUST, 497, 1997-03-31

Next: KS BANCORP INC, 10-K, 1997-03-31

1933 Act File No. 33-50773
1940 Act File No. 811-7115

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

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

Post-Effective Amendment No. 9 ........... X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 11 .......................... X

FEDERATED TOTAL RETURN SERIES, INC.
(formerly, Insight Institutional Series, Inc.)

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
xon March 31, 1997 pursuant to paragraph (b)(1)(v)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
-----------------
x 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.

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:

filed the Notice required by that Rule on or
------------------
intends to file the Notice required by that Rule on or about
; or
------------
X during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

Copies To:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of Federated Total Return
Series, Inc. (formerly,Insight Institutional Series, Inc.), which consists
of four portfolios: (1) Federated Total Return Bond Fund (formerly,
Federated Government Total Return Fund), (2) Federated Total Return Limited
Duration Fund, (3) Federated Total Return Government Fund, and (4)
Federated Limited Duration Government Fund. This filing relates to
Federated Total Return Bond Fund which consists of two classes of shares:
(a)Institutional Shares and (b)Institutional Service Sharesand is comprised
of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............(1) Cover Page.
Item 2. Synopsis.................(1) Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(14) Performance Information.
Item 4. General Description of
Registrant..............(1) General Information; (1) Investment
Information; (1) Investment Objective;
(1) Investment Policies; (1) Investment
Limitations.
Item 5. Management of the Fund...(1) Fund Information; (1) Management of
the Corporation; (1) Distribution of
Institutional/ Institutional Service
Shares; (1) Administration of the Fund;
(1) Expenses of the Fund and
Institutional/Institutional Service
Shares.
Item 6. Capital Stock and Other
Securities..............(1) Dividends and Distributions; (1-4)
Shareholder Information; (1) Voting
Rights; (1) Tax Information; (1) Federal
Income Tax; (1) State and Local Taxes.
Item 7. Purchase of Securities Being
Offered.................(1) Net Asset Value; (1) Investing in
Institutional/ Institutional Service
Shares; (1) Share Purchases; (1) (b)
Distribution Plan and Shareholder
Services; (1) (a) Shareholder Services;
(1) Minimum Investment Required; (1)
What Shares Cost; (1) Exchanging
Securities for Fund Shares; (1)
Certificates and Confirmations.
Item 8. Redemption or Repurchase.(1) Redeeming Institutional/
Institutional Service Shares; (1)
Telephone Redemption; (1) Written
Requests; (1) Accounts with Low
Balances.
Item 9. Pending Legal Proceedings None.

PART B.INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1) Cover Page.
Item 11. Table of Contents........(1) Table of Contents.
Item 12. General Information and
History.................(1) General Information About the Fund;
About Federated Investors.
Item 13. Investment Objectives and
Policies................(1) Investment Objective and Policies;
(1) Investment Limitations.
Item 14. Management of the Fund...(1) Federated Total Return Series, Inc.
Management; (1) Directors Compensation.
Item 15. Control Persons and Principal
Holders of Securities...(1) Fund Ownership.
Item 16. Investment Advisory and Other
Services................(1) Investment Advisory Services; (1)
Distribution Plan and Shareholder
Services; (1) Other services; (1)
Transfer Agent; (1) Custodian and
Portfolio Accounting; (1) Fund
Administration; (1) Independent
Auditors.
Item 17. Brokerage Allocation.....(1) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1) Purchasing Shares; (1)
Determining Net Asset Value; (1)
Redeeming Shares.
Item 20. Tax Status...............(1) Tax Status.
Item 21. Underwriters.............Not Applicable.
Item 22. Calculation of Performance
Data....................(1) Total Return; (1) Yield; (1)
Performance Comparisons.
Item 23. Financial Statements.....(1) Filed in Part A..

FEDERATED TOTAL RETURN BOND FUND
(FORMERLY, FEDERATED GOVERNMENT TOTAL RETURN FUND)
(A Portfolio of Federated Total Return Series, Inc.)
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO THE PROSPECTUS DATED SEPTEMBER 16, 1996

The following information is a supplement to your prospectus. We're providing it
to keep you up to date and comply with regulations that require mutual fund
companies to update shareholders concerning changes in prospectuses.

We suggest that you keep this information for your records.

A. Please insert the following "Financial Highlights" table immediately
following the Summary of Fund Expenses table in the prospectus:

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
JANUARY 31, 1997(A)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------
Net investment income 0.23
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.11
- --------------------------------------------------------------------------------- -------------
Total from investment operations 0.34
- --------------------------------------------------------------------------------- -------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------
Distributions from net investment income (0.23)
- --------------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $10.11
- --------------------------------------------------------------------------------- -------------
TOTAL RETURN (B) 3.28%
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expenses 0.05%*
- ---------------------------------------------------------------------------------
Net investment income 7.67%*
- ---------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.72%*
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------
Net assets, end of period
(000 omitted) $5,537
- ---------------------------------------------------------------------------------
Portfolio turnover 72%
- ---------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from October 1, 1996 (date of initial
public offering) to January 31, 1997.

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

(See Notes which are an integral part of the Financial Statements)

B. Please insert the following as the fourth paragraph under the section
entitled "Voting Rights"on page 20:

"As of March 3, 1997, Federated Securities Corp., Pittsburgh, PA, owned,
approximately 439,868 Institutional Shares (77.36%) of the voting securities of
the Fund, and, therefore, may, for certain purposes be deemed to control the
Fund."

C Please insert the following Portfolio of Investments and Financial Statements
beginning on page 22 of the prospectus:

FEDERATED TOTAL RETURN BOND FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- --------------------------------------------------------------------- ----------
<C> <S> <C>
ADJUSTABLE RATE MORTGAGES--8.9%
- -----------------------------------------------------------------------------------
$ 482,000 GNMA ARM 8746, 30 Year, 11/20/2025
(IDENTIFIED COST $491,339) $ 493,655
--------------------------------------------------------------------- ----------
CORPORATE BONDS--49.1%
- -----------------------------------------------------------------------------------
BANKING--4.7%
---------------------------------------------------------------------
260,000 FirstBank Puerto Rico, Sub. Note, 7.625%, 12/20/2005 259,926
--------------------------------------------------------------------- ----------
CABLE TELEVISION--4.9%
---------------------------------------------------------------------
250,000 TKR Cable, Inc., 10.50%, 10/30/2007 271,249
--------------------------------------------------------------------- ----------
CLOTHING & TEXTILES--2.3%
---------------------------------------------------------------------
150,000 Phillips Van Heusen Corp., Deb., 7.75%, 11/15/2023 128,169
--------------------------------------------------------------------- ----------
ECOLOGICAL SERVICES & EQUIPMENT--4.9%
---------------------------------------------------------------------
250,000 WMX Technologies, Inc., Deb., 8.75%, 5/1/2018 270,120
--------------------------------------------------------------------- ----------
ELECTRONICS--4.6%
---------------------------------------------------------------------
250,000 Anixter International, Inc., Company Guarantee, 8.00%, 9/15/2003 254,795
--------------------------------------------------------------------- ----------
FINANCIAL INTERMEDIARIES--5.6%
---------------------------------------------------------------------
250,000 Green Tree Financial Corp. 1995-8, Sr. Sub. Note, 10.25%, 6/1/2002 288,190
---------------------------------------------------------------------
25,000 Norwest Financial, Inc., Note, 6.23%, 9/1/1998 25,087
--------------------------------------------------------------------- ----------
Total 313,277
--------------------------------------------------------------------- ----------
INDUSTRIAL PRODUCTS & EQUIPMENT--4.7%
---------------------------------------------------------------------
250,000 Figgie International Holdings, Inc., Sr. Note, 9.875%, 10/1/1999 260,722
--------------------------------------------------------------------- ----------
</TABLE>

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- --------------------------------------------------------------------- ----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
INSURANCE--5.3%
---------------------------------------------------------------------
$ 250,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 $ 295,897
--------------------------------------------------------------------- ----------
RETAILERS--4.6%
---------------------------------------------------------------------
250,000 Penney (J.C.) Co., Inc., Deb., 7.65%, 8/15/2016 252,390
--------------------------------------------------------------------- ----------
SURFACE TRANSPORTATION--7.5%
---------------------------------------------------------------------
350,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 415,216
--------------------------------------------------------------------- ----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $2,728,474) 2,721,761
--------------------------------------------------------------------- ----------
MORTGAGE BACKED SECURITIES--18.4%
- -----------------------------------------------------------------------------------
997,733 Federal Home Loan Mortgage Corp., Pool D73503, 8.00%, 8/1/2026
(IDENTIFIED COST $1,009,269) 1,018,626
--------------------------------------------------------------------- ----------
MUNICIPAL SECURITIES--4.4%
- -----------------------------------------------------------------------------------
250,000 West Valley City, UT Municipal Building Authority, Taxable Lease
Revenue Bonds, Series 1996A, 7.625% Bonds (West Valley Event Center
Project)/(AMBAC INS), 5/1/2022 (IDENTIFIED COST $245,191) 243,468
--------------------------------------------------------------------- ----------
U.S. TREASURY--21.7%
- -----------------------------------------------------------------------------------
U.S. TREASURY NOTES--21.7%
---------------------------------------------------------------------
250,000 6.50%, 10/15/2006 249,798
---------------------------------------------------------------------
905,000 7.50%, 5/15/2002 954,630
--------------------------------------------------------------------- ----------
TOTAL U.S. TREASURY (IDENTIFIED COST $1,196,047) 1,204,428
--------------------------------------------------------------------- ----------
</TABLE>

(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.

(b) The cost of investments for federal tax purposes amounts to $5,715,320. The
net unrealized appreciation of investments on a federal tax basis amounts to
$11,618 which is comprised of $33,257 appreciation and $21,639 depreciation
at January 31, 1997.

Note: The categories of investments are shown as a percentage of net assets
($5,542,361) at January 31, 1997.

The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
ARM -- Adjustable Rate Mortgage
GNMA -- Government National Mortgage Association
INS -- Insured
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $5,715,320) $5,726,938
- -------------------------------------------------------------------------------------------
Cash 3,394
- -------------------------------------------------------------------------------------------
Income receivable 88,406
- -------------------------------------------------------------------------------------------
Deferred Expenses 25,967
- ------------------------------------------------------------------------------------------- ----------
Total assets 5,844,705
- -------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $269,226
- --------------------------------------------------------------------------------
Income distribution payable 33,118
- -------------------------------------------------------------------------------- --------
Total liabilities 302,344
- ------------------------------------------------------------------------------------------- ----------
Net Assets for 548,312.486 shares outstanding $5,542,361
- ------------------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------
Paid in capital $5,619,300
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 11,618
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (88,557)
- ------------------------------------------------------------------------------------------- ----------
Total Net Assets $5,542,361
- ------------------------------------------------------------------------------------------- ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------------------
$5,537,039 / 547,786 shares outstanding $10.11
- ------------------------------------------------------------------------------------------- ----------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------------------
$5,321.73 / 526.486 shares outstanding $10.11
- ------------------------------------------------------------------------------------------- ----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1997 (UNAUDITED)*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------
Interest $124,911
- ----------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee $ 6,484
- ----------------------------------------------------------------------------------
Administrative personnel and services fee 32,725
- ----------------------------------------------------------------------------------
Custodian fees 3,402
- ----------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 682
- ----------------------------------------------------------------------------------
Legal fees 84
- ----------------------------------------------------------------------------------
Portfolio accounting fees 10,914
- ----------------------------------------------------------------------------------
Distribution services fee-Institutional Service Shares 4
- ----------------------------------------------------------------------------------
Shareholder services fee-Institutional Shares 4,049
- ----------------------------------------------------------------------------------
Shareholder services fee-Institutional Service Shares 4
- ----------------------------------------------------------------------------------
Share registration costs 1,661
- ----------------------------------------------------------------------------------
Printing and postage 491
- ----------------------------------------------------------------------------------
Insurance premiums 37
- ----------------------------------------------------------------------------------
Miscellaneous 388
- ---------------------------------------------------------------------------------- --------
Total expenses 60,925
- ----------------------------------------------------------------------------------
Waivers and reimbursements--
- ----------------------------------------------------------------------------------
Waiver of investment advisory fee $ (6,484)
- -----------------------------------------------------------------------
Waiver of distribution services fee-Institutional Service Shares (3)
- -----------------------------------------------------------------------
Waiver of shareholder services fee-Institutional Shares (4,049)
- -----------------------------------------------------------------------
Reimbursement of other operating expenses (49,532)
- ----------------------------------------------------------------------- --------
Total waivers and reimbursements (60,068)
- ---------------------------------------------------------------------------------- --------
Net expenses 857
- ---------------------------------------------------------------------------------------------- --------
Net investment income 124,054
- ---------------------------------------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------------------------------
Net realized gain on investments 37,776
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 11,618
- ---------------------------------------------------------------------------------------------- --------
Net realized and unrealized gain on investments 49,394
- ---------------------------------------------------------------------------------------------- --------
Change in net assets resulting from operations $173,448
- ---------------------------------------------------------------------------------------------- --------
</TABLE>

* For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
JANUARY 31, 1997*
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------
Net investment income $ 124,054
- ------------------------------------------------------------------------
Net realized gain (loss) on investments 37,776
- ------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 11,618
- ------------------------------------------------------------------------ ---------------
Change in net assets resulting from operations 173,448
- ------------------------------------------------------------------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------------------
Institutional Shares (123,952)
- ------------------------------------------------------------------------
Institutional Service Shares (102)
- ------------------------------------------------------------------------ ---------------
Change in net assets resulting from distributions to shareholders (124,054)
- ------------------------------------------------------------------------ ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------------
Proceeds from sale of shares 5,071,465
- ------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 143
- ------------------------------------------------------------------------
Cost of shares redeemed (4,679,156)
- ------------------------------------------------------------------------ ---------------
Change in net assets resulting from share transactions 392,452
- ------------------------------------------------------------------------ ---------------
Change in net assets 441,846
- ------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------
Beginning of period 5,100,515
- ------------------------------------------------------------------------ ---------------
End of period $5,542,361
- ------------------------------------------------------------------------ ---------------
</TABLE>

* For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND

NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

(1) ORGANIZATION

Federated Total Return Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of four portfolios. The
financial statements included herein are only those of Federated Total Return
Bond Fund (the "Fund"), a diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Fund offers two classes of shares: Institutional Shares and
Institutional Service Shares. The investment objective of the Fund is to provide
total return.

(2) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed corporate bonds, (other fixed income and
asset-backed securities), and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked
price as furnished by an independent pricing service. Short-term securities
are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost, which
approximates fair market value.

REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.

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

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.

DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed five years from the Fund's
commencement date.

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

OTHER--Investment transactions are accounted for on the trade date.

(3) CAPITAL STOCK
At January 31, 1997, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
# OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
- --------------------------- ---------------------------
<S> <C>
Institutional Shares 1,000,000,000
Institutional Service
Shares 1,000,000,000
</TABLE>

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1997(A)
-----------------------
INSTITUTIONAL SHARES SHARES AMOUNT
- --------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Shares sold 494,503 $ 5,061,462
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 14 139
- ---------------------------------------------------------------------
Shares redeemed (456,752) (4,674,154)
- --------------------------------------------------------------------- -------- -----------
Net change resulting from Institutional Shares transactions 37,765 $ 387,447
- --------------------------------------------------------------------- -------- -----------
</TABLE>

(a) For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1997(A)
----------------------
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT
- ---------------------------------------------------------------------- ---------- --------
<S> <C> <C>
Shares sold 997.000 $ 10,003
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared .413 4
- ----------------------------------------------------------------------
Shares redeemed (501.198) (5,002)
- ---------------------------------------------------------------------- ---------- --------
Net change resulting from Institutional Service Shares transactions 496.215 $ 5,005
- ---------------------------------------------------------------------- ---------- --------
Net change resulting from share transactions 38,261.215 $392,452
- ---------------------------------------------------------------------- ---------- --------
</TABLE>

(a) For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40% of the Fund's average daily net assets.

ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.

DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate 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 Institutional Service Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule annually, to
FSC:
<TABLE>
<CAPTION>
% OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
- -------------------------- --------------------
<S> <C>
Institutional Service
Shares 0.25%
</TABLE>

The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.

SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for the shareholders and to maintain
shareholder accounts. For the period ended January 31, 1997, the Institutional
Shares did not incur a shareholder services fee. FSS may voluntarily choose to
waive any portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.

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

GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.

