Federated Total Return Series N-CSRS Certified semi-annual shareholder report (management investment company)

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form N-CSR

Certified Shareholder Report of Registered Management Investment Companies

811-7115

(Investment Company Act File Number)

Federated Total Return Series, Inc.

______________________________________________________________

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds

4000 Ericsson Drive

Warrendale, PA 15086-7561

(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)

Date of Fiscal Year End: 09/30/2013

Date of Reporting Period: Six months ended 03/31/2013

Item 1. Reports to Stockholders

Semi-Annual Shareholder Report

March 31, 2013

Share Class	Ticker
Institutional	FGFIX
Service	FGFSX

 

Federated Mortgage Fund

A Portfolio of Federated Total Return Series, Inc.

Not FDIC Insured • May Lose Value • No Bank Guarantee

CONTENTS

Portfolio of Investments Summary Table	1
Portfolio of Investments	2
Financial Highlights	7
Statement of Assets and Liabilities	9
Statement of Operations	10
Statement of Changes in Net Assets	11
Notes to Financial Statements	12
Shareholder Expense Example	21
Evaluation and Approval of Advisory Contract	23
Voting Proxies on Fund Portfolio Securities	28
Quarterly Portfolio Schedule	28

Portfolio of Investments Summary Table (unaudited)

At March 31, 2013, the Fund's portfolio composition¹ was as follows:

Type of Investments	Percentage of Total Net Assets
U.S. Government Agency Mortgage-Backed Securities	70.0%
Non-Agency Commercial Mortgage-Backed Securities	12.5%
Non-Agency Mortgage-Backed Securities	10.6%
U.S. Government Agency Commercial Mortgage-Backed Securities	3.0%
Repurchase Agreements-Collateral2	12.3%
Derivative Contracts3	(0.1)%
Other Assets and Liabilities—Net4	(8.3)%
TOTAL	100.0%

1	See the Fund's Prospectus and Statement of Additional Information for a description of the types of securities in which the Fund invests.
2	Includes repurchase agreements purchased with cash collateral or proceeds received in dollar-roll transactions, as well as cash covering when-issued and delayed-delivery transactions.
3	Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report.
4	Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.

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Portfolio of Investments

March 31, 2013 (unaudited)

Principal Amount			Value
		Mortgage-Backed Securities—69.7%
		Federal Home Loan Mortgage Corporation—20.6%
$10,870,570		3.500%, 11/1/2025 - 7/1/2042	$11,511,193
861,240		4.000%, 8/1/2025	914,832
14,579,553		4.500%, 6/1/2019 - 9/1/2040	15,600,375
10,285,209		5.000%, 7/1/2019 - 10/1/2039	11,101,505
7,778,962		5.500%, 10/1/2021 - 10/1/2039	8,435,883
4,953,450		6.000%, 4/1/2036 - 7/1/2037	5,428,316
286,090		7.500%, 1/1/2027 - 2/1/2031	333,129
		TOTAL	53,325,233
		Federal National Mortgage Association—41.5%
2,776,310		2.500%, 8/1/2027	2,882,971
12,846,820	1	3.000%, 6/1/2027 - 2/25/2043	13,393,747
14,830,019	1	3.500%, 12/1/2026 - 4/1/2043	15,672,494
36,695,656		4.000%, 12/1/2031 - 12/1/2042	39,615,927
19,631,671		4.500%, 12/1/2019 - 2/1/2042	21,313,822
3,190,563		5.000%, 7/1/2019 - 2/1/2038	3,452,737
4,769,514		5.500%, 9/1/2034 - 4/1/2036	5,236,010
4,660,042		6.000%, 11/1/2034 - 10/1/2037	5,137,884
681,541		6.500%, 2/1/2014 - 8/1/2034	778,324
189,679		7.000%, 6/1/2016 - 2/1/2030	206,587
2,215		7.500%, 4/1/2015	2,321
8,606		8.000%, 12/1/2026	10,206
		TOTAL	107,703,030
		Government National Mortgage Association—7.6%
1,000,000	1	3.000%, 2/15/2043	1,045,422
11,916,843		3.500%, 9/20/2042 - 11/15/2042	12,790,698
2,249,843		4.500%, 10/15/2039	2,474,124
2,862,438		5.000%, 6/20/2039 - 9/20/2039	3,163,688
108,968		7.000%, 9/15/2028 - 11/15/2031	127,011
198,032		8.000%, 10/15/2030 - 11/15/2030	234,855
		TOTAL	19,835,798
		TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $175,680,117)	180,864,061
		Collateralized Mortgage Obligations—10.9%
		Federal National Mortgage Association—0.3%
1,239,414		REMIC 368 27, 6.500%, 11/1/2035	245,115

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Principal Amount			Value
		Collateralized Mortgage Obligations—continued
		Federal National Mortgage Association—continued
$1,319,389		REMIC 356 23, 6.500%, 12/1/2034	$270,389
45,541		REMIC 321 2, 6.500%, 4/1/2032	8,012
1,557,238		REMIC 356 24, 6.500%, 9/1/2035	319,165
		TOTAL	842,681
		Non-Agency Mortgage-Backed Securities—10.6%
1,541,504		Countrywide Alternative Loan Trust 2003-J3, Class 1A3, 5.250%, 11/25/2033	1,568,959
1,500,992		Countrywide Home Loans 2007-14, Class A18, 6.000%, 9/25/2037	1,442,196
2,994,848	2,3	Credit Suisse Commercial Mortgage Trust, Class A1, 2.130%, 2/25/2043	2,976,142
556,415		Credit Suisse Mortgage Capital Certificate 2007-4, Class 4A2, 5.500%, 6/25/2037	489,379
2,327,074	2,3	Credit Suisse Mortgage Capital Certificate 2012-CIM2, Class A1, 3.000%, 6/25/2042	2,366,878
581,812		First Horizon Alternative Mortgage Securities 2005-FA7, Class 2A1, 5.000%, 9/25/2020	580,291
1,254,748		Lehman Mortgage Trust 2007-9, Class 1A1, 6.000%, 10/25/2037	1,200,739
4	2,4	Lehman Structured Securities Corp. Mortgage 2001-GE3, Class A, 0.000%, 5/28/2018	3
33,527	2,4	Lehman Structured Securities Corp. Mortgage 2002-GE1, Class A, 0.000%, 7/26/2024	24,904
152,668	2,4	Salomon Brothers Mortgage Sec. VII 1999-4, Class IO, 2.547%, 12/25/2027	3,572
173,966		Sequoia Mortgage Trust 2010-H1, Class A1, 3.750%, 2/25/2040	174,656
586,999		Sequoia Mortgage Trust 2011-1, Class A1, 4.125%, 2/25/2041	593,201
1,222,010		Sequoia Mortgage Trust 2011-2, Class A1, 3.900%, 9/25/2041	1,239,540
1,455,329		Sequoia Mortgage Trust 2012-1, Class 2A1, 3.474%, 1/25/2042	1,485,749
2,618,920		Sequoia Mortgage Trust 2012-4, Class A3, 2.069%, 9/25/2042	2,602,268
2,575,502		Sequoia Mortgage Trust 2013-1, Class 2A1, 1.855%, 2/25/2043	2,559,205
3,910,332		Sequoia Mortgage Trust 2013-2, Class A1, 1.874%, 2/25/2043	3,865,726
1,350,000	2	Springleaf Mortgage Loan Trust 2012-3A, Class M1, 2.660%, 12/25/2059	1,352,153
1,727,944		Structured Asset Securities Corp. 2005-17, Class 5A1, 5.500%, 10/25/2035	1,659,574
1,247,484		Wells Fargo Mortgage Backed Securities Trust 2005-12, Class 1A1, 5.500%, 11/25/2035	1,287,052
		TOTAL	27,472,187
		TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $28,575,561)	28,314,868

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Principal Amount			Value
		Commercial Mortgage-Backed Securities—15.5%
		Agency Commercial Mortgage-Backed Securities—3.0%
$2,700,000	2,3	FREMF Mortgage Trust 2013-K25, Class B, 3.617%, 11/25/2045	$2,729,420
3,000,000	2,3	FREMF Mortgage Trust 2013-K502, Class B, 2.842%, 3/25/2045	3,060,228
2,000,000	2,3	FREMF Mortgage Trust 2013-K24, Class B, 3.502%, 11/25/2045	2,004,709
		TOTAL	7,794,357
		Non-Agency Commercial Mortgage-Backed Securities—12.5%
3,420,000		Commercial Mortgage Pass-Through Certificates 2012-LC4, Class A2, 2.256%, 12/10/2044	3,552,353
2,650,000	2,3	DBUBS Mortgage Trust 2011-LC2A, Class A2, 3.386%, 7/10/2044	2,837,572
2,132,748	2,3	GS Mortgage Securities Corp. 2010-C1, Class A1, 3.679%, 8/10/2043	2,284,380
2,829,190	2,3	GS Mortgage Securities Corp. 2010-C2, Class A1, 3.849%, 12/10/2043	3,089,976
2,353,206	2,3	JP Morgan Chase Commercial Mortgage Securities 2010-C1, Class A1, 3.853%, 6/15/2043	2,485,090
2,372,353	2,3	JP Morgan Chase Commercial Mortgage Securities 2010-C2, Class A1, 2.749%, 11/15/2043	2,471,328
2,400,000	2,3	JP Morgan Chase Commercial Mortgage Securities, Class A2, 3.341%, 7/15/2046	2,559,302
4,000,000		Morgan Stanley Capital I 2012-C4, Class A2, 2.111%, 3/15/2045	4,139,872
3,750,000		UBS-Citigroup Commercial Mortgage Trust 2011-C1, Class A2, 2.804%, 1/10/2045	3,948,536
1,500,000	2,3	WF-RBS Commercial Mortgage Trust 2011-C3, Class A2, 3.240%, 3/15/2044	1,595,529
3,500,000	2,3	WF-RBS Commercial Mortgage Trust 2012-C7, Class AFL, 1.403%, 6/15/2045	3,581,070
		TOTAL	32,545,008
		TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $38,976,807)	40,339,365
		Repurchase Agreements—12.3%
12,388,000	5	Interest in $2,950,000,000 joint repurchase agreement 0.20%, dated 3/28/2013 under which Bank of America, N.A. will repurchase securities provided as collateral for $2,950,065,556 on 4/1/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 2/20/2040 and the market value of those underlying securities was $3,019,778,792.	12,388,000
12,489,000	5,6	Interest in $210,698,000 joint repurchase agreement 0.14%, dated 3/12/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $210,722,581 on 4/11/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 8/1/2042 and the market value of those underlying securities was $215,447,310.	12,489,000

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Principal Amount			Value
		Repurchase Agreements—continued
$6,905,000	6	Interest in $500,000,000 joint repurchase agreement 0.14%, dated 3/19/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $500,058,333 on 4/18/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 11/15/2042 and the market value of those underlying securities was $510,019,833.	$6,905,000
		TOTAL REPURCHASE AGREEMENTS (AT COST)	31,782,000
		TOTAL INVESTMENTS—108.4% (IDENTIFIED COST $275,014,485)7	281,300,294
		OTHER ASSETS AND LIABILITIES - NET—(8.4)%8	(21,755,380)
		TOTAL NET ASSETS—100%	$259,544,914

At March 31, 2013, the Fund had the following outstanding futures contracts:

Description	Number of Contracts	Notional Value	Expiration Date	Unrealized Depreciation
9U.S. Treasury Note 10-Year Short Futures	20	$2,639,688	June 2013	$(33,951)
9U.S. Treasury Bond 30-Year Short Futures	35	$5,056,406	June 2013	$(100,157)
UNREALIZED DEPRECIATION ON FUTURES CONTRACTS				$(134,108)

Unrealized Depreciation on Futures Contracts is included in “Other Assets and
Liabilities—Net.”

1	All or a portion of these To Be Announced Securities (TBAs) are subject to dollar-roll transactions.
2	Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At March 31, 2013, these restricted securities amounted to $35,422,256, which represented 13.6% of total net assets.
3	Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At March 31, 2013, these liquid restricted securities amounted to $34,041,624, which represented 13.1% of total net assets.
4	Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Directors.
5	All or a portion of these securities are segregated pending settlement of dollar-roll transactions.
6	Although the repurchase date is more than seven days after the date of purchase, the Fund has the right to terminate the repurchase agreement at any time with seven-days' notice.
7	The cost of investments for federal tax purposes amounts to $274,552,421.
8	Assets, other than investment in securities, less liabilities. See Statement of Assets and Liabilities.
9	Non-income producing security.

Note: The categories of investments are shown as a percentage of total net assets at March 31, 2013.

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Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:

Level 1— quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.

Level 2— other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3— significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of March 31, 2013, in valuing the Fund's assets carried at fair value:

Valuation Inputs
	Level 1— Quoted Prices and Investments in Mutual Funds	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Debt Securities:
Mortgage-Backed Securities	$—	$180,864,061	$—	$180,864,061
Collateralized Mortgage Obligations	—	28,286,389	28,479	28,314,868
Commercial Mortgage-Backed Securities	—	40,339,365	—	40,339,365
Repurchase Agreements	—	31,782,000	—	31,782,000
TOTAL SECURITIES	$—	$281,271,815	$28,479	$281,300,294
OTHER FINANCIAL INSTRUMENTS*	$(134,108)	$—	$—	$(134,108)

* Other financial instruments include futures contracts.

