DG
GOVERNMENT
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
Deposit Guaranty
National Bank
Jackson, MS
Commercial
National Bank
Shreveport, LA
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
AUGUST 31, 1994
23321N301
2091604 (10/94)
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of DG Government
Income Fund (the "Fund"). This report covers activity in the Fund for the
six-month period ended August 31, 1994.
In the Investment Review, the portfolio manager discusses the Fund's strategies
in response to economic and market developments. Following the Investment Review
are a complete list of the Fund's investments and Financial Statements.
To help you pursue competitive monthly income, the Fund invests primarily in a
diversified portfolio of U.S. government securities. At the end of the report
period, more than 72% of the Fund's assets were invested in U.S. Treasury
securities, with another 15% of assets invested in high-quality corporate bonds.
The remainder of the portfolio was invested in repurchase agreements backed by
U.S. Treasury obligations.
At the end of the period, net assets in the Fund totaled $156.2 million.
Dividends paid to shareholders during the period totaled more than $3.9 million,
or $0.26 per share.
Thank you for selecting the Fund as a convenient, diversified way to invest for
income through the relative safety of government securities.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Interest rates continued to climb due to stronger economic news and rate actions
by the Federal Reserve Board intended to head off inflation. The rise in rates
has depressed bond prices in all maturity and economic sectors. Derivative and
mortgage holders have been especially hard-hit as higher rates have lengthened
maturities and durations. These changes in durations have compounded the losses
as bondholders now own a "different" security from the one they initially
purchased. We have avoided these areas due to the uncertainty in the
marketplace.
Our strategy has been to assess U.S. Treasury, agency and corporate yields to
determine the appropriate weighting for each class of assets. We have been
overweighted in Treasury securities due to the reduced yield pick-up in agency
and corporate offerings. Agency spreads have begun to widen and we anticipate
more participation in this sector.
We will continue to pursue a high-quality, diversified portfolio for investors.
DG GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--15.2%
- -----------------------------------------------------------------------------------
BANKING--1.1%
----------------------------------------------------------------
$ 800,000 Bankers Trust New York Corp., 4.70%, 7/1/96 $ 775,816
----------------------------------------------------------------
1,000,000 Nationsbank Corp., 5.375%, 4/15/2000 901,510
---------------------------------------------------------------- ------------
Total 1,677,326
---------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICE--1.0%
----------------------------------------------------------------
1,500,000 International Business Machines Corp., 6.375%, 11/1/97 1,473,675
---------------------------------------------------------------- ------------
CONSUMER DURABLES--0.3%
----------------------------------------------------------------
437,000 Eastman Kodak Co., 9.125%, (Callable 3/1/95 @ 100), 3/1/98 444,477
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--1.7%
----------------------------------------------------------------
889,000 Anheuser-Busch Cos., 6.90%, 10/1/2002 847,519
----------------------------------------------------------------
1,000,000 H.J. Heinz Co., 6.75%, 10/15/99 978,050
----------------------------------------------------------------
919,000 PepsiCo, Inc., 5.625%, 7/1/95 913,238
---------------------------------------------------------------- ------------
Total 2,738,807
---------------------------------------------------------------- ------------
FINANCIAL SERVICES--2.4%
----------------------------------------------------------------
1,500,000 Ford Motor Credit Corp., 5.625%, 3/3/97 1,457,100
----------------------------------------------------------------
437,000 General Motors Acceptance Corp., 9.75%,
(Callable 5/15/96 @ 100), 5/15/99 457,368
----------------------------------------------------------------
1,000,000 Northwest Financial, Inc., 6.25%, 2/15/97 985,730
----------------------------------------------------------------
437,000 Security Pacific Corp., 8.75%, 9/15/94 437,148
----------------------------------------------------------------
437,000 TNE Funding, 9.00%, 5/1/95 444,844
---------------------------------------------------------------- ------------
Total 3,782,190
---------------------------------------------------------------- ------------
HEALTHCARE--0.6%
----------------------------------------------------------------
1,000,000 Upjohn Co., 5.875%, 4/15/2000 938,980
---------------------------------------------------------------- ------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
RAW MATERIALS--0.8%
----------------------------------------------------------------
$ 889,000 DuPont (E.I.) de Nemours & Co., 6.75%, 10/15/2002 $ 848,373
----------------------------------------------------------------
437,000 DuPont (E.I.) de Nemours & Co., 9.15%, 4/15/2000 471,768
---------------------------------------------------------------- ------------
Total 1,320,141
---------------------------------------------------------------- ------------
RETAIL--1.6%
----------------------------------------------------------------
437,000 Sears, Roebuck & Co., 9.00%, 9/15/96 452,378
----------------------------------------------------------------
437,000 The Limited, 7.80%, 5/15/2002 437,214
----------------------------------------------------------------
437,000 Wal-Mart, Inc., 10.875%, (Callable 8/15/95 @ 102.51), 8/15/2000 473,446
----------------------------------------------------------------
1,200,000 Wal-Mart, Inc., 5.50%, 9/15/97 1,156,440
---------------------------------------------------------------- ------------
Total 2,519,478
---------------------------------------------------------------- ------------
SHELTER--0.3%
----------------------------------------------------------------
437,000 Kimberly Clark Corp., 9.125%, 6/1/97 460,572
---------------------------------------------------------------- ------------
TECHNOLOGY--0.6%
----------------------------------------------------------------
437,000 Boeing Co., 8.375%, 3/1/96 448,594
----------------------------------------------------------------
437,000 Texas Instruments, 9.25%, 6/15/2003 478,585
---------------------------------------------------------------- ------------
Total 927,179
---------------------------------------------------------------- ------------
UTILITIES--4.8%
----------------------------------------------------------------
1,000,000 Alabama Power Co., 6.75%, (Callable 2/1/98 @ 101.60), 2/1/2003 938,590
----------------------------------------------------------------
437,000 ALLTEL Corp., 10.375%, (Callable 4/1/94 @ 106.50), 4/1/2009 465,361
----------------------------------------------------------------
1,500,000 GTE California, 6.25%, 1/15/98 1,466,070
----------------------------------------------------------------
1,500,000 New England Telephone & Telegraph Co., 6.25%, 12/15/97 1,480,845
----------------------------------------------------------------
1,500,000 Northern States Power Co., 5.50%, 2/1/99 1,406,925
----------------------------------------------------------------
1,000,000 Pacific Gas and Electric Co., 6.25%, 3/1/2004 901,430
----------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.625%, 10/1/2002 880,750
---------------------------------------------------------------- ------------
Total 7,539,971
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $24,742,900) 23,822,796
---------------------------------------------------------------- ------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--72.9%
- -----------------------------------------------------------------------------------
U.S. TREASURY BONDS--25.5%
----------------------------------------------------------------
$11,000,000 7.625%, 11/15/2022 $ 11,075,350
----------------------------------------------------------------
8,000,000 7.50%, 11/15/2016 7,911,040
----------------------------------------------------------------
3,000,000 7.25%, 8/15/2022 2,888,130
----------------------------------------------------------------
9,000,000 7.125%, 2/15/2023 8,544,780
----------------------------------------------------------------
11,000,000 6.25%, 8/15/2023 9,337,680
---------------------------------------------------------------- ------------
Total 39,756,980
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--47.4%
----------------------------------------------------------------
4,000,000 9.375%, 4/15/96 4,215,960
----------------------------------------------------------------
5,000,000 8.50%, 11/15/2000 5,397,650
----------------------------------------------------------------
13,000,000 8.00%, 1/15/97 13,494,000
----------------------------------------------------------------
8,000,000 6.375%, 8/15/2002 7,660,240
----------------------------------------------------------------
3,000,000 5.875%, 3/31/99 2,899,620
----------------------------------------------------------------
7,000,000 5.75%, 8/15/2003 6,357,750
----------------------------------------------------------------
5,000,000 5.50%, 2/28/99 4,773,400
----------------------------------------------------------------
4,000,000 5.00%, 1/31/99 3,742,920
----------------------------------------------------------------
3,000,000 4.75%, 8/31/98 2,803,200
----------------------------------------------------------------
10,000,000 4.625%, 12/31/94 9,980,800
----------------------------------------------------------------
3,000,000 4.25%, 10/31/94 2,997,060
----------------------------------------------------------------
3,000,000 4.25%, 12/31/95 2,942,550
----------------------------------------------------------------
7,000,000 4.00%, 1/31/96 6,828,710
---------------------------------------------------------------- ------------
Total 74,093,860
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST, $118,471,045) 113,850,840
---------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--1.2%
- -----------------------------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp., 6.50%,
(Callable 6/15/95 @ 100), 6/15/1999 1,509,300
----------------------------------------------------------------
437,000 Tennessee Valley Authority, 8.25%, 10/1/94 437,516
---------------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST, $1,979,405) 1,946,816
---------------------------------------------------------------- ------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--7.8%
- -----------------------------------------------------------------------------------
$12,149,800 Cantor, Fitzgerald Securities Corp., 4.75%, dated 8/31/94,
due 9/1/94 (at amortized cost) $ 12,149,800
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $157,343,150) $151,770,252+
---------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $157,343,150. The
net unrealized depreciation of investments on a federal tax basis amounts to
$5,572,898 which is comprised of $46,350 appreciation and $5,619,248
depreciation at August 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($156,209,077) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $157,343,150) $151,770,252
- -------------------------------------------------------------------------------
Interest receivable 1,722,858
- -------------------------------------------------------------------------------
Receivable for Fund shares sold 2,754,324
- -------------------------------------------------------------------------------
Deferred expenses 22,417
- ------------------------------------------------------------------------------- ------------
Total assets 156,269,851
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for Fund shares repurchased $25,658
- ---------------------------------------------------------------------
Accrued expenses 35,116
- --------------------------------------------------------------------- -------
Total liabilities 60,774
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 16,493,210 shares of beneficial interest outstanding $156,209,077
- ------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid-in capital $161,848,756
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (5,572,898)
- -------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (87,638)
- -------------------------------------------------------------------------------
