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
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Pre-Effective Amendment No. ______.................... ____
Post-Effective Amendment No. 22 ................... _X__
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__
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Amendment No. 26 .................................... _X__
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FEDERATED TOTAL RETURN SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b) __ _ on _______________
pursuant to paragraph (b) _ _ 60 days after filing pursuant to paragraph (a) (i)
____ on _______ pursuant to paragraph (a) (i) _X__ 75 days after filing pursuant
to paragraph (a)(ii) ____ on________________ pursuant to paragraph (a)(ii) of
Rule 485.
If appropriate, check the following box:
____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
A Portfolio of Federated Total Return Series, Inc.
INSTITUTIONAL SHARES
A mutual fund seeking total return by investing its assets in securities
guaranteed as to payment of principal and interest by the U.S. government or its
agencies or instrumentalities.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
october _____, 2000
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the
Fund Invests?
What are the Specific Risks of Investing in the Fund?
What Do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide total return. The Fund's total
return will consist of two components: (1) changes in the market value of its
portfolio of securities (both realized and unrealized appreciation); and (2)
income from its portfolio of securities. The Fund's Adviser expects that income
will comprise the largest component of total return.While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing in U.S. government
securities, including mortgage backed securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:
o INTEREST RATE RISK. Prices of fixed income securities generally fall
when interest rates rise.
o PREPAYMENT RISK. When homeowners prepay their mortgages in response to lower
interest rates, the Fund will be required to reinvest the proceeds at the
lower interest rates available. Also, when interest rates fall, the price of
mortgage backed securities may not rise to as great an extent as that of
other fixed income securities.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
A performance bar chart and total return information for the Fund will be
provided after the Fund has been in operation for a full calendar year.
WHAT ARE THE FUND'S FEES AND EXPENSES?
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND - INSTITUTIONAL SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Shares of the Fund's Institutional Shares.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage None
of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of original None purchase
price or redemption proceeds, as applicable) Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and None other Distributions) (as a percentage of
offering price). Redemption Fee (as a percentage of amount redeemed, if
applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers and Reimbursements)1
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 4 0.85%
Total Annual Fund Operating Expenses 1.50%
1 Although not contractually obligated to do so, the adviser and
shareholder services provider expect to waive and reimburse certain amounts.
These are shown below along with the net expenses the Fund expects to ACTUALLY
PAY for the fiscal year ending February 28, 2001.
Total Waiver and Reimbursement of Fund Expenses 1.20%
Total Actual Annual Operating Expenses (after waivers and 0.30%
reimbursements)
2 The adviser expects to voluntarily waive the management fee. The adviser can
terminate this voluntary waiver at any time. The management fee paid by the
Fund (after the anticipated voluntary waiver) is expected to be 0.00% for the
fiscal year ending February 28, 2001.
3 The shareholder services provider expects to voluntarily waive the shareholder
services fee. The shareholder services provider can terminate this voluntary
waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after the anticipated voluntary waiver) is expected to
be 0.00% for the fiscal year ending February 28, 2001.
4 The adviser expects to voluntarily reimburse certain operating expenses of the
Fund. The adviser can terminate this voluntary reimbursement at any time. The
other expenses paid by the Fund (after the anticipated voluntary
reimbursement) is expected to be 0.30% for the fiscal year ending February 28,
2001.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund's Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS AND REIMBURSEMENTS as shown in the table and remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
1 Year 3 Years
$153 $474
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests in a portfolio of U.S. government securities. A description of
the various types of securities in which the Fund invests, and their risks,
immediately follows this strategy section.
The Adviser allocates the Fund's portfolio holdings between U.S. government
mortgage backed securities and U.S. Treasury and agency securities. Mortgage
backed securities generally offer higher relative returns versus comparable U.S.
Treasury and agency securities to compensate for prepayment risk. Prepayment
risk is the unscheduled or complete payment of the principal outstanding on a
mortgage loan by the homeowner. One important reason for prepayments is change
in market interest rates from the time of mortgage origination. The Adviser
actively manages the Fund's portfolio, seeking the higher relative returns of
mortgage backed securities while attempting to limit the prepayment risk.
The Adviser attempts to manage the Fund's prepayment risk by selecting
mortgage backed securities with characteristics that make prepayment less
likely. Characteristics that the Adviser may consider in selecting securities
include the average interest rates of the underlying mortgages, the prior
prepayment history of the mortgages and the federal agencies that securitize the
mortgages. The Adviser attempts to assess the relative returns and risks of
mortgage backed securities by analyzing how the timing, amount and division of
cash flows from the pool of mortgages underlying the security might change in
response to changing economic and market conditions.
The Adviser selects securities with longer or shorter duration based on its
interest rate outlook. Duration measures the price sensitivity of a portfolio of
fixed income securities to changes in interest rates. The Adviser formulates its
interest rate outlook and otherwise attempts to anticipate changes in economic
and market conditions by analyzing a variety of factors such as:
o current and expected U.S. economic growth; o current and expected interest
rates and inflation; o the Federal Reserve's monetary policy; and o changes in
the supply of or demand for U.S. government securities.
There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.
The Adviser may use collateralized mortgage obligations ("CMOs") with
relatively predictable cash flows (such as sequential pay, planned amortization
class and targeted amortization class) to reduce prepayment risk.
The Adviser may attempt to take advantage of current and potential yield
differentials existing from time to time between various mortgage backed
securities in order to increase the Fund's return. The Fund may also engage in
dollar roll transactions for their potential to enhance income.
The Fund pursues its investment objective primarily by investing in another
investment company (which is not available for general investment by the public)
that is advised by an affiliate of the Adviser. The other investment company
(the "Core Portfolio") follows the investment strategies described above, but is
managed independently of the Fund and may incur additional administrative
expenses. Therefore, any such investment by the Fund may be subject to duplicate
expenses. However, the Adviser believes that the benefits and efficiencies of
this approach should outweigh the potential additional expenses.
The Fund may also invest in securities directly. The reference above to the
Fund's adviser includes the adviser to the Core Portfolio to the extent that the
fund has invested in the Core Portfolio.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the principal types of fixed income securities in
which the Fund may invest:
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS
CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risk depends upon the structure of the CMOs.
However, the actual returns on any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risk, but not as low as treasury
securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risk, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.
SPECIAL TRANSACTIONS
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other delayed delivery transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the particular
securities to be delivered. Instead, the Fund agrees to accept any security that
meets specified terms. For example, in a TBA mortgage backed transaction, the
Fund and the seller would agree upon the issuer, interest rate and terms of the
underlying mortgages. The seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities increase
interest rate risks because the underlying mortgages may be less favorable than
anticipated by the Fund.