The following acronyms are used throughout this portfolio:

IO	—Interest Only
REMIC	—Real Estate Mortgage Investment Conduit

See Notes which are an integral part of the Financial Statements

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Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period)

	Six Months Ended (unaudited) 3/31/2013	Year Ended September 30,
		2012	2011	20101	2009	2008
Net Asset Value, Beginning of Period	$10.03	$9.98	$9.97	$9.89	$9.61	$9.72
Income From Investment Operations:
Net investment income	0.12	0.292	0.342	0.402	0.452	0.482
Net realized and unrealized gain (loss) on investments and futures contracts	(0.12)	0.11	0.09	0.15	0.33	(0.07)
TOTAL FROM INVESTMENT OPERATIONS	0.00	0.40	0.43	0.55	0.78	0.41
Less Distributions:
Distributions from net investment income	(0.14)	(0.35)	(0.42)	(0.47)	(0.50)	(0.52)
Net Asset Value, End of Period	$9.89	$10.03	$9.98	$9.97	$9.89	$9.61
Total Return3	0.04%	4.10%	4.39%	5.69%	8.34%	4.27%
Ratios to Average Net Assets:
Net expenses	0.40%4	0.38%	0.35%	0.35%	0.35%	0.35%
Net investment income	2.48%4	2.95%	3.41%	3.98%	4.59%	4.94%
Expense waiver/reimbursement5	0.22%4	0.21%	0.24%	0.28%	0.25%	0.22%
Supplemental Data:
Net assets, end of period (000 omitted)	$214,659	$221,088	$265,567	$307,718	$288,052	$299,358
Portfolio turnover	78%	227%	222%	178%	200%	222%
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)	26%	64%	37%	27%	35%	25%

1	Beginning with the year ended September 30, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm.
2	Per share numbers have been calculated using the average shares method.
3	Based on net asset value. Total returns for periods of less than one year are not annualized.
4	Computed on an annualized basis.
5	This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

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Financial Highlights–Service Shares

(For a Share Outstanding Throughout Each Period)

	Six Months Ended (unaudited) 3/31/2013	Year Ended September 30,
		2012	2011	20101	2009	2008
Net Asset Value, Beginning of Period	$10.03	$9.98	$9.97	$9.89	$9.61	$9.72
Income From Investment Operations:
Net investment income	0.11	0.262	0.312	0.372	0.422	0.462
Net realized and unrealized gain (loss) on investments and futures contracts	(0.12)	0.11	0.09	0.15	0.33	(0.07)
TOTAL FROM INVESTMENT OPERATIONS	(0.01)	0.37	0.40	0.52	0.75	0.39
Less Distributions:
Distributions from net investment income	(0.13)	(0.32)	(0.39)	(0.44)	(0.47)	(0.50)
Net Asset Value, End of Period	$9.89	$10.03	$9.98	$9.97	$9.89	$9.61
Total Return3	(0.11)%	3.79%	4.08%	5.38%	8.04%	4.00%4
Ratios to Average Net Assets:
Net expenses	0.70%5	0.68%	0.65%	0.65%	0.63%	0.62%
Net investment income	2.18%5	2.65%	3.11%	3.69%	4.31%	4.67%
Expense waiver/reimbursement6	0.39%5	0.39%	0.42%	0.46%	0.45%	0.44%
Supplemental Data:
Net assets, end of period (000 omitted)	$44,886	$49,665	$53,023	$55,467	$56,017	$60,002
Portfolio turnover	78%	227%	222%	178%	200%	222%
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)	26%	64%	37%	27%	35%	25%

1	Beginning with the year ended September 30, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm.
2	Per share numbers have been calculated using the average shares method.
3	Based on net asset value. Total returns for periods of less than one year are not annualized.
4	During the period, the Fund was reimbursed by an affiliated shareholder services provider, which had an impact of 0.11% on total return.
5	Computed on an annualized basis.
6	This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

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Statement of Assets and Liabilities

March 31, 2013 (unaudited)

Assets:
Investment in repurchase agreements	$31,782,000
Investment in securities, at value	249,518,294
Total investment in securities, at value (identified cost $275,014,485)		$281,300,294
Restricted cash (Note 2)		109,500
Income receivable		828,445
Receivable for shares sold		48,833
Receivable for daily variation margin		6,094
TOTAL ASSETS		282,293,166
Liabilities:
Payable for investments purchased	22,030,291
Payable for shares redeemed	455,999
Bank overdraft	68,171
Income distribution payable	168,044
Payable for Directors'/Trustees' fees (Note 5)	600
Payable for distribution services fee (Note 5)	2,882
Payable for shareholder services fee (Note 5)	8,215
Accrued expenses (Note 5)	14,050
TOTAL LIABILITIES		22,748,252
Net assets for 26,241,792 shares outstanding		$259,544,914
Net Assets Consist of:
Paid-in capital		$269,195,954
Net unrealized appreciation of investments and futures contracts		6,151,701
Accumulated net realized loss on investments and futures contracts		(15,254,075)
Distributions in excess of net investment income		(548,666)
TOTAL NET ASSETS		$259,544,914
Net Asset Value, Offering Price and Redemption Proceeds Per Share
Institutional Shares:
($214,659,120 ÷ 21,703,651 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized		$9.89
Service Shares:
($44,885,794 ÷ 4,538,141 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized		$9.89

See Notes which are an integral part of the Financial Statements

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Statement of Operations

Six Months Ended March 31, 2013 (unaudited)

Investment Income:
Interest			$3,797,859
Expenses:
Investment adviser fee (Note 5)		$528,190
Administrative fee (Note 5)		103,023
Custodian fees		10,917
Transfer and dividend disbursing agent fees and expenses		48,049
Directors'/Trustees' fees (Note 5)		1,676
Auditing fees		13,712
Legal fees		3,361
Portfolio accounting fees		61,311
Distribution services fee (Note 5)		59,166
Shareholder services fee (Note 5)		49,909
Account administration fee (Note 2)		2,987
Share registration costs		24,066
Printing and postage		7,543
Insurance premiums (Note 5)		2,199
Taxes		10,056
Miscellaneous (Note 5)		885
TOTAL EXPENSES		927,050
Waivers (Note 5):
Waiver of investment adviser fee	$(289,352)
Waiver of distribution services fee	(41,062)
TOTAL WAIVERS		(330,414)
Net expenses			596,636
Net investment income			3,201,223
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
Net realized gain on investments			1,290,269
Net realized gain on futures contracts			9,187
Net change in unrealized appreciation of investments			(4,362,929)
Net change in unrealized depreciation of futures contracts			(85,058)
Net realized and unrealized loss on investments and futures contracts			(3,148,531)
Change in net assets resulting from operations			$52,692

See Notes which are an integral part of the Financial Statements

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Statement of Changes in Net Assets

	Six Months Ended (unaudited) 3/31/2013	Year Ended 9/30/2012
Increase (Decrease) in Net Assets
Operations:
Net investment income	$3,201,223	$8,912,663
Net realized gain on investments and futures contracts	1,299,456	3,982,539
Net change in unrealized appreciation/depreciation of investments and futures contracts	(4,447,987)	(1,084,910)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	52,692	11,810,292
Distributions to Shareholders:
Distributions from net investment income
Institutional Shares	(3,149,120)	(9,032,636)
Service Shares	(615,311)	(1,646,055)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	(3,764,431)	(10,678,691)
Share Transactions:
Proceeds from sale of shares	21,050,266	67,441,887
Net asset value of shares issued to shareholders in payment of distributions declared	2,804,958	7,028,774
Cost of shares redeemed	(31,351,281)	(123,438,970)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	(7,496,057)	(48,968,309)
Change in net assets	(11,207,796)	(47,836,708)
Net Assets:
Beginning of period	270,752,710	318,589,418
End of period (including undistributed (distributions in excess of) net investment income of $(548,666) and $14,542, respectively)	$259,544,914	$270,752,710

See Notes which are an integral part of the Financial Statements

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Notes to Financial Statements

March 31, 2013 (unaudited)

1. ORGANIZATION

Federated Total Return Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The Corporation consists of three portfolios. The financial statements included herein are only those of Federated Mortgage Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Institutional Shares and Service Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide total return.

2. SIGNIFICANT ACCOUNTING POLICIES

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

Investment Valuation

In calculating its net asset value (NAV), the Fund generally values investments as follows:

■	Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Directors.
■	Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
■	Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
■	Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Directors.
■	Shares of other mutual funds are valued based upon their reported NAVs.
■	For securities that are fair valued in accordance with procedures established by and under the general supervision of the Directors, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.

If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable time (for example, within five business days after a new security is delivered to the Fund),the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.

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Fair Valuation and Significant Events Procedures

The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and the Adviser's affiliated companies to determine fair value of securities and in overseeing the calculation of the NAV. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities and mortgage-backed securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Directors.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

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The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Institutional Shares and Service Shares may bear distribution services fees, shareholder services fees and account administration fees unique to those classes. For the six months ended March 31, 2013, account administration fees for the Fund were as follows:

	Account Administration Fees Incurred
Service Shares	$2,987

Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Premium and Discount Amortization/Paydown Gains and Losses

All premiums and discounts on fixed-income securities, other than mortgage-backed securities, are amortized/accreted using the effective interest rate method. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.

Federal Taxes

It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended March 31, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of March 31, 2013, tax years 2009 through 2012 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.

Other Taxes

As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.

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When-Issued and Delayed-Delivery Transactions

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

The Fund may transact in To Be Announced Securities (TBAs). As with other delayed-delivery transactions, a seller agrees to issue TBAs 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 such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Fund.

Futures Contracts

The Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. In addition, futures contracts are used as a duration and yield curve management tool with the goal of enhancing the Fund's total rate of return. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities which is shown as Restricted cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

The average notional value of short futures contracts held by the Fund throughout the period was $8,498,136. This is based on amounts held as of each month-end throughout the six-month fiscal period.

Dollar-Roll Transactions

The Fund engages in dollar-roll transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities involved are TBA mortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and credit risks.

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Restricted Securities

The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Directors.

Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, if applicable, held at March 31, 2013, is as follows:

Security	Acquisition Date	Cost	Market Value
Lehman Structured Securities Corp. Mortgage 2001-GE3, Class A, 0.000%, 5/28/2018	8/15/2001	$7	$3
Lehman Structured Securities Corp. Mortgage 2002-GE1, Class A, 0.000%, 7/26/2024	1/29/2002	$26,685	$24,904
Salomon Brother Mortgage Sec. VII 1999-4, Class IO, 2.547%, 12/25/2027	6/11/1999	$3,637	$3,572
Springleaf Mortgage Loan Trust 2012-3A, Class M1, 2.660%, 12/25/2059	10/18/2012	$1,349,444	$1,352,153

Additional Disclosure Related to Derivative Instruments

Fair Value of Derivative Instruments
	Asset
	Statement of Assets and Liabilities Location	Fair Value
Derivatives not accounted for as hedging instruments under ASC Topic 815
Interest rate contracts	Receivable for daily variation margin	$(134,108)*

* Includes cumulative depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.

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The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended March 31, 2013

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
	Futures
Interest rate contracts	$9,187

Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
	Futures
Interest rate contracts	$(85,058)

Other

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

3. CAPITAL STOCK

The following tables summarize capital stock activity:

	Six Months Ended 3/31/2013		Year Ended 9/30/2012
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	1,821,905	$18,129,818	6,014,574	$59,955,366
Shares issued to shareholders in payment of distributions declared	257,584	2,561,717	641,552	6,397,422
Shares redeemed	(2,419,295)	(24,077,795)	(11,209,363)	(111,749,880)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	(339,806)	$(3,386,260)	(4,553,237)	$(45,397,092)

	Six Months Ended 3/31/2013		Year Ended 9/30/2012
Service Shares:	Shares	Amount	Shares	Amount
Shares sold	293,391	$2,920,448	750,484	$7,486,521
Shares issued to shareholders in payment of distributions declared	24,456	243,241	63,315	631,352
Shares redeemed	(731,471)	(7,273,486)	(1,172,296)	(11,689,090)
NET CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS	(413,624)	$(4,109,797)	(358,497)	$(3,571,217)
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	(753,430)	$(7,496,057)	(4,911,734)	$(48,968,309)

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4. FEDERAL TAX INFORMATION

At March 31, 2013, the cost of investments for federal tax purposes was $274,552,421. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized depreciation resulting from futures contracts was $6,747,873. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $7,674,401 and net unrealized depreciation from investments for those securities having an excess of cost over value of $926,528.

At September 30, 2012, the Fund had a capital loss carryforward of $17,711,762 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.

The following schedule summarizes the Fund's capital loss carryforwards and expiration years:

Expiration Year	Short-Term	Long-Term	Total
2013	$1,748,518	NA	$1,748,518
2014	$2,323,596	NA	$2,323,596
2015	$7,353,651	NA	$7,353,651
2016	$1,771,734	NA	$1,771,734
2018	$4,514,263	NA	$4,514,263

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, the Adviser voluntarily waived $289,352 of its fee.

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Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.150%	on the first $5 billion
0.125%	on the next $5 billion
0.100%	on the next $10 billion
0.075%	on assets in excess of $20 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, the net fee paid to FAS was 0.078% of average daily net assets of the Fund.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Service Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.25% of average daily net assets, annually, to compensate FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, distribution services fees for the Fund were as follows:

	Distribution Services Fees Incurred	Distribution Services Fees Waived
Service Shares	$59,166	$(41,062)

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended March 31, 2013, FSC retained $18,104 of fees paid by the Fund.

Shareholder Services Fee

The Fund may pay fees (“ Service Fees”) up to 0.25% of the average daily net assets of the Fund's Institutional Shares and Service Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended March 31, 2013, Service Fees for the Fund were as follows:

	Service Fees Incurred
Service Shares	$49,909

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For the six months ended March 31, 2013, FSSC received $108 of fees paid by the Fund. For six months ended March 31, 2013, the Fund's Institutional Shares did not incur Service Fees.

Expense Limitation

Effective December 1, 2012, the Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Institutional Shares and Service Shares (after the voluntary waivers and reimbursements) will not exceed 0.40% and 0.70% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) December 1, 2013 or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.

General

Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.

6. Investment TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended March 31, 2013, were as follows:

Purchases	$19,777,145
Sales	$35,443,602

7. LINE OF CREDIT

The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of March 31, 2013, there were no outstanding loans. During the six months ended March 31, 2013, the Fund did not utilize the LOC.

8. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of March 31, 2013, there were no outstanding loans. During the six months ended March 31, 2013, the program was not utilized.

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2012 to March 31, 2013.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

	Beginning Account Value 10/1/2012	Ending Account Value 3/31/2013	Expenses Paid During Period1
Actual:
Institutional Shares	$1,000	$1,000.40	$1.99
Service Shares	$1,000	$998.90	$3.49
Hypothetical (assuming a 5% return before expenses):
Institutional Shares	$1,000	$1,022.94	$2.02
Service Shares	$1,000	$1,021.44	$3.53

1 Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

Institutional Shares	0.40%
Service Shares	0.70%

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Evaluation and Approval of Advisory
Contract–May 2012

Federated Mortgage Fund (the “Fund”)

Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year term. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.

