DG INVESTOR SERIES, 485BPOS, 1996-06-24

DG INVESTOR SERIES
485BPOS, 1996-06-24

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1933 Act File No. 33-46431
1940 Act File No. 811-6607

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ...........

Post-Effective Amendment No. 10 .............. X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 13 ............................. X

DG INVESTOR SERIES

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
X on June 28, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:

X filed the Notice required by that Rule on April 15, 1996; or
intends to file the Notice required by that Rule on or about
; or
------------
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

Copies To:

Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of DG INVESTOR SERIES
which consists of six portfolios: (1) DG U.S. Government Money Market Fund,
(2) DG Limited Term Government Income Fund, (3) DG Government Income Fund,
(4) DG Equity Fund, (5) DG Municipal Income Fund, and (6) DG Opportunity
Fund, relates only to (6) DG Opportunity Fund and is comprised of the
following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-6) Cover Page.
Item 2. Synopsis.................(1-6) Synopsis; (1-6) Summary of Fund
Expenses; (1-6) Financial Highlights.
Item 3. Condensed Financial
Information..............(1-6) Performance Information.
Item 4. General Description of
Registrant...............(1-6) Objectives and Policies of Each
Fund; (1-6) Portfolio Investments and
Strategies; (1-6) Investment Limitations.
Item 5. Management of the Fund...(1-6) DG Investor Series Information; (1-
6) Management of the Trust; (1-6)
Distribution of Fund Shares; (1-6)
Administration of the Funds; (6)
Shareholder Services Plan; (1-6)
Brokerage Transactions.
Item 6. Capital Stock and Other
Securities...............(1-6) Dividends and Distributions; (1)
Capital Gains; (1-6) Shareholder
Information; (1-6) Voting Rights; (1-6)
Tax Information; (1-6) Federal Income
Tax; (5) Additional Tax Information for
Municipal Income Fund; (5) Other State
and Local Taxes; (1-6) Effect of Banking
Laws.
Item 7. Purchase of Securities Being
Offered..................(1-6) Net Asset Value; (1-6) Investing
in the Funds; (1-6) Share Purchases; (1-
6) Minimum Investment Required; (1-6)
What Shares Cost; (2-6) Reducing the
Sales Charge; (1-6) Systematic
Investment Program; (1-6) Certificates
and Confirmations; (1-6) Exchanging
Shares; (1-6) Exchange Privilege.
Item 8. Redemption or Repurchase.(1-6) Redeeming Shares; (1-6) Through the
Banks; (1-6) Systematic Withdrawal
Program; (1-6) Accounts With Low
Balances.
Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL IFORMATION.

Item 10. Cover Page...............(1-6) Cover Page.
Item 11. Table of Contents........(1-6) Table of Contents.
Item 12. General Information and
History .................(1-6) General Information About the
Funds.
Item 13. Investment Objectives and
Policies.................(1-6) Investment Objective(s) and
Policies; (4,6) Equity Fund and
Opportunity Fund; (2,3) Limited Term Fund
and Government Income Fund; (5) Municipal
Income Fund; (1) Money Market Fund; (1-6)
Investment Policies and Strategies; (1-6)
Investment Limitations; (1) Regulatory
Compliance.
Item 14. Management of the Fund...(1-6) DG Investor Series Management.
Item 15. Control Persons and Principal
Holders of Securities....(1-6) Trust Ownership; (1-6) Trustees'
Compensation; (1-6) Trustee Liability.
Item 16. Investment Advisory and Other
Services.................(1-6) Investment Advisory Services; (1-6)
Adviser to the Funds; (1-6) Advisory
Fees; (2-6) Sub-Adviser to the Funds; (2-
6) Sub-Advisory Fees; (1-6) Other
Services; (1-6) Administration of the
Trust; (1-6) Custodian; (1-6) Transfer
Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent; (1-6)
Independent Auditors.
Item 17. Brokerage Allocation.....(1-6) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................(1-6) Purchasing Shares; (1-6) Conversion
to Federal Funds; (1-6) Exchange
Privilege; (1-6) Requirement of Exchange;
(1-6) Making an Exchange; (1-6)
Determining Net Asset Value; (2-4,6)
Determining Market Value of Securities;
(5) Valuing Municipal Securities; (1) Use
of the Amortized Cost Method; (1-6)
Redeeming Shares; (1-6) Redemption in
Kind; (1-6) Massachusetts Partnership
Law.
Item 20. Tax Status...............(1-6) Tax Status (1-6) The Funds' Tax
Status; (1-6) Shareholders' Tax Status;
Item 21. Underwriters.............(1-5) Distribution Plan; (6) Distribution
and Shareholder Services Plans;
Item 22. Calculation of Performance
Data.....................(1-6) Performance Comparisons; (1-6)
Yield; (1) Effective Yield; (1-6) Total
Return; (5) Tax-Equivalent Yield; (5)
Tax-Equivalency Table.
Item 23. Financial Statements.....(1-6) Incorporated by reference into the
Annual Reports of the Trust dated
February 29, 1996 (File Nos. 33-46431 and
811-6607)

DG
Investor Series

Equity Fund
Opportunity Fund
Limited Term Government Income Fund
Government Income Fund
Municipal Income Fund
U.S. Government Money Market Fund

COMBINED PROSPECTUS

Diversified Portfolios 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

The shares offered by this prospectu are not deposits or obligations of
Deposity Guaranty National Bank or Commercial National Bank, are
endorsed or guaranteed by Deposit Guaranty National Bank or Commercial National
Bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency.
Investment in these shares involves investment risks including
possible loss of principal.