(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended January 31, 1997, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $8,562,096
- -------------------------------------------------------------------------------- ----------
SALES $3,163,953
- -------------------------------------------------------------------------------- ----------
</TABLE>

March 31, 1997

Federated Total Return Bond Fund
(formerly, Federated Government Total Return Fund)
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Shares

Prospectus

The Institutional Shares of Federated Total Return Bond Fund (formerly,
Federated Government Total Return Fund) (the `Fund'') offered by this
prospectus represent interests in a diversified investment portfolio of
Federated Total Return Series, Inc. (the "Corporation"), an open-end,
management investment company (a mutual fund).
The investment objective of the Fund is to provide total return. The Fund
pursues this investment objective by seeking value among most sectors of
fixed income securities, focusing on investment grade debt 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
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in these shares involves investment
risks, including the possible loss of principal.
This prospectus contains the information you should read and know before
you invest in Institutional Shares of the Fund. Keep this prospectus for
future reference.
The Fund has also filed a Statement of Additional Information dated
September16, 1996, with the Securities and Exchange Commission (`SEC'').
The information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge by
calling 1-800-341-7400. To obtain other information or to make inquiries
about the Fund, contact the Fund at the address listed on the back of this
prospectus. The Statement of Additional Information, material incorporated
by reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated September 16, 1996

Table of Contents will be generated when document is complete.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
October 11, 1993. On March 21, 1995, the name of the Corporation was
changed from "Insight Institutional Series, Inc." to "Federated Total
Return Series, Inc." and the name of the Fund was changed from "Insight
U.S. Government Fund" to "Federated Government Total Return Fund." On May
15, 1996, the name of the Fund was changed from `Federated Government
Total Return Fund''to ``Federated Total Return Bond Fund.'' The Articles
of Incorporation permit the Corporation to offer separate portfolios and
classes of shares. As of the date of this prospectus, the Board of
Directors (the "Directors") has established two classes of shares for
Federated Total Return Bond Fund: Institutional Shares and Institutional
Service Shares. This prospectus relates only to Institutional Shares of
Federated Total Return Bond Fund.
Institutional Shares (`Shares'') of the Fund are sold primarily to
accounts for which financial institutions act in a fiduciary or agency
capacity as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio of investment grade debt
securities. A minimum initial investment of $100,000 over a 90-day period
is required.
Shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION

The securities in which the Fund invests principally are:
oasset-backed securities;
o domestic (i.e., issued in the United States) and foreign issues
of corporate debt obligations as well as domestic and foreign issues
of obligations of foreign governments and/or their instrumentalities
having floating or fixed rates of interest;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government, or its agencies or
instrumentalities;
omortgage-backed securities;
omunicipal securities;
ocommercial paper which matures in 270 days or less;
otime deposits (including savings deposits and certificates of
deposit) and bankers' acceptances in commercial or savings banks
whose accounts are insured by the Bank Insurance Fund ("BIF") or the
Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation ("FDIC"),
including certificates of deposit issued by and other time deposits
in foreign branches of FDIC insured banks or which have at least
$100 million in capital; and
orepurchase agreements collateralized by eligible investments.
CORPORATE AND FOREIGN GOVERNMENT/AGENCY DEBT OBLIGATIONS. The Fund invests
in corporate and foreign government/agency debt obligations, including
bonds, notes, medium term notes, and debentures, which may have floating or
fixed rates of interest. The prices of fixed income securities fluctuate
inversely to the direction of interest rates.
FLOATING RATE DEBT OBLIGATIONS. The Fund expects to invest in floating
rate debt obligations, including increasing rate securities. Floating rate
securities are generally offered at an initial interest rate which is at or
above prevailing market rates. The interest rate paid on these securities
is then reset periodically (commonly every 90 days) to an increment over
some predetermined interest rate index. Commonly utilized indices include
the three-month Treasury bill rate, the six-month Treasury bill rate, the
one-month or three-month London Interbank Offered Rate (LIBOR), the prime
rate of a bank, the commercial paper rates, or the longer-term rates on
U.S. Treasury securities.
Increasing rate securities, which currently do not make up a significant
share of the market in corporate debt securities, are generally offered at
an initial interest rate which is at or above prevailing market rates.
Interest rates are reset periodically (most commonly every 90 days) at
different levels on a predetermined scale. These levels of interest are
ordinarily set at progressively higher increments over time. Some
increasing rate securities may, by agreement, revert to a fixed rate
status. These securities may also contain features which allow the issuer
the option to convert the increasing rate of interest to a fixed rate under
such terms, conditions, and limitations as are described in each issue's
prospectus.
FIXED RATE DEBT OBLIGATIONS. The Fund will also invest in fixed rate
securities, including fixed rate securities with short-term
characteristics. Fixed rate securities with short-term characteristics are
long-term debt obligations but are treated in the market as having short
maturities because call features of the securities may make them callable
within a short period of time. A fixed rate security with short-term
characteristics would include a fixed income security priced close to call
or redemption price or a fixed income security approaching maturity, where
the expectation of call or redemption is high.
Fixed rate securities tend to exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described above,
behave like short-term instruments in that the rate of interest they pay is
subject to periodic adjustments based on a designated interest rate index.
Fixed rate securities pay a fixed rate of interest and are more sensitive
to fluctuating interest rates. In periods of rising interest rates, the
value of a fixed rate security is likely to fall. Fixed rate securities
with short-term characteristics are not subject to the same price
volatility as fixed rate securities without such characteristics.
Therefore, they behave more like floating rate securities with respect to
price volatility.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Many variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features."
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. government
securities, which generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations (including
mortgage-backed securities, bonds, notes and discount notes) issued or
guaranteed by the following U.S. government agencies or instrumentalities:
Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives; Farmers Home Administration;
Federal Home Loan Banks; Federal Home Loan Mortgage Corporation; Federal
National Mortgage Association; Government National Mortgage Association;
and Student Loan Marketing Association. These securities are backed by: the
full faith and credit of the U.S. Treasury; the issuer's right to borrow an
amount limited to a specific line of credit from the U.S. Treasury; the
discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or the credit of the agency
or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which are permissible
investments which may not always receive financial support from the U.S.
government are: Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives; Federal Home
Loan Banks; Federal National Mortgage Association; Student Loan Marketing
Association; and Federal Home Loan Mortgage Corporation.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. There are currently four
basic types of mortgage-backed securities: (i) those issued or guaranteed
by the U.S. government or one of its agencies or instrumentalities, such as
Government National Mortgage Association ("Ginnie Mae"), the Federal
National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage
Corporation ("Freddie Mac"); (ii) those issued by private issuers that
represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities; (iii) those issued by private issuers that
represent an interest in or are collateralized by whole loans or mortgage-
backed securities without a government guarantee but usually having some
form of private credit enhancement; and (iv) privately issued securities
which are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government.
The privately issued mortgage-related securities provide for a periodic
payment consisting of both interest and/or principal. The interest portion
of these payments will be distributed by the Fund as income, and the
capital portion will be reinvested.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through
mortgage securities with adjustable rather than fixed interest rates. The
ARMS in which the Fund invests include, but are not limited to, securities
issued by Ginnie Mae, Fannie Mae, and Freddie Mac and are actively traded.
The underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration or Veterans
Administration, while those collateralizing ARMS issued by Fannie Mae or
Freddie Mac are typically conventional residential mortgages conforming to
strict underwriting size and maturity constraints. ARMS may also be
collateralized by whole loans or private pass-through securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates, but may be collateralized by whole loans or private pass-
through securities. CMOs may have fixed or floating rates of interest.
The Fund may invest in certain CMOs which are issued by private entities
such as investment banking firms and companies related to the construction
industry. The CMOs in which the Fund may invest may be: (i) securities
which are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (ii) securities which are
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized
by U.S. government securities; or (iii) other securities in which the
proceeds of the issuance are invested in mortgage-backed securities and
payment of the principal and interest is supported by the credit of an
agency or instrumentality of the U.S. government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings
of multiple class mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code, as
amended. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages.
Once REMIC status is elected and obtained, the entity is not subject to
federal income taxation. Instead, income is passed through the entity and
is taxed to the person or persons who hold interests in the REMIC. A REMIC
interest must consist of one or more classes of "regular interests," some
of which may offer adjustable rates of interest, and a single class of
"residual interests." To qualify as a REMIC, substantially all the assets
of the entity must be in assets directly or indirectly secured principally
by real property.
ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities but have underlying
assets that generally are not mortgage loans or interests in mortgage
loans. The Fund may invest in asset-backed securities including, but not
limited to, interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables, equipment
leases, manufactured housing (mobile home) leases, or home equity loans.
These securities may be in the form of pass-through instruments or asset-
backed bonds. The securities are issued by non-governmental entities and
carry no direct or indirect government guarantee.
INVESTMENT RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-
backed and asset-backed securities generally pay back principal and
interest over the life of the security. At the time the Fund reinvests the
payments and any unscheduled prepayments of principal are received, the
Fund may receive a rate of interest which is actually lower than the rate
of interest paid on these securities ("prepayment risks"). Mortgage-backed
and asset-backed securities are subject to higher prepayment risks than
most other types of debt instruments with prepayment risks because the
underlying mortgage loans or the collateral supporting asset-backed
securities may be prepaid without penalty or premium. Prepayment risks on
mortgage-backed securities tend to increase during periods of declining
mortgage interest rates because many borrowers refinance their mortgages to
take advantage of the more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the frequency with
which people sell their homes or elect to make unscheduled payments on
their mortgages. Although asset-backed securities generally are less likely
to experience substantial prepayments than are mortgage-backed securities,
certain factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on many types of asset-
backed securities.
While mortgage-backed securities generally entail less risk of a decline
during periods of rapidly rising interest rates, mortgage-backed securities
may also have less potential for capital appreciation than other similar
investments (e.g., investments with comparable maturities) because as
interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may
result in some loss of a holder's principal investment to the extent of the
premium paid. Conversely, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit
card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many
of which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of asset-
backed securities backed by motor vehicle installment purchase obligations
permit the servicer of such receivables to retain possession of the
underlying obligations. If the servicer sells these obligations to another
party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities.
Further, if a vehicle is registered in one state and is then re-registered
because the owner and obligor moves to another state, such re-registration
could defeat the original security interest in the vehicle in certain
cases. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee
for the holders of asset-backed securities backed by automobile receivables
may not have a proper security interest in all of the obligations backing
such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
FOREIGN SECURITIES. The Fund may invest in foreign securities. Foreign
securities do not include American Depository Receipts, but do include
foreign securities not publicly traded in the United States. Investments in
foreign securities involve special risks that differ from those associated
with investments in domestic securities. The Fund may invest more than 10%
in foreign securities.
RISKS. The risks associated with investments in foreign securities relate
to political and economic developments abroad, as well as those that result
from the differences between the regulation of domestic securities and
issuers and foreign securities and issuers. These risks may include, but
are not limited to, expropriation, confiscatory taxation, currency
fluctuations, withholding taxes on interest, limitations on the use or
transfer of assets, political or social instability, ability to obtain or
enforce court judgments abroad and adverse diplomatic developments.
Moreover, individual foreign economies may differ favorably or unfavorably
from the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain
foreign governments; the lack of uniform financial accounting standards
applicable to foreign issuers; less readily available market quotations on
foreign issues; the likelihood that securities of foreign issuers may be
less liquid or more volatile; generally higher foreign brokerage
commissions; and unreliable mail service between countries.
CURRENCY RISKS. Foreign securities may be denominated in foreign
currencies. Therefore, the value in U.S. dollars of the Fund's assets and
income may be affected by changes in exchange rates and regulations.
Although the Fund values its assets daily in U.S. dollars, it will not
convert its holdings of foreign currencies to U.S. dollars daily. When the
Fund converts its holdings to another currency, it may incur conversion
costs. Foreign exchange dealers realize a profit on the difference between
the prices at which they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market or through forward contracts to purchase or sell foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. When the Fund
enters into a contract for the purchase or sale of a security denominated
in a foreign currency, it may want to establish the U.S. dollar cost or
proceeds, as the case may be. By entering into a forward contract in U.S.
dollars for the purchase or sale of the amount of foreign currency involved
in an underlying security transaction, the Fund attempts to protect itself
against a possible loss between trade and settlement dates resulting from
an adverse change in the relationship between the U.S. dollar and such
foreign currency. However, this tends to limit potential gains which might
result from a positive change in such currency relationships.
The Fund will not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts where the Fund would be obligated
to deliver an amount of foreign currency in excess of the value of the
Fund's securities or other assets denominated in that currency or
denominated in a currency or currencies that the adviser believes will
reflect a high degree of correlation with the currency with regard to price
movements. The Fund generally will not enter into forward foreign currency
exchange contracts with a term longer than one year.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are
derivative multi-class securities which may be issued by agencies or
instrumentalities of the U.S. government, or by private originators of, or
investors in, mortgage loans, such as savings and loan associations,
mortgage banks, commercial banks, investment banks, and special purpose
subsidiaries of the foregoing organizations. The market volatility of
stripped mortgage-backed securities tends to be greater than the market
volatility of the other types of mortgage-related securities in which the
Fund invests. Principal-only stripped mortgage-backed securities are used
primarily to hedge against interest rate risk to the capital assets of the
Fund in a changing interest rate environment. A principal-only investor is
assured of receiving cash flows in the amount of principal purchased - the
unknown is when the cash flows will be received. Interest-only investments
over the life of the investment horizon may not receive cash flows in the
amount of the original investment.
MUNICIPAL SECURITIES. Municipal securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They
are also issued to repay outstanding obligations, to raise funds for
general operating expenses, and to make loans to other public institutions
and facilities.
Municipal securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue
bonds, however, are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds
do not represent a pledge of credit or create any debt of or charge against
the general revenues of a municipality or public authority. Industrial
development bonds are typically classified as revenue bonds.
BANK INSTRUMENTS. The Fund only invests in bank instruments either issued
by an institution that has capital, surplus and undivided profits over $100
million or is insured by the BIF or the SAIF. Bank instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The banks issuing
these instruments are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements,
loan requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping and the public availability of information.
CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender (such as the Fund) payable upon
demand by either party. The notice period for demand typically ranges from
one to seven days, and the party may demand full or partial payment.
Revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower
during a specified term. As the borrower repays the loan, an amount equal
to the repayment may be borrowed again during the term of the facility. The
Fund generally acquires a participation interest in a revolving credit
facility from a bank or other financial institution. The terms of the
participation require the Fund to make a pro rata share of all loans
extended to the borrower and entitles the Fund to a pro rata share of all
payments made by the borrower. Demand notes and revolving facilities
usually provide for floating or variable rates of interest.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. The Fund
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Fund will treat credit enhanced securities as having
been issued by the credit enhancer for diversification purposes. However,
under certain circumstances applicable regulations may require the Fund to
treat the securities as having been issued by both the issuer and the
credit enhancer. The bankruptcy, receivership or default of the credit
enhancer will adversely affect the quality and marketability of the
underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund
with liquidity and not to protect against changes in the market value of
the underlying securities. The bankruptcy, receivership or default by the
issuer of the demand feature, or a default on the underlying security or
other event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying
security are treated as a form of credit enhancement.
INTEREST RATE SWAPS. As one way of managing its exposure to different
types of investments, the Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars, and
floors. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of the Fund's investments, its share price
and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on the Fund's performance. Swap agreements are subject
to risks related to the counterparty's ability to perform, and may decline
in value if the counterparty's creditworthiness deteriorates. The Fund may
also suffer losses if it is unable to terminate outstanding swap agreements
to reduce its exposure through offsetting transactions. When the Fund
enters into a swap agreement, assets of the Fund equal to the value of the
swap agreement will be segregated by the Fund.
FINANCIAL AND FOREIGN CURRENCY FUTURES AND OPTIONS ON FUTURES. The Fund
may purchase and sell financial and foreign currency futures contracts to
hedge all or a portion of its portfolio against changes in interest rates.
Financial futures contracts call for the delivery of particular debt
instruments at a certain time in the future, while foreign currency futures
contracts call for the delivery of either U.S. or foreign currency at a
certain time in the future. The seller of the contract agrees to make
delivery of the type of instrument called for in the contract and the buyer
agrees to take delivery of the instrument at the specified future time.
The Fund may also write (sell) or purchase put and call options on
financial and foreign currency futures contracts as a hedge to attempt to
protect securities in its portfolio against decreases in value. When the
Fund writes a call or put option on a futures contract, it is undertaking
the obligation of selling or purchasing, respectively, a futures contract
at a fixed price at any time during a specified period if the option is
exercised. Conversely, as purchaser of a call or put option on a futures
contract, the Fund is entitled (but not obligated) to buy or sell,
respectively, a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the
Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets. When the
Fund purchases a futures contract, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contract (less any
related margin deposits), will be deposited in a segregated account with
the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the use of such futures contract is
unleveraged.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the instruments subject to the
futures contracts may not correlate perfectly with the prices of the
instruments in the Fund's portfolio. This may cause the futures contract
and any related options to react differently than the portfolio's holdings
to market changes. In addition, the Fund's investment adviser could be
incorrect in its expectations about the direction or extent of market
factors such as interest rate movements. In these events, the Fund may lose
money on the futures contract or option. It is not certain that a secondary
market for positions in futures contracts or for options will exist at all
times. Although the investment adviser will consider liquidity before
entering into options transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
HIGH-YIELD DEBT OBLIGATIONS. The Fund may invest up to but not including
35% of its assets in debt securities that are not investment-grade but are
rated BB or lower by an NRSRO (or, if unrated, determined by the adviser to
be of comparable quality). Some of these securities may involve equity
characteristics. The Fund may invest in equity securities, including unit
offerings which combine fixed rate securities and common stock or common
stock equivalents such as warrants, rights and options. Securities which
are rated BB or lower by a nationally recognized statistical rating
organization are considered speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligations. These securities are commonly referred to as "junk bonds." A
description of the rating categories for the permissible investments are
contained in the Appendix to this Prospectus.
RISKS. Debt obligations that are not determined to be investment grade are
high-yield, high-risk bonds, typically subject to greater market
fluctuations and greater risk of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, lower-
rated bonds tend to reflect short-term corporate, economic and market
developments, as well as investor perceptions of the issuer's credit
quality. In addition, lower-rated bonds may be more difficult to dispose of
or to value than higher-rated, lower-yielding bonds.
The Fund's investment adviser attempts to reduce the risks described above
through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has
traditionally been applied to certain contracts (including, futures,
forward, option and swap contracts) that "derive" their value from changes
in the value of an underlying security, currency, commodity or index.
Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as `derivatives."
Some securities, such as stock rights, warrants and convertible securities,
although not typically referred to as derivatives, contain options that may
affect their value and performance. Derivative contracts and securities
can be used to reduce or increase the volatility of an investment
portfolio's total performance. While the response of certain derivative
contracts and securities to market changes may differ from traditional
investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will
only use derivative contracts for the purposes disclosed in the applicable
prospectus sections above. To the extent that the Fund invests in
securities that could be characterized as derivatives, it will only do so
in a manner consistent with its investment objective, policies and
limitations.
TOTAL RETURN. The "total return" sought by the Fund will consist of
interest and dividends from underlying securities, capital appreciation
reflected in unrealized increases in value of portfolio securities
(realized by the shareholder only upon selling Shares) or realized from the
purchase and sale of securities, and successful use of futures and options,
or gains from favorable changes in foreign currency exchange rates.
Generally, over the long term, the total return obtained by a portfolio
investing primarily in fixed income securities is not expected to be as
great as that obtained by a portfolio that invests primarily in equity
securities. At the same time, the market risk and price volatility of a
fixed income portfolio is expected to be less than that of an equity
portfolio.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price.
To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any
sale of such securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund intends to invest in
restricted securities. Restricted securities are any securities in which
the Fund may otherwise invest pursuant to its investment objective and
policies, but which are subject to restriction on resale under federal
securities law. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to
be liquid, interest rate swaps, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days
after notice, to 15% of the value of its net assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest
in the securities of other investment companies, but it will not own more
than 3% of the total outstanding voting stock of any investment company,
invest more than 5% of its total assets in any one investment company, or
invest more than 10% of its total assets in investment companies in
general. The Fund will invest in other investment companies primarily for
the purpose of investing short-term cash which has not yet been invested in
other portfolio instruments. It should be noted that investment companies
incur certain expenses such as management fees and, therefore, any
investment by the Fund in shares of another investment company would be
subject to such duplicate expenses. The investment adviser will waive its
investment advisory fee on assets invested in securities of open-end
investment companies.
The Fund reserves the right to invest up to 100% of its assets in one
or more investment companies, but would do so only after receipt of an
exemptive order from the Securities and Exchange Commission permitting
this. If, in the future, the Fund does receive such an exemptive
order, the Fund would notify shareholders of its intent to increase the
level of investment in other investment companies. However,
shareholder approval will not be required to effect any such change in
this investment policy.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend portfolio securities on a short-term or long-term basis,
to broker/dealers, banks, or other institutional borrowers of securities.
The Fund will only enter into loan arrangements with broker/dealers, banks,
or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Directors and will receive
collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned at all times.
There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file
for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more or less
than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
INVESTMENT LIMITATIONS
The Fund will not:
oborrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
set date) or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets
and pledge its assets to secure such borrowings; or
owith respect to 75% of its total assets, invest more than 5% of the
value of its total assets in securities of any one issuer (other
than cash, cash items, or securities issued or guaranteed by the
U.S. government and its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) or acquire
more than 10% of the outstanding voting securities of any one
issuer.
The above investment limitations cannot be changed without shareholder
approval.
HUB AND SPOKE OPTION
If the Directors determine it to be in the best interest of the Fund and
its shareholders, the Fund may in the future seek to achieve its investment
objective by investing all of its assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. It is expected
that any such investment company would be managed in substantially the same
manner as the Fund.
The initial shareholder of the Fund (who is an affiliate of Federated
Securities Corp.) voted to vest authority to use this investment structure
in the sole discretion of the Directors. No further approval of
shareholders is required. Shareholders will receive at least 30 days prior
notice of any such investment.
In making its determination, the Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiencies. Although it is expected that the
Directors will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will remain the same or be
materially reduced if this investment structure is implemented.
NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for
Shares is determined by dividing the sum of the market value of all
securities and all other assets, less liabilities, by the number of Shares
outstanding. The net asset value for Shares may exceed that of
Institutional Service Shares 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.
INVESTING IN INSTITUTIONAL SHARES

SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or
mail.
To purchase shares of the Fund, open an account by calling Federated
Securities Corp. Information needed to establish the account will be taken
over the telephone. The Fund reserves the right to reject any purchase
request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before
4:00 p.m. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00
p.m. (Eastern time) on the next business day following the order. Federal
funds should be wired as follows: Federated Shareholder Services Company,
c/o State Street Bank and Trust Company, Boston, Massachusetts; Attention:
EDGEWIRE; For Credit to: Federated Total Return Bond Fund - Institutional
Shares; Fund Number (this number can be found on the account statement or
by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire
purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
BY MAIL. To purchase Shares by mail, send a check made payable to
Federated Total Return Bond Fund - Institutional Shares to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts 02266-
8600. Orders by mail are considered received when payment by check is
converted by State Street Bank and Trust Company (`State Street Bank'')
into federal funds. This is normally the next business day after State
Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $100,000 plus any non-
affiliated bank or broker's fee. However, an account may be opened with a
smaller amount as long as the $100,000 minimum is reached within 90 days.
An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established
through a non-affiliated bank or broker may be subject to a smaller minimum
investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who
purchase Shares through a financial intermediary may be charged a service
fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time), on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund Shares. The Fund will
allow such exchanges only upon the prior approval of the Fund and a
determination by the Fund and the adviser that the securities to be
exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, and must be
liquid. The market value of any securities exchanged in an initial
investment, plus any cash, must be at least equal to the minimum investment
in the Fund. The Fund acquires the exchanged securities for investment and
not for resale.
Securities accepted by the Fund will be valued in the same manner as the
Fund values its assets. The basis of the exchange will depend on the net
asset value of Fund shares on the day the securities are valued. One share
of the Fund will be issued for the equivalent amount of securities
accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription
or other rights attached to the securities become the property of the Fund,
along with the securities.
If an exchange is permitted, it will be treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Fund shares, a gain or loss may be realized by the investor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during
the month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Distributions of any net
realized long-term capital gains will be made at least once every twelve
months. Dividends and distributions are automatically reinvested in
additional Shares of the Fund on payment dates at net asset value, unless
cash payments are requested by shareholders on the application or by
writing to Federated Securities Corp.
Dividends are declared just prior to determining net asset value. If an
order for Shares is placed on the preceding business day, Shares purchased
by wire begin earning dividends on the business day wire payment is
received by State Street Bank. If the order for shares and payment by wire
are received on the same day, Shares begin earning dividends on the next
business day. Shares purchased by check begin earning dividends on the
business day after the check is converted, upon instruction of the transfer
agent, into federal funds.
Shares earn dividends through the business day that proper redemption
instructions are received by State Street Bank.
REDEEMING INSTITUTIONAL SHARES

The Fund redeems Shares at their net asset value next determined after the
Fund receives the redemption request. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. Redemptions will be made on days on which the Fund computes
its net asset value. Redemption requests must be received in proper form
and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00
p.m. (Eastern time). The proceeds will normally be wired the following
business day, but in no event more than seven days, to the shareholder's
account at a domestic commercial bank that is a member of the Federal
Reserve System. Proceeds from redemption requests received on holidays
when wire transfers are restricted will be wired the following business
day. Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative
at the telephone number listed on your account statement. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders will be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it
may be liable for losses due to unauthorized or fraudulent telephone
instructions. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a
case should occur, another method of redemption, such as "Written
Requests," should be considered.
WRITTEN REQUESTS
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 2266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: Federated Total Return Bond Fund -
Institutional Shares; the account name as registered with the Fund; the
account number; and the number of shares to be redeemed or the dollar
amount requested. All owners of the account must sign the request exactly
as the Shares are registered. Normally, a check for the proceeds is mailed
within one business day, but in no event more than seven days, after the
receipt of a proper written redemption request. Dividends are paid up to
and including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the
Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other `eligible guarantor institution,'' as defined in
the Securities Exchange Act of 1934. The Fund does not accept signatures
guaranteed by a notary public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may redeem Shares in any account, and pay the proceeds to the shareholder,
if the account balance falls below a required minimum value of $100,000 due
to shareholder redemptions. This requirement does not apply, however, if
the balance falls below $100,000 because of changes in the Fund's net asset
value. Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to
meet the minimum requirement.
FUND INFORMATION

MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs
and for exercising all the Corporation's powers except those reserved for
the shareholders. The Executive Committee of the Board of Directors handles
the Directors' responsibilities between meetings of the Directors.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the
Directors. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .40% of the Fund's average daily net assets. Under the
investment advisory contract, which provides for voluntary waivers of
expenses by the adviser, the adviser may voluntarily waive some or all of
its fee. The adviser can terminate this voluntary waiver of some or all of
its advisory fee at any time at its sole discretion. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Corporation and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of the employees' own interests. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased
or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of the
codes are subject to review by the Directors and could result in severe
penalties.
PORTFOLIO MANAGER'S BACKGROUND. Joseph M. Balestrino is the Fund's
portfolio manager. Mr. Balestrino joined Federated Investors in
1986 and has been a Vice President of the Fund's investment adviser
since 1995. Mr. Balestrino was an Assistant Vice President of the
investment adviser from 1991 until 1995 and served as an Investment
Analyst of the investment adviser from 1989 until 1991. Mr.
Balestrino is a Chartered Financial Analyst and received his
Master's Degree in Urban and Regional Planning from the University
of Pittsburgh.
Mark E. Durbiano is the Fund's sub-portfolio manager for the high
yield corporate bonds asset category. He has performed these duties since
the Fund's inception. Mr. Durbiano joined Federated Investors in 1982 and
has been a Senior Vice President of the Fund's adviser since January 1996.
Mr. Durbiano was a Vice President of the Fund's adviser from 1988 through
1995. Mr. Durbiano is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Pittsburgh.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional
Shares. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25% of the average
daily net asset value of the Institutional Shares, computed at an annual
rate, to obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions
to perform shareholder services. Financial institutions will receive fees
based upon Shares owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments
made pursuant to the Shareholder Services Agreement, Federated Securities
Corp. and Federated Shareholder Services, from their own assets, may pay
financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder
services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund' s
investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors ("Federated Funds") as
specified below:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Federated Funds
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% 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 choose voluntarily to waive a portion of its
fee.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Institutional Shares pay their allocable portion of Corporation
and Fund expenses.
The Corporation expenses for which holders of Institutional Shares pay
their allocable portion include, but are not limited to: the cost of
organizing the Corporation and continuing its existence; registering the
Corporation with federal and state securities authorities; Directors' fees;
auditors' fees, the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The Fund expenses for which holders of Institutional Shares pay their
allocable portion include, but are not limited to: registering the
portfolio and Institutional Shares of the portfolio; investment advisory
services; taxes and commissions; custodian fees; insurance premiums;
auditors' fees; and such non-recurring and extraordinary items as may arise
from time to time.
At present, the only expenses which are allocated specifically to
Institutional Shares as a class are expenses under the Corporation's
Shareholder Services Agreement. However, the Directors reserve the right
to allocate certain other expenses to holders of Institutional Shares as
they deem appropriate (`Class Expenses''). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified
by the transfer agent as attributable to holders of Institutional Shares;
fees under the Corporation's Shareholder Services; printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and to
state securities commissions; expenses related to adminstrative personnel
and services as required to support holders of Institutional Shares; and
Directors' fees incurred as a result of issues relating solely to
Institutional Shares.
FEDERATED LIFETRACK PROGRAM
The Fund is a member of the Federated LifeTrack Program sold through
financial representatives. Federated LifeTrack Program is an integrated
program of investment options, plan recordkeeping, and consultation
services for 401(k) and other participant-directed benefit and savings
plans. Under the Federated LifeTrack Program, employers or plan trustees
may select a group of investment options to be offered in a plan which also
uses the Federated LifeTrack Program for recordkeeping and administrative
services. Additional fees are charged to participating plans for these
services. As part of the Federated LifeTrack Program, exchanges may
readily be made between investment options selected by the employer or a
plan trustee.
SHAREHOLDER INFORMATION

VOTING RIGHTS
Each Share of the Fund is entitled to one vote at all meetings of
shareholders. All shares of all portfolios in the Corporation have equal
voting rights except that in matters affecting only a particular portfolio
or class of shares, only shares of that portfolio or class of shares are
entitled to vote.
As a Maryland corporation, the Fund is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under
certain circumstances.
Directors may be removed by a majority vote of the shareholders at a
special meeting. A special meeting of shareholders shall be called by the
Directors upon the request of shareholders owning at least 10% of the
Corporation's outstanding shares of all series entitled to vote.
TAX INFORMATION

FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code, as amended, applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax purposes so that income (including capital gains) and losses realized
by the Corporation's other portfolios will not be combined for tax purposes
with those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income
tax on any dividends and other distributions, including capital gains
distributions, received. This applies whether dividends and distributions
are received in cash or as additional shares. Distributions representing
long-term capital gains, if any, will be taxable to shareholders as long-
term capital gains no matter how long the shareholders have held their
shares. Information on the tax status of dividends and distributions is
provided annually.
STATE AND LOCAL TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the maximum offering price per share
of the Fund on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect
income actually earned by the Fund and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
Shares are sold without any sales charge or other similar non-recurring
charges.
Total return and yield will be calculated separately for Institutional
Shares and Institutional Service Shares.
From time to time, advertisements for the Fund's Institutional Shares may
refer to ratings, rankings, and other information in certain financial
publications and/or compare the Fund's Institutional Shares performance to
certain indices.
OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Institutional Service
Shares which are sold at net asset value to accounts for financial
institutions and are subject to a minimum initial investment of $25,000
over a 90-day period.
Institutional Service Shares are distributed under a 12b-1 Plan adopted by
the Fund.
Institutional Service Shares and Institutional Shares are subject to
certain of the same expenses. Expense differences, however, between
Institutional Service Shares and Institutional Shares may affect the
performance of each class.
To obtain more information and a prospectus for Institutional Service
Shares, investors may call 1-800-341-7400.

APPENDIX

Standard and Poor's Ratings Group Long-Term Debt Ratings
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 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 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.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.

Moody's Investors Service, Inc., Corporate Bond 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 some time 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 Investors Service, Inc., Long-Term Debt Ratings
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 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 in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. DDD represents the highest potential for recovery on these bonds,
and D represents the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the AAA category.
Duff & Phelps Credit Rating Co.
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- --High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A, A- --Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, BBB- --Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB- --Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may
move up or down frequently within this category.
B+, B, B- --Below investment grade and possessing risk that obligation will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.
CCC--Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD--Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP-Preferred stock with dividend arrearages.
Moody's Investors Service, Inc. Commercial Paper Ratings
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
oLeading market positions in well established industries.
oHigh rates of return on funds employed.
oConservative capitalization structure with moderate reliance on debt
and ample asset protection.
oBroad margins in earning coverage of fixed financial charges and
high internal cash generation.
oWell 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 Ratings Group 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 Investors Service, 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 Total Return Bond Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
Independent Auditors
Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219

Federated Total Return Bond Fund
(formerly, Federated Government Total Return Fund)
Institutional Shares

Prospectus

A Diversified Portfolio of
Federated Total Return Series, Inc.
an Open-End, Management
Investment Company

Prospectus dated September 16, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 31428Q 101
G01721-01-IS (9/96)

FEDERATED TOTAL RETURN BOND FUND
(FORMERLY, FEDERATED GOVERNMENT TOTAL RETURN FUND)
(A Portfolio of Federated Total Return Series, Inc.)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO THE PROSPECTUS DATED SEPTEMBER 16, 1996

We suggest that you keep this information for your records.

A. Please insert the following "Financial Highlights" table immediately
following the Summary of Fund Expenses table in the prospectus:

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
JANUARY 31, 1997(A)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------
Net investment income 0.23
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.11
- --------------------------------------------------------------------------------- -------------
Total from investment operations 0.34
- --------------------------------------------------------------------------------- --------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------
Distributions from net investment income (0.23)
- --------------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $10.11
- --------------------------------------------------------------------------------- -------------
TOTAL RETURN (B) 3.21%
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expenses 0.32%*
- ---------------------------------------------------------------------------------
Net investment income 6.79%*
- ---------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.80%*
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------
Net assets, end of period
(000 omitted) $5
- ---------------------------------------------------------------------------------
Portfolio turnover 72%
- ---------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from October 1, 1996 (date of initial
public offering) to January 31, 1997.

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

(See Notes which are an integral part of the Financial Statements)

B. Please insert the following as the fourth paragraph under the section
entitled "Voting Rights" on page 21:

"As of March 3, 1997, Trust Corp., Great Falls, MT, owned, approximately 3,426
Institutional Service Shares (86.68%) of the voting securities of the Fund, and,
therefore, may, for certain purposes be deemed to control the Fund."