In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.

The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.

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The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.

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While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.

The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.

The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.

The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.

The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The

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information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.

Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.

The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.

The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.

It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.

Semi-Annual Shareholder Report

26

The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.

In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.

The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.

Semi-Annual Shareholder Report

27

Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “ Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.

Quarterly Portfolio Schedule

The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “ Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”

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28

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

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

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY 

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

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29

Federated Mortgage Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 31428Q887
CUSIP 31428Q804

G02367-01 (5/13)

Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.

Semi-Annual Shareholder Report

March 31, 2013

Share Class	Ticker
A	FULAX
Institutional	FULIX
Service	FULBX

 

Federated Ultrashort Bond Fund

Fund Established 1997

A Portfolio of Federated Total Return Series, Inc.

Dear Valued Shareholder,

I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from October 1, 2012 through March 31, 2013. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.

In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.

Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.

Sincerely,

J. Christopher Donahue, President

Not FDIC Insured • May Lose Value • No Bank Guarantee

CONTENTS

Portfolio of Investments Summary Table	1
Portfolio of Investments	2
Financial Highlights	21
Statement of Assets and Liabilities	24
Statement of Operations	26
Statement of Changes in Net Assets	28
Notes to Financial Statements	29
Shareholder Expense Example	43
Evaluation and Approval of Advisory Contract	45
Voting Proxies on Fund Portfolio Securities	50
Quarterly Portfolio Schedule	50

Portfolio of Investments Summary Table (unaudited)

At March 31, 2013, the Fund's portfolio composition¹ was as follows:

Security Type	Percentage of Total Net Assets2
Asset-Backed Securities	49.8%
Corporate Debt Securities	26.3%
Collateralized Mortgage Obligations	13.7%
Floating Rate Loans	1.9%
U.S. Treasury and Agency Securities3	0.9%
Mortgage-Backed Securities4	0.7%
Municipal Bond	0.5%
Trade Finance Agreements	0.3%
Derivative Contracts5,6	(0.0)%
Cash Equivalents7	5.0%
Other Assets and Liabilities—Net8	0.9%
TOTAL	100.0%

1	See the Fund's Prospectus and Statement of Additional Information for a description of these security types.
2	As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market mutual fund) is not treated as a single portfolio security, but rather the Fund is treated as owning a pro rata portion of each security and each other asset and liability owned by the affiliated investment company. Accordingly, the percentages of total net assets shown in the table will differ from those presented on the Portfolio of Investments.
3	For purposes of this table, U.S. Treasury and Agency Securities do not include mortgage-backed securities guaranteed by Government Sponsored Entities (GSEs).
4	For purposes of this table, Mortgage-Backed Securities include mortgage-backed securities guaranteed by GSEs and adjustable rate, mortgage-backed securities.
5	Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report.
6	Represents less than 0.1%.
7	Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
8	Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.

Semi-Annual Shareholder Report

1

Portfolio of Investments

March 31, 2013 (unaudited)

Principal Amount or Shares			Value
		Adjustable Rate Mortgages—0.4%
		Federal National Mortgage Association—0.4%
$2,583,715		FNMA ARM 544848, 2.702%, 4/01/2030	$2,649,925
2,587,591		FNMA ARM 544872, 3.081%, 7/01/2034	2,760,381
536,350		FNMA ARM 556379, 1.578%, 5/01/2040	546,186
2,826,169		FNMA ARM 618128, 2.321%, 8/01/2033	2,949,819
		TOTAL ADJUSTABLE RATE MORTGAGES (IDENTIFIED COST $8,651,396)	8,906,311
		Asset-Backed Securities—49.8%
		Auto Receivables—22.8%
4,200,000	1,2	ARI Fleet Lease Trust 2013-A, Class A3, 0.51%, 7/15/2021	4,199,580
5,000,000	1,2	Ally Master Owner Trust 2012-1, Class D, 3.12%, 2/15/2017	5,056,838
3,510,000	1,2	Ally Master Owner Trust 2012-3, Class D, 2.553%, 6/15/2017	3,516,392
5,000,000		Ally Master Owner Trust 2013-1, Class A1, 0.653%, 2/15/2018	5,004,561
12,000,000	1,2	American Credit Acceptance Receivables Trust 2013-1, Class A, 1.45%, 4/16/2018	11,993,160
3,500,000		Americredit Automobile Receivables Trust 2009-1, Class B, 3.76%, 7/15/2015	3,538,508
1,793,295		Americredit Automobile Receivables Trust 2010-2, Class B, 2.73%, 3/9/2015	1,800,890
4,750,000		Americredit Automobile Receivables Trust 2010-3, Class B, 2.04%, 9/8/2015	4,835,224
6,393,000		Americredit Automobile Receivables Trust 2011-1, Class C, 2.85%, 8/8/2016	6,561,296
6,500,000		Americredit Automobile Receivables Trust 2011-3, Class C, 2.86%, 1/9/2017	6,709,494
10,000,000		Americredit Automobile Receivables Trust 2011-5, Class D, 5.05%, 12/8/2017	10,821,221
3,000,000		Americredit Automobile Receivables Trust 2012-1, Class C, 2.67%, 1/8/2018	3,093,792
7,000,000		Americredit Automobile Receivables Trust 2012-2, Class D, 3.38%, 4/9/2018	7,291,644
2,000,000		Americredit Automobile Receivables Trust 2012-4, Class B, 1.31%, 11/8/2017	2,008,509
5,000,000		Americredit Automobile Receivables Trust 2012-4, Class C, 1.93%, 8/8/2018	5,054,646
6,000,000		Americredit Automobile Receivables Trust 2012-5, Class D, 2.35%, 12/10/2018	6,032,342
12,200,000	1,2	BMW Floorplan Master Owner Trust 2012-1, Class A, 0.603%, 9/15/2017	12,242,939

Semi-Annual Shareholder Report

2

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Auto Receivables—continued
$14,500,000		BMW Vehicle Lease Trust 2013-1, Class A4, 0.66%, 6/20/2016	$14,526,213
8,015,000		Bank of America Auto Trust 2012-1, Class C, 2.09%, 7/17/2017	8,238,476
3,600,000	1,2	Chesapeake Funding LLC 2012-2A, Class C, 1.753%, 5/7/2024	3,602,385
2,500,000	1,2	Chesapeake Funding LLC 2012-2A, Class D, 2.053%, 5/7/2024	2,501,648
1,395,653		Chrysler Financial Auto Securitization Trust 2010-A, Class C, 2.00%, 1/8/2014	1,396,686
4,500,000		Fifth Third Auto Trust 2013-A, Class B, 1.21%, 4/15/2019	4,503,402
4,754,000		Fifth Third Auto Trust 2013-A, Class C, 1.74%, 6/15/2020	4,758,191
14,000,000	1,2	Ford Credit Auto Lease Trust 2012-A, Class B, 1.61%, 10/15/2016	14,100,310
6,500,000	1,2	Ford Credit Auto Lease Trust 2012-B, Class C, 1.50%, 3/15/2017	6,543,972
12,000,000		Ford Credit Auto Lease Trust 2013-A, Class D, 1.79%, 10/15/2017	12,012,462
9,000,000		Ford Credit Auto Owner Trust 2012-C, Class C, 1.69%, 4/15/2018	9,161,116
5,500,000		Ford Credit Auto Owner Trust 2012-D, Class D, 1.97%, 5/15/2019	5,559,130
15,000,000	1,2	Ford Credit Floorplan Master Owner Trust 2011-1, Class C, 2.61%, 2/15/2016	15,146,595
5,000,000	1,2	Ford Credit Floorplan Master Owner Trust 2011-1, Class D, 2.96%, 2/15/2016	5,048,896
8,900,000		Ford Credit FloorPlan Master Owner Trust 2013-1, Class A2, 0.583%, 1/15/2018	8,907,707
10,500,000		Harley-Davidson Motorcycle Trust 2012-1, Class B, 1.37%, 6/15/2018	10,543,093
6,000,000	1,2	Huntington Auto Trust 2011-1A, Class D, 3.52%, 6/15/2018	6,335,117
8,400,000		Huntington Auto Trust 2012-1, Class D, 2.85%, 12/17/2018	8,691,690
2,800,000		Huntington Auto Trust 2012-2, Class C, 1.37%, 5/15/2018	2,820,946
7,000,000		Huntington Auto Trust 2012-2, Class D, 2.11%, 5/15/2019	7,106,219
3,941,790	1,2	Hyundai Auto Lease Securitization Trust 2011-A, Class A3, 1.02%, 8/15/2014	3,953,292
19,804,000	1,2	Hyundai Auto Lease Securitization Trust 2013-A, Class B, 0.96%, 8/15/2017	19,806,230
4,000,000		Hyundai Auto Receivables Trust 2012-A, Class D, 2.61%, 5/15/2018	4,115,432
8,000,000		Hyundai Auto Receivables Trust 2012-B, Class B, 1.39%, 3/15/2018	8,120,220
10,657,639	1,2	Hyundai Capital Auto Funding, Ltd. 2010-8A, Class A, 1.203%, 9/20/2016	10,680,021
3,480,000	1,2	MMCA Automobile Trust 2010-A, Class B, 3.96%, 10/15/2015	3,540,926
4,000,000	1,2	MMCA Automobile Trust 2012-A, Class A3, 1.08%, 9/15/2015	4,010,224
5,000,000	1,2	Mercedes-Benz Master Owner Trust 2012-AA, Class A, 0.79%, 11/15/2017	4,997,519
7,000,000	1,2	Mercedes-Benz Master Owner Trust 2012-BA, Class A, 0.473%, 11/15/2016	7,005,199
5,000,000	1,2	Motor 2012 PLC, Class A1C, 1.286%, 2/25/2020	5,022,350

Semi-Annual Shareholder Report

3

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Auto Receivables—continued
$3,550,000	1,2	Navistar Financial 2012-A Owner Trust, Class B, 1.56%, 1/18/2019	$3,567,731
2,500,000	1,2	Navistar Financial 2012-A Owner Trust, Class C, 2.55%, 1/18/2019	2,507,563
5,000,000	1,2	Navistar Financial Dealer Note Master Trust 2011-1, Class A, 1.354%, 10/25/2016	5,026,219
3,210,000	1,2	Navistar Financial Dealer Note Master Trust 2011-1, Class B, 1.954%, 10/25/2016	3,234,992
3,000,000		Nissan Auto Lease Trust 2011-A, Class A4, 1.24%, 4/17/2017	3,019,953
10,000,000		Nissan Auto Lease Trust 2011-B, Class A4, 1.10%, 1/16/2017	10,067,552
20,000,000		Nissan Master Owner Trust Receivables 2013-A, Class A, 0.503%, 2/15/2018	20,016,938
2,800,000	1,2	Porsche Innovative Lease Owner Trust 2011-1 A, Class A4, 1.26%, 11/20/2017	2,819,760
18,360,000	1,2	Porsche Innovative Lease Owner Trust 2012-1 A4, Class A4, 0.67%, 11/21/2018	18,368,032
5,000,000	1,2	SMART ABS Series 2012-2US Trust, Class A4B, 1.453%, 3/14/2018	5,096,875
4,000,000		SMART ABS Series 2012-4US Trust, Class A4B, 0.903%, 8/14/2018	4,047,400
6,500,000	1,2	SMART Series 2012-1US Trust, Class A3B, 1.103%, 5/14/2016	6,541,600
13,700,000		SMART Series 2013-1US Trust, Class A4B, 0.703%, 10/14/2018	13,837,822
12,840,000		Santander Drive Auto Receivables Trust 2012-3, Class B, 1.94%, 12/15/2016	13,000,761
4,000,000		Santander Drive Auto Receivables Trust 2012-6, Class D, 2.52%, 9/17/2018	4,016,704
6,800,000		Santander Drive Auto Receivables Trust 2013-1, Class D, 2.27%, 1/15/2019	6,744,629
5,000,000		USAA Auto Owner Trust 2012-1, Class B, 1.02%, 12/17/2018	5,005,121
13,000,000	1,2	Volkswagen Credit Auto Master Trust 2011-1A, Note, 0.883%, 9/20/2016	13,082,971
6,000,000		World Omni Automobile Lease Securitization Trust 2011-A, Class A4, 1.78%, 9/15/2016	6,069,661
6,000,000		World Omni Automobile Lease Securitization Trust 2011-A, Class B, 2.10%, 12/15/2016	6,072,069
2,500,000		World Omni Automobile Lease Securitization Trust 2012-A, Class B, 1.49%, 2/15/2018	2,522,267
10,500,000	1,2	World Omni Master Owner Trust 2013-1, Class A, 0.602%, 2/15/2018	10,507,066
		TOTAL	487,690,389
		Credit Card—10.9%
10,000,000	1,2	ARRAN Cards Funding PLC 2012-1A, Class A1, 0.903%, 7/15/2015	10,002,500
3,550,000	1,2	American Express Credit Account Master Trust 2012-2, Class C, 1.29%, 3/15/2018	3,580,952
11,200,000	1,2	American Express Credit Account Master Trust 2012-4, Class C, 1.003%, 5/15/2020	11,290,037