DOLLAR ROLLS
Dollar rolls are transactions where the Fund sells mortgage backed securities
with a commitment to buy similar, but not identical, mortgage backed securities
on a future date at a lower price. Normally, one or both securities involved are
TBA mortgage backed securities. Dollar rolls are subject to interest rate and
credit risks.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations without
entering into an offsetting derivative contract or terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities or
to realize losses on special transactions.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to interest rate
changes in the interest paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market factors,
such as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
PREPAYMENT RISKS
Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and a partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price and yield of
mortgage backed securities. For example, during periods of declining interest
rates, prepayments can be expected to accelerate, and the Fund would be required
to reinvest the proceeds at the lower interest rates then available. In
addition, like other interest-bearing securities, the values of mortgage backed
securities generally fall when interest rates rise.
Since rising interest rates generally result in decreased prepayments of
mortgage backed securities, this could cause mortgage securities to have greater
average lives than expected and their value may decline more than other fixed
income securities. Conversely, when interest rates fall, their potential for
capital appreciation is limited due to the existence of the prepayment feature.
Generally, mortgage backed securities compensate for greater prepayment risk
by paying a higher yield. The additional interest paid for risk is measured by
the difference between the yield of a mortgage backed security and the yield of
a U.S. Treasury security with a comparable maturity (the spread). An increase in
the spread will cause the price of the security to decline. Spreads generally
increase in response to adverse economic or market conditions.
WHAT DO SHARES COST?
You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in this prospectus) it is processed at the next calculated net
asset value (NAV).
The Fund does not charge a front-end sales charge. NAV is determined at the
end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is
open.
The Fund generally values fixed income securities according to the mean
between bid and asked prices as furnished by an independent pricing service,
except that fixed income securities with remaining maturities of less than 60
days at the time of purchase may be valued at amortized cost.
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The required minimum initial investment for Fund Shares is $100,000. There is
no required minimum subsequent investment amount.
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 is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund offers two share classes: Institutional Service Shares and
Institutional Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Shares. Each share
class has different sales charges and other expenses, which affect their
performance. Contact your investment professional or call 1-800-341-7400 for
more information concerning the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to institutions or to individuals, directly or
through investment professionals.
When the Distributor receives marketing fees and sales charges, it may pay
some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before the
end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within three
business days. You will become the owner of Shares and receive dividends when
the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New
Account Form; and
o Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares and your Shares will be priced at the next calculated
NAV after the Fund receives your wire or your check. If your check does not
clear, your purchase will be canceled and you could be liable for any losses or
fees incurred by the Fund or Federated Shareholder Services Company, the Fund's
transfer agent.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions. If you
call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem Shares by mailing a written request to the Fund. You will receive
a redemption amount based on the next calculated NAV after the Fund receives
your written request in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration; o amount
to be redeemed or exchanged; o signatures of all shareholders exactly as
registered. Call your investment professional or the Fund if you need special
instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days;
o a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that
is an ACH member; or
o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the
Fund's ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund does not issue share certificates.
ACCOUNT AND SHARE INFORMATION
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders.
Dividends are paid to all shareholders invested in the Fund on the record date.
The record date is the date on which a shareholder must officially own Shares in
order to earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a capital
gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
THE FUND'S PORTFOLIO MANAGERS ARE:
KATHLEEN M. FOODY-MALUS
Kathleen M. Foody-Malus has been the Fund's Portfolio Manager since the Fund's
inception. Ms. Foody-Malus joined Federated in 1983 and has been a Senior
Portfolio Manager since 1996 and a Vice President of the Fund's Adviser since
1993. She was a Portfolio Manager of the Fund's Adviser from 1993 to 1996. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.
SUSAN M. NASON
Susan M. Nason has been the Fund's Portfolio Manager since the Fund's
inception. Ms. Nason joined Federated in 1987 and has been a Senior
Portfolio Manager and Senior Vice President of the Fund's Adviser since 1997.
Ms. Nason served as a Portfolio Manager and Vice President of the Adviser
from 1993 to 1997. Ms. Nason is a Chartered Financial Analyst and received
her M.S.I.A. concentrating in Finance from Carnegie Mellon University.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Fund's fiscal year end is February 28. As this is the Fund's first fiscal
year, financial information is not yet available.
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
(A Portfolio of Federated Total Return Series, Inc.)
INSTITUTIONAL SHARES
october _____, 2000
A Statement of Additional Information (SAI) dated October ______, 2000, is
incorporated by reference into this prospectus. To obtain the SAI and other
information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1- 202-942-8090 for
information on the Public Reference Room's operations and copying fees.
INVESTMENT COMPANY ACT FILE NO. 811-7115
CUSIP _____________
________________ (10/00)
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
A Portfolio of Federated Total Return Series, Inc.
INSTITUTIONAL SERVICE SHARES
A mutual fund seeking total return by investing its assets in securities
guaranteed as to payment of principal and interest by the U.S. government or its
agencies or instrumentalities.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
october _____, 2000
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the
Fund Invests?
What are the Specific Risks of Investing in the Fund?
What Do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide total return. The Fund's total
return will consist of two components: (1) changes in the market value of its
portfolio of securities (both realized and unrealized appreciation); and (2)
income from its portfolio of securities. The Fund's Adviser expects that income
will comprise the largest component of total return.While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing in U.S. government
securities, including mortgage backed securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:
o INTEREST RATE RISK. Prices of fixed income securities generally fall
when interest rates rise.
o PREPAYMENT RISK. When homeowners prepay their mortgages in response to lower
interest rates, the Fund will be required to reinvest the proceeds at the
lower interest rates available. Also, when interest rates fall, the price of
mortgage backed securities may not rise to as great an extent as that of
other fixed income securities.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
A performance bar chart and total return information for the Fund will be
provided after the Fund has been in operation for a full calendar year.
WHAT ARE THE FUND'S FEES AND EXPENSES?
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND - INSTITUTIONAL SERVICE SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Shares of the Fund's Institutional Service Shares.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage None
of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of original None purchase
price or redemption proceeds, as applicable) Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and None other Distributions) (as a percentage of
offering price). Redemption Fee (as a percentage of amount redeemed, if
applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers and Reimbursements)1
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 0.25%
Other Expenses 4 0.85%
Total Annual Fund Operating Expenses 1.75%
1 Although not contractually obligated to do so, the adviser and
distributor expect to waive and reimburse certain amounts. These are shown
below along with the net expenses the Fund expects to ACTUALLY PAY for the
fiscal year ending February 28, 2001.
Total Waiver and Reimbursement of Fund Expenses 1.20%
Total Actual Annual Operating Expenses (after waivers and 0.55%
reimbursements)
2 The Adviser expects to voluntarily waive the management fee. The Adviser can
terminate this voluntary waiver at any time. The management fee paid by the
Fund (after the anticipated voluntary waiver) is expected to be 0.00% for the
fiscal year ending February 28, 2001.