June 30, 1996

FDIC

The shares offered by this prospectu are not deposits or obligations of Deposity
Guaranty National Bank or Commercial National Bank, are
endorsed or guaranteed by Deposit Guaranty National Bank or Commercial
National Bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency.
Investment in these shares involves investment risks including
possible loss of principal.

[LOGO] Federated Investors
Since 1955

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the funds
and is a subsidiary of Federated Investors.

Cusip 23321N301
Cusip 23321N400
Cusip 23321N103
Cusip 23321N509
Cusip 23321N202
Cusip 23321N608
G00499-04 (6/96)
[LOGO]

DG INVESTOR SERIES
PROSPECTUS

DG Investor Series (the "Trust") is an open-end, management investment company
(a mutual fund). This combined prospectus offers investors interests in the
following six separate investment portfolios (the "Funds"), each having a
distinct investment objective and policies:

- DG Equity Fund;
- DG Opportunity Fund;

- DG Limited Term Government Income Fund;

- DG Government Income Fund;

- DG Municipal Income Fund; and

- DG U.S. Government Money Market Fund.

This combined prospectus contains the information you should read and know
before you invest in any of the Funds. Keep this prospectus for future
reference.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF DEPOSIT
GUARANTY NATIONAL BANK OR COMMERCIAL NATIONAL BANK, ARE NOT ENDORSED OR
GUARANTEED BY DEPOSIT GUARANTY NATIONAL BANK OR COMMERCIAL NATIONAL BANK, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.

INVESTMENT IN THE SHARES OF DG EQUITY FUND, DG OPPORTUNITY FUND, DG LIMITED TERM
GOVERNMENT INCOME FUND, DG GOVERNMENT INCOME FUND AND DG MUNICIPAL INCOME FUND
INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

DG U.S. GOVERNMENT MONEY MARKET FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THIS FUND WILL BE ABLE
TO DO SO.

The Funds have also filed a Statement of Additional Information dated June 30,
1996, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-530-7377. To
obtain other information, or make inquiries about any of the Funds, contact the
Trust at the address listed on the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Trust is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated June 30, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SYNOPSIS 1
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES 3
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------------

OBJECTIVE AND POLICIES OF EACH FUND 10
- ------------------------------------------------------

Equity Fund 10
Opportunity Fund 11
Limited Term Fund 13
Government Income Fund 15
Municipal Income Fund 15
Money Market Fund 18

PORTFOLIO INVESTMENT AND STRATEGIES 19
- ------------------------------------------------------

Securities of Foreign Issuers 19
Put and Call Options 19
Futures Contracts and Options on Futures 19
Repurchase Agreements 20
When-Issued and Delayed
Delivery Transactions 20
Lending of Portfolio Securities 21
Temporary Investments 21
Fixed Income Securities 21

INVESTMENT LIMITATIONS 22
- ------------------------------------------------------

DG INVESTOR SERIES INFORMATION 22
- ------------------------------------------------------

Management of the Trust 22
Distribution of Fund Shares 24

ADMINISTRATION OF THE FUNDS 26
- ------------------------------------------------------

Brokerage Transactions 26
NET ASSET VALUE 26
- ------------------------------------------------------

INVESTING IN THE FUND 27
- ------------------------------------------------------

Share Purchases 27
Minimum Investment Required 27
What Shares Cost 27
Reducing the Sales Charge 29
Systematic Investment Program 30
Certificates and Confirmations 30
Dividends and Distributions 31
Capital Gains 31

EXCHANGE PRIVILEGE 31
- ------------------------------------------------------

Exchanging Shares 31

REDEEMING SHARES 32
- ------------------------------------------------------

Through the Banks 32
Systematic Withdrawal Program 33
Accounts With Low Balances 33

SHAREHOLDER INFORMATION 34
- ------------------------------------------------------

Voting Rights 34

EFFECT OF BANKING LAWS 35
- ------------------------------------------------------

TAX INFORMATION 35
- ------------------------------------------------------

Federal Income Tax 35
Additional Tax Information for
Municipal Income Fund 36
Other State and Local Taxes 36

PERFORMANCE INFORMATION 36
- ------------------------------------------------------

ADDRESSES 38
- ------------------------------------------------------

SYNOPSIS
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated February 7, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. Shares of the Funds are designed for retail and
trust customers of Deposit Guaranty National Bank and Commercial National Bank
and their affiliates as a convenient means of participating in professionally
managed, diversified portfolios.

As of the date of this prospectus, the Trust is composed of the following six
portfolios:

- DG Equity Fund ("Equity Fund")--seeks to provide long-term capital
appreciation (and current income as a secondary objective) by investing
at least 70% of its assets in equity securities including large
capitalization stocks that, in the opinion of the Adviser, have potential
to provide for capital appreciation and current income;

- DG Opportunity Fund ("Opportunity Fund")--seeks to provide capital
appreciation by investing primarily in a portfolio of equity securities
comprising the small capitalization sector of the United States equity
market;

- DG Limited Term Government Income Fund ("Limited Term Fund") -- seeks
to provide current income, the weighted average duration of which will
at all times be limited to between one and six years, by investing
primarily in securities which are guaranteed as to payment of principal
and interest by the U.S. government or U.S. government agencies or
instrumentalities;

- DG Government Income Fund ("Government Income Fund")--seeks to provide
current income by investing primarily in securities which are guaranteed
as to payment of principal and interest by the U.S. government or U.S.
government agencies or instrumentalities;

- DG Municipal Income Fund ("Municipal Income Fund")--seeks to provide
dividend income that is exempt from federal regular income tax by
investing primarily in municipal securities; and

- DG U.S. Government Money Market Fund ("Money Market Fund")--seeks to
provide current income consistent with stability of principal and
liquidity by investing primarily in a portfolio of short-term U.S.
government securities.

