FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 23321N202
2091602 (10/95)
DG
EQUITY FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
[LOGO]Commercial
National Bank
Shreveport, LA
Sub-Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG Equity
Fund. This report covers activity in the fund over the six-month period ended
August 31, 1995.
The report begins with an investment review, in which the portfolio manager
discusses economic and market developments as well as fund strategy. Following
the investment review is a complete list of fund holdings and its financial
statements.
During the six-month period ended August 31, 1995, the fund's portfolio of
high-quality stocks rewarded shareholders with strong performance. Dividends
paid to shareholders during the period totaled $0.09 per share, while its net
asset value increased from $11.41 on the first day of the period to $12.85 on
the last day of the period. Through its dividends and growth in share price, the
fund delivered a solid total return of 13.45% based on net asset value (9.52%
taking into account the sales charge).* At the end of the reporting period, net
assets stood at more than $355 million.
Thank you for participating in DG Equity 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
* 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.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The first half of the DG Equity Fund's 1995 fiscal year has proven to be very
rewarding for investors. Reflecting most of the remarkable strength exhibited by
the broad market indicators for the period, the fund generated a total return of
13.45% based on net asset value for the six-month period ended August 31, 1995.*
For the latest twelve month period--which would include last fiscal year's
second half and the current fiscal year's first half experiences--the fund
generated an impressive total return of 22.46% based on net asset value (18.18%
taking into account the sales charge)* or approximately 1% more than that of our
benchmark, the Standard & Poor's 500 Composite Stock Index.** For the period
from August 3, 1992 (date of initial public investment) to August 31, 1995, the
fund generated a total return of 37.16% based on net asset value (32.39% taking
into account the sales charge).*
For the most part, we believe our latest successes mirror favorable interest
trends--almost always a positive for growth-style issues--diminishing inflation
related concerns, and investor expectations of average or better earnings growth
for the companies comprising our portfolio. It is our contention that the
expected slowing of overall economic growth rates, over the near term, will not
be felt as dramatically by our growth stock portfolio as would the experiences
of the more economically sensitive value stock portfolios. However, this
well-worn notion remains to be re-tested over this unique economic cycle.
We will continue to take advantage of market unpredictability by applying our
large-cap growth management style consistently and without fail. By doing so, we
believe most major equity management pitfalls can be avoided. We firmly believe
stock price follows earnings growth. Therefore, in our opinion, the best equity
investment for the long-term is a well-diversified portfolio of stocks in which
company earnings can reasonably be expected to grow rapidly and relatively
consistently. Coupled with our unique very high quality issue requirements, a
portfolio such as ours offers considerable long-term equity investment potential
for the discerning investor.
* 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.
** This index is unmanaged.
DG EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--91.8%
- -------------------------------------------------------------------------------------
BUSINESS EQUIPMENT AND SERVICES--8.0%
-----------------------------------------------------------------
150,000 Automatic Data Processing, Inc. $ 9,750,000
-----------------------------------------------------------------
150,000 Donnelley (R.R.) & Sons Co. 5,700,000
-----------------------------------------------------------------
100,000 Dun & Bradstreet Corp. 5,787,500
-----------------------------------------------------------------
180,000 Pitney Bowes, Inc. 7,312,500
----------------------------------------------------------------- ------------
Total 28,550,000
----------------------------------------------------------------- ------------
CAPITAL GOODS--7.1%
-----------------------------------------------------------------
100,000 Dover Corp. 7,975,000
-----------------------------------------------------------------
135,000 General Electric Co. 7,948,125
-----------------------------------------------------------------
150,000 PPG Industries, Inc. 6,412,500
-----------------------------------------------------------------
50,000 Tyco International, LTD 2,956,250
----------------------------------------------------------------- ------------
Total 25,291,875
----------------------------------------------------------------- ------------
CONSUMER DURABLES--0.8%
-----------------------------------------------------------------
50,000 Whirlpool Corp. 2,725,000
----------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--19.6%
-----------------------------------------------------------------
145,000 Coca-Cola Co. 9,316,250
-----------------------------------------------------------------
60,000 Eastman Kodak Co. 3,457,500
-----------------------------------------------------------------
110,000 Heinz (H.J.) Co. 4,661,250
-----------------------------------------------------------------
220,000 International Flavors & Fragrances 10,532,500
-----------------------------------------------------------------
200,000 PepsiCo., Inc. 9,050,000
-----------------------------------------------------------------
80,000 Philip Morris Cos., Inc. 5,970,000
-----------------------------------------------------------------
120,000 Proctor & Gamble Co. 8,325,000
-----------------------------------------------------------------
140,000 Quaker Oats Co. 4,865,000
-----------------------------------------------------------------
200,000 Sara Lee Corp. 5,550,000
-----------------------------------------------------------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
-----------------------------------------------------------------
140,000 Sysco Corp. $ 4,025,000
-----------------------------------------------------------------
90,000 Tambrands, Inc. 4,038,750
----------------------------------------------------------------- ------------
Total 69,791,250
----------------------------------------------------------------- ------------
CONSUMER SERVICES--3.2%
-----------------------------------------------------------------
200,000 Disney (Walt) Co. 11,225,000
----------------------------------------------------------------- ------------
ENERGY--2.9%
-----------------------------------------------------------------
60,000 Amoco Corp. 3,825,000
-----------------------------------------------------------------
90,000 Chevron Corp. 4,353,750
-----------------------------------------------------------------
35,400 Schlumberger, Ltd. 2,283,300
----------------------------------------------------------------- ------------
Total 10,462,050
----------------------------------------------------------------- ------------
HEALTHCARE--15.8%
-----------------------------------------------------------------
180,000 Abbott Laboratories 6,975,000
-----------------------------------------------------------------
120,000 Bristol-Myers Squibb Co. 8,235,000
-----------------------------------------------------------------
70,000 Hillenbrand Industries, Inc. 2,073,750
-----------------------------------------------------------------
120,000 Johnson & Johnson 8,280,000
-----------------------------------------------------------------
100,000 Medtronic, Inc. 9,437,500
-----------------------------------------------------------------
120,000 Merck & Co., Inc. 5,985,000
-----------------------------------------------------------------
170,000 Pfizer, Inc. 8,393,750
-----------------------------------------------------------------
100,000 Schering Plough, Inc. 4,662,500
-----------------------------------------------------------------
30,000 U.S. Healthcare, Inc. 960,000
-----------------------------------------------------------------
30,000 United Healthcare Corp. 1,267,500
----------------------------------------------------------------- ------------
Total 56,270,000
----------------------------------------------------------------- ------------
RAW MATERIALS--3.3%
-----------------------------------------------------------------
75,000 Great Lakes Chemical Corp. 4,959,375
-----------------------------------------------------------------
90,000 Lubrizol Corp. 2,790,000
-----------------------------------------------------------------
120,000 Morton International, Inc. 3,900,000
----------------------------------------------------------------- ------------
Total 11,649,375
----------------------------------------------------------------- ------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
RETAIL--10.8%
-----------------------------------------------------------------
180,000 Albertsons, Inc. $ 5,737,500
-----------------------------------------------------------------
150,000 Home Depot, Inc. 5,981,250
-----------------------------------------------------------------
300,000 McDonald's Corp. 10,950,000
-----------------------------------------------------------------
240,000 Wal-Mart Stores, Inc. 5,910,000
-----------------------------------------------------------------
400,000 Walgreen Co. 9,800,000
----------------------------------------------------------------- ------------
Total 38,378,750
----------------------------------------------------------------- ------------
TECHNOLOGY--16.9%
-----------------------------------------------------------------
120,000 AMP, Inc. 4,875,000
-----------------------------------------------------------------
85,000 Boeing Co. 5,418,750
-----------------------------------------------------------------
200,000 * Compaq Computer Corp. 9,550,000
-----------------------------------------------------------------
130,000 * Digital Equipment Corp. 5,427,500
-----------------------------------------------------------------
170,000 Hewlett-Packard Co. 13,600,000
-----------------------------------------------------------------
80,000 International Business Machines Corp. 8,270,000
-----------------------------------------------------------------
120,000 Motorola, Inc. 8,970,000
-----------------------------------------------------------------
50,000 Raytheon Co. 4,043,750
----------------------------------------------------------------- ------------
Total 60,155,000
----------------------------------------------------------------- ------------
UTILITIES--3.4%
-----------------------------------------------------------------
100,000 AT&T Corp. 5,650,000
-----------------------------------------------------------------
35,000 BellSouth Corp. 2,406,250
-----------------------------------------------------------------
80,000 Central & Southwest Corp. 1,960,000
-----------------------------------------------------------------
40,000 Southwestern Bell Corp. 2,025,000
----------------------------------------------------------------- ------------
Total 12,041,250
----------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $267,341,882) 326,539,550
----------------------------------------------------------------- ------------
</TABLE>
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
**REPURCHASE AGREEMENT--6.8%
- -------------------------------------------------------------------------------------
$24,252,423 Cantor Fitzgerald Securities Corp., 5.85%, dated 8/31/1995,
due 9/1/1995 (at amortized cost) $ 24,252,423
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $291,594,305) $350,791,973+
----------------------------------------------------------------- ------------
</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 $291,594,305. The
net unrealized appreciation of investments on a federal tax cost basis
amounts to $59,197,668, which is comprised of $64,368,729 appreciation and
$5,171,061 depreciation at August 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($355,839,136) at August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $291,594,305) $350,791,973
- --------------------------------------------------------------------------------
Income receivable 761,666
- --------------------------------------------------------------------------------
Receivable for investments sold 8,990,346
- --------------------------------------------------------------------------------
Receivable for shares sold 64,715
- --------------------------------------------------------------------------------
Deferred expenses 24,224
- -------------------------------------------------------------------------------- ------------
Total assets 360,632,924
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $4,669,130
- -------------------------------------------------------------------
Payable for shares redeemed 108,791
- -------------------------------------------------------------------
Accrued expenses 15,867
- ------------------------------------------------------------------- ----------
Total liabilities 4,793,788
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 27,694,850 shares outstanding $355,839,136
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $291,617,044
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 59,197,668
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments 4,459,121
- --------------------------------------------------------------------------------
Undistributed net investment income 565,303
- -------------------------------------------------------------------------------- ------------
Total Net Assets $355,839,136
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Net Asset Value Per Share ($355,839,136 / 27,694,850 shares outstanding) $12.85
- -------------------------------------------------------------------------------- ------------
Offering Price Per Share (100/96.50 of $12.85)* $13.32
- -------------------------------------------------------------------------------- ------------
</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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Dividends $ 3,027,155
- ---------------------------------------------------------------------------------
Interest 769,565
- --------------------------------------------------------------------------------- -----------
Total income 3,796,720
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $1,216,252
- --------------------------------------------------------------------
Administrative personnel and services fee 195,258
- --------------------------------------------------------------------
Custodian fees 17,582
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,249
- --------------------------------------------------------------------
Directors'/Trustees' fees 1,985
- --------------------------------------------------------------------
Auditing fees 6,072
- --------------------------------------------------------------------
Legal fees 929
- --------------------------------------------------------------------
Portfolio accounting fees 34,322
- --------------------------------------------------------------------
Share registration costs 12,369
- --------------------------------------------------------------------
Printing and postage 6,033
- --------------------------------------------------------------------
Insurance premiums 3,520
- --------------------------------------------------------------------
Miscellaneous 5,045
- -------------------------------------------------------------------- ----------
Total expenses 1,517,616
- --------------------------------------------------------------------------------- -----------
Net investment income 2,279,104
- --------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 4,546,151
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 32,862,664
- --------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 37,408,815
- --------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $39,687,919
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, 1995 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1995
--------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------
Net investment income $ 2,279,104 $ 3,920,459
- ------------------------------------------------------
Net realized gain (loss) on investments ($4,546,151
and $2,523,351, respectively, as computed for
federal tax purposes) 4,546,151 2,434,655
- ------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments 32,862,664 11,661,159
- ------------------------------------------------------ -------------- -------------
Change in net assets resulting from operations 39,687,919 18,016,273
- ------------------------------------------------------ -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------
Distributions from net investment income (2,331,539) (3,923,189)
- ------------------------------------------------------
Distributions from net realized gains -- (3,737,081)
- ------------------------------------------------------ -------------- -------------
Change in net assets resulting from distributions
to shareholders (2,331,539) (7,660,270)
- ------------------------------------------------------ -------------- -------------
SHARE TRANSACTIONS--
- ------------------------------------------------------
Proceeds from sale of shares 83,261,842 61,047,804
- ------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,402,234 4,839,980
- ------------------------------------------------------
Cost of shares redeemed (26,179,244) (100,448,383)
- ------------------------------------------------------ -------------- -------------
Change in net assets resulting from share
transactions 58,484,832 (34,560,599)
- ------------------------------------------------------ -------------- -------------
Change in net assets 95,841,212 (24,204,596)
- ------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------
Beginning of period 259,997,924 284,202,520
- ------------------------------------------------------ -------------- -------------
End of period (including undistributed net investment
income of $565,303 and $617,738, respectively) $ 355,839,136 $ 259,997,924
- ------------------------------------------------------ -------------- -------------
</TABLE>
(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>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28,
1995 -------------------------------
(UNAUDITED) 1995 1994 1993(a)
----------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.41 $10.87 $10.54 $10.00
- ---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------
Net investment income 0.09 0.16 0.14 0.12
- ---------------------------------------------------
Net realized and unrealized gain (loss) on
investments 1.44 0.71 0.38 0.52
- --------------------------------------------------- -------- ------ ------ -------
Total from investment operations 1.53 0.87 0.52 0.64
- --------------------------------------------------- -------- ------ ------ -------
LESS DISTRIBUTIONS
- ---------------------------------------------------
Distributions from net investment income (0.09) (0.16) (0.14) (0.10)
- ---------------------------------------------------
Distributions from net realized gain on
investment transactions -- (0.17) (0.05) --
- --------------------------------------------------- -------- ------ ------ -------
Total distributions (0.09) (0.33) (0.19) (0.10)
- --------------------------------------------------- -------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 12.85 $11.41 $10.87 $10.54
- --------------------------------------------------- -------- ------ ------ -------
TOTAL RETURN (b) 13.45% 8.23% 4.99% 6.40%
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------
Expenses 0.94%* 0.95% 0.96% 0.51%*
- ---------------------------------------------------
Net investment income 1.41%* 1.54% 1.38% 2.15%*
- ---------------------------------------------------
Expense waiver/reimbursement (c) -- -- 0.01% 0.53%*
- ---------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------
Net assets, end of period (000 omitted) $355,839 $259,998 $284,203 $181,239
- ---------------------------------------------------
Portfolio turnover 3% 1% 7% 28%
- ---------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) 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 EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investors 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 are 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.
