United States Securities and Exchange Commission Washington, D.C. 20549 Form N-CSR Certified Shareholder Report of Registered Management Investment Companies 811-07309 (Investment Company Act File Number) _______________________________________________________________ Federated Total Return Government Bond Fund (Exact Name of Registrant as Specified in Charter) Federated Investors Funds 5800 Corporate Drive Pittsburgh, Pennsylvania 15237-7000 (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: February 29, 2004 Date of Reporting Period: Fiscal year ended 2/29/2004 Item 1. Reports to Stockholders
Federated Investors
World-Class Investment Manager
Federated Total Return Government Bond Fund
ANNUAL SHAREHOLDER REPORT
February 29, 2004
Institutional Shares
Institutional Service Shares
FINANCIAL HIGHLIGHTS
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
BOARD OF TRUSTEES AND FUND OFFICERS
NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE
Financial Highlights--Institutional Shares
(For a Share Outstanding Throughout Each Period)
Year Ended February 28 or 29 |
|
| 2004 |
|
| 2003 |
|
| 2002 |
|
| 2001 |
|
| 2000 |
|
Net Asset Value, Beginning of Period |
|
| $11.26 |
|
| $10.58 |
|
| $10.45 |
|
| $ 9.58 |
|
| $10.24 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
| 0.47 |
|
| 0.54 |
|
| 0.59 |
|
| 0.60 |
|
| 0.54 |
|
Net realized and unrealized gain (loss) on investments |
|
| (0.14 | ) |
| 0.68 |
|
| 0.12 |
|
| 0.87 |
|
| (0.64 | ) |
TOTAL FROM INVESTMENT OPERATIONS |
|
| 0.33 |
|
| 1.22 |
|
| 0.71 |
|
| 1.47 |
|
| (0.10 | ) |
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
| (0.47 | ) |
| (0.54 | ) |
| (0.58 | ) |
| (0.60 | ) |
| (0.54 | ) |
Distributions from net realized gain on investments |
|
| -- |
|
| -- |
|
| -- |
|
| -- |
|
| (0.02 | ) |
TOTAL DISTRIBUTIONS |
|
| (0.47 | ) |
| (0.54 | ) |
| (0.58 | ) |
| (0.60 | ) |
| (0.56 | ) |
Net Asset Value, End of Period |
|
| $11.12 |
|
| $11.26 |
|
| $10.58 |
|
| $10.45 |
|
| $ 9.58 |
|
Total Return1 |
|
| 3.04 | % |
| 11.81 | % |
| 7.01 | % |
| 15.85 | % |
| (0.96 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
| 0.30 | % |
| 0.30 | % |
| 0.31 | % |
| 0.30 | % |
| 0.30 | % |
Net investment income |
|
| 4.24 | % |
| 4.92 | % |
| 5.59 | % |
| 6.07 | % |
| 5.45 | % |
Expense waiver/reimbursement2 |
|
| 0.65 | % |
| 0.72 | % |
| 0.75 | % |
| 0.87 | % |
| 0.82 | % |
Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted) |
|
| $176,215 |
| $156,975 |
| $82,138 |
| $70,644 |
| $53,675 |
| ||||
Portfolio turnover |
|
| 16 | % |
| 15 | % |
| 46 | % |
| 116 | % |
| 90 | % |
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
2 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights--Institutional Service Shares
(For a Share Outstanding Throughout Each Period)
Year Ended February 28 or 29 |
| 2004 |
|
| 2003 |
|
| 2002 |
|
| 2001 |
|
| 2000 |
|
Net Asset Value, Beginning of Period |
| $11.26 |
|
| $10.58 |
|
| $10.45 |
|
| $ 9.58 |
|
| $10.24 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
| 0.44 |
|
| 0.50 |
|
| 0.55 |
|
| 0.57 |
|
| 0.51 |
|
Net realized and unrealized gain (loss) on investments |
| (0.14 | ) |
| 0.68 |
|
| 0.13 |
|
| 0.87 |
|
| (0.64 | ) |
TOTAL FROM INVESTMENT OPERATIONS |
| 0.30 |
|
| 1.18 |
|
| 0.68 |
|
| 1.44 |
|
| (0.13 | ) |
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
| (0.44 | ) |
| (0.50 | ) |
| (0.55 | ) |
| (0.57 | ) |
| (0.51 | ) |
Distributions from net realized gain on investments |
| -- |
|
| -- |
|
| -- |
|
| -- |
|
| (0.02 | ) |
TOTAL DISTRIBUTIONS |
| (0.44 | ) |
| (0.50 | ) |
| (0.55 | ) |
| (0.57 | ) |
| (0.53 | ) |
Net Asset Value, End of Period |
| $11.12 |
|
| $11.26 |
|
| $10.58 |
|
| $10.45 |
|
| $ 9.58 |
|
Total Return1 |
| 2.73 | % |
| 11.48 | % |
| 6.69 | % |
| 15.51 | % |
| (1.26 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
| 0.60 | % |
| 0.60 | % |
| 0.61 | % |
| 0.60 | % |
| 0.60 | % |
Net investment income |
| 3.94 | % |
| 4.63 | % |
| 5.29 | % |
| 5.78 | % |
| 5.21 | % |
Expense waiver/reimbursement2 |
| 0.60 | % |
| 0.67 | % |
| 0.70 | % |
| 0.82 | % |
| 0.77 | % |
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted) |
| $61,728 |
| $43,626 |
| $33,299 |
| $35,447 |
| $32,457 |
| ||||
Portfolio turnover |
| 16 | % |
| 15 | % |
| 46 | % |
| 116 | % |
| 90 | % |
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
2 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Management's Discussion of Fund Performance
Federated Total Return Government Bond Fund (FTRGBF) invests exclusively in U.S. government securities which include U.S. Treasury and government agency obligations including mortgage-backed securities. The Fund's average duration1 is managed within 20% of the duration of the Lehman Brothers Government Bond Index.