3 The distributor expects to voluntarily waive the distribution (12b-1) fee. The
distributor can terminate this voluntary waiver at any time. The distribution
(12b-1) fee paid by the Fund's Institutional Service Shares (after the
anticipated voluntary waiver) is expected to be 0.00% for the fiscal year
ending February 28, 2001.
4 The adviser expects to voluntarily reimburse certain operating expenses of the
Fund. The adviser can terminate this anticipated voluntary reimbursement at
any time. The other expenses paid by the Fund (after the anticipated voluntary
reimbursement) is expected to be 0.30% for the fiscal year ending February 28,
2001.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS AND REIMBURSEMENTS as shown in the table and remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year3
Years
$178 $551
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests in a portfolio of U.S. government securities. A description of
the various types of securities in which the Fund invests, and their risks,
immediately follows this strategy section.
The Adviser allocates the Fund's portfolio holdings between U.S. government
mortgage backed securities and U.S. Treasury and agency securities. Mortgage
backed securities generally offer higher relative returns versus comparable U.S.
Treasury and agency securities to compensate for prepayment risk. Prepayment
risk is the unscheduled or complete payment of the principal outstanding on a
mortgage loan by the homeowner. One important reason for prepayments is change
in market interest rates from the time of mortgage origination. The Adviser
actively manages the Fund's portfolio, seeking the higher relative returns of
mortgage backed securities while attempting to limit the prepayment risk.
The Adviser attempts to manage the Fund's prepayment risk by selecting
mortgage backed securities with characteristics that make prepayment less
likely. Characteristics that the Adviser may consider in selecting securities
include the average interest rates of the underlying mortgages, the prior
prepayment history of the mortgages and the federal agencies that securitize the
mortgages. The Adviser attempts to assess the relative returns and risks of
mortgage backed securities by analyzing how the timing, amount and division of
cash flows from the pool of mortgages underlying the security might change in
response to changing economic and market conditions.
The Adviser selects securities with longer or shorter duration based on its
interest rate outlook. Duration measures the price sensitivity of a portfolio of
fixed income securities to changes in interest rates. The Adviser formulates its
interest rate outlook and otherwise attempts to anticipate changes in economic
and market conditions by analyzing a variety of factors such as:
o current and expected U.S. economic growth; o current and expected interest
rates and inflation; o the Federal Reserve's monetary policy; and o changes in
the supply of or demand for U.S. government securities.
There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.
The Adviser may use collateralized mortgage obligations ("CMOs") with
relatively predictable cash flows (such as sequential pay, planned amortization
class and targeted amortization class) to reduce prepayment risk.
The Adviser may attempt to take advantage of current and potential yield
differentials existing from time to time between various mortgage backed
securities in order to increase the Fund's return. The Fund may also engage in
dollar roll transactions for their potential to enhance income.
The Fund pursues its investment objective primarily by investing in another
investment company (which is not available for general investment by the public)
that is advised by an affiliate of the Adviser. The other investment company
(the "Core Portfolio") follows the investment strategies described above, but is
managed independently of the Fund and may incur additional administrative
expenses. Therefore, any such investment by the Fund may be subject to duplicate
expenses. However, the Adviser believes that the benefits and efficiencies of
this approach should outweigh the potential additional expenses.
The Fund may also invest in securities directly. The reference above to the
Fund's adviser includes the adviser to the Core Portfolio to the extent that the
fund has invested in the Core Portfolio.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the principal types of fixed income securities in
which the Fund may invest:
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS
CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risk depends upon the structure of the CMOs.
However, the actual returns on any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risk, but not as low as treasury
securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risk, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.
SPECIAL TRANSACTIONS
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other delayed delivery transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the particular
securities to be delivered. Instead, the Fund agrees to accept any security that
meets specified terms. For example, in a TBA mortgage backed transaction, the
Fund and the seller would agree upon the issuer, interest rate and terms of the
underlying mortgages. The seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities increase
interest rate risks because the underlying mortgages may be less favorable than
anticipated by the Fund.
DOLLAR ROLLS
Dollar rolls are transactions where the Fund sells mortgage backed securities
with a commitment to buy similar, but not identical, mortgage backed securities
on a future date at a lower price. Normally, one or both securities involved are
TBA mortgage backed securities. Dollar rolls are subject to interest rate and
credit risks.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations without
entering into an offsetting derivative contract or terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities or
to realize losses on special transactions.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to interest rate
changes in the interest paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market factors,
such as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
PREPAYMENT RISKS
Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and a partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price and yield of
mortgage backed securities. For example, during periods of declining interest
rates, prepayments can be expected to accelerate, and the Fund would be required
to reinvest the proceeds at the lower interest rates then available. In
addition, like other interest-bearing securities, the values of mortgage backed
securities generally fall when interest rates rise.
Since rising interest rates generally result in decreased prepayments of
mortgage backed securities, this could cause mortgage securities to have greater
average lives than expected and their value may decline more than other fixed
income securities. Conversely, when interest rates fall, their potential for
capital appreciation is limited due to the existence of the prepayment feature.
Generally, mortgage backed securities compensate for greater prepayment risk
by paying a higher yield. The additional interest paid for risk is measured by
the difference between the yield of a mortgage backed security and the yield of
a U.S. Treasury security with a comparable maturity (the spread). An increase in
the spread will cause the price of the security to decline. Spreads generally
increase in response to adverse economic or market conditions.
WHAT DO SHARES COST?
You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in this prospectus) it is processed at the next calculated net
asset value (NAV).
The Fund does not charge a front-end sales charge. NAV is determined at the
end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is
open.
The Fund generally values fixed income securities according to the mean
between bid and asked prices as furnished by an independent pricing service,
except that fixed income securities with remaining maturities of less than 60
days at the time of purchase may be valued at amortized cost.
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
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 is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund offers two share classes: Institutional Service Shares and
Institutional Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Service Shares. Each
share class has different sales charges and other expenses, which affect their
performance. Contact your investment professional or call 1-800-341-7400 for
more information concerning the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to institutions or to individuals, directly or
through investment professionals.
When the Distributor receives marketing fees and sales charges, it may pay
some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Service Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees. The Fund will not accrue or pay any distribution expenses for the fiscal
year ending February 28, 2001.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before the
end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within three
business days. You will become the owner of Shares and receive dividends when
the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New
Account Form; and
o Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares and your Shares will be priced at the next calculated
NAV after the Fund receives your wire or your check. If your check does not
clear, your purchase will be canceled and you could be liable for any losses or
fees incurred by the Fund or Federated Shareholder Services Company, the Fund's
transfer agent.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions. If you
call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem Shares by mailing a written request to the Fund. You will receive
a redemption amount based on the next calculated NAV after the Fund receives
your written request in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration; o amount
to be redeemed or exchanged; o signatures of all shareholders exactly as
registered. Call your investment professional or the Fund if you need special
instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days;
o a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that
is an ACH member; or
o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the
Fund's ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund does not issue share certificates.
ACCOUNT AND SHARE INFORMATION
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders.