(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.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
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").
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 income. Accordingly, no
provisions for federal tax are necessary.
DG EQUITY FUND
- --------------------------------------------------------------------------------
Additionally, net capital losses of $88,697 attributable to security
transactions incurred after October 31, 1994 are treated as arising on
March 1, 1995, the first day of the Fund's current taxable year.
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.
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 over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(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 shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
- -------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 6,918,577 5,663,505
- --------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 115,735 455,037
- --------------------------------------------------------
Shares redeemed (2,116,834) (9,475,512)
- -------------------------------------------------------- -------------- ---------------
Net change resulting from share transactions 4,917,478 (3,356,970)
- -------------------------------------------------------- -------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund'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.
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
DG EQUITY FUND
- --------------------------------------------------------------------------------
to .25 of 1% of the Fund's average daily net assets. In addition, Trust Division
of Commercial National Bank may voluntarily choose to reduce its compensation.
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 AGENT AND PORTFOLIO ACCOUNTING FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. This
fee is based on the size, type, and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($23,061) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 20, 1992 (the date the Fund became
effective). For the period ended August 31, 1995, the Fund paid $2,377 pursuant
to this agreement.
GENERAL--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
period ended August 31, 1995, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $62,744,825
- ------------------------------------------------------------------------------- -----------
SALES $ 9,477,188
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
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 investment 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.
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 2332IN301
2091604 (10/95)
DG
GOVERNMENT
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
[LOGO]Commercial
National Bank
Shreveport, LA
Sub-Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG Government
Income Fund. This report covers activity in the fund over the six-month period
ended August 31, 1995.
The report begins with an investment review, in which the portfolio manager
discusses economic and market developments as well as fund strategy. Following
the investment review is a complete list of fund holdings and its financial
statements.
As a shareholder in DG Government Income Fund, you are pursuing competitive
monthly income with relative safety, through a diversified portfolio of U.S.
government securities. At the end of the reporting period, 69.3% of the fund's
assets were invested in U.S. Treasury securities, with another 23.2% of assets
invested in high-quality corporate bonds. The remainder of the portfolio was
invested in a repurchase agreement backed by U.S. government securities.
Dividends paid to shareholders during the six-month period ended August 31,
1995, totaled $0.29 per share. The fund's net asset value increased from $9.47
on the first day of the period to $9.84 on the last day of the period. Through
its dividends and growth in share price, the fund delivered a total return of
7.10% based on net asset value (4.99% taking into account the sales charge).* At
the end of the reporting period, net assets stood at more than $106 million.
Thank you for participating in DG 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investors shares, when redeemed, may
be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The yields on fixed-income securities fell during the six-month period ended
August 31, 1995. The corresponding rise in market values of these securities
helped investors recoup some of their unrealized losses suffered in 1994. The
drop in rates was attributed in part to a rate reduction by the Federal Open
Market Committee. Investors continued to hope for a soft landing and a lessening
of inflation fears. All maturity ranges participated in this rally as the yield
curve continued to flatten.
For the six months ended August 31, 1995, the fund's total return was 7.10%
based on net asset value* compared to the Lehman Brothers Government/Corporate
Bond Index** total return of 8.16%. We continued to utilize a barbell strategy
during this period. Our duration of 4.51 years and average maturity of 8.14
years continue to be shorter than the benchmark.
* 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.
** This index is unmanaged.
DG GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--23.2%
- -----------------------------------------------------------------------------------
BANKING--1.6%
----------------------------------------------------------------
$ 800,000 Bankers Trust New York Corp., 4.70%, 7/1/1996 $ 790,960
----------------------------------------------------------------
1,000,000 NationsBank Corp., 5.375%, 4/15/2000 954,420
---------------------------------------------------------------- ------------
Total 1,745,380
---------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICE--1.4%
----------------------------------------------------------------
1,500,000 International Business Machines Corp., 6.375%, 11/1/1997 1,505,340
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--1.8%
----------------------------------------------------------------
889,000 Anheuser-Busch Cos. Inc., 6.90%, 10/1/2002 897,526
----------------------------------------------------------------
1,000,000 H.J. Heinz Co., 6.75%, 10/15/1999 1,010,270
---------------------------------------------------------------- ------------
Total 1,907,796
---------------------------------------------------------------- ------------
FINANCIAL SERVICES--2.8%
----------------------------------------------------------------
1,500,000 Ford Motor Credit Corp., 5.625%, 3/3/1997 1,490,355
----------------------------------------------------------------
437,000 General Motors Acceptance Corp., 9.75%,
(Callable 5/15/1996 @ 100), 5/15/1999 447,303
----------------------------------------------------------------
1,000,000 Norwest Financial, Inc., 6.25%, 2/15/1997 1,002,140
---------------------------------------------------------------- ------------
Total 2,939,798
---------------------------------------------------------------- ------------
HEALTHCARE--0.9%
----------------------------------------------------------------
1,000,000 Upjohn Co., 5.875%, 4/15/2000 975,960
---------------------------------------------------------------- ------------
PHARMACEUTICAL-HEALTH CARE--1.4%
----------------------------------------------------------------
1,400,000 American Home Products, 7.70%, 2/15/2000 1,465,114
---------------------------------------------------------------- ------------
PRINTING & PUBLISHING--1.4%
----------------------------------------------------------------
1,500,000 Gannett, Inc., 5.25%, 3/1/1998 1,465,050
---------------------------------------------------------------- ------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
RAW MATERIALS--1.3%
----------------------------------------------------------------
$ 889,000 DuPont (E.I.) de Nemours & Co., 6.75%, 10/15/2002 $ 896,014
----------------------------------------------------------------
437,000 DuPont (E.I.) de Nemours & Co., 9.15%, 4/15/2000 482,142
---------------------------------------------------------------- ------------
Total 1,378,156
---------------------------------------------------------------- ------------
RETAIL TRADE--2.0%
----------------------------------------------------------------
437,000 Sears, Roebuck & Co., 9.00%, 9/15/1996 449,695
----------------------------------------------------------------
437,000 The Limited, Inc., 7.80%, 5/15/2002 457,841
----------------------------------------------------------------
1,200,000 Wal-Mart, Inc., 5.50%, 9/15/97 1,185,864
---------------------------------------------------------------- ------------
Total 2,093,400
---------------------------------------------------------------- ------------
SHELTER--0.4%
----------------------------------------------------------------
437,000 Kimberly Clark Corp., 9.125%, 6/1/1997 458,299
---------------------------------------------------------------- ------------
TECHNOLOGY SERVICES--0.9%
----------------------------------------------------------------
437,000 Boeing Co., 8.375%, 3/1/1996 442,283
----------------------------------------------------------------
437,000 Texas Instruments, Inc., 9.25%, 6/15/2003 495,095
---------------------------------------------------------------- ------------
Total 937,378
---------------------------------------------------------------- ------------
UTILITIES--7.3%
----------------------------------------------------------------
437,000 ALLTEL Corp., 10.375%, 4/1/2009 464,763
----------------------------------------------------------------
1,000,000 Alabama Power Co., 6.75%, (Callable 2/1/1998 @ 101.6), 2/1/2003 983,600
----------------------------------------------------------------
1,500,000 GTE California, Inc., 6.25%, 1/15/1998 1,494,570
----------------------------------------------------------------
1,500,000 New England Telephone & Telegraph Co., 6.25%, 12/15/1997 1,496,565
----------------------------------------------------------------
1,500,000 Northern States Power Co., 5.50%, 2/1/1999 1,460,115
----------------------------------------------------------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------
$ 1,000,000 Pacific Gas and Electric Co., 6.25%, 3/1/2004 $ 963,590
----------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.625%, 10/1/2002 934,060
---------------------------------------------------------------- ------------
Total 7,797,263
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $24,706,510) 24,668,934
---------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--5.6%
- -----------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--5.6%
----------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.70%, 12/1/1995 2,001,780
----------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.72%, 2/1/1996 2,001,180
----------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.98% 9/1/1995 2,000,940
---------------------------------------------------------------- ------------
TOTAL (IDENTIFIED COST, $6,000,000) 6,003,900
---------------------------------------------------------------- ------------
U.S. TREASURY--63.7%
- -----------------------------------------------------------------------------------
TREASURY BONDS--23.3%
----------------------------------------------------------------
9,000,000 7.125%, 2/15/2023 9,408,150
----------------------------------------------------------------
7,000,000 7.50%, 11/15/2016 7,585,900
----------------------------------------------------------------
7,000,000 7.625%, 11/15/2022 7,749,000
---------------------------------------------------------------- ------------
Total 24,743,050
---------------------------------------------------------------- ------------
TREASURY NOTES--40.4%
----------------------------------------------------------------
10,000,000 7.50%, 10/31/1999 10,519,300
----------------------------------------------------------------
7,000,000 7.875%, 8/15/2001 7,599,130
----------------------------------------------------------------
8,000,000 8.00%, 1/15/1997 8,234,000
----------------------------------------------------------------
7,000,000 8.50%, 11/15/1995 7,041,860
----------------------------------------------------------------
5,000,000 8.50%, 11/15/2000 5,528,400
----------------------------------------------------------------
4,000,000 9.375%, 4/15/1996 4,088,960
---------------------------------------------------------------- ------------
Total 43,011,650
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY (IDENTIFIED COST, $66,113,476) 67,754,700
---------------------------------------------------------------- ------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--7.7%
- -----------------------------------------------------------------------------------
$ 8,154,600 Cantor Fitzgerald Securities Corp., 5.82%, dated 8/31/1995,
due 9/1/1995 (at amortized cost) $ 8,154,600
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $104,974,586) $106,582,134+
---------------------------------------------------------------- ------------
</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 $104,974,586. The
unrealized appreciation of investments on a federal tax basis amounts to
$1,607,548, which is composed of $2,937,030 appreciation and $1,329,482
depreciation at August 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($106,317,249) at August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $104,974,586) $106,582,134
