FEDERATED TOTAL RETURN SERIES INC, 485APOS, 1997-10-31

FEDERATED TOTAL RETURN SERIES INC
485APOS, 1997-10-31

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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. 12 .................... X
------- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
----

Amendment No. 14 ..................................... 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)
on _________________ pursuant to paragraph (b)(1)(v)
X 60 days after filing pursuant to paragraph (a) (i) on _________________
pursuant to paragraph (a) (i) 75 days after filing pursuant to paragraph
(a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

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

Copies To:

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

<PAGE>

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 Limited Duration Fund (formerly,
Federated Total Return Limited Duration Fund), (3) Federated Government Fund,
and (4) Federated Limited Duration Government Fund is comprised of the
following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

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

<PAGE>

PART B.INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page..........................(1-4) Cover Page.
Item 11. Table of Contents...................(1-4) Table of Contents.
Item 12. General Information and
History............................(1-4) General Information About the Fund; (1-4) About Federated
Investors.
Item 13. Investment Objectives and
Policies...........................(1-4) Investment Objective and Policies; (1-4) Investment Limitations.
Item 14. Management of the Fund (1-4) Federated Total Return Series, Inc. Management; (1-4) Directors Compensation.
Item 15. Control Persons and Principal
Holders of Securities (1-4) Fund Ownership.
Item 16. Investment Advisory and Other
Services...........................(1-4) Investment Advisory Services; (1-4) Distribution Plan and
Shareholder Services; (1-4) Other Services.
Item 17. Brokerage Allocation................(1-4) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered.........(1-4) Purchasing Shares; (1-4) Determining Net Asset Value; (1-4)
Redeeming Shares.
Item 20. Tax Status..........................(1-4) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data...............................(1-4) Total Return; (1-4) Yield; (1-4) Performance
Comparisons.
Item 23. Financial Statements................(1-4) To be filed by amendment.

</TABLE>

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 November
___, 1997, 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 November ___, 1997

<PAGE>

TABLE OF CONTENTS.

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES.

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS - INSTITUTIONAL SHARES.

to be filed by amendment

<PAGE>

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

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.
The Fund may also invest in convertible securities. 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:

o asset-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;

o obligations issued or guaranteed as to payment of principal
and interest by the U.S. government, or its agencies or
instrumentalities;

o mortgage-backed securities;

o municipal securities;

o commercial paper which matures in 270 days or less;

o time 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

o repurchase 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.

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.

CONVERTIBLE SECURITIES Convertible securities include a spectrum of securities
which can be exchanged for or converted into common stock. Convertible
securities may include, but are not limited to: convertible bonds or debentures;
convertible preferred stock; units consisting of usable bonds and warrants; or
securities which can or otherwise limit returns to the convertible security
holder, such as DECS (Dividend Enhanced Convertible Stock, or Debt Exchangeable
for Common Stock when issued as a debt security.), LYONS (Liquid Yield Option
Notes which are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS (Preferred Equity Redemption
Cumulative Stock which are an equity issue that pays a high cash dividend, has a
cap price and mandatory conversion to common stock at maturity), and PRIDES
(Preferred Redeemable Increased Dividend Securities, which are essentially the
same as DECS; the difference is little more than who initially underwrites the
issue.).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

The Fund's investments in convertible securities will not be
subject to the quality rating limit on other securities in which the
Fund invests. See "High Yield Debt Obligations."

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. The Fund may invest in the
High Yield Bond Portfolio, a portfolio of Federated Core Trust, as an efficient
means of investing in high-yield debt obligations. Federated Core Trust is a
registered investment company advised by Federated Research Corp., an affiliate
of the Fund's adviser. The High Yield Bond Portfolio's investment objective is
to seek high current income and its primary investment policy is to invest in
lower-rated, high-yield debt securities. Federated Core Trust currently is not
charged an advisory fee and is sold without any sales charge. Any administrative
fee charged to Federated Core Trust by an affiliate of the Fund's adviser will
be for services provided in addition to the administrative services provided to
the Fund. The Fund's adviser anticipates that the High Yield Bond Portfolio will
provide the Fund broad diversity and exposure to all aspects of the high-yield
bond sector of the market while at the same time providing greater liquidity
than if high-yield debt obligations were purchased separately for the Fund.

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.

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:

o borrow 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

o with 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 (R) 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 a portfolio manager of the Fund. Mr. Balestrino joined Federated
Investors in 1986 and has been a Vice President of the Fund's investment adviser
and Federated Research Corp. since 1995. Mr. Balestrino served as an Assistant
Vice President of the investment adviser and Federated Research Corp. from 1991
to 1995. Mr. Balestrino is a Chartered Financial Analyst and received his
Master's Degree in Urban and Regional Planning from the University of
Pittsburgh.

John T. Gentry has been a portfolio manager of the Fund since November 1997. Mr.
Gentry joined Federated Investors in 1995 as an Investment Analyst and has been
an Assistant Vice President of the Fund's adviser and Federated Research Corp.
since April 1997. Mr. Gentry served as a Senior Treasury Analyst at Sun Company,
Inc. from 1991 to 1995. Mr. Gentry is a Chartered Financial Analyst and earned
his M.B.A., with concentrations in Finance and Accounting, from Cornell
University.

Donald T. Ellenberger has been a portfolio manager of the Fund since November
1997. Mr. Ellenberger joined Federated in 1996 as a Vice President of a
Federated advisory subsidiary. He has been a Vice President of the Fund's
adviser and Federated Research Corp. since March, 1997. From 1986 to 1996, he
served as a Trader/Portfolio Manager for Mellon Bank, N.A. Mr. Ellenberger
received his M.B.A. in Finance from Stanford University.

Mark E. Durbiano is the Fund's 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 and Federated Research Corp. since January 1996.
Mr. Durbiano was a Vice President of the Fund's adviser and Federated Research
Corp. 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(TM) PROGRAM

The Fund is a member of the Federated LifeTrack(TM) Program sold through
financial representatives. Federated LifeTrack(TM) 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(TM) Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Federated
LifeTrack(TM) Program for recordkeeping and administrative services. Additional
fees are charged to participating plans for these services. As part of the
Federated LifeTrack(TM) Program, exchanges may readily be made between
investment options selected by the employer or a plan trustee.

SHAREHOLDER INFORMATION

VOTING RIGHTS

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.

<PAGE>

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.

<PAGE>

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:

o Leading market positions in well established industries.

o High rates of return on funds employed.

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

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

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

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

Standard and Poor's 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.

<PAGE>

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

<PAGE>

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 November ___, 1997

[LOGO]

G01721-01-IS (11/97)

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).

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.

Prospectus dated November ___, 1997

<PAGE>

TABLE OF CONTENTS.

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES

to be filed by amendment

<PAGE>

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

INVESTMENT POLICIES

The securities in which the Fund invests principally are:

o asset-backed securities;

o obligations issued or guaranteed as to payment of principal
and interest by the U.S. government, or its agencies or
instrumentalities;

o mortgage-backed securities;

o municipal securities;

o commercial paper which matures in 270 days or less;

o repurchase agreements collateralized by eligible investments.

government.

The Fund's investments in convertible securities will not be
subject to the quality rating limit on other securities in which the
Fund invests. See "High Yield Debt Obligations."

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.
The Fund may invest in the High Yield Bond Portfolio, a portfolio of
Federated Core Trust, as an efficient means of investing in high-yield debt
obligations. Federated Core Trust is a registered investment company advised by
Federated Research Corp., an affiliate of the Fund's adviser. The High Yield
Bond Portfolio's investment objective is to seek high current income and its
primary investment policy is to invest in lower-rated, high-yield debt
securities. Federated Core Trust currently is not charged an advisory fee and is
sold without any sales charge. Any administrative fee charged to Federated Core
Trust by an affiliate of the Fund's adviser will be for services provided in
addition to the administrative services provided to the Fund. The Fund's adviser
anticipates that the High Yield Bond Portfolio will provide the Fund broad
diversity and exposure to all aspects of the high-yield bond sector of the
market while at the same time providing greater liquidity than if high-yield
debt obligations were purchased separately for the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

HUB AND SPOKE (R) OPTION

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

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

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

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.