Undistributed net investment income 20,857
- ------------------------------------------------------------------------------- ------------
Total Net Assets $156,209,077
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($156,209,077 / 16,493,210 shares of beneficial interest outstanding) $9.47
- ------------------------------------------------------------------------------- ------------
Computation of Offering Price:
Offering Price Per Share (100/98 of $9.47)* $9.66
- ------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income $ 4,419,307
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $ 424,449
- --------------------------------------------------------------------
Administrative personnel and services fees 89,094
- --------------------------------------------------------------------
Trustees' fees 1,332
- --------------------------------------------------------------------
Custodian fees 7,838
- --------------------------------------------------------------------
Portfolio accounting fees 24,494
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 17,242
- --------------------------------------------------------------------
Legal fees 4,086
- --------------------------------------------------------------------
Printing and postage 5,899
- --------------------------------------------------------------------
Auditing fees 6,098
- --------------------------------------------------------------------
Fund share registration fees 20,894
- --------------------------------------------------------------------
Insurance premiums 3,709
- --------------------------------------------------------------------
Miscellaneous 3,242
- -------------------------------------------------------------------- ---------
Total expenses 608,377
- --------------------------------------------------------------------
Deduct--waiver of investment advisory fee (106,112)
- -------------------------------------------------------------------- ---------
Net expenses 502,265
- -------------------------------------------------------------------------------- -----------
Net investment income 3,917,042
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (26,147)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (5,428,643)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (5,454,790)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $(1,537,748)
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------
1995* 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 3,917,042 $ 5,123,208
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($26,147 net loss and
$863,884 net gain, respectively, as computed for federal tax
purposes) (26,147) 863,884
- ----------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (5,428,643) (2,189,669)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (1,537,748) 3,797,423
- ---------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (3,900,644) (5,120,294)
- ----------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions -- (2,324,618)
- ----------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on
investment transactions -- (61,491)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets from distributions to shareholders (3,900,644) (7,506,403)
- ----------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 56,147,569 78,872,953
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,678,481 3,614,024
- ----------------------------------------------------------------
Cost of shares redeemed (14,873,704) (71,518,109)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets from Fund share transactions 42,952,346 10,968,868
- ---------------------------------------------------------------- ------------ ------------
Change in net assets 37,513,954 7,259,888
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 118,695,123 111,435,235
- ---------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$20,857 and $4,459, respectively) $156,209,077 $118,695,123
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------
1995* 1994 1993**
------ ------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.90 $10.25 $10.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.26 0.55 0.37
- ---------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.43) (0.09) 0.25
- --------------------------------------------------------------- ------ ------ -------
Total from investment operations (0.17) 0.46 0.62
- --------------------------------------------------------------- ------ ------ -------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (0.26) (0.55) (0.37 )
- ---------------------------------------------------------------
Distributions to shareholders from net realized gain
on investment transactions -- (0.25) --
- ---------------------------------------------------------------
Distributions to shareholders in excess of net realized gain
on investment transactions (c) -- (0.01) --
- --------------------------------------------------------------- ------ ------ -------
Total distributions (0.26) (0.81) (0.37 )
- --------------------------------------------------------------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 9.47 $ 9.90 $10.25
- --------------------------------------------------------------- ------ ------ -------
TOTAL RETURN*** (0.02%) 4.55% 6.40 %
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.71%(a) 0.70% 0.50 %(a)
- ---------------------------------------------------------------
Net investment income 5.54%(a) 5.34% 6.45 %(a)
- ---------------------------------------------------------------
Expense waiver/reimbursement (b) 0.15%(a) 0.19% 0.41 %(a)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $156,209 $118,695 $11,435
- ---------------------------------------------------------------
Portfolio turnover rate 2% 49% 78 %
- ---------------------------------------------------------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
** Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) These distributions do not represent a return of capital for federal tax
purposes.
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of six diversified portfolios. The financial statements
included herein present only those of DG Government Income Fund (the "Fund").
The financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. As of August 31, 1994, DG Opportunity
Fund was effective but did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Corporate bonds (and other fixed-income and asset backed securities) are valued
at the last sale price reported on national securities exchanges on that day, if
available. Otherwise, corporate bonds (and other fixed-income and asset backed
securities) and short-term obligations are valued at the prices provided by an
independent pricing service. Short-term securities with remaining maturities of sixty
days or less may be stated at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as brokers/dealers, which are deemed by the Trust's adviser
to be creditworthy pursuant to the guidelines established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date. Distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principals. These
distributions do not represent a return of capital for federal income tax purposes.
The amounts shown in the financial statements for net realized gain on investment
transactions for the fiscal year ended February 28, 1994, differ from those determined
for tax purposes because of certain timing differences. This resulted in distributions to
shareholders in excess of net realized gain on investment transactions. These
distributions do not represent a return of capital for federal income tax purposes.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary. Additionally, net capital losses of $61,904 attributable to security
transactions incurred after October 31, 1993 are treated as arising on March 1, 1994, the
first day of the Fund's next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
--------------------------
1995* 1994
- ------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Shares sold 5,884,401 7,738,340
- ------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 176,437 355,836
- ------------------------------------------------------------------
Shares redeemed (1,561,599) (6,968,280)
- ------------------------------------------------------------------ ---------- ----------
Net change resulting from Fund share transactions 4,499,239 1,125,896
- ------------------------------------------------------------------ ---------- ----------
</TABLE>
* Six months ended August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and the Trust Division of
Commercial National Bank, Commercial National Bank receives an annual fee from
the Adviser equal to .25 of 1% of the Fund's average daily net assets. In
addition, Commercial National Bank may voluntarily choose to reduce its
compensation. For the six months ended August 31, 1994, Commercial National Bank
earned a sub-advisory fee of $176,854, all of which was voluntarily waived.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $21,681 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 20, 1992 (date the Fund first became
effective). For six months ended August 31, 1994, the Fund paid $1,529 pursuant
to this agreement.
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended August 31, 1994 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $38,855,965
- ------------------------------------------------------------------------------- -----------
SALES $ 2,437,000
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Charles L. Davis, Jr.
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Karen M. Brownlee
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
DG
EQUITY FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
Deposit Guaranty
National Bank
Jackson, MS
Commercial
National Bank
Shreveport, LA
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
AUGUST 31, 1994
23321N202
2091602 (10/94)
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present this Semi-Annual Report for Shareholders of DG Equity
Fund (the "Fund"). This report covers activity in the Fund for the six-month
period ended August 31, 1994.
In the Investment Review, the portfolio manager explains the Fund's strategies
in response to economic and market developments. Following the Investment Review
are a complete list of the Fund's investments and Financial Statements.
Regardless of day-to-day ups and downs in the stock market, stocks are a proven
way to help you pursue your goal of money growth over the long term. At the end
of the report period, the portfolio consisted of 56 stocks representing 13
different sectors. These stocks are issued by many well-known companies,
including Eastman Kodak, Sara Lee, Blockbuster Entertainment, Atlantic
Richfield, Wal-Mart and Boeing.
At the end of the period, net assets in the Fund amounted to more than $263
million. Dividends paid to shareholders during the period totaled more than $1.9
million, or $0.08 per share. Capital gains paid by the Fund amounted to $1.2
million, or $0.05 per share.
Thank you for your confidence in the Fund. We will continue to keep you up to
date on your investment and provide your account with the highest level of
personal service.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The apparent wave of enthusiasm which drove the market to its January highs
diminished considerably and fairly consistently from our last report through
very nearly the end of August. With the exception of a brief moment last month,
this semi-annual period was essentially a dud. The Standard & Poor's 500 Index*
("S&P 500") and the Dow Jones Industrial Average* were both up a bit but the
breadth of the market was decidedly lower for the six month period. The culprit,
if there was only one to be blamed, was surely interest rate concerns, both real
and imagined.
Our own Fund gave back some of last year's gains versus our large-cap growth
style benchmarks and trailed both the S&P 500 and the Dow Jones Industrial
Average indices, as well. However, we continue to trim issues with lower growth
potentials from the portfolio thereby reducing our issue total to less than
sixty. Additionally, some paring of a currently maintained position was
initiated as short-term market strength in the issue pushed its weight in the
portfolio above levels at which we found comfort.
We continue to focus on the very high quality, true growth, large-cap segment of
the market as offering a favorable source of long-term growth candidates for
this portfolio. We believe this much maligned and currently overlooked segment
will once again surge to the fore with our portfolio benefiting as it has in the
past.
* This index is unmanaged.