- --------------------------------------------------------------------------------
Cash 57
- --------------------------------------------------------------------------------
Income receivable 1,658,486
- --------------------------------------------------------------------------------
Receivable for shares sold 94,824
- --------------------------------------------------------------------------------
Deferred expenses 14,821
- -------------------------------------------------------------------------------- ------------
Total assets 108,350,322
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $2,000,000
- -------------------------------------------------------------------
Payable for shares redeemed 7,279
- -------------------------------------------------------------------
Accrued expenses 25,794
- ------------------------------------------------------------------- ----------
Total liabilities 2,033,073
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 10,805,923 shares outstanding $106,317,249
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $105,517,730
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,607,548
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,051,287)
- --------------------------------------------------------------------------------
Undistributed net investment income 243,258
- -------------------------------------------------------------------------------- ------------
Total Net Assets $106,317,249
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
Net Asset Value Per Share ($106,317,249 / 10,805,923 shares outstanding) $9.84
- -------------------------------------------------------------------------------- ------------
Offering Price Per Share (100/98.00 of $9.84)* $10.04
- -------------------------------------------------------------------------------- ------------
</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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest $ 4,313,738
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $ 379,464
- --------------------------------------------------------------------
Administrative personnel and services fees 76,493
- --------------------------------------------------------------------
Custodian fees 9,384
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,824
- --------------------------------------------------------------------
Directors'/Trustees' fees 1,840
- --------------------------------------------------------------------
Auditing fees 6,256
- --------------------------------------------------------------------
Legal fees 1,288
- --------------------------------------------------------------------
Portfolio accounting fees 28,888
- --------------------------------------------------------------------
Share registration costs 8,648
- --------------------------------------------------------------------
Printing and postage 6,992
- --------------------------------------------------------------------
Insurance premiums 2,760
- --------------------------------------------------------------------
Miscellaneous 3,128
- -------------------------------------------------------------------- ---------
Total expenses 540,965
- --------------------------------------------------------------------
Deduct--waiver of investment advisory fee 63,244
- -------------------------------------------------------------------- ---------
Net expenses 477,721
- -------------------------------------------------------------------------------- -----------
Net investment income 3,836,017
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain on investments 1,311,871
- --------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 4,471,873
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 5,783,744
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 9,619,761
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1995 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1995
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 3,836,017 $ 8,944,197
- ---------------------------------------------------
Net realized gain (loss) on investments
($1,311,871 and $(181,520), respectively, as
computed for federal tax purposes) 1,311,871 (2,301,667)
- ---------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments 4,471,873 (2,720,070)
- --------------------------------------------------- ---------------- ------------------
Change in net assets resulting from operations 9,619,761 3,922,460
- --------------------------------------------------- ---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (3,765,835) (8,775,580)
- --------------------------------------------------- ---------------- ------------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 22,104,634 101,532,823
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,152,149 3,719,989
- ---------------------------------------------------
Cost of shares redeemed (91,106,945) (50,781,330)
- --------------------------------------------------- ---------------- ------------------
Change in net assets resulting from share
transactions (67,850,162) 54,471,482
- --------------------------------------------------- ---------------- ------------------
Change in net assets (61,996,236) 49,618,362
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 168,313,485 118,695,123
- --------------------------------------------------- ---------------- ------------------
End of period (including undistributed net
investment
income of $243,258 and $173,076, respectively) $ 106,317,249 $ 168,313,485
- --------------------------------------------------- ---------------- ------------------
</TABLE>
(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>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28,
1995 -------------------------------
(UNAUDITED) 1995 1994 1993(a)
----------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.47 $ 9.90 $10.25 $10.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------
Net investment income 0.30 0.54 0.55 0.37
- -------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.36 (0.44) (0.09) 0.25
- ------------------------------------------------------- -------- ------ ------ -------
Total from investment operations 0.66 0.10 0.46 0.62
- ------------------------------------------------------- -------- ------ ------ -------
LESS DISTRIBUTIONS
- -------------------------------------------------------
Distributions from net investment income (0.29) (0.53) (0.55) (0.37)
- -------------------------------------------------------
Distributions from net realized gain on investment
transactions 0.00 0.00 (0.25) 0.00
- -------------------------------------------------------
Distributions in excess of net realized gain on
investments(d) 0.00 0.00 (0.01) 0.00
- ------------------------------------------------------- -------- ------ ------ -------
Total distributions (0.29) (0.53) (0.81) (0.37)
- ------------------------------------------------------- -------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 9.84 $ 9.47 $ 9.90 $10.25
- ------------------------------------------------------- -------- ------ ------ -------
TOTAL RETURN (b) 7.10% 1.20% 4.55% 6.40%
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 0.75%* 0.68% 0.70% 0.50%*
- -------------------------------------------------------
Net investment income 6.05%* 5.79% 5.34% 6.45%*
- -------------------------------------------------------
Expense waiver/reimbursement (c) 0.10%* 0.15% 0.19% 0.41%*
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $106,317 $168,313 $118,695 $111,435
- -------------------------------------------------------
Portfolio turnover 14% 31% 49% 78%
- -------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) This distribution does 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, 1995
(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 are 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.
(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.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--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").
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 income. Accordingly, no
provisions for federal tax are necessary.
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
At February 28, 1995, the Fund, for federal tax purposes, had a capital
loss carryforward of $181,520, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
--------------- -----------------
<S> <C>
2003 $ 181,520
</TABLE>
Additionally, net capital losses of $2,181,240 attributable to security
transactions incurred after October 31, 1994 are treated as arising on
March 1, 1995, the first day of the Fund's next taxable year.
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.
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 over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(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 shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
- --------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 2,275,017 10,805,072
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 119,331 397,343
- ---------------------------------------------------
Shares redeemed (9,361,142) (5,423,669)
- --------------------------------------------------- -------------- ---------------
Net change resulting from share transactions (6,966,794) (5,778,746)
- --------------------------------------------------- -------------- ---------------
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund'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 any 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, Trust Division of Commercial National Bank may voluntarily
choose to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This 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 AGENT AND PORTFOLIO ACCOUNTING FEES--Federated Services Company
("Fserv") serves as transfer and dividend disbursing agent for the Fund. This
fee is based on the size, type, and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($21,681) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 20, 1992 (the date the Fund became
effective). For the period ended August 31, 1995, the Fund paid $2,224 pursuant
to this agreement.
GENERAL--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
period ended August 31, 1995 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $17,030,000
- ------------------------------------------------------------------------------- -----------
SALES $77,736,000
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and
John E. Murray, Jr. Secretary
Wesley W. Posvar Charles L. Davis, Jr.
Marjorie P. Smuts Vice President and Assistant
Treasurer
C. Grant Anderson
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 investment 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.
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 23321N400
2091603 (10/95)
DG
LIMITED TERM
GOVERNMENT
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
[LOGO]Commercial
National Bank
Shreveport, LA
Sub-Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG Limited
Term Government Income Fund. This report covers activity in the fund over the
six-month period ended August 31, 1995.
The report begins with an investment review, in which the portfolio manager
discusses economic and market developments as well as fund strategy. Following
the investment review is a complete list of fund holdings and its financial
statements.
As a shareholder in DG Limited Term Government Income Fund, you are pursuing
competitive monthly income with relative safety. The fund invests primarily in a
diversified portfolio of U.S. government and corporate bonds. At the end of the
reporting period, 72.6% of the fund's assets were invested in U.S. Treasury
obligations, with another 22.5% of assets invested in corporate bonds. The
remainder of the portfolio was invested in a repurchase agreement backed by U.S.
government securities.
During the six-month period ended August 31, 1995, the fund paid dividends of
$0.26 per share. The fund's net asset value increased from $9.65 on the first
day of the period to $9.80 on the last day of the period. Through its dividends
and growth in share price, the fund delivered a total return of 4.30% based on
net asset value (2.18% taking into account the sales charge).* At the end of the
period, net assets stood at $94 million.
Thank you for participating in 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
*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.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The yields on fixed-income securities fell during the six-month period ended
August 31, 1995. The corresponding rise in market values of these securities
helped investors recoup some of their unrealized losses suffered in 1994. The
drop in rates was attributed in part to a rate reduction by the Federal Open
Market Committee. Investors continued to hope for a soft landing and a lessening
of inflation fears. All maturity ranges participated in this rally as the yield
curve continued to flatten.
For the six months ended August 31, 1995, the fund's total rate of return was
4.30% based on net asset value* compared to the Merrill Lynch 1-3 Year Treasury
Index** total return of 4.83%. The fund's duration of 1.46 years and average
maturity of 1.62 years were reduced during the period. U.S. Treasury securities
continue to hold a majority position in the fund. Corporate securities may be
utilized more in the future as spreads to Treasuries have widened, providing a
more adequate return for the additional risk.
* 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.