Dividends are paid to all shareholders invested in the Fund on the record date.
The record date is the date on which a shareholder must officially own Shares in
order to earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a capital
gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
THE FUND'S PORTFOLIO MANAGERS ARE:
KATHLEEN M. FOODY-MALUS
Kathleen M. Foody-Malus has been the Fund's Portfolio Manager since the Fund's
inception. Ms. Foody-Malus joined Federated in 1983 and has been a Senior
Portfolio Manager since 1996 and a Vice President of the Fund's Adviser since
1993. She was a Portfolio Manager of the Fund's Adviser from 1993 to 1996. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.
SUSAN M. NASON
Susan M. Nason has been the Fund's Portfolio Manager since the Fund's
inception. Ms. Nason joined Federated in 1987 and has been a Senior
Portfolio Manager and Senior Vice President of the Fund's Adviser since 1997.
Ms. Nason served as a Portfolio Manager and Vice President of the Adviser
from 1993 to 1997. Ms. Nason is a Chartered Financial Analyst and received
her M.S.I.A. concentrating in Finance from Carnegie Mellon University.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Fund's fiscal year end is February 28. As this is the Fund's first fiscal
year, financial information is not yet available.
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
(A Portfolio of Federated Total Return Series, Inc.)
INSTITUTIONAL SERVICE SHARES
october _____, 2000
A Statement of Additional Information (SAI) dated October ______, 2000, is
incorporated by reference into this prospectus. To obtain the SAI and other
information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1- 202-942-8090 for
information on the Public Reference Room's operations and copying fees.
INVESTMENT COMPANY ACT FILE NO. 811-7115
CUSIP _____________
________________ (10/00)
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
A Portfolio of Federated Total Return Series, Inc.
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Institutional Shares and
Institutional Service Shares of Federated Total Return Government Bond Fund
(Fund), dated October _____, 2000.
Obtain the prospectuses without charge by calling 1-800-341-7400.
October _______, 2000
_____________ (10/00)
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Federated Total Return Series, Inc.
(Corporation). The Corporation is an open-end, management investment company
that was established under the laws of the State of Maryland on October 11,
1993. The Corporation may offer separate series of shares representing interests
in separate portfolios of securities.
The Board of Directors (the "Board") has established two classes of shares of
the Fund, known as Institutional Shares and Institutional Service Shares
(Shares). This SAI relates to both classes of Shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser).
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest:
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass- through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.
Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class.
Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal payments and
prepayments. The next class of CMOs receives all principal payments after the
first class is paid off. This process repeats for each sequential class of CMO.
As a result, each class of sequential pay CMOs reduces the prepayment risks of
subsequent classes.
PACs, TACs and Companion Classes
More sophisticated CMOs include planned amortization classes (PACs) and targeted
amortization classes (TACs). PACs and TACs are issued with companion classes.
PACs and TACs receive principal payments and prepayments at a specified rate.
The companion classes receive principal payments and prepayments in excess of
the specified rate. In addition, PACs will receive the companion classes' share
of principal payments, if necessary, to cover a shortfall in the prepayment
rate. This helps PACs and TACs to control prepayment risks by increasing the
risks to their companion classes.
IOs and POs
CMOs may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs increase in
value when prepayment rates increase. In contrast, IOs decrease in value when
prepayments increase, because the underlying mortgages generate less interest
payments. However, IOs tend to increase in value when interest rates rise (and
prepayments decrease), making IOs a useful hedge against interest rate risks.
Floaters and Inverse Floaters
Another variant allocates interest payments between two classes of CMOs. One
class (Floaters) receives a share of interest payments based upon a market index
such as LIBOR. The other class (Inverse Floaters) receives any remaining
interest payments from the underlying mortgages. Floater classes receive more
interest (and Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and interest rate risks from the
Floater to the Inverse Floater class, reducing the price volatility of the
Floater class and increasing the price volatility of the Inverse Floater class.
Z Classes
CMOs must allocate all payments received from the underlying mortgages to some
class. To capture any unallocated payments, CMOs generally have an accrual (Z)
class. Z classes do not receive any payments from the underlying mortgages until
all other CMO classes have been paid off. Once this happens, holders of Z class
CMOs receive all payments and prepayments. The degree of increased or decreased
prepayment risks depends upon the structure of the CMOs. However, the actual
returns on any type of mortgage backed security depend upon the performance of
the underlying pool of mortgages, which no one can predict and will vary among
pools. Derivative Contracts Derivative contracts are financial instruments that
require payments based upon changes in the values of designated (or underlying)
securities, currencies, commodities, financial indices or other assets. Some
derivative contracts (such as futures, forwards and options) require payments
relating to a future trade involving the underlying asset. Other derivative
contracts (such as swaps) require payments relating to the income or returns
from the underlying asset. The other party to a derivative contract is referred
to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges.
In this case, the exchange sets all the terms of the contract except for the
price. Investors make payments due under their contracts through the exchange.
Most exchanges require investors to maintain margin accounts through their
brokers to cover their potential obligations to the exchange. Parties to the
contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell Fund securities at unfavorable prices to do so). Inability to close
out a contract could also harm the Fund by preventing it from disposing of or
trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending how the Fund uses derivative contracts and the relationships between
the market value of a derivative contract and the underlying asset, derivative
contracts may increase or decrease the Fund's exposure to market and currency
risks, and may also expose the Fund to liquidity and leverage risks. OTC
contracts also expose the Fund to credit risks in the event that a counterparty
defaults on the contract. Hedging The Fund may engage in hedging transactions
using derivative contracts. Hedging transactions are intended to reduce specific
risks. For example, to protect the Fund against circumstances that would
normally cause the Fund's portfolio securities to decline in value, the Fund may
buy or sell a derivative contract that would normally increase in value under
the same circumstances. The Fund may also attempt to hedge by using combinations
of different derivatives contracts, or derivatives contracts and securities. The
Fund's ability to hedge may be limited by the costs of the derivatives
contracts. The Fund may attempt to lower the cost of hedging by entering into
transactions that provide only limited protection, including transactions that:
(1) hedge only a portion of its portfolio; (2) use derivatives contracts that
cover a narrow range of circumstances; or (3) involve the sale of derivatives
contracts with different terms. Consequently, hedging transactions will not
eliminate risk even if they work as intended. In addition, hedging strategies
are not always successful, and could result in increased expenses and losses to
the Fund.
The Fund may trade in the following types of derivative contracts: Futures
Contracts Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of an underlying asset at a
specified price, date, and time. Entering into a contract to buy an underlying
asset is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures contracts
traded OTC are frequently referred to as forward contracts.
The Fund may buy/sell financial futures contracts.