DG EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--94.9%
- -------------------------------------------------------------------------------------
BUSINESS EQUIPMENT AND SERVICES--10.9%
-----------------------------------------------------------------
170,000 Automatic Data Processing, Inc. $ 9,201,250
-----------------------------------------------------------------
180,000 Donnelley (R.R.) & Sons Co. 5,445,000
-----------------------------------------------------------------
110,000 Dun & Bradstreet Corp. 6,338,750
-----------------------------------------------------------------
200,000 Pitney Bowes, Inc. 7,700,000
----------------------------------------------------------------- ------------
Total 28,685,000
----------------------------------------------------------------- ------------
CAPITAL GOODS--9.5%
-----------------------------------------------------------------
130,000 Dover Corp. 7,523,750
-----------------------------------------------------------------
35,400 Emerson Electric Co. 2,199,225
-----------------------------------------------------------------
160,000 General Electric Co. 7,960,000
-----------------------------------------------------------------
160,000 PPG Industries, Inc. 6,660,000
-----------------------------------------------------------------
16,900 Tyco International, LTD 743,600
----------------------------------------------------------------- ------------
Total 25,086,575
----------------------------------------------------------------- ------------
CONSUMER DURABLES--1.4%
-----------------------------------------------------------------
70,000 Whirlpool Corp. 3,841,250
----------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--21.9%
-----------------------------------------------------------------
100,000 Coca-Cola Co. 4,600,000
-----------------------------------------------------------------
60,000 Eastman Kodak Co. 2,985,000
-----------------------------------------------------------------
110,000 Heinz (H.J.) Co. 4,028,750
-----------------------------------------------------------------
240,000 International Flavors & Fragrances 10,530,000
-----------------------------------------------------------------
185,000 PepsiCo, Inc. 6,128,125
-----------------------------------------------------------------
80,000 Philip Morris Cos., Inc. 4,880,000
-----------------------------------------------------------------
130,000 Proctor & Gamble Co. 7,913,750
-----------------------------------------------------------------
70,000 Quaker Oats Co. 5,626,250
-----------------------------------------------------------------
180,000 Sara Lee Corp. 4,162,500
-----------------------------------------------------------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
-----------------------------------------------------------------
160,000 Sysco Corp. $ 4,100,000
-----------------------------------------------------------------
80,000 Tambrands, Inc. 2,970,000
----------------------------------------------------------------- ------------
Total 57,924,375
----------------------------------------------------------------- ------------
CONSUMER SERVICES--4.1%
-----------------------------------------------------------------
100,000 Blockbuster Entertainment Corp. 2,587,500
-----------------------------------------------------------------
200,000 Disney (Walt) Co. 8,225,000
----------------------------------------------------------------- ------------
Total 10,812,500
----------------------------------------------------------------- ------------
ENERGY--4.9%
-----------------------------------------------------------------
60,000 Amoco Corp. 3,472,500
-----------------------------------------------------------------
43,000 Anadarko Petroleum Corp. 2,015,625
-----------------------------------------------------------------
15,000 Atlantic Richfield Co. 1,606,875
-----------------------------------------------------------------
90,000 Chevron Corp. 3,813,750
-----------------------------------------------------------------
35,400 Schlumberger, Ltd. 2,017,800
----------------------------------------------------------------- ------------
Total 12,926,550
----------------------------------------------------------------- ------------
FINANCIAL SERVICES--0.8%
-----------------------------------------------------------------
70,000 American General Corp. 2,091,250
----------------------------------------------------------------- ------------
HEALTHCARE--9.9%
-----------------------------------------------------------------
100,000 Abbott Laboratories 3,000,000
-----------------------------------------------------------------
19,800 American Home Products Corp. 1,175,625
-----------------------------------------------------------------
51,900 Baxter International, Inc. 1,472,663
-----------------------------------------------------------------
120,000 Bristol-Myers Squibb Co. 6,900,000
-----------------------------------------------------------------
50,000 Eli Lilly & Co. 2,843,750
-----------------------------------------------------------------
85,000 Hillenbrand Industry, Inc. 2,826,250
-----------------------------------------------------------------
58,800 Merck & Co., Inc. 2,006,550
-----------------------------------------------------------------
85,000 Pfizer, Inc. 5,801,250
----------------------------------------------------------------- ------------
Total 26,026,088
----------------------------------------------------------------- ------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
RAW MATERIALS--4.4%
-----------------------------------------------------------------
95,000 Great Lakes Chemical Corp. $ 5,723,750
-----------------------------------------------------------------
90,000 Lubrizol Corp. 2,812,500
-----------------------------------------------------------------
105,000 Morton International, Inc. 3,110,625
----------------------------------------------------------------- ------------
Total 11,646,875
----------------------------------------------------------------- ------------
RETAIL--10.4%
-----------------------------------------------------------------
350,000 McDonald's Corp. 9,887,500
-----------------------------------------------------------------
70,000 Melville Corp. 2,651,250
-----------------------------------------------------------------
40,000 Sears, Roebuck & Co. 1,895,000
-----------------------------------------------------------------
175,000 Walgreen Company 6,584,375
-----------------------------------------------------------------
260,000 Wal-Mart Stores, Inc. 6,402,500
----------------------------------------------------------------- ------------
Total 27,420,625
----------------------------------------------------------------- ------------
TECHNOLOGY--11.9%
-----------------------------------------------------------------
30,000 AMP, Inc. 2,178,750
-----------------------------------------------------------------
85,000 Boeing Co. 3,867,500
-----------------------------------------------------------------
195,000 * Compaq Computer Corp. 7,288,125
-----------------------------------------------------------------
120,000 * Digital Equipment Corp. 2,910,000
-----------------------------------------------------------------
100,000 Hewlett-Packard Co. 8,987,500
-----------------------------------------------------------------
40,000 International Business Machines Corp. 2,745,000
-----------------------------------------------------------------
50,000 Raytheon Co. 3,381,250
----------------------------------------------------------------- ------------
Total 31,358,125
----------------------------------------------------------------- ------------
UTILITIES--4.8%
-----------------------------------------------------------------
130,000 American Telephone & Telegraph Co. 7,117,500
-----------------------------------------------------------------
35,000 BellSouth Corp. 2,078,125
-----------------------------------------------------------------
80,000 Central & Southwest Corp. 1,800,000
-----------------------------------------------------------------
40,000 Southwestern Bell Corp. 1,655,000
----------------------------------------------------------------- ------------
Total 12,650,625
----------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $240,844,005) 250,469,838
----------------------------------------------------------------- ------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
**REPURCHASE AGREEMENT--4.8%
- -------------------------------------------------------------------------------------
$12,604,179 Daiwa Securities America, Inc., 4.77%, dated 8/31/94, due 9/1/94
(at amortized cost) $ 12,604,179
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $253,448,184) $263,074,017+
----------------------------------------------------------------- ------------
</TABLE>
* Non-income producing securities.
** The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $253,448,184. The
net unrealized appreciation of investments on a federal tax cost basis
amounts to $9,625,833, which is comprised of $25,602,541 appreciation and
$15,976,708 depreciation at August 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($263,888,190) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $253,448,184) $263,074,017
- -------------------------------------------------------------------------------
Dividends and interest receivable 766,573
- -------------------------------------------------------------------------------
Receivable for Fund shares sold 241,048
- -------------------------------------------------------------------------------
Deferred expenses 37,992
- ------------------------------------------------------------------------------- ------------
Total assets 264,119,630
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for Fund shares repurchased $195,788
- --------------------------------------------------------------------
Accrued expenses 35,652
- -------------------------------------------------------------------- --------
Total liabilities 231,440
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 24,499,204 shares of beneficial interest outstanding $263,888,190
- ------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid-in capital $250,922,833
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 9,625,833
- -------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments 2,626,913
- -------------------------------------------------------------------------------
Undistributed net investment income 712,611
- ------------------------------------------------------------------------------- ------------
Total Net Assets $263,888,190
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($263,888,190 / 24,499,204 shares of beneficial interest outstanding) $10.77
- ------------------------------------------------------------------------------- ------------
Computation of Offering Price:
Offering Price Per Share (100/98 of $10.77)* $10.99
- ------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See notes which are an integral part of the Financial Statements)
DG EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Dividends $ 2,979,126
- --------------------------------------------------------------------------------
Interest 326,399
- -------------------------------------------------------------------------------- -----------
Total income 3,305,525
- --------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------
Investment advisory fee $996,085
- ---------------------------------------------------------------------
Administrative personnel and services fees 167,227
- ---------------------------------------------------------------------
Trustees' fees 3,035
- ---------------------------------------------------------------------
Custodian fees 16,514
- ---------------------------------------------------------------------
Portfolio accounting fees 35,940
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 19,653
- ---------------------------------------------------------------------
Legal fees 4,128
- ---------------------------------------------------------------------
Printing and postage 5,942
- ---------------------------------------------------------------------
Auditing fees 5,833
- ---------------------------------------------------------------------
Fund share registration costs 12,842
- ---------------------------------------------------------------------
Insurance premiums 4,893
- ---------------------------------------------------------------------
Miscellaneous 2,897
- --------------------------------------------------------------------- --------
Total expenses 1,274,989
- -------------------------------------------------------------------------------- -----------
Net investment income 2,030,536
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 2,625,326
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (5,048,012)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (2,422,686)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (392,150)
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------
1995* 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 2,030,536 $ 3,524,794
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($2,625,326 and
$2,837,598 net gain, respectively, as computed for federal tax
purposes) 2,625,326 3,099,223
- ----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (5,048,012) 7,867,219
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (392,150) 14,491,236
- ---------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (1,938,393) (3,253,053)
- ----------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (1,213,809) (1,382,777)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets from distributions to shareholders (3,152,202) (4,635,830)
- ---------------------------------------------------------------- ------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 27,256,454 134,529,308
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 2,037,503 3,351,297
- ----------------------------------------------------------------
Cost of shares redeemed (46,063,935) (44,772,757)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets from Fund share transactions (16,769,978) 93,107,848
- ---------------------------------------------------------------- ------------ ------------
Change in net assets (20,314,330) 102,963,254
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 284,202,520 181,239,266
- ---------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income
of $712,611 and $620,468, respectively) $263,888,190 $284,202,520
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------------
1995* 1994 1993**
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.87 $10.54 $10.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.08 0.14 0.12
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.05) 0.38 0.52
- ------------------------------------------------------------ ------ ----- -----
Total from investment operations 0.03 0.52 0.64
- ------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.08) (0.14 ) (0.10 )
- ------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.05) (0.05 ) --
- ------------------------------------------------------------ ------ ----- -----
Total distributions (0.13) (0.19 ) (0.10 )
- ------------------------------------------------------------ ------ ----- -----
NET ASSET VALUE, END OF PERIOD $10.77 $10.87 $10.54
- ------------------------------------------------------------ ------ ----- -----
TOTAL RETURN*** 0.26% 4.99 % 6.40 %
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.96%(a) 0.96 % 0.51 %(a)
- ------------------------------------------------------------
Net investment income 1.52%(a) 1.38 % 2.15 %(a)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $263,888 $284,203 $181,239
- ------------------------------------------------------------
Portfolio turnover rate 0% 7 % 28 %
- ------------------------------------------------------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
** Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
*** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of six diversified portfolios. The financial statements
included herein present only those of DG Equity Fund (the "Fund"). The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. As of August 31, 1994, DG Opportunity Fund
was effective but did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale price
reported on national securities exchanges. Unlisted securities and short-term obligations
(and private placement securities) are generally valued at the price provided by an
independent pricing service.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued interest.