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

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

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.

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

Portfolio Manager's Background. Joseph M. Balestrino is a portfolio manager of
the Fund. Mr. Balestrino joined Federated Investors in 1986 and has been a Vice
President of the Fund's investment adviser and Federated Research Corp. since
1995. Mr. Balestrino served as an Assistant Vice President of the investment
adviser and Federated Research Corp. from 1991 to 1995. Mr. Balestrino is a
Chartered Financial Analyst and received his Master's Degree in Urban and
Regional Planning 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

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

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(TM) PROGRAM

SHAREHOLDER INFORMATION

VOTING RIGHTS

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

<PAGE>

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.

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

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

<PAGE>

Moody's Investors Service, Inc., Corporate Bond Ratings

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

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.

NR--NR indicates that Fitch does not rate the specific issue.

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.

Overall quality may move up or down frequently within this category.

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

o Leading market positions in well established industries.

o High rates of return on funds employed.

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

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

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

Standard and Poor's Ratings Group Commercial Paper Ratings

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.

<PAGE>

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

<PAGE>

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 November ___, 1997

[LOGO]

G01721-03-SS (11/97)

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 November ___, 1997.
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 November ___, 1997

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.

Cusip 31428Q101
31428Q507

G01722-02 (11/97)

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

GENERAL INFORMATION ABOUT THE FUND

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:

(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities; and

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

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 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.

CONVERTIBLE SECURITIES

DECS, or similar instruments marketed under different names, offer a substantial
dividend advantage with the possibility of unlimited upside potential if the
price of the underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the price of the
common stock at the time of maturity. DECS contain two call options at different
strike prices. The DECS participate with the common stock up to the first call
price. They are effectively capped at that point unless the common stock rises
above a second price point, at which time they participate with unlimited upside
potential.

PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited to
a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises.

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.

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 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

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 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

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:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the 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.

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 Directors 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.

As of October 28, 1997, Anbee & Company, Aurora, IL owned approximately 87,777
(5.02%), Union Planters National Bank, Memphis, TN owned approximately 225,764
(12.91%), Sunbank and Co., Sunbury, PA owned approximately 246,474 (14.09%),
Grand Old Co., Zanesville, OH owned approximately 268,281 (15.34%), Onedun,
Dundee, IL owned approximately 201,826 (11.54%), and First Mar & Co., Marquette,
MI owned approximately 263,274 (15.06%) of the Institutional Shares of the Fund.
As of October 28, 1997, Ambee & Company, Aurora, IL owned approximately 208,178
(91.14%) of the Institutional Service Shares of the Fund.

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

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

</TABLE>

*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

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

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:

o as provided by an independent pricing service;

o for 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

o at fair value as determined in good faith by the Directors.

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

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:

o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

o derive less than 30% of its gross income from the sale of securities held
less than three months;

o invest in securities within certain statutory limits; and

o distribute 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

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:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;

o changes in the Fund expenses; and

o various other factors.

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:

o RUSSELL 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.

o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various
fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all
capital gains distributions and income dividends and takes
into account any change in 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.

o LEHMAN 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.

o LEHMAN 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.

o LEHMAN 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.

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

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

Federated Limited Duration Fund

Federated Total Return Limited Duration Fund)

(A Portfolio of Federated Total Return Series, Inc.)

Institutional Shares

Prospectus

The Institutional Shares of Federated Limited Duration 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.

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 November
___, 1997, 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

Prospectus dated November ___, 1997

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES

to be filed by amendment

<PAGE>

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." On May 14, 1997, the Board of Directors (the "Directors") approved the
Fund's name change from Federated Total Return Limited Duration Fund to
Federated Limited Duration 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 Limited Duration Fund: Institutional Shares and
Institutional Service Shares. This prospectus relates only to the Institutional
Shares of Federated Limited Duration 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 fixed income 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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in a
diversified portfolio of fixed income 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. The Fund's weighted-average portfolio duration will
at all times be limited to three years or less. (See the section entitled
"Average Portfolio Duration" in this Prospectus.) 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 corporate debt obligations, U.S.
and foreign government obligations, and mortgage-backed and asset-backed
securities. The Fund may also invest in convertible securities. 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:

o obligations issued or guaranteed as to payment of
principal and interest by the U.S. government, or its
agencies or instrumentalities;

o mortgage-backed securities;

o asset-backed securities;

o municipal securities;

o commercial paper which matures in 270 days or less;

o repurchase agreements collateralized by eligible investments.

government.

The Fund's investments in convertible securities will not be
subject to the quality rating limit on other securities in which the
Fund invests. See "High Yield Debt Obligations."

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, recordkeeping and the public
availability of information.

AVERAGE PORTFOLIO DURATION. Although the Fund will not maintain a stable net
asset value, the adviser will seek to limit, to the extent consistent with the
Fund's investment objective of total return, the magnitude of fluctuations in
the Fund's net asset value by limiting the dollar-weighted average duration of
the Fund's portfolio. 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. Securities with shorter
durations generally have less volatile prices than securities of comparable
quality with longer durations. The Fund should be expected to maintain a higher
average duration during periods of lower expected market volatility, and a lower
average duration during periods of higher expected market volatility. In any
event, the Fund's dollar-weighted average duration will not exceed three years.

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.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES.. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

HUB AND SPOKE (R) OPTION

NET ASSET VALUE

INVESTING IN INSTITUTIONAL SHARES

SHARE PURCHASES

BY WIRE. To purchase shares of the Fund 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 Limited Duration 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 of the Fund by mail, send a check made payable to
Federated Limited Duration 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

WHAT SHARES COST

EXCHANGING SECURITIES FOR FUND SHARES

Any securities exchanged must meet the investment objective and policies of the
Fund and must have a readily ascertainable market value. 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.

CERTIFICATES AND CONFIRMATIONS

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

The written request should state: Federated Limited Duration 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.

ACCOUNTS WITH LOW BALANCES

FUND INFORMATION

MANAGEMENT OF THE CORPORATION

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.

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 $110 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

PORTFOLIO MANAGER'S BACKGROUND. Randall S. Bauer is the Fund's
portfolio manager. Mr. Bauer joined Federated Investors in 1989 and
has been a Vice President of the Fund's investment adviser and Federated
Research Corp. since 1994. Mr. Bauer was an Assistant Vice President of the
Fund's investment adviser and Federated Research Corp. from 1989 to 1993.
Mr. Bauer is a Chartered Financial Analyst
and received his M.B.A. in Finance from Pennsylvania State University.

Robert K. Kinsey has been the Fund's portfolio manager since May,
1997. Mr. Kinsey joined Federated in 1995 as a Vice President of a
Federated advisory subsidiary. He has been a Vice President of the
Fund's adviser and Federated Research Corp. since March, 1997.
From 1992 to 1995, he served as a Portfolio Manager for Harris Investment
Management Co., Inc. Mr. Kinsey received his M.B.A. in Finance from U.C.L.A.

Mark E. Durbiano is the Fund's portfolio manager for the high
yield corporate bonds asset category. Mr. Durbiano joined Federated
Investors in 1982 and has been a Senior Vice President of the Fund's
adviser and Federated Research Corp. since January 1996. Mr. Durbiano
was a Vice President of the Fund's adviser and Federated Research Corp.
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 shares of the Fund.
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. 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.

ADMINISTRATION OF THE FUND

<PAGE>

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

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of Institutional Shares pay their allocable portion of Corporation and
Fund expenses.

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 administrative
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.

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 of October
28, 1997, Anbee & Company, who was the record owner of 267,780 (94.49%) of the
Institutional Service Shares of the Fund and Sunbank and Co., who was the record
owner of 250,872 (31.31%) and First Mar & Co., who was the record owner of
234,049 (29.21%) of the Institutional Shares of the Fund, may for certain
purposes be deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

OTHER CLASSES OF SHARES

Institutional Service Shares are distributed under a 12b-1 Plan adopted by the
Fund.

To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-341-7400.

<PAGE>

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.