C. Please insert the following Portfolio of Investments and Financial Statements
beginning on page 22 of the prospectus:

Note: The categories of investments are shown as a percentage of net assets
($5,542,361) at January 31, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $5,715,320) $ 5,726,938
- ------------------------------------------------------------------------------------------
Cash 3,394
- ------------------------------------------------------------------------------------------
Income receivable 88,406
- ------------------------------------------------------------------------------------------
Deferred Expenses 25,967
- ------------------------------------------------------------------------------------------ ----------
Total assets 5,844,705
- ------------------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------------------
Payable for investments purchased $ 269,226
- ------------------------------------------------------------------------------
Income distribution payable 33,118
- ------------------------------------------------------------------------------ ---------
Total liabilities 302,344
- ------------------------------------------------------------------------------------------ -----------
Net Assets for 548,312.486 shares outstanding $ 5,542,361
- ------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------
Paid in capital $ 5,619,300
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 11,618
- ------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (88,557)
- ------------------------------------------------------------------------------------------ ----------
Total Net Assets $ 5,542,361
- ------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ------------------------------------------------------------------------------------------
$5,537,039 / 547,786 shares outstanding $10.11
- ------------------------------------------------------------------------------------------ ----------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------------------
$5,321.73 / 526.486 shares outstanding $10.11
- ------------------------------------------------------------------------------------------ ----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

* For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(See Notes which are an integral part of the Financial Statements)

* For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED TOTAL RETURN BOND FUND

NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

(1) ORGANIZATION

(2) SIGNIFICANT ACCOUNTING POLICIES

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------

OTHER--Investment transactions are accounted for on the trade date.

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1997(A)
--------------------------
INSTITUTIONAL SHARES SHARES AMOUNT
- ------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
Shares sold 494,503 $ 5,061,462
- -------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 14 139
- -------------------------------------------------------------------
Shares redeemed (456,752) (4,674,154)
- ------------------------------------------------------------------- ---------- ------------
Net change resulting from Institutional Shares transactions 37,765 $ 387,447
- ------------------------------------------------------------------- ---------- ------------
</TABLE>

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1997(A)
-----------------------
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT
- --------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Shares sold 997.000 $ 10,003
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared .413 4
- ---------------------------------------------------------------------
Shares redeemed (501.198) (5,002)
- --------------------------------------------------------------------- ---------- ---------
Net change resulting from Institutional Service Shares transactions 496.215 $ 5,005
- --------------------------------------------------------------------- ---------- ---------
Net change resulting from share transactions 38,261.215 $ 392,452
- --------------------------------------------------------------------- ---------- ---------
</TABLE>

(a) For the period from October 1, 1996 (date of initial public offering) to
January 31, 1997.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.

FEDERATED TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------

incur a shareholder services fee. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.

GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended January 31, 1997, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $ 8,562,096
- ------------------------------------------------------------------------------- -----------
SALES $ 3,163,953
- ------------------------------------------------------------------------------- -----------
</TABLE>

March 31, 1997

Federated Total Return Bond Fund
(formerly, Federated Government Total Return Fund)
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Service Shares

Prospectus

The Institutional Service Shares of Federated Total Return Bond Fund
(formerly, Federated Government Total Return Fund) (the `Fund'') offered
by this prospectus represent interests in a diversified investment
portfolio of Federated Total Return Series, Inc. (the "Corporation"), an
open-end, management investment company (a mutual fund).
The investment objective of the Fund is to provide total return. The Fund
pursues this investment objective by seeking value among most sectors of
fixed income securities, focusing on investment grade debt 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
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in these shares involves investment
risks, including the possible loss of principal.
This prospectus contains the information you should read and know before
you invest in Institutional Service Shares of the Fund. Keep this
prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
September 16, 1996, with the Securities and Exchange Commission (`SEC'').
The information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge by
calling 1-800-341-7400. To obtain other information or to make inquiries
about the Fund, contact the Fund at the address listed on the back of this
prospectus. The Statement of Additional Information, material incorporated
by reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated September 16, 1996

Table of Contents will be generated when document is complete.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
October 11, 1993. On March 21, 1995, the name of the Corporation was
changed from "Insight Institutional Series, Inc." to "Federated Total
Return Series, Inc." and the name of the Fund was changed from "Insight
U.S. Government Fund" to "Federated Government Total Return Fund." On May
15 1996, the name of the Fund was changed from `Federated Government Total
Return Fund''to ``Federated Total Return Bond Fund.'' The Articles of
Incorporation permit the Corporation to offer separate portfolios and
classes of shares. As of the date of this prospectus, the Board of
Directors (the "Directors") has established two classes of shares for
Federated Total Return Bond Fund: Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional
Service Shares of Federated Total Return Bond Fund.
Institutional Service Shares (`Shares'') of the Fund are designed
primarily for retail and private banking customers of financial
institutions as a convenient means of accumulating an interst in a
professionally managed, diversified portfolio investing primarily in
investment grade debt securities. A minimum initial investment of $25,000
over a 90-day period is required.
Shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION

INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide total return. The
investment objective cannot be changed without approval of shareholders.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of investment grade debt securities. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in domestic investment grade debt securities. Investment grade debt
securities are rated in the four highest rating categories by one or more
nationally recognized statistical rating organizations (`NRSROs'') (AAA,
AA, A or BBB by Standard & Poor's Ratings Group ("Standard & Poor's"),
Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps Rating Service Co.
(`Duff & Phelps'') or Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
("Moody's")), or which are of comparable quality in the judgment of the
adviser. Downgraded securities will be evaluated on a case-by-case basis by
the adviser. The adviser will determine whether or not the security
continues to be an acceptable investment. If not, the security will be
sold. The remainder of the Fund's assets may be invested in any of the
securities discussed below. Unless indicated otherwise, the investment
policies may be changed by the Directors without the approval of
shareholders. Shareholders will be notified before any material change in
these investment policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in a professionally managed,
diversified portfolio consisting primarily of investment grade debt
securities, mortgage-backed securities, asset-backed securities, and U.S.
government obligations. The Fund may also invest in derivative instruments
of such securities (including instruments with demand features or credit
enhancement and stripped mortgage-backed securities), as well as money
market instruments and cash.
The securities in which the Fund invests principally are:
oasset-backed securities;
o domestic (i.e., issued in the United States) and foreign issues
of corporate debt obligations as well as domestic and foreign issues
of obligations of foreign governments and/or their instrumentalities
having floating or fixed rates of interest;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government, or its agencies or
instrumentalities;
omortgage-backed securities;
omunicipal securities;
ocommercial paper which matures in 270 days or less;
otime deposits (including savings deposits and certificates of
deposit) and bankers' acceptances in commercial or savings banks
whose accounts are insured by the Bank Insurance Fund ("BIF") or the
Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation ("FDIC"),
including certificates of deposit issued by and other time deposits
in foreign branches of FDIC insured banks or which have at least
$100 million in capital; and
orepurchase agreements collateralized by eligible investments.
CORPORATE AND FOREIGN GOVERNMENT/AGENCY DEBT OBLIGATIONS. The Fund invests
in corporate and foreign government/agency debt obligations, including
bonds, notes, medium term notes, and debentures, which may have floating or
fixed rates of interest. The prices of fixed income securities fluctuate
inversely to the direction of interest rates.
FLOATING RATE DEBT OBLIGATIONS. The Fund expects to invest in floating
rate debt obligations, including increasing rate securities. Floating rate
securities are generally offered at an initial interest rate which is at or
above prevailing market rates. The interest rate paid on these securities
is then reset periodically (commonly every 90 days) to an increment over
some predetermined interest rate index. Commonly utilized indices include
the three-month Treasury bill rate, the six-month Treasury bill rate, the
one-month or three-month London Interbank Offered Rate (LIBOR), the prime
rate of a bank, the commercial paper rates, or the longer-term rates on
U.S. Treasury securities.
Increasing rate securities, which currently do not make up a significant
share of the market in corporate debt securities, are generally offered at
an initial interest rate which is at or above prevailing market rates.
Interest rates are reset periodically (most commonly every 90 days) at
different levels on a predetermined scale. These levels of interest are
ordinarily set at progressively higher increments over time. Some
increasing rate securities may, by agreement, revert to a fixed rate
status. These securities may also contain features which allow the issuer
the option to convert the increasing rate of interest to a fixed rate under
such terms, conditions, and limitations as are described in each issue's
prospectus.
FIXED RATE DEBT OBLIGATIONS. The Fund will also invest in fixed rate
securities, including fixed rate securities with short-term
characteristics. Fixed rate securities with short-term characteristics are
long-term debt obligations but are treated in the market as having short
maturities because call features of the securities may make them callable
within a short period of time. A fixed rate security with short-term
characteristics would include a fixed income security priced close to call
or redemption price or a fixed income security approaching maturity, where
the expectation of call or redemption is high.
Fixed rate securities tend to exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described above,
behave like short-term instruments in that the rate of interest they pay is
subject to periodic adjustments based on a designated interest rate index.
Fixed rate securities pay a fixed rate of interest and are more sensitive
to fluctuating interest rates. In periods of rising interest rates, the
value of a fixed rate security is likely to fall. Fixed rate securities
with short-term characteristics are not subject to the same price
volatility as fixed rate securities without such characteristics.
Therefore, they behave more like floating rate securities with respect to
price volatility.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Many variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features."
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. government
securities, which generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations (including
mortgage-backed securities, bonds, notes and discount notes) issued or
guaranteed by the following U.S. government agencies or instrumentalities:
Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives; Farmers Home Administration;
Federal Home Loan Banks; Federal Home Loan Mortgage Corporation; Federal
National Mortgage Association; Government National Mortgage Association;
and Student Loan Marketing Association. These securities are backed by: the
full faith and credit of the U.S. Treasury; the issuer's right to borrow an
amount limited to a specific line of credit from the U.S. Treasury; the
discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or the credit of the agency
or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which are permissible
investments which may not always receive financial support from the U.S.
government are: Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives; Federal Home
Loan Banks; Federal National Mortgage Association; Student Loan Marketing
Association; and Federal Home Loan Mortgage Corporation.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. There are currently four
basic types of mortgage-backed securities: (i) those issued or guaranteed
by the U.S. government or one of its agencies or instrumentalities, such as
Government National Mortgage Association ("Ginnie Mae"), the Federal
National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage
Corporation ("Freddie Mac"); (ii) those issued by private issuers that
represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities; (iii) those issued by private issuers that
represent an interest in or are collateralized by whole loans or mortgage-
backed securities without a government guarantee but usually having some
form of private credit enhancement; and (iv) privately issued securities
which are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government.
The privately issued mortgage-related securities provide for a periodic
payment consisting of both interest and/or principal. The interest portion
of these payments will be distributed by the Fund as income, and the
capital portion will be reinvested.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through
mortgage securities with adjustable rather than fixed interest rates. The
ARMS in which the Fund invests include, but are not limited to, securities
issued by Ginnie Mae, Fannie Mae, and Freddie Mac and are actively traded.
The underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration or Veterans
Administration, while those collateralizing ARMS issued by Fannie Mae or
Freddie Mac are typically conventional residential mortgages conforming to
strict underwriting size and maturity constraints. ARMS may also be
collateralized by whole loans or private pass-through securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates, but may be collateralized by whole loans or private pass-
through securities. CMOs may have fixed or floating rates of interest.
The Fund may invest in certain CMOs which are issued by private entities
such as investment banking firms and companies related to the construction
industry. The CMOs in which the Fund may invest may be: (i) securities
which are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (ii) securities which are
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized
by U.S. government securities; or (iii) other securities in which the
proceeds of the issuance are invested in mortgage-backed securities and
payment of the principal and interest is supported by the credit of an
agency or instrumentality of the U.S. government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings
of multiple class mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code, as
amended. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages.
Once REMIC status is elected and obtained, the entity is not subject to
federal income taxation. Instead, income is passed through the entity and
is taxed to the person or persons who hold interests in the REMIC. A REMIC
interest must consist of one or more classes of "regular interests," some
of which may offer adjustable rates of interest, and a single class of
"residual interests." To qualify as a REMIC, substantially all the assets
of the entity must be in assets directly or indirectly secured principally
by real property.
ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities but have underlying
assets that generally are not mortgage loans or interests in mortgage
loans. The Fund may invest in asset-backed securities including, but not
limited to, interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables, equipment
leases, manufactured housing (mobile home) leases, or home equity loans.
These securities may be in the form of pass-through instruments or asset-
backed bonds. The securities are issued by non-governmental entities and
carry no direct or indirect government guarantee.
INVESTMENT RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-
backed and asset-backed securities generally pay back principal and
interest over the life of the security. At the time the Fund reinvests the
payments and any unscheduled prepayments of principal are received, the
Fund may receive a rate of interest which is actually lower than the rate
of interest paid on these securities ("prepayment risks"). Mortgage-backed
and asset-backed securities are subject to higher prepayment risks than
most other types of debt instruments with prepayment risks because the
underlying mortgage loans or the collateral supporting asset-backed
securities may be prepaid without penalty or premium. Prepayment risks on
mortgage-backed securities tend to increase during periods of declining
mortgage interest rates because many borrowers refinance their mortgages to
take advantage of the more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the frequency with
which people sell their homes or elect to make unscheduled payments on
their mortgages. Although asset-backed securities generally are less likely
to experience substantial prepayments than are mortgage-backed securities,
certain factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on many types of asset-
backed securities.
While mortgage-backed securities generally entail less risk of a decline
during periods of rapidly rising interest rates, mortgage-backed securities
may also have less potential for capital appreciation than other similar
investments (e.g., investments with comparable maturities) because as
interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may
result in some loss of a holder's principal investment to the extent of the
premium paid. Conversely, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit
card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many
of which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of asset-
backed securities backed by motor vehicle installment purchase obligations
permit the servicer of such receivables to retain possession of the
underlying obligations. If the servicer sells these obligations to another
party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities.
Further, if a vehicle is registered in one state and is then re-registered
because the owner and obligor moves to another state, such re-registration
could defeat the original security interest in the vehicle in certain
cases. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee
for the holders of asset-backed securities backed by automobile receivables
may not have a proper security interest in all of the obligations backing
such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
FOREIGN SECURITIES. The Fund may invest in foreign securities. Foreign
securities do not include American Depository Receipts, but do include
foreign securities not publicly traded in the United States. Investments in
foreign securities involve special risks that differ from those associated
with investments in domestic securities. The Fund may invest more than 10%
in foreign securities.
RISKS. The risks associated with investments in foreign securities relate
to political and economic developments abroad, as well as those that result
from the differences between the regulation of domestic securities and
issuers and foreign securities and issuers. These risks may include, but
are not limited to, expropriation, confiscatory taxation, currency
fluctuations, withholding taxes on interest, limitations on the use or
transfer of assets, political or social instability, ability to obtain or
enforce court judgments abroad and adverse diplomatic developments.
Moreover, individual foreign economies may differ favorably or unfavorably
from the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain
foreign governments; the lack of uniform financial accounting standards
applicable to foreign issuers; less readily available market quotations on
foreign issues; the likelihood that securities of foreign issuers may be
less liquid or more volatile; generally higher foreign brokerage
commissions; and unreliable mail service between countries.
CURRENCY RISKS. Foreign securities may be denominated in foreign
currencies. Therefore, the value in U.S. dollars of the Fund's assets and
income may be affected by changes in exchange rates and regulations.
Although the Fund values its assets daily in U.S. dollars, it will not
convert its holdings of foreign currencies to U.S. dollars daily. When the
Fund converts its holdings to another currency, it may incur conversion
costs. Foreign exchange dealers realize a profit on the difference between
the prices at which they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market or through forward contracts to purchase or sell foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. When the Fund
enters into a contract for the purchase or sale of a security denominated
in a foreign currency, it may want to establish the U.S. dollar cost or
proceeds, as the case may be. By entering into a forward contract in U.S.
dollars for the purchase or sale of the amount of foreign currency involved
in an underlying security transaction, the Fund attempts to protect itself
against a possible loss between trade and settlement dates resulting from
an adverse change in the relationship between the U.S. dollar and such
foreign currency. However, this tends to limit potential gains which might
result from a positive change in such currency relationships.
The Fund will not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts where the Fund would be obligated
to deliver an amount of foreign currency in excess of the value of the
Fund's securities or other assets denominated in that currency or
denominated in a currency or currencies that the adviser believes will
reflect a high degree of correlation with the currency with regard to price
movements. The Fund generally will not enter into forward foreign currency
exchange contracts with a term longer than one year.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are
derivative multi-class securities which may be issued by agencies or
instrumentalities of the U.S. government, or by private originators of, or
investors in, mortgage loans, such as savings and loan associations,
mortgage banks, commercial banks, investment banks, and special purpose
subsidiaries of the foregoing organizations. The market volatility of
stripped mortgage-backed securities tends to be greater than the market
volatility of the other types of mortgage-related securities in which the
Fund invests. Principal-only stripped mortgage-backed securities are used
primarily to hedge against interest rate risk to the capital assets of the
Fund in a changing interest rate environment. A principal-only investor is
assured of receiving cash flows in the amount of principal purchased - the
unknown is when the cash flows will be received. Interest-only investments
over the life of the investment horizon may not receive cash flows in the
amount of the original investment.
MUNICIPAL SECURITIES. Municipal securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They
are also issued to repay outstanding obligations, to raise funds for
general operating expenses, and to make loans to other public institutions
and facilities.
Municipal securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue
bonds, however, are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds
do not represent a pledge of credit or create any debt of or charge against
the general revenues of a municipality or public authority. Industrial
development bonds are typically classified as revenue bonds.
BANK INSTRUMENTS. The Fund only invests in bank instruments either issued
by an institution that has capital, surplus and undivided profits over $100
million or is insured by the BIF or the SAIF. Bank instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The banks issuing
these instruments are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements,
loan requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping and the public availability of information.
CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender (such as the Fund) payable upon
demand by either party. The notice period for demand typically ranges from
one to seven days, and the party may demand full or partial payment.
Revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower
during a specified term. As the borrower repays the loan, an amount equal
to the repayment may be borrowed again during the term of the facility. The
Fund generally acquires a participation interest in a revolving credit
facility from a bank or other financial institution. The terms of the
participation require the Fund to make a pro rata share of all loans
extended to the borrower and entitles the Fund to a pro rata share of all
payments made by the borrower. Demand notes and revolving facilities
usually provide for floating or variable rates of interest.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. The Fund
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Fund will treat credit enhanced securities as having
been issued by the credit enhancer for diversification purposes. However,
under certain circumstances applicable regulations may require the Fund to
treat the securities as having been issued by both the issuer and the
credit enhancer. The bankruptcy, receivership or default of the credit
enhancer will adversely affect the quality and marketability of the
underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund
with liquidity and not to protect against changes in the market value of
the underlying securities. The bankruptcy, receivership or default by the
issuer of the demand feature, or a default on the underlying security or
other event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying
security are treated as a form of credit enhancement.
INTEREST RATE SWAPS. As one way of managing its exposure to different
types of investments, the Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars, and
floors. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of the Fund's investments, its share price
and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on the Fund's performance. Swap agreements are subject
to risks related to the counterparty's ability to perform, and may decline
in value if the counterparty's creditworthiness deteriorates. The Fund may
also suffer losses if it is unable to terminate outstanding swap agreements
to reduce its exposure through offsetting transactions. When the Fund
enters into a swap agreement, assets of the Fund equal to the value of the
swap agreement will be segregated by the Fund.
FINANCIAL AND FOREIGN CURRENCY FUTURES AND OPTIONS ON FUTURES. The Fund
may purchase and sell financial and foreign currency futures contracts to
hedge all or a portion of its portfolio against changes in interest rates.
Financial futures contracts call for the delivery of particular debt
instruments at a certain time in the future, while foreign currency futures
contracts call for the delivery of either U.S. or foreign currency at a
certain time in the future. The seller of the contract agrees to make
delivery of the type of instrument called for in the contract and the buyer
agrees to take delivery of the instrument at the specified future time.
The Fund may also write (sell) or purchase put and call options on
financial and foreign currency futures contracts as a hedge to attempt to
protect securities in its portfolio against decreases in value. When the
Fund writes a call or put option on a futures contract, it is undertaking
the obligation of selling or purchasing, respectively, a futures contract
at a fixed price at any time during a specified period if the option is
exercised. Conversely, as purchaser of a call or put option on a futures
contract, the Fund is entitled (but not obligated) to buy or sell,
respectively, a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the
Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets. When the
Fund purchases a futures contract, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contract (less any
related margin deposits), will be deposited in a segregated account with
the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the use of such futures contract is
unleveraged.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the instruments subject to the
futures contracts may not correlate perfectly with the prices of the
instruments in the Fund's portfolio. This may cause the futures contract
and any related options to react differently than the portfolio's holdings
to market changes. In addition, the Fund's investment adviser could be
incorrect in its expectations about the direction or extent of market
factors such as interest rate movements. In these events, the Fund may lose
money on the futures contract or option. It is not certain that a secondary
market for positions in futures contracts or for options will exist at all
times. Although the investment adviser will consider liquidity before
entering into options transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
HIGH-YIELD DEBT OBLIGATIONS. The Fund may invest up to but not including
35% of its total assets in debt securities that are not investment-grade
but are rated BB or lower by an NRSRO (or, if unrated, determined by the
adviser to be of comparable quality). Some of these securities may involve
equity characteristics. The Fund may invest in equity securities,
including unit offerings which combine fixed rate securities and common
stock or common stock equivalents such as warrants, rights and options.
Securities which are rated BB or lower by a nationally recognized
statistical rating organization are considered speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligations. These securities are commonly referred to as "junk
bonds." A description of the rating categories for the permissible
investments are contained in the Appendix to this Prospectus.
RISKS. Debt obligations that are not determined to be investment grade are
high-yield, high-risk bonds, typically subject to greater market
fluctuations and greater risk of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, lower-
rated bonds tend to reflect short-term corporate, economic and market
developments, as well as investor perceptions of the issuer's credit
quality. In addition, lower-rated bonds may be more difficult to dispose of
or to value than higher-rated, lower-yielding bonds.
The Fund's investment adviser attempts to reduce the risks described above
through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has
traditionally been applied to certain contracts (including, futures,
forward, option and swap contracts) that "derive" their value from changes
in the value of an underlying security, currency, commodity or index.
Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as `derivatives."
Some securities, such as stock rights, warrants and convertible securities,
although not typically referred to as derivatives, contain options that may
affect their value and performance. Derivative contracts and securities
can be used to reduce or increase the volatility of an investment
portfolio's total performance. While the response of certain derivative
contracts and securities to market changes may differ from traditional
investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will
only use derivative contracts for the purposes disclosed in the applicable
prospectus sections above. To the extent that the Fund invests in
securities that could be characterized as derivatives, it will only do so
in a manner consistent with its investment objective, policies and
limitations.
TOTAL RETURN. The "total return" sought by the Fund will consist of
interest and dividends from underlying securities, capital appreciation
reflected in unrealized increases in value of portfolio securities
(realized by the shareholder only upon selling Shares) or realized from the
purchase and sale of securities, and successful use of futures and options,
or gains from favorable changes in foreign currency exchange rates.
Generally, over the long term, the total return obtained by a portfolio
investing primarily in fixed income securities is not expected to be as
great as that obtained by a portfolio that invests primarily in equity
securities. At the same time, the market risk and price volatility of a
fixed income portfolio is expected to be less than that of an equity
portfolio.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price.
To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any
sale of such securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund intends to invest in
restricted securities. Restricted securities are any securities in which
the Fund may otherwise invest pursuant to its investment objective and
policies, but which are subject to restriction on resale under federal
securities law. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to
be liquid, interest rate swaps, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days
after notice, to 15% of the value of its net assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest
in the securities of other investment companies, but it will not own more
than 3% of the total outstanding voting stock of any investment company,
invest more than 5% of its total assets in any one investment company, or
invest more than 10% of its total assets in investment companies in
general. The Fund will invest in other investment companies primarily for
the purpose of investing short-term cash which has not yet been invested in
other portfolio instruments. It should be noted that investment companies
incur certain expenses such as management fees and, therefore, any
investment by the Fund in shares of another investment company would be
subject to such duplicate expenses. The investment adviser will waive its
investment advisory fee on assets invested in securities of open-end
investment companies.
The Fund reserves the right to invest up to 100% of its assets in one or
more investment companies, but would do so only after receipt of an
exemptive order from the Securities and Exchange Commission permitting
this. If, in the future, the Fund does receive such an exemptive order,
the Fund would notify shareholders of its intent to increase the level of
investment in other investment companies. However, shareholder approval
will not be required to effect any such change in this investment policy.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend portfolio securities on a short-term or long-term basis,
to broker/dealers, banks, or other institutional borrowers of securities.
The Fund will only enter into loan arrangements with broker/dealers, banks,
or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Directors and will receive
collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned at all times.
There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file
for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more or less
than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
INVESTMENT LIMITATIONS
The Fund will not:
oborrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
set date) or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets
and pledge its assets to secure such borrowings; or
owith respect to 75% of its total assets, invest more than 5% of the
value of its total assets in securities of any one issuer (other
than cash, cash items, or securities issued or guaranteed by the
U.S. government and its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) or acquire
more than 10% of the outstanding voting securities of any one
issuer.
The above investment limitations cannot be changed without shareholder
approval.
HUB AND SPOKE OPTION
If the Directors determine it to be in the best interest of the Fund and
its shareholders, the Fund may in the future seek to achieve its investment
objective by investing all of its assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. It is expected
that any such investment company would be managed in substantially the same
manner as the Fund.
The initial shareholder of the Fund (who is an affiliate of Federated
Securities Corp.) voted to vest authority to use this investment structure
in the sole discretion of the Directors. No further approval of
shareholders is required. Shareholders will receive at least 30 days prior
notice of any such investment.
In making its determination, the Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiencies. Although it is expected that the
Directors will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will remain the same or be
materially reduced if this investment structure is implemented.
NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for
Shares is determined by dividing the sum of the market value of all
securities and all other assets, less liabilities, by the number of Shares
outstanding. The net asset value for Institutional Shares may exceed that
of Shares 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.
INVESTING IN INSTITUTIONAL SERVICE SHARES

SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or
mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the
telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before
4:00 p.m. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00
p.m. (Eastern time) on the next business day following the order. Federal
funds should be wired as follows: Federated Shareholder Services Company,
c/o State Street Bank and Trust Company, Boston, Massachusetts; Attention:
EDGEWIRE; For Credit to: Federated Total Return Bond Fund - Institutional
Service Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee
or Institution Name; ABA Number 011000028. Shares cannot be purchased by
wire on holidays when wire transfers are restricted. Questions on wire
purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
BY MAIL. To purchase Shares by mail, send a check made payable to
Federated Total Return Bond Fund - Institutional Service Shares to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. Orders by mail are considered received when
payment by check is converted by State Street Bank and Trust Company
(`State Street Bank'') into federal funds. This is normally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000 plus any non-
affiliated bank or broker's fee. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining
all accounts it maintains with the Fund. Accounts established through a
non-affiliated bank or broker may be subject to a smaller minimum
investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who
purchase Shares through a financial intermediary may be charged a service
fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time), on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund Shares. The Fund will
allow such exchanges only upon the prior approval of the Fund and a
determination by the Fund and the adviser that the securities to be
exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, and must be
liquid. The market value of any securities exchanged in an initial
investment, plus any cash, must be at least equal to the minimum investment
in the Fund. The Fund acquires the exchanged securities for investment and
not for resale.
Securities accepted by the Fund will be valued in the same manner as the
Fund values its assets. The basis of the exchange will depend on the net
asset value of Fund Shares on the day the securities are valued. One Share
of the Fund will be issued for the equivalent amount of securities
accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription
or other rights attached to the securities become the property of the Fund,
along with the securities.
If an exchange is permitted, it will be treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Fund Shares, a gain or loss may be realized by the investor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during
the month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Distributions of any net
realized long-term capital gains will be made at least once every twelve
months. Dividends and distributions are automatically reinvested in
additional Shares of the Fund on payment dates at net asset value, unless
cash payments are requested by shareholders on the application or by
writing to Federated Securities Corp.
Dividends are declared just prior to determining net asset value. If an
order for Shares is placed on the preceding business day, Shares purchased
by wire begin earning dividends on the business day wire payment is
received by State Street Bank. If the order for Shares and payment by wire
are received on the same day, Shares begin earning dividends on the next
business day. Shares purchased by check begin earning dividends on the
business day after the check is converted, upon instruction of the transfer
agent, into federal funds.
Shares earn dividends through the business day that proper redemption
instructions are received by State Street Bank.
REDEEMING INSTITUTIONAL SERVICE SHARES

The Fund redeems Shares at their net asset value next determined after the
Fund receives the redemption request. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. Redemptions will be made on days on which the Fund computes
its net asset value. Redemption requests must be received in proper form
and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00
p.m. (Eastern time). The proceeds will normally be wired the following
business day, but in no event more than seven days, to the shareholder's
account at a domestic commercial bank that is a member of the Federal
Reserve System. Proceeds from redemption requests received on holidays
when wire transfers are restricted will be wired the following business
day. Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative
at the telephone number listed on your account statement. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders will be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it
may be liable for losses due to unauthorized or fraudulent telephone
instructions. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a
case should occur, another method of redemption, such as "Written
Requests," should be considered.
WRITTEN REQUESTS
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 2266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: Federated Total Return Bond Fund -
Institutional Service Shares; the account name as registered with the Fund;
the account number; and the number of Shares to be redeemed or the dollar
amount requested. All owners of the account must sign the request exactly
as the Shares are registered. Normally, a check for the proceeds is mailed
within one business day, but in no event more than seven days, after the
receipt of a proper written redemption request. Dividends are paid up to
and including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the
Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other `eligible guarantor institution,'' as defined in
the Securities Exchange Act of 1934. The Fund does not accept signatures
guaranteed by a notary public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may redeem Shares in any account, and pay the proceeds to the shareholder,
if the account balance falls below a required minimum value of $25,000 due
to shareholder redemptions. This requirement does not apply, however, if
the balance falls below $25,000 because of changes in the Fund's net asset
value. Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to
meet the minimum requirement.
FUND INFORMATION

MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs
and for exercising all the Corporation's powers except those reserved for
the shareholders. The Executive Committee of the Board of Directors handles
the Directors' responsibilities between meetings of the Directors.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the
Directors. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .40% of the Fund's average daily net assets. Under the
investment advisory contract, which provides for voluntary waivers of
expenses by the adviser, the adviser may voluntarily waive some or all of
its fee. The adviser can terminate this voluntary waiver of some or all of
its advisory fee at any time at its sole discretion. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Corporation and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of the employees' own interests. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased
or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of the
codes are subject to review by the Directors and could result in severe
penalties.
PORTFOLIO MANAGER'S BACKGROUND. Joseph M. Balestrino is the Fund's
portfolio manager. Mr. Balestrino joined Federated Investors in
1986 and has been a Vice President of the Fund's investment adviser
since 1995. Mr. Balestrino was an Assistant Vice President of the
investment adviser from 1991 until 1995 and served as an Investment
Analyst of the investment adviser from 1989 until 1991. Mr.
Balestrino is a Chartered Financial Analyst and received his
Master's Degree in Urban and Regional Planning from the University
of Pittsburgh.
Mark E. Durbiano is the Fund's sub-portfolio manager for the high
yield corporate bonds asset category. He has performed these duties since
the Fund's inception. Mr. Durbiano joined Federated Investors in 1982 and
has been a Senior Vice President of the Fund's adviser since January 1996.
Mr. Durbiano was a Vice President of the Fund's adviser from 1988 through
1995. Mr. Durbiano is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Pittsburgh.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service Shares. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan
adopted in accordance with Rule 12b-1 under the Investment Company Act of
1940 (the "Plan"), the distributor may be paid a fee by the Fund in an
amount computed at an annual rate of .25% of the average daily net asset
value of Institutional Service Shares of the Fund. The distributor may
select financial institutions such as banks, fiduciaries, custodians for
public funds, investment advisers, and broker/dealers to provide sales
services or distribution-related support services as agents for their
clients or customers.
The Plan is a compensation-type plan. As such, the Fund makes no payments
to the distributor except as described above. Therefore, the Fund does not
pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the
Fund, interest, carrying or other financing charges in connection with
excess amounts expended, or the distributor's overhead expenses. However,
the distributor may be able to recover such amounts or may earn a profit
from future payments made by the Fund under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to .25% of the average daily net
asset value of Shares to obtain certain personal services for shareholders
and to maintain shareholder accounts. From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or
will select financial institutions to perform shareholder services.
Financial institutions will receive fees based upon Shares owned by their
clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments
made pursuant to the Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets,
may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount
of Shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund' s investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors ("Federated Funds") as
specified below:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Federated Funds
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% 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 choose voluntarily to waive a portion of its
fee.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Institutional Service Shares pay their allocable portion of
Corporation and Fund expenses.
The Corporation expenses for which holders of Institutional Service Shares
pay their allocable portion include, but are not limited to: the cost of
organizing the Corporation and continuing its existence; registering the
Corporation with federal and state securities authorities; Directors' fees;
auditors' fees, the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The Fund expenses for which holders of Institutional Service Shares pay
their allocable portion include, but are not limited to: registering the
portfolio and Institutional Service Shares of the portfolio; investment
advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as
may arise from time to time.
At present, the only expenses which are allocated specifically to
Institutional Service Shares as a class are expenses under the
Corporation's Distribution Plan and Shareholder Services Agreement.
However, the Directors reserve the right to allocate certain other expenses
to holders of Institutional Service Shares as they deem appropriate
(`Class Expenses''). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent
as attributable to holders of Institutional Service Shares; fees under the
Corporation's Shareholder Services; printing and postage expenses related
to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to
the Securities and Exchange Commission and to state securities commissions;
expenses related to adminstrative personnel and services as required to
support holders of Institutional Service Shares; and Directors' fees
incurred as a result of issues relating solely to Institutional Service
Shares.
FEDERATED LIFETRACK PROGRAM
The Fund is a member of the Federated LifeTrack Program sold through
financial representatives. Federated LifeTrack Program is an integrated
program of investment options, plan recordkeeping, and consultation
services for 401(k) and other participant-directed benefit and savings
plans. Under the Federated LifeTrack Program, employers or plan trustees
may select a group of investment options to be offered in a plan which also
uses the Federated LifeTrack Program for recordkeeping and administrative
services. Additional fees are charged to participating plans for these
services. As part of the Federated LifeTrack Program, exchanges may
readily be made between investment options selected by the employer or a
plan trustee.
SHAREHOLDER INFORMATION

From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the maximum offering price per share
of the Fund on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect
income actually earned by the Fund and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
Shares are sold without any sales charge or other similar non-recurring
charges.
Total return and yield will be calculated separately for Institutional
Service Shares and Institutional Shares.
From time to time, advertisements for the Fund's Institutional Service
Shares may refer to ratings, rankings, and other information in certain
financial publications and/or compare the Fund's Institutional Service
Shares performance to certain indices.
OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Institutional Shares
which are sold at net asset value to accounts for financial institutions
and are subject to a minimum initial investment of $100,000 over a 90-day
period.
Institutional Shares are distributed with no 12b-1 Plan.
Institutional Shares and Institutional Service Shares are subject to
certain of the same expenses. Expense differences, however, between
Institutional Shares and Institutional Service Shares may affect the
performance of each class.
To obtain more information and a prospectus for Institutional Shares,
investors may call 1-800-341-7400.