The Fund 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 established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income and expenses are
accrued daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code").
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its tax-exempt income. Accordingly, no provisions for federal tax
are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------
1995* 1994
- -------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 2,584,821 12,800,127
- --------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 192,660 315,593
- --------------------------------------------------------------------
Shares redeemed (4,412,619) (4,180,747)
- -------------------------------------------------------------------- ---------- ----------
Net change resulting from Fund share transactions (1,635,138) 8,934,973
- -------------------------------------------------------------------- ---------- ----------
</TABLE>
* Six months ended August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. Under the terms
of a sub-advisory agreement between the Adviser and the Trust Division of
Commercial National Bank, Commercial National Bank receives an annual fee from
the Adviser, equal to .25 of 1% of the Fund's average daily net assets. In
addition, Commercial National Bank may voluntarily choose to reduce its
compensation. For the six months ended August 31, 1994, Commercial National Bank
earned a sub-advisory fee of $332,028, all of which was voluntarily waived.
DG EQUITY FUND
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $23,061 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 22, 1992 (date the Fund first became
effective). For the six months ended August 31, 1994, the Fund paid $1,667
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended August 31, 1994 were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES --
- -------------------------------------------------------------------------------- ----------
SALES $9,564,951
- -------------------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Charles L. Davis, Jr.
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Karen M. Brownlee
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
DG
MUNICIPAL
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
Deposit Guaranty
National Bank
Jackson, MS
Commercial
National Bank
Shreveport, LA
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
AUGUST 31, 1994
23321N509
3091403 (10/94)
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of DG Municipal
Income Fund (the "Fund"). This report covers activity in the Fund over the
six-month period ended August 31, 1994.
In the Investment Review, the portfolio manager explains the Fund's strategies
in response to economic and market developments. Following the Investment Review
are a complete list of the Fund's investments and Financial Statements.
Higher taxes always seem to be on the horizon. As a shareholder in this Fund,
you can keep more of what you earn in your pocket by investing primarily in a
diverse portfolio of long-term municipal securities. As of August 31, 1994, the
Fund was invested in high-quality securities issued by municipalities across 28
states. The income earned by these securities is free of federal regular income
tax.*
At the end of the report period, net assets stood at more than $39 million.
Tax-free dividends paid to shareholders during the period totaled more than
$852,275, or $0.24 per share.
Thank you for choosing the Fund for a convenient, diversified approach to
tax-free investing.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG Municipal Income Fund (the "Fund") was established in December 1992 to
provide investors with the ability to invest in a diversified portfolio of
quality longer term municipal issues. The investment objective of the Fund is to
provide dividend income that is exempt from federal regular income tax.*
Issues purchased by the Fund during the last twelve months consisted largely of
general obligations of states, cities, and counties. The Fund is currently
managed with a thirteen-year average maturity. This is a change from past
reporting periods when the Fund was managed with a fifteen-year maturity. Market
conditions have dictated a shortening of the portfolio's average maturity. The
investment adviser believes that the value in the market is in higher quality
municipal issues and continues to reflect this strategy in the Fund's portfolio.
The total rate of return (income plus capital appreciation) for the past six
months was -2.00% based on net asset value (-4.00% taking into account the sales
charge).**
The Fund's 30-day distribution rate as of August 31, 1994 was 4.82% for shares
based on net asset value (and 4.73% taking into account the sales charge).***
The Fund's net assets increased from $34.4 million on February 28, 1994 to $39.5
million as of August 31, 1994.
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Performance quoted represents past performance. 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.
*** Distribution rate reflects actual distributions made to shareholders. It is
calculated by dividing the monthly annualized dividend plus short-term
capital gains, if any, by the average 30-day offering price.
DG MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--97.3%
- ----------------------------------------------------------------------
ALABAMA--1.3%
--------------------------------------------------------
$ 500,000 Huntsville, AL, 6.00% GO Bonds, 11/1/2012
(Callable 11/1/2002 @ 102) AA $ 502,215
-------------------------------------------------------- -----------
ARIZONA--2.3%
--------------------------------------------------------
1,000,000 Phoenix, AZ, 4.90% GO Bonds, (Series C), 7/1/2008 AA+ 911,550
-------------------------------------------------------- -----------
CALIFORNIA--2.5%
--------------------------------------------------------
1,000,000 State of California, 5.75% GO UT Bonds, 5/1/2007
(Callable 5/1/2004 @ 102) A1 997,240
-------------------------------------------------------- -----------
CONNECTICUT--2.5%
--------------------------------------------------------
1,000,000 State of Connecticut, 5.80% GO UT Bonds, (Series C),
8/15/2008 (Callable 8/15/2004 @ 101) Aa 1,005,960
-------------------------------------------------------- -----------
FLORIDA--7.3%
--------------------------------------------------------
1,000,000 Broward County, FL, School District, 5.60% UT Bonds,
2/15/2007 (Callable 2/15/2003 @ 102) AA 995,540
--------------------------------------------------------
1,000,000 Jacksonville, FL, Electric Authority, 5.50%, Refunding
Revenue Bonds, 10/1/2013 Aa1 936,030
--------------------------------------------------------
1,000,000 St. Petersburg, FL, Public Utilities, 5.50% Revenue
Bonds, 10/1/2009 Aa 959,380
-------------------------------------------------------- -----------
Total 2,890,950
-------------------------------------------------------- -----------
GEORGIA--1.3%
--------------------------------------------------------
500,000 Albany, GA, Sewer System, 6.625% Revenue Bonds, 7/1/2017
(Callable 7/1/2002 @ 102) AAA 525,175
-------------------------------------------------------- -----------
HAWAII--1.3%
--------------------------------------------------------
500,000 State of Hawaii, 5.75% GO Bonds, 1/1/2008 AA 502,730
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
ILLINOIS--6.2%
--------------------------------------------------------
$ 500,000 Chicago, IL, Pier and Expo Authority, 6.00% Revenue
Bonds, 6/1/2014, (MBIA Insured) AAA $ 485,870
--------------------------------------------------------
500,000 Du Page County, IL, 5.40% GO Bonds, 1/1/2007 AAA 488,095
--------------------------------------------------------
1,000,000 State of Illinois, 5.60% GO UT Bonds, 4/1/2008
(Callable 4/1/2004 @ 102) Aa 974,450
--------------------------------------------------------
500,000 State of Illinois, 5.875% GO Bonds, 6/1/2011
(Callable 6/1/2002 @ 102) Aa 494,435
-------------------------------------------------------- -----------
Total 2,442,850
-------------------------------------------------------- -----------
INDIANA--1.3%
--------------------------------------------------------
500,000 Indianapolis, IN, Local Public Improvement, 6.00%
GO Bonds, 7/1/2010 (Callable 7/1/2003 @ 102) Aa 502,320
-------------------------------------------------------- -----------
KENTUCKY--2.2%
--------------------------------------------------------
1,000,000 State of Kentucky, Property & Building Commission, 5.00%
Revenue Refunding Bonds, (Project No. 55), 9/1/2009 A 891,980
-------------------------------------------------------- -----------
LOUISIANA--1.3%
--------------------------------------------------------
500,000 Louisiana Public Facilities Authority, 6.05% Hospital
Revenue Refunding Bonds, 12/1/2008, (MBIA Insured) AAA 506,120
-------------------------------------------------------- -----------
MARYLAND--2.5%
--------------------------------------------------------
1,000,000 State of Maryland, 5.50% GO UT Bonds, (Series BB),
6/1/2009 (Callable 6/1/2009 @ 102) AAA 980,130
-------------------------------------------------------- -----------
MASSACHUSETTS--1.1%