The level of and changes in interest rates continue to be the primary driver of the Fund's performance. U.S. Treasury yields ended the Fund's February 29, 2004, annual reporting period slightly higher but were volatile throughout the year. The Federal Reserve Board (the "Fed") cited the possibility of an "unwelcome substantial fall in inflation" at its Federal Open Market Committee (FOMC) meeting in early May 2003, which drove Treasury yields to historic lows. The Fed followed up with the only rate cut of 2003, reducing the federal funds target rate from 1.25% to 1.00% at its FOMC meeting in late June 2003. Yields of 5-year and 10-year Treasury notes hit lows of 2.03% and 3.11%, respectively, in mid-June 2003 versus 2.66% and 3.69% at the end of February 2003. Treasury yields increased significantly during the summer of 2003 in response to stronger economic data, but declined late in the reporting period as market participants gained confidence that Fed monetary policy would remain on hold. Yields of 5-year and 10-year Treasury notes increased to 3.61% and 4.60%, respectively, before ending the reporting period at 2.94% and 3.97%.2
Although approximately half of the Fund remained in Treasury securities, over a quarter of the Fund was invested in government agency securities at the start of the reporting period. Agency securities underperformed Treasury securities in the summer of 2003 due to accounting irregularities at Federal Home Loan Mortgage Corporation, but outperformed Treasury securities over the entire reporting period. The Fund's agency allocation was reduced to 20% and its mortgage-backed security allocation was increased to 25% by the end of the reporting period. The Fund's mortgage security selection positively contributed to performance through reducing the negative impact of refinancing.
The Fund's net total return for the year ending February 29, 2004 was 3.04% for Institutional Shares and 2.73% for Institutional Service Shares versus 3.04% for the Lehman Brothers Government Bond Index.3
1 Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
2 Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance information is available at our website www.federatedinvestors.com or by calling 1-800-341-7400.
3 Lehman Brothers Government Bond Index is a market value weighted index of U.S. government and government agency securities with maturities of one year or more.
GROWTH OF A $25,000 INVESTMENT -- INSTITUTIONAL SHARES
The graph below illustrates the hypothetical investment of $25,0001 in the Federated Total Return Government Bond Fund (Institutional Shares) (the "Fund") from October 19, 1995 (start of performance) to February 29, 2004, compared to the Lehman Brothers Government Bond Index (LBGB).2
Average Annual Total Return for the Period Ended 2/29/2004 |
| |
1 Year |
| 3.04% |
5 Years |
| 7.18% |
Start of Performance (10/19/1995) |
| 7.09% |
![](https://capedge.com/proxy/N-CSR/0001056288-04-000261/ftrgbf302141.gif)
Past performance is no guarantee of future results. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For after-tax returns, visit www.federatedinvestors.com. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.
1 The Fund's performance assumes the reinvestment of all dividends and distributions. The LBGB has been adjusted to reflect reinvestment of dividends on securities in the index.
2 The LBGB is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund's performance. The index is unmanaged.
GROWTH OF A $25,000 INVESTMENT -- INSTITUTIONAL SERVICE SHARES
The graph below illustrates the hypothetical investment of $25,0001 in the Federated Total Return Government Bond Fund (Institutional Service Shares) (the "Fund") from October 19, 1995 (start of performance) to February 29, 2004, compared to the Lehman Brothers Government Bond Index (LBGB).2
Average Annual Total Return for the Period Ended 2/29/2004 |
| |
1 Year |
| 2.73% |
5 Years |
| 6.86% |
Start of Performance (10/19/1995) |
| 6.77% |
![](https://capedge.com/proxy/N-CSR/0001056288-04-000261/ftrgbf302142.gif)
Past performance is no guarantee of future results. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For after-tax returns, visit www.federatedinvestors.com. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.
1 The Fund's performance assumes the reinvestment of all dividends and distributions. The LBGB has been adjusted to reflect reinvestment of dividends on securities in the index.