APPENDIX

ADDRESSES

Federated Total Return Bond Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

Federated Total Return Bond Fund
(formerly, Federated Government Total Return Fund)
Institutional Service Shares

Prospectus

A Diversified Portfolio of
Federated Total Return Series, Inc.
an Open-End, Management
Investment Company

Prospectus dated September 16, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 31428Q 101
G01721-03-SS (9/96)

FEDERATED TOTAL RETURN BOND FUND
(FORMERLY, FEDERATED GOVERNMENT TOTAL RETURN FUND)
(A Portfolio of Federated Total Return Series, Inc.)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 16,
1996

A. Please insert the following two sentences to the end of the section
entitled `Portfolio Turnover'' on page 6:

`For the period from October 1, 1996 (initial public offering) to January
31, 1997, the portfolio turnover rate was 104%. The portfolio turnover
rate is representative of only four months of activity.''

B. Please insert the following as the second and third paragraphs under
the section entitled `Fund Ownership'' on page 13:

`As of March 3, 1997, the following shareholders of record owned 5% or
more of the outstanding Institutional Shares of the Fund: Union Planters
National Bank, Memphis, TN owned approximately 56,803 shares (9.99%);
Drovers & Company, York, PA owned approximately 58,404 shares (10.27%); and
Federated Securities Corp., Pittsburgh, PA, owned, approximately 439,868
shares (77.36%).
As of March 3, 1997, the following shareholder of record owned 5% or more
of the outstanding Institutional Service Shares of the Fund: Trust Corp.,
Great Falls, MT, owned, approximately 3,426 shares (86.68%).''

C. Please delete the section entitled ``Directors' Compensation,'' which
begins on page 13, and replace it with the following:

`DIRECTORS' COMPENSATION

AGGREGATE
NAME, COMPENSATION TOTAL COMPENSATION PAID
POSITION WITH FROM FROM FUND COMPLEX +
THE CORPORATIONTHE CORPORATION *

John F. Donahue, $0 $0 for the Corporation and
Chairman and Director 56 other investment companies in
the Fund Complex
Thomas G. Bigley,$1008 $108,725 for the Corporation and
Director 56 other investment companies in the
Fund Complex
John T. Conroy, Jr., $1109 $119,615 for the Corporation
and
Director 56 other investment companies in the
Fund Complex
William J. Copeland, $1109 $119,615 for the Corporation
and
Director 56 other investment companies in the
Fund Complex
J. Christopher Donahue, $0 $0 for the Corporation and
Director 18 other investment companies in the
Fund Complex
James E. Dowd, $1109 $119,615 for the Corporation and
Director 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $1008 $108,725 for the Corporation
and
Director 56 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $1109 $119,615 for the Corporation
and
Director 56 other investment companies in the
Fund Complex

Peter E. Madden, $1008 $108,725 for the Corporation and
Director 56 other investment companies in the
Fund Complex
Gregor F. Meyer, $1008 $108,725 for the Corporation and
Director 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $1008 $108,725 for the Corporation
and
Director 56 other investment companies in the
Fund Complex
Wesley W. Posvar,$1008 $108,725 for the Corporation and
Director 56 other investment companies in the
Fund Complex
Marjorie P. Smuts, $1008 $108,725 for the Corporation
and
Director 56 other
investment companies in the Fund Complex

*Information is furnished for the fiscal year ended September 30,1996.
+This information is provided as of the last calendar year.''

D. Please insert the following as the last sentence of the first paragraph
under the section entitled `Advisory Fees'' on page 14:

`For the period from October 1, 1996 (initial public offering) to January
31, 1997, the Fund's Adviser earned $6,484, all of which was
voluntarily waived.''

E. Please insert the following information as the second sentence under
the section entitled `Fund Administration''on page 15:

`For the period from October 1, 1996 (initial public offering) to January
31, 1997, the Fund incurred costs for administrative services of $32,725,
all of which was voluntarily waived.''

F. Please insert the following information as the final sentence to the
third paragraph under the section entitled `Brokerage Transactions'' on
page 15:

`For the period from October 1, 1996 (initial public offering) to January
31, 1997, the Fund paid no brokerage commissions.''

G. Please delete the final paragraph under the section entitled
``Distribution Plan (Institutional Service Shares only) and
Shareholder Services''which begins on page 15 and insert the following
information in its place:

`For the period from October 1, 1996 (initial public offering) to January
31, 1997, payments in the amount of $4 were made to financial institutions
by Institutional Service Shares, pursuant to the Distribution Plan, of
which $3 was voluntarily waived.''
In addition, for this period, payments in the amounts of $4,049 and $4, for
Institutional Shares and Institutional Service Shares, respectively, were
made pursuant to the Shareholder Services Agreement of which $4,049 and $0,
respectively, were voluntarily waived.''

H. Please insert the following information as the final paragraph under
the section entitled `Total Return'' on page 17:

`Cumulative total return reflects the Fund's total performance over a
specified period of time. The Fund's cumulative total return is reflective
of four months of fund activity since the Fund's date of initial public
offering. The Fund's cumulative total returns for the period from October
1, 1996 (initial public offering) to January 31, 1997, were 3.28% for
Institutional Shares and 3.21% Institutional Service Shares.''

I. Please insert the following information as the final paragraph under
the section entitled `Yield'' on page 18:

`The Fund's yield for the thirty-day period ended January 31, 1997, was
7.20% for Institutional Shares and 6.90% for Institutional Service
Shares.''

March 31, 1997

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 31428Q408
Cusip 31428Q309
G01664-03 (3/97)

FEDERATED TOTAL RETURN BOND FUND
(FORMERLY, FEDERATED GOVERNMENT TOTAL RETURN FUND)
(A PORTFOLIO OF FEDERATED TOTAL RETURN SERIES, INC.)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus(es) of Federated Total Return Bond Fund (formerly,
Federated Government Total Return Fund) (the `Fund''), a portfolio of
Federated Total Return Series, Inc. (the `Corporation'') dated
September 16, 1996. This Statement is not a prospectus. You may
request a copy of a prospectus or a paper copy of this Statement, if
you have received it electronically, free of charge by calling
1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 16, 1996

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 31428Q101
31428Q507
G01722-02 (9/96)

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
Adjustable Rate Mortgage Securities ("ARMS") 1
Collateralized Mortgage Obligations ("CMOs") 1
Real Estate Mortgage Investment Conduits
("REMICs") 2
Interest-Only and Principal-Only Investments 2
Privately Issued Mortgage-Related Securities 2
Resets of Interest 2
Caps and Floors 3
Foreign Bank Instruments 3
Futures and Options Transactions 3
Medium Term Notes and Deposit Notes 5
Weighted Average Portfolio Maturity 5
Weighted Average Portfolio Duration 5
When-Issued and Delayed Delivery Transactions 5
Lending of Portfolio Securities 6
Restricted and Illiquid Securities 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 7

FEDERATED TOTAL RETURN SERIES, INC. MANAGEMENT 9

Officers and Directors 9
Fund Ownership 13
Directors' Compensation 13
Director Liability 14
INVESTMENT ADVISORY SERVICES 14

Adviser to the Fund 14
Advisory Fees 14
OTHER SERVICES 15

Fund Administration 15
Custodian and Portfolio Accounting 15
Transfer Agent 15
Independent Auditors 15
BROKERAGE TRANSACTIONS 15

PURCHASING SHARES 15

Distribution Plan (Institutional Service Shares
only )
and Shareholder Services 15
DETERMINING NET ASSET VALUE 16

Determining Market Value of Securities 16
Valuing Municipal Bonds 16
Use of Amortized Cost 16
REDEEMING SHARES 17
Redemption In Kind 17
TAX STATUS 17

The Fund's Tax Status 17
Shareholders' Tax Status 17
TOTAL RETURN 17

YIELD 17

PERFORMANCE COMPARISONS 18

Economic and Market Information 19
ABOUT FEDERATED INVESTORS 19

Mutual Fund Market 19
GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio of Federated Total Return Series, Inc. (the
"Corporation"). The Corporation was incorporated under the laws of the
State of Maryland on October 11, 1993. On March 21, 1995, the name of the
Corporation was changed from "Insight Institutional Series, Inc." to
"Federated Total Return Series, Inc." and the name of the Fund was changed
from "Insight U.S. Government Fund" to "Federated Government Total Return
Fund." ." On May 15, 1996, the name of the Fund was changed from
`Federated Government Total Return Fund'' to ``Federated Total Return Bond
Fund.'' The Articles of Incorporation permit the Corporation to offer
separate portfolios and classes of shares.
Shares of the Fund are offered in two classes, known as Institutional
Shares and Institutional Service Shares (individually and collectively
referred to as `Shares,'' as the context may require). This Statement of
Additional Information relates to the above-mentioned Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide total return. The
investment objective cannot be changed without approval of shareholders.
The investment policies stated below may be changed by the Board of
Directors ("Directors") without shareholder approval. Shareholders will be
notified before any material change in the investment policies becomes
effective.
TYPES OF INVESTMENTS
The Fund invests primarily in a diversified portfolio of debt securities.
Under normal circumstances, the Fund will invest at least 65% of the value
of its total assets in domestic investment grade debt securities.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")
The ARMS in which the Fund invests include, but are not limited to,
securities issued by Government National Mortgage Association, Federal
National Mortgage Association, and Federal Home Loan Mortgage Corporation.
Unlike conventional bonds, ARMS pay back principal over the life of the
ARMS rather than at maturity. Thus, a holder of the ARMS, such as the Fund,
would receive monthly scheduled payments of principal and interest, and may
receive unscheduled principal payments representing payments on the
underlying mortgages. At the time that a holder of the ARMS reinvests the
payments and any unscheduled prepayments of principal that it receives, the
holder may receive a rate of interest which is actually lower than the rate
of interest paid on the existing ARMS. As a consequence, ARMS may be a less
effective means of "locking in" long-term interest rates than other types
of fixed income securities. ARMS may also be collateralized by whole loans
or private pass-through securities.
Like other fixed income securities, the market value of ARMS will generally
vary inversely with changes in market interest rates. Thus, the market
value of ARMS generally declines when interest rates rise and generally
rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g., investments with
comparable maturities) because, as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payments may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The following example illustrates how mortgage cash flows are prioritized
in the case of CMOs; most of the CMOs in which the Fund invests use the
same basic structure:
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities.
The first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date, and the final class (Z bond) typically
receives any excess income from the underlying investments after payments
are made to the other classes and receives no principal or interest
payments until the shorter maturity classes have been retired, but then
receives all remaining principal and interest payments;
(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities; and
(3) The classes of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity class (or A bond).
When those securities are completely retired, all principal payments are
then directed to the next shortest-maturity security (or B bond). This
process continues until all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata, as
with pass-through securities, the cash flows and average lives of CMOs are
more predictable, and there is a period of time during which the investors
in the longer-maturity classes receive no principal paydowns. The interest
portion of these payments is distributed by the Fund as income, and the
capital portion is reinvested.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class mortgage-backed securities which
qualify and elect treatment as such under provisions of the Internal
Revenue Code, as amended. Issuers of REMICs may take several forms, such as
trusts, partnerships, corporations, associations, or segregated pools of
mortgages. Once REMIC status is elected and obtained, the entity is not
subject to federal income taxation. Instead, income is passed through the
entity and is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of "regular
interests," some of which may offer adjustable rates of interest, and a
single class of "residual interests." To qualify as a REMIC, substantially
all the assets of the entity must be in assets directly or indirectly
secured principally by real property.
INTEREST-ONLY AND PRINCIPAL-ONLY INVESTMENTS
Some of the securities purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or
"SMBSs"). SMBSs are usually structured with two classes and receive
different proportions of the interest and principal distributions on the
pool of underlying mortgage-backed securities. Due to the possibility of
prepayments on the underlying mortgages, SMBSs may be more interest-rate
sensitive than other securities purchased by the Fund. If prevailing
interest rates fall below the level at which SMBSs were issued, there may
be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs (the principal-only or
"PO" class) and a reduction in the amount of payments made to holders of
interest-only SMBSs (the interest-only or "IO" class). Because the yield to
maturity of an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage-backed
securities, it is possible that the Fund might not recover its original
investment on interest-only SMBSs if there are substantial prepayments on
the underlying mortgages. The Fund's inability to fully recoup its
investments in these securities as a result of a rapid rate of principal
prepayments may occur even if the securities are rated by an NRSRO.
Therefore, interest-only SMBSs generally increase in value as interest
rates rise and decrease in value as interest rates fall, counter to changes
in value experienced by most fixed income securities.
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES
Privately issued mortgage-related securities generally represent an
ownership interest in federal agency mortgage pass-through securities such
as those issued by Government National Mortgage Association as well as
those issued by non-government related entities. The terms and
characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools. The market for such mortgage-related securities has
expanded considerably since its inception. The size of the primary issuance
market and the active participation in the secondary market by securities
dealers and other investors makes government-related and non-government
related pools highly liquid.
RESETS OF INTEREST
The interest rates paid on the ARMS, CMOs, and REMICs in which the Fund
invests generally are readjusted at intervals of one year or less to an
increment over some predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those
derived from a calculated measure, such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the
one-year and five-year constant maturity Treasury Note rates, the three-
month Treasury Bill rate, the 180-day Treasury Bill rate, rates on longer-
term Treasury securities, the National Median Cost of Funds, the one-month
or three-month London Interbank Offered Rate (LIBOR), the prime rate of a
specific bank, or commercial paper rates. Some indices, such as the one-
year constant maturity Treasury Note rate, closely mirror changes in market
interest rate levels.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence, ARMS
which use indices that lag changes in market rates should experience
greater price volatility than adjustable rate mortgage securities that
closely mirror the market.

CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval, and (2) over the
life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These payment
caps may result in negative amortization.
The value of mortgage securities in which the Fund invests may be affected
if market interest rates rise or fall faster and farther than the allowable
caps or floors on the underlying residential mortgage loans. Additionally,
even though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which the Fund invests
to be shorter than the maturities stated in the underlying mortgages.
FOREIGN BANK INSTRUMENTS
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Yankee Certificates of Deposit ("Yankee CDs"), and Europaper are
subject to somewhat different risks than domestic obligations of domestic
issuers. Examples of these risks include international, economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholdings
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing bank, and the possible impact of interruptions
of the flow of international currency transactions. Different risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan requirements, loan limitations,
examinations, accounting, auditing, and recordkeeping and the public
availability of information. These factors will be carefully considered by
the Fund's adviser in selecting investments for the Fund.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying
and selling financial futures contracts, buying put options on portfolio
securities and listed put options on futures contracts, and writing call
options on futures contracts. The Fund may also write covered call options
on portfolio securities to attempt to increase its current income. The Fund
currently does not intend to invest more than 5% of its total assets in
options transactions.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery
of the security ("going long") at a certain time in the future. In the
fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in
rates means a rise in price. In order to hedge its holdings of fixed
income securities against a rise in market interest rates, the Fund
could enter into contracts to deliver securities at a predetermined
price (i.e., "go short") to protect itself against the possibility that
the prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would agree to purchase securities
in the future at a predetermined price (i.e., "go long") to hedge
against a decline in market interest rates.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures
contracts.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
The Fund would purchase put options on futures contracts to protect
portfolio securities against decreases in value resulting from an
anticipated increase in market interest rates. Generally, if the hedged
portfolio securities decrease in value during the term of an option,
the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally
close out its option by selling an identical option. If the hedge is
successful, the proceeds received by the Fund upon the sale of the
second option will be large enough to offset both the premium paid by
the Fund for the original option plus the decrease in value of the
hedged securities.
Alternatively, the Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the
option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract
in return for payment of the strike price. If the Fund neither closes
out nor exercises an option, the option will expire on the date
provided in the option contract, and the premium paid for the contract
will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts to hedge its portfolio against
an increase in market interest rates. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As market interest rates rise, causing the prices
of futures to go down, the Fund's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can offset the drop in value of the Fund's fixed income
portfolio which is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund will then offset the
decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will
take prompt action to close out a sufficient number of open contracts
to bring its open futures and options positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash
or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that
futures contract initial margin does not involve the borrowing of funds
by the Fund to finance the transactions. Initial margin is in the
nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark-to-
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. A
put option gives the Fund, in return for a premium, the right to sell
the underlying security to the writer (seller) at a specified price
during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may also write covered call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of
the option during the option period to deliver the underlying security
upon payment of the exercise price. The Fund may only sell call options
either on securities held in its portfolio or on securities which it
has the right to obtain without payment of further consideration (or
has segregated cash in the amount of any additional consideration).
MEDIUM TERM NOTES AND DEPOSIT NOTES
Medium term notes ("MTNs") and Deposit Notes are similar to corporate debt
obligations as described in the prospectus. MTNs and Deposit Notes trade
like commercial paper, but may have maturities from 9 months to ten years.
WEIGHTED AVERAGE PORTFOLIO MATURITY
The Fund will determine its dollar-weighted average portfolio maturity by
assigning a `weight'' to each portfolio security based upon the pro rata
market value of such portfolio security in comparison to the market value
of the entire portfolio. The remaining maturity to each portfolio security
is then multiplied by its weight, and the results are added together to
determine the weighted average maturity of the portfolio. For purposes of
calculating its dollar-weighted average portfolio maturity, the Fund will
treat (a) asset-backed securites as having a maturity equal to their
estimated weighted-average maturity and (b) variable and floating rate
instruments as having a remaining maturity commensurate with the period
remaining until the next scheduled adjustment to the instrument's interest
rate. The average maturity of asset-backed securities will be calculated
based upon assumptions established by the investment adviser as to the
probable amount of the principal prepayments weighted by the period until
such prepayments are expected to be received.
Fixed rate securities hedged with interest rate swaps or caps will be
treated as floating or variable rate securities based upon the interest
rate index of the swap or cap; floating and variable rate securities hedged
with interest rate swaps or floors will be treated as having a maturity
equal to the term of the swap or floor. In the event that the Fund holds
an interest rate swap, cap or floor that is not hedging another portfolio
security, the swap, cap or floor will be treated as having a maturity equal
to its term and a weight equal to its notional principal amount of such
term.
WEIGHTED AVERAGE PORTFOLIO DURATION
Duration is a commonly used measure of the potential volatility of the
price of a debt security, or the aggregate market value of a portfolio of
debt securities, prior to maturity. Duration measures the magnitude of the
change in the price of a debt security relative to a given change in the
market rate of interest. The duration of a debt security depends upon three
primary variables: the security's coupon rate, maturity date and the level
of market interest rates for similar debt securities. Generally, debt
securities with lower coupons or longer maturities will have a longer
duration than securities with higher coupons or shorter maturities.
Duration is calculated by dividing the sum of the time-weighted values of
cash flows of a security or portfolio of securities, including principal
and interest payments, by the sum of the present values of the cash flows.
Certain debt securities, such as asset-backed securities, may be subject to
prepayment at irregular intervals. The duration of these instruments will
be calculated based upon assumptions established by the investment adviser
as the probable amount and sequence of principal prepayments.
The duration of interest rate agreements, such as interest rates swaps,
caps and floors, is calculated in the same manner as other securities.
However, certain interest rate agreements have negative durations, which
the Fund may use to reduce its weighted average portfolio duration.
Mathematically, duration is measured as follows:
Duration = PVCF1(1) + PVCF2(2) + PVCF3(3) +
... + PVCFn(n)
PVTCF PVTCF PVTCF PVTCF
where
PVCTFt = the present value of the cash flow in period t discounted at
the prevailing yield-to-maturity
t = the period when the cash flow is received
n = remaining number of periods until maturity
PVTCF = total present value of the cash flow from the bond where the
present value is determined using the prevailing yield-to-maturity.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. Settlement dates may be a month
or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices. No fees or
other expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to
be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction
has been settled. The Fund does not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause the segregation
of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain
restricted securities is permitted under the Securities and Exchange
Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a non-
exclusive safe harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws.
The Rule provides an exemption from registration for resales of otherwise
restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for
securities eligible for resale under Rule 144A. The Fund believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities to the Directors. The Directors consider the
following criteria in determining the liquidity of certain restricted
securities:
othe frequency of trades and quotes for the security;
othe number of dealers willing to purchase or sell the security and
the number of other potential buyers;
odealer undertakings to make a market in the security; and
othe nature of the security and the nature of the marketplace trades.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that a defaulting seller
files for bankruptcy or becomes insolvent, disposition of securities by the
Fund might be delayed pending court action. The Fund believes that under
the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse
repurchase transaction is similar to borrowing cash. In a reverse
repurchase agreement the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in
cash, and agrees that on a stipulated date in the future, the Fund will
repurchase the portfolio instrument by remitting the original consideration
plus interest at an agreed upon rate. The use of reverse repurchase
agreements may enable the Fund to avoid selling portfolio instruments at a
time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will
be able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%.

INVESTMENT LIMITATIONS

The following limitations are fundamental [except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, or assets exempted
by the Securities and Exchange Commission) in an open-end investment
company with substantially the same investment objectives]:
SELLING SHORT OR BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of portfolio securities. The
deposit or payment by the Fund of initial or variation margin in
connection with 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 directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including the
amount 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 to facilitate management
of the Fund by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. For purposes of this limitation, the
following will not be deemed to be pledges of the Fund's assets: margin
deposits for the purchase and sale of financial futures contracts and
related options, and segregation or collateral arrangements made in
connection with options activities or the purchase of securities on a
when-issued basis.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, or securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result, more
than 5% of the value of its total assets would be invested in the
securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the 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, commodity contracts, or
commodity futures contracts except to the extent that the Fund may
engage in transactions involving financial futures contracts or options
on financial futures contracts.
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 securities in accordance with its
investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding U.S.
government obligations, money market instruments, variable rate demand
notes, bonds, debentures, notes, certificates of indebtedness, or other
debt securities, entering into repurchase agreements, or engaging in
other transactions where permitted by the Fund's investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry (other than securities issued by the U.S.
government, its agencies or instrumentalities).
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
The above limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors
without shareholder approval [except that no investment limitation of
the Fund shall prevent the Fund from investing substantially all of its
assets (except for assets which are not considered ``investment
securities'' under the Investment Company Act of 1940, or assets
exempted by the Securities and Exchange Commission) in an open-end
investment company with substantially the same investment objectives].
Shareholders will be notified before any material changes in these
limitations become effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in securities subject to restrictions on resale under the Securities
Act of 1933, except for commercial paper issued under Section 4(2) of
the Securities Act of 1933 and certain other restricted securities
which meet the criteria for liquidity as established by the Directors.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, interest rate swaps,
non-negotiable fixed time deposits with maturities over seven days, and
certain restricted securities not determined by the Directors to be
liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in securities of companies, including their predecessors, that have
been in operation for less than three years. With respect to asset-
backed securities, the Fund will treat the originator of the asset pool
as the company issuing the security for purposes of determining
compliance with this limitation.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest
in the securities of issuers which invest in or sponsor such programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, invest no more than 5% of its total assets in any one
investment company, and invest no more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
or acquisition of assets.
The Fund reserves the right to invest up to 100% of its assets in one
or more investment companies, but would do so only after receipt of an
exemptive order from the Securities and Exchange Commission permitting
this. If, in the future, the Fund does receive such an exemptive
order, the Fund would notify shareholders of its intent to increase the
level of investment in other investment companies. However,
shareholder approval will not be required to effect any such change in
this investment policy.
DEALING IN PUTS AND CALLS
The Fund will not purchase puts, calls, straddles, spreads, or any
combination of them, if by reason thereof the value of such securities
would exceed 5% of its total assets.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS
OF THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if
the officers and Directors of the Corporation or the Fund's investment
adviser, owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund does not expect to borrow money, pledge securities or engage in
reverse repurchase agreements during the coming fiscal year.
To comply with registration requirements in certain states, the Fund (1)
will limit the aggregate value of the assets underlying covered call
options or put options written by the Fund to not more than 25% of its net
assets, (2) will limit the premiums paid for options purchased by the Fund
to 5% of its net assets, and (3) will limit the margin deposits on futures
contracts entered into by the Fund to 5% of its net assets. (If state
requirements change, these restrictions may be revised without shareholder
notification.)
For purposes of its policies and limitations, 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 items."
FEDERATED TOTAL RETURN SERIES, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with Federated Total Return Series, Inc. and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Corporation .

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director or Trustee of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Director
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Director of the Corporation.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Miller, Ament, Henny & Kochuba; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
New port, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

* This Directors is deemed to be an "interested person" as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Directorss handles the responsibilities of the Board between
meetings of the Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Group of
Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated ARMS Fund; Federated Equity Funds; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust;, Federated U.S. Government Bond
Fund; Federated U. S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 5-10 Years; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities,
Inc,; High Yield Cash Trust; Federated Insurance Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Targeted Duration Trust; Tax-Free Instruments Trust; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligation; The Virtus
Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund`s
outstanding shares.
DIRECTORS' COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION* FROM FUND COMPLEX +

JOHN F. DONAHUE, $ 0 $0 FOR THE CORPORATION AND
CHAIRMAN AND DIRECTOR 68 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

THOMAS G. BIGLEY,++ $750 $20,688 FOR THE CORPORATION AND
DIRECTOR 49 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

JOHN T. CONROY, JR., $825 $117,202 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

WILLIAM J. COPELAND, $825 $117,202 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

J. CHRISTOPHER DONAHUE, $ 0 $0 FOR THE CORPORATION AND
DIRECTOR 68 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

++
Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October
1, 1995, he was appointed a Trustee on 15 additional Federated Funds.

JAMES E. DOWD, $825 $117,202 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

LAWRENCE D. ELLIS, M.D., $750 $106,460 FOR THE CORPORATION
AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

EDWARD L. FLAHERTY, JR., $825 $117,202 FOR THE CORPORATION
AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

PETER E. MADDEN, $750 $90,563 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

GREGOR F. MEYER, $750 $106,460 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

JOHN E. MURRAY, JR., $750 $0 FOR THE CORPORATIONAND
DIRECTOR 69 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

WESLEY W. POSVAR, $750 $106,460 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

MARJORIE P. SMUTS, $750 $106,460 FOR THE CORPORATION AND
DIRECTOR 64 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX

*Information is furnished for the fiscal year ended September 30, 1995.
+The information is provided for the last calendar year.
DIRECTOR LIABILITY
The Corporation's Articles of Incorporation provide that the Directors will
not be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It
is a subsidiary of Federated Investors. All of the voting securities of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund or any 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.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2- 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1- 1/2%
per year of the remaining average net assets, the Adviser will
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be waived by the Adviser will be
limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Fund. Federated Services Company,
Pittsburgh, Pennsylvania, provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments. The fee paid
for this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.
Transfer Agent
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based upon the
size, type and number of accounts and transactions made by shareholders.
Independent Auditors
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
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. In working with dealers, 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. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Directorss.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and 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 provided by brokers and dealers may be used by the
adviser or by affiliates in advising the Fund and other accounts. To the
extent that receipt of these services may supplant 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 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.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
PURCHASING SHARES

Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares of the Fund is explained
in the prospectus under "Investing in the Fund."
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES ONLY) AND SHAREHOLDER
SERVICES
As explained in the respective prospectuses, with respect to Shares of the
Fund, the Fund has adopted a Shareholder Services Agreement, and, with
respect to Institutional Service Shares, the Fund has adopted a
Distribution Plan.
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations and addresses.
By adopting the Plan, the Directors expect that the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended September 30, 1995, the Fund paid no fees under a
Distribution Plan. In addition, for the fiscal year ended September 30,
1995, the Fund paid no shareholder service fees.
DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's securities, other than options, are determined
as follows:
oas provided by an independent pricing service;
ofor short-term obligations, according to the mean bid and asked
prices, as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less
at the time of purchase, at amortized cost unless the Directors
determine this is not fair value; or
oat fair value as determined in good faith by the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider: yield,
quality, coupon rate, maturity, type of issue, trading characteristics, and
other market data.
The Fund will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
option trading on such exchanges unless the Directors determine in good
faith that another method of valuing option positions is necessary.
VALUING MUNICIPAL BONDS
The Directors use an independent pricing service to value municipal bonds.
The independent pricing service takes into consideration yield, stability,
risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
The Directors have decided that the fair value of debt securities
authorized to be purchased by the Fund with remaining maturities of 60 days
or less at the time of purchase shall be their amortized cost value, unless
the particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Directors.
REDEEMING SHARES

The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, under which a Fund is obligated to redeem shares for
any one shareholder solely in cash only up to the lesser of $250,000 or 1%
of the Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payments should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way that net asset value is determined. The
portfolio instruments will be selected in a manner that the Directors deem
fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the
Fund must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. No portion of any income
dividend paid by the Fund is eligible for the dividends received deduction
available to corporations.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund shares.
TOTAL RETURN

The average annual total return for the Fund 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 net asset value 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, adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD

The yield of the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This value is annualized using semi-
annual compounding. This means that the amount of income generated during
the thirty-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio securities;
ochanges in the Fund expenses; and
ovarious other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any 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:
oRUSSELL ACTIVE SECTOR ROTATION ACCOUNTS UNIVERSE includes
portfolios that change interest rate exposure relative to the Lehman
Brothers Aggregate Bond Index or other broad market indexes, with
changes in portfolio interest rate sensitivity limited to
approximately plus or minus 20% index duration. Durations have
typically been 3.5 to 6 years. Primary emphasis is on selecting
undervalued sectors or issues. Includes separate accounts, pooled
funds, or mutual funds managed by investment advisors, banks or
insurance companies.
oLIPPER 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 offering price over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the "Intermediate
Investment Grade Debt " category in advertising and sales
literature.
oLEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues, which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine
years. Tracked by Lehman Brothers, Inc., the index calculates total
returns for one-month, three-month, twelve-month, and ten-year
periods and year-to-date.
oLEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is an
unmanaged index comprised of all the bonds issued by the Lehman
Brothers Government/Corporate Bond Index with maturities between 1
and 9.99 years. Total return is based on price
appreciation/depreciation and income as a percentage of the original
investment. Indices are rebalanced monthly by market
capitalization.
oLEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total
return comprises price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced
monthly by market capitalization.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive
Vice President, oversees Federated's domestic fixed income management.
Henry A. Frantzen, Executive Vice President, oversees the management of
Federated's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of applications, 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 advisors. The marketing effort to these
institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 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 Mark R. Gensheimer, Executive Vice President, Bank Marketing
& Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage
firms nationwide--including 200 New York Stock Exchange firms--supported
by more wholesalers than any other mutual fund distributor.
Federated's service to financial professionals and institutions has
earned it high rankings in several DALBAR Surveys. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer
Division.
*source: Investment Company Institute

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:
(a) Financial Statements filed in Part A.
(b) Exhibits:
(1)(i) Conformed copy of Articles of
Incorporation (1);
(ii) Conformed copy of Articles of Amendment
of Articles of Incorporation (2);
(2) Copy of By-Laws (1);
(3) Not Applicable;
(4) Copy of Specimen Certificate for Shares of
Capital Stock of the Registrant(10);
(5)(i) Copy of Investment Advisory Contract and
conformed copies of Exhibits A and B of
Investment Advisory Contract (7);
(ii) Conformed copies of Exhibits D and E of
Investment Advisory Contract;+
(6) (i) Copy of Distributor's Contract and
Conformed copies of Exhibits A, B, C, and D to
Distributor's Contract (4);
(ii) Copy of Distributor's Contract and
Conformed copies of Exhibits E and F to
Distributor's Contract(10);
(iii) Conformed copies of Exhibits G and H to
Distributor's Contract;+
(iv) 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 Numbers 33-38550 and 811-6269);

+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 25, 1993. (File Nos.
33-50773 and 811-7115).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 21, 1993. (File Nos. 33-
50773 and 811-7115).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 27, 1994. (File Nos. 33-50773
and 811-7115).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No.4 on Form N-1A filed June 6, 1995. (File Nos. 33-50773
and 811-7115).
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No.9 on Form N-1A filed November 27, 1996.
(File Nos. 33-50773 and 811-7115).

(7) Not Applicable;
(8) Conformed copy of the Custodian Agreement of
the Registrant (4);
(9)(i) Conformed copy of Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement
Agreement of the Registrant (4);
(ii) Conformed copy of Administrative
Services Agreement (4);
(iii) The responses described in Item 24 (b) (6) are
hereby incorporated by reference;
(iv) Form of Shareholder Services Agreement of the
Registrant (8);
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered (2);
(11) Conformed copy of Consent of Independent
Auditors (8);
(12) Not Applicable;
(13) Conformed copy of Initial Capital
Understanding (3);
(14) Not Applicable;
(15) (i) Conformed copy of Distribution Plan
including Exhibits A and B;+
(ii) Conformed copy of Exhibits C to
Distribution Plan (10);
(ii) Conformed copy of Exhibit D and E to
Distribution Plan;+
(iii) The responses described in Item 24(b)(6)
are hereby incorporated by reference;
(16) Not Applicable
(17) Copy of Financial Data Schedule;+
(18) 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);
(19) (i) Conformed copy of Power of Attorney;+
(ii) Conformed copy of Limited Power of
Attorney(10);

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 21, 1993. (File Nos. 33-
50773 and 811-7115).
(3) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed January 13, 1994. (File Nos. 33-
50773 and 811-7115).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 27, 1994. (File Nos. 33-50773
and 811-7115).
(8) Response is incorporated by reference to Registrant's Post-Effective
Amendment No.5 on Form N-1A filed November 22, 1995. (File Nos. 33-
50773 and 811-7115).
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No.9 on Form N-1A filed November 27, 1996. (File Nos. 33-
50773 and 811-7115).