--------------------------------------------------------
450,000 State of Massachusetts, 6.00% GO Bonds, (Consolidated
Loan Series A), 6/1/2011, (Capital Guaranty Insured) AAA 449,478
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
MISSISSIPPI--20.3%
--------------------------------------------------------
$ 300,000 Hinds County, MS, 5.40% Hospital Revenue Bonds,
(Mississippi Methodist Hospital and Rehabilitation),
5/1/2006, (AMBAC Insured) AAA $ 297,339
--------------------------------------------------------
1,000,000 Hinds County, MS, 5.50% GO UT Refunding Bonds, 3/1/2008,
(MBIA Insured) AAA 977,660
--------------------------------------------------------
400,000 Jackson County, MS, 5.60% GO Bonds, (Series B), 5/1/2008 A 389,724
--------------------------------------------------------
400,000 Jackson County, MS, 5.70% GO Bonds, (Series B), 5/1/2009 A 388,744
--------------------------------------------------------
1,125,000 Jackson, MS, 5.85% GO UT Bonds, 5/1/2006
(Callable 5/1/2002 @ 100)/(MBIA Insured) AAA 1,145,734
--------------------------------------------------------
500,000 Jackson, MS, Redevelopment Authority Urban Renewal,
5.75%, 7/1/2008 A 490,615
--------------------------------------------------------
700,000 Lamar County, MS, 4.85% Pollution Control Revenue Bonds,
12/1/2006, (Callable 12/1/2003 @ Par) Aa3 626,871
--------------------------------------------------------
1,000,000 Madison County, MS, 5.10% Refunding School District GO
Bonds, 6/1/2008, (AMBAC Insured) AAA 935,100
--------------------------------------------------------
1,000,000 Mississippi Hospital Equipment & Facilities Authority,
5.50%, Revenue Refunding & Improvement Bonds, 5/15/2009,
(AMBAC Insured) AAA 952,440
--------------------------------------------------------
900,000 Mississippi Hospital Equipment & Facilities, 5.55%
Revenue Bonds, (Rankin Medical Center), 3/1/2014 A 808,992
--------------------------------------------------------
1,000,000 State of Mississippi, 5.80% GO UT Bonds, (Series A),
6/1/2009 (Callable 6/1/2004 @ 100) Aa 994,020
-------------------------------------------------------- -----------
Total 8,007,239
-------------------------------------------------------- -----------
MISSOURI--1.2%
--------------------------------------------------------
500,000 State of Missouri Water Pollution Control, 5.25% GO
Bonds,
(Series B), 8/1/2008 (Callable 8/1/2008 @ Par) AAA 482,040
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
MONTANA--2.3%
--------------------------------------------------------
$ 1,000,000 State of Montana, 4.875% GO Bonds, (Series A), 8/1/2009 Aa $ 898,280
-------------------------------------------------------- -----------
NEVADA--3.6%
--------------------------------------------------------
500,000 Las Vegas Valley, NV, 5.75% Water District, 9/1/2008,
(MBIA Insured) AAA 499,520
--------------------------------------------------------
1,000,000 State of Nevada, 4.90% Refunding Bonds, (Project R-5)/
(Series A), 11/1/2007 AA 915,250
-------------------------------------------------------- -----------
Total 1,414,770
-------------------------------------------------------- -----------
NEW JERSEY--1.3%
--------------------------------------------------------
500,000 State of New Jersey, 5.90% Refunding GO Bonds, (Series
B), 2/15/2008 AA+ 506,595
-------------------------------------------------------- -----------
NORTH CAROLINA--6.0%
--------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 6.125%
Revenue Refunding Bonds, (Series B)/(Original Issue
Discount 6.30%), 1/1/2009 A 495,485
--------------------------------------------------------
1,000,000 North Carolina Eastern Municipal Power Agency, 5.50%
Revenue Refunding Bonds, (Series C)/(Original Issue
Discount 5.70%), 1/1/2007 A 955,090
--------------------------------------------------------
1,000,000 North Carolina Municipal Power Agency, 5.75%
#1 Catawba Electric Revenue Bonds, 1/1/2015
(Callable 1/1/2015 @ 100) A 934,070
-------------------------------------------------------- -----------
Total 2,384,645
-------------------------------------------------------- -----------
NORTH DAKOTA--1.3%
--------------------------------------------------------
500,000 North Dakota Building Authority, 6.00% Revenue Bonds,
(Series A), 6/1/2010, (MBIA Insured) AAA 504,280
-------------------------------------------------------- -----------
OREGON--2.4%
--------------------------------------------------------
1,000,000 Portland, OR, 4.90% GO Bonds, 10/1/2007 AAA 928,620
-------------------------------------------------------- -----------
PENNSYLVANIA--1.2%
--------------------------------------------------------
450,000 State of Pennsylvania, 5.875% GO UT Bonds, 12/1/2006 AA 462,069
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
RHODE ISLAND--1.3%
--------------------------------------------------------
$ 500,000 Providence, RI, 5.90% GO Bonds, 1/15/2009
(Callable 1/15/2002 @ 102) AA+ $ 503,250
-------------------------------------------------------- -----------
TENNESSEE--2.4%
--------------------------------------------------------
1,000,000 Memphis, TN, 4.90% GO Bonds, (Series A), 8/1/2006
(Callable 8/1/2002 @ 101) AA 937,190
-------------------------------------------------------- -----------
TEXAS--9.0%
--------------------------------------------------------
500,000 Corpus Christi, TX, 6.00% GO Bonds, (Series 1993),
3/1/2010 (Callable 3/1/2003 @ 100) AAA 502,640
--------------------------------------------------------
500,000 El Paso, TX, 5.75% Refunding Bonds, (Series A),
7/1/2007 (Callable 7/1/2002 @ 100) AAA 502,770
--------------------------------------------------------
500,000 Harris County, TX, 6.20% Flood Control Bonds,
(Series B), 10/1/2011 (Callable 10/1/2002 @ Par) AA+ 534,325
--------------------------------------------------------
1,000,000 Houston, TX, School District, 5.50% Refunding Bonds,
8/15/2008 AAA 979,950
--------------------------------------------------------
500,000 Houston, TX, 5.90% Water and Sewer Revenue Bonds,
12/1/2005 (Callable 12/1/2002 @ 102) AAA 515,460
--------------------------------------------------------
500,000 San Antonio, TX, 6.00% Electric and Gas Revenue
Refunding Bonds, 2/1/2008 (Callable 2/1/2002 @
101)/(MBIA Insured) AA 514,211
-------------------------------------------------------- -----------
Total 3,549,356
-------------------------------------------------------- -----------
VIRGINIA--3.8%
--------------------------------------------------------
1,000,000 Fairfax County, VA, 5.50% Public Improvement, GO UT
Bonds, (Series A), 6/1/2008 (Callable 6/1/2002 @ 102) AAA 987,570
--------------------------------------------------------
500,000 State of Virginia, Transportation Board, 6.00% Revenue
Bonds, 4/1/2010 (Callable 4/1/2002 @ 102) AA 502,860
-------------------------------------------------------- -----------
Total 1,490,430
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL RATING:
AMOUNT MOODY'S
OR SHARES OR S&P* VALUE
- ----------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
WASHINGTON--5.5%
----------------------------------------------------------
$ 500,000 King County, WA, 6.00% GO Bonds, 12/1/2010
(Callable 12/1/2003 @ 100) AA+ $ 504,175
----------------------------------------------------------
500,000 Port of Seattle, WA, 6.25% GO Bonds, (Series A),
11/1/2010 (Callable 11/1/2002 @ 102) Aa 508,215
----------------------------------------------------------
500,000 State of Washington, 6.25% GO Bonds, 9/1/2009
(Callable 9/1/2001 @ 100) AA 508,200
----------------------------------------------------------
650,000 Tacoma, WA, 6.25% Electric Revenue Bonds, 1/1/2011
(Callable 1/1/2002 @ 102)/(AMBAC Insured) AAA 657,709
---------------------------------------------------------- -----------
Total 2,178,299
---------------------------------------------------------- -----------
WISCONSIN--2.6%
----------------------------------------------------------
500,000 Green Bay, WI, 6.00% GO Bonds, 4/1/2010 Aa 503,205
----------------------------------------------------------
500,000 State of Wisconsin, 6.30% GO Bonds, (Series A),
5/1/2012 (Callable 5/1/2002 @ Par) AA 536,650
---------------------------------------------------------- -----------
Total 1,039,855
---------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $39,110,399) 38,395,616
---------------------------------------------------------- -----------
MUTUAL FUND SHARES--1.7%
- ------------------------------------------------------------------------
459,853 Dreyfus Tax Exempt Cash Management Fund NR 459,853
----------------------------------------------------------
221,656 Lehman Municipal Money Market Fund NR 221,656
---------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES, (AT NET ASSET VALUE) 681,509
---------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $39,791,908) $39,077,125+
---------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
+ The cost of investments for federal tax purposes amounts to $39,791,908. The
net unrealized depreciation of investments on a federal tax basis amounts to
$714,783, which is comprised of $282,126 appreciation and $996,909 depreciation
at August 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($39,456,016) at August 31, 1994.