2 The LBGB is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund's performance. The index is unmanaged.
Portfolio of Investments
February 29, 2004
Principal |
|
| Value |
| |||
|
|
| U.S. TREASURY--51.7% |
|
|
|
|
|
|
| Treasury Inflation-Indexed Bond--3.7% |
|
|
|
|
$ | 6,536,188 |
| 3.875%, 4/15/2029 |
| $ | 8,883,070 |
|
|
|
| U.S. Treasury Bonds--18.2% |
|
|
|
|
| 325,000 |
| 12.000%, 8/15/2013 |
|
| 450,073 |
|
| 2,200,000 |
| 11.250%, 2/15/2015 |
|
| 3,582,898 |
|
| 3,700,000 |
| 7.250%, 5/15/2016 |
|
| 4,721,533 |
|
| 2,050,000 |
| 8.750%, 5/15/2017 |
|
| 2,938,860 |
|
| 1,000,000 |
| 8.125%, 5/15/2021 |
|
| 1,402,340 |
|
| 1,800,000 |
| 7.250%, 8/15/2022 |
|
| 2,341,962 |
|
| 4,000,000 |
| 7.125%, 2/15/2023 |
|
| 5,149,360 |
|
| 6,000,000 |
| 6.250%, 8/15/2023 |
|
| 7,061,220 |
|
| 14,598,000 |
| 5.375%, 2/15/2031 |
|
| 15,733,870 |
|
|
|
| TOTAL |
|
| 43,382,116 |
|
|
|
| U.S. Treasury Notes--29.8% |
|
|
|
|
| 2,000,000 |
| 5.875%, 11/15/2004 |
|
| 2,067,040 |
|
| 5,000,000 |
| 1.625%, 1/31/2005 |
|
| 5,023,050 |
|
| 1,000 |
| 6.500%, 5/15/2005 |
|
| 1,063 |
|
| 5,000,000 |
| 1.500%, 7/31/2005 |
|
| 5,013,300 |
|
| 2,000,000 |
| 1.625%, 10/31/2005 |
|
| 2,005,620 |
|
| 4,600,000 |
| 7.000%, 7/15/2006 |
|
| 5,149,838 |
|
| 15,100,000 |
| 6.500%, 10/15/2006 |
|
| 16,843,597 |
|
| 5,500,000 |
| 3.500%, 11/15/2006 |
|
| 5,715,710 |
|
| 2,000,000 |
| 6.250%, 2/15/2007 |
|
| 2,237,180 |
|
| 2,000,000 |
| 6.625%, 5/15/2007 |
|
| 2,271,560 |
|
| 1,000,000 |
| 5.500%, 2/15/2008 |
|
| 1,111,560 |
|
| 6,500,000 |
| 4.750%, 11/15/2008 |
|
| 7,045,415 |
|
| 2,800,000 | 1 | 5.500%, 5/15/2009 |
|
| 3,145,632 |
|
| 2,000,000 |
| 6.000%, 8/15/2009 |
|
| 2,294,060 |
|
| 10,109,000 |
| 4.875%, 2/15/2012 |
|
| 10,928,739 |
|
|
|
| TOTAL |
|
| 70,853,364 |
|
|
|
| TOTAL U.S. TREASURY (IDENTIFIED COST $116,225,218) |
|
| 123,118,550 |
|
Principal |
|
| Value |
| |||
|
|
| GOVERNMENT AGENCIES--19.5% |
|
|
|
|
|
|
| Federal Home Loan Bank --12.6% |
|
|
|
|
$ | 7,500,000 |
| 3.625%, 10/15/2004 |
| $ | 7,616,550 |
|
| 7,000,000 |
| 7.250%, 2/15/2007 |
|
| 7,976,220 |
|
| 3,000,000 |
| 6.730%, 6/22/2009 |
|
| 3,487,710 |
|
| 900,000 |
| 6.500%, 11/13/2009 |
|
| 1,036,881 |
|
| 1,300,000 |
| 7.375%, 2/12/2010 |
|
| 1,557,530 |
|
| 4,450,000 |
| 7.625%, 5/14/2010 |
|
| 5,416,673 |
|
| 2,500,000 |
| 6.875%, 8/13/2010 |
|
| 2,947,750 |
|
|
|
| TOTAL |
|
| 30,039,314 |
|
|
|
| Federal Home Loan Mortgage Corp.--2.7% |
|
|
|
|
| 6,000,000 |
| 5.250%, 1/15/2006 |
|
| 6,382,680 |
|
| 70,000 |
| 6.750%, 9/15/2029 |
|
| 83,369 |
|
|
|
| TOTAL |
|
| 6,466,049 |
|
|
|
| Federal National Mortgage Association--2.8% |
|
|
|
|
| 6,000,000 |
| 5.500%, 3/15/2011 |
|
| 6,587,580 |
|
|
|
| Government Agency--1.4% |
|
|
|
|
| 1,700,000 |
| Federal Agricultural Mortgage Association, 8.070%, 4/16/2007 |
|
| 1,985,719 |
|
| 1,000,000 |
| Student Loan Marketing Association, 7.300%, 8/1/2012 |
|
| 1,222,070 |
|
|
|
| TOTAL |
|
| 3,207,789 |
|
|
|
| TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $41,989,226) |
|
| 46,300,732 |
|
|
|
| COLLATERALIZED MORTGAGE OBLIGATIONS--0.1% |
|
|
|
|
|
|
| Federal National Mortgage Association REMIC--0.1% |
|
|
|
|
| 83,080 |
| Series 1988-16-B, 9.500%, 6/25/2018 |
|
| 90,968 |
|
| 28,333 |
| Series 1989-35-G, 9.500%, 7/25/2019 |
|
| 30,835 |
|
|
|
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $119,294) |
|
| 121,803 |
|
|
|
| MORTGAGE BACKED SECURITIES--1.8% |
|
|
|
|
|
|
| Federal Home Loan Mortgage Corp.--0.0% |
|
|
|
|
| 47,665 |
| 6.500%, 7/1/2004 |
|
| 47,791 |
|
|
|
| Federal National Mortgage Association--0.1% |
|
|
|
|
| 72,334 |
| 7.500%, 6/1/2012 |
|
| 77,850 |
|
|
|
| Government National Mortgage Association--1.7% |
|
|
|
|
| 334,204 |
| 7.500%, 10/15/2026 - 10/15/2027 |
|
| 360,007 |
|
| 1,873,209 |
| 7.000%, 8/15/2027 |
|
| 2,005,495 |
|
| 226,246 |
| 8.000%, 10/15/2027 |
|
| 246,891 |
|
| 1,415,829 |
| 6.500%, 10/15/2031 |
|
| 1,495,031 |
|
|
|
| TOTAL |
|
| 4,107,424 |
|
|
|