For information on how to purchase shares of any of the Funds, please refer to
"Investing in the Funds." A minimum initial investment of $1,000 is required for
each Fund. Subsequent investments must be in amounts of at least $100. Shares of
each Fund are sold at net asset value plus any applicable sales charge, and are
redeemed at net asset value. Information on redeeming shares may be found under
"Redeeming Shares." The Funds are advised by Deposit Guaranty National Bank (the
"Adviser"). All of the Funds with the exception of Money Market Fund are
sub-advised by Commercial National Bank (the "Sub-Adviser").

RISK FACTORS

Investors should be aware of the following general considerations: market values
of fixed income securities, which constitute a major part of the investments of
some Funds, may vary inversely in response to changes in prevailing interest
rates. The foreign securities in which some Funds may invest may be subject to
certain risks in addition to those inherent in U.S. investments. Shareholders of
Municipal Income Fund may be subject to the federal alternative minimum tax on
that part of its dividends derived from interest on certain municipal
securities. One or more Funds may make certain investments and employ certain
investment techniques that involve other risks, including entering into
repurchase agreements, lending portfolio securities and entering into financial
futures contracts and related options as hedges. These risks and those
associated with investing in mortgage-backed securities, when-issued securities,
options, and variable rate securities are described under "Objective of Each
Fund" and "Portfolio Investments and Strategies."

SUMMARY OF FUND EXPENSES

- --------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
GOVERNMENT MUNICIPAL
EQUITY OPPORTUNITY LIMITED TERM INCOME INCOME MONEY MARKET
FUND FUND FUND FUND FUND FUND
------ ----------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)................. 3.50% 3.50% 2.00% 2.00% 2.00% None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price)... None None None None None None
Contingent Deferred Sales Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable)........ None None None None None None
Redemption Fee (as a percentage of
amount redeemed, if
applicable)..................... None None None None None None
Exchange Fee...................... None None None None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after
waiver)(1)...................... 0.75% 0.75% 0.40% 0.50% 0.25% 0.30%
12b-1 Fees(2)..................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Other Expenses.............. 0.19% 0.42% 0.29% 0.22% 0.45% 0.21%
Shareholder Services Fees(3)...... -- 0.00% -- -- -- --
Total Fund Operating
Expenses(4)................. 0.94% 1.17% 0.69% 0.72% 0.70% 0.51%
</TABLE>

(1) The management fees of Opportunity Fund, Limited Term Fund, Government
Income Fund, Municipal Income Fund and Money Market Fund have been reduced to
reflect the voluntary waivers by the Adviser. The Adviser can terminate these
voluntary waivers at any time at its sole discretion. The maximum management
fees for these Funds are 0.95%, 0.60%, 0.60%, 0.60%, and 0.50%, respectively.

(2) As of the date of this prospectus, the Funds are not paying or accruing
12b-1 fees. The Funds will not accrue or pay 12b-1 fees until a separate class
of shares has been created for certain institutional investors. Equity Fund,
Opportunity Fund, Limited Term Fund, Government Income Fund, and Municipal
Income Fund could each pay 0.35% as a 12b-1 fee to the distributor. Money Market
Fund could pay 0.25% as a 12b-1 fee to the distributor.

(3) As of the date of this prospectus, Opportunity Fund is not paying or
accruing shareholder services fees. The Fund can pay up to 0.15% as a
shareholder services fee.

(4) Total Fund Operating Expenses above reflect those for the period ended
February 29, 1996. Total Fund Operating Expenses for Opportunity Fund, Limited
Term Fund, Government Income Fund, Municipal Income Fund and Money Market Fund
were 1.52%, 0.89%, 0.82%, 1.17%, and 0.71%, respectively, absent the voluntary
waivers described above in note (1).

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUNDS WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "DG INVESTOR SERIES INFORMATION" AND "INVESTING IN THE FUNDS."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.

<TABLE>
<CAPTION>
EXAMPLE 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return, (2) redemption at the end of each time period, and (3) payment
of the maximum sales charge. The Funds charge no contingent deferred sales
charges.
Equity Fund.................................................................. $ 44 $ 64 $ 85 $ 146
Opportunity Fund............................................................. $ 47 $ 71 $ 97 $ 172
Limited Term Fund............................................................ $ 27 $ 42 $ 58 $ 104
Government Income Fund....................................................... $ 27 $ 43 $ 59 $ 108
Municipal Income Fund........................................................ $ 27 $ 42 $ 58 $ 105
Money Market Fund............................................................ $ 5 $ 16 $ 29 $ 64
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