** This index is unmanaged.
DG LIMITED TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
CORPORATE BONDS--22.5%
- -------------------------------------------------------------------------------------
BANKING--2.8%
------------------------------------------------------------------
$1,200,000 Bankers Trust New York Corp., 4.70%, 7/1/1996 $ 1,186,440
------------------------------------------------------------------
1,500,000 NationsBank Corp., 5.375%, 12/1/1995 1,498,950
------------------------------------------------------------------ -----------
Total 2,685,390
------------------------------------------------------------------ -----------
BUSINESS EQUIPMENT & SERVICES--1.1%
------------------------------------------------------------------
1,000,000 International Business Machines Corp., 6.375%, 11/1/1997 1,003,560
------------------------------------------------------------------ -----------
CAPITAL GOODS--1.6%
------------------------------------------------------------------
1,500,000 General Electric Capital Corp., 5.25%, 11/15/1995 1,498,605
------------------------------------------------------------------ -----------
CONSUMER NON-DURABLES--2.3%
------------------------------------------------------------------
1,447,000 Kellogg Co., 5.90%, 7/15/1997 1,440,575
------------------------------------------------------------------
725,000 Philip Morris Cos. Inc., 7.50%, 3/15/1997 739,123
------------------------------------------------------------------ -----------
Total 2,179,698
------------------------------------------------------------------ -----------
FINANCIAL SERVICES--3.6%
------------------------------------------------------------------
905,000 American General Finance Corp., 7.15%, 5/15/1997 919,199
------------------------------------------------------------------
1,500,000 Ford Motor Credit Corp., 5.625%, 3/3/1997 1,490,356
------------------------------------------------------------------
1,000,000 Norwest Financial, Inc., 6.25%, 2/15/1997 1,002,140
------------------------------------------------------------------ -----------
Total 3,411,695
------------------------------------------------------------------ -----------
HEALTHCARE--1.3%
------------------------------------------------------------------
1,250,000 Upjohn Co., 5.875%, 4/15/2000 1,219,950
------------------------------------------------------------------ -----------
PHARMACEUTICALS--1.1%
------------------------------------------------------------------
1,000,000 American Home Products, 7.70%, 2/15/2000 1,046,510
------------------------------------------------------------------ -----------
POLLUTION CONTROL--0.8%
------------------------------------------------------------------
723,000 Waste Management, Inc., 6.375%, 7/1/1997 725,292
------------------------------------------------------------------ -----------
PUBLISHING--1.0%
------------------------------------------------------------------
1,000,000 Gannett, Inc., 5.25%, 3/1/1998 976,700
------------------------------------------------------------------ -----------
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------------------
RETAIL TRADE--1.2%
------------------------------------------------------------------
$1,136,000 Wal-Mart Stores Inc., 5.50%, 9/15/1997 $ 1,122,618
------------------------------------------------------------------ -----------
UTILITIES--5.7%
------------------------------------------------------------------
1,000,000 GTE California, Inc., 6.25%, 1/15/1998 996,380
------------------------------------------------------------------
1,000,000 New England Telephone & Telegraph Co., 6.25%, 12/15/1997 997,710
------------------------------------------------------------------
1,500,000 Northern States Power Co., 5.50%, 2/1/1999 1,460,115
------------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 5.375%, 8/1/1998 972,680
------------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.60%, 12/15/1998 976,300
------------------------------------------------------------------ -----------
Total 5,403,185
------------------------------------------------------------------ -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $24,254,235) 21,273,203
------------------------------------------------------------------ -----------
GOVERNMENT AGENCIES--8.5%
- -------------------------------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.73%, 11/1/1995 2,001,460
------------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.73%, 3/1/1996 2,001,920
------------------------------------------------------------------
2,000,000 Federal Farm Credit Bank, 5.98%, 9/1/1995 2,000,940
------------------------------------------------------------------
2,000,000 Federal Home Loan Bank, 6.23%, 4/24/1996 2,007,860
------------------------------------------------------------------ -----------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $7,998,120) 8,012,180
------------------------------------------------------------------ -----------
U.S. TREASURY NOTES--64.1%
- -------------------------------------------------------------------------------------
9,000,000 5.125%, 3/31/1998 8,834,130
------------------------------------------------------------------
2,000,000 5.625%, 6/30/1997 1,993,600
------------------------------------------------------------------
4,000,000 5.75%, 10/31/1997 3,991,240
------------------------------------------------------------------
8,000,000 6.25%, 1/31/1997 8,054,400
------------------------------------------------------------------
7,000,000 6.50%, 4/30/1997 7,076,090
------------------------------------------------------------------
4,000,000 6.75%, 6/30/1999 4,096,040
------------------------------------------------------------------
5,000,000 7.375%, 5/15/1996 5,057,450
------------------------------------------------------------------
5,000,000 7.50%, 1/31/1996 5,038,700
------------------------------------------------------------------
2,000,000 7.50%, 10/31/1999 2,103,860
------------------------------------------------------------------
4,000,000 8.00%, 1/15/1997 4,117,000
------------------------------------------------------------------
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
- -------------------------------------------------------------------------------------
$7,000,000 8.00%, 10/15/1996 $ 7,170,870
------------------------------------------------------------------
3,000,000 8.50%, 11/15/1995 3,017,940
------------------------------------------------------------------ -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $58,033,355) 60,551,320
------------------------------------------------------------------ -----------
REPURCHASE AGREEMENT--5.5%**
- -------------------------------------------------------------------------------------
5,161,400 Cantor Fitzgerald Securities Corp., 5.82%, dated 8/31/1995, due
9/1/1995 (at amortized cost) 5,161,400
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $95,447,110) $94,998,103*
------------------------------------------------------------------ -----------
</TABLE>
* The cost for federal tax purposes amounts to $95,447,110. The net unrealized
depreciation of investments on a federal tax basis amounts to $449,007, which
is comprised of $504,820 appreciation and $953,827 depreciation at August 31,
1995.
** The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($94,423,170) at August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
DG LIMITED TERM GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $95,447,110) $94,998,103
- -------------------------------------------------------------------------------
Cash 61
- -------------------------------------------------------------------------------
Income receivable 1,459,926
- -------------------------------------------------------------------------------
Receivable for shares sold 5,005
- -------------------------------------------------------------------------------
Deferred expenses 11,975
- ------------------------------------------------------------------------------- -----------
Total assets 96,475,070
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for investments purchased $2,000,000
- ------------------------------------------------------------------
Payable for shares redeemed 32,301
- ------------------------------------------------------------------
Accrued expenses 19,599
- ------------------------------------------------------------------ ----------
Total liabilities 2,051,900
- ------------------------------------------------------------------------------- -----------
NET ASSETS for 9,635,941 shares outstanding $94,423,170
- ------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid-in capital $97,117,639
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments (449,007)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,409,807)
- -------------------------------------------------------------------------------
Undistributed net investment income 164,345
- ------------------------------------------------------------------------------- -----------
Total Net Assets $94,423,170
- ------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------
NET ASSET VALUE Per Share ($94,423,170 / 9,635,941 shares outstanding) $9.80
- ------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/98.00 of $9.80)* $10.00
- ------------------------------------------------------------------------------- -----------
</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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest $2,974,436
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $291,665
- ---------------------------------------------------------------------
Administrative personnel and services fee 58,625
- ---------------------------------------------------------------------
Custodian fees 7,544
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,560
- ---------------------------------------------------------------------
Directors'/Trustees' fees 1,656
- ---------------------------------------------------------------------
Auditing fees 6,072
- ---------------------------------------------------------------------
Legal fees 552
- ---------------------------------------------------------------------
Portfolio accounting fees 26,312
- ---------------------------------------------------------------------
Share registration costs 8,464
- ---------------------------------------------------------------------
Printing and postage 6,072
- ---------------------------------------------------------------------
Insurance premiums 2,208
- ---------------------------------------------------------------------
Miscellaneous 4,048
- --------------------------------------------------------------------- --------
Total expenses 429,778
- ---------------------------------------------------------------------
Deduct-Waiver of investment advisory fee 97,222
- --------------------------------------------------------------------- --------
Net expenses 332,556
- -------------------------------------------------------------------------------- ----------
Net investment income 2,641,880
- -------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized loss on investments (566,263)
- --------------------------------------------------------------------------------
Net change in unrealized depreciation of investments 2,046,678
- -------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 1,480,415
- -------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,122,295
- -------------------------------------------------------------------------------- ----------
</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>
SIX MONTHS ENDED
AUGUST 31, 1995 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1995
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 2,641,880 $ 5,347,922
- ---------------------------------------------------
Net realized loss on investments ($566,263 and
1,406,691, respectively, as computed for federal
tax purposes) (566,263) (1,068,070)
- ---------------------------------------------------
Net change in unrealized depreciation of
investments 2,046,678 (1,836,643)
- --------------------------------------------------- --------------- ------------
Change in net assets resulting from operations 4,122,295 2,443,209
- --------------------------------------------------- --------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (2,571,471) (5,266,273)
- --------------------------------------------------- --------------- ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 11,252,938 43,863,105
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,082,036 2,064,317
- ---------------------------------------------------
Cost of shares redeemed (15,679,062) (63,548,352)
- --------------------------------------------------- --------------- ------------
Change in net assets resulting from share
transactions (3,344,088) (17,620,930)
- --------------------------------------------------- --------------- ------------
Change in net assets (1,793,264) (20,443,994)
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 96,216,434 116,660,428
- --------------------------------------------------- --------------- ------------
End of period (including undistributed net
investment income of $164,345 and $93,936,
respectively) $ 94,423,170 $ 96,216,434
- --------------------------------------------------- --------------- ------------
</TABLE>
(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>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28,
1995 ------------------------------
(UNAUDITED) 1995 1994 1993(a)
----------- ----- ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.65 $9.87 $10.07 $10.00
- --------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------
Net investment income 0.27 0.49 0.52 0.36
- --------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.14 (0.23) (0.17) 0.07
- -------------------------------------------------------- -------- ----- ------ -----
Total from investment operations 0.41 0.26 0.35 0.43
- -------------------------------------------------------- -------- ----- ------ -----
LESS DISTRIBUTIONS
- --------------------------------------------------------
Distributions from net investment income (0.26) (0.48) (0.52) (0.36)
- --------------------------------------------------------
Distributions in excess of net investment income 0.00 0.00 (0.03) --
- -------------------------------------------------------- -------- ----- ------ -----
Total distributions (0.26) (0.48) (0.55) (0.36)
- -------------------------------------------------------- -------- ----- ------ -----
NET ASSET VALUE, END OF PERIOD $9.80 $9.65 $ 9.87 $10.07
- -------------------------------------------------------- -------- ----- ------ -----
TOTAL RETURN (b) 4.30% 2.72% 3.52% 4.43%
- --------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------
Expenses 0.69%* 0.63% 0.59% 0.50%*
- --------------------------------------------------------
Net investment income 5.49%* 5.00% 5.21% 6.25%*
- --------------------------------------------------------
Expense waiver/reimbursement (c) 0.20%* 0.25% 0.29% 0.42%*
- --------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------
Net assets, end of period (000 omitted) $94,423 $96,216 $116,660 $99,921
- --------------------------------------------------------
Portfolio turnover 38% 14% 76% 18%
- --------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) 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, 1995
(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 are 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.
(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.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--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").
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 income. Accordingly, no
provisions for federal tax are necessary.
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
At February 28, 1995, the Fund, for federal tax purposes, had a capital
loss carryforward of $1,406,691, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any, to the
extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Fund of any liability for federal tax. Pursuant to the Code, such
capital loss carryforward will expire as follows:
<TABLE>
<S> <C>
Expiration Year Expiration Amount
2003 $1,406,691
</TABLE>
Additionally, net capital losses of $437,277, attributable to security
transactions incurred after October 31, 1994 are treated as arising on
March 1, 1995, the Fund's current taxable year.
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.