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

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

<PAGE>

Moody's Investors Service, Inc., Corporate Bond Ratings

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

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.

NR--NR indicates that Fitch does not rate the specific issue.

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.

Overall quality may move up or down frequently within this category.

DD--Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.

DP-Preferred stock with dividend averages.

Moody's Investors Service, Inc. Commercial Paper Ratings

o Leading market positions in well established industries.

o High rates of return on funds employed.

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

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

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

Standard and Poor's Ratings Group Commercial Paper Ratings

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.

<PAGE>

ADDRESSES

Federated Limited Duration 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

<PAGE>

Federated Limited Duration Fund

(Formerly Federated Total Return Limited Duration Fund)

Institutional Shares

Prospectus

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

Prospectus dated November ____, 1997

[LOGO]

G01744-01-IS (11/97)

Federated Limited Duration Fund

(Formerly Federated Total Return Limited Duration Fund)

(A Portfolio of Federated Total Return Series, Inc.)

Institutional Service Shares

Prospectus

The Institutional Service Shares of Federated Limited Duration 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.

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 November
____, 1997, 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).

Prospectus dated November ____, 1997

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES

to be filed by amendment

<PAGE>

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." On May 14, 1997, the Board of Directors (the "Directors") approved the
Fund's name change from Federated Total Return Limited Duration Fund to
Federated Limited Duration 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 Limited Duration Fund: Institutional Service
Shares and Institutional Shares. This prospectus relates only to the
Institutional Service Shares of Federated Limited Duration 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 interest in a professionally managed, diversified
portfolio investing primarily in fixed income 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

INVESTMENT POLICIES

<PAGE>

The securities in which the Fund invests principally are:

o obligations issued or guaranteed as to payment of principal
and interest by the U.S. government, or its agencies or
instrumentalities;

o mortgage-backed securities;

o asset-backed securities;

o municipal securities;

o commercial paper which matures in 270 days or less;

o repurchase agreements collateralized by eligible investments.

government.

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.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests. See "High

Yield Debt Obligations."

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, recordkeeping and the public
availability of information.

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 but or sell, respectively, a futures contract at the fixed price
during the life of the option.

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.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

HUB AND SPOKE (R) OPTION

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

BY WIRE. To purchase Shares of the Fund 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 Limited Duration 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 of the Fund by mail, send a check made payable to
Federated Limited Duration 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 & 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

WHAT SHARES COST

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

CERTIFICATES AND CONFIRMATIONS

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

The written request should state: Federated Limited Duration 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.

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

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 $110 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

subsidiary of Federated Investors.

ADMINISTRATION OF THE FUND

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

EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES

Holders of Institutional Service Shares pay their allocable portion of
Corporation and Fund expenses.

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
administrative 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.

SHAREHOLDER INFORMATION

VOTING RIGHTS

TAX INFORMATION

FEDERAL INCOME TAX

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.

<PAGE>

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield.

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.

OTHER CLASSES OF SHARES

Institutional Shares are distributed with no 12b-1 Plan.

To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-341-7400.

<PAGE>

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.

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

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

<PAGE>

Moody's Investors Service, Inc., Corporate Bond Ratings

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

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.

NR--NR indicates that Fitch does not rate the specific issue.

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.

Overall quality may move up or down frequently within this category.

DD--Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.

DP-Preferred stock with dividend averages.

Moody's Investors Service, Inc. Commercial Paper Ratings

o Leading market positions in well established industries.

o High rates of return on funds employed.

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

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

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

Standard and Poor's Ratings Group Commercial Paper Ratings

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.

<PAGE>

ADDRESSES

Federated Limited Duration 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

<PAGE>

Federated Limited Duration Fund

(Formerly Federated Total Return Limited Duration Fund)

Institutional Service Shares

Prospectus

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

Prospectus dated November ___, 1997

[LOGO]

G01744-02-SS (11/97)

FEDERATED LIMITED DURATION FUND
(FORMERLY, FEDERATED TOTAL RETURN LIMITED DURATION 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 Limited Duration Fund (the "Fund"), a
portfolio of Federated Total Return Series, Inc. (the "Corporation") dated
November ____, 1997. 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 November ___, 1997

[GRAPHIC OMITTED]

Cusip 31428Q408
Cusip 31428Q309

G01744-03 (11/97)

<PAGE>

TABLE OF CONTENTS

TABLE OF CONTENTS
to be filed by amendment

<PAGE>

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." On May 14, 1997 the Board of Directors ("Directors") approved the
Fund's name change from Federated Total Return Limited Duration Fund to
Federated Limited Duration 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 Directors without shareholder
approval. Shareholders will be notified before any material change in the
investment policies becomes effective.

TYPES OF INVESTMENTS

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")

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:

(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")

INTEREST-ONLY AND PRINCIPAL-ONLY INVESTMENTS

PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES

RESETS OF INTEREST

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

These payment caps may result in negative amortization.

CONVERTIBLE SECURITIES

FOREIGN BANK INSTRUMENTS

FUTURES AND OPTIONS TRANSACTIONS

FINANCIAL FUTURES CONTRACTS

PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS

The Fund may purchase listed put options on financial futures contracts.

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS

"MARGIN" IN FUTURES TRANSACTIONS

The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES

MEDIUM TERM NOTES AND DEPOSIT NOTES

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.

WEIGHTED AVERAGE PORTFOLIO DURATION

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.

<PAGE>

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

LENDING OF PORTFOLIO SECURITIES

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:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.

REPURCHASE AGREEMENTS

REVERSE REPURCHASE AGREEMENTS

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%. For the period from October 1, 1996 (start of
performance) to March 31, 1997, the portfolio turnover rate was 91%. The
portfolio turnover rate is representative of only 6 months of activity.

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

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

DIVERSIFICATION OF INVESTMENTS

INVESTING IN REAL ESTATE

INVESTING IN COMMODITIES

UNDERWRITING

LENDING CASH OR SECURITIES

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 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 ILLIQUID SECURITIES

The Fund does not expect to borrow money, pledge securities or engage in reverse
repurchase agreements during the coming fiscal year.

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 and

Director of the Corporation.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

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; Partner
or Inc. and Northgate Village Development Corporation; Director or

Trustee of the Funds.ples Property Management,

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue *
Federated Investors Tower

Pittsburgh, PA
Birthdate: April 11, 1949

Executive Vice President and Director

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, 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 of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Director

Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of

the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL

Birthdate: October 6, 1926

Director

Attorney, Retired Member of 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.

<PAGE>

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh

Pittsburgh, PA
Birthdate: September 14, 1925

Director

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy Board and Czech
Management Center; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; 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

<PAGE>

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, Funds; Treasurer of some
of the Funds Vice President and Secretary of the

*THIS DIRECTOR 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
Directors handles the responsibilities of the Board between meetings of the
Board.

THE FUNDS

111 Corcoran Funds; Arrow Funds; Automated Government Money Trust; 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; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.

FUND OWNERSHIP

Officers and Directors as a group own less than 1% of the Fund's outstanding
shares.

As of October 28, 1997, Anbee & Company, Aurora, IL owned approximately 267,780
(94.49%) of the Institutional Service Shares of the Fund and 42,384 (5.29%) of
the Institutional Shares of the Fund. As of October 28, 1997, Sunbank and Co.,
Sunbury, PA owned approximately 250,872 (31.31%), Grand Old Co., Zanesville, OH
owned approximately 124,003 (15.48%), First Mar & Co., Marquette, MI owned
approximately 234,049 (29.21%), and Soy Capital Bank & Trust, Decatur, IL owned
approximately 68,677 (8.57%) of the Institutional Shares of the Fund.