EQUITY FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------------------
1996 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 0.16 0.16 0.14 0.12
- -----------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.63 0.71 0.38 0.52
- ----------------------------------------------------------------- ----- ----- ----- ------
Total from investment operations 3.79 0.87 0.52 0.64
- -----------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Distributions from net investment income (0.17) (0.16) (0.14) (0.10)
- -----------------------------------------------------------------
Distributions from net realized gain on investments (0.54) (0.17) (0.05) --
- ----------------------------------------------------------------- ----- ----- ----- ------
Total distributions (0.71) (0.33) (0.19) (0.10)
- ----------------------------------------------------------------- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $14.49 $11.41 $10.87 $10.54
- ----------------------------------------------------------------- ----- ----- ----- ------
TOTAL RETURN(B) 33.73% 8.23% 4.99% 6.40%
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses 0.94% 0.95% 0.96% 0.51%*
- -----------------------------------------------------------------
Net investment income 1.24% 1.54% 1.38% 2.15%*
- -----------------------------------------------------------------
Expense waiver/reimbursement(c) -- -- 0.01% 0.53%*
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets end of period, (000 omitted) $385,145 $259,998 $284,203 $181,239
- -----------------------------------------------------------------
Average commission rate paid $0.0653 -- -- --
- -----------------------------------------------------------------
Portfolio turnover 15% 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 charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. Their report dated April 8, 1996 on the Fund's financial
statements is incorporated by reference to the Annual Report dated February 29,
1996. This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28 OR 29,
----------------------
1996 1995(a)
------ ------
<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 3.30 1.17
- --------------------------------------------------------------------------------------- ----- ------
Total from investment operations 3.30 1.19
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
Distributions from net investment income -- (0.02)
- ---------------------------------------------------------------------------------------
Distributions from net realized gain on investments (1.66) (0.02)
- --------------------------------------------------------------------------------------- ----- ------
Total distributions (1.66) (0.04)
- --------------------------------------------------------------------------------------- ----- ------
NET ASSET VALUE, END OF PERIOD $12.79 $11.15
- --------------------------------------------------------------------------------------- ----- ------
TOTAL RETURN(b) 31.42% 11.84%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 1.17% 0.79%*
- ---------------------------------------------------------------------------------------
Net investment income -- 0.06%*
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 0.35% 1.34%*
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets end of period, (000 omitted) $53,477 $36,664
- ---------------------------------------------------------------------------------------
Average commission rate paid $0.0098 --
- ---------------------------------------------------------------------------------------
Portfolio turnover 154% 45%
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from August 1, 1994 (date of initial
public investment) to February 28, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

LIMITED TERM FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. Their report dated April 5, 1996 on the Fund's financial
statements is incorporated by reference to the Annual Report dated February 29,
1996. This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------
1996 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 0.54 0.49 0.52 0.36
- -------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.15 (0.23) (0.17) 0.07
- ------------------------------------------------------------- ------ ------ ------ ------
Total from investment operations 0.69 0.26 0.35 0.43
- -------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Distributions from net investment income (0.54) (0.48) (0.52) (0.36)
- -------------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.03) --
- ------------------------------------------------------------- ------ ------ ------ ------
Total distributions (0.54) (0.48) (0.55) (0.36)
- ------------------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.80 $ 9.65 $ 9.87 $10.07
- ------------------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(b) 7.34% 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) $93,276 $96,216 $116,600 $99,921
- -------------------------------------------------------------
Portfolio turnover 56% 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 charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------------------
1996 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 0.58 0.54 0.55 0.37
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.41 (0.44) (0.09) 0.25
- ---------------------------------------------------------------------- ----- ----- ----- ------
Total from investment operations 0.99 0.10 0.46 0.62
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Distributions from net investment income (0.59) (0.53) (0.55) (0.37)
- ----------------------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.25) --
- ----------------------------------------------------------------------
Distributions in excess of net realized gain on investments(d) -- -- (0.01) --
- ---------------------------------------------------------------------- ----- ----- ----- ------
Total distributions (0.59) (0.53) (0.81) (0.37)
- ---------------------------------------------------------------------- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.47 $ 9.90 $10.25
- ---------------------------------------------------------------------- ----- ----- ----- ------
TOTAL RETURN(b) 10.70% 1.20% 4.55% 6.40%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.72% 0.68% 0.70% 0.50%*
- ----------------------------------------------------------------------
Net investment income 5.96% 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) $184,226 $168,313 $118,695 $111,435
- ----------------------------------------------------------------------
Portfolio turnover 87% 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 charge or
contingent deferred sales charge, if applicable.

(d) This distribution does not represent a return of capital for federal tax
purposes.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------
1996 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 0.49 0.49 0.48 0.07
- -------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.50 (0.43) 0.08 0.49
- ------------------------------------------------------------- ------ ------ ------ -----
Total from investment operations 0.99 0.06 0.56 0.56
- -------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Distributions from net investment income (0.48) (0.48) (0.49) (0.05)
- -------------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.01) --
- ------------------------------------------------------------- ------ ------ ------ -----
Total distributions (0.48) (0.48) (0.50) (0.05)
- ------------------------------------------------------------- ------ ------ ------ -----
NET ASSET VALUE, END OF PERIOD $10.66 $10.15 $10.57 $10.51
- ------------------------------------------------------------- ------ ------ ------ -----
TOTAL RETURN(b 9.96% 0.81% 5.34% 5.65%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.70% 0.75% 0.74% 0.48%*
- -------------------------------------------------------------
Net investment income 4.65% 4.93% 4.60% 4.11%*
- -------------------------------------------------------------
Expense waiver/reimbursement(c) 0.47% 0.41% 0.67% 1.02%*
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets end of period, (000 omitted) $44,578 $41,542 $34,435 $15,644
- -------------------------------------------------------------
Portfolio turnover 20% 9% 9% 93%
- -------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

MONEY MARKET FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------
1996 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 0.05 0.04 0.03 0.02
- -------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Distributions from net investment income (0.05) (0.04) (0.03) (0.02)
- ------------------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(b 5.48% 4.06% 2.74% 1.97%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.51% 0.53% 0.54% 0.41%*
- -------------------------------------------------------------
Net investment income 5.33% 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) $245,647 $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 charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended February 29, 1996, which can be obtained free
of charge.

OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------

The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus, and, in the case of Money
Market Fund, by complying with the diversification and other requirements of
Rule 2a-7 under the Investment Company Act of 1940 which regulates money market
mutual funds.

