N-CSR 1 ftrgbf.htm Federated Total Return Government Bond Fund 




                               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%

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%

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
Amount

  

  

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
Amount

  

  

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
(IDENTIFIED COST $4,028,535)

   

   

4,233,065

   

Shares or
Principal
Amount

  

  

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%
(IDENTIFIED COST $226,828,770)3

   

   

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
Issued in Relation to Tax-Free Transfer of Assets

  

Tax-Free Transfer
of Riggs
U.S. Government
Securities Fund
Net Assets Received

  

Unrealized
Appreciation
Issued in
Tax-Free Net
Assets Received

2,428,080

   

$26,878,841

   

$1,025,361

   

   

   

   

   

Net Assets of Trust Prior to Combination

  

Net Assets of Riggs
U.S. Government
Securities Fund
Immediately Prior
to Combination

  

Net Assets
of Trust
Immediately
After Combination

$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
of Securities Loaned

  

Market Value
of Collateral

$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



423,956



   


4,694,635




375,489



   


4,090,205


Shares redeemed

 

(4,478,708

)

   

   

(49,925,494

)

   

(5,928,809

)

   

   

(64,252,774

)

NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS

   


1,898,853

   

   


$


20,872,159

   

   


6,174,836

   

   

$


67,700,464

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   



2,428,080

   

   

   


26,878,841

   

   

--

   

   

   

--

   

Shares issued to shareholders in payment of distributions declared



122,079





1,349,976




78,043





851,424


Shares redeemed

 

(3,958,787

)

   

   

(43,776,731

)

   

(3,113,665

)

   

   

(34,123,951

)

NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS

   


1,674,296

   

   


$


18,774,103

   

   


725,894

   

   


$


8,151,942

   

NET CHANGE RESULTING FROM SHARE TRANSACTIONS



3,573,149




$


39,646,262




6,900,730




$


75,852,406


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
Assets of the Federated Funds

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
Net Assets of the Federated Funds

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
Birth Date
Address
Positions Held with Fund
Date Service Began

  

Principal Occupation(s), Other Directorships
Held and Previous Position(s)

John F. Donahue*
Birth Date: July 28, 1924
CHAIRMAN AND TRUSTEE
Began serving: July 1995

 

Principal Occupations: Chairman and Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.

Previous Positions: Trustee, Federated Investment Management Company and Chairman and Director, Federated Investment Counseling.

 

 

 

J. Christopher Donahue*
Birth Date: April 11, 1949
PRESIDENT AND TRUSTEE
Began serving: July 1999

 

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.

Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd.

 

 

 

 

 

 

Name
Birth Date
Address
Positions Held with Fund
Date Service Began

  

Principal Occupation(s), Other Directorships
Held and Previous Position(s)

Lawrence D. Ellis, M.D.*
Birth Date: October 11, 1932
3471 Fifth Avenue
Suite 1111
Pittsburgh, PA
TRUSTEE
Began serving: July 1995

 

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.

Other Directorships Held: Member, National Board of Trustees, Leukemia Society of America.

Previous Positions: Trustee, University of Pittsburgh; Director, 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
Birth Date
Address
Positions Held with Fund
Date Service Began

  

Principal Occupation(s), Other Directorships
Held and Previous Position(s)

Thomas G. Bigley
Birth Date: February 3, 1934
15 Old Timber Trail
Pittsburgh, PA
TRUSTEE
Began serving: July 1995

 

Principal Occupation: Director or Trustee of the Federated Fund Complex.

Other Directorships Held: Director, Member of Executive Committee, Children's Hospital of Pittsburgh; Director, University of Pittsburgh.

Previous Position: Senior Partner, Ernst & Young LLP.

 

 

 

John T. Conroy, Jr.
Birth Date: June 23, 1937
Grubb & Ellis/Investment
Properties Corporation
3838 North Tamiami Trail
Suite 402
Naples, FL
TRUSTEE
Began serving: July 1995

 

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.