| TOTAL MORTGAGE BACKED SECURITIES |
|
| 4,233,065 |
|
Shares or |
|
| Value |
| |||
|
|
| MUTUAL FUND--22.7% |
|
|
|
|
| 5,277,806 | 2 | Federated Mortgage Core Portfolio (IDENTIFIED COST $52,927,497) |
| $ | 54,097,514 |
|
|
|
| REPURCHASE AGREEMENTS-4.8% |
|
|
|
|
$ | 8,327,000 |
| Interest in $1,700,000,000 joint repurchase agreement with Bank of America LLC, 1.070%, dated 2/27/2004, to be repurchased at $8,327,742 on 3/1/2004, collateralized by U.S. Government Agency Obligations with various maturities to 3/1/2034 |
|
| 8,327,000 |
|
| 3,212,000 |
| Interest in $1,700,000,000 joint repurchase agreement with Bank of America LLC, 1.070%, dated 2/27/2004, to be repurchased at $3,212,286 on 3/1/2004, collateralized by U.S. Government Agency Obligations with various maturities to 3/1/2034 (held as collateral for securities lending) |
|
| 3,212,000 |
|
|
|
| TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) |
|
| 11,539,000 |
|
|
|
| TOTAL INVESTMENTS--100.6% |
|
| 239,410,664 |
|
|
|
| OTHER ASSETS AND LIABILITIES -- NET--(0.6)% |
|
| (1,468,615 | ) |
|
|
| TOTAL NET ASSETS--100% |
| $ | 237,942,049 |
|
1 Certain principal amounts are temporarily on loan to unaffiliated broker/dealers.
2 Affiliated company.
3 The cost of investments for federal tax purposes amounts to $226,829,761.
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2004.
The following acronym is used throughout this portfolio:
REMIC | - --Real Estate Mortgage Investment Conduit |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
February 29, 2004
Assets: |
|
|
|
|
|
|
|
|
Total investments in securities, at value including $54,097,514 of investments in affiliated issuers (Note 5) and $3,145,632 of securities loaned (identified cost $226,828,770) |
|
|
|
|
| $ | 239,410,664 |
|
Cash |
|
|
|
|
|
| 440 |
|
Income receivable |
|
|
|
|
|
| 1,632,033 |
|
Receivable for shares sold |
|
|
|
|
|
| 667,789 |
|
TOTAL ASSETS |
|
|
|
|
|
| 241,710,926 |
|
Liabilities: |
|
|
|
|
|
|
|
|
Payable for shares redeemed |
| $ | 288,726 |
|
|
|
|
|
Income distribution payable |
|
| 229,709 |
|
|
|
|
|
Payable on collateral due to broker |
|
| 3,212,000 |
|
|
|
|
|
Payable for transfer and dividend disbursing agent fees and expenses (Note 5) |
|
| 11,698 |
|
|
|
|
|
Payable for distribution services fee (Note 5) |
|
| 4,408 |
|
|
|
|
|
Payable for shareholder services fee (Note 5) |
|
| 17,757 |
|
|
|
|
|
Accrued expenses |
|
| 4,579 |
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
| 3,768,877 |
|
Net assets for 21,389,876 shares outstanding |
|
|
|
|
| $ | 237,942,049 |
|
Net Assets Consist of: |
|
|
|
|
|
|
|
|
Paid in capital |
|
|
|
|
| $ | 227,418,742 |
|
Net unrealized appreciation of investments |
|
|
|
|
|
| 12,581,894 |
|
Accumulated net realized loss on investments |
|
|
|
|
|
| (2,046,090 | ) |
Distributions in excess of net investment income |
|
|
|
|
|
| (12,497 | ) |
TOTAL NET ASSETS |
|
|
|
|
| $ | 237,942,049 |
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share |
|
|
|
|
|
|
|
|
Institutional Shares: |
|
|
|
|
|
|
|
|
$176,214,528 ÷ 15,840,870 shares outstanding |
|
|
|
|
|
| $11.12 |
|
Institutional Service Shares: |
|
|
|
|
|
|
|
|
$61,727,521 ÷ 5,549,006 shares outstanding |
|
|
|
|
|
| $11.12 |
|
See Notes which are an integral part of the Financial Statements
Statement of Operations
Year Ended February 29, 2004
Investment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest (including income on securities loaned of $2,628) |
|
|
|
|
|
|
|
|
| $ | 7,335,880 |
|
Dividends (received from affiliated issuers) (Note 5) |
|
|
|
|
|
|
|
|
|
| 2,328,664 |
|
TOTAL INCOME |
|
|
|
|
|
|
|
|
|
| 9,664,544 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment adviser fee (Note 5) |
|
|
|
|
| $ | 1,062,615 |
|
|
|
|
|
Administrative personnel and services fee (Note 5) |
|
|
|
|
|
| 166,623 |
|
|
|
|
|
Custodian fees |
|
|
|
|
|
| 13,386 |
|
|
|
|
|
Transfer and dividend disbursing agent fees and expenses (Note 5) |
|
|
|
|
|