Unless indicated otherwise, the investment policies and limitations of a Fund
may be changed by the Board of Trustees ("Trustees") without approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.

Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appears in
the "Portfolio Investments and Strategies" section of this Prospectus and in the
Statement of Additional Information.

EQUITY FUND

The primary investment objective of Equity Fund is to provide long-term capital
appreciation. Current income is a secondary objective. Equity Fund pursues its
investment objectives by investing at least 70% of its assets in equity
securities. The equity securities in which the Equity Fund may invest include,
but are not limited to, large capitalization stocks which, in the opinion of the
Adviser, have potential to provide for capital appreciation and current income.
Issuers of large capitalization stocks have equity market valuation in excess of
$1 billion.

ACCEPTABLE INVESTMENTS. Consistent with the above, Equity Fund may invest in:

- common stock of U.S. companies which are either listed on the New York or
American Stock Exchange or traded in over-the-counter markets, preferred
stock of such companies, warrants, and preferred stock convertible into
common stock of such companies;

- investments in American Depositary Receipts ("ADRs") of foreign companies
traded on the New York Stock Exchange or in the over-the-counter market;

- convertible bonds rated at least BBB by Standard & Poor's Ratings Group
("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch"), or at
least Baa by Moody's Investors Service, Inc. ("Moody's"), or, if not
rated, are determined by the Adviser to be of comparable quality;

- money market instruments rated A-1 or A-2 by Standard & Poor's, Prime-1
or Prime-2 by Moody's, or F-1 or F-2 by Fitch;

- fixed rate notes and bonds and adjustable and variable rate notes of
companies whose common stock it may acquire rated BBB or better by
Standard & Poor's or Baa or better by Moody's;

- zero coupon convertible securities; and

- obligations, including certificates of deposit and bankers' acceptances,
of banks or savings associations having at least $1 billion in deposits
as of the date of their most recently published financial statements and
which are insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), both of which are administered by
the Federal Deposit Insurance Corporation ("FDIC"), including U.S.
branches of foreign banks and foreign branches of U.S. banks.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and
warrants, or a combination of the features of several of these securities. The
investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment
objectives.

Equity Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in which, in
the Adviser's opinion, the investment characteristics of the underlying common
shares will assist Equity Fund in achieving its investment objective. Otherwise,
Equity Fund may hold or trade convertible securities. In selecting convertible
securities for Equity Fund, the Adviser evaluates the investment characteristics
of the convertible security as a fixed income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security, the
Adviser considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment alternatives,
trends in the determinants of the issuer's profits, and the issuer's management
capability and practices.

CERTAIN OTHER PORTFOLIO STRATEGIES. Equity Fund may also invest or engage in
repurchase agreements, securities of foreign issuers, put and call options,
futures contracts and options on futures, lending of portfolio securities,
when-issued and delayed delivery transactions and temporary investments. See
"Portfolio Investments and Strategies."

OPPORTUNITY FUND

The investment objective of Opportunity Fund is to provide capital appreciation.
Opportunity Fund pursues its investment objective by investing primarily in a
portfolio of equity securities comprising the small capitalization sector of the
United States equity market. In the Adviser's opinion, small capitalization
stocks have special value in the marketplace and can provide greater growth of
principal than large capitalization stocks, but will not necessarily do so.
Opportunity Fund attempts to select companies whose potential for capital
appreciation exceeds that of larger capitalization stocks commensurate with
increased risk. Under normal market conditions, Opportunity Fund intends to
invest at least 65% of its total assets in equity securities of companies that
have a market value capitalization of less than $1 billion.

In pursuing its investment objective, Opportunity Fund will employ investment
strategies that utilize a fundamental growth-oriented approach along with
technical analysis and valuation relative to the
Standard & Poor's 500 and the stock market to select the small capitalization
stocks which will comprise Opportunity Fund's investment portfolio.

ACCEPTABLE INVESTMENTS. Opportunity Fund may invest in common stocks,
convertible bonds, ADRs, money market instruments, fixed rate notes and bonds
and adjustable and variable rate notes, and obligations of banks or savings
associations of the kind that are described under "Equity Fund-Acceptable
Investments."

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. Opportunity Fund may
invest in securities of other investment companies. Opportunity Fund will limit
its investment in other investment companies to no more than 3% of the total
outstanding voting stock of any investment company, will not invest more than 5%
of its total assets in any one investment company, or invest more than 10% of
its total assets in investment companies in general. Opportunity Fund will
purchase securities of closed-end investment companies only in open-market
transactions involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation, or acquisition of assets. While it is Opportunity Fund's policy
to waive its investment advisory fees on assets invested in securities of other
open-end investment companies, it should be noted that investment companies
incur certain expenses, such as management fees, and, therefore, any investment
by a fund in shares of another investment company would be subject to such
duplicate expenses. Opportunity Fund will invest in other investment companies
primarily for the purpose of investing its short-term cash on a temporary basis.
The Adviser will waive its investment advisory fee on assets invested in
securities of open-end investment companies.