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 over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(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 shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
- ---------------------------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold 1,155,429 4,530,674
- ----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 111,134 232,522
- ----------------------------------------------------
Shares redeemed (1,605,773) (6,604,481)
- ---------------------------------------------------- ------------- --------------
Net change resulting from share transactions (339,210) (1,841,285)
- ---------------------------------------------------- ------------- --------------
</TABLE>
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund'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 any 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, Trust Division of Commercial National Bank may voluntarily
choose to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This 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 AGENT AND PORTFOLIO ACCOUNTING FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type, and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily 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 organizational expenses
during the five year period following July 20, 1992 (the date the Fund became
effective). For the period ended August 31, 1995, the Fund paid $2,490 pursuant
to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1995 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $36,267,847
- ------------------------------------------------------------------------------- -----------
SALES $33,358,512
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
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 investment 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.
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 23321N509
3091403 (10/95)
DG
MUNICIPAL
INCOME FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
[LOGO]Commercial
National Bank
Shreveport, LA
Sub-Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG Municipal
Income Fund. This report covers activity in the fund over the six-month period
ended August 31, 1995.
The report begins with an investment review, in which the portfolio manager
discusses economic and market developments as well as fund strategy. Following
the investment review is a complete list of fund holdings and its financial
statements.
DG Municipal Income Fund helps you keep more of what you earn by investing in a
diverse portfolio of long-term municipal securities.* As of August 31, 1995, the
fund was invested in high-quality securities issued by municipalities across the
U.S. The income earned by these securities is free of federal regular income
tax.
Tax-free dividends paid to shareholders during the six-month period ended August
31, 1995, totaled $0.24 per share. The fund's net asset value increased from
$10.15 on the first day of the period to $10.43 on the last day of the period.
Through its dividends and growth in share price, the fund delivered a total
return of 5.23% based on net asset value (3.10% taking into account the sales
charge).** At the end of the reporting period, net assets stood at more than $43
million.
Thank you for participating in DG Municipal 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
* 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.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG Municipal Income Fund was established in December 1992 to provide investors
with the ability to invest in a diversified portfolio of quality long-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 six months consisted largely of
general obligations of states, counties and cities. The fund is
currently-managed with a ten-year average maturity. This is a change from our
last reporting period. We took advantage of higher prices for municipal bonds
and shortened the portfolio's average weighted maturity. The fund's 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 5.23% based on net asset value. For the same period, the 30-day SEC
yield was 4.60%.**
The fund's 30-day distribution rate as of August 31, 1995 was 4.69% for shares
based on net asset value (4.59% taking into account the sales charge).*** The
fund's net assets increased from $41.5 million on February 28, 1995 to $43.4
million as of August 31, 1995.
* 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. Yield will vary.
*** Distribution rate reflects actual distribution 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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--94.5%
- ----------------------------------------------------------------------
ALABAMA--3.5%
--------------------------------------------------------
$ 500,000 Huntsville, AL, 6.00% GO Bonds, 11/1/2012 (Callable
11/1/2002 @ 102) AA $ 511,980
--------------------------------------------------------
1,000,000 Jefferson County, AL, 6.00% Sewer Revenue Bonds
(Original Issue Discount: 6.30%), 9/1/2013 (Callable
9/1/2002 @ 102) A1 1,006,210
-------------------------------------------------------- -----------
Total 1,518,190
-------------------------------------------------------- -----------
ARIZONA--2.2%
--------------------------------------------------------
1,000,000 Phoenix, AZ, 4.90% GO Bonds (Series C), 7/1/2008 AA+ 965,730
-------------------------------------------------------- -----------
CALIFORNIA--2.4%
--------------------------------------------------------
1,000,000 State of California, 5.75% GO UT Bonds, 5/1/2007
(Callable 5/1/2004 @ 102) A1 1,032,100
-------------------------------------------------------- -----------
CONNECTICUT--2.4%
--------------------------------------------------------
1,000,000 State of Connecticut, 5.80% GO UT Bonds (Series C),
8/15/2008 (Callable 8/15/2004 @ 101) Aa 1,045,880
-------------------------------------------------------- -----------
FLORIDA--6.9%
--------------------------------------------------------
1,000,000 Broward County, FL, School District, 5.60% UT Bonds,
2/15/2007 (Callable 2/15/2003 @ 102) AA 1,031,810
--------------------------------------------------------
1,000,000 Jacksonville, FL, Electric Authority, 5.50% Refunding
Revenue Bonds, 10/1/2013 Aa1 967,700
--------------------------------------------------------
1,000,000 St. Petersburg, FL, Public Utilities, 5.50% Revenue
Bonds, 10/1/2009 Aa 999,940
-------------------------------------------------------- -----------
Total 2,999,450
-------------------------------------------------------- -----------
HAWAII--1.2%
--------------------------------------------------------
500,000 State of Hawaii, 5.75% GO Bonds, 1/1/2008 AA 522,905
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
ILLINOIS--4.6%
--------------------------------------------------------
$ 500,000 Du Page County, IL, 5.40% GO Bonds, 1/1/2007 AAA $ 505,070
--------------------------------------------------------
1,000,000 State of Illinois, 5.60% GO UT Bonds, 4/1/2008
(Callable 4/1/2004 @ 102) Aa 1,009,480
--------------------------------------------------------
500,000 State of Illinois, 5.875% GO Bonds, 6/1/2011
(Callable 6/1/2002 @ 102) Aa 501,470
-------------------------------------------------------- -----------
Total 2,016,020
-------------------------------------------------------- -----------
INDIANA--1.2%
--------------------------------------------------------
500,000 Indianapolis, IN, 6.00% Local Public Improvement GO
Bonds, 7/1/2010 (Callable 7/1/2003 @ 102) Aa 517,595
-------------------------------------------------------- -----------
KENTUCKY--2.2%
--------------------------------------------------------
1,000,000 State of Kentucky, Property & Building Commission, 5.00%
Revenue Refunding Bonds (Project No. 55), 9/1/2009 A 938,610
-------------------------------------------------------- -----------
LOUISIANA--1.2%
--------------------------------------------------------
500,000 Louisiana Public Facilities Authority, 6.05% Hospital
Revenue Refunding Bonds (MBIA Insured), 12/1/2008 AAA 515,650
-------------------------------------------------------- -----------
MARYLAND--2.4%
--------------------------------------------------------
1,000,000 State of Maryland, 5.50% GO UT Bonds (Series BB),
6/1/2009 (Callable 6/1/2004 @ 102) AAA 1,022,930
-------------------------------------------------------- -----------
MASSACHUSETTS--3.6%
--------------------------------------------------------
450,000 State of Massachusetts, 6.00% GO Bonds (Consolidated
Loan Series A)/(Capital Guaranty Insured), 6/1/2011 AAA 458,699
--------------------------------------------------------
1,000,000 State of Massachusetts, 6.25% GO UT Bonds (Series A),
7/1/2003 A1 1,094,340
-------------------------------------------------------- -----------
Total 1,553,039
-------------------------------------------------------- -----------
MISSISSIPPI--19.4%
--------------------------------------------------------
1,000,000 Hinds County, MS, 5.50% GO UT Refunding Bonds (MBIA
Insured), 3/1/2008 AAA 1,022,700
--------------------------------------------------------
1,125,000 Jackson, MS, 5.85% GO UT Bonds (MBIA Insured), 5/1/2006
(Callable 5/1/2002 @ 100) AAA 1,173,375
--------------------------------------------------------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
MISSISSIPPI--CONTINUED
--------------------------------------------------------
$ 500,000 Jackson, MS, Redevelopment Authority Urban Renewal,
5.75%, 7/1/2008 A $ 507,670
--------------------------------------------------------
700,000 Lamar County, MS, 4.85% Pollution Control Revenue Bonds,
12/1/2006 (Callable 12/1/2003 @ 100) Aa3 647,178
--------------------------------------------------------
1,000,000 Madison County, MS, 5.10% Refunding School District GO
Bonds (AMBAC Insured), 6/1/2008 AAA 974,310
--------------------------------------------------------
1,000,000 Mississippi Hospital Equipment & Facilities Authority,
5.50% Revenue Refunding & Improvement Bonds (AMBAC
Insured), 5/15/2009 AAA 987,600
--------------------------------------------------------
1,000,000 State of Mississippi, 5.50% GO UT Bonds (Series A),
5/1/2000 Aa 1,048,460
--------------------------------------------------------
1,000,000 State of Mississippi, 5.90% Capital Improvement GO Bonds
(Original Issue Discount: 5.95%), 12/15/2008 AAA 1,081,580
--------------------------------------------------------
1,000,000 Tupelo, MS, Public School District, 5.00% GO UT Bonds,
(AMBAC Insured), 12/1/2007 (Callable 6/1/2004 @ 100) Aaa 979,300
-------------------------------------------------------- -----------
Total 8,422,173
-------------------------------------------------------- -----------
MISSOURI--1.2%
--------------------------------------------------------
500,000 State of Missouri Water Pollution Control, 5.25% GO
Bonds (Series B), 8/1/2008 (Callable 8/1/2008 @ 100) AAA 504,880
-------------------------------------------------------- -----------
MONTANA--2.2%
--------------------------------------------------------
1,000,000 State of Montana, 4.875% GO Bonds (Series A), 8/1/2009 Aa 948,110
-------------------------------------------------------- -----------
NEVADA--3.4%
--------------------------------------------------------
500,000 Las Vegas Valley, NV, 5.75% Water District (MBIA
Insured), 9/1/2008 AAA 508,920
--------------------------------------------------------
1,000,000 State of Nevada, 4.90% Refunding Bonds (Project R-5)/
(Series A), 11/1/2007 AA 965,260
-------------------------------------------------------- -----------
Total 1,474,180
-------------------------------------------------------- -----------
NEW JERSEY--1.2%
--------------------------------------------------------
500,000 State of New Jersey, 5.90% Refunding GO Bonds (Series
B), 2/15/2008 AA+ 525,105
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
NORTH CAROLINA--3.4%
--------------------------------------------------------
$ 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 $ 968,790
--------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 6.125%
Revenue Refunding Bonds (Series B)/(Original Issue
Discount: 6.30%), 1/1/2009 A 504,255
-------------------------------------------------------- -----------
Total 1,473,045
-------------------------------------------------------- -----------
NORTH DAKOTA--1.2%
--------------------------------------------------------
500,000 North Dakota Building Authority, 6.00% Revenue Bonds
(Series A)/(MBIA Insured), 6/1/2010 AAA 516,335
-------------------------------------------------------- -----------
OREGON--2.3%
--------------------------------------------------------
1,000,000 Portland, OR, 4.90% GO Bonds, 10/1/2007 AAA 982,080
-------------------------------------------------------- -----------
PENNSYLVANIA--1.1%
--------------------------------------------------------
450,000 State of Pennsylvania, 5.875% GO UT Bonds, 12/1/2006 AA 476,122
-------------------------------------------------------- -----------
RHODE ISLAND--1.2%
--------------------------------------------------------
500,000 Providence, RI, 5.90% GO Bonds, 1/15/2009 (Callable
1/15/2002 @ 101) AA+ 517,210
-------------------------------------------------------- -----------
TENNESSEE--4.7%
--------------------------------------------------------
1,000,000 Memphis, TN, 4.90% GO Bonds (Series A), 8/1/2006
(Callable 8/1/2002 @ 101) AA 991,620
--------------------------------------------------------
1,000,000 Metropolitan Government Nashville & Davidson County, TN,
5.70% GO Bonds (Original Issue Discount: 5.80%),
5/15/2007 (Callable 5/15/2002 @ 102) AA 1,040,950
-------------------------------------------------------- -----------
Total 2,032,570
-------------------------------------------------------- -----------
TEXAS--8.4%
--------------------------------------------------------
500,000 Corpus Christi, TX, 6.00% GO Bonds (Series 1993),
3/1/2010 (Callable 3/1/2003 @ 100) AAA 508,440
--------------------------------------------------------
500,000 El Paso, TX, 5.75% Refunding Bonds (Series A), 7/1/2007
(Callable 7/1/2002 @ 100) AAA 515,315
--------------------------------------------------------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
TEXAS--CONTINUED
--------------------------------------------------------
$ 500,000 Harris County, TX, 6.20% Flood Control Bonds (Series B),
10/1/2011 (Callable 10/1/2002 @ 100) AA+ $ 546,920
--------------------------------------------------------
500,000 Houston, TX, 5.90% Water & Sewer Revenue Bonds,
12/1/2005 (Callable 2/1/2002 @ 102) AAA 534,485
--------------------------------------------------------
1,000,000 Houston, TX, School District, 5.50% Refunding Bonds,
8/15/2008 AAA 1,016,050
--------------------------------------------------------
500,000 State of Texas Public Finance Authority, 5.90% GO Bonds
(Original Issue Discount: 6.00%), 10/1/2011 (Callable
4/1/2005 @ 100) AA 512,840
-------------------------------------------------------- -----------
Total 3,634,050
-------------------------------------------------------- -----------
VIRGINIA--3.5%
--------------------------------------------------------
1,000,000 Fairfax County, VA, 5.50% Public Improvement, GO UT
Bonds (Series A), 6/1/2008 (Callable 6/1/2002 @ 102) AAA 1,020,780
