Federated Limited Duration Government Fund
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Service Shares
Semi-Annual Report and Supplement to Prospectus dated November 30, 1997
A. Please insert the following "Financial Highlights" table for Institutional
Service Shares as page 2 of the Institutional Service Shares prospectus:
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31, 1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28
Net realized and unrealized gain (loss) on 0.02
investments
Total from investment operations 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.28)
Distributions from net realized gain on investments (0.06)
Total distributions (0.34)
NET ASSET VALUE, END OF PERIOD $10.05
TOTAL RETURN(B) 2.97%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.58%*
Net investment income 5.77%*
Expense waiver/reimbursement(c) 6.76%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,536
Portfolio turnover 303%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 3, 1997 (date of initial
public investment) to March 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the first paragraph of the sub-section entitled "Voting Rights"
on page 12 and replace it with the following:
"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 April 8, 1998, the following shareholders of record owned 25% or more of
the outstanding Institutional Service Shares of the Fund: Charlotte County Day
School, Charlotte, North Carolina, owned approximately 258,230 Shares (73.07%)
and PCA International Inc., Matthews, North Carolina, owned approximately 95,161
Shares (26.93%) and therefore, 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."
C. Please insert the following "Financial Highlights" table for Institutional
Shares as page 14 of the Institutional Service Shares prospectus:
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31, 1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28
Net realized and unrealized gain (loss) on 0.03
investments
Total from investment operations 0.31
LESS DISTRIBUTIONS
Distributions from net investment income (0.29)
Distributions from net realized gain on investments (0.06)
Total distributions (0.35)
NET ASSET VALUE, END OF PERIOD $10.05
TOTAL RETURN(B) 3.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.15%*
Net investment income 5.89%*
Expense waiver/reimbursement(c) 6.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,634
Portfolio turnover 303%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 3, 1997 (date of initial
public investment) to March 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
D. Please insert the following financial statements after the "Financial
Highlights" table for Institutional Shares:
PORTFOLIO OF INVESTMENTS
FEDERATED LIMITED DURATION GOVERNMENT FUND
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT OBLIGATIONS--96.7%
$ 1,486,293 Government National Mortgage Association, 7.00% - 9.00%, $ 1,558,423
5/15/2027 - 11/15/2017
3,438,000 United States Treasury Notes, 5.625%, 12/31/1999 3,441,884
Total Government Obligations (identified cost $5,003,401) 5,000,307
(A)REPURCHASE AGREEMENT--2.7%
140,000 BT Securities Corp., 5.97%, dated 3/31/1998, due 4/1/1998 (at 140,000
amortized cost)
Total Investments (identified cost $5,143,401)(b) $ 5,140,307
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment[s] in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $5,143,401. The
net unrealized depreciation of investments on a federal tax basis amounts to
$3,094 which is comprised of $2,067 appreciation and $5,161 depreciation at
March 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($5,169,200) at March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED LIMITED DURATION GOVERNMENT FUND
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $ 5,140,307
$5,143,401)
Cash 946
Income receivable 58,581
Total assets 5,199,834
LIABILITIES:
Income distribution payable $ 21,810
Accrued expenses 8,824
Total liabilities 30,634
Net Assets for 514,580 shares outstanding $ 5,169,200
NET ASSETS CONSIST OF:
Paid in capital $ 5,145,970
Net unrealized depreciation of investments (3,094)
Accumulated net realized gain on investments 26,829
Distributions in excess of net investment income (505)
Total Net Assets $ 5,169,200
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,633,550 / 162,616 shares outstanding $10.05
INSTITUTIONAL SERVICE SHARES:
$3,535,650 / 351,964 shares outstanding $10.05
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED LIMITED DURATION GOVERNMENT FUND
PERIOD ENDED MARCH 31, 1998 (UNAUDITED)*
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $4,281) $ 153,927
EXPENSES:
Investment advisory fee $ 10,289
Administrative personnel and services fee 77,288
Custodian fees 3,143
Transfer and dividend disbursing agent fees and expenses 15,395
Directors'/Trustees' fees 1,026
Auditing fees 5,132
Legal fees 2,567
Portfolio accounting fees 29,280
Distribution services fee--Institutional Service Shares 1,013
Shareholder services fee--Institutional Service Shares 1,013
Share registration costs 11,410
Printing and postage 5,132
Insurance premiums 1,284
Taxes 1,026
Miscellaneous 2,569
Total expenses 167,567
Waivers and reimbursements--
Waiver of investment advisory fee $ (10,289)
Waiver of distribution services fee--Institutional Service (810)
Shares
Reimbursement of other operating expenses (151,045)
Total waivers and reimbursements (162,144)
Net expenses 5,423
Net investment income 148,504
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 26,834
Net change in unrealized appreciation (depreciation) of (3,094)
investments
Net realized and unrealized gain on investments 23,740
Change in net assets resulting from operations $ 172,244