INVESTMENT RISKS. As with other mutual funds that invest primarily in equity
securities, Opportunity Fund is subject to market risks. That is, the
possibility exists that common stocks will decline over short or even extended
periods of time. The United States equity market tends to be cyclical,
experiencing both periods when stock prices generally increase and periods when
stock prices generally decrease. However, because Opportunity Fund invests
primarily in small capitalization stocks, there are some additional risk factors
associated with investments in Opportunity Fund. In particular, stocks in the
small capitalization sector of the United States equity market have historically
been more volatile in price than larger capitalization stocks, such as those
included in the Standard & Poor's 500 Composite Stock Price Index ("Standard &
Poor's 500 Index"). This is because, among other things, small companies have
less certain growth prospects than larger companies; have a lower degree of
liquidity in the equity market; and tend to have a greater sensitivity to
changing economic conditions. Further, in addition to exhibiting greater
volatility, the stocks of small companies may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of small
companies may decline in price as the prices of large company stocks rise or
vice versa. Therefore, investors should expect that Opportunity Fund will be
more volatile than, and may fluctuate independently of, broad stock market
indices such as the Standard & Poor's 500 Index.

PORTFOLIO TURNOVER. Although Opportunity Fund does not intend to invest for the
purpose of seeking short-term profits, securities in the portfolio will be sold
whenever the Adviser believes it is appropriate to do so in light of Opportunity
Fund's investment objective, without regard to the length of time a particular
security may have been held. A high portfolio turnover rate may lead to
increased costs and may also result in higher taxes paid by Opportunity Fund's
shareholders. During fiscal year ended February 29, 1996, Opportunity Fund's
portfolio turnover rate was 154%. For the period from
August 1, 1994 (date of initial public investment) through February 28, 1995,
Opportunity Fund's portfolio turnover rate was 45%.

RESTRICTED AND ILLIQUID SECURITIES. Opportunity Fund may invest in restricted
securities. Restricted securities are any securities in which Opportunity Fund
may otherwise invest pursuant to its investment objective and policies but which
are subject to restrictions on resale under federal securities law. However,
Opportunity Fund will not invest more than 15% of its net assets in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, over-the-counter options
and repurchase agreements providing for settlement in more than seven days after
notice.

CERTAIN PORTFOLIO STRATEGIES. Opportunity Fund may also invest or engage in
repurchase agreements, securities of foreign issuers, put and call options,
futures contracts and options on futures, when-issued and delayed delivery
transactions, lending of portfolio securities and temporary investments. See
"Portfolio Investments and Strategies."

LIMITED TERM FUND

The investment objective of Limited Term Fund is current income, the
weighted-average duration of which will at all times be limited to between one
and six years. Limited Term Fund pursues its investment objective by investing
primarily in securities which are guaranteed as to payment of principal and
interest by the U.S. government or U.S. government agencies or
instrumentalities. Limited Term Fund may also invest in corporate bonds,
asset-backed securities and bank instruments. Under normal circumstances,
Limited Term Fund will invest at least 65% of the value of its total assets in
U.S. government securities.

The net asset value of Limited Term Fund is expected to fluctuate with changes
in interest rates and bond market conditions, although this fluctuation should
be more moderate than that of a fund with a longer average portfolio maturity.
The Adviser, however, will attempt to minimize principal fluctuation through,
among other things, diversification, careful credit analysis and security
selection, and adjustments of Limited Term Fund's average portfolio maturity. In
periods of rising interest rates and falling bond prices, the Adviser may
shorten Limited Term Fund's average duration to minimize the effect of declining
bond values on its net asset value. Conversely, during times of falling interest
rates and rising prices a longer average maturity to seven years may be sought.

ACCEPTABLE INVESTMENTS. The U.S. government securities in which Limited Term
Fund will invest include:

- direct obligations of the U.S. Treasury such as bills, notes, and bonds;
and

- notes, bonds, and discount notes issued by the Federal Home Loan Banks;
Government National Mortgage Association; Farm Credit System, including
the National Bank for Cooperatives and Banks for Cooperatives; Tennessee
Valley Authority; Export-Import Bank of the United States; Commodity
Credit Corporation; Federal Financing Bank; Student Loan Marketing
Association; Federal Home Loan Mortgage Corporation; or National Credit
Union Administration.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurance can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

- the credit of the agency or instrumentality.

CORPORATE BONDS. Limited Term Fund may invest in issues of corporate debt
obligations which are rated in one of the three highest categories by a
nationally recognized statistical rating organization (rated Aaa, Aa, or A by
Moody's; AAA, AA, or A by Standard & Poor's or by Fitch, or which are of
comparable quality in the judgment of the Adviser).

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. There are currently three basic
types of mortgage-backed securities: (i) those issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, such as the Government
National Mortgage Association ("Ginnie Mae"), the Federal National Mortgage
Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"); (ii) those issued by private issuers that represent an interest
in or are collateralized by mortgage-backed securities issued or guaranteed by
the U.S. government or one of its agencies or instrumentalities; and (iii)those
issued by private issuers that represent an interest in or are collateralized by
whole loans or mortgage-backed securities without a government guarantee but
usually having some form of private credit enhancement.

COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by Ginnie Mae,
Fannie Mae or Freddie Mac Certificates, but may be collateralized by whole
loans or private pass-through securities.

Limited Term Fund and Government Income Fund will only invest in CMOs which
are rated AAA by a nationally recognized rating agency, and which may be:
(a) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of
mortgages in which payment of principal and interest is guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities;
or (c) securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest are supported
by the credit of an agency or instrumentality of the U.S. government.

ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. Limited Term Fund
may invest in asset-backed securities rated A or higher by a nationally
recognized rating agency. The collateral for such securities will consist of
motor vehicle installment
purchase obligations and credit card receivables. These securities may be in the
form of pass-through instruments or asset-backed bonds. The securities are
issued by non-governmental entities and carry no direct or indirect government
guarantee.

BANK INSTRUMENTS. Limited Term Fund only invests in bank instruments issued by
an institution having capital, surplus and undivided profits over $100 million,
or insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF").