Previous Positions: President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; President, Naples Property Management, Inc. and Northgate Village Development Corporation.

 

 

 

Nicholas P. Constantakis
Birth Date: September 3, 1939
175 Woodshire Drive
Pittsburgh, PA
TRUSTEE
Began serving: February 1998

 

Principal Occupations: Director or Trustee of the Federated Fund Complex.

Other Directorships Held: Director and Member of the Audit Committee, Michael Baker Corporation (engineering and energy services worldwide).

Previous Position: Partner, Andersen Worldwide SC.

 

 

 

 

 

 

Name
Birth Date
Address
Positions Held with Fund
Date Service Began

  

Principal Occupation(s), Other Directorships
Held and Previous Position(s)

John F. Cunningham
Birth Date: March 5, 1943
353 El Brillo Way
Palm Beach, FL
TRUSTEE
Began serving: January 1999

 

Principal Occupation: Director or Trustee of the Federated Fund Complex.

Other Directorships Held: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.

Previous Positions: Director, Redgate Communications and EMC Corporation (computer storage systems); Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc.

 

 

 

Peter E. Madden
Birth Date: March 16, 1942
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
TRUSTEE
Began serving: July 1995

 

Principal Occupation: Director or Trustee of the Federated Fund Complex; Management Consultant.

Other Directorships Held: Board of Overseers, Babson College.

Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.

 

 

 

Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
80 South Road
Westhampton Beach, NY
TRUSTEE
Began serving: January 1999

 

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).

Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University.

 

 

 

John E. Murray, Jr., J.D., S.J.D.
Birth Date: December 20, 1932
Chancellor, Duquesne University
Pittsburgh, PA
TRUSTEE
Began serving: July 1995

 

Principal Occupations: Director or Trustee of the Federated Fund Complex; Chancellor and Law Professor, Duquesne University; Partner, Murray, Hogue and Lannis.

Other Directorships Held: Director, Michael Baker Corp. (engineering, construction, operations and technical services).

Previous Positions: President, Duquesne University; Dean and Professor of Law, University of Pittsburgh School of Law; Dean and Professor of Law, Villanova University School of Law.

 

 

 

 

 

 

Name
Birth Date
Address
Positions Held with Fund
Date Service Began

  

Principal Occupation(s), Other Directorships
Held and Previous Position(s)

Marjorie P. Smuts
Birth Date: June 21, 1935
4905 Bayard Street
Pittsburgh, PA
TRUSTEE
Began serving: July 1995

 

Principal Occupations: Director or Trustee of the Federated Fund Complex; Public Relations/Marketing Consultant/Conference Coordinator.

Previous Positions: National Spokesperson, Aluminum Company of America; television producer; President, Marj Palmer Assoc.; Owner, Scandia Bord.

 

 

 

John S. Walsh
Birth Date: November 28, 1957
2604 William Drive
Valparaiso, IN
TRUSTEE
Began serving: January 1999

 

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.

Previous Position: Vice President, Walsh & Kelly, Inc.

 

 

 

OFFICERS

 

 

 

Name
Birth Date
Date Service Began
Positions Held with Fund

  

Principal Occupation(s) and Previous Position(s)

John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT
AND SECRETARY
Began serving: June 1995

 

Principal Occupations: Executive Vice President and Secretary of the Federated Fund Complex; Executive Vice President, Secretary and Director, Federated Investors, Inc.

 

 

 

Richard J. Thomas
Birth Date: June 17, 1954
TREASURER
Began serving: November 1998

 

Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services.

 

 

 

Richard B. Fisher
Birth Date: May 17, 1923
VICE PRESIDENT
Began serving: June 1995

 

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.

Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.

 

 

 

 

 

 

Name
Birth Date
Date Service Began
Positions Held with Fund

  

Principal Occupation(s) and Previous Position(s)

Susan M. Nason
Birth Date: August 29, 1961
VICE PRESIDENT
Began serving: November 1998

 

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