DIRECTORS' COMPENSATION

AGGREGATE
NAME,

COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID
COMPANY CORPORATION *# FROM FUND COMPLEX +

John F. Donahue, $0 $0 for the Fund and
Chairman and Director 56 other investment companies in the Fund Complex

J. Christopher Donahue, $0 $0 for the Fund and
Executive Vice President and Director 18 other investment companies in the Fund Complex

Thomas G. Bigley, $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

John T. Conroy, Jr., $1109.11 $119,615 for the Fund and
Director 56 other investment companies in the Fund Complex

William J. Copeland, $1109.11 $119,615 for the Fund and
Director 56 other investment companies in the Fund Complex

James E. Dowd, $1109.11 $119,615 for the Fund and
Director 56 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D., $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

Edward L Flaherty, Jr., $1109.11 $119,615 for the Fund and
Director 56 other investment companies in the Fund Complex

Peter E. Madden, $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

Gregor F. Meyer, Jr., $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

John E. Murray, Jr., $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

Wesley W. Posvar, $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

Marjorie P. Smuts, $1008.14 $108,725 for the Fund and
Director 56 other investment companies in the Fund Complex

</TABLE>

*Information is furnished for the fiscal year ended September 30, 1997.

#The aggregate compensation is provided for the Corporation which is comprised
of four portfolios.

The information is provided for the last calendar year.

DIRECTOR LIABILITY

<PAGE>

INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND

Christopher Donahue.

ADVISORY FEES

For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the period from October 1, 1996
(start of performance) to March 31, 1997, the Fund's Adviser earned $10,080, all
of which was voluntarily waived.

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. For the period from October 1, 1996, (start of performance) to March
31, 1997, the Fund incurred costs for administrative services of $77,500, all of
which was voluntarily waived.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

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 Directors.

PURCHASING SHARES

DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES ONLY) AND SHAREHOLDER SERVICES

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.

For the period from October 1, 1996 (start of performance) to March 31, 1997,
payments in the amount of $14 were made to financial institutions by
Institutional Service Shares, pursuant to the Distribution Plan, of which $11
was voluntarily waived. In addition, for the period from October 1, 1996 (start
of performance) to March 31, 1997, payments in the amount of $6,286 and $14 were
made pursuant to the Shareholder Services Agreement for Institutional Shares and
Institutional Service Shares, respectively, of which all and $0, respectively,
were voluntarily waived.

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.

<PAGE>

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's securities, other than options, are determined as
follows:

o as provided by an independent pricing service;

o for 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

o at fair value as determined in good faith by the Directors.

VALUING MUNICIPAL BONDS

USE OF AMORTIZED COST

REDEEMING SHARES

REDEMPTION IN KIND

TAX STATUS
THE FUND'S TAX STATUS

o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

o derive less than 30% of its gross income from the sale of securities held
less than three months;

o invest in securities within certain statutory limits; and

o distribute to its shareholders at least 90% of its net income earned during
the year.

SHAREHOLDERS' TAX STATUS

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

Cumulative total return reflects the Fund's total performance over a specified
period of time. The Fund's cumulative total return is reflective of 6 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 (start of
performance) to March 31, 1997, were 3.08% for Institutional Shares and 3.07%
for Institutional Service Shares.

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.

The Fund's yield for the thirty-day period ended March 31, 1997, was 6.64% for
Institutional Shares and 6.48% for Institutional Service
Shares.

<PAGE>

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;

o changes in the Fund expenses; and

o various other factors.

o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an unmanaged index tracking
short-term U.S. government securities between 1 and 2.99 years. The index
is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.

o MERRILL LYNCH 1-3 YEAR CORPORATE INDEX is a market
capitalization weighted index including fixed-coupon domestic
investment grade corporate bonds with at least $100 million par
amount outstanding. Both interest and price return are
calculated daily based on an accrued schedule and trader
pricing. Quality range is BBB3-AAA. Maturities for all bonds are
more than one year and less than three years. Yankees,
Canadians, and all Structured Notes are excluded. 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.

o LEHMAN BROTHERS HIGH YIELD INDEX covers the universe of fixed rate,
publicly issued, noninvestment grade debt registered with the SEC. All
bonds included in the High Yield Index must be dollar-denominated and
nonconvertible and have at least one year remaining to maturity and an
outstanding par value of at least $100 million. Generally securities must
be rated Ba1 or lower by Moody's Investors Service, including defaulted
issues. If no Moody's rating is available, bonds must be rated BB+ or
lower by S&P; and if no S&P rating is available, bonds must be rated below
investment grade by Fitch Investor's Service. A small number of unrated
bonds is included in the index; to be eligible they must have previously
held a high yield rating or have been associated with a high yield issuer,
and must trade accordingly.

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 ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.

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.

In the government sector, as of December 31, 1996, Federated Investors managed 9
mortgage-backed, 5 government/agency and 17 government money market mutual
funds, with assets approximating $6.3 billion, $1.7 billion and $23.6 billion,
respectively. Federated trades approximately $309 million in U.S. government and
mortgage-backed securities daily and places $17 billion in repurchase agreements
each day. Federated introduced the first U.S. government fund to invest in U.S.
government bond securities in 1969. Federated has been a major force in the
short- and intermediate-term government markets since 1982 and currently manages
nearly $30 billion in government funds within these maturity ranges.

In the corporate bond sector, as of December 31, 1996, Federated Investors
managed 12 money market funds and 17 bond funds with assets approximating $17.2
billion and $4.0 billion, respectively. Federated's corporate bond decision
making--based on intensive, diligent credit analysis--is backed by over 21 years
of experience in the corporate bond sector. In 1972, Federated introduced one of
the first high-yield bond funds in the industry. In 1983, Federated was one of
the first fund managers to participate in the asset-backed securities market, a
market totaling more than $200 billion.

portfolios.

MUTUAL FUND MARKET

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

INSTITUTIONAL CLIENTS

BANK MARKETING

Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their
clients' portfolios. The marketing effort to trust clients is headed by
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--we have over 2,000 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Federated Securities Corp.

* Source: Investment Company Institute.

FEDERATED GOVERNMENT FUND

(A PORTFOLIO OF FEDERATED TOTAL RETURN SERIES, INC.)
INSTITUTIONAL SHARES

PROSPECTUS

The Institutional Shares of Federated Government 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 investing primarily in a portfolio of U.S.
government 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.

<PAGE>

Table of Contents

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS - INSTITUTIONAL SHARES

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
October 11, 1993. 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 the Fund: Institutional Shares and Institutional Service Shares. This
prospectus relates only to Institutional Shares of the 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 U.S. government 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

INVESTMENT OBJECTIVE

The "total return" sought by the Fund will consist of interest and dividends
from underlying securities, or 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. 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.

INVESTMENT POLICIES

The Fund pursues this investment objective by investing in U.S. government
securities, including mortgage-backed securities and non-U.S. government
mortgage-backed securities and asset-backed securities. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in securities that are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. 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 securities in which the Fund invests
principally are:

- direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;

- notes, bonds, discount notes and mortgage-backed securities
issued or guaranteed by U.S. government agencies and instrumentalities
supported by the full faith and credit of the United States;

- notes, bonds, discount notes and mortgage-backed securities of
U.S. government agencies or instrumentalities which receive or have
access to federal funding;

- notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities; and

- asset-backed securities and commercial mortgage securities
rated BBB or better by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group ("Standard & Poor's"), or Fitch
Investors Service, Inc. ("Fitch"), or which are of comparable quality
in the judgment of the adviser.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

GOVERNMENT SECURITIES. Some obligations issued or guaranteed by
agencies or instrumentalities of the U.S. government are backed by the
full faith and credit of the U.S. Treasury. No assurances can be given
that the U.S. government will provide financial support to other
agencies or instrumentalities, since it is not obligated to do so. The

instrumentalities are supported by:

- the issuer's right to borrow an amount limited to a specific
line of credit from the U.S. Treasury;

- discretionary authority of the U.S. government to purchase
certain obligations of an agency or instrumentality; or

- the credit of the agency or instrumentality.

MORTGAGE-BACKED SECURITIES. The Fund may purchase mortgage-backed securities
issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security is an
obligation of the issuer backed by a mortgage or pool of mortgages or a direct
interest in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations ("CMOs"), make payments of both
principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on different types of
mortgages including those on commercial real estate or residential properties.
Other types of mortgage-backed securities will likely be developed in the
future, and the Fund may invest in them if the investment adviser determines
they are consistent with the Fund's investment objective and policies.