--------------------------------------------------------
500,000 State of Virginia, Transportation Board, 6.00% Revenue
Bonds, 4/1/2010 (Callable 4/1/2002 @ 102) AA 513,110
-------------------------------------------------------- -----------
Total 1,533,890
-------------------------------------------------------- -----------
WASHINGTON--5.1%
--------------------------------------------------------
500,000 King County, WA, 6.00% GO Bonds (Series A), 12/1/2010
(Callable 12/1/2003 @ 100) AA+ 514,345
--------------------------------------------------------
500,000 Port of Seattle, WA, 6.25% GO Bonds (Series A),
11/1/2010 (Callable 11/1/2002 @ 102) Aa 517,930
--------------------------------------------------------
500,000 State of Washington, 6.25% GO Bonds, 9/1/2009 (Callable
9/1/2001 @ 100) AA 518,425
--------------------------------------------------------
650,000 Tacoma, WA, 6.25% Electric Revenue Bonds (AMBAC
Insured), 1/1/2011 (Callable 1/1/2002 @ 102) AAA 676,013
-------------------------------------------------------- -----------
Total 2,226,713
-------------------------------------------------------- -----------
</TABLE>
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
- ----------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
WISCONSIN--2.4%
--------------------------------------------------------
$ 500,000 Green Bay, WI, 6.00% GO Bonds, 4/1/2010 Aa $ 509,925
--------------------------------------------------------
500,000 State of Wisconsin, 6.30% GO Bonds (Series A), 5/1/2012
(Callable 5/1/2002 @ 100) AA 548,585
-------------------------------------------------------- -----------
Total 1,058,510
-------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $40,186,481) 40,973,072
-------------------------------------------------------- -----------
MUTUAL FUND SHARES--4.3%
- ----------------------------------------------------------------------
724,346 Dreyfus Tax Exempt Cash Management 724,346
--------------------------------------------------------
1,146,299 Lehman Municipal Money Market Fund 1,146,299
-------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 1,870,645
-------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $42,057,126) $42,843,717+
-------------------------------------------------------- -----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $42,057,126. The
unrealized appreciation of investments on a federal tax basis amounts to
$786,591, which is comprised of $1,029,203 appreciation and $242,612
depreciation at August 31, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($43,360,593) at August 31, 1995.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $42,057,126) $42,843,717
- --------------------------------------------------------------------------------
Income receivable 634,369
- --------------------------------------------------------------------------------
Receivable for shares sold 20,000
- --------------------------------------------------------------------------------
Deferred expenses 2,392
- -------------------------------------------------------------------------------- -----------
Total assets 43,500,478
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for shares redeemed $117,100
- ---------------------------------------------------------------------
Accrued expenses 22,785
- --------------------------------------------------------------------- --------
Total liabilities 139,885
- -------------------------------------------------------------------------------- -----------
Net Assets for 4,158,637 shares outstanding $43,360,593
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $42,663,128
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 786,591
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (113,237)
- --------------------------------------------------------------------------------
Undistributed net investment income 24,111
- -------------------------------------------------------------------------------- -----------
Total Net Assets $43,360,593
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Net Asset Value Per Share ($43,360,593 / 4,158,637 shares outstanding) $10.43
- -------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/98.00 of $10.43)* $10.64
- -------------------------------------------------------------------------------- -----------
</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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $1,151,862
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $127,204
- ----------------------------------------------------------------------
Administrative personnel and services fee 25,563
- ----------------------------------------------------------------------
Custodian fees 11,224
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 13,984
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,104
- ----------------------------------------------------------------------
Auditing fees 6,072
- ----------------------------------------------------------------------
Legal fees 920
- ----------------------------------------------------------------------
Portfolio accounting fees 27,416
- ----------------------------------------------------------------------
Share registration costs 6,072
- ----------------------------------------------------------------------
Printing and postage 5,152
- ----------------------------------------------------------------------
Insurance premiums 1,656
- ----------------------------------------------------------------------
Miscellaneous 2,576
- ---------------------------------------------------------------------- --------
Total expenses 228,943
- ----------------------------------------------------------------------
Deduct--waiver of investment advisory fee 76,305
- ---------------------------------------------------------------------- --------
Net expenses 152,638
- --------------------------------------------------------------------------------- ----------
Net investment income 999,224
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized loss on investments (124,714)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments 1,274,294
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 1,149,580
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $2,148,804
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG MUNICIPAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1995 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1995
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 999,224 $ 1,853,385
- ---------------------------------------------------
Net realized gain (loss) on investments ($124,714
net loss and $11,477 net gain, respectively, as
computed for federal tax purposes) (124,714) 11,477
- ---------------------------------------------------
Net change in unrealized appreciation
(depreciation)
of investments 1,274,294 (1,201,336)
- --------------------------------------------------- -------------- ----------------
Change in net assets resulting from operations 2,148,804 663,526
- --------------------------------------------------- -------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (1,000,973) (1,838,300)
- --------------------------------------------------- -------------- ----------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 7,455,080 17,562,723
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 11,272 18,007
- ---------------------------------------------------
Cost of shares redeemed (6,795,733) (9,298,915)
- --------------------------------------------------- -------------- ----------------
Change in net assets resulting from share
transactions 670,619 8,281,815
- --------------------------------------------------- -------------- ----------------
Change in net assets 1,818,450 7,107,041
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 41,542,143 34,435,102
- --------------------------------------------------- -------------- ----------------
End of period (including undistributed net
investment income of $24,111 and $25,860,
respectively) $ 43,360,593 $41,542,143
- --------------------------------------------------- -------------- ----------------
</TABLE>
(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>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28,
1995 ---------------------------------
(UNAUDITED) 1995 1994 1993(a)
----------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $10.57 $10.51 $10.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------
Net investment income 0.24 0.49 0.48 0.07
- -------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.28 (0.43) 0.08 0.49
- ------------------------------------------------- -------- ------ ------ -------
Total from investment operations 0.52 0.06 0.56 0.56
- ------------------------------------------------- -------- ------ ------ -------
LESS DISTRIBUTIONS
- -------------------------------------------------
Distributions from net investment income (0.24) (0.48) (0.49) (0.05)
- -------------------------------------------------
Distributions from net realized gain on
investment transactions -- -- (0.01) --
- ------------------------------------------------- -------- ------ ------ -------
Total distributions (0.24) (0.48) (0.50) (0.05)
- ------------------------------------------------- -------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 10.43 $10.15 $10.57 $10.51
- ------------------------------------------------- -------- ------ ------ -------
TOTAL RETURN (b) 5.23% 0.81% 5.34% 5.65%
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------
Expenses 0.72%(c) 0.75% 0.74% 0.48%(c)
- -------------------------------------------------
Net investment income 4.70%(c) 4.93% 4.60% 4.11%(c)
- -------------------------------------------------
Expense waiver/reimbursement (d) 0.36%(c) 0.41% 0.67% 1.02%(c)
- -------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------
Net assets, end of period (000 omitted) $43,361 $41,542 $34,435 $15,644
- -------------------------------------------------
Portfolio turnover 8% 9% 9% 93%
- -------------------------------------------------
</TABLE>
(a) Reflects operations for the period from December 21, 1992 (date of initial
public investment) to February 28, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) 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, 1995
(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 are 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.
(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.
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 the
pricing service 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. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end investment companies are valued at net
asset value.
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.
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 income. Accordingly, no
provisions for federal tax are necessary.
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.
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 the shares, have been deferred and
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
are being amortized using the straight-line method not to exceed a period
of five years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
an unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
- --------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 724,288 1,764,990
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,096 1,825
- ---------------------------------------------------
Shares redeemed (657,640) (933,737)
- --------------------------------------------------- ----------- --------------
Net change resulting from share transactions 67,744 833,078
- --------------------------------------------------- ----------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund'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, Trust Division of Commercial National Bank may voluntarily
choose to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
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 AGENT AND PORTFOLIO ACCOUNTING FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The fee is based on the size, type, and number of accounts and transactions made
by shareholders.
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
FServ also maintains the Fund's accounting records for which it receives a fee.
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 ($25,535) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following December 2, 1992 (the date the Fund became
effective). For the six months ended August 31, 1995, the Fund paid $1,932
pursuant to this agreement.
GENERAL--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
period ended August 31, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $3,086,480
- -------------------------------------------------------------------------------- ----------
SALES $3,572,894
- -------------------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
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 investment 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.
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 23321N608
G00498-01 (10/95)
DG
OPPORTUNITY
FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
[LOGO]Commercial
National Bank
Shreveport, LA
Sub-Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG
Opportunity Fund. This report covers activity in the fund over the six-month
period ended August 31, 1995.
The report begins with an investment review, in which the portfolio manager
discusses economic and market developments as well as fund strategy. Following
the investment review is a complete list of fund holdings and its financial
statements.
During the six-month period ended August 31, 1995, the fund's portfolio of
stocks issued by small, emerging companies rewarded shareholders with strong
performance. Capital gains paid to shareholders during the period totaled $0.13
per share, while its net asset value increased from $11.15 on the first day of
the period to $13.87 on the last day of the period. Through its gains and growth
in share price, the fund delivered a total return of 25.71% based on net asset
value (21.36% taking into account the sales charge).* At the end of the
reporting period, net assets stood at more than $52 million.
Thank you for participating in DG Opportunity 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
* 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.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG Opportunity Fund was established in July 1994 to provide investors with a
diversified portfolio of smaller capitalized companies. The investment objective
of the fund is to provide capital appreciation.
Stocks purchased by the fund since February 1995 have primarily been smaller
capitalization issues. The stock selection has been well diversified with some
concentrations being made in the telecommunications, financial, retail, and
restaurant sectors. The fund's holdings in the technology sector were reduced.
We anticipate more sector rotation during the next six months.
The total rate of return (income plus capital appreciation) for the past six
months was 25.71% based on net asset value.* The fund's net assets have
increased from $36.7 million as of February 28, 1995 to $52.6 million as of
August 31, 1995.