</TABLE>
* For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED LIMITED DURATION GOVERNMENT FUND
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31, 1998*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations--
Net investment income $ 148,504
Net realized gain on investments ($26,834 as computed 26,834
for federal tax purposes)
Net change in unrealized depreciation (3,094)
Change in net assets resulting from operations 172,244
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (127,262)
Institutional Service Shares (21,746)
Distributions from net realized gains
Institutional Shares (28,854)
Institutional Service Shares (1)
Change in net assets resulting from distributions to (177,863)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 6,911,539
Net asset value of shares issued to shareholders in 27,972
payment of distributions declared
Cost of shares redeemed (6,799,116)
Change in net assets resulting from share transactions 140,395
Change in net assets 134,776
NET ASSETS:
Beginning of period 5,034,424
End of period $ 5,169,200
</TABLE>
* For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION
Federated Total Return Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of four portfolios. The
financial statements included herein are only those of Federated Limited
Duration Government Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares. The investment objective of the Fund is to provide total return
consistent with current income.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
U.S. government securities, are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/ dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions with respect to mortgage
securities issued by GNMA, FNMA, and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
CAPITAL STOCK
At March 31, 1998, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
SHARE CLASS NAME CAPITAL STOCK AUTHORIZED
Institutional Shares 1,000,000,000
Institutional Service Shares 1,000,000,000
Total shares authorized 2,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1998(A)
INSTITUTIONAL SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 335,196 $ 3,375,755
Shares issued to shareholders in payment of distributions declared 2,063 20,769
Shares redeemed (675,169) (6,799,007)
Net change resulting from Institutional Share transactions (337,910) $(3,402,483)
<CAPTION>
PERIOD ENDED
MARCH 31, 1998(A)
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 351,227 $3,535,784
Shares issued to shareholders in payment of
distributions declared 717 7,203
Shares redeemed (11) (109)
Net change resulting from Institutional Service
Share transactions 351,933 $3,542,878
Net change resulting from share transactions 14,023 $140,395
</TABLE>
(a) For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Corporation's
Institutional Shares and Institutional Service Shares. The Plan provides that
the Fund may incur distribution expenses up to 0.25% of average daily net assets
of the Institutional Shares and Institutional Service Shares, annually, to
compensate FSC. FSC may voluntarily choose to waive a portion of this fee. FSC
can modify or terminate this voluntary waiver at any time at its sole
discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Institutional Service Shares for the period. The fee paid to FSS is used
to finance certain services for shareholders and to maintain shareholder
accounts. Federated Shareholder Services may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1998, were as follows:
PURCHASES $15,141,502
SALES $14,975,110
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Anthony R. Bosch
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency. Investment in mutual funds involves
risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Investors
Federated Limited Duration Government Fund
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Service Shares
Semi-Annual Report and
Supplement to Prospectus Dated November 30, 1997
March 31, 1998
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31428Q606
G02369-02 (4/98)
[Graphic]
Federated Limited Duration Government Fund
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Shares
Semi-Annual Report and Supplement to Prospectus dated November 30, 1997
A. Please insert the following "Financial Highlights" table for Institutional
Shares as page 2 of the Institutional Shares prospectus:
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28
Net realized and unrealized gain (loss) on investments 0.03
Total from investment operations 0.31
LESS DISTRIBUTIONS
Distributions from net investment income (0.29)
Distributions from net realized gain on investments (0.06)
Total distributions (0.35)
NET ASSET VALUE, END OF PERIOD $10.05
TOTAL RETURN(B) 3.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.15%*
Net investment income 5.89%*
Expense waiver/reimbursement(c) 6.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,634
Portfolio turnover 303%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 3, 1997 (date of initial
public investment) to March 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the first paragraph of the sub-section entitled "Voting Rights"
on page 12 and replace it with the following: "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 April 8, 1998, the following shareholders of record owned 25% or more of
the outstanding Institutional Shares of the Fund: Lebanon Valley National Bank,
Lebanon, Pennsylvania, owned approximately 43,331 Shares (27.91%) and The
Fidelity State Bank, Garden City, Kansas, owned approximately 42,304 Shares
(27.25%) and therefore, 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."