The value of mortgage-backed securities may change due to shifts in the market's
perception of issuers. In addition, regulatory or tax changes may adversely
affect the mortgage securities market as a whole. Non-government mortgage-backed
securities may offer higher yields than those issued by government entities, but
also may be subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
total returns.

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 generally are 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.

COLLATERALIZED MORTGAGE OBLIGATIONS. 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 will invest only in CMOs that are rated A or better by a nationally
recognized statistical rating organization. The Fund may also 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; (iii) collateralized by pools of mortgages in which
payment of principal and interest is dependent upon the underlying pool of
mortgages with no U.S. government guarantee; or (iv) 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. 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.

STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are derivative
multiclass 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 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.
Interest-only stripped mortgage-backed securities yield to maturity 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 stripped
mortgage-backed securities if there are substantial prepayments on the
underlying mortgages. Interest-only stripped mortgage- backed securities
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.

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 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 asset-backed
securities.

While mortgage-backed securities generally entail less risk of a decline during
periods of 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.

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 not 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.

FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial 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. 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 call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.

RISKS. When the Fund uses financial futures and options on financial futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities 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.

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 stocks 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.

LEVERAGE AND BORROWING. The Fund is authorized to borrow money from banks or
otherwise in an amount up to 33 1/3% of the Fund's total assets (including the
amount borrowed), less all liabilities and indebtedness other than the bank or
other borrowing. This limitation may not be changed without the approval of
shareholders. The Fund is also authorized to borrow an additional 5% of its
total assets without regard to the foregoing limitation for temporary purposes
such as clearance of portfolio transactions and share repurchases. The Fund will
only borrow when there is an expectation that it will benefit the Fund after
taking into account considerations such as interest income and possible gains or
losses upon liquidation. The Fund also may borrow in order to effect share
purchases and tender offers.

Borrowing by the Fund creates an opportunity for increased net income but, at
the same time, creates special risk considerations. For example, leveraging may
exaggerate changes in the net asset value of the Fund shares and in the yield on
the Fund's portfolio. Although the principal of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced. The Fund may also
borrow for emergency purposes, for the payment of dividends for share
repurchases or for the clearance of transactions.

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument 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 does not ensure
this result. 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 on the Trust's records at the trade date; marked to
market daily; and maintained until the transaction is settled.

The Fund may enter into "dollar rolls" in which the Fund sells securities for
delivery in the current month and simultaneously contracts to purchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Fund foregoes principal and interest
paid on the securities. The Fund is compensated by the difference between the
current sales price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered dollar roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction. To the extent that dollar rolls are not covered rolls,
they will be included in the 33 1/3% borrowing limit.

The Fund expects that some of its borrowings may be made on a secured basis. In
such situations, either the custodian will segregate the pledged assets for the
benefit of the lender or arrangements will be made with (i) the lender to act as
a subcustodian if the lender is a bank or otherwise qualifies as a custodian of
investment company assets or (ii) a suitable subcustodian. Because few or none
of its assets will consist of margin securities, the Fund does not expect to
borrow on margin.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses. 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 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.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government obligations 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 these transactions may cause the Fund to miss a price 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.

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 in 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.

PORTFOLIO TURNOVER

The Fund does not attempt to set or meet any specific portfolio turnover rate,
since turnover is incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. High turnover rates may result in higher
brokerage commissions and capital gains. See "Tax Information" in this
prospectus.

HUB AND SPOKE(R) OPTION

The initial shareholder of the Fund (which 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.

NET ASSET VALUE

INVESTING IN INSTITUTIONAL SHARES

SHARE PURCHASES

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 Government 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 Government 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

WHAT SHARES COST

EXCHANGING SECURITIES FOR FUND SHARES

The Fund may accept securities in exchange for 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, and must have a readily ascertainable market value. 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 Shares on the day the securities are valued. One Share will be issued for the
equivalent amount of securities accepted.

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 Shares,
a gain or loss may be realized by the investor.

CERTIFICATES AND CONFIRMATIONS

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 on
payment dates at net asset value, unless cash payments are requested by
shareholders on the application or by writing to Federated Securities Corp.

Shares earn dividends through the business day that proper redemption
instructions are received by State Street Bank.

REDEEMING INSTITUTIONAL SHARES

TELEPHONE REDEMPTION

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 02266-8600.
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: the Fund name and the class designation; 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.

ACCOUNTS WITH LOW BALANCES

FUND INFORMATION

MANAGEMENT OF THE FUND

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 $110 billion invested across over 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

Kathleen M. Foody-Malus has been the Fund's portfolio manager
since inception. Ms. Foody-Malus joined Federated Investors in 1983
and has been a Vice President of the Fund's investment adviser since
1993. Ms. Foody-Malus served as an Assistant Vice President of the
investment adviser from 1990 until 1992. Ms. Foody-Malus received her
M.B.A. in Accounting/Finance from the University of Pittsburgh.

Edward J. Tiedge has been the Fund's portfolio manager since
inception. Mr. Tiedge joined Federated Investors in 1993 and has been
a Vice President of the Fund's investment adviser since January 1996.
He served as an Assistant Vice President of the Fund's investment
adviser in 1995, and an Investment Analyst during 1993 and 1994. Mr.
Tiedge served as Director of Investments at Duquesne Light Company
from 1990 to 1993. Mr. Tiedge is a Chartered Financial Analyst and
received his M.S.I.A.

concentrating in Finance from Carnegie Mellon University.

Donald T. Ellenberger has been the Fund's portfolio manager since
inception. Mr. Ellenberger joined Federated Investors in 1996 as a
Vice President of a Federated advisory subsidiary. He has been a Vice
President of the Fund's investment adviser since March, 1997. From
1986 to 1996, he served as a Trader/Portfolio Manager for Mellon Bank,
N.A. Mr. Ellenberger received his M.B.A. in Finance from Stanford
University.

DISTRIBUTION OF INSTITUTIONAL SHARES

subsidiary of Federated Investors.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS

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

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 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, meetings of Directors
and shareholders and proxy solicitations therefor; 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 Shares pay their allocable portion
include, but are not limited to: registering the portfolio and 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 would be allocated specifically to 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 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 Shares; 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 administrative personnel and
services as required to support holders of Shares; and Directors' fees incurred
as a result of issues relating solely to Shares.

SHAREHOLDER INFORMATION

VOTING RIGHTS

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.

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

OTHER CLASSES OF SHARES

Institutional Service Shares are distributed under a 12b-1 Plan adopted by the
Fund and are also subject to shareholder services fees.

To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-341-7400.

ADDRESSES

Federated Government 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
c/o Federated Services 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

GOVERNMENT FUND
INSTITUTIONAL SHARES

PROSPECTUS

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

Prospectus dated November ___, 1997

LOGO

G01922-01-IS (11/97)

FEDERATED GOVERNMENT FUND

(A PORTFOLIO OF FEDERATED TOTAL RETURN SERIES, INC.)
INSTITUTIONAL SERVICE SHARES

PROSPECTUS

The Institutional Service Shares of Federated Government 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 investing primarily in a portfolio of U.S.
government securities.

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.

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS - INSTITUTIONAL SERVICE SHARES

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
October 11, 1993. 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 the Fund: Institutional Service Shares and Institutional Shares. This
prospectus relates only to Institutional Service Shares of the 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 interest in a professionally managed, diversified
portfolio investing primarily in U.S. government 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

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The securities in which the Fund invests
principally are:

- direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;

- notes, bonds, discount notes and mortgage-backed securities
issued or guaranteed by U.S. government agencies and instrumentalities
supported by the full faith and credit of the United States;

- notes, bonds, discount notes and mortgage-backed securities of
U.S. government agencies or instrumentalities which receive or have
access to federal funding;

- notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities; and

The prices of fixed income securities fluctuate inversely to the direction
of interest rates.

instrumentalities are supported by:

- the issuer's right to borrow an amount limited to a specific
line of credit from the U.S. Treasury;

- discretionary authority of the U.S. government to purchase
certain obligations of an agency or instrumentality; or

- - the credit of the agency or instrumentality.