AVERAGE PORTFOLIO DURATION. Although Limited Term Fund will not maintain a
stable net asset value, the Adviser will seek to limit, to the extent consistent
with its investment objective of current income, the magnitude of fluctuations
in Limited Term Fund's net asset value by limiting the dollar-weighted average
duration of the portfolio. Although the dollar-weighted average duration will
not exceed six years, the weighted average maturity of Limited Term Fund's
portfolio could be longer than six years. Generally, the duration of a security
is shorter than the maturity of a security. A typical security makes coupon
payments prior to its maturity date and duration takes into account the timing
of a security's cash flow. Duration is a commonly used measure of the potential
volatility of the price of a debt security, or the aggregate market value of a
portfolio of debt securities, prior to maturity. Securities with shorter
durations generally have less volatile prices than securities of comparable
quality with longer durations. Limited Term Fund should be expected to maintain
a higher average duration during periods of falling interest rates, and a lower
average duration during periods of rising interest rates.

CERTAIN OTHER PORTFOLIO STRATEGIES. Limited Term Fund may also invest or engage
in put and call options, temporary investments, repurchase agreements, lending
of portfolio securities and when-issued and delayed delivery transactions. See
"Portfolio Investments and Strategies."

GOVERNMENT INCOME FUND

The investment objective of Government Income Fund is current income. Government
Income Fund pursues its investment objective by investing primarily in
securities which are guaranteed as to payment of principal and interest by the
U.S. government or U.S. government agencies or instrumentalities. Government
Income Fund may also invest in corporate bonds, asset-backed securities and bank
instruments. Under normal circumstances, Government Income Fund will invest at
least 65% of the value of its total assets in U.S. government securities.

ACCEPTABLE INVESTMENTS. Government Income Fund may invest in U.S. government
securities, corporate bonds, mortgage-backed securities (including
collateralized mortgage obligations), asset-backed securities and bank
instruments of the kind described under "Limited Term Fund--Acceptable
Investments."

CERTAIN OTHER PORTFOLIO STRATEGIES. Government Income Fund may also invest or
engage in put and call options, temporary investments, repurchase agreements,
lending of portfolio securities and when-issued and delayed delivery
transactions. See "Portfolio Investments and Strategies."

MUNICIPAL INCOME FUND

The investment objective of Municipal Income Fund is to provide dividend income
that is exempt from federal regular income tax. Interest income of Municipal
Income Fund that is exempt from federal
regular income tax retains its tax-free status when distributed to Municipal
Income Fund's shareholders. Municipal Income Fund pursues its investment
objective by investing in municipal securities. As a matter of investment
policy, which may not be changed without shareholder approval, under normal
circumstances, Municipal Income Fund will be invested so that at least 80% of
the income from investments will be exempt from federal regular income tax or
that at least 80% of its net assets are invested in obligations, the interest
from which is exempt from federal regular income tax.

ACCEPTABLE INVESTMENTS. The municipal securities in which Municipal Income Fund
invests are:

- debt obligations and municipal leases issued by or on behalf of any
state, territory, or possession of the United States, including the
District of Columbia, or any political subdivision of any of them; and

- participation interests, as described below, in any of the above
obligations,

the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of Municipal Income Fund and/or the Adviser, exempt from
federal regular income tax.

CHARACTERISTICS. The municipal securities in which Municipal Income Fund
invests are:

- rated "investment grade," i.e., Baa or better by Moody's, or BBB or
better by Standard & Poor's or Fitch;

- guaranteed at the time of purchase by the U.S. government, its agencies
or instrumentalities, as to the payment of principal and interest;

- fully collateralized by an escrow of U.S. government or other securities
acceptable to the Adviser;
- rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial
paper rating (P-1) or S&P's highest short-term municipal commercial paper
rating (SP-1) or Fitch's highest tax-exempt municipal obligation rating
(FIN-1);

- unrated if, at the time of purchase, longer term municipal securities of
the issuer are rated Baa or better by Moody's or BBB or better by S&P or
Fitch (however, investments in unrated securities will not exceed 20% of
Municipal Income Fund's total assets); or

- determined by the Adviser to be equivalent to municipal securities which
are rated Baa or better by Moody's or BBB or better by S&P or Fitch.

It should be noted that securities rated BBB by S&P or Baa by Moody's are
considered to have speculative characteristics. Changes in economic conditions
or other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information. The prices of fixed income securities fluctuate inversely to the
direction of interest rates.

PARTICIPATION INTERESTS. Municipal Income Fund may purchase participation
interests from financial institutions such as commercial banks, savings
associations, and insurance companies. These participation interests give
Municipal Income Fund an undivided interest in municipal securities. The
financial institutions from which Municipal Income Fund purchases
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the
participation interests are of high quality. The Trustees will determine
that participation interests meet the prescribed quality standards for
Municipal Income Fund.

VARIABLE RATE MUNICIPAL SECURITIES. Municipal Income Fund may purchase
municipal securities that have variable interest rates. Variable interest
rates are ordinarily stated as a percentage of a published interest rate,
interest rate index, or some similar standard, such as the 91-day U.S.
Treasury bill rate.

Many variable rate municipal securities are subject to payment of principal
on demand by Municipal Income Fund, usually in not more than seven days.
All variable rate municipal securities will meet the quality standards for
Municipal Income Fund.

MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the form
of a lease, an installment purchase contract, or a conditional sales
contract.