C. Please insert the following "Financial Highlights" table for Institutional
Service Shares as page 14 of the Institutional Shares prospectus:
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28
Net realized and unrealized gain (loss) on investments 0.02
Total from investment operations 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.28)
Distributions from net realized gain on investments (0.06)
Total distributions (0.34)
NET ASSET VALUE, END OF PERIOD $10.05
TOTAL RETURN(B) 2.97%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.58%*
Net investment income 5.77%*
Expense waiver/reimbursement(c) 6.76%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,536
Portfolio turnover 303%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 3, 1997 (date of initial
public investment) to March 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
D. Please insert the following financial statements after the "Financial
Highlights" table for Institutional Service Shares:
PORTFOLIO OF INVESTMENTS
FEDERATED LIMITED DURATION GOVERNMENT FUND
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT OBLIGATIONS--96.7%
$ 1,486,293 Government National Mortgage Association, 7.00% - 9.00%, $ 1,558,423
5/15/2027 - 11/15/2017
3,438,000 United States Treasury Notes, 5.625%, 12/31/1999 3,441,884
Total Government Obligations (identified cost $5,003,401) 5,000,307
(A)REPURCHASE AGREEMENT--2.7%
140,000 BT Securities Corp., 5.97%, dated 3/31/1998, due 4/1/1998 (at 140,000
amortized cost)
Total Investments (identified cost $5,143,401)(b) $ 5,140,307
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment[s] in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $5,143,401. The
net unrealized depreciation of investments on a federal tax basis amounts to
$3,094 which is comprised of $2,067 appreciation and $5,161 depreciation at
March 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($5,169,200) at March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED LIMITED DURATION GOVERNMENT FUND
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $ 5,140,307
$5,143,401)
Cash 946
Income receivable 58,581
Total assets 5,199,834
LIABILITIES:
Income distribution payable $ 21,810
Accrued expenses 8,824
Total liabilities 30,634
Net Assets for 514,580 shares outstanding $ 5,169,200
NET ASSETS CONSIST OF:
Paid in capital $ 5,145,970
Net unrealized depreciation of investments (3,094)
Accumulated net realized gain on investments 26,829
Distributions in excess of net investment income (505)
Total Net Assets $ 5,169,200
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,633,550 / 162,616 shares outstanding $10.05
INSTITUTIONAL SERVICE SHARES:
$3,535,650 / 351,964 shares outstanding $10.05
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED LIMITED DURATION GOVERNMENT FUND
PERIOD ENDED MARCH 31, 1998 (UNAUDITED)*
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $4,281) $ 153,927
EXPENSES:
Investment advisory fee $ 10,289
Administrative personnel and services fee 77,288
Custodian fees 3,143
Transfer and dividend disbursing agent fees and expenses 15,395
Directors'/Trustees' fees 1,026
Auditing fees 5,132
Legal fees 2,567
Portfolio accounting fees 29,280
Distribution services fee--Institutional Service Shares 1,013
Shareholder services fee--Institutional Service Shares 1,013
Share registration costs 11,410
Printing and postage 5,132
Insurance premiums 1,284
Taxes 1,026
Miscellaneous 2,569
Total expenses 167,567
Waivers and reimbursements--
Waiver of investment advisory fee $ (10,289)
Waiver of distribution services fee--Institutional Service (810)
Shares
Reimbursement of other operating expenses (151,045)
Total waivers and reimbursements (162,144)
Net expenses 5,423
Net investment income 148,504
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 26,834
Net change in unrealized appreciation (depreciation) of (3,094)
investments
Net realized and unrealized gain on investments 23,740
Change in net assets resulting from operations $ 172,244
</TABLE>
* For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED LIMITED DURATION GOVERNMENT FUND