| 83,926 |
|
|
|
|
|
Directors'/Trustees' fees |
|
|
|
|
|
| 11,209 |
|
|
|
|
|
Auditing fees |
|
|
|
|
|
| 5,834 |
|
|
|
|
|
Legal fees |
|
|
|
|
|
| 4,891 |
|
|
|
|
|
Portfolio accounting fees (Note 5) |
|
|
|
|
|
| 67,118 |
|
|
|
|
|
Distribution services fee--Institutional Service Shares (Note 5) |
|
|
|
|
|
| 135,273 |
|
|
|
|
|
Shareholder services fee--Institutional Shares (Note 5) |
|
|
|
|
|
| 395,842 |
|
|
|
|
|
Shareholder services fee--Institutional Service Shares (Note 5) |
|
|
|
|
|
| 135,273 |
|
|
|
|
|
Share registration costs |
|
|
|
|
|
| 53,314 |
|
|
|
|
|
Printing and postage |
|
|
|
|
|
| 19,697 |
|
|
|
|
|
Insurance premiums |
|
|
|
|
|
| 1,970 |
|
|
|
|
|
Miscellaneous |
|
|
|
|
|
| 6,674 |
|
|
|
|
|
TOTAL EXPENSES |
|
|
|
|
|
| 2,163,645 |
|
|
|
|
|
Waivers and Reimbursement (Note 5): |
|
|
|
|
|
|
|
|
|
|
|
|
Waiver/reimbursement of investment adviser fee |
| $ | (921,355 | ) |
|
|
|
|
|
|
|
|
Waiver of administrative personnel and services fee |
|
| (5,668 | ) |
|
|
|
|
|
|
|
|
Waiver of transfer and dividend disbursing agent fees and expenses |
|
| (7,085 | ) |
|
|
|
|
|
|
|
|
Waiver of distribution services fee--Institutional Service Shares |
|
| (86,575 | ) |
|
|
|
|
|
|
|
|
Waiver of shareholder services fee--Institutional Shares |
|
| (332,508 | ) |
|
|
|
|
|
|
|
|
TOTAL WAIVERS AND REIMBURSEMENT |
|
|
|
|
|
| (1,353,191 | ) |
|
|
|
|
Net expenses |
|
|
|
|
|
|
|
|
|
| 810,454 |
|
Net investment income |
|
|
|
|
|
|
|
|
|
| 8,854,090 |
|
Realized and Unrealized Gain (Loss) on Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain on investments |
|
|
|
|
|
|
|
|
|
| 953,536 |
|
Net change in unrealized appreciation of investments |
|
|
|
|
|
|
|
|
|
| (3,262,133 | ) |
Net realized and unrealized loss on investments |
|
|
|
|
|
|
|
|
|
| (2,308,597 | ) |
Change in net assets resulting from operations |
|
|
|
|
|
|
|
|
| $ | 6,545,493 |
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
Year Ended February 28 or 29 |
|
| 2004 |
|
|
| 2003 |
|
Increase (Decrease) in Net Assets |
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
Net investment income |
| $ | 8,854,090 |
|
| $ | 7,260,526 |
|
Net realized gain (loss) on investments |
|
| 953,536 |
|
|
| (59,506 | ) |
Net change in unrealized appreciation/depreciation of investments |
|
| (3,262,133 | ) |
|
| 9,383,896 |
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS |
|
| 6,545,493 |
|
|
| 16,584,916 |
|
Distributions to Shareholders: |
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
|
|
|
|
|
|
|
Institutional Shares |
|
| (6,723,390 | ) |
|
| (5,524,849 | ) |
Institutional Service Shares |
|
| (2,127,419 | ) |
|
| (1,748,461 | ) |
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
|
| (8,850,809 | ) |
|
| (7,273,310 | ) |
Share Transactions: |
|
|
|
|
|
|
|
|
Proceeds from sale of shares |
|
| 100,425,035 |
|
|
| 169,287,502 |
|
Proceeds from shares issued in connection with the tax-free transfer of assets from Riggs U.S. Government Securities Fund |
|
| 26,878,841 |
|
|
| -- |
|
Net asset value of shares issued to shareholders in payment of distributions declared |
|
| 6,044,611 |
|
|
| 4,941,629 |
|
Cost of shares redeemed |
|
| (93,702,225 | ) |
|
| (98,376,725 | ) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
|
| 39,646,262 |
|
|
| 75,852,406 |
|
Change in net assets |
|
| 37,340,946 |
|
|
| 85,164,012 |
|
Net Assets: |
|
|
|
|
|
|
|
|
Beginning of period |
|
| 200,601,103 |
|
|
| 115,437,091 |
|
End of period (including distribution in excess of net investment income of $(12,497) and $(15,778), respectively) |
| $ | 237,942,049 |
|
| $ | 200,601,103 |
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 29, 2004
1. ORGANIZATION
Federated Total Return Government Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Trust offers two classes of shares: Institutional Shares and Institutional Service Shares. The investment objective of the Trust is to pursue total return consistent with current income.