Semi-Annual Shareholder Report

4

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Credit Card—continued
$11,834,000		American Express Issuance Trust II 2013-1, Class C, 0.903%, 2/15/2019	$11,849,982
19,500,000		Bank of America Credit Card Trust 2006-C5, Class C5, 0.603%, 1/15/2016	19,470,764
15,000,000		Bank of America Credit Card Trust 2008-C5, Class C5, 4.953%, 3/15/2016	15,299,106
13,775,000		Bank One Issuance Trust 2003-C3, Class C3, 4.77%, 2/16/2016	13,893,240
10,000,000	1,2	Citibank Omni Master Trust 2009-A17, Class A17, 4.90%, 11/15/2018	10,681,655
14,000,000		Discover Card Master Trust 2011-A1, Class A1, 0.553%, 8/15/2016	14,040,618
15,000,000		Discover Card Master Trust I 2012—B3, Class B3, 0.653%, 5/15/2018	15,017,046
8,000,000	1,2	Golden Credit Card Trust 2012-3A, Class A, 0.653%, 7/17/2017	8,043,400
13,000,000	1,2	Golden Credit Card Trust 2012-5A, Class A, 0.79%, 9/15/2017	13,022,425
14,450,000	1,2	Golden Credit Card Trust 2013-1A, Class A, 0.452%, 2/15/2018	14,461,921
10,000,000	1,2	Gracechurch Card PLC 2012-1A, Class A1, 0.903%, 2/15/2017	10,106,380
5,000,000		MBNA Credit Card Master Note Trust 2004-C2, Class C2, 1.103%, 11/15/2016	5,023,187
20,000,000	1,2	Master Credit Card Trust 2012-2A, Class A, 0.78%, 4/21/2017	20,033,500
5,500,000	1,2	Master Credit Card Trust 2012-2A, Class C, 1.97%, 4/21/2017	5,575,598
10,170,000	1,2	Penarth Master Issuer PLC 2011-1, Class A1, 0.853%, 5/18/2015	10,170,305
13,000,000	1,2	Turquoise Card Backed Securities PLC 2011-1, Class A, 0.953%, 9/15/2016	13,067,340
8,000,000	1,2	Turquoise Card Backed Securities PLC 2012-1A, Class A, 1.003%, 6/17/2019	8,042,800
		TOTAL	232,672,756
		Equipment Lease—6.0%
8,000,000	1,2	CLI Funding LLC 2013-1A, Note, 2.83%, 3/18/2028	8,020,540
7,287,240	1,2	CLI Funding LLC. 2006-1A, Class A, 0.383%, 8/18/2021	7,153,669
3,000,000		CNH Equipment Trust 2010-A, Class B, 4.04%, 9/15/2016	3,037,244
8,000,000		CNH Equipment Trust 2011-B, Class B, 2.25%, 3/15/2018	8,213,660
2,300,000		CNH Equipment Trust 2012-C, Class B, 1.30%, 3/16/2020	2,312,773
7,615,000		CNH Equipment Trust 2012-D, Class B, 1.27%, 5/15/2020	7,639,343
6,500,000		CNH Equipment Trust 2013-A, Class B, 1.36%, 8/17/2020	6,519,461
15,000,000		GE Dealer Floorplan Master Note Trust 2012-1, Class A, 0.773%, 2/20/2017	15,088,684
9,000,000		GE Dealer Floorplan Master Note Trust 2012-3, Class A, 0.693%, 6/20/2017	9,035,306
7,892,887	1,2	GE Equipment Small Ticket LLC (Series 2011-1), Class A3, 1.45%, 1/21/2018	7,933,203
3,150,000		GE Equipment Transportation LLC, (Series 2012-1), Class B, 1.16%, 9/22/2020	3,152,596

Semi-Annual Shareholder Report

5

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Equipment Lease—continued
$5,500,000		GE Equipment Transportation LLC, (Series 2012-2), Class A4, 0.81%, 9/24/2020	$5,509,160
2,500,000	1,2	Great America Leasing Receivables 2009-1, Class B, 4.52%, 11/15/2014	2,503,742
4,778,000	1,2	Great America Leasing Receivables 2011-1, Class B, 2.88%, 5/15/2016	4,879,915
2,000,000	1,2	Great America Leasing Receivables 2012-1, Class B, 2.30%, 4/17/2017	2,028,212
2,900,000	1,2	Great America Leasing Receivables 2013-1, Class A4, 1.16%, 5/15/2018	2,908,419
1,200,000	1,2	Great America Leasing Receivables 2013-1, Class B, 1.44%, 5/15/2018	1,204,646
1,000,000	1,2	Great America Leasing Receivables 2013-1, Class C, 1.83%, 6/17/2019	1,003,593
4,000,000	1,2	MMAF Equipment Finance LLC 2011-AA, Class A3, 1.27%, 9/15/2015	4,020,016
7,000,000	1,2	MMAF Equipment Finance LLC 2012-A, Class A4, 1.35%, 10/10/2018	7,137,305
3,250,000	1,2	Macquarie Equipment Funding Trust 2012-A, Class B, 1.74%, 10/22/2018	3,254,114
2,332,000	1,2	Macquarie Equipment Funding Trust 2012-A, Class C, 2.68%, 10/22/2018	2,334,849
9,166,667	1,2	Triton Container Finance LLC, Class A, 4.21%, 5/14/2027	9,461,132
3,990,000	1,2	Volvo Financial Equipment LLC (Series 2013-1), Class C, 1.62%, 8/17/2020	3,998,209
		TOTAL	128,349,791
		Home Equity Loan—0.6%
1,051,239		Asset Backed Funding Certificate 2005-OPT1, Class A2C, 0.564%, 7/25/2035	1,009,132
7,647,153		Carrington Mortgage Loan Trust 2006-OPT1, Class A3, 0.384%, 2/25/2036	7,242,848
15,600		Carrington Mortgage Loan Trust 2006-RFC1, Class A2, 0.304%, 5/25/2036	15,609
438,358		Chase Funding Mortgage Loan Asset-Backed Certificates 2003-5, Class 1A4, 4.396%, 2/25/2030	440,130
164,559		Citifinancial Mortgage Securities, Inc. (Series 2003-4), Class AF4, 4.427%, 10/25/2033	164,369
28,888		Countrywide Asset Backed Certificates 2004-4, Class A, 0.944%, 8/25/2034	28,537
528,215		Morgan Stanley ABS Capital I 2004-OP1, Class M3, 1.224%, 11/25/2034	474,644
109,416	1,3	NC Finance Trust 1999-1, Class D, 8.75%, 1/25/2029	13,023
161,745		Option One Mortgage Loan Trust 2005-1, Class A1B, 0.534%, 2/25/2035	126,539
800,849	1,2	Quest Trust 2004—X1, Class A, 0.534%, 3/25/2034	788,427
2,180,416		Renaissance Home Equity Loan Trust 2005-3, Class AF3, 4.814%, 11/25/2035	2,153,601

Semi-Annual Shareholder Report

6

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Home Equity Loan—continued
$127,934		Residential Asset Securities Corporation 2003-KS6, Class A2, 0.804%, 8/25/2033	$121,599
2,532,132	1,2,3	Washington Mutual Asset-Backed Certificates NIM Notes 2007-WM1, Class N1, 6.75%, 1/25/2047	0
321,575		Wells Fargo Home Equity Trust, 2006-1, Class A3, 0.354%, 5/25/2036	321,462
		TOTAL	12,899,920
		Manufactured Housing—0.0%
159,209		Green Tree Financial Corp. 1996-3, Class A5, 7.35%, 5/15/2027	164,713
586,763		Green Tree Financial Corp. 1996-5, Class A6, 7.75%, 7/15/2027	587,969
41,614		Indymac Manufactured Housing Contract 1997-1, Class A3, 6.61%, 2/25/2028	41,644
		TOTAL	794,326
		Other—9.5%
8,845,506	1,2	ACS Pass Through Trust 2007-1A, Class G1, 0.512%, 6/14/2037	8,054,939
5,622,217	1,2	Aircraft Lease Securitisation Ltd. 2007-1A, Class G3, 0.463%, 5/10/2032	5,383,273
4,880,909	1,2	Bank of America Student Loan Trust 2010-1A, Class A, 1.101%, 2/25/2043	4,907,241
4,330,163		Educational Funding Of The South, Inc. 2011-1, Class A1, 0.851%, 10/25/2021	4,346,241
1,628,638	1,2	GE Business Loan Trust, (Series 2004-1), Class A, 0.493%, 5/15/2032	1,573,678
2,500,000		GE Dealer Floorplan Master Note Trust 2012-4, Class A, 0.643%, 10/20/2017	2,506,563
5,832,000		GE Dealer Floorplan Master Note Trust 2012-4, Class B, 0.903%, 10/20/2017	5,837,524
1,524,328		Louisiana Public Facilities Authority 2011-A, Class A1, 0.801%, 4/26/2021	1,524,237
7,000,000		New Hampshire Higher Education Loan Co. 2011-1, Class A2, 1.301%, 10/25/2025	7,098,210
9,506,201		New Hampshire Higher Education Loan Co. 2012-1, Class A, 0.715%, 10/25/2028	9,512,855
3,526,521		North Carolina Education Assistance Authority, 2011-1, Class A1, 0.901%, 1/25/2021	3,531,423
14,000,000	1,2	PFS Financing Corp. 2012-AA, Class A, 1.403%, 2/15/2016	14,121,997
4,000,000	1,2	PFS Financing Corp. 2012-BA, Class A, 0.903%, 10/17/2016	4,021,609
3,000,000	1,2	PFS Financing Corp. 2012-BA, Class B, 1.703%, 10/17/2016	3,025,777
8,450,000	1,2	PFS Financing Corp. 2013-AA, Class A, 0.753%, 2/15/2018	8,458,077
19,995,589	1,2	SLM Student Loan Trust 2010-A, Class 2A, 3.453%, 5/16/2044	21,208,182
1,261,565	1,2	SLM Student Loan Trust 2010-C, Class A1, 1.853%, 12/15/2017	1,265,844
11,426,554		SLM Student Loan Trust 2011-1, Class A1, 0.724%, 3/25/2026	11,489,257

Semi-Annual Shareholder Report

7

Principal Amount or Shares			Value
		Asset-Backed Securities—continued
		Other—continued
$7,202,927		SLM Student Loan Trust 2011-2, Class A1, 0.804%, 11/25/2027	$7,257,925
5,323,779	1,2	SLM Student Loan Trust 2011-A, Class A1, 1.203%, 10/15/2024	5,365,595
5,344,983	1,2	SLM Student Loan Trust 2012-A, Class A1, 1.603%, 8/15/2025	5,428,894
11,822,319	1,2	SLM Student Loan Trust 2012-C, Class A1, 1.303%, 8/15/2023	11,941,399
9,955,629	1,2	SLM Student Loan Trust 2012-E, Class A1, 0.953%, 10/16/2023	10,006,686
11,046,409		SLM Student Loan Trust 2013-1, Class A1, 0.354%, 2/27/2017	11,048,348
5,850,000	1,2	SLM Student Loan Trust 2013-A, Class A2B, 1.303%, 5/17/2027	5,858,067
7,000,000	1,2	SLM Student Loan Trust 2013-A, Class B, 2.50%, 3/15/2047	6,658,159
1,236,180	1,2	Sierra Receivables Funding Co. 2010-1A, Class A1, 4.48%, 7/20/2026	1,285,154
7,222,935	1,2	Sierra Receivables Funding Co. 2010-2A, Class A, 3.84%, 11/20/2025	7,389,266
1,756,254	1,2	Sierra Receivables Funding Co. 2010-3A, Class A, 3.51%, 11/20/2025	1,797,043
3,386,781	1,2	Sierra Receivables Funding Co. 2012-1A, Class A, 2.84%, 11/20/2028	3,475,271
4,043,450	1,2	Sierra Receivables Funding Co. 2012-3A, Class A, 1.87%, 8/20/2029	4,093,420
3,378,217		South Texas Higher Education Authority, Class A1, 0.808%, 10/1/2020	3,349,367
		TOTAL	202,821,521
		TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $1,060,402,449)	1,065,228,703
		Corporate Bonds—23.6%
		Basic Industry - Chemicals—0.6%
2,500,000	1,2	Incitec Pivot Finance LLC, Company Guarantee, (Series 144A), 4.00%, 12/7/2015	2,620,062
1,500,000		Praxair, Inc., Note, 4.375%, 3/31/2014	1,557,362
8,500,000		Praxair, Inc., Sr. Unsecd. Note, 0.75%, 2/21/2016	8,530,064
		TOTAL	12,707,488
		Basic Industry - Metals & Mining—0.5%
3,000,000		ArcelorMittal USA, Inc., Company Guarantee, 6.50%, 4/15/2014	3,138,627
3,000,000		ArcelorMittal, Sr. Unsecd. Note, 9.50%, 2/15/2015	3,391,479
4,000,000	1,2	Hyundai Steel Co., Sr. Unsecd. Note, (Series 144A), 4.625%, 4/21/2016	4,324,564
		TOTAL	10,854,670
		Capital Goods - Diversified Manufacturing—0.4%
2,500,000		ABB Finance USA, Inc., Sr. Unsecd. Note, 1.625%, 5/8/2017	2,538,325
1,300,000	1,2	Hutchison Whampoa International Ltd., Company Guarantee, (Series 144A), 3.50%, 1/13/2017	1,387,759
1,500,000		Ingersoll-Rand Global Holding Co. Ltd., 9.50%, 4/15/2014	1,630,392
3,000,000		Textron Financial Corp., 5.40%, 4/28/2013	3,009,975
		TOTAL	8,566,451
		Communications - Media & Cable—0.3%
1,500,000		Comcast Corp., Company Guarantee, 5.85%, 11/15/2015	1,696,126