Options
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Fund may:
o Buy call options on securities and financial futures contracts in
anticipation of an increase in value of the underlying asset;
o Buy put options on securities and financial futures contracts in
anticipation of a decrease in the value of the underlying asset; and
o Buy or write options to close out existing options positions. The Fund may
also write call options on financial futures contracts to generate income
from premiums, and in anticipation of a decrease or only limited increase
in the value of the underlying asset. If a call written by the Fund is
exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the
premium received.
The Fund may also write put options on securities and financial futures
contracts to generate income from premiums, and in anticipation of an increase
or only limited decrease in the value of the underlying asset. In writing puts,
there is a risk that the Fund may be required to take delivery of the underlying
asset when its current market price is lower than the exercise price.
When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.
SPECIAL TRANSACTIONS
INTER-FUND BORROWING AND LENDING ARRANGEMENTS
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board, and the Board monitors the operation of
the program. Any inter-fund loan must comply with certain conditions set out in
the exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only: (a) to meet shareholder
redemption requests; and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") AND more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
To Be Announced Securities (TBAs)
As with other delayed delivery transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the particular
securities to be delivered. Instead, the Fund agrees to accept any security that
meets specified terms. For example, in a TBA mortgage backed transaction, the
Fund and the seller would agree upon the issuer, interest rate and terms of the
underlying mortgages. The seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities increase
interest rate risks because the underlying mortgages may be less favorable than
anticipated by the Fund. Dollar Rolls Dollar rolls are transactions where the
Fund sells mortgage backed securities with a commitment to buy similar, but not
identical, mortgage backed securities on a future date at a lower price.
Normally, one or both securities involved are TBA mortgage backed securities.
Dollar rolls are subject to interest rate and credit risks.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on loan,
but it will terminate a loan in anticipation of any important vote. The Fund may
pay administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate and credit risks.
Asset Coverage In order to secure its obligations in connection with derivatives
contracts or special transactions, the Fund will either own the underlying
assets, enter into an offsetting transaction or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without entering into an offsetting
derivative contract or terminating a special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on derivative
contracts or special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectuses. Additional risk factors are
outlined below.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes in the interest paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market factors,
such as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other
securities rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
PREPAYMENT RISKS
o Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price or yield of
mortgage backed securities. For example, during periods of declining interest
rates, prepayments can be expected to accelerate, and the Fund would be
required to reinvest the proceeds at the lower interest rates then available.
In addition, like other interest- bearing securities, the values of mortgage
backed securities generally fall when interest rates rise.
o Since rising interest rates generally result in decreased prepayments of
mortgage backed securities, this could cause mortgage backed securities, this
could cause mortgage securities to have greater average lives than expected
and their value may decline more than other fixed income securities.
Conversely, when interest rates fall, their potential for capital appreciation
is limited due to the existence of the prepayment feature.
o Generally, mortgage backed securities compensate for greater prepayment risk
by paying a higher yield. The additional interest paid for risk is measured by
the difference between the yield of a mortgage backed security and the yield
of a U.S. Treasury security with a comparable maturity (the spread). An
increase in the spread will cause the price of the security to decline.
Spreads may generally increase in response to adverse economic or market
conditions.
LIQUIDITY RISKS
o Trading opportunities are more limited for CMOs that have complex terms or
that are not widely held. These features may make it more difficult to sell or
buy a security at a favorable price or time. Consequently, the Fund may have
to accept a lower price to sell a security, sell other securities to raise
cash or give up an investment opportunity, any of which could have a negative
effect on the Fund's performance. Infrequent trading of securities may also
lead to an increase in their price volatility.
o Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.
RISKS ASSOCIATED WITH COMPLEX CMOS
o CMOs with complex or highly variable prepayment terms, such as companion
classes, IOs, POs, and Inverse Floaters, generally entail greater market,
prepayment and liquidity risks than other mortgage backed securities. For
example, their prices are more volatile and their trading market may be more
limited.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.
FUNDAMENTAL INVESTMENT OBJECTIVE
The investment objective of the fund is to provide total return. The investment
objective may not be changed by the Fund's Directors without shareholder
approval.
INVESTMENT LIMITATIONS
DIVERSIFICATION
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
CONCENTRATION
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
For purposes of this restriction, the term concentration has the meaning set
forth in the Investment Company Act of 1940 Act (1940 Act) , any rule or order
thereunder, or any SEC staff interpretation thereof. Government securities and
municipal securities will not be deemed to constitute an industry.
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities. For purposes of
this restriction, investments in transactions involving futures contracts and
options, forward currency contracts, swap transactions and other financial
contracts that settle by payment of cash are not deemed to be investments in
commodities.
INVESTING IN REAL ESTATE
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
BORROWING MONEY AND ISSUING SENIOR SECURITIES
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act, any rule or order
thereunder, or any SEC staff interpretation thereof.
LENDING
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD AND BY
THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE
1940 ACT. THE FOLLOWING LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD
WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL
CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.
ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.
INVESTING IN 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. At the present time, the Fund expects
that its investments in other investment companies may include shares of money
market funds, including funds affiliated with the Fund's investment adviser.
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.
PURCHASES ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." 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 limitation.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
o for fixed income securities, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that fixed
income securities with remaining maturities of less than 60 days at the
time of purchase may be valued at amortized cost;
o futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of
trading on such exchanges. Options traded in the over-the- counter market
are generally valued according to the mean between the last bid and the
last asked price for the option as provided by an investment dealer or
other financial institution that deals in the option. The Board may
determine in good faith that another method of valuing such investments is
necessary to appraise their fair market value;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that
short-term obligations with remaining maturities of less than 60 days at
the time of purchase may be valued at amortized cost or at fair market
value as determined in good faith by the Board; and
o for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker/dealers or
other financial institutions that trade the securities.
WHAT DO SHARES COST?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The NAV for each class of
Shares may differ due to the variance in daily net income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best- efforts basis.
RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of shares, the maximum Rule 12b-1 Plan fee that can be paid
in any one year may not be sufficient to cover the marketing-related expenses
the Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving the portfolio securities and selling them
before their maturity could receive less than the redemption value of the
securities and could incur certain transaction costs.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of the Fund have
equal voting rights, except that in matters affecting only a particular class,
only Shares of that class are entitled to vote.
Directors may be removed by the Board or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Director from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Corporation is comprised of
five Funds and the Federated Fund Complex is comprised of 43 investment
companies, whose investment advisers are affiliated with the Fund's Adviser.
<TABLE>
<CAPTION>
NAME BIRTH DATE PRINCIPAL OCCUPATIONS FOR PAST FIVE YEARS AGGREGATE TOTAL
ADDRESS POSITION COMPENSATION COMPENSATION
WITH FUND FROM FUND FROM FUND
AND FUND
COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*# Chief Executive Officer and Director or $0 $0 for the
Birth Date: July Trustee of the Federated Fund Complex; Fund and 43
28, 1924 Federated Chairman and Director, Federated other
Investors Tower Investors, Inc.; Chairman, Federated investment
1001 Liberty Avenue Investment Management Company, Federated companies in
Pittsburgh, PA Global Investment Management Corp. and the Fund
CHAIRMAN AND Passport Research, Ltd.; formerly: Complex
DIRECTOR Trustee, Federated Investment Management
Company and Chairman and Director,
Federated Investment Counseling.