On September 26, 2003, the Trust received a tax-free transfer of assets from Riggs U.S. Government Securities Fund, as follows:
Institutional Service Shares of the Trust |
| Tax-Free Transfer |
| Unrealized |
2,428,080 |
| $26,878,841 |
| $1,025,361 |
|
|
|
|
|
Net Assets of Trust Prior to Combination |
| Net Assets of Riggs | | Net Assets |
$200,102,906 |
| $26,878,841 |
| $226,981,747 |
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles ("GAAP") in the United States of America.
Investment Valuation
U.S. government securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in good faith using methods approved by the Board of Trustees (the "Trustees").
Repurchase Agreements
It is the policy of the Trust to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Trust to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of the collateral at least equals the repurchase price to be paid under the repurchase agreement.
The Trust will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Trust's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Trustees. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Trust could receive less than the repurchase price on the sale of collateral securities. The Trust, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.
Investment Income, Expenses and Distributions
Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Trust offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Trust based on average daily net assets of each class, without distinction between share classes. 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. 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 Trust'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 tax is necessary.
When-Issued and Delayed Delivery Transactions
The Trust may engage in when-issued or delayed delivery transactions. The Trust 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.
Securities Lending
The Trust participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. Collateral for securities loaned is invested in an affiliated money market fund. Collateral is maintained at a minimum level of 102% of the market value of investments loaned, plus interest, if applicable. Earnings on collateral are allocated between the securities lending agent, as a fee for its services under the program, and the Trust, according to agreed-upon rates.
As of February 29, 2004 securities subject to this type of arrangement and related collateral were as follows:
Market Value |
| Market Value |
$3,145,632 |
| $3,212,000 |
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares.
Transactions in capital stock were as follows:
Year Ended February 28 or 29 |
| 2004 |
| 2003 | ||||||||||
Institutional Shares: |
| Shares |
| Amount |
| Shares |
| Amount | ||||||
Shares sold |
| 5,953,605 |
|
| $ | 66,103,018 |
|
| 11,728,156 |
|
| $ | 127,863,033 |
|
Shares issued to shareholders in payment of distributions declared |
|
|
|
|
|
| ||||||||
Shares redeemed |
| (4,478,708 | ) |
|
| (49,925,494 | ) |
| (5,928,809 | ) |
|
| (64,252,774 | ) |
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended February 28 or 29 |
| 2004 |
| 2003 | ||||||||||
Institutional Service Shares: |
| Shares |
| Amount |
| Shares |
| Amount | ||||||
Shares sold |
| 3,082,924 |
|
| $ | 34,322,017 |
|
| 3,761,516 |
|
| $ | 41,424,469 |
|
Shares issued in connection with the tax-free transfer of assets from Riggs U.S. Government Securities Fund |
|
|
|
|
|
|
|
| -- |
|
|
| -- |
|
Shares issued to shareholders in payment of distributions declared |
|
|
|
| ||||||||||
Shares redeemed |
| (3,958,787 | ) |
|
| (43,776,731 | ) |
| (3,113,665 | ) |
|
| (34,123,951 | ) |
NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS |
|
|
|
|
|
| ||||||||
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended February 29, 2004 and February 28, 2003, were as follows:
|
| 2004 |
| 2003 |
Ordinary income1 |
| $8,850,809 |
| $7,273,310 |
1 For tax purposes short-term capital gain distributions are considered ordinary income distributions.
As of February 29, 2004, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income |
| $ | 217,211 |
Net unrealized appreciation |
| $ | 12,580,903 |
Capital loss carryforward |
| $ | 2,045,099 |
The difference between book-basis and tax basis net unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At February 29, 2004, the cost of investments for federal tax purposes was $226,829,761. The net unrealized appreciation of investments for federal tax purposes was $12,580,903. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $12,589,706 and net unrealized depreciation from investments for those securities having an excess of cost over value of $8,803.
At February 29, 2004, the Trust had a capital loss carryforward of $2,045,099, which will reduce the Trust's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Trust of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire in 2009.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Trust's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.50% of the Trust's average daily net assets. The Adviser may voluntary choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Trust may invest in other funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse certain investment adviser fees as a result of these transactions. Income distributions earned from investments in these funds are recorded as income in the accompanying financial statements and are listed below:
Government Obligations Fund |
| $ | 97,659 |
Federated Mortgage Core Portfolio |
| $ | 2,231,005 |
Administrative Fee
Federated Administrative Services ("FAS"), under the Administrative Services Agreement ("Agreement"), provides the Trust with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:
Maximum Administrative Fee | | Average Aggregate Daily Net |
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 |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares.
FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Prior to November 1, 2003, Federated Services Company ("FServ") provided the Trust with administrative personnel and services. The fee paid to FServ was based on the average aggregate daily net assets of all Federated funds as specified below:
Maximum Administrative Fee |
| Average Aggregate Daily |
0.150% |
| on the first $250 million |
0.125% |
| on the next $250 million |
0.100% |
| on the next $250 million |
0.075% |
| on assets in excess of $750 million |
The administrative fee received during any fiscal year was at least $125,000 per portfolio and $30,000 per each additional class of Shares.
For the year ended February 29, 2004 the fees paid to FAS and FServ were $57,147 and $103,808, respectively, after voluntary waiver, if applicable.
Distribution Services Fee
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Trust will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the daily net assets of the Trust's Institutional Service Shares to finance activities intended to result in the sale of the these shares. The Plan provides that the Trust may incur distribution expenses of up to 0.25% of average daily net assets, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Trust will pay FSSC up to 0.25% of the average daily net assets of the Trust's Institutional Shares and Institutional Service Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses
FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Trust. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion.
Portfolio Accounting Fees
Prior to January 1, 2004, FServ maintained the Trust's accounting records for which it received a fee. The fee was based on the level of the Trust's average daily net assets for the period, plus out-of-pocket expenses. The fee paid to FServ during the reporting period was $55,058, after voluntary waiver, if applicable.
General
Certain of the Officers and Directors of the Trust are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended February 29, 2004, were as follows:
Purchases |
| $ | 17,670,401 |
Sales |
| $ | -- |
7. LEGAL PROCEEDINGS
In October, 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated ("Funds") were named as defendants in several class action lawsuits filed in the United States District Court for the Western District of Pennsylvania seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations have been filed, and others may be filed in the future. Although Federated does not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from related regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
Report of Ernst & Young LLP, Independent Auditors
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FEDERATED TOTAL RETURN GOVERNMENT BOND FUND:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Federated Total Return Government Bond Fund (the "Fund"), as of February 29, 2004, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 29, 2004 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Federated Total Return Government Bond Fund at February 29, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Boston, Massachusetts
April 7, 2004
Board of Trustees and Fund Officers
The Board is responsible for managing the Fund's business affairs and for exercising all the Fund's powers except those reserved for the shareholders. The following tables give information about each Board member and the senior officers of the Fund. Where required, the tables separately list Board members who are "interested persons" of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent" Board members). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA. The Federated Fund Complex consists of 44 investment companies (comprising 136 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Board member oversees all portfolios in the Federated Fund Complex; serves for an indefinite term; and also serves as a Board member of the following investment company complexes: Banknorth Funds--four portfolios; Golden Oak® Family of Funds--seven portfolios and WesMark Funds--five portfolios. The Fund's Statement of Additional Information includes additional information about Fund Trustees and is available, without charge and upon request, by calling 1-800-341-7400.
INTERESTED TRUSTEES BACKGROUND
|
|
|
Name |
| Principal Occupation(s), Other Directorships |
John F. Donahue* |
| Principal Occupations: Chairman and Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc. |
|
|
|
J. Christopher Donahue* |
| Principal Occupations: Principal Executive Officer and President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Passport Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. |
|
|
|
|
|
|
Name |
| Principal Occupation(s), Other Directorships |
Lawrence D. Ellis, M.D.* |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; Professor of Medicine, University of Pittsburgh; Medical Director, University of Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist, University of Pittsburgh Medical Center. |
|
|
|
* Family relationships and reasons for "interested" status: John F. Donahue is the father of J. Christopher Donahue; both are "interested" due to the positions they hold with Federated Investors, Inc. and its subsidiaries. Lawrence D. Ellis, M.D. is "interested" because his son-in-law is employed by the Fund's principal underwriter, Federated Securities Corp.