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of March 3, 1997
-

Shares of capital stock
($0.001 per Share par value)
Federated Total Return Bond Fund
Institutional Shares 1,014
Institutional Service Shares 1,006
Federated Total Return Limited Duration Fund
Institutional Shares 1,006
Institutional Service Shares 1,005
Federated Total Return Government Fund
Institutional Shares 5
Institutional Service Shares 5
Federated Limited Duration Government Fund
Institutional Shares 5
Institutional Service Shares 5

Item 27. Indemnification: (1)

Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled "Fund Information - Management
of the Corporation" 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 "Federated Total Return Series, Inc. Management -
Officers and Directors." The remaining Trustee of the investment
adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson,
(Partner, Wilson, Holbrook and Bayard), 107 W. Market Street,
Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are: William D.
Dawson, III, Henry A. Frantzen, J. Thomas Madden, and Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, Drew J. Collins, Jonathan
C. Conley and J. Alan Minteer, Senior Vice Presidents; J. Scott
Albrecht, Joseph M. Balestrino, Randall A. Bauer, David A.
Briggs, Kenneth J. Cody, Deborah A. Cunningham, Michael P.
Donnelly, Linda A. Duessel, Mark E. Durbiano, Kathleen M. Foody-
Malus, Thomas M. Franks, Edward C. Gonzales, Timothy E. Keefe,
Stephen A. Keen, Mark S. Kopinski, Jeff A. Kozemchak, Marian R.
Marinack, Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D. Roberge,
Frank Semack, William F. Stoltz, Sandra L. Weber, and
Christopher H. Wiles, Vice Presidents;Thomas R. Donahue,
Treasurer; and Stephen A. Keen, Secretary. The business address
of each of the Officers of the investment adviser is Federated
Investors Tower, Pittsburgh, PA 15222-3779. These individuals
are also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.

Item 29. Principal Underwriters:

(a) 111 Corcoran Funds; Arrow Funds; Automated Government Money Trust;
BayFunds; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; 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 Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund
for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds;
RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Biltmore Funds; The
Biltmore Municipal Funds; The Monitor Funds; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The Virtus Funds; Tower Mutual
Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Vision Group of Funds, Inc.; Wesmark Funds; and World
Investment Series, Inc.

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

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive ViceExecutive
Federated Investors Tower President, Federated, Vice President
Pittsburgh, PA 15222-3779 Securities Corp.

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

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

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

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

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

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

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

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

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

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

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

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

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

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

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

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

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

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

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

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

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

Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

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

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

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

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

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Item 30. 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
.........................Pittsburgh, PA 15222-3779

Federated Services Company Federated Investors Tower
Transfer Agent, Dividend.Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Recordkeeper

Federated Administrative Federated Investors Tower
Services.................Pittsburgh, PA 15222-3779

Federated Management.....Federated Investors Tower
Investment Adviser.......Pittsburgh, PA 15222-3779

State Street Bank and....P.O. Box 8600
Trust Company............Boston, Massachusetts 02266
Custodian

Item 31. Management Services: Not applicable.

Item 32. 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.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.

Registrant hereby undertakes to file a post-effective amendment
on behalf of Federated Total Return Government Fund and Federated
Limited Duration Government Fund, using financial statements for
Federated Total Return Government Fund and Federated Limited
Duration Government Fund, which need not be certified, within
four to six months from the effective date of Post-Effective
Amendment No. 8.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED TOTAL RETURN
SERIES, INC. (formerly, Insight Institutional Series, Inc.) certifies that
it meets all of the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(a) 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, thereunto duly authorized, all in
the City of Pittsburgh and Commonwealth of Pennsylvania, on the 31st day of
March, 1997.

FEDERATED TOTAL RETURN SERIES, INC.
(formerly, Insight Institutional Series, Inc.)

BY: /s/ J. Crilley Kelly
J. Crilley Kelly, Assistant Secretary
Attorney in Fact for John F. Donahue
March 31, 1997

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/ J. Crilley Kelly
J. Crilley Kelly Attorney In Fact March 31, 1997
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Director March 31, 1997
(Chief Executive Officer)

Glen R. Johnson* President

J. Christopher Donahue* Executive Vice President
and Director

Edward C. Gonzales Executive Vice President

John W. McGonigle* Executive Vice President,
Treasurer and Secretary (Principal
Financial and
Accounting Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

William J. Copeland* Director

James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director

Edward L. Flaherty, Jr.* Director

Peter E. Madden* Director

Gregor F. Meyer* Director

John E. Murray, Jr.* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

* By Power of Attorney

Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED TOTAL RETURN
SERIES, INC. and the Deputy General Counsel of Federated Services Company,
and each of them, their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for them and in their names,
place and stead, in any and all capacities, to sign any and all documents
to be filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.

SIGNATURES TITLE DATE

/s/ John F. Donahue Chairman and Directors March 4, 1997
John F. Donahue (Chief Executive Officer)

/s/Glen R. Johnson President March 4, 1997
Glen R. Johnson

/s/ J. Christopher Donahue Executive Vice President March 4, 1997
J. Christopher Donahue and Director

/s/ John W. McGonigle Treasurer, Executive March 4, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and Accounting
Officer)

/s/ Thomas G. Bigley Director March 4, 1997
Thomas G. Bigley

/s/ John T. Conroy, Jr. Director March 4, 1997
John T. Conroy, Jr.

/s/ William J. Copeland Director March 4, 1997
William J. Copeland

/s/ James E. Dowd. Director March 4, 1997
James E. Dowd

/s/ Lawrence D. Ellis, M.D. Director March 4, 1997
Lawrence D. Ellis, M.D.

/s/ Edward L. Flaherty, Jr. Director March 4, 1997
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Director March 4, 1997
Peter E. Madden

/s/ Gregor F. Meyer Director March 4, 1997
Gregor F. Meyer

/s/ John E. Murray Director March 4, 1997
John E. Murray

/s/ Wesley W. Posvar Director March 4, 1997
Wesley W. Posvar

/s/ Marjorie P. Smuts Director March 4, 1997
Marjorie P. Smuts

Sworn to and subscribed before me this 4th day of March, 1997

/s/ Marie M. Hamm
Marie M. Hamm

Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

EXHIBIT D
to the
Investment Advisory Contract

Federated Limited Duration Government Fund

For all services rendered by Adviser hereunder, the above-named Fund
of the Corporation shall pay to Adviser and Adviser agrees to accept as
full compensation for all services rendered hereunder, an annual investment
advisory fee equal to .40 of 1% of the average daily net assets of the
Fund.

The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .40 of 1% applied to
the daily net assets of the Fund.

The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this December 1, 1996.

Attest: Federated Management

/s/ Stephen A. Keen By/s/ William D. Dawson, III
Secretary Executive Vice President

Attest: Federated Total Return Series, Inc.

/s/ J. Crilley Kelly By: /s/ John W. McGonigle
Assistant Secretary Vice President

Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

EXHIBIT E
to the
Investment Advisory Contract

Federated Total Return Government Fund

The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .40 of 1% applied to
the daily net assets of the Fund.

The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this December 1, 1996.

Attest: Federated Management

/s/ Stephen A. Keen By/s/ William D. Dawson, III
Secretary Executive Vice President

Attest: Federated Total Return Series, Inc.

/s/ J. Crilley Kelly By: /s/ John W. McGonigle
Assistant Secretary Vice President

Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit G
to the
Distributor's Contract

Federated Limited Duration Government Fund
Institutional Shares

Federated Total Return Government Fund
Institutional Shares

In consideration of the mutual covenants set forth in the
Distributor's Contract dated December 1, 1993 between Federated Total
Return Series, Inc. and Federated Securities Corp., Federated Total
Return Series, Inc. executes and delivers this Exhibit on behalf of
the Funds, and with respect to the Institutional Shares thereof, first
set forth in this Exhibit.
Witness the due execution hereof this 1st day of December, 1996.

ATTEST: FEDERATED TOTAL RETURN SERIES, INC.

/s/ John W. McGonigle By:/s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ Byron F. Bowman By:/s/ David M. Taylor
Secretary Executive Vice President

(SEAL)

Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit H
to the
Distributor's Contract

FEDERATED TOTAL RETURN SERIES, INC.
Federated Limited Duration Government Fund
Institutional Service Shares
Federated Total Return Government Fund
Institutional Service Shares

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated December 1, 1993 between Federated Total
Return Series, Inc. and Federated Securities Corp. with respect to the
Classes of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Classes
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set forth
in the respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of the
Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate proration
of any fee payable on the basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Financial Institutions a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be
paid shall be determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation on
a quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated December 1, 1993, between Federated Total
Return Series, Inc. and Federated Securities Corp., Federated Total
Return Series, Inc. executes and delivers this Exhibit on behalf of the
Funds, and with respect to the Institutional Service Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 1st day of December, 1996.

ATTEST: Federated Total Return Series, Inc.

/s/ John W. McGonigle By:/s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ Byron F. Bowman By: /s/ David M. Taylor
Secretary Executive Vice President

(SEAL)

Exhibit 15 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT D

to the

Distribution Plan

FEDERATED TOTAL RETURN SERIES, INC.

FEDERATED LIMITED DURATION GOVERNMENT FUND
INSTITUTIONAL SERVICE SHARES

This Distribution Plan is adopted by Federated Total Return Series,
Inc. with respect to the Class of Shares of the portfolio of the
Corporation set forth above.

In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net assets value of the Institutional Service Shares of
Federated Limited Duration Government Fund held during the month.

Witness the due execution hereof this 1st day of December, 1996.

Federated Total Return Series, Inc.

By:/s/ Glen R. Johnson
President

Exhibit 15 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT E

to the

Distribution Plan

FEDERATED TOTAL RETURN SERIES, INC.

FEDERATED TOTAL RETURN GOVERNMENT FUND
INSTITUTIONAL SERVICE SHARES

This Distribution Plan is adopted by Federated Total Return Series,
Inc. with respect to the Class of Shares of the portfolio of the
Corporation set forth above.

In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net assets value of the Institutional Service Shares of
Federated Total Return Government Fund held during the month.

Witness the due execution hereof this 1st day of December, 1996.

Federated Total Return Series, Inc.
By:/s/ Glen R. Johnson
President

Exhibit 15 under Form N-1A
Exhibit 1 under Item 601/Reg. S-Ks

FEDERATED TOTAL RETURN SERIES, INC.
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of June 1, 1996, by the
Board of Directors of Federated Total Return Series, Inc. (the
"Corporation"), a Maryland corporation with respect to certain classes
of shares ("Classes") of the portfolios of the Corporation (the "Funds")
set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("Act"), so as to allow the Corporation to make
payments as contemplated herein, in conjunction with the distribution of
Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of Federated Securities
Corp. ("FSC") principally intended to result in the sale of Shares to
include: (a) providing incentives to financial institutions ("Financial
Institutions") to sell Shares; (b) advertising and marketing of Shares
to include preparing, printing and distributing prospectuses and sales
literature to prospective shareholders and with Financial Institutions;
and (c) implementing and operating the Plan. In compensation for
services provided pursuant to this Plan, FSC will be paid a fee in
respect of the following Classes set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will be made pursuant to
the "Distributor's Contract" entered into by the Corporation and FSC.
Any payments made by FSC to Financial Institutions with funds received
as compensation under this Plan will be made pursuant to the "Financial
Institution Agreement" entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole discretion, the Financial
Institutions to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Financial Institution Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC shall
prepare and furnish to the Board of Directors of the Corporation, and
the Board of Directors shall review, a written report of the amounts
expended under the Plan and the purpose for which such expenditures were
made.
6. This Plan shall become effective with respect to each Class (i) after
approval by majority votes of: (a) the Corporation's Board of Directors;
(b) the members of the Board of the Corporation who are not interested
persons of the Corporation and have no direct or indirect financial
interest in the operation of the Corporation's Plan or in any related
documents to the Plan ("Disinterested Directors"), cast in person at a
meeting called for the purpose of voting on the Plan; and (c) the
outstanding voting securities of the particular Class , as defined in
Section 2(a)(42) of the Act and (ii) upon execution of an exhibit
adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to each Class presently
set forth on an exhibit and any subsequent Classes added pursuant to an
exhibit during the initial year of this Plan for the period of one year
from the date set forth above and may be continued thereafter if this
Plan is approved with respect to each Class at least annually by a
majority of the Corporation's Board of Directors and a majority of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting on such Plan. If this Plan is adopted with respect to
a Class after the first annual approval by the Directors as described
above, this Plan will be effective as to that Class upon execution of
the applicable exhibit pursuant to the provisions of paragraph 6(ii)
above and will continue in effect until the next annual approval of this
Plan by the Directors and thereafter for successive periods of one year
subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Directors of the Corporation and of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting
on it.
9. This Plan may not be amended in order to increase materially the costs
which the Classes may bear for distribution pursuant to the Plan without
being approved by a majority vote of the outstanding voting securities
of the Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at any
time by: (a) a majority vote of the Disinterested Directors; or (b) a
vote of a majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of the Act; or (c) by
FSC on 60 days' notice to the Corporation.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Directors of the Corporation shall be committed to the
discretion of the Disinterested Directors then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.

EXHIBIT A
to the
Distribution Plan

FEDERATED TOTAL RETURN SERIES, INC.

FEDERATED SHORT-TERMTOTAL RETURN FUND
INSTITUTIONAL SERVICE SHARES

This Distribution Plan is adopted by Federated Total Return Series,
Inc. with respect to the Class of Shares of the portfolio of the
Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of
the average aggregate net asset value of the Institutional Service Shares
of Federated Short-Term Total Return Fund held during the month.
Witness the due execution hereof this 1st day June, 1996 .

Federated Total Return Series, Inc.

By: /s/Glen R. Johnson
President

EXHIBIT B
to the
Distribution Plan

FEDERATED TOTAL RETURN SERIES, INC.

FEDERATED TOTAL RETURN BOND FUND
INSTITUTIONAL SERVICE SHARES

This Distribution Plan is adopted by Federated Total Return Series,
Inc. with respect to the Class of Shares of the portfolio of the
Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of
the average aggregate net asset value of the Institutional Service Shares
of Federated Total Return Bond Fund held during the month.
Witness the due execution hereof this 1st day June, 1996 .

Federated Total Return Series, Inc.

By: /s/ Glen R. Johnson
President

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> Federated Total Return Series
Federated Total Return Bond Fund
Institutional Shares
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 5,715,320
<INVESTMENTS-AT-VALUE> 5,726,938
<RECEIVABLES> 88,406
<ASSETS-OTHER> 29,361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,844,705
<PAYABLE-FOR-SECURITIES> 269,226
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,118
<TOTAL-LIABILITIES> 302,344
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,619,300
<SHARES-COMMON-STOCK> 547,786
<SHARES-COMMON-PRIOR> 510,021
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88,557)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,618
<NET-ASSETS> 5,537,039
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 124,911
<OTHER-INCOME> 0
<EXPENSES-NET> 857
<NET-INVESTMENT-INCOME> 124,054
<REALIZED-GAINS-CURRENT> 37,776
<APPREC-INCREASE-CURRENT> 11,618
<NET-CHANGE-FROM-OPS> 173,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 123,952
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 494,503
<NUMBER-OF-SHARES-REDEEMED> (456,752)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 441,846
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60,925
<AVERAGE-NET-ASSETS> 5,373,856
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.230
<PER-SHARE-GAIN-APPREC> 0.110
<PER-SHARE-DIVIDEND> 0.230
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.110
<EXPENSE-RATIO> 5.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> Federated Total Return Series
Federated Total Return Bond Fund
Institutional Service Shares
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 5,715,320
<INVESTMENTS-AT-VALUE> 5,726,938
<RECEIVABLES> 88,406
<ASSETS-OTHER> 29,361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,844,705
<PAYABLE-FOR-SECURITIES> 269,226
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,118
<TOTAL-LIABILITIES> 302,344
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,619,300
<SHARES-COMMON-STOCK> 526
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88,557)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,618
<NET-ASSETS> 5,322
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 124,911
<OTHER-INCOME> 0
<EXPENSES-NET> 857
<NET-INVESTMENT-INCOME> 124,054
<REALIZED-GAINS-CURRENT> 37,776
<APPREC-INCREASE-CURRENT> 11,618
<NET-CHANGE-FROM-OPS> 173,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 102
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 997
<NUMBER-OF-SHARES-REDEEMED> (501)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 441,846
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60,925
<AVERAGE-NET-ASSETS> 5,373,856
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.230
<PER-SHARE-GAIN-APPREC> 0.110
<PER-SHARE-DIVIDEND> 0.230
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.110
<EXPENSE-RATIO> 32.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>