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
NR -- Not Rated
UT -- Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost, $39,791,908) $39,077,125
- --------------------------------------------------------------------------------
Interest receivable 586,434
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 92,000
- --------------------------------------------------------------------------------
Deferred expense 4,341
- -------------------------------------------------------------------------------- -----------
Total assets 39,759,900
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $287,057
- ---------------------------------------------------------------------
Accrued expenses 16,827
- --------------------------------------------------------------------- --------
Total liabilities 303,884
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 3,897,742 shares of beneficial interest outstanding $39,456,016
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $40,144,659
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (714,783)
- --------------------------------------------------------------------------------
Undistributed net investment income 26,140
- -------------------------------------------------------------------------------- -----------
Total Net Assets $39,456,016
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
($39,456,016 / 3,897,742 shares of beneficial interest outstanding) $10.12
- -------------------------------------------------------------------------------- -----------
Computation of Offering Price:
Offering Price Per Share (100/98 of $10.12)* $10.33
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income $ 1,003,242
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $109,947
- ---------------------------------------------------------------------
Administrative personnel and services fees 23,077
- ---------------------------------------------------------------------
Trustees' fees 359
- ---------------------------------------------------------------------
Custodian fees 10,133
- ---------------------------------------------------------------------
Portfolio accounting fees 24,998
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 13,564
- ---------------------------------------------------------------------
Legal fees 3,287
- ---------------------------------------------------------------------
Printing and postage 5,566
- ---------------------------------------------------------------------
Auditing fees 4,638
- ---------------------------------------------------------------------
Fund share registration fees 9,860
- ---------------------------------------------------------------------
Insurance premiums 2,643
- ---------------------------------------------------------------------
Miscellaneous 2,661
- --------------------------------------------------------------------- --------
Total expenses 210,733
- ---------------------------------------------------------------------
Deduct--waiver of investment advisory fees 75,131
- --------------------------------------------------------------------- --------
Net expenses 135,602
- -------------------------------------------------------------------------------- -----------
Net investment income 867,640
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------
Net realized gain (loss) on investment (identified cost basis) --
- ---------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (1,428,416)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (1,428,416)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (560,776)
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------
1995* 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 867,640 $ 1,184,276
- -----------------------------------------------------------------
Net realized gain (loss) on investments ($0 and $20,558, net gain
respectively, as computed for federal tax purposes) -- 20,558
- -----------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (1,428,416) 52,310
- ----------------------------------------------------------------- ----------- -----------
Change in net assets resulting from operations (560,776) 1,257,144
- ----------------------------------------------------------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (852,275) (1,193,319)
- -----------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions -- (20,558)
- ----------------------------------------------------------------- ----------- -----------
Change in net assets from distributions to shareholders (852,275) (1,213,877)
- ----------------------------------------------------------------- ----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 10,685,378 25,360,605
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 8,359 9,035
- -----------------------------------------------------------------
Cost of shares redeemed (4,259,772) (6,622,204)
- ----------------------------------------------------------------- ----------- -----------
Change in net assets from Fund share transactions 6,433,965 18,747,436
- ----------------------------------------------------------------- ----------- -----------
Change in net assets 5,020,914 18,790,703
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 34,435,102 15,644,399
- ----------------------------------------------------------------- ----------- -----------
End of period (including undistributed net investment income of
$26,140 and $10,775, respectively) $39,456,016 $34,435,102
- ----------------------------------------------------------------- ----------- -----------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------------
1995* 1994 1993**
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.57 $10.51 $10.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.24 0.48 0.07
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.45) 0.08 0.49
- ------------------------------------------------------------ ------ ------ -----
Total from investment operations (0.21) 0.56 0.56
- ------------------------------------------------------------ ------ ------ -----
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.24) (0.49) (0.05 )
- ------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions -- (0.01) --
- ------------------------------------------------------------ ------ ------ -----
Total distributions (0.24) (0.50) (0.05 )
- ------------------------------------------------------------ ------ ------ -----
NET ASSET VALUE, END OF PERIOD $10.12 $10.57 $10.51
- ------------------------------------------------------------ ------ ------ -----
TOTAL RETURN*** (2.00%) 5.34% 5.65 %
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.74%(a) 0.74% 0.48 %(a)
- ------------------------------------------------------------
Net investment income 4.73%(a) 4.60% 4.11 %(a)
- ------------------------------------------------------------
Expense waiver/reimbursement (b) 0.41%(a) 0.67% 1.02 %(a)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $39,456 $34,435 $15,644
- ------------------------------------------------------------
Portfolio turnover rate 1% 9% 93 %
- ------------------------------------------------------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
** Reflects operations for the period from December 21, 1992 (date of initial
public investment) to February 28, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of six diversified portfolios. The financial statements
included herein present only those of DG Municipal Income Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. As of August 31, 1994, DG Opportunity
Fund was effective but did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service
taking into consideration yield, liquidity, risk, credit, quality, coupon, maturity, type
of issue, and any other factors or market data it deems relevant in determining
valuations for normal institutional size trading units of debt securities. The
independent pricing service does not rely exclusively on quoted prices.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its tax-exempt income. Accordingly, no provisions for federal tax
are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-------------------------
1995* 1994
- ------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Shares sold 1,059,749 2,391,912
- -------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 829 844
- -------------------------------------------------------------------
Shares redeemed (420,651) (623,997)
- ------------------------------------------------------------------- --------- ---------
Net change resulting from Fund share transactions 639,927 1,768,759
- ------------------------------------------------------------------- --------- ---------
</TABLE>
* Six months ended August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and the Trust Division of
Commercial National Bank, Commercial National Bank receives an annual fee from
the Adviser, equal to .25 of 1% of the Fund's average daily net assets. In
addition, Commercial National Bank may voluntarily choose to reduce its
compensation. For the six months ended August 31, 1994, Commercial National Bank
earned a sub-advisory fee of $45,811, all of which was voluntarily waived.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $25,535 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
following December 12, 1992 (date the Fund first became effective). For the six
months ended August 31, 1994, the Fund paid $1,932 pursuant to this agreement.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended August 31, 1994 were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $7,517,316
- -------------------------------------------------------------------------------- ----------
SALES $ 500,000
- -------------------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Charles L. Davis, Jr.
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Karen M. Brownlee
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
DG
LIMITED TERM
GOVERNMENT
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
Deposit Guaranty
National Bank
Jackson, MS
Commercial
National Bank
Shreveport, LA
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
AUGUST 31, 1994
23321N400
2091603 (10/94)
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of DG Limited
Term Government Income Fund (the "Fund"). This report covers activity in the
Fund over the six-month period ended August 31, 1994.
In the Investment Review, the portfolio manager explains the Fund's strategies
in response to economic and market developments. Following the Investment Review
are a complete list of the Fund's investments and Financial Statements.
To help you pursue competitive monthly income, the Fund invests primarily in a
diversified portfolio of U.S. government and corporate bonds. At the end of the
report period, more than 68% of the Fund's assets were invested in U.S. Treasury
obligations, with another 21% of assets invested in corporate bonds. The
remainder of the portfolio was invested in a repurchase agreement backed by U.S.
Treasury obligations.
At the end of the period, net assets in the Fund decreased to approximately $110
million, due in part to market uncertainty over interest rates. Dividends paid
to shareholders during the period totaled more than $2.7 million, or $0.23 per
share.
Thank you for your ongoing confidence in the DG Limited Term Government Income
Fund. We will continue to keep you up-to-date on your investment and provide
your account with the highest level of personal service.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Interest rates continued to climb due to stronger economic news and rate actions
by the Federal Reserve Board intended to head off inflation. The rise in rates
has depressed bond prices in all maturity and economic sectors. Derivative and
mortgage holders have been especially hard-hit as higher rates have lengthened
maturities and durations. These changes in durations have compounded the losses
as bondholders now own a "different" security from the one they initially
purchased. We have avoided these areas due to the uncertainty in the
marketplace.
Our strategy has been to assess U.S. Treasury, agency, and corporate yields to
determine the appropriate weighting for each class of assets. We have been
overweighted in Treasury securities due to the reduced yield pick-up in agency
and corporate offerings. Agency spreads have begun to widen and we anticipate
more participation in this sector.
We will continue to pursue a high-quality, diversified portfolio for investors.