TEMPORARY INVESTMENTS. From time to time, on a temporary basis, or when the
Adviser determines that market conditions call for a temporary defensive
posture, Municipal Income Fund may invest in short-term tax-exempt or taxable
temporary investments. These temporary investments include: fixed or variable
rate notes issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
other debt securities; securities of other investment companies; commercial
paper; certificates of deposit, demand and time deposits, bankers' acceptances,
deposit notes, and other instruments of domestic and foreign banks and other
deposit institutions ("Bank Instruments"); and repurchase agreements
(arrangements in which the institution selling Municipal Income Fund a bond or
temporary investment agrees at the time of sale to repurchase it at a mutually
agreed upon time and price). There are no rating requirements applicable to
temporary investments.

Although Municipal Income Fund is permitted to make taxable, temporary
investments, there is no current intention of generating income subject to
federal regular income tax.

OTHER INVESTMENT TECHNIQUES. Municipal Income Fund may purchase a right to sell
a security held by it back to the issuer or to another party at an agreed upon
price at any time during a stated period or on a certain date. These rights may
be referred to as "liquidity puts" or "standby commitments."

MUNICIPAL SECURITIES. Municipal securities are generally issued to finance
public works such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.

Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. Interest on and principal of revenue
bonds, however, are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the general
revenues of a municipality or public authority. Industrial development bonds are
typically classified as revenue bonds.

INVESTMENT RISKS. Yields on municipal securities depend on a variety of
factors, including: the general conditions of the money market and the taxable
and municipal bond markets; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of Municipal Income
Fund to achieve its investment objective also depends on the continuing ability
of the issuers of municipal securities and participation interests, or the
guarantors of either, to meet their obligations for the payment of interest and
principal when due.

CERTAIN OTHER PORTFOLIO STRATEGIES. Municipal Income Fund may also invest or
engage in when-issued and delayed delivery transactions and lending of portfolio
securities. See "Portfolio Investments and Strategies."

MONEY MARKET FUND

The investment objective of Money Market Fund is current income consistent with
stability of principal and liquidity. Money Market Fund pursues its investment
objective by investing primarily in a portfolio of short-term U.S. government
securities. The average maturity of U.S. government securities in its portfolio,
computed on a dollar-weighted basis, will be 90 days or less, and Money Market
Fund will invest only in securities with remaining maturities of 13 months or
less at the time of purchase.

ACCEPTABLE INVESTMENTS. The U.S. government securities in which Money Market
Fund invests are either issued or guaranteed by the U.S. government, its
agencies, or instrumentalities. These securities include, but are not limited
to:

- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the Farm Credit System, including the National
Bank for Cooperatives and Banks for Cooperatives; Federal Home Loan
Banks; Government National Mortgage Association; Federal Home Loan
Mortgage Corporation; and Student Loan Marketing Association.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

- the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

- the credit of the agency or instrumentality.

CERTAIN OTHER PORTFOLIO STRATEGIES. Money Market Fund may also invest or engage
in repurchase agreements, lending of portfolio securities and when-issued and
delayed delivery transactions. See "Portfolio Investments and Strategies."

PORTFOLIO INVESTMENTS AND STRATEGIES
- --------------------------------------------------------------------------------

SECURITIES OF FOREIGN ISSUERS

Equity Fund and Opportunity Fund may invest (in the case of Opportunity Fund up
to 20% of its total assets) in securities of foreign issuers traded on the New
York or American Stock Exchange or in the over-the-counter market in the form of
depositary receipts. Securities of a foreign issuer may present greater risks in
the form of nationalization, confiscation, domestic marketability, or other
national or international restrictions. As a matter of practice, the Funds will
not invest in the securities of a foreign issuer if any such risk appears to the
Adviser to be substantial.

PUT AND CALL OPTIONS

Equity Fund, Opportunity Fund, Limited Term Fund and Government Income Fund may
purchase put options on their portfolio securities as a hedge to attempt to
protect securities which the Funds hold, or will be purchasing, against
decreases in value. The Funds may also write (sell) call options on all or any
portion of their portfolios to generate income for the Funds. The Funds will
write call options on securities either held in their portfolios or which they
have the right to obtain without payment of further consideration or for which
they have segregated cash or U.S. government securities in the amount of any
additional consideration.

Equity Fund and Opportunity Fund may purchase and write over-the-counter put and
call options, and Limited Term Fund and Government Income Fund may purchase
over-the-counter put options, on portfolio securities in negotiated transactions
with the buyers or writers of the options when options on the portfolio
securities held by the Funds are not traded on an exchange. The Funds purchase
and write options only with investment dealers and other financial institutions
(such as commercial banks or savings associations) deemed creditworthy by the
Adviser. The call options which Limited Term Fund and Government Income Fund may
write and sell must be listed on a recognized options exchange.

Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market, while over-the-counter options may not.

Opportunity Fund will not buy call options or write put options without further
notification to shareholders. Although Limited Term Fund and Government Income
Fund reserve the right to write covered call options on their entire portfolios,
they will not write options on more than 25% of their respective total assets
unless a higher limit is authorized by the Trustees.

FUTURES CONTRACTS AND OPTIONS ON FUTURES

Equity Fund and Opportunity Fund may purchase and sell financial futures and
stock index futures contracts to hedge all or a portion of their portfolios
against changes in the price of their portfolio
securities, but will not engage in futures transactions for speculative
purposes. Limited Term Fund and Government Income Fund may also attempt to hedge
their portfolios by entering into financial futures contracts, but will notify
shareholders before they begin engaging in these transactions.

Equity Fund and Opportunity Fund may also write call options and purchase put
options on financial futures and stock index futures contracts as a hedge to
attempt to protect securities in their portfolios against decreases in value.

Limited Term Fund and Government Income Fund may purchase put options on
financial futures contracts for the same purposes.

The Funds may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Funds