Semi-Annual Shareholder Report

8

Principal Amount or Shares			Value
		Corporate Bonds—continued
		Communications - Media & Cable—continued
$5,000,000		DIRECTV Holdings LLC, Company Guarantee, 3.50%, 3/1/2016	$5,313,790
		TOTAL	7,009,916
		Communications - Telecom Wireless—0.2%
1,750,000		Cellco Partnership/Verizon Wireless Capital LLC, Sr. Unsecd. Note, 5.55%, 2/1/2014	1,818,840
1,500,000		Vodafone Group PLC, Note, 5.375%, 1/30/2015	1,626,325
		TOTAL	3,445,165
		Communications - Telecom Wirelines—1.1%
6,000,000		AT&T, Inc., Floating Rate Note—Sr. Note, (Series FRN), 0.677%, 2/12/2016	6,029,034
3,000,000		AT&T, Inc., Sr. Unsecd. Note, 0.80%, 12/1/2015	2,995,977
5,650,000		AT&T, Inc., Sr. Unsecd. Note, 2.95%, 5/15/2016	5,982,565
3,000,000		Deutsche Telekom International Finance BV, 5.25%, 7/22/2013	3,042,168
2,000,000		Rogers Communications, Inc., 5.50%, 3/15/2014	2,091,436
1,000,000		Telecom Italia Capital SA, Company Guarantee, 5.25%, 11/15/2013	1,021,017
3,000,000		Verizon Communications, Inc., Floating Rate Note—Sr. Note, (Series FRN), 0.894%, 3/28/2014	3,016,914
		TOTAL	24,179,111
		Consumer Cyclical - Automotive—1.4%
4,000,000	1,2	American Honda Finance Corp., Sr. Unsecd. Note, (Series 144A), 1.60%, 2/16/2018	4,054,532
6,000,000	1,2	Daimler Finance NA LLC, Floating Rate Note—Sr. Note, (Series 144A), 0.894%, 3/28/2014	6,016,608
4,700,000	1,2	Daimler Finance NA LLC, Floating Rate Note—Sr. Note, (Series 144A), 1.480%, 9/13/2013	4,718,885
6,900,000	1,2	RCI Banque SA, Sr. Unsecd. Note, 3.50%, 4/3/2018	6,923,112
8,000,000	1,2	Volkswagen International Finance NV, Floating Rate Note—Sr. Note, (Series 144A), 1.032%, 3/21/2014	8,042,400
		TOTAL	29,755,537
		Consumer Cyclical - Entertainment—1.1%
9,400,000		NBC Universal, Inc., Sr. Unsecd. Note, 2.10%, 4/1/2014	9,532,813
4,000,000		Viacom, Inc., Sr. Unsecd. Note, 4.25%, 9/15/2015	4,308,680
5,000,000		Walt Disney Co., Sr. Unsecd. Note, (Series MTN), 0.45%, 12/1/2015	4,998,545
5,000,000		Walt Disney Co., Sr. Unsecd. Note, 0.875%, 12/1/2014	5,043,350
		TOTAL	23,883,388
		Consumer Non-Cyclical - Food/Beverage—1.2%
1,500,000	1,2	Bacardi Ltd., Sr. Note, (Series 144A), 7.45%, 4/1/2014	1,598,262
3,300,000		ConAgra Foods, Inc., Sr. Unsecd. Note, 1.30%, 1/25/2016	3,328,647
5,000,000		General Mills, Inc., Floating Rate Note—Sr. Note, 0.640%, 5/16/2014	5,017,665

Semi-Annual Shareholder Report

9

Principal Amount or Shares			Value
		Corporate Bonds—continued
		Consumer Non-Cyclical - Food/Beverage—continued
$2,000,000		Kellogg Co., 1.125%, 5/15/2015	$2,019,892
3,000,000		Kraft Foods Group, Inc., 1.625%, 6/4/2015	3,047,847
2,000,000		PepsiCo, Inc., Sr. Unsecd. Note, 0.875%, 10/25/2013	2,006,206
1,500,000		PepsiCo, Inc., Sr. Unsecd. Note, 3.75%, 3/1/2014	1,545,497
2,000,000	1,2	Pernod-Ricard SA, Sr. Unsecd. Note, (Series 144A), 2.95%, 1/15/2017	2,103,228
4,650,000	1,2	SABMiller Holdings, Inc., Company Guarantee, (Series 144A), 1.85%, 1/15/2015	4,727,041
		TOTAL	25,394,285
		Consumer Non-Cyclical - Health Care—0.2%
4,000,000		Stryker Corp., Sr. Unsecd. Note, 1.30%, 4/1/2018	3,990,364
		Consumer Non-Cyclical - Pharmaceuticals—0.1%
1,500,000		Eli Lilly & Co., 4.20%, 3/6/2014	1,553,396
		Consumer Non-Cyclical - Products—0.1%
1,050,000		Philips Electronics NV, Sr. Unsecd. Note, 7.25%, 8/15/2013	1,074,805
		Consumer Non-Cyclical - Supermarkets—0.1%
1,500,000		Kroger Co., 5.00%, 4/15/2013	1,502,321
		Consumer Non-Cyclical - Tobacco—0.2%
5,000,000		Altria Group, Inc., Company Guarantee, 4.125%, 9/11/2015	5,398,065
		Credit Card—0.7%
10,400,000		BA Credit Card Trust, (Series B4), 5.45%, 9/18/2013	16,045,917
		Energy - Integrated—1.5%
5,000,000		BP Capital Markets PLC, Company Guarantee, 3.125%, 10/1/2015	5,282,585
5,000,000		BP Capital Markets PLC, Company Guarantee, 3.20%, 3/11/2016	5,330,380
3,000,000	1,2	CNPC Hong Kong Overseas Capital Ltd., Company Guarantee, (Series 144A), 3.125%, 4/28/2016	3,152,985
400,000		ConocoPhillips, Mtg. Note, 4.75%, 2/1/2014	414,465
1,000,000	1,2	Enel Finance International SA, Company Guarantee, (Series 144A), 3.875%, 10/7/2014	1,028,209
3,164,000		Husky Energy, Inc., 5.90%, 6/15/2014	3,354,669
10,000,000		Petrohawk Energy Corp., Company Guarantee, 7.25%, 8/15/2018	11,207,040
3,000,000		Statoil ASA, 2.90%, 10/15/2014	3,114,015
		TOTAL	32,884,348
		Energy - Oil Field Services—0.3%
4,000,000	1,2	Schlumberger Investment SA, Floating Rate Note—Sr. Note, (Series 144A), 0.830%, 9/12/2014	4,030,132
2,000,000	1,2	Schlumberger Investment SA, Sr. Unsecd. Note, (Series 144A), 1.25%, 8/1/2017	1,998,312
		TOTAL	6,028,444

Semi-Annual Shareholder Report

10

Principal Amount or Shares		Value
	Corporate Bonds—continued
	Financial Institution - Banking—5.8%
$6,500,000	Associated Banc-Corp., Sr. Unsecd. Note, 1.875%, 3/12/2014	$6,530,088
9,000,000	Bank of America Corp., Note, 4.50%, 4/1/2015	9,541,188
5,000,000	Bank of America Corp., Sr. Unsecd. Note, (Series MTN), 1.104%, 3/22/2016	4,984,660
5,000,000	Bank of America Corp., Sr. Unsecd. Note, (Series MTNK), 0.610%, 9/15/2014	4,987,775
7,500,000	Bear Stearns Cos., Inc., Sr. Unsecd. Note, 5.70%, 11/15/2014	8,086,395
1,000,000	Citigroup, Inc., 5.50%, 4/11/2013	1,001,172
8,000,000	Citigroup, Inc., Floating Rate Note—Sr. Note, 1.084%, 4/1/2016	8,010,552
1,964,000	Citigroup, Inc., Floating Rate Note—Sr. Note, 1.238%, 4/1/2014	1,973,848
5,000,000	Citigroup, Inc., Sub. Note, 5.00%, 9/15/2014	5,251,995
5,000,000	Goldman Sachs Group, Inc., Floating Rate Note—Sr. Note, 1.296%, 2/7/2014	5,025,445
7,000,000	Goldman Sachs Group, Inc., Sr. Unsecd. Note, 5.00%, 10/1/2014	7,413,119
4,800,000	HSBC USA, Inc., Sr. Unsecd. Note, 1.625%, 1/16/2018	4,803,240
6,200,000	HSBC USA, Inc., Sr. Unsecd. Note, 2.375%, 2/13/2015	6,382,218
4,000,000	JPMorgan Chase & Co., Floating Rate Note—Sr. Note, (Series MTN), 1.030%, 5/2/2014	4,025,780
4,000,000	Morgan Stanley, Floating Rate Note—Sr. Note, (Series FRN), 1.902%, 1/24/2014	4,033,808
2,725,000	Morgan Stanley, Floating Rate Note—Sr. Note, 1.538%, 2/25/2016	2,738,549
5,000,000	Morgan Stanley, Sr. Unsecd. Note, 6.00%, 5/13/2014	5,271,420
1,205,000	National City Bank, Sub. Note, 4.625%, 5/1/2013	1,208,772
4,500,000	PNC Bank, N.A., Floating Rate Note—Sr. Note, 0.611%, 1/28/2016	4,510,764
1,500,000	PNC Funding Corp., Sr. Unsecd. Note, 5.40%, 6/10/2014	1,584,015
14,250,000	Royal Bank of Canada, Montreal, Floating Rate Note—Sr. Note, 0.650%, 3/8/2016	14,268,553
3,000,000	State Street Corp., Sr. Note, 4.30%, 5/30/2014	3,136,101
5,000,000	Wells Fargo & Co., Sr. Unsecd. Note, (Series FRN), 1.205%, 6/26/2015	5,068,145
5,000,000	Wells Fargo & Co., Sr. Unsecd. Note, 1.50%, 1/16/2018	4,997,645
	TOTAL	124,835,247
	Financial Institution - Brokerage—0.5%
5,000,000	BlackRock, Inc., Floating Rate Note—Sr. Note, 0.588%, 5/24/2013	5,001,805
5,000,000	BlackRock, Inc., Sr. Unsecd. Note, 1.375%, 6/1/2015	5,088,380
	TOTAL	10,090,185
	Financial Institution - Finance Noncaptive—1.2%
2,000,000	American Express Credit Corp., (Series C), 7.30%, 8/20/2013	2,051,416
2,250,000	American Express Credit Corp., (Series MTN), 5.875%, 5/2/2013	2,259,846

Semi-Annual Shareholder Report

11

Principal Amount or Shares			Value
		Corporate Bonds—continued
		Financial Institution - Finance Noncaptive—continued
$4,000,000		General Electric Capital Corp., Floating Rate Note—Sr. Note, (Series MTN), 1.002%, 4/24/2014	$4,029,536
6,750,000		General Electric Capital Corp., Floating Rate Note—Sr. Note, 1.155%, 1/7/2014	6,795,589
10,000,000		General Electric Capital Corp., Sr. Unsecd. Note, 1.625%, 7/2/2015	10,178,620
		TOTAL	25,315,007
		Financial Institution - Insurance - Life—1.1%
2,400,000		Aflac, Inc., Sr. Unsecd. Note, 2.65%, 2/15/2017	2,526,425
5,200,000		MetLife, Inc., Floating Rate Note—Sr. Note, 1.546%, 8/6/2013	5,222,037
3,000,000	1,2	New York Life Global Funding, Floating Rate Note—Sr. Secured Note, (Series 144A), 0.565%, 4/4/2014	3,010,095
10,000,000	1,2	New York Life Global Funding, Sr. Unsecd. Note, 1.30%, 1/12/2015	10,137,440
3,000,000		Principal Financial Group, Inc., Sr. Unsecd. Note, 1.85%, 11/15/2017	3,035,907
		TOTAL	23,931,904
		Financial Institution - Insurance - P&C—0.1%
3,000,000		Berkshire Hathaway, Inc., Floating Rate Note—Sr. Note, (Series FRN), 0.990%, 8/15/2014	3,029,748
		Financial Institution - REITs—0.4%
3,150,000		Avalonbay Communities, Inc., Sr. Unsecd. Note, (Series MTN), 5.375%, 4/15/2014	3,300,646
5,000,000		Health Care REIT, Inc., Sr. Unsecd. Note, 6.00%, 11/15/2013	5,159,130
		TOTAL	8,459,776
		Technology—1.4%
7,850,000		Cisco Systems, Inc., Floating Rate Note—Sr. Note, 0.531%, 3/14/2014	7,873,558
5,000,000		Hewlett-Packard Co., Sr. Unsecd. Note, 1.55%, 5/30/2014	5,021,715
12,000,000		Texas Instruments, Inc., Sr. Unsecd. Note, 1.375%, 5/15/2014	12,140,856
4,250,000		Xerox Corp., Floating Rate Note—Sr. Note, 1.110%, 5/16/2014	4,237,819
		TOTAL	29,273,948
		Transportation - Services—0.5%
6,000,000	1,2	Penske Truck Leasing Co. LP & PTL Finance Corp., (Series 144A), 3.125%, 5/11/2015	6,211,290
2,000,000		Ryder System, Inc., Sr. Unsecd. Note, (Series MTN), 3.60%, 3/1/2016	2,097,216
3,000,000		Ryder System, Inc., Sr. Unsecd. Note, (Series MTN), 5.85%, 3/1/2014	3,136,923
		TOTAL	11,445,429
		Utility - Electric—1.5%
1,500,000	1,2	Electricite de France SA, (Series 144A), 5.50%, 1/26/2014	1,558,265
5,000,000		Exelon Corp., Sr. Unsecd. Note, 4.90%, 6/15/2015	5,415,090
1,150,000		FirstEnergy Corp., Sr. Unsecd. Note, (Series A), 2.75%, 3/15/2018	1,164,898

Semi-Annual Shareholder Report

12

Principal Amount or Shares			Value
		Corporate Bonds—continued
		Utility - Electric—continued
$2,000,000		FirstEnergy Solutions Corp., Company Guarantee, 4.80%, 2/15/2015	$2,156,808
3,000,000		National Rural Utilities Cooperative Finance Corp., Collateral Trust, 1.125%, 11/1/2013	3,013,128
2,000,000		NextEra Energy Capital Holdings, Inc., Sr. Unsecd. Note, 1.20%, 6/1/2015	2,016,198
3,000,000		NextEra Energy Capital Holdings, Inc., Sr. Unsecd. Note, 1.611%, 6/1/2014	3,029,064
3,000,000		P G & E Corp., 5.75%, 4/1/2014	3,143,046
3,500,000		PPL Energy Supply LLC, Sr. Unsecd. Note, 6.30%, 7/15/2013	3,555,398
3,000,000	1,2	PPL WEM Holdings PLC, Sr. Unsecd. Note, (Series 144A), 3.90%, 5/1/2016	3,171,498
2,500,000		PSEG Power LLC, Company Guarantee, 2.50%, 4/15/2013	2,501,730
1,000,000		Public Service Electric & Gas Co., 1st Mtg. Bond, (Series G), 0.85%, 8/15/2014	1,005,429
		TOTAL	31,730,552
		Utility - Natural Gas Distributor—0.5%
10,000,000		Sempra Energy, Floating Rate Note—Sr. Note, 1.040%, 3/15/2014	10,053,970
		Utility - Natural Gas Pipelines—0.6%
4,335,000		Kinder Morgan Energy Partners LP, 5.125%, 11/15/2014	4,641,268
1,945,000		Spectra Energy Capital LLC, Sr. Unsecd. Note, 5.668%, 8/15/2014	2,070,357
7,000,000		TransCanada PipeLines Ltd., Sr. Unsecd. Note, 0.75%, 1/15/2016	6,996,906
		TOTAL	13,708,531
		TOTAL CORPORATE BONDS (IDENTIFIED COST $499,627,838)	506,147,968
		MUNICIPAL BOND—0.5%
		Municipal Services—0.5%
10,000,000		Mississippi State, Taxable UT GO Refunding Bonds (Series 2012C), 0.904% Bonds, 11/1/2017 (IDENTIFIED COST $10,000,000)	9,999,100
		Mortgage-Backed Securities—0.0%
		Federal National Mortgage Association—0.0%
56,781		Federal National Mortgage Association, Pool 456622, 5.500%, 1/1/2014	60,534
689,847		Federal National Mortgage Association, Pool 728568, 6.500%, 10/1/2033	790,490
		TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $786,274)	851,024
		Collateralized Mortgage Obligations—13.7%
		Commercial Mortgage—1.7%
5,061,728		Bank of America Commercial Mortgage, Inc., Class A3, 5.449%, 1/15/2049	5,190,776