DG LIMITED TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--21.0%
- -------------------------------------------------------------------------------------
BANKING--2.4%
-----------------------------------------------------------------
$ 1,200,000 Bankers Trust New York Corp., 4.70%, 7/1/96 $ 1,163,724
-----------------------------------------------------------------
1,500,000 NationsBank Corp., 5.375%, 12/1/95 1,483,185
----------------------------------------------------------------- ------------
Total 2,646,909
----------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICE--1.5%
-----------------------------------------------------------------
1,000,000 International Business Machines Corp., 6.375%, 11/1/97 982,450
-----------------------------------------------------------------
723,000 Waste Management, Inc., 6.375%, 7/1/97 714,346
----------------------------------------------------------------- ------------
Total 1,696,796
----------------------------------------------------------------- ------------
CAPITAL GOODS--1.3%
-----------------------------------------------------------------
1,500,000 General Electric Capital Corp., 5.25%, 11/15/95 1,483,305
----------------------------------------------------------------- ------------
CONSUMER DURABLES--0.5%
-----------------------------------------------------------------
545,000 Eastman Kodak Co., 9.20%, 1/15/95 554,429
----------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--2.6%
-----------------------------------------------------------------
1,447,000 Kellogg Co., 5.90%, 7/15/97 1,420,997
-----------------------------------------------------------------
723,000 PepsiCo, Inc., 5.625%, 7/1/95 718,467
-----------------------------------------------------------------
725,000 Philip Morris Cos., Inc., 7.50%, 3/15/97 734,519
----------------------------------------------------------------- ------------
Total 2,873,983
----------------------------------------------------------------- ------------
FINANCE-AUTOMOTIVE--2.5%
-----------------------------------------------------------------
2,045,000 Ford Motor Credit Co., 5.625%-8.75%, 1/15/95-3/3/97 2,006,814
-----------------------------------------------------------------
723,000 Toyota Motor Credit Corp., 5.75%, 6/15/95 722,103
----------------------------------------------------------------- ------------
Total 2,728,917
----------------------------------------------------------------- ------------
FINANCIAL SERVICES--2.0%
-----------------------------------------------------------------
905,000 American General Finance Corp., 7.15%, 5/15/97 913,932
-----------------------------------------------------------------
306,000 ITT Financial Corp., 7.25%, 5/15/97 305,556
-----------------------------------------------------------------
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
-----------------------------------------------------------------
$ 1,000,000 Norwest Financial, Inc., 6.25%, 2/15/97 $ 985,730
----------------------------------------------------------------- ------------
Total 2,205,218
----------------------------------------------------------------- ------------
HEALTH CARE--1.1%
-----------------------------------------------------------------
1,250,000 Upjohn Co., 5.875%, 4/15/2000 1,173,725
----------------------------------------------------------------- ------------
OIL--0.7%
-----------------------------------------------------------------
725,000 Shell Oil Co., 6.125%, 11/15/94 724,406
----------------------------------------------------------------- ------------
RETAIL--1.6%
-----------------------------------------------------------------
725,000 Sears, Roebuck & Co., 7.00%, 11/1/94 725,399
-----------------------------------------------------------------
1,136,000 Wal-Mart Stores, Inc., 5.50%, 9/15/97 1,094,763
----------------------------------------------------------------- ------------
Total 1,820,162
----------------------------------------------------------------- ------------
UTILITIES--4.8%
-----------------------------------------------------------------
1,000,000 GTE California, Inc., 6.25%, 1/15/98 977,380
-----------------------------------------------------------------
1,000,000 New England Telephone & Telegraph Co., 6.25%, 12/15/97 987,230
-----------------------------------------------------------------
1,500,000 Northern States Power Co., 5.50%, 2/1/99 1,406,925
-----------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 5.375%, 8/1/98 940,010
-----------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.60%, 12/15/98 941,840
----------------------------------------------------------------- ------------
Total 5,253,385
----------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $23,736,573) 23,161,235
----------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--1.4%
- -------------------------------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp., 6.50%, 6/15/99,
(identified cost $1,511,250) 1,509,300
----------------------------------------------------------------- ------------
U.S. TREASURY NOTES--68.5%
- -------------------------------------------------------------------------------------
2,538,000 9.50%, 10/15/94 2,551,401
-----------------------------------------------------------------
11,000,000 8.00%, 10/15/96 11,415,800
-----------------------------------------------------------------
2,000,000 6.75%, 6/30/99 1,997,180
-----------------------------------------------------------------
15,000,000 6.25%, 1/31/97 15,000,600
-----------------------------------------------------------------
4,000,000 6.00%, 12/31/97 3,941,520
-----------------------------------------------------------------
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
- -------------------------------------------------------------------------------------
$ 4,000,000 5.75%, 10/31/97 $ 3,919,840
-----------------------------------------------------------------
9,000,000 5.125%, 3/31/98 8,592,030
-----------------------------------------------------------------
1,500,000 4.75%, 9/30/98 1,399,530
-----------------------------------------------------------------
10,000,000 4.25%, 10/31/94 9,990,200
-----------------------------------------------------------------
5,000,000 4.125%, 6/30/95 4,948,600
-----------------------------------------------------------------
3,000,000 3.875%, 4/30/95 8,933,310
-----------------------------------------------------------------
9,000,000 3.875%, 3/31/95 2,972,310
----------------------------------------------------------------- ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $77,822,147) 75,662,321
----------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--8.9%
- -------------------------------------------------------------------------------------
9,877,300 Cantor, Fitzgerald Securities Corp., 4.75%, dated 8/31/94, due
9/1/94
(at amortized cost) 9,877,300
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $112,947,270) $110,210,156+
----------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $112,947,270. The
net unrealized depreciation of investments on a federal tax basis amounts to
$2,737,114, which is comprised of $18,043 appreciation and $2,755,157
depreciation at August 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($110,455,065) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $112,947,270) $110,210,156
- --------------------------------------------------------------------------------
Interest receivable 1,610,493
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 1,136,649
- --------------------------------------------------------------------------------
Deferred expenses 19,644
- -------------------------------------------------------------------------------- ------------
Total assets 112,976,942
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $2,510,307
- -------------------------------------------------------------------
Accrued expenses 11,570
- ------------------------------------------------------------------- ----------
Total liabilities 2,521,877
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 11,424,463 shares of beneficial interest outstanding $110,455,065
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $114,228,817
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (2,737,114)
- --------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments (1,097,897)
- --------------------------------------------------------------------------------
Undistributed net investment income 61,259
- -------------------------------------------------------------------------------- ------------
Total Net Assets $110,455,065
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($110,455,065 / 11,424,463 shares of beneficial interest outstanding) $9.67
- -------------------------------------------------------------------------------- ------------
Computation of Offering Price:
Offering Price Per Share (100/98 of $9.67)* $9.87
- -------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest $ 3,130,943
- --------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------
Investment advisory fee $342,407
- ---------------------------------------------------------------------
Administrative personnel and services fees 71,861
- ---------------------------------------------------------------------
Trustees' fees 851
- ---------------------------------------------------------------------
Custodian fees 7,535
- ---------------------------------------------------------------------
Portfolio accounting fees 23,338
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 14,918
- ---------------------------------------------------------------------
Legal fees 3,224
- ---------------------------------------------------------------------
Printing and postage 4,060
- ---------------------------------------------------------------------
Auditing fees 5,011
- ---------------------------------------------------------------------
Fund share registration costs 11,653
- ---------------------------------------------------------------------
Insurance premiums 3,287
- ---------------------------------------------------------------------
Miscellaneous 2,639
- --------------------------------------------------------------------- --------
Total expenses 490,784
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 142,670
- --------------------------------------------------------------------- --------
Net expenses 348,114
- -------------------------------------------------------------------------------- -----------
Net investment income 2,782,829
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (322,423)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (2,078,073)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (2,400,496)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 382,333
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------------
1995* 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 2,782,829 $ 6,023,613
- ---------------------------------------------------------------
Net realized gain (loss) on investments ($322,423 net loss
and $347,369 net gain, respectively, as computed
for federal tax purposes) (322,423) (367,399)
- ---------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (2,078,073) (1,681,025)
- --------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 382,333 3,975,189
- --------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (2,733,857) (6,011,126)
- ---------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions -- (344,594)
- --------------------------------------------------------------- ------------ ------------
Change in net assets from distributions to shareholders (2,733,857) (6,355,720)
- --------------------------------------------------------------- ------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 25,415,302 70,831,278
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,219,505 2,764,678
- ---------------------------------------------------------------
Cost of shares redeemed (30,488,646) (54,475,647)
- --------------------------------------------------------------- ------------ ------------
Change in net assets from Fund share transactions (3,853,839) 19,120,309
- --------------------------------------------------------------- ------------ ------------
Change in net assets (6,205,363) 16,739,778
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 116,660,428 99,920,650
- --------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$61,259 and $12,287, respectively) $110,455,065 $116,660,428
- --------------------------------------------------------------- ------------ ------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------------
1995* 1994 1993**
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.87 $10.07 $10.00
- --------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------
Net investment income 0.24 0.52 0.36
- --------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.21) (0.17) 0.07
- -------------------------------------------------------------- ------ ------ ------
Total from investment operations 0.03 0.35 0.43
- --------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------
Dividends to shareholders from net investment income (0.23) (0.52) (0.36)
- --------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions -- (0.03) --
- -------------------------------------------------------------- ------ ------ ------
Total distributions (0.23) (0.55) (0.36)
- -------------------------------------------------------------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.67 $9.87 $10.07
- -------------------------------------------------------------- ------ ------ ------
TOTAL RETURN*** 0.36% 3.52% 4.43%
- --------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------
Expenses 0.61%(a) 0.59% 0.50%(a)
- --------------------------------------------------------------
Net investment income 4.88%(a) 5.21% 6.25%(a)
- --------------------------------------------------------------
Expense waiver/reimbursement (b) 0.25%(a) 0.29% 0.42%(a)
- --------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------
Net assets, end of period (000 omitted) $110,455 $116,660 $99,921
- --------------------------------------------------------------
Portfolio turnover rate 1% 76% 18%
- --------------------------------------------------------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
** Reflects operations for the period from August 3, 1992 (date of initial
public investment) to
February 28, 1993.
*** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of six diversified portfolios. The financial statements
included herein present only those of DG Limited Term Government Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. As of August 31,
1994, DG Opportunity Fund was effective but did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Corporate bonds (and other fixed income and asset backed securities) are valued
at the last sale price reported on national securities exchanges on that day, if
available. Unlisted bonds and securities otherwise, corporate bonds (and other
fixed-income and asset backed securities) and short-term obligations are valued at the
prices provided by an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which approximates
value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued interest.
The Fund 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 established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------
1995* 1994
- ----------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 2,615,258 7,051,287
- -----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 125,463 276,031
- -----------------------------------------------------------------
Shares redeemed (3,133,076) (5,433,649)
- ----------------------------------------------------------------- ---------- ----------
Net change resulting from Fund share transactions (392,355) 1,893,669
- ----------------------------------------------------------------- ---------- ----------
</TABLE>
* Six months ended August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and the Trust Division of
Commercial National
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
Bank, Commercial National Bank receives an annual fee from the Adviser equal to
.25 of 1% of the Fund's average daily net assets. In addition, Commercial
National Bank may voluntarily choose to reduce its compensation. For the six
months ended August 31, 1994, Commercial National Bank earned a sub-advisory fee
of $142,670, all of which was voluntarily waived.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $24,074 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organization expenses
during the five year period following July 20, 1992 (date the Fund first became
effective). For the six months ended August 31, 1994, the Fund paid $1,768
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended August 31, 1994 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $12,224,700
- ------------------------------------------------------------------------------- -----------
SALES $ 545,000
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Charles L. Davis, Jr.
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Karen M. Brownlee
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
DG
U.S. GOVERNMENT
MONEY MARKET FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
Deposit Guaranty
National Bank
Jackson, MS
Commercial
National Bank
Shreveport, LA
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
AUGUST 31, 1994
23321N103
2091605 (10/94)
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of DG U.S.