* 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.
DG OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--87.02%
- -------------------------------------------------------------------------------------
BROADCASTING--2.2%
------------------------------------------------------------------
49,000 New World Communications $ 1,139,250
------------------------------------------------------------------ -----------
COMMERCIAL SERVICES--2.1%
------------------------------------------------------------------
69,600 Actava Group, Inc. 1,104,900
------------------------------------------------------------------ -----------
COMMUNICATIONS EQUIPMENT--3.3%
------------------------------------------------------------------
40,000 Mobile Telecommunications 1,230,000
------------------------------------------------------------------
21,000 Teltrend, Inc. 493,500
------------------------------------------------------------------ -----------
Total 1,723,500
------------------------------------------------------------------ -----------
COMPUTER SERVICES--0.02%
------------------------------------------------------------------
700 Harbinger Corp. 10,150
------------------------------------------------------------------ -----------
CONSUMER DURABLES--0.9%
------------------------------------------------------------------
46,000 River Oaks Furniture, Inc. 471,500
------------------------------------------------------------------ -----------
ELECTRICAL EQUIPMENT--1.7%
------------------------------------------------------------------
75,000 Kuhlman Corp. 881,250
------------------------------------------------------------------ -----------
ENVIRONMENTAL CONTROL--1.7%
------------------------------------------------------------------
25,000 Crown Andersen, Inc. 228,125
------------------------------------------------------------------
35,000 IMCO Recycling, Inc. 708,750
------------------------------------------------------------------ -----------
Total 936,875
------------------------------------------------------------------ -----------
FINANCIAL SERVICES--14.9%
------------------------------------------------------------------
50,000 A.G. Edwards, Inc. 1,218,750
------------------------------------------------------------------
27,000 Amresco, Inc. 317,250
------------------------------------------------------------------
45,000 Commercial Bankshares, Inc. 708,750
------------------------------------------------------------------
69,000 Envoy Corp. 724,500
------------------------------------------------------------------
60,000 Life Bancorp, Inc. 952,500
------------------------------------------------------------------
59,250 Morgan Keegan, Inc. 681,375
------------------------------------------------------------------
57,000 PALFED, Inc. 662,625
------------------------------------------------------------------
</TABLE>
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
------------------------------------------------------------------
31,000 Stewart Enterprises, Inc. $ 988,125
------------------------------------------------------------------
33,000 T. Rowe Price & Associates, Inc. 1,567,500
------------------------------------------------------------------ -----------
Total 7,821,375
------------------------------------------------------------------ -----------
HEALTHCARE--12.6%
------------------------------------------------------------------
73,000 Clintrials Research, Inc. 1,295,750
------------------------------------------------------------------
26,000 Isolyser, Inc. 1,027,000
------------------------------------------------------------------
25,000 Keravision, Inc. 275,000
------------------------------------------------------------------
64,000 Sun Healthcare Group, Inc. 936,000
------------------------------------------------------------------
135,000 Tokos Medical Corp. 1,468,125
------------------------------------------------------------------
32,000 Vencor, Inc. 948,000
------------------------------------------------------------------
21,000 Vivra, Inc. 695,625
------------------------------------------------------------------ -----------
Total 6,645,500
------------------------------------------------------------------ -----------
HOTELS--3.2%
------------------------------------------------------------------
92,300 Aztar Corp. 911,463
------------------------------------------------------------------
38,000 Promus Hotel Corp. 783,750
------------------------------------------------------------------ -----------
Total 1,695,213
------------------------------------------------------------------ -----------
INSURANCE--3.8%
------------------------------------------------------------------
47,000 APPS Dental, Inc. 1,280,750
------------------------------------------------------------------
37,500 Midland Financial Group, Inc. 712,500
------------------------------------------------------------------ -----------
Total 1,993,250
------------------------------------------------------------------ -----------
MANUFACTURING--0.4%
------------------------------------------------------------------
5,000 Computational System, Inc. 77,500
------------------------------------------------------------------
6,000 Quanex Corp. 143,250
------------------------------------------------------------------ -----------
Total 220,750
------------------------------------------------------------------ -----------
OIL & GAS--6.1%
------------------------------------------------------------------
55,000 Belden & Blake Corp. 893,750
------------------------------------------------------------------
60,000 Comstock Resource, Inc. 281,250
------------------------------------------------------------------
</TABLE>
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
OIL & GAS--CONTINUED
------------------------------------------------------------------
59,100 Quaker State Corp. $ 886,500
------------------------------------------------------------------
65,000 Snyder Oil Corp. 853,125
------------------------------------------------------------------
24,200 Stone Energy Corp. 293,425
------------------------------------------------------------------ -----------
Total 3,208,050
------------------------------------------------------------------ -----------
RETAIL--25.0%
------------------------------------------------------------------
42,000 Apple South, Inc. 1,029,000
------------------------------------------------------------------
116,000 Cato Corp. 841,000
------------------------------------------------------------------
24,000 Cutter & Buck, Inc. 189,000
------------------------------------------------------------------
47,000 Fossil, Inc. 737,313
------------------------------------------------------------------
38,000 Friedmans, Inc. 883,500
------------------------------------------------------------------
67,000 Hechinger Co. 360,125
------------------------------------------------------------------
47,500 Hometown Buffet, Inc. 564,062
------------------------------------------------------------------
20,000 Insight Enterprises, Inc. 382,500
------------------------------------------------------------------
62,000 Logan's Roadhouse, Inc. 976,500
------------------------------------------------------------------
18,000 Michaels Stores, Inc. 292,500
------------------------------------------------------------------
40,700 Morrison Restaurants, Inc. 798,737
------------------------------------------------------------------
35,000 Outback Steakhouse, Inc. 1,128,750
------------------------------------------------------------------
39,000 Papa John's International, Inc. 1,560,000
------------------------------------------------------------------
76,000 Pollo Tropical, Inc. 589,000
------------------------------------------------------------------
65,000 Sanderson Farms, Inc. 763,750
------------------------------------------------------------------
60,000 Stein Mart, Inc. 825,000
------------------------------------------------------------------
95,000 The Good Guys, Inc. 1,199,375
------------------------------------------------------------------ -----------
Total 13,120,112
------------------------------------------------------------------ -----------
TECHNOLOGY--1.5%
------------------------------------------------------------------
40,000 Wholesale Cellular USA, Inc. 795,000
------------------------------------------------------------------ -----------
</TABLE>
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
TRANSPORTATION--2.0%
------------------------------------------------------------------
35,000 KLLM Transportation Services, Inc. $ 376,250
------------------------------------------------------------------
23,000 Valuejet Airlines, Inc. 669,875
------------------------------------------------------------------ -----------
Total 1,046,125
------------------------------------------------------------------ -----------
UTILITIES--5.6%
------------------------------------------------------------------
67,000 Equalnet Holding Corp. 1,147,375
------------------------------------------------------------------
32,000 MFS Communications, Inc. 1,416,000
------------------------------------------------------------------
24,000 Midcom Communications, Inc. 378,000
------------------------------------------------------------------ -----------
Total 2,941,375
------------------------------------------------------------------ -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $40,812,274) 45,754,175
------------------------------------------------------------------ -----------
MUTUAL FUND SHARES--0.2%
- -------------------------------------------------------------------------------------
129,248 Lehman Brothers Installment Funds Group Trust (AT NET ASSET VALUE) 129,248
------------------------------------------------------------------ -----------
*REPURCHASE AGREEMENT--10.0%
- -------------------------------------------------------------------------------------
$5,255,065 Eastbridge Capital, Inc., 5.80%, dated 8/31/1995, due 9/1/1995
(AT AMORTIZED COST) 5,255,065
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $46,196,587)(a) $51,138,488
------------------------------------------------------------------ -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
(a) The cost of investments for federal tax purposes amounts to $46,196,587. The
unrealized appreciation of investments on a federal tax basis amounts to
$4,941,901, which is comprised of $7,073,507 appreciation and $2,131,606
depreciation at August 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($52,579,129) at August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
DG OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified cost and tax cost
$46,196,587) $51,138,488
- --------------------------------------------------------------------------------
Income receivable 17,700
- --------------------------------------------------------------------------------
Receivable for investments sold 1,772,018
- --------------------------------------------------------------------------------
Receivable for shares sold 34,031
- --------------------------------------------------------------------------------
Deferred expenses 2,034
- -------------------------------------------------------------------------------- -----------
Total assets 52,964,271
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $365,250
- ---------------------------------------------------------------------
Accrued expenses 19,892
- --------------------------------------------------------------------- --------
Total liabilities 385,142
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 3,789,995 shares outstanding $52,579,129
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $41,727,900
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,941,901
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments 5,891,110
- --------------------------------------------------------------------------------
Undistributed net investment income 18,218
- -------------------------------------------------------------------------------- -----------
Total Net Assets $52,579,129
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Net Asset Value Per Share ($52,579,129 / 3,789,995 shares outstanding) $13.87
- -------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/96.50 of $13.87)* $14.37
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
DG OPPORTUNITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Dividends $ 88,674
- --------------------------------------------------------------------------------
Interest 165,472
- -------------------------------------------------------------------------------- -----------
Total income 254,146
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $209,240
- ---------------------------------------------------------------------
Administrative personnel and services fee 50,272
- ---------------------------------------------------------------------
Custodian fees 11,524
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 10,939
- ---------------------------------------------------------------------
Directors'/Trustees' fees 324
- ---------------------------------------------------------------------
Auditing fees 5,027
- ---------------------------------------------------------------------
Legal fees 1,257
- ---------------------------------------------------------------------
Portfolio accounting fees 25,247
- ---------------------------------------------------------------------
Share registration costs 10,057
- ---------------------------------------------------------------------
Printing and postage 6,788
- ---------------------------------------------------------------------
Insurance premiums 2,661
- ---------------------------------------------------------------------
Miscellaneous 1,803
- --------------------------------------------------------------------- --------
Total expenses 335,139
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 99,113
- --------------------------------------------------------------------- --------
Net expenses 236,026
- -------------------------------------------------------------------------------- -----------
Net investment income 18,120
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain on investments 5,918,569
- --------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 4,206,826
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 10,125,395
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $10,143,515
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1995 PERIOD ENDED
(UNAUDITED) FEBRUARY 28, 1994*
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------
OPERATIONS--
- --------------------------------------------------
Net investment income $ 18,120 $ 7,921
- --------------------------------------------------
Net realized gain on investments ($5,918,569 and
$529,084, respectively, as computed for federal
tax purposes) 5,918,569 501,584
- --------------------------------------------------
Net change in unrealized appreciation of
investments 4,206,826 735,075
-----------
- -------------------------------------------------- ---------------
Change in net assets resulting from
operations 10,143,515 1,244,580
-----------
- -------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------
Distributions from net investment income 0 (7,823)
- --------------------------------------------------
Distributions from net realized gains (481,284) (47,759)
-----------
- -------------------------------------------------- ---------------
Change in net assets resulting from
distributions to shareholders (481,284) (55,582)
-----------
- -------------------------------------------------- ---------------
SHARE TRANSACTIONS--
- --------------------------------------------------
Proceeds from sale of shares 8,279,760 38,226,967
- --------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 362,886 37,506
- --------------------------------------------------
Cost of shares redeemed (2,389,301) (2,789,918)
-----------
- -------------------------------------------------- ---------------
Change in net assets resulting from share
transactions 6,253,345 35,474,555
-----------
- -------------------------------------------------- ---------------
Change in net assets 15,915,576 36,663,553
- --------------------------------------------------
NET ASSETS:
- --------------------------------------------------
Beginning of period 36,663,553 0
-----------
- -------------------------------------------------- ---------------
End of period (including undistributed net
investment income of $18,218 and $98,
respectively) $52,579,129 $36,663,553
-----------
- -------------------------------------------------- ---------------
</TABLE>
* For the period from July 21, 1994 (date of initial public investment) to
February 28, 1995.