THOMAS G. BIGLEY Director or Trustee of theFederated Fund $0 $116,760.63
Birth Date: Complex; Director, Member of Executive for the Fund
February 3, 1934 Committee, Children's Hospital of and 43 other
15 Old Timber Trail Pittsburgh; Director, Robroy Industries, investment
Pittsburgh, PA Inc. (coated steel conduits/computer companies in
DIRECTOR storage equipment); formerly: Senior the Fund
Partner, Ernst & Young LLP; Director, MED Complex
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $0 $128,455.37
Birth Date: June Complex; President, Investment Properties for the Fund
23, 1937 Corporation; Senior Vice President, and 43 other
Grubb & JohnR.Wood and Associates, Inc., Realtors; investment
Ellis/Investment Partner or Trustee in private real estate companies in
Properties ventures in Southwest Florida; formerly: the Fund
Corporation President, Naples Property Management, Complex
3201 Tamiami Trail Inc. and Northgate Village Development
North Corporation.
Naples, FL
DIRECTOR
NICHOLAS P. Director or Trustee of the Federated Fund $0 $73,191.21
CONSTANTAKIS Complex; Director, Michael Baker for the Fund
Birth Date: Corporation (engineering, construction, and 37 other
September 3, 1939 operations and technical services); investment
175 Woodshire Drive formerly: Partner, Andersen Worldwide SC. companies in
Pittsburgh, PA the Fund
DIRECTOR Complex
JOHN F. CUNNINGHAM Director or Trustee of some of the $0 $93,190.48
Birth Date: March Federated Fund Complex; Chairman, for the Fund
5, 1943 President and Chief Executive Officer, and 37 other
353 El Brillo Way Cunningham & Co., Inc. (strategic business investment
Palm Beach, FL consulting); Trustee Associate, Boston companies in
DIRECTOR College; Director, Iperia Corp. the Fund
(communications/software); formerly: Complex
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board
and Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories;
Director, First National Bank of Boston;
Director, Apollo Computer, Inc.
J.CHRISTOPHER President or Executive Vice President of $0 $0 for the
DONAHUE* + the Federated Fund Complex; Director or Fund and 30
Birth Date: April Trustee of some of the Funds in the other
11, 1949 Federated Federated Fund Complex; President, Chief investment
Investors Tower Executive Officer and Director, Federated companies in
1001 Liberty Avenue Investors, Inc.; President, Chief the Fund
Pittsburgh, PA Executive Officer and Trustee, Federated Complex
EXECUTIVE VICE Investment Management Company; Trustee,
PRESIDENT AND Federated Investment Counseling;
DIRECTOR President, Chief Executive Officer and
Director, Federated Global Investment
Management Corp.; President and Chief
Executive Officer, Passport Research,
Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated
Services Company; formerly: President,
Federated Investment Counseling.
LAWRENCE D. ELLIS, Director or Trustee of the Federated Fund $0 $116,760.63
M.D.* Complex; Professor of Medicine, University for the Fund
Birth Date: October of Pittsburgh; Medical Director, and 43 other
11, 1932 University of Pittsburgh Medical investment
3471 Fifth Avenue CenterDowntown; Hematologist, Oncologist companies in
Suite 1111 and Internist, University of Pittsburgh the Fund
Pittsburgh, PA Medical Center; Member, National Board of Complex
DIRECTOR Trustees, Leukemia Society of America.
PETER E. MADDEN Director or Trustee of the Federated Fund $0 $109,153.60
Birth Date: March Complex; formerly: Representative, for the Fund
16, 1942 Commonwealth of Massachusetts General and 43 other
One Royal Palm Way Court; President, State Street Bank and Investment
100 Royal Palm Way Trust Company and State Street companies in
Palm Beach, FL Corporation. Previous Positions: Director, the Fund
DIRECTOR VISA USA and VISA International; Chairman Complex
and Director, Massachusetts Bankers
Association; Director, Depository Trust
Corporation; Director, The Boston Stock
Exchange.
CHARLES F. Director or Trustee of some of the $0 $102,573.91
MANSFIELD, JR. Federated Fund Complex; Executive Vice for the Fund
Birth Date: April President, Legal and External Affairs, and 40 other
10, 1945 Dugan Valva Contess, Inc. (marketing, investment
80 South Road communications, technology and companies in
Westhampton Beach, consulting); formerly: Management the Fund
NY DIRECTOR Consultant. Previous Positions: Chief Complex
Executive Officer, PBTC International Bank; Partner, Arthur
Young & Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland Bank; Vice President,
Citibank; Assistant Professor of Banking and Finance, Frank
G. Zarb School of Business, Hofstra University.
JOHN E. MURRAY, Director or Trustee of theFederated Fund $0 $128,455.37
JR., J.D., S.J.D.# Complex; President, Law Professor, for the Fund
Birth Date: Duquesne University; Consulting Partner, and 43 other
December 20, 1932 Mollica & Murray; Director, Michael Baker investment
President, Duquesne Corp. (engineering, construction, companies in
University operations and technical services). the Fund
Pittsburgh, PA Previous Positions: Dean and Professor of Complex
DIRECTOR Law, University of Pittsburgh School of
Law; Dean and Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $0 $116,760.63
Birth Date: June Complex; Public Relations/ for the Fund
21, 1935 Marketing/Conference Planning. Previous and 43 other
4905 Bayard Street Positions: National Spokesperson, Aluminum Investment
Pittsburgh, PA Company of America; television producer; companies in
DIRECTOR business owner. the Fund
Complex
JOHN S. WALSH Director or Trustee of some of the $0 $94,536.85
Birth Date: Federated Fund Complex; President and for the Fund
November 28, 1957 Director, Heat Wagon, Inc. (manufacturer and 39 other
2007 Sherwood Drive of construction temporary heaters); investment
Valparaiso, IN President and Director, Manufacturers companies in
DIRECTOR Products, Inc. (distributor of portable the Fund
construction heaters); President, Portable Complex
Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.