Government Money Market Fund (the "Fund"). This report covers activity in the
Fund over the six-month period ended August 31, 1994.
In the Investment Review, the portfolio manager explains the Fund's strategies
in response to economic and market developments. Following the Investment Review
are a complete list of the Fund's investments and Financial Statements.
The recent series of interest rate increases should be welcome to you as an
investor in this Fund, because it helps your cash respond to rate increases on a
daily basis. The Fund invests in a diversified portfolio of short-term U.S.
government money market securities while pursuing a stable share price of $1.*
At the end of the report period, net assets had grown to more than $168 million.
Dividends paid to shareholders during the period totaled more than $2 million,
or $0.02 per share.
Thank you for your ongoing faith in the Fund. We will continue to keep you
up-to-date on your investment and provide your account with the highest level of
personal service.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
* No money market mutual fund can guarantee that a stable net asset value will
be maintained. An investment in the Fund is neither insured nor guaranteed by
the U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
During the last six months the DG U.S. Government Money Market Fund (the "Fund")
yield moved significantly higher with the 30-day average net simple yield
increasing to 3.79% from 2.79%.* The Fund's yield was below the average taxable
money market funds, whose 30-day yield increased to 4.16% from 2.64%. This is
due to the Fund's maturity being longer than the average of all funds, and the
Fund's concentration in U.S. Treasury obligations as opposed to agencies. The
average maturity of the Fund stood at 46 days on August 31, 1994 while the
average taxable money market fund's maturity was 42 days.
The Federal Reserve Board (the "Fed") has made five "preemptive strikes " at
inflation by increasing the federal funds rate to 4.75%. The federal funds rate
increases are the Fed's way of discontinuing its stimulus to the economy and is
moving to a completely neutral stance. The short term fixed income market has
seen the 90-day T-bill yield rise to its current level of 4.61%.
The portfolio structure of approximately 53% repurchase agreements and 47% U.S.
Treasury bills and notes gives it a combination of flexibility from shorter
maturity repurchase agreements and yield from longer maturity U.S. Treasury
bills and notes. We anticipate the portfolio structure to increase slightly in
the dollar amount held in repurchase agreements causing the average maturity to
continue to shorten in anticipation of additional Fed tightening.
* Past performance may not be indicative of future performance.
DG U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--46.7%
- ------------------------------------------------------------------------------------
U.S. TREASURY BILLS--28.8%
----------------------------------------------------------------
$ 3,000,000 9/1/94 $ 3,000,000
----------------------------------------------------------------
3,000,000 9/8/94 2,997,602
----------------------------------------------------------------
5,000,000 9/22/94 4,990,302
----------------------------------------------------------------
4,000,000 9/29/94 3,986,638
----------------------------------------------------------------
4,000,000 10/6/94 3,982,811
----------------------------------------------------------------
3,000,000 10/13/94 2,985,055
----------------------------------------------------------------
3,000,000 10/27/94 2,980,167
----------------------------------------------------------------
3,000,000 11/10/94 2,974,246
----------------------------------------------------------------
4,000,000 11/25/94 3,956,839
----------------------------------------------------------------
3,000,000 12/8/94 2,962,147
----------------------------------------------------------------
5,000,000 12/15/94 4,949,615
----------------------------------------------------------------
3,000,000 12/22/94 2,956,507
----------------------------------------------------------------
3,000,000 2/2/95 2,938,977
----------------------------------------------------------------
3,000,000 2/23/95 2,929,125
---------------------------------------------------------------- ------------
Total 48,590,031
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--17.9%
----------------------------------------------------------------
3,000,000 8.62%, 1/15/95 3,037,992
----------------------------------------------------------------
5,000,000 8.25%, 11/15/94 5,046,176
----------------------------------------------------------------
4,000,000 7.75%, 2/15/95 4,046,133
----------------------------------------------------------------
4,000,000 7.62%, 12/31/94 4,050,748
----------------------------------------------------------------
3,000,000 5.50%, 2/15/95 3,006,151
----------------------------------------------------------------
3,000,000 4.62%, 11/30/94 3,007,629
----------------------------------------------------------------
</TABLE>
DG U.S. GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
----------------------------------------------------------------
$ 4,000,000 4.25%, 10/31/94 $ 4,004,408
----------------------------------------------------------------
4,000,000 3.87%, 2/28/95 4,000,000
---------------------------------------------------------------- ------------
Total 30,199,237
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 78,789,268
---------------------------------------------------------------- ------------
*REPURCHASE AGREEMENTS--53.4%
- ------------------------------------------------------------------------------------
7,131,177 Cantor, Fitzgerald Securities Corp., 4.75%, dated 8/31/94, due
9/1/94 7,131,177
----------------------------------------------------------------
7,500,000 Daiwa Securities America, Inc., 4.77%, dated 8/31/94, due 9/1/94 7,500,000
----------------------------------------------------------------
7,500,000 Eastbridge Capital, Inc., 4.80%, dated 8/31/94, due 9/1/94 7,500,000
----------------------------------------------------------------
38,000,000 ** Kidder, Peabody & Co., Inc., 4.675%, dated 8/22/94, due 9/6/94 38,000,000
----------------------------------------------------------------
30,000,000 ** First Boston Corp., 4.68%, dated 8/29/94, due 9/12/94 30,000,000
---------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 90,131,177
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $168,920,445+
---------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
** Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($168,801,338) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $90,131,177
- ------------------------------------------------------------------
Investments in other securities 78,789,268
- ------------------------------------------------------------------ -----------
Total investments, at amortized cost and value $168,920,445
- --------------------------------------------------------------------------------
Interest receivable 387,037
- --------------------------------------------------------------------------------
Deferred expenses 41,642
- -------------------------------------------------------------------------------- ------------
Total assets 169,349,124
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Dividends payable $ 518,266
- ------------------------------------------------------------------
Accrued expenses 29,520
- ------------------------------------------------------------------ -----------
Total liabilities 547,786
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 168,801,338 shares of beneficial interest outstanding $168,801,338
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds per Share:
($168,801,338 / 168,801,338 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------
Interest income $3,312,098
- ---------------------------------------------------------------------------------
EXPENSES--
- ---------------------------------------------------------------------------------
Investment advisory fee $428,427
- ----------------------------------------------------------------------
Administrative personnel and services fees 107,892
- ----------------------------------------------------------------------
Trustees' fees 1,747
- ----------------------------------------------------------------------
Custodian fees 10,069
- ----------------------------------------------------------------------
Portfolio accounting fees 22,532
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,009
- ----------------------------------------------------------------------
Legal fees 3,786
- ----------------------------------------------------------------------
Printing and postage 3,766
- ----------------------------------------------------------------------
Auditing fees 6,486
- ----------------------------------------------------------------------
Fund share registration costs 19,168
- ----------------------------------------------------------------------
Insurance premiums 3,656
- ----------------------------------------------------------------------
Miscellaneous 2,966
- ---------------------------------------------------------------------- --------
Total expenses 625,504
- ----------------------------------------------------------------------
Deduct--waiver of investment advisory fee 171,371
- ---------------------------------------------------------------------- --------
Net expenses 454,133
- --------------------------------------------------------------------------------- ----------
Net investment income $2,857,965
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-------------------------------
1995* 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 2,857,965 $ 4,342,390
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Dividends to shareholders from net investment income (2,857,965) (4,342,390)
- ------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 158,031,648 317,109,684
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 13,262 4,328
- -------------------------------------------------------------
Cost of shares redeemed (178,558,347) (316,822,908)
- ------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions (20,513,437) 291,104
- ------------------------------------------------------------- ------------- -------------
Change in net assets (20,513,437) 291,104
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 189,314,775 189,023,671
- ------------------------------------------------------------- ------------- -------------
End of period $ 168,801,338 $ 189,314,775
- ------------------------------------------------------------- ------------- -------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
--------------------------------
1995* 1994 1993**
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.02 0.03 0.02
- ---------------------------------------------------------- ----- ----- ------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.03) (0.02)
- ---------------------------------------------------------- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ---------------------------------------------------------- ----- ----- ------
TOTAL RETURN*** 1.70% 2.74% 1.97%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.53%(a) 0.54% 0.41%(a)
- ----------------------------------------------------------
Net investment income 3.34%(a) 2.70% 2.88%(a)
- ----------------------------------------------------------
Expense waiver/reimbursement (b) 0.20%(a) 0.20% 0.38%(a)
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $168,801 $189,315 $189,024
- ----------------------------------------------------------
</TABLE>
* Six months ended August 31, 1994 (unaudited).
** Reflects operations for the period from July 1, 1992 (date of initial public
investment) to February 28, 1993. During the period from March 31, 1992
(start of business) to June 30, 1992, net investment income aggregating
$0.0090 per share ($899) was distributed to Federated Administrative
Services.
*** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of six diversified portfolios. The financial statements
included herein present only those of DG U.S. Government Money Market Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. As of August 31,
1994, DG Opportunity Fund was effective but did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its
portfolios securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued interest.
The Fund 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 established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
</TABLE>
DG U.S GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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). At August
31, 1994, capital paid-in aggregated $168,801,338. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------
1995* 1994
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 158,031,648 317,109,684
- ----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 13,262 4,328
- ----------------------------------------------------------------
Shares redeemed (178,558,347) (316,822,908)
- ---------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions (20,513,437) 291,104
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
* Six months ended August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DG U.S GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $40,903 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following May 5, 1992 (date the Fund first became
effective). For the six months ended August 31, 1994, the Fund paid $2,336
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Charles L. Davis, Jr.
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Karen M. Brownlee
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal. Although money market funds seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able to
do so.
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.