INDEPENDENT TRUSTEES BACKGROUND
|
|
|
Name |
| Principal Occupation(s), Other Directorships |
Thomas G. Bigley |
| Principal Occupation: Director or Trustee of the Federated Fund Complex. |
|
|
|
John T. Conroy, Jr. |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman of the Board, Investment Properties Corporation; Partner or Trustee in private real estate ventures in Southwest Florida. |
|
|
|
Nicholas P. Constantakis |
| Principal Occupations: Director or Trustee of the Federated Fund Complex. |
|
|
|
|
|
|
Name |
| Principal Occupation(s), Other Directorships |
John F. Cunningham |
| Principal Occupation: Director or Trustee of the Federated Fund Complex. |
|
|
|
Peter E. Madden |
| Principal Occupation: Director or Trustee of the Federated Fund Complex; Management Consultant. |
|
|
|
Charles F. Mansfield, Jr. |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; Management Consultant; Executive Vice President, DVC Group, Inc. (marketing communications and technology) (prior to 9/1/00). |
|
|
|
John E. Murray, Jr., J.D., S.J.D. |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; Chancellor and Law Professor, Duquesne University; Partner, Murray, Hogue and Lannis. |
|
|
|
|
|
|
Name |
| Principal Occupation(s), Other Directorships |
Marjorie P. Smuts |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; Public Relations/Marketing Consultant/Conference Coordinator. |
|
|
|
John S. Walsh |
| Principal Occupations: Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. |
|
|
|
OFFICERS
|
|
|
Name |
| Principal Occupation(s) and Previous Position(s) |
John W. McGonigle |
| Principal Occupations: Executive Vice President and Secretary of the Federated Fund Complex; Executive Vice President, Secretary and Director, Federated Investors, Inc. |
|
|
|
Richard J. Thomas |
| Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services. |
|
|
|
Richard B. Fisher |
| Principal Occupations: Vice Chairman or President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp. |
|
|
|
|
|
|
Name |
| Principal Occupation(s) and Previous Position(s) |
Susan M. Nason |
| Susan M. Nason has been the Fund's Portfolio Manager since its inception. She is Vice President of the Fund. Ms. Nason joined Federated in 1987 and has been a Senior Portfolio Manager and Senior Vice President of the Fund's Adviser since 1997. Ms. Nason served as a Portfolio Manager and Vice President of the Adviser from 1993 to 1997. Ms. Nason is a Chartered Financial Analyst and received her M.S.I.A. concentrating in Finance from Carnegie Mellon University. |
|
|
|
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.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. This information is also available from the EDGAR database on the SEC's Internet site at http://www.sec.gov.
Federated Investors
World-Class Investment Manager
Federated Total Return Government Bond Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com
Contact us at 1-800-341-7400 or
www.federatedinvestors.com/contact
Federated Securities Corp., Distributor
Cusip 31429A105
Cusip 31429A204
Federated is a registered mark of Federated Investors, Inc. 2004 ©Federated Investors, Inc.
30214 (4/04)
Item 2. Code of Ethics As of the end of the period covered by this report, the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer; the registrant's Principal Financial Officer also serves as the Principal Accounting Officer. The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers. Item 3. Audit Committee Financial Expert The registrant's Board has determined that each member of the Board's Audit Committee is an "audit committee financial expert," and that each such member is "independent," for purposes of this Item. The Audit Committee consists of the following Board members: Thomas G. Bigley, John T. Conroy, Jr., Nicholas P. Constantakis and Charles F. Mansfield, Jr. Item 4. Principal Accountant Fees and Services Item 4 Principal Accountant Fees and Services (a) Audit Fees billed to the registrant for the two most recent fiscal years: Fiscal year ended 2004 - $15,984 Fiscal year ended 2003 - $15,500 (b) Audit-Related Fees billed to the registrant for the two most recent fiscal years: Fiscal year ended 2004 - $0 Fiscal year ended 2003 - $0 Amount requiring approval of the registrant's audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively. (c) Tax Fees billed to the registrant for the two most recent fiscal years: Fiscal year ended 2004 - $0 Fiscal year ended 2003 - $0 Amount requiring approval of the registrant's audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively. (d) All Other Fees billed to the registrant for the two most recent fiscal years: Fiscal year ended 2004 - $0 Fiscal year ended 2003 - $0 Amount requiring approval of the registrant's audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $19,872 respectively. Executive compensation anaylsis. (e)(1) Audit Committee Policies regarding Pre-approval of Services. The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor's independence. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee. Certain services have the general pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent auditor to management. The Audit Committee has delegated pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable. AUDIT SERVICES The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters. In addition to the annual Audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related services must be specifically pre-approved by the Audit Committee. TAX SERVICES The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing the auditor's independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee. ALL OTHER SERVICES With respect to the provision of services other than audit, review or attest services the pre-approval requirement is waived if: (1) The aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the registrant, the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant to its accountant during the fiscal year in which the services are provided; (2) Such services were not recognized by the registrant, the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant at the time of the engagement to be non-audit services; and (3) Such services are promptly brought to the attention of the Audit Committee of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee. The Audit Committee may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions to certain of the prohibitions. PRE-APPROVAL FEE LEVELS Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee. PROCEDURES Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. (e)(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: 4(b) Fiscal year ended 2004 - 0% Fiscal year ended 2003 - 0% Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively. 4(c) Fiscal year ended 2004 - 0% Fiscal year ended 2003 - 0% Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively. 4(d) Fiscal year ended 2004 - 0% Fiscal year ended 2003 - 0% Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively. (f) NA (g) Non-Audit Fees billed to the registrant, the registrant's investment adviser, and certain entities controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant: Fiscal year ended 2004 - $87,839 Fiscal year ended 2003 - $287,951 (h) The registrant's Audit Committee has considered that the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. Item 5 Audit Committee of Listed Registrants Not Applicable Item 6 [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not Applicable Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not Applicable Item 9. Submission of Matters to a Vote of Security Holders Not Applicable Item 10. 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), or the internal control over financial reporting of its service providers during the last fiscal half year (the registrant's second half year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits 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 Government Bond Fund By /S/ Richard J. Thomas, Principal Financial Officer (insert name and title) Date April 23, 2004 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, Principal Executive Officer Date April 23, 2004 By /S/ Richard J. Thomas, Principal Financial Officer Date April 23, 2004