GLEN R. JOHNSON Staff Member, Federated Securities Corp. $0 $0 for the
Birth Date: May 2, Fund and 21
1929 other
Federated Investors investment
Tower companies in
1001 Liberty Avenue the Fund
Pittsburgh, PA Complex
PRESIDENT
EDWARD C. GONZALES President, Executive Vice President and $0 $0 for the
Birth Date: October Treasurer of some of the Funds in the Fund and 42
22, 1930 Federated Federated Fund Complex; Vice Chairman, other
Investors Tower Federated Investors, Inc.; Trustee, investment
1001 Liberty Avenue Federated Administrative Services; companies in
Pittsburgh, PA formerly: Trustee or Director of some of the Fund
EXECUTIVE VICE the Funds in the Federated Fund Complex; Complex
PRESIDENT CEO and Chairman, Federated Administrative
Services; Vice President, Federated
Investment Management Company, Federated
Investment Counseling, Federated Global
Investment Management Corp. and Passport
Research, Ltd.; Director and Executive
Vice President, Federated Securities
Corp.; Director, Federated Services
Company; Trustee, Federated Shareholder
Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of $0 $0 for the
Birth Date: October the Federated Fund Complex; Executive Vice Fund and 43
26, 1938 Federated President, Secretary and Director, other
Investors Tower Federated Investors, Inc.; formerly: investment
1001 Liberty Avenue Trustee, Federated Investment Management companies in
Pittsburgh, PA Company and Federated Investment the Fund
EXECUTIVE VICE Counseling; Director, Federated Global Complex
PRESIDENT AND Investment Management Corp., Federated
SECRETARY Services Company and Federated Securities
Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the
Birth Date: June Senior Vice President, Federated Fund and 43
17, 1954 Federated Administrative Services; formerly: Vice other
Investors Tower President, Federated Administrative investment
1001 Liberty Avenue Services; held various management companies in
Pittsburgh, PA positions within Funds Financial Services the Fund
TREASURER Division of Federated Investors, Inc. Complex
WILLIAM D. DAWSON Chief Investment Officer of this Fund and $0 $0 for the
III various other Funds in the Federated Fund Fund and 27
Birth Date: March Complex; Executive Vice President, other
3, 1949 Federated Federated Investment Counseling, Federated investment
Investors Tower Global Investment Management Corp., companies in
1001 Liberty Avenue Federated Investment Management Company the Fund
Pittsburgh, PA and Passport Research, Ltd.; Director, Complex
CHIEF INVESTMENT Federated Global Investment Management
OFFICER Corp. and Federated Investment Management
Company; Registered Representative,
Federated Securities Corp.; Portfolio
Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling
Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company
and Passport Research, Ltd.
JOSEPH M. BALESTRINO Joseph Balestrino is Vice President of $0 $0 for the
Federated the Fund. Mr. Balestrino joined Federated Fund and 3
Investors Tower in 1986 and has been a Senior Portfolio other
1001 Liberty Avenue Manager and Senior Vice President of the investment
Pittsburgh, PA Fund's Adviser since 1998.. He was a companies in
VICE PRESIDENT Portfolio Manager and a Vice President of the Fund
the Fund's Adviser from 1995 to 1998. Mr. Complex
Balestrino is a Chartered Financial Analyst and received
his Master's Degree in Urban and Regional Planning from the
University of Pittsburgh..
</TABLE>
* AN ASTERISK DENOTES A DIRECTOR WHO IS DEEMED TO BE AN INTERESTED PERSON AS
DEFINED IN THE 1940 ACT.
# A POUND SIGN DENOTES A MEMBER OF THE BOARD'S EXECUTIVE COMMITTEE, WHICH
HANDLES THE BOARD'S RESPONSIBILITIES BETWEEN ITS MEETINGS.
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE PRESIDENT
AND DIRECTOR OF THE FUND.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated. The Adviser shall
not be liable to the Fund or any Fund shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Directors, and certain other employees. Although they
do permit these people to trade in securities, including those that the Fund
could buy, they also contain significant safeguards designed to protect the Fund
and its shareholders from abuses in this area, such as requirements to obtain
prior approval for, and to report, particular transactions.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
RESEARCH SERVICES
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
OF THE FEDERATED
FUNDS
0.150 of 1% on the first
$250million
0.125 of 1% on the next
$250million
0.100 of 1% on the next
$250million
0.075 of 1% on assets in
excess of
$750million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
When Shares of a fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi- annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC.
Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "U.S. government
funds" category in advertising and sales literature.
LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX
The Lehman Brothers Mortgage Backed Securities Index is a universe of fixed rate
securities backed by mortgage pools of Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal National
Mortgage Association (FNMA).
THE MERRILL LYNCH TAXABLE BOND INDICES
The Merrill Lynch Taxable Bond Indices include U.S. Treasury and agency issues
and were designed to keep pace with structural changes in the fixed income
market. The performance indicators capture all rating changes, new issues, and
any structural changes of the entire market.
MORNINGSTAR, INC.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e., utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares.
Other innovations include the first institutional tax-free money market fund. As
of December 31, 1999, Federated managed more than $83.0 billion in assets across
54 money market funds, including 16 government, 13 prime, 24 municipal and 1
euro- denominated with assets approximating $34.1 billion, $35.7 billion, $13.1
billion and $115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield--J. Thomas
Madden; U.S. fixed income--William D. Dawson III; and global equities and fixed
income--Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax exempt entities, foundations/
endowments, insurance companies, and investment and financial advisers. The
marketing effort to these institutional clients is headed by John B. Fisher,
President, Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
ADDRESSES
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND
Insitutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
ITEM 23. EXHIBITS.
(a)...(i) Conformed copy of Articles of Incorporation; (1)
(ii) Conformed copy of Articles of Amendment of Articles of
Incorporation; (2)
(b) Copy of By-Laws of the Registrant; (1)
(c) Copy of Specimen Certificate for Shares of Capital Stock of
the Registrant; (10)
(d) (i) Copy of Investment Advisory Contract of the Registrant
and conformed copies of Exhibits A and B of Investment
Advisory Contract of the Registrant; (7)
.(ii) Conformed copies of Exhibits D and E of Investment
Advisory Contract; (11)
......(iii) Conformed copy of Exhibit F of Investment
Advisory Contract; (17)
(e) (i) Copy of Distributor's Contract of the Registrant and
Conformed copies of Exhibits A, B, C, and D to Distributor's
Contract of the Registrant;(4)
(ii) Copy of Distributor's Contract of the Registrant and
Conformed copies of Exhibits E and F to Distributor's Contract
of the Registrant; (10)
(iii) Conformed copies of Exhibits G and H to Distributor's
Contract of the Registrant; (11)
(iv) The Registrant hereby incorporates the conformed copy of the
specimen Mutual Funds Sales and Service Agreement; Mutual Funds Service
Agreement; and Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of
the Cash Trust Series II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Numbers 33-38550 and 811-6269).