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MARCH 31, 1998*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations--
Net investment income $ 148,504
Net realized gain on investments ($26,834 as computed for federal tax 26,834
purposes)
Net change in unrealized depreciation (3,094)
Change in net assets resulting from operations 172,244
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (127,262)
Institutional Service Shares (21,746)
Distributions from net realized gains
Institutional Shares (28,854)
Institutional Service Shares (1)
Change in net assets resulting from distributions to shareholders (177,863)
SHARE TRANSACTIONS-- Proceeds from sale of shares 6,911,539 Net asset value of
shares issued to shareholders in payment of distributions 27,972 declared Cost
of shares redeemed (6,799,116)
Change in net assets resulting from share transactions 140,395
Change in net assets 134,776
NET ASSETS:
Beginning of period 5,034,424
End of period $ 5,169,200
</TABLE>
* For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED LIMITED DURATION GOVERNMENT FUND
MARCH 31, 1998 (UNAUDITED)
ORGANIZATION
Federated Total Return Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of four portfolios. The
financial statements included herein are only those of Federated Limited
Duration Government Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares. The investment objective of the Fund is to provide total return
consistent with current income.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
U.S. government securities, are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/ dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions with respect to mortgage
securities issued by GNMA, FNMA, and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
CAPITAL STOCK
At March 31, 1998, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
SHARE CLASS NAME CAPITAL STOCK AUTHORIZED
Institutional Shares 1,000,000,000
Institutional Service Shares 1,000,000,000
Total shares authorized 2,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1998(A)
INSTITUTIONAL SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 335,196 $ 3,375,755
Shares issued to shareholders in payment of distributions declared 2,063 20,769
Shares redeemed (675,169) (6,799,007)
Net change resulting from Institutional Share transactions (337,910) $(3,402,483)
<CAPTION>
PERIOD ENDED
MARCH 31, 1998(A)
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 351,227 $3,535,784
Shares issued to shareholders in payment of
distributions declared 717 7,203
Shares redeemed (11) (109)
Net change resulting from Institutional Service
Share transactions 351,933 $3,542,878
Net change resulting from share transactions 14,023 $140,395
</TABLE>
(a) For the period from October 3, 1997 (date of initial public investment) to
March 31, 1998.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Corporation's
Institutional Shares and Institutional Service Shares. The Plan provides that
the Fund may incur distribution expenses up to 0.25% of average daily net assets
of the Institutional Shares and Institutional Service Shares, annually, to
compensate FSC. FSC may voluntarily choose to waive a portion of this fee. FSC
can modify or terminate this voluntary waiver at any time at its sole
discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Institutional Service Shares for the period. The fee paid to FSS is used
to finance certain services for shareholders and to maintain shareholder
accounts. Federated Shareholder Services may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1998, were as follows:
PURCHASES $15,141,502
SALES $14,975,110
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Anthony R. Bosch
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Investors
Federated Limited Duration Government Fund
(A Portfolio of Federated Total Return Series, Inc.)
Institutional Shares
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 30, 1997
March 31, 1998
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31428Q705
G02369-01 (4/98)
[Graphic]