Semi-Annual Shareholder Report

13

Principal Amount or Shares			Value
		Collateralized Mortgage Obligations—continued
		Commercial Mortgage—continued
$893,525		Citigroup/Deutsche Bank Commercial Mortgage 2007-CD4, Class A2B, 5.205%, 12/11/2049	$922,177
2,504,293	1,2	Commercial Mortgage Pass-Through Certificates 2010-C1, Class A1, 3.156%, 7/10/2046	2,625,834
3,973,615		Commercial Mortgage Pass-Through Certificates 2012-LC4, Class A1, 1.156%, 12/10/2044	3,999,156
2,863,803	1,2	DBUBS Mortgage Trust 2011-LC1A, Class A1, 3.742%, 11/10/2046	3,073,197
1,411,924	1,2	JP Morgan Chase Commercial Mortgage Securities 2010-C1, Class A1, 3.853%, 6/15/2043	1,491,054
6,300,471		Morgan Stanley BAML Trust 2012-C5, Class A1, 0.916%, 8/15/2045	6,327,364
2,497,667	1,2	Morgan Stanley Capital I 2011-C1, Class A1, 2.602%, 9/15/2047	2,555,377
29,567		Morgan Stanley Capital, Inc. 2007-T27, Class A2, 5.651%, 6/11/2042	30,018
5,681,383		UBS-Citigroup Commercial Mortgage Trust 2011-C1, Class A1, 1.524%, 1/10/2045	5,744,441
5,000,000	1,2	WF-RBS Commercial Mortgage Trust 2012-C7, Class AFL, 1.403%, 6/15/2045	5,115,814
		TOTAL	37,075,208
		Federal Home Loan Mortgage Corporation—2.7%
141,964		Federal Home Loan Mortgage Corp. REMIC 2571 FB, 0.553%, 2/15/2018	142,540
6,224,694		Federal Home Loan Mortgage Corp. REMIC 2819 F, 0.603%, 6/15/2034	6,245,993
2,025,445		Federal Home Loan Mortgage Corp. REMIC 3071 TF, 0.503%, 4/15/2035	2,027,805
3,469,686		Federal Home Loan Mortgage Corp. REMIC 3084 XF, 0.723%, 12/15/2035	3,498,693
1,594,785		Federal Home Loan Mortgage Corp. REMIC 3152 WF, 0.663%, 2/15/2034	1,603,686
6,238,947		Federal Home Loan Mortgage Corp. REMIC 3153 EF, 0.613%, 5/15/2036	6,262,068
2,117,192		Federal Home Loan Mortgage Corp. REMIC 3153 FJ, 0.583%, 5/15/2036	2,124,794
1,772,520		Federal Home Loan Mortgage Corp. REMIC 3156 HF, 0.688%, 8/15/2035	1,782,392
572,713		Federal Home Loan Mortgage Corp. REMIC 3191 FE, 0.603%, 7/15/2036	574,675
3,275,296		Federal Home Loan Mortgage Corp. REMIC 3211 FN, 0.503%, 9/15/2036	3,276,756
3,556,038		Federal Home Loan Mortgage Corp. REMIC 3317 F, 0.603%, 7/15/2036	3,562,925
1,189,181		Federal Home Loan Mortgage Corp. REMIC 3320 FM, 0.603%, 7/15/2036	1,195,341
3,316,442		Federal Home Loan Mortgage Corp. REMIC 3339 AF, 0.653%, 7/15/2037	3,327,581

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Principal Amount or Shares			Value
		Collateralized Mortgage Obligations—continued
		Federal Home Loan Mortgage Corporation—continued
$9,657,881		Federal Home Loan Mortgage Corp. REMIC 3382 FG, 0.803%, 11/15/2037	$9,737,303
5,171,305		Federal Home Loan Mortgage Corp. REMIC 3387 PF, 0.623%, 11/15/2037	5,194,631
1,377,737		Federal Home Loan Mortgage Corp. REMIC 3542 NF, 0.953%, 7/15/2036	1,396,557
2,425,130		Federal Home Loan Mortgage Corp. REMIC 3556 FA, 1.113%, 7/15/2037	2,474,951
4,087,856		Federal Home Loan Mortgage Corp. REMIC K701 A1, 2.776%, 6/25/2017	4,277,419
		TOTAL	58,706,110
		Federal National Mortgage Association—1.7%
814,309		Federal National Mortgage Association REMIC 2002-77 FA, 1.203%, 12/18/2032	830,338
2,219,392		Federal National Mortgage Association REMIC 2006-44 FK, 0.634%, 6/25/2036	2,229,824
8,234,253		Federal National Mortgage Association REMIC 2006-61 FQ, 0.604%, 7/25/2036	8,263,368
1,996,450		Federal National Mortgage Association REMIC 2006-79 DF, 0.554%, 8/25/2036	2,002,876
4,437,501		Federal National Mortgage Association REMIC 2006-81 FB, 0.554%, 9/25/2036	4,449,677
2,605,250		Federal National Mortgage Association REMIC 2006-119 CF, 0.504%, 12/25/2036	2,607,364
3,412,399		Federal National Mortgage Association REMIC 2006-W1 2AF1, 0.424%, 2/25/2046	3,378,373
2,975,922		Federal National Mortgage Association REMIC 2007-88 FY, 0.664%, 9/25/2037	2,988,111
2,217,956		Federal National Mortgage Association REMIC 2007-97 FE, 0.654%, 7/25/2037	2,232,038
1,364,742		Federal National Mortgage Association REMIC 2008-69 FB, 1.204%, 6/25/2037	1,397,701
1,631,029		Federal National Mortgage Association REMIC 2009-42 FG, 1.004%, 5/25/2039	1,653,177
609,002		Federal National Mortgage Association REMIC 2009-63 FB, 0.704%, 8/25/2039	612,138
2,583,692		Federal National Mortgage Association REMIC 2009-69 F, 1.054%, 4/25/2037	2,632,737
		TOTAL	35,277,722
		Government Agency—0.9%
9,000,000	1,2	FDIC Trust 2013-R1, Class A, 1.15%, 3/25/2033	8,989,446
7,423,388		NCUA Guaranteed Notes 2011-C1, Class 2A, 0.733%, 3/9/2021	7,516,181

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Principal Amount or Shares			Value
		Collateralized Mortgage Obligations—continued
		Government Agency—continued
$2,261,502		NCUA Guaranteed Notes 2011-R1, Class 1A, 0.653%, 1/8/2020	$2,272,102
		TOTAL	18,777,729
		Government National Mortgage Association—0.9%
19,853,813		Government National Mortgage Association REMIC 2012H31 FA, 0.561%, 11/20/2062	19,815,555
		Non-Agency Mortgage—5.8%
15,000,000	1,2	Arkle Master Issuer PLC 2012-1, Class 2A1, 1.990%, 5/17/2060	15,398,336
1,848,687	1,2	Arran Residential Mortgages Funding (Series 2011-1A), Class A1C, 1.490%, 11/19/2047	1,851,220
40,043		Bank of America Mortgage Securities 2003-A, Class 1A1, 2.872%, 2/25/2033	40,894
346,253	1	C-BASS ABS LLC (Series 1999-3), Class B1, 6.433%, 2/3/2029	121,892
439,555		Chaseflex Trust 2006-1, Class A2A, 5.564%, 6/25/2036	438,720
551,396		Countrywide Alternative Loan Trust 2005-51, Class 3AB3, 0.753%, 11/20/2035	10,307
2,994,848	1,2	Credit Suisse Commercial Mortgage Trust, Class A1, 2.130%, 2/25/2043	2,976,142
2,585,638	1,2	Credit Suisse Mortgage Capital Certificate 2012-CIM2, Class A1, 3.000%, 6/25/2042	2,629,865
498,508		Crusade Global Trust 2005-1, Class A1, 0.340%, 6/17/2037	495,754
6,375,928	1,2	Fosse Master Issuer PLC 2011-1A, Class A2, 1.703%, 10/18/2054	6,453,219
4,500,000	1,2	Fosse Master Issuer PLC 2012-1, Class 2A2, 1.703%, 10/18/2054	4,598,226
10,304,952	1,2	Holmes Master Issuer PLC 2010-1A, Class A2, 1.704%, 10/15/2054	10,375,017
1,832,410	1,2	Holmes Master Issuer PLC 2011-1A, Class A2, 1.654%, 10/15/2054	1,849,460
520,997		Impac CMB Trust 2004-7, Class 1A2, 1.124%, 11/25/2034	472,216
688,982		Impac CMB Trust 2004-9, Class 1A2, 1.084%, 1/25/2035	399,264
4,000,000		Indymac Index Mortgage Loan Trust 2007-FLX1, Class A4, 0.474%, 2/25/2037	540,378
10,000,000	1,2	Lanark Master Issuer PLC 2012-2A, Class 1A, 1.689%, 12/22/2054	10,191,198
1,673,595		Mellon Residential Funding Corp. 2001-TBC1, Class A1, 0.903%, 11/15/2031	1,616,423
8,000,000	1,2	Permanent Master Issuer PLC 2011-1A, Class 1A1, 1.704%, 7/15/2042	8,071,018
263,444		Residential Funding Mortgage Securities I 2005-S6, Class A1, 5.00%, 8/25/2035	266,048
893,260		Sequoia Mortgage Trust 2011-1, Class A1, 4.125%, 2/25/2041	902,698
1,222,010		Sequoia Mortgage Trust 2011-2, Class A1, 3.900%, 9/25/2041	1,239,540
1,600,862		Sequoia Mortgage Trust 2012-1, Class 2A1, 3.474%, 1/25/2042	1,634,324
3,815,644		Sequoia Mortgage Trust 2012-4, Class A3, 2.069%, 9/25/2042	3,791,384
6,816,839		Sequoia Mortgage Trust 2012-6, Class A2, 1.808%, 12/25/2042	6,793,450

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Principal Amount or Shares			Value
		Collateralized Mortgage Obligations—continued
		Non-Agency Mortgage—continued
$17,370,415		Sequoia Mortgage Trust 2013-1, Class 1A1, 1.450%, 2/25/2043	$17,333,973
12,000,000	1,2	Silverstone Master Issuer 2010-1A, Class A1, 1.702%, 1/21/2055	12,079,562
1,500,000	1,2	Silverstone Master Issuer 2012-1A, Class 1A, 1.852%, 1/21/2055	1,532,418
5,416,616	1,2	Springleaf Mortgage Loan Trust 2012-3A, Class A, 1.570%, 12/25/2059	5,457,663
1,353,321		Washington Mutual 2006-AR1, Class 2A1B, 1.247%, 1/25/2046	1,151,795
1,875,603		Washington Mutual 2006-AR15, Class 1A, 1.017%, 11/25/2046	1,425,867
978,643		Washington Mutual 2006-AR17, Class 1A, 0.997%, 12/25/2046	749,705
193,509		Wells Fargo Mortgage Backed Securities Trust 2004-I, Class 1A1, 2.784%, 7/25/2034	202,365
		TOTAL	123,090,341
		TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $295,535,140)	292,742,665
		MUTUAL FUNDS—11.0%4
1,232,895		Emerging Markets Fixed Income Core Fund	42,526,097
4,222,771		Federated Bank Loan Core Fund	43,452,314
737,241		Federated Mortgage Core Portfolio	7,468,252
99,381,342	5	Federated Prime Value Obligations Fund, Institutional Shares, 0.12%	99,381,342
638,007		Federated Project and Trade Finance Core Fund	6,233,324
5,390,762		High Yield Bond Portfolio	36,387,640
		TOTAL MUTUAL FUNDS (IDENTIFIED COST $227,766,969)	235,448,969
		TOTAL INVESTMENTS—99.0% (IDENTIFIED COST $2,102,770,066)6	2,119,324,740
		OTHER ASSETS AND LIABILITIES - NET—1.0%7	21,555,564
		TOTAL NET ASSETS—100%	$2,140,880,304

At March 31, 2013, the Fund had the following outstanding futures contracts:

Description	Number of Contracts	Notional Value	Expiration Date	Unrealized Depreciation
8United States Treasury Notes 2-Year Short Futures	800	$176,362,501	June 2013	$(99,051)
8United States Treasury Notes 5-Year Short Futures	200	$24,810,938	June 2013	$(106,700)
UNREALIZED DEPRECIATION ON FUTURES CONTRACTS				$(205,751)

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17

At March 31, 2013, the Fund had the following outstanding foreign exchange contracts as follows:

Settlement Date	Foreign Currency Units to Receive	In Exchange For	Unrealized Appreciation
Contracts sold:
9/18/2013	6,222,431 Pound Sterling	$10,082,205	$634,348
9/18/2013	4,745,921 Pound Sterling	$7,290,684	$84,692
UNREALIZED APPRECIATION ON FOREIGN EXCHANGE CONTRACTS			$719,040

At March 31, 2013, the Fund had the following open swap contracts:

Credit Default Swap Counterparty	Goldman Sachs and Co.	Goldman Sachs and Co.	Goldman Sachs and Co.	Unrealized Depreciation of Credit Default Swaps
Reference Entity	Series 18 EM CDX Index	Series 19 High Yield CDX Index	Series 19 Leveraged Loan CDSI Index
Buy/Sell	Sell	Sell	Sell
Pay/Receive Fixed Rate	5.00%	5.00%	2.50%
Expiration Date	12/20/2017	12/20/2017	12/20/2017
Implied Credit Spread at 3/31/20139	6.08%	4.54%	2.29%
Notional Amount	$15,000,000	$12,000,000	$12,000,000
Market Value	$1,530,539	$502,867	$350,000
Upfront Premiums Paid	$2,145,000	$281,250	$240,000
Net Unrealized Appreciation/Depreciation	$(614,461)	$221,617	$110,000	$(282,844)

Net Unrealized Appreciation/Depreciation on Futures Contracts, Foreign Exchange Contracts and Swap Contracts is included in “Other Assets and Liabilities—Net.”