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. 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.

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 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 asset-backed
securities.

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 stocks 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.

PORTFOLIO TURNOVER

HUB AND SPOKE(R) OPTION

The initial shareholder of the Fund (which 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.

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

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 Government 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 Government 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

WHAT SHARES COST

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

CERTIFICATES AND CONFIRMATIONS

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

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 FUND

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 $110 billion invested across over 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

concentrating in Finance from Carnegie Mellon University.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Corp. is a subsidiary of Federated Investors.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS

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

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 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; meetings of Directors
and shareholders and proxy solicitations therefor; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.

At present, the only expenses which are allocated specifically to 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 Shares as they deem appropriate ("Class Expenses").
In any case, Class Expenses would be limited to: transfer agent fees as
identified by the transfer agent as attributable to holders of Shares; 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 administrative personnel and
services as required to support holders of Shares; and Directors' fees incurred
as a result of issues relating solely to Shares.

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 of October
28, 1997, Federated Securities Corp. who was the record owner of 367,774
(72.08%) of the Institutional Shares of the Fund, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders. 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.

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

OTHER CLASSES OF SHARES

Institutional Shares are distributed with no 12b-1 Plan and may be subject to
shareholder services fees.

To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-341-7400.

ADDRESSES

Federated Government 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
c/o Federated Services 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

GOVERNMENT FUND
INSTITUTIONAL SERVICE SHARES

PROSPECTUS

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

Prospectus dated November ___, 1997

LOGO

G01922-02-SS (11/97)

FEDERATED GOVERNMENT 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 Government Fund (the "Fund"), a portfolio of
Federated Total Return Series, Inc. (the "Corporation") dated
November____, 1997. 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 November ___, 1997

[GRAPHIC OMITTED]

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.

Cusip 31428Q887
31428Q804

G01922-03(11/97)

<PAGE>

TABLE OF CONTENTS

TABLE OF CONTENTS
to be filed by amendment

<PAGE>

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio of Federated Total Return Series, Inc. 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." 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

Under normal circumstances, the Fund will invest at least 65% of
the value of its total assets in securities that are issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
The Fund may also invest in the securities described below and in the
prospectus. ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")

The ARMS in which the Fund invests generally will be 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 U.S.

government securities.

Like other U.S. government 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 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")

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.

FUTURES AND 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).

LEVERAGING

Leveraging exaggerates the effect on the net asset value of any increase or
decrease in the market value of the portfolio. Money borrowed for leveraging
will be limited to 33 1/3% of the value of the Fund's total assets. These
borrowings will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased; in certain cases, interest costs
may exceed the return received on the securities purchased. LEVERAGE THROUGH
BORROWING

For the borrowings for investment purposes, the Investment Company Act of 1940
requires the Fund to maintain continuous asset coverage (i.e., total assets
including borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed. If the required coverage should decline as a result of market
fluctuations or other reason, the Fund may be required to sell some of its
portfolio holdings within 3 days to reduce the debt and restore the 300%
coverage, even though it may be disadvantageous from an investment standpoint to
sell at that time. The Fund also may be required to maintain minimum average
balances in connection with such borrowings or to pay a commitment fee to
maintain a line of credit; either of those requirements would increase the cost
of borrowings over the stated rate. To the extent the Fund enters into a reverse
repurchase agreement, the Fund will maintain in a segregated custodial account
cash or U.S. governement securities or other high quality liquid debt securities
at least equal to the aggregate amount of its reverse repurchase obligations,
plus accrued interest in certain cases, in accordance with releases promulgated
by the SEC. The SEC views reverse repurchase transactions as collateralized
borrowings by the Fund.

<PAGE>

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. AVERAGE LIFE

Average Life, as applicable to asset-backed securities, is computed by
multiplying each principal repayment by the time of payment (months or years
from the evaluation date), summing these products, and dividing the sum by the
total amount of principal repaid. The weighted-average life is calculated by
multiplying the maturity of each security in a given pool by its remaining
balance, summing the products, and dividing the result by the total remaining
balance. 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 present 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. 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.

Certain debt securities, such as mortgage-backed and 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.
Duration calculated in this manner, commonly referred to as "effective
duration," allows for changing prepayment rates as interest rates change and
expected future cash flows are affected. The calculation of effective duration
will depend upon the investment adviser's assumed prepayment rate. 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. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment. 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.

<PAGE>

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. 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.
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 such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such 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. This 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
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. Portfolio securities will be sold when the
adviser believes it is appropriate, regardless of how long those securities have
been held. The adviser does not anticipate that the Fund's portfolio turnover
rate will exceed 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 AND 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.

BORROWING MONEY

The Fund will not borrow money, except to the extent permitted under the 1940
Act (which currently limits borrowings to no more than 33 1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the entry
into options, forward contracts, futures contracts, including those related to
indices, options on futures contracts or indices, and dollar roll transactions
shall not constitute borrowing. CONCENTRATION OF INVESTMENTS

The Fund will not invest more than 25% of its total assets in
securities of issuers having their principal business activities in
the same industry. 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.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 10% of the value of total assets at the time of the
borrowing. LENDING CASH OR SECURITIES

The Fund will not lend any assets except portfolio securities.
(This will not prevent the purchase or holding of bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, repurchase agreements or other transactions which are
permitted by the Fund's investment objective and policies or Articles
of Incorporation). ISSUING SENIOR SECURITIES

The Fund will not issue senior securities, except as permitted by its investment
objective and policies.

The above limitations cannot be changed without shareholder approval. The
following limitation, 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 this limitation become effective. INVESTING IN RESTRICTED AND
ILLIQUID SECURITIES

The Fund will not invest more than 15% of its net assets in illiquid securities,
including certain restricted securities (except for Section 4(2) commercial
paper and certain other restricted securities which meet the criteria for
liquidity as established by the Directors), non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice. Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of 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. 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

and Director of the Corporation .

<PAGE>

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934
Director

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

William J. Copeland
One PNC Plaza - 23rd Floor

Pittsburgh, PA
Birthdate: July 4, 1918
Director

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.

<PAGE>

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111

Pittsburgh, PA
Birthdate: October 11, 1932
Director

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street

Pittsburgh, PA
Birthdate: June 18, 1924
Director

Attorney of Counsel, 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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942
Director

Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of

the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL

Birthdate: October 6, 1926
Director

Attorney, Retired Member of 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.

<PAGE>

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., National Defense University, U.S. Space Foundation and Czecho
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935
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

<PAGE>

John W. McGonigle
Federated Investors Tower

Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

* 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: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; 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; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.

FUND OWNERSHIP

Officers and Directors as a group own less than 1% of the Fund`s
outstanding shares.

As of October 28, 1997, Colonial Trust Co., Personal Division, Pheonix, AZ owned
approximately 62,790 (12.31%) and Federated Securities Corp., Pittsburgh, PA
owned approximately 367,774 (72.08%) of the Institutional Shares of the Fund.

<PAGE>

DIRECTORS' COMPENSATION

AGGREGATE

NAME , COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION* FROM FUND COMPLEX +
<S> <C> <C>

John F. Donahue, $ 0 $0 for the Corporation and
Chairman and Director 54 other investment companies in the Fund Complex

Thomas G. Bigley++ $1,008.14 $86,331 for the Corporation and
Director 54 other investment companies in the Fund Complex

John T. Conroy, Jr., $1,109.11 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex

William J. Copeland, $1,109.11 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex

J. Christopher Donahue, $ 0 $0 for the Corporation and
Executive Vice President 16 other investment companies in the Fund Complex
andDirector

James E. Dowd, $1,109.11 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D., $1,008.14 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex

Edward L. Flaherty, Jr., $1,109.11 $115,760 for the Corporation and
Director 54 other investment companies in the Fund Complex

Peter E. Madden, $1,008.14 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex

Gregor F. Meyer, $1,008.14 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex

John E. Murray, Jr., $1,008.14 $104,898 for the Corporationand
Director 54 other investment companies in the Fund Complex

Wesley W. Posvar, $1,008.14 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex

Marjorie P. Smuts, $1,008.14 $104,898 for the Corporation and
Director 54 other investment companies in the Fund Complex

</TABLE>

* Information is furnished for the fiscal year ended September 30, 1996 and
the Corporation was comprised of 2 portfolios.