(See Notes which are an integral part of the Financial Statements)
DG OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, 1995 PERIOD ENDED
(UNAUDITED) FEBRUARY 28, 1995*
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.15 $ 10.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income -- 0.02
- ----------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.85 1.17
- ---------------------------------------------------------- ----------- ------------
Total from investment operations 2.85 1.19
- ---------------------------------------------------------- ----------- ------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Distributions from net investment income -- (0.02)
- ----------------------------------------------------------
Distributions from net realized gain on investment
transactions (0.13) (0.02)
- ---------------------------------------------------------- ----------- ------------
Total distributions (0.13) (0.04)
- ---------------------------------------------------------- ----------- ------------
NET ASSET VALUE, END OF PERIOD $13.87 $ 11.15
- ---------------------------------------------------------- ----------- ------------
TOTAL RETURN (a) 25.71% 11.84%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 1.07%(b) 0.79%(b)
- ----------------------------------------------------------
Net investment income 0.08%(b) 0.06%(b)
- ----------------------------------------------------------
Expense waiver/reimbursement (c) 0.45%(b) 1.34%(b)
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $52,579 $36,664
- ----------------------------------------------------------
Portfolio turnover 101% 45%
- ----------------------------------------------------------
</TABLE>
* Reflects operations for the period from August 1, 1994 (date of initial public
investment) to February 28, 1995.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) 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 OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
(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 are only those of DG Opportunity 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.
(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.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in other open-end
investment companies are valued at net asset value. All other securities
are valued at prices provided by an independent pricing service.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
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").
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 income. Accordingly, no
provisions for federal tax are necessary.
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
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.
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 over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(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 shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995*
- -------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Shares sold 670,639 3,539,667
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 28,641 3,640
- --------------------------------------------------
Shares redeemed (197,227) (255,365)
----------
- -------------------------------------------------- -------------
Net change resulting from share transactions 502,053 3,287,942
----------
- -------------------------------------------------- -------------
</TABLE>
* For the period from July 21, 1994 (start of business) to February 28, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .95 of 1% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any 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, Trust Division of Commercial National Bank may voluntarily
choose to reduce its compensation.
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This 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 AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($30,000) were initially borne
by FAS.
The Fund has agreed to reimburse FAS for the organizational expenses during the
five year period following July 25, 1994 (the date the Fund became effective).
For the period ended August 31, 1995, the Fund paid $1,500 pursuant to this
agreement.
GENERAL--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
period ended August 31, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES $39,054,485
- ------------------------------------------------------------------------------ -----------
SALES $39,172,449
- ------------------------------------------------------------------------------ -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
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 investment 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.
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 23321N103
2091605 (10/95)
DG
U.S. GOVERNMENT
MONEY MARKET FUND
-----------------------------------
SEMI-ANNUAL REPORT
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
[LOGO]Deposit Guaranty
National Bank
Jackson, MS
Investment Adviser
AUGUST 31, 1995
-----------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for DG U.S.
Government Money Market Fund. This report covers activity in the fund over the
six-month period ended August 31, 1995.
As a shareholder in DG U.S. Government Money Market Fund, you are putting your
cash to work every day in a diversified portfolio of high-quality U.S.
government money market securities.* Dividends paid to shareholders during the
six-month period ended August 31, 1995, totaled $0.03 per share. At the end of
the reporting period, net assets had grown to more than $230 million.
Thank you for participating in DG U.S. Government Money Market 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
October 15, 1995
* 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. An investment in
the Fund is neither insured nor guaranteed by the U.S. government.
DG U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--53.8%
- ------------------------------------------------------------------------------------
U.S. TREASURY BILLS--29.4%
----------------------------------------------------------------
$ 4,000,000 9/7/1995 $ 3,996,090
----------------------------------------------------------------
5,000,000 9/28/1995 4,979,544
----------------------------------------------------------------
4,000,000 10/19/1995 3,967,040
----------------------------------------------------------------
4,700,000 10/19/1995 4,665,659
----------------------------------------------------------------
5,000,000 10/26/1995 4,960,125
----------------------------------------------------------------
5,000,000 11/2/1995 4,954,576
----------------------------------------------------------------
5,000,000 11/9/1995 4,949,208
----------------------------------------------------------------
4,000,000 11/16/1995 3,947,222
----------------------------------------------------------------
5,000,000 12/7/1995 4,926,880
----------------------------------------------------------------
6,000,000 1/4/1996 5,886,563
----------------------------------------------------------------
5,000,000 1/18/1996 4,895,364
----------------------------------------------------------------
6,000,000 4/4/1996 5,807,040
----------------------------------------------------------------
5,000,000 5/2/1996 4,812,933
----------------------------------------------------------------
5,000,000 5/30/1996 4,796,000
---------------------------------------------------------------- ------------
Total 67,544,244
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--24.4%
----------------------------------------------------------------
5,000,000 8.625%, 10/15/1995 5,015,613
----------------------------------------------------------------
4,000,000 4.250%, 11/30/1995 3,980,804
----------------------------------------------------------------
5,000,000 4.000%, 1/31/1996 4,966,071
----------------------------------------------------------------
3,000,000 4.625%, 2/15/1996 2,971,690
----------------------------------------------------------------
4,000,000 7.875%, 2/15/1996 4,017,631
----------------------------------------------------------------
5,000,000 4.625%, 2/29/1996 4,974,799
----------------------------------------------------------------
5,000,000 9.375%, 4/15/1996 5,108,478
----------------------------------------------------------------
</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
----------------------------------------------------------------
$ 5,000,000 7.625%, 4/30/1996 $ 5,048,506
----------------------------------------------------------------
4,000,000 5.500%, 4/30/1996 3,993,927
----------------------------------------------------------------
5,000,000 4.250%, 5/15/1996 4,950,116
----------------------------------------------------------------
5,000,000 5.875%, 5/31/1996 4,997,891
----------------------------------------------------------------
6,000,000 7.875%, 7/15/1996 6,114,632
---------------------------------------------------------------- ------------
Total 56,140,158
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 123,684,402
---------------------------------------------------------------- ------------
*REPURCHASE AGREEMENTS--46.3%
- ------------------------------------------------------------------------------------
50,000,000 Eastbridge Capital, Inc., 5.85%, dated 8/31/1995, due 9/1/1995 50,000,000
----------------------------------------------------------------
50,000,000 First Union Corp., 5.85%, dated 8/31/1995, due 9/1/1995 50,000,000
----------------------------------------------------------------
6,527,967 Sanwa-BGK Securities Co., 5.75%, dated 8/31/1995, due 9/1/1995 6,527,967
---------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 106,527,967
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $230,212,369+
---------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($230,047,222) at August 31, 1995.
(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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $106,527,967
- -----------------------------------------------------------------
Investments in securities 123,684,402
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value $230,212,369
- --------------------------------------------------------------------------------
Income receivable 843,089
- --------------------------------------------------------------------------------
Receivable for shares sold 4,888
- --------------------------------------------------------------------------------
Deferred expenses 25,370
- -------------------------------------------------------------------------------- ------------
Total assets 231,085,716
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for shares redeemed 1,712
- -----------------------------------------------------------------
Income distribution payable 1,010,105
- -----------------------------------------------------------------
Accrued expenses 26,677
- ----------------------------------------------------------------- ------------
Total liabilities 1,038,494
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 230,047,222 shares outstanding $230,047,222
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per
Share:
- --------------------------------------------------------------------------------
$230,047,222/230,047,222 shares 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, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $5,890,467
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $486,563
- ----------------------------------------------------------------------
Administrative personnel and services fee 116,999
- ----------------------------------------------------------------------
Custodian fees 11,940
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,047
- ----------------------------------------------------------------------
Directors'/Trustees' fees 913
- ----------------------------------------------------------------------
Auditing fees 6,033
- ----------------------------------------------------------------------
Legal fees 1,106
- ----------------------------------------------------------------------
Portfolio accounting fees 19,245
- ----------------------------------------------------------------------
Share registration costs 10,827
- ----------------------------------------------------------------------
Printing and postage 5,078
- ----------------------------------------------------------------------
Insurance premiums 2,788
- ----------------------------------------------------------------------
Miscellaneous 3,176
- ---------------------------------------------------------------------- --------
Total expenses 680,715
- ----------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 194,625
- ---------------------------------------------------------------------- --------
Net expenses 486,090
- --------------------------------------------------------------------------------- ----------
Net investment income $5,404,377
- --------------------------------------------------------------------------------- ----------
</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>
SIX MONTHS ENDED
AUGUST 31, 1995 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1995
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 5,404,377 $ 6,636,382
- --------------------------------------------------- ---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (5,404,377) (6,636,382)
- --------------------------------------------------- ---------------- ------------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 245,158,747 394,768,127
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 52,527 51,622
- ---------------------------------------------------
Cost of shares redeemed (177,678,758) (421,619,818)
- --------------------------------------------------- ---------------- ------------------
Change in net assets resulting from share
transactions 67,532,516 (26,800,069)
- --------------------------------------------------- ---------------- ------------------
Change in net assets 67,532,516 (26,800,069)
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 162,514,706 189,314,775
- --------------------------------------------------- ---------------- ------------------
End of period $ 230,047,222 $ 162,514,706
- --------------------------------------------------- ---------------- ------------------
</TABLE>
(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>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28,
1995 -------------------------------
(UNAUDITED) 1995 1994 1993(a)
----------- ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.03 0.04 0.03 0.02
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.03) (0.04) (0.03) (0.02)
- --------------------------------------------- -------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- -------- ------ ------ -------
TOTAL RETURN (b) 2.83% 4.06% 2.74% 1.97%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.50%* 0.53% 0.54% 0.41%*
- ---------------------------------------------
Net investment income 5.54%* 3.96% 2.70% 2.88%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 0.20%* 0.20% 0.20% 0.38%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $230,047 $162,515 $189,315 $189,024
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1992 (date of initial public
investment) to February 28, 1993. For the period from March 31, 1992 (start
of business) to June 30, 1992, all income was distributed to the
administrator.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) 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, 1995
(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 are 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.
(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.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--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").
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 income. Accordingly, no
provisions for federal tax are necessary.
DG U.S GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
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.
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 over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(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, 1995, capital paid-in aggregated $230,047,222.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
- --------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 245,158,747 394,768,127
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 52,527 51,622
- ---------------------------------------------------
Shares redeemed (177,678,758) (421,619,818)
- --------------------------------------------------- -------------- ---------------
Net change resulting from share transactions 67,532,516 (26,800,069)
- --------------------------------------------------- -------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Fund'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 any 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 Fund
with certain administrative personnel and services. This 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 AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($40,903) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following May 5, 1992 (the date the Fund became
effective). For the period ended August 31, 1995, the Fund paid $3,246 pursuant
to this agreement.
GENERAL--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
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Richard B. Fisher
Edward C. Gonzales Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
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 investment 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