1	Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At March 31, 2013, these restricted securities amounted to $750,348,437, which represented 35.0% of total net assets.
2	Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At March 31, 2013, these liquid restricted securities amounted to $750,213,522, which represented 35.0% of total net assets.
3	Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Directors.
4	Affiliated holdings.
5	7-day net yield.
6	The cost of investments for federal tax purposes amounts to $2,102,799,760.
7	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.
8	Non-income producing security.

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18

9 Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.

Note: The categories of investments are shown as a percentage of total net assets at March 31, 2013.

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:

Level 1— quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.

Level 2— other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3— significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of March 31, 2013, in valuing the Fund's assets carried at fair value:

Valuation Inputs
	Level 1— Quoted Prices and Investments in Mutual Funds1	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Debt Securities:
Adjustable Rate Mortgages	$—	$8,906,311	$—	$8,906,311
Asset-Backed Securities	—	1,041,584,0452	23,644,658	1,065,228,703
Corporate Bonds	—	506,147,968	—	506,147,968
Municipal Bond	—	9,999,100	—	9,999,100
Mortgage-Backed Securities	—	851,024	—	851,024
Collateralized Mortgage Obligations	—	283,631,327	9,111,338	292,742,665
Mutual Funds	229,215,645	6,233,324	—	235,448,969
TOTAL SECURITIES	$229,215,645	$1,857,353,099	$32,755,996	$2,119,324,740
OTHER FINANCIAL INSTRUMENTS3	$(205,751)	$3,102,446	$—	$2,896,695

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19

1	Emerging Markets Fixed Income Core Fund, Federated Bank Loan Core Fund, Federated Mortgage Core Portfolio and High Yield Bond Portfolio are affiliated holdings offered only to registered investment companies and other accredited investors.
2	Includes $7,298,927 of asset-backed securities transferred from Level 3 to Level 2 because observable market data was obtained for securities. These transfers represent the value of the securities at the beginning of the period.
3	Other financial instruments include futures contracts, foreign exchange contracts and swap contracts.

Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

	Investments in Asset-Backed Securities	Investments in Collateralized Mortgage Obligations
Balance as of October 1, 2012	$18,830,079	$124,089
Realized gain (loss)	2,526,832	3,578
Change in unrealized appreciation (depreciation)	(2,412,360)	13,948
Purchases	11,999,034	8,989,446
(Sales)	—	(19,723)
(Transfers out of Level 3)	(7,298,927)	—
Balance as of March 31, 2013	$23,644,658	$9,111,338
The total change in unrealized appreciation/depreciation included in the Statement of Operations attributable to investments still held at March 31, 2013.	$(2,412,861)	$4,490

The following acronyms are used throughout this portfolio:

ARM	—Adjustable Rate Mortgage
FDIC	—Federal Deposit Insurance Corporation
FNMA	—Federal National Mortgage Association
GO	—General Obligation
MTN	—Medium Term Note
NIM	—Net Interest Margin
REITs	—Real Estate Investment Trusts
REMIC	—Real Estate Mortgage Investment Conduit
UT	—Unlimited Tax

See Notes which are an integral part of the Financial Statements

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Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period)

	Six Months Ended (unaudited) 3/31/2013	Year Ended September 30,
		2012	2011	20101	2009	2008
Net Asset Value, Beginning of Period	$9.23	$9.15	$9.22	$9.06	$8.83	$9.30
Income From Investment Operations:
Net investment income	0.04	0.12	0.142	0.162	0.222	0.332
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions	0.01	0.07	(0.08)	0.15	0.24	(0.47)
TOTAL FROM INVESTMENT OPERATIONS	0.05	0.19	0.06	0.31	0.46	(0.14)
Less Distributions:
Distributions from net investment income	(0.05)	(0.11)	(0.13)	(0.15)	(0.23)	(0.33)
Net Asset Value, End of Period	$9.23	$9.23	$9.15	$9.22	$9.06	$8.83
Total Return3	0.61%	2.26%	0.67%	3.49%	5.35%	(1.57)%
Ratios to Average Net Assets:
Net expenses	0.90%4	0.90%	0.90%	0.90%	0.90%	0.90%
Net investment income	1.01%4	1.34%	1.48%	1.73%	2.49%	3.58%
Expense waiver/reimbursement5	0.39%4	0.40%	0.40%	0.41%	0.43%	0.44%
Supplemental Data:
Net assets, end of period (000 omitted)	$719,482	$456,913	$377,029	$288,744	$107,568	$31,979
Portfolio turnover	14%	31%	38%	34%	41%	64%

1	Beginning with the year ended September 30, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm.
2	Per share numbers have been calculated using the average shares method.
3	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
4	Computed on an annualized basis.
5	This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

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Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period)

	Six Months Ended (unaudited) 3/31/2013	Year Ended September 30,
		2012	2011	20101	2009	2008
Net Asset Value, Beginning of Period	$9.23	$9.15	$9.22	$9.06	$8.83	$9.30
Income From Investment Operations:
Net investment income	0.07	0.17	0.192	0.212	0.282	0.382
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions	(0.01)	0.08	(0.08)	0.15	0.23	(0.47)
TOTAL FROM INVESTMENT OPERATIONS	0.06	0.25	0.11	0.36	0.51	(0.09)
Less Distributions:
Distributions from net investment income	(0.07)	(0.17)	(0.18)	(0.20)	(0.28)	(0.38)
Net Asset Value, End of Period	$9.22	$9.23	$9.15	$9.22	$9.06	$8.83
Total Return3	0.77%	2.82%	1.23%	4.05%	5.93%	(1.03)%
Ratios to Average Net Assets:
Net expenses	0.35%4	0.35%	0.35%	0.35%	0.35%	0.35%
Net investment income	1.56%4	1.90%	2.04%	2.27%	3.22%	4.13%
Expense waiver/reimbursement5	0.39%4	0.40%	0.40%	0.41%	0.43%	0.44%
Supplemental Data:
Net assets, end of period (000 omitted)	$1,331,644	$1,050,985	$818,994	$570,477	$233,255	$189,261
Portfolio turnover	14%	31%	38%	34%	41%	64%

1	Beginning with the year ended September 30, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm.
2	Per share numbers have been calculated using the average shares method.
3	Based on net asset value. Total returns for periods of less than one year are not annualized.
4	Computed on an annualized basis.
5	This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

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Financial Highlights–Service Shares

(For a Share Outstanding Throughout Each Period)

	Six Months Ended (unaudited) 3/31/2013	Year Ended September 30,
		2012	2011	20101	2009	2008
Net Asset Value, Beginning of Period	$9.23	$9.15	$9.22	$9.06	$8.83	$9.30
Income From Investment Operations:
Net investment income	0.04	0.13	0.142	0.172	0.232	0.312
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions	(0.00)3	0.07	(0.07)	0.15	0.24	(0.44)
TOTAL FROM INVESTMENT OPERATIONS	0.04	0.20	0.07	0.32	0.47	(0.13)
Less Distributions:
Distributions from net investment income	(0.05)	(0.12)	(0.14)	(0.16)	(0.24)	(0.34)
Net Asset Value, End of Period	$9.22	$9.23	$9.15	$9.22	$9.06	$8.83
Total Return4	0.55%	2.36%	0.77%	3.59%	5.45%	(1.46)%
Ratios to Average Net Assets:
Net expenses	0.80%5	0.80%	0.80%	0.80%	0.80%	0.79%
Net investment income	1.12%5	1.51%	1.55%	1.83%	2.65%	3.46%
Expense waiver/reimbursement6	0.42%5	0.43%	0.44%	0.46%	0.48%	0.49%
Supplemental Data:
Net assets, end of period (000 omitted)	$89,755	$93,680	$120,661	$502,459	$380,697	$169,217
Portfolio turnover	14%	31%	38%	34%	41%	64%

1	Beginning with the year ended September 30, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm.
2	Per share numbers have been calculated using the average shares method.
3	Represents less than $0.01.
4	Based on net asset value. Total returns for periods of less than one year are not annualized.
5	Computed on an annualized basis.
6	This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

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Statement of Assets and Liabilities

March 31, 2013 (unaudited)

Assets:
Total investment in securities, at value including $235,448,969 of investment in affiliated holdings (Note 5) (identified cost $2,102,770,066)		$2,119,324,740
Cash denominated in foreign currencies (identified cost $14,881)		13,253
Restricted cash (Note 2)		290,000
Income receivable		5,334,774
Swaps, at value (premium paid $2,666,250)		2,383,406
Receivable for shares sold		31,963,200
Unrealized appreciation on foreign exchange contracts		719,040
Receivable for daily variation margin		7,812
Receivable for periodic payments from swap contracts		55,000
Miscellaneous receivables		41,171
TOTAL ASSETS		2,160,132,396
Liabilities:
Payable for investments purchased	$11,088,744
Payable for shares redeemed	7,144,839
Bank overdraft	97,466
Income distribution payable	478,163
Payable for Directors'/Trustees' fees (Note 5)	1,173
Payable for distribution services fee (Note 5)	194,816
Payable for shareholder services fee (Note 5)	169,758
Accrued expenses (Note 5)	77,133
TOTAL LIABILITIES		19,252,092
Net assets for 232,127,760 shares outstanding		$2,140,880,304
Net Assets Consist of:
Paid-in capital		$2,167,049,558
Net unrealized appreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency		16,764,233
Accumulated net realized loss on investments, futures contracts, swap contracts and foreign currency transactions		(41,966,066)
Distributions in excess of net investment income		(967,421)
TOTAL NET ASSETS		$2,140,880,304

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Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share
Class A Shares:
Net asset value per share ($719,482,122 ÷ 77,981,386 shares outstanding), $0.001 par value, 2,000,000,000 shares authorized	$9.23
Offering price per share (100/98.00 of $9.23)	$9.42
Redemption proceeds per share	$9.23
Institutional Shares:
Net asset value per share ($1,331,643,503 ÷ 144,413,846 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized	$9.22
Offering price per share	$9.22
Redemption proceeds per share	$9.22
Service Shares:
Net asset value per share ($89,754,679 ÷ 9,732,528 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized	$9.22
Offering price per share	$9.22
Redemption proceeds per share	$9.22

See Notes which are an integral part of the Financial Statements

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Statement of Operations

Six Months Ended March 31, 2013 (unaudited)

Investment Income:
Interest (net of foreign taxes withheld of $196)		$14,598,652
Dividends received from affiliated holdings (Note 5)		2,235,396
Investment income allocated from affiliated partnership (Note 5)		937,082
TOTAL INCOME		17,771,130
Expenses:
Investment adviser fee (Note 5)	$5,560,643
Administrative fee (Note 5)	722,986
Custodian fees	36,609
Transfer and dividend disbursing agent fees and expenses	330,057
Directors'/Trustees' fees (Note 5)	4,461
Auditing fees	14,042
Legal fees	3,325
Portfolio accounting fees	103,820
Distribution services fee (Note 5)	978,737
Shareholder services fee (Note 5)	818,600
Account administration fee (Note 2)	7,305
Share registration costs	62,850
Printing and postage	23,403
Insurance premiums (Note 5)	3,300
Taxes	62,526
Miscellaneous (Note 5)	3,515
TOTAL EXPENSES	8,736,179

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Statement of Operations–continued

Waivers and Reimbursment (Note 5):
Waiver/reimbursement of investment adviser fee	$(3,642,418)
Waiver of distribution services fee	(13,987)
TOTAL WAIVERS AND REIMBURSEMENT		$(3,656,405)
Net expenses			$5,079,774
Net investment income			12,691,356
Realized and Unrealized Gain (loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions:
Net realized loss on investments			(908,887)
Net realized loss on futures contracts			(57,451)
Net realized gain on swap contracts			380,000
Net realized gain allocated from affiliated partnership (Note 5)			166,395
Realized gain distribution from affiliated investment company shares			111,100
Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency			(85,214)
Net change in unrealized depreciation of futures contracts			(58,745)
Net change in unrealized depreciation of swap contracts			(282,844)
Net realized and unrealized loss on investments, futures contracts, swap contracts and foreign currency transactions			(735,646)
Change in net assets resulting from operations			$11,955,710

See Notes which are an integral part of the Financial Statements

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Statement of Changes in Net Assets

	Six Months Ended (unaudited) 3/31/2013	Year Ended 9/30/2012
Increase (Decrease) in Net Assets
Operations:
Net investment income	$12,691,356	$25,080,836
Net realized loss on investments including allocation from affiliated partnership, futures contracts, swap contracts and foreign currency transactions	(308,843)	(2,113,632)
Net change in unrealized appreciation/depreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency	(426,803)	16,165,096
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	11,955,710	39,132,300
Distributions to Shareholders:
Distributions from net investment income
Class A Shares	(3,437,765)	(5,363,270)
Institutional Shares	(10,430,518)	(17,915,818)
Service Shares	(583,260)	(1,691,788)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	(14,451,543)	(24,970,876)
Share Transactions:
Proceeds from sale of shares	1,280,513,966	1,407,454,900
Net asset value of shares issued to shareholders in payment of distributions declared	11,081,295	17,801,032
Cost of shares redeemed	(749,797,046)	(1,154,522,856)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	541,798,215	270,733,076
Change in net assets	539,302,382	284,894,500
Net Assets:
Beginning of period	1,601,577,922	1,316,683,422
End of period (including undistributed (distributions in excess of) net investment income of $(967,421) and $792,766, respectively)	$2,140,880,304	$1,601,577,922

See Notes which are an integral part of the Financial Statements

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Notes to Financial Statements

March 31, 2013 (unaudited)

1. ORGANIZATION

Federated Total Return Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of three portfolios. The financial statements included herein are only those of Federated Ultrashort Bond Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers three classes of shares: Class A Shares, Institutional Shares and Service Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide total return consistent with current income.