+ The information is provided for the last calendar year.

++ 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.

DIRECTOR LIABILITY

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. 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 Directors. 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.

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

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.

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 each Share's prospectus under
"Investing in the Institutional Shares" or "Investing in Institutional Service
Shares." 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. 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:

o as provided by an independent pricing service;

o for 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

o at 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. 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 Instituional Shares" or "Redeeming Institutional
Service 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 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

o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

o derive less than 30% of its gross income from the sale of securities held
less than three months;

o invest in securities within certain statutory limits; and

o distribute to its shareholders at least 90% of its net income earned during
the year.

SHAREHOLDERS' TAX STATUS

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:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;

o changes in the Fund expenses; and

o various 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:

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

o LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX is composed
of all fixed rate, securitized mortgage pools by Federal Home
Loan Mortgage Corp. (Freddie Mac), Federal National Mortgage
Association (Fannie Mae), and Government National Mortgage
Association (GNMA), including GNMA Graduated Payment
Mortgages. The minimum principal amount required for
inclusion is $50 million. Total return comprises price
appreciation/depreciation and income as a percentage of the
original investment. Indexes are unmanaged and rebalanced
monthly by market capitalization.

Investments cannot be made in an index.

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

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. In the government sector, as of December 31, 1996, Federated
Investors managed 9 mortgage-backed, 5 government/agency and 17 government money
market mutual funds, with assets approximating $6.3 billion, $1.7 billion and
$23.6 billion, respectively. Federated trades approximately $309 million in U.S.
government and mortgage-backed securities daily and places approximately $17
billion in repurchase agreements each day. Federated introduced the first U.S.
government fund to invest in U.S. government bond securities in 1969. Federated
has been a major force in the short- and intermediate-term government markets
since 1982 and currently manages nearly $30 billion in government funds within
these maturity ranges. J. Thomas Madden, Executive Vice President, oversees
Federated Investors' equity and high yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated Investors'
domestic fixed income management. Henry A. Frantzen, Executive Vice President,
oversees the management of Federated Investors' international and global
portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 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.

BANK MARKETING

Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by 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--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high rankings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.

- ------
*source: Investment Company Institute

FEDERATED LIMITED DURATION GOVERNMENT FUND
(A PORTFOLIO OF FEDERATED TOTAL RETURN SERIES, INC.)

INSTITUTIONAL SHARES

PROSPECTUS

The Institutional Shares of Federated Limited Duration Government 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 consistent with
current income. The Fund pursues this investment objective by investing
primarily in securities which are guaranteed as to payment of principal and
interest by the U.S. government or U.S.

government agencies or instrumentalities.

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 November
___, 1997, 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 NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November ___, 1997

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES

to be filed by amendment

<PAGE>

GENERAL INFORMATION

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 U.S. government 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

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide total return consistent with
current income. 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 U.S.
government securities. Under normal circumstances, the Fund will invest at least
65% of the value of its total assets in securities that are issued or guaranteed
by the U.S. government, its agencies or instrumentalities. The Fund's dollar
weighted-average duration will at all times be limited to three years or less.
(See the section entitled "Average Portfolio Duration" in this Prospectus.)
Unless indicated otherwise, the investment policies may be changed by the
Directors without the approval of shareholders.

ACCEPTABLE INVESTMENTS. The Fund invests primarily in U.S.
government securities, including mortgage-backed securities. These
instruments are either issued or guaranteed by the U.S. government,
its agencies, or instrumentalities. These

securities include, but are not limited to:

- - direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;

- - notes, bonds, discount notes and mortgage-backed securities
issued or guaranteed by U.S. government agencies and
instrumentalities supported by the full faith and credit of the
United States;

- - notes, bonds, discount notes and mortgage-backed securities of
U.S. government agencies or instrumentalities which receive or
have access to federal funding;

- - notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities; and

- - asset-backed securities and commercial mortgage securities rated BBB or better
by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("Standard & Poor's"), or Fitch Investors Service, Inc. ("Fitch"), or which are
of comparable quality in the judgment of the adviser. As a matter of investment
policy, which may be changed by the Directors without shareholder approval, the
Fund does not intend to invest in asset-backed securities and commercial
mortgage securities, but reserves the right to invest in these securities in the
future. Shareholders will receive at least 30 days prior notice of any such
investment.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

instrumentalities are supported by:

- - the issuer's right to borrow an amount limited to a specific line
of credit from the U.S. Treasury;

- - discretionary authority of the U.S. government to purchase
certain obligations of an agency or instrumentality; or

- - the credit of the agency or instrumentality.

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. 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.

STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are derivative
multiclass 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.
Interest-only stripped mortgage-backed securities yield to maturity 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 stripped
mortgage-backed securities if there are substantial prepayments on the
underlying mortgages. Interest-only stripped mortgage-backed securities
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.

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 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 asset-backed
securities.

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.

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 stocks 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.

AVERAGE PORTFOLIO DURATION. Although the Fund will not maintain a stable net
asset value, the adviser will seek to limit, to the extent consistent with the
Fund's investment objective of total return, the magnitude of fluctuations in
the Fund's net asset value by limiting the dollar-weighted average duration of
the Fund's portfolio. 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. Securities with shorter
durations generally have less volatile prices than securities of comparable
quality with longer durations. The Fund should be expected to maintain a higher
average duration during periods of falling interest rates, and a lower average
duration during periods of rising interest rates. In any event, the Fund's
dollar-weighted average duration will not exceed three years.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government 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 these transactions 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.

PORTFOLIO TURNOVER. The Fund does not attempt to set or meet any specific
portfolio rate, since turnover is incidental to transactions undertaken in an
attempt to achieve the Fund's investment objective. High turnover rates may
result in higher brokerage commissions and capital gains. See "Tax Information"
in this prospectus.

INVESTMENT LIMITATIONS

The following limitation may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

The Fund will not invest more than 15% of the value of its net assets in
securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.

HUB AND SPOKE(R) OPTION

The initial shareholder of the Fund (which 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.

NET ASSET VALUE

INVESTING IN INSTITUTIONAL SHARES

SHARE PURCHASES

BY WIRE. To purchase shares of the Fund 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 Limited Duration Government 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 of the Fund by mail, send a check made payable to
Federated Limited Duration Government 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

WHAT SHARES COST

EXCHANGING SECURITIES FOR FUND SHARES

CERTIFICATES AND CONFIRMATIONS

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

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 $110 billion invested across over 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

Susan M. Nason has been the Fund's portfolio manager since
inception. Ms. Nason joined Federated Investors in 1987 and has been a
Senior Vice President of the Fund's investment adviser since April
1997. Ms. Nason served as a Vice President of the investment adviser
from 1993 to 1997, and as an Assistant Vice President of the
investment adviser from 1990 until 1992. Ms. Nason is a Chartered
Financial Analyst and received her M.S.I.A. concentrating in Finance
from Carnegie Mellon University.

Todd A. Abraham has been the Fund's portfolio manager since
inception. Mr. Abraham joined Federated Investors in 1993 as an
Investment Analyst and has been an Assistant Vice President of the
Fund's investment adviser since 1995. Mr. Abraham served as a
Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr.
Abraham received his M.B.A. in Finance from Loyola College.

Robert J. Ostrowski has been the Fund's portfolio manager since
inception. Mr. Ostrowski joined Federated Investors in 1987 as an
Investment Analyst and has been a Vice President of the Fund's
investment adviser since 1993. From 1990 to 1992, he served as an
Assistant Vice President. Mr. Ostrowski is a Chartered Financial
Analyst. He received his M.S.I.A. concentrating in Finance from
Carnegie Mellon University.

DISTRIBUTION OF INSTITUTIONAL SHARES

Federated Securities Corp. is the principal distributor for
Institutional Shares of the Fund. 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.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS

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

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of Institutional Shares pay their allocable portion of Corporation and
Fund expenses.