-------------------------------------------------
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed October 25, 1993. (File Nos. 33-50773 and
811-7115)
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 21, 1993. (File Nos. 33-50773
and 811-7115)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 27, 1994. (File Nos. 33-50773 and
811-7115)
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed June 6, 1995. (File Nos. 33-50773 and
811-7115)
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed November 27, 1996. (File Nos. 33-50773
and 811-7115)
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed March 31, 1997. (File Nos. 33-50773 and
811-7115)
(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed November 26, 1997. (File Nos. 33-50773
and 811-7115)
(f)...Not Applicable;
(g)...(i) Conformed copy of the Custodian Agreement of the
Registrant; (4)
(ii) Conformed Copy of Fee Schedule to the Custodian
Agreement of the Registrant; (13)
(h) ..(i) Conformed copy of Fund Accounting Services,
Administrative Services, Transfer Agency Services,
and Custody Services Procurement Agreement of the
Registrant; (13)
(ii) Conformed copy of Administrative Services Agreement; (4) (iii)
Conformed copy of Exhibit B of Funds Participating in
Services Agreement; (15)
(iv) The responses described in Item 24(b)(6) are hereby
incorporated by reference;
(v) Conformed Copy of Amended and Restated Shareholder
Services Agreement of the Registrant; (13)
(i) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (2)
(j) Conformed copy of Consent of Independent Auditors; (17) (k) ..Not
Applicable; (l) ..Conformed copy of Initial Capital Understanding; (3)(m)
(i) Conformed copy of Distribution Plan of the Registrant
including Exhibits
A and B; (11)
(ii) Conformed copy of Exhibits C to Distribution Plan of the
Registrant;(10)
(iii) Conformed copy of Exhibit D and E to Distribution
Plan of the Registrant; (11)
(iv) The responses described in Item 24(b)(6) are hereby
incorporated by reference;
----------------------------------
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 21, 1993. (File Nos. 33-50773
and 811-7115)
(3) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed January 13, 1994. (File Nos. 33-50773
and 811-7115)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 27, 1994. (File Nos. 33-50773 and
811-7115)
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed November 27, 1996. (File Nos. 33-50773
and 811-7115)
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed March 31, 1997. (File Nos. 33-50773 and
811-7115)
(13) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed November 26, 1997. (File Nos. 33-50773
and 811-7115)
(15) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed August 28, 1998. (File Nos. 33-50773
and 811-7115)
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed November 29, 1999. (File Nos. 33-50773
and 811-7115)
(n) The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment
Series, Inc. Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos. 33-52149 and 811-07141);
(o) (i) ..Conformed copy of Power of Attorney; (16) ......(ii) Conformed
copy of Limited Power of Attorney; (10) ......(iii) Conformed copy of
Power of Attorney for William D. Dawson; (16)
(p) The Registrant hereby incorporates the conformed copy of the Code of
Ethics for Access Persons from Item 23(p) of the Money Market
Obligations Trust Registration Statement on form N-1A filed with the
Commission on February 25, 2000. (File Nos. 33-31602 and 811-5950).
Item 24. Persons Controlled by or Under Common Control with the Fund:
None
Item 25. Indemnification: (1)
Item 26. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to the
Fund?" The remaining Trustees of the investment adviser and, in
parentheses, their principal occupations are: Thomas R. Donahue, (Chief
Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue,
Pittsburgh, PA, 15222-3779 and Mark D. Olson (a principal of the firm
Mark D. Olson & Company, L.L.C. and Partner, Wilson, Halbrook &
Bayard), Suite 301 Little Falls Center Two, 2751 Centerville Road,
Wilmington, DE 19808.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Stephen F. Auth
Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Deborah A. Cunningham
-------------------------------------------------
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 25, 1993. (File Nos.
33-50773 and 811-7115)
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed November 27, 1996. (File Nos.
33-50773 and 811-7115)
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed November 29, 1999. (File Nos.
33-50773 and 811-7115)
Michael P. Donnelly
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Bernard A. Picchi
Peter Vutz
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
Marc Halperin
John W. Harris
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Robert M. Kowit
Richard J. Lazarchic
Steven J. Lehman
Marian R. Marinack
Christopher Matyszewski
Jeffrey A. Petro
Vice Presidents Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
Lori A. Wolff
George B. Wright
Assistant Vice Presidents: Catherine A. Arendas
Nancy J. Belz
James R. Crea, Jr.
Karol M. Krummie
Lee R. Cunningham, II
Fred B. Crutchfield
James H. Davis, II
Paul S. Drotch
Salvatore A. Esposito
Gary E. Falwell
John T. Gentry
Nikola A. Ivanov
Item 26. Business and Other Connections of Investment Adviser (continued):
Nathan H. Kehm
John C. Kerber
Ted T. Lietz, Sr.
Monica Lugani
Grant K. McKay
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Bob Nolte
Mary Kay Pavuk
John Quartarolo
Rae Ann Rice
Roberto Sanchez-Dahl, Sr.
Sarath Sathkumara
James W. Schaub
John Sidawi
Diane R. Startari
Diane Tolby
Timothy G. Trebilcock
Michael R. Tucker
Steven J. Wagner
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: C. Grant Anderson
Leslie K. Ross
Assistant Treasurer: Denis McAuley, III
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also officers of a
majority of the investment advisers to the investment companies in the
Federated Fund Complex described in Part B of this Registration
Statement.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a)...Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end
investment companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund,
Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fixed Income Securities, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated
International Series, Inc.; Federated Investment Series Funds, Inc.; Federated
Managed Allocation Portfolios; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Securities Income
Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated 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.; Federated World Investment Series, Inc.; FirstMerit Funds; Hibernia
Funds; Independence One Mutual Funds; Intermediate Municipal Trust; Marshall
Funds, Inc.; Money Market Obligations Trust; Regions Funds; RIGGS Funds;
SouthTrust Funds; Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia
Municipal Funds; and Vision Group of Funds, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Richard B. Fisher Chairman, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice --
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John M. Albert Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
--------------------------------
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Shareholder Federated Investors Funds
Services Company 5800 Corporate Drive
("Transfer Agent, Dividend Pittsburgh, PA 15237-7000
Disbursing Agent and
Portfolio Recordkeeper")
Federated Administrative Federated Investors Tower
Services 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian")
Item 29. MANAGEMENT SERVICES: Not applicable.
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Item 30. Undertakings:
Registrant hereby undertakes to comply with the provisions of Section
16(c) of the 1940 Act with respect to the removal of Directors and the
calling of special shareholder meetings by shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED TOTAL RETURN SERIES,
INC. has duly caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, duly authorized, all in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 18th day of August, 2000.
FEDERATED TOTAL RETURN SERIES, INC.
BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
August 18, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ C. Grant Anderson Attorney In Fact August 18, 2000
C. Grant Anderson For the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Glen R. Johnson* President
J. Christopher Donahue* Executive Vice President
and Director
Edward C. Gonzales* Executive Vice President
John W. McGonigle* Executive Vice President
and Secretary
Richard J. Thomas* Treasurer
William D. Dawson III* Chief Investment Officer
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
Nicholas P. Constantakis* Director
John F. Cunningham* Director
Lawrence D. Ellis, M.D.* Director
Peter E. Madden* Director
Charles F. Mansfield, Jr.* Director
John E. Murray, Jr.* Director
Marjorie P. Smuts* Director
John S. Walsh* Director
* By Power of Attorney