2. SIGNIFICANT ACCOUNTING POLICIES

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

Investment Valuation

In calculating its net asset value (NAV), the Fund generally values investments as follows:

■	Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Directors.
■	Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
■	Shares of other mutual funds are valued based upon their reported NAVs.
■	Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
■	Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Directors.
■	Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
■	For securities that are fair valued in accordance with procedures established by and under the general supervision of the Directors, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.

If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable time (for example, within five

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business days after a new security is delivered to the Fund), the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.

Fair Valuation and Significant Events Procedures

The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and the Adviser's affiliated companies to determine fair value of securities and in overseeing the calculation of the NAV. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. The Fund may hold securities that are valued on the basis of prices provided by a single pricing source, including dealers from whom the securities were purchased. These securities may be less liquid and the price realized upon a sale may be different than the price used to value the security. The Fund may classify these securities as having a Level 3 valuation due to a lack of observable market transactions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities and mortgage-backed securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Directors.

The Directors also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

■	With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;
■	Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and

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■  Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.

The Directors have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Directors.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

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Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Institutional Shares and Service Shares may bear distribution services fees, shareholder services fees and account administration fees unique to those classes. For the six months ended March 31, 2013, account administration fees for the Fund were as follows:

	Account Administration Fees Incurred
Service Shares	$7,305

The Fund may also invest in Emerging Markets Fixed Income Core Fund (EMCORE), a portfolio of Federated Core Trust II, L.P. which is a limited partnership established under the laws of the state of Delaware. The Fund records daily its proportionate share of income, expenses, realized and unrealized gains and losses from EMCORE. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Premium and Discount Amortization/Paydown Gains and Losses

All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.

Federal Taxes

It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended March 31, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of March 31, 2013, tax years 2009 through 2012 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the state of Maryland and the Commonwealth of Pennsylvania.

Other Taxes

As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.

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When-Issued and Delayed-Delivery Transactions

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

Swap Contracts

Swap contracts involve two parties that agree to exchange the returns (or the differential in rates of return) earned or realized on particular predetermined investments, instruments, indices or other measures. The gross returns to be exchanged or “swapped” between parties are generally calculated with respect to a “notional amount” for a predetermined period of time. The Fund enters into interest rate, total return, credit default, currency and other swap agreements. Risks may arise upon entering into swap agreements from the potential inability of the counterparties to meet the terms of their contract from unanticipated changes in the value of the swap agreement.

The Fund uses credit default swaps to manage exposure to a given issuer or sector by either selling protection to increase exposure, or buying protection to reduce exposure. The “buyer” in a credit default swap is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or the “par value”, of the reference obligation in exchange for the reference obligation. In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is typically determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specific valuation method, are used to calculate the settlement value. The maximum amount of the payment that may occur, as a result of a credit event payable by the protection seller, is equal to the notional amount of the underlying index or security. The Fund's maximum exposure to loss of the notional value of credit default swaps outstanding at March 31, 2013 is $39,000,000. The Fund's maximum risk of loss from counterparty credit risk, either as the protection buyer or as the protection seller, is the fair value of the contract. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty.

Upfront payments received or paid by the Fund will be reflected as an asset or liability on the Statement of Assets and Liabilities. Changes in the value of swap contracts are included in “Swaps, at value” on the Statement of Assets and Liabilities, and periodic payments are reported as “Net realized gain (loss) on swap contracts” in the Statement of Operations.

Swap contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

The average notional amount of Swap contracts held by the Fund throughout the period was $16,714,286. This is based on amounts held as of each month-end throughout the six month fiscal period.

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Futures Contracts

The Fund purchases and sells financial futures contracts to manage duration and cash flows, enhance yield to potentially reduce transaction costs. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities which is shown as Restricted Cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

The average notional value short futures contracts held by the Fund throughout the period was $156,303,125. This is based on amounts held as of each month-end throughout the six month fiscal period.

Foreign Exchange Contracts

The Fund enters into foreign exchange contracts for the delayed delivery of securities or foreign currency exchange transactions. The Fund enters into foreign exchange contracts to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.

Foreign exchange contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

The average value at settlement date payable and receivable of foreign exchange contracts purchased and sold by the Fund throughout the period was $272,651 and $243,504, respectively. This is based on the contracts held as of each month-end throughout the six month fiscal period.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

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Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Restricted Securities

The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Directors.

Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, if applicable, held at March 31, 2013, is as follows:

Security	Acquisition Date	Cost	Market Value
C-BASS ABS LLC (Series 1999-3), Class B1, 6.433%, 2/3/2029	7/9/1999	$283,441	$121,892
NC Finance Trust 1999-1, Class D, 8.75%, 1/25/2029	2/23/1999	$108,887	$13,023

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Additional Disclosure Related to Derivative Instruments

Fair Value of Derivative Instruments
	Asset
	Statement of Assets and Liabilities Location	Fair Value
Derivatives not accounted for as hedging instruments under ASC Topic 815
Interest rate contracts	Receivable for daily variation margin	$(205,751)*
Foreign exchange contracts	Unrealized appreciation on foreign exchange contracts	$719,040
Credit contracts	Receivable for periodic payments from swap contracts	$55,000
Credit contracts	Swaps, at value	$2,383,406
Total derivatives not accounted for as hedging instruments under ASC Topic 815		$2,951,695

* Includes cumulative depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.

The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended March 31, 2013

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
	Credit Default Swaps	Futures	Total
Interest rate contracts	$—	$(57,451)	$(57,451)
Credit contracts	380,000	—	380,000
TOTAL	$380,000	$(57,451)	$322,549

Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
	Credit Default Swaps	Futures	Forward Currency Contracts	Total
Interest rate contracts	$—	$(58,745)	$—	$(58,745)
Foreign exchange contracts	—	—	1,037,521	1,037,521
Credit contracts	(282,844)	—	—	(282,844)
TOTAL	$(282,844)	$(58,745)	$1,037,521	$695,932

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Other

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

3. CAPITAL stock

The following tables summarize share activity:

	Six Months Ended 3/31/2013		Year Ended 9/30/2012
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	53,788,170	$496,648,832	38,753,452	$355,453,798
Shares issued to shareholders in payment of distributions declared	359,707	3,321,140	563,128	5,165,696
Shares redeemed	(25,645,164)	(236,754,614)	(31,053,366)	(284,716,032)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	28,502,713	$263,215,358	8,263,214	$75,903,462

	Six Months Ended 3/31/2013		Year Ended 9/30/2012
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	82,122,556	$757,722,483	111,329,105	$1,020,825,347
Shares issued to shareholders in payment of distributions declared	796,010	7,341,772	1,234,720	11,330,243
Shares redeemed	(52,314,082)	(482,677,594)	(88,243,123)	(809,299,191)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	30,604,484	$282,386,661	24,320,702	$222,856,399

	Six Months Ended 3/31/2013		Year Ended 9/30/2012
Service Shares:	Shares	Amount	Shares	Amount
Shares sold	2,833,359	$26,142,651	3,399,580	$31,175,755
Shares issued to shareholders in payment of distributions declared	45,342	418,383	142,293	1,305,093
Shares redeemed	(3,290,380)	(30,364,838)	(6,583,927)	(60,507,633)
NET CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS	(411,679)	$(3,803,804)	(3,042,054)	$(28,026,785)
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	58,695,518	$541,798,215	29,541,862	$270,733,076

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4. FEDERAL TAX INFORMATION

At March 31, 2013, the cost of investments for federal tax purposes was $2,102,799,760. The net unrealized appreciation of investments for federal tax purposes excluding: a) any unrealized appreciation/depreciation resulting from the translation of FCs to U.S. dollars of assets and liabilities other than investments in securities, b) outstanding foreign currency commitments, c) futures contracts and d) swap contracts was $16,524,980. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $27,289,427 and net unrealized depreciation from investments for those securities having an excess of cost over value of $10,764,447.

At September 30, 2012, the Fund had a capital loss carryforward of $43,900,931 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.

The following schedule summarizes the Fund's capital loss carryforwards and expiration years:

Expiration Year	Short-Term	Long-Term	Total
No expiration	$2,792,708	$1,062,282	$3,854,990
2013	$23,192,477	NA	$23,192,477
2014	$7,195,870	NA	$7,195,870
2015	$2,881,559	NA	$2,881,559
2016	$2,623,709	NA	$2,623,709
2017	$3,321,296	NA	$3,321,296
2018	$831,030	NA	$831,030

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, the Adviser waived $3,563,652 of its fee.

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Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Comlpex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.150%	on the first $5 billion
0.125%	on the next $5 billion
0.100%	on the next $10 billion
0.075%	on assets in excess of $20 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, the fee paid to FAS was 0.078% of average daily net assets of the Fund

Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Service Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:

Share Class Name	Percentage of Average Daily Net Assets of Class
Class A Shares	0.30%
Service Shares	0.25%

Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended March 31, 2013, distribution services fees for the Fund were as follows:

	Distribution Services Fees Incurred	Distribution Services Fees Waived
Class A Shares	$867,821	$—
Service Shares	110,916	(13,987)
TOTAL	$978,737	$(13,987)

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended March 31, 2013, FSC retained $677,562 of fees paid by the Fund.

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Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended March 31, 2013, FSC did not retain any sales charge from the sale of Class A Shares.

Shareholder Services Fee

The Fund may pay fees (“ Service Fees”) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Institutional Shares and Service Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended March 31, 2013, Service Fees for the Fund were as follows:

	Service Fees Incurred
Class A Shares	$723,184
Service Shares	95,416
TOTAL	$818,600

For the six months ended March 31, 2013, FSC received $1,095 of fees paid by the Fund. For the six months ended March 31, 2013, the Fund's Institutional Shares did not incur Service Fees.

Expense Limitation

The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares, Institutional Shares and Service Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.90%, 0.35% and 0.80% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) December 1, 2013; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.

General

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.

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Transactions Involving Affiliated Holdings

Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the six months ended March 31, 2013, the Adviser reimbursed $78,766. Transactions involving the affiliated holdings during the six months ended March 31, 2013, were as follows:

	Emerging Markets Fixed Income Core Fund	Federated Bank Loan Core Fund	Federated Mortgage Core Portfolio	Federated Prime Value Obligations Fund, Institutional Shares	Federated Project and Trade Finance Core Fund	High Yield Bond Portfolio	Total of Affiliated Transactions
Balance of Shares Held 9/30/2012	805,936	2,974,467	727,452	73,888,596	621,030	2,829,939	81,847,420
Purchases/ Additions	426,959	1,248,304	9,789	591,550,571	16,977	2,560,823	595,813,423
Sales/ Reductions	—	—	—	566,057,825	—	—	566,057,825
Balance of Shares Held 3/31/2013	1,232,895	4,222,771	737,241	99,381,342	638,007	5,390,762	111,603,018
Value	$42,526,097	$43,452,314	$7,468,252	$99,381,342	$6,233,324	$36,387,640	$235,448,969
Dividend Income/ Allocated Investment Income	$937,082	$797,709	$99,646	$94,543	$148,905	$1,094,593	$3,172,478
Capital Gain Distributions/ Allocated Net Realized Gain	$166,395	$—	$—	$—	$17,292	$93,808	$277,495

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6. Investment TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended March 31, 2013, were as follows:

Purchases	$739,856,344
Sales	$142,378,824

7. LINE OF CREDIT

The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of March 31, 2013, there were no outstanding loans. During the six months ended March 31, 2013, the Fund did not utilize the LOC.

8. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of March 31, 2013, there were no outstanding loans. During the six months ended March 31, 2013, the program was not utilized.

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2012 to March 31, 2013.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

	Beginning Account Value 10/1/2012	Ending Account Value 3/31/2013	Expenses Paid During Period1
Actual:
Class A Shares	$1,000	$1,006.10	$4.50
Institutional Shares	$1,000	$1,007.70	$1.75
Service Shares	$1,000	$1,005.50	$4.00
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,020.44	$4.53
Institutional Shares	$1,000	$1,023.19	$1.77
Service Shares	$1,000	$1,020.94	$4.03

1 Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

Class A Shares	0.90%
Institutional Shares	0.35%
Service Shares	0.80%

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Evaluation and Approval of Advisory
Contract–May 2012

Federated Ultrashort Bond Fund (the “Fund”)

Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year term. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.

In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.

The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.

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The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.

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While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.

The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.

The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.

The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.

The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The

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information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.

Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.

The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.

The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.

It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.

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The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.

In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.

The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.

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Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “ Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.

Quarterly Portfolio Schedule

The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “ Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”

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

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

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY 

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

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Federated Ultrashort Bond Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 31428Q762
CUSIP 31428Q747
CUSIP 31428Q754

28411 (5/13)

Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.

Item 2. Code of Ethics

Not Applicable

Item 3. Audit Committee Financial Expert

Not Applicable

Item 4. Principal Accountant Fees and Services

Not Applicable

Item 5. Audit Committee of Listed Registrants

Not Applicable

Item 6. Schedule of Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.

(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not Applicable

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not Applicable

Item 10. Submission of Matters to a Vote of Security Holders

Not Applicable

Item 11. Controls and Procedures

(a) The registrant’s President and Treasurer have concluded that the

registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits

(a)(1) Code of Ethics- Not Applicable to this Report.

(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.

(a)(3) Not Applicable.

(b) Certifications pursuant to 18 U.S.C. Section 1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant Federated Total Return Series, Inc.

By /S/ Lori A. Hensler

Lori A. Hensler, Principal Financial Officer

Date May 22, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /S/ J. Christopher Donahue

J. Christopher Donahue, Principal Executive Officer

Date May 22, 2013

By /S/ Lori A. Hensler

Lori A. Hensler, Principal Financial Officer

Date May 22, 2013