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 of October
28, 1997, Edgewood Services, Inc. who was the record owner of 153,879 (30.11%),
and Federated Management Co. who was the record owner of 251,239 (49.15%) of the
Institutional Shares and Federated Management was the record owner of 10
(33.89%) of the Institutional Service Shares of the Fund, may for certain
purposes be deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders.

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.

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

OTHER CLASSES OF SHARES

Institutional Service Shares are distributed under a 12b-1 Plan adopted by the
Fund and are also subject to shareholder services fees.

To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-341-7400.

ADDRESSES

Federated Limited Duration Government 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
c/o Federated Services 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 LIMITED
DURATION GOVERNMENT

FUND

INSTITUTIONAL SHARES

PROSPECTUS

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

Prospectus dated November ___, 1997,

LOGO

G01923-01-IS (11/97)

FEDERATED LIMITED DURATION GOVERNMENT FUND
(A PORTFOLIO OF FEDERATED TOTAL RETURN SERIES, INC.)

INSTITUTIONAL SERVICE SHARES

PROSPECTUS

The Institutional Service Shares of Federated Limited Duration Government 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).

government agencies or instrumentalities.

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 November
___, 1997, 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 NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November ___, 1997

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

SUMMARY OF FUND EXPENSES

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS - INSTITUTIONAL SERVICE SHARES

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
October 11, 1993. 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 the Fund: Institutional Service Shares and Institutional Shares. This
prospectus relates only to the Institutional Service Shares of the 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 interest in a professionally managed, diversified
portfolio investing primarily in U.S. government 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

INVESTMENT POLICIES

securities include, but are not limited to:

- direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;

- notes, bonds, discount notes and mortgage-backed securities
issued or guaranteed by U.S. government agencies and instrumentalities
supported by the full faith and credit of the United States;

- notes, bonds, discount notes and mortgage-backed securities of
U.S. government agencies or instrumentalities which receive or have
access to federal funding;

- notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities; and

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

instrumentalities are supported by:

- the issuer's right to borrow an amount limited to a specific
line of credit from the U.S. Treasury;

- discretionary authority of the U.S. government to purchase
certain obligations of an agency or instrumentality; or

- the credit of the agency or instrumentality.

MORTGAGE-BACKED SECURITIES. The Fund may purchase mortgage-backed securities
issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security is an
obligation of the issuer backed by a mortgage or pool of mortgages or a direct
interest in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations (" CMOs"), make payments of both
principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on different types of
mortgages including those on commercial real estate or residential properties.
Other types of mortgage-backed securities will likely be developed in the
future, and the Fund may invest in them if the investment adviser determines
they are consistent with the Fund's investment objective and policies.

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. 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.

STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are derivative
multiclass 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.
Interest-only stripped mortgage-backed securities yield to maturity 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 stripped
mortgage-backed securities if there are substantial prepayments on the
underlying mortgages. Interest-only stripped mortgage-backed securities
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.

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 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 asset-backed
securities.

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 stocks 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.

AVERAGE PORTFOLIO DURATION. Although the Fund will not maintain a stable net
asset value, the adviser will seek to limit, to the extent consistent with the
Fund's investment objective of total return, the magnitude of fluctuations in
the Fund's net asset value by limiting the dollar-weighted average duration of
the Fund's portfolio. 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. Securities with shorter
durations generally have less volatile prices than securities of comparable
quality with longer durations. The Fund should be expected to maintain a higher
average duration during periods of falling interest rates, and a lower average
duration during periods of rising interest rates. In any event, the Fund's
dollar-weighted average duration will not exceed three years.

INVESTMENT LIMITATIONS

The following limitation may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

The Fund will not invest more than 15% of the value of its net assets in
securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.

HUB AND SPOKE(R) OPTION

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

BY WIRE. To purchase Shares of the Fund 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 Limited Duration Government 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 of the Fund by mail, send a check made payable to
Federated Limited Duration Government 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 & 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

WHAT SHARES COST

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

CERTIFICATES AND CONFIRMATIONS

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 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

TELEPHONE REDEMPTION

WRITTEN REQUESTS

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 FUND

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Managment, 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.

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 $110 billion invested across over 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Corp. is a subsidiary of Federated Investors.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS

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

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 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; meetings of Directors
and shareholders and proxy solicitations therefor; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.

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 of October
28, 1997, Edgewood Services, Inc. who was the record owner of 153,879 (30.11%),
and Federated Management Co. who was the record owner of 251,239 (49.15%) of the
Institutional Shares and Federated Management was the record owner of 10
(33.89%) of the Institutional Service Shares of the Fund, may for certain
purposes be deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders. 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.

TAX INFORMATION

FEDERAL INCOME TAX

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.

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.

OTHER CLASSES OF SHARES

Institutional Shares are distributed with no 12b-1 Plan and are also subject to
shareholder services fees.

To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-341-7400.

ADDRESSES

Federated Limited Duration Government 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
c/o Federated Services 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 LIMITED
DURATION GOVERNMENT

FUND

INSTITUTIONAL SERVICE SHARES

PROSPECTUS

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

Prospectus dated November ___, 1997,

LOGO

G01923-02-SS (11/97)

FEDERATED LIMITED DURATION GOVERNMENT 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 Limited Duration Government Fund (the
"Fund"), a portfolio of Federated Total Return Series, Inc. (the
"Corporation") dated November ___, 1997. 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 November ___, 1997

[GRAPHIC OMITTED]

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.

Cusip 31428Q705
31428Q606

G01923-03(11/97)

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

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." 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 consistent with
current income. 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 U.S. government securities. The Fund's
weighted-average portfolio duration will at all times be limited to three years
or less.

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")

The ARMS in which the Fund invests generally will be 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 U.S.

government securities.

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:

RESETS OF INTEREST

CAPS AND FLOORS

FUTURES AND 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.

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS

"MARGIN" IN FUTURES TRANSACTIONS

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).

LEVERAGING

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.

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. 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.
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 such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such 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 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. Portfolio securities will be sold when the
adviser believes it is appropriate, regardless of how long those securities have
been held. The adviser does not anticipate that the Fund's portfolio turnover
rate will exceed 150%. 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 AND BUYING ON MARGIN

The Fund will not acquire more than 25% of its total assets in securities of
issuers having their principal business

activities in the same industry.

BORROWING MONEY

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.

PLEDGING ASSETS

The Fund will not issue senior securities, except as permitted by its investment
objective and policies.

The Fund will not invest more than 15% of its net assets in illiquid securities,
including certain restricted securities (except for Section 4(2) commercial
paper and certain other restricted securities which meet the criteria for
liquidity as established by the Directors), non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice. Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of 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. As a matter of operating policy, the Fund will not purchase
any securities while borrowings in excess of 5% of its total assets are
outstanding. 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

and Director of the Corporation .

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934
Director

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

William J. Copeland
One PNC Plaza - 23rd Floor

Pittsburgh, PA
Birthdate: July 4, 1918
Director

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

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street

Pittsburgh, PA
Birthdate: June 18, 1924
Director

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942
Director

Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of

the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL

Birthdate: October 6, 1926
Director

Attorney, Retired Member of 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., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

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

John W. McGonigle
Federated Investors Tower

Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

* 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: 111 Corcoran Funds; Arrow Funds;
Automated Government Money Trust; 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; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Wesmark Funds; and World Investment Series, Inc. FUND
OWNERSHIP

Officers and Directors as a group own less than 1% of the Fund`s outstanding
shares.

As of October 28, 1997, Edgewood Services, Inc., Pittsburgh, PA owned
approximately 153,879 (30.11%), Federated Management Co., Pittsburgh, PA owned
approximately 251,239 (49.15%), and Federated Securities Corp., Pittsburgh, PA
owned approximately 92,893 (18.17%) of the Institutional Shares of the Fund. As
of October 28, 1997, Federated Services Company, Pittsburgh, PA, acting in
various capacities for numerous accounts, owned approximately 19 (76.01%), and
Federated Management, Pittsburgh, PA owned approximately 10 (33.89%) of the
Institutional Service Shares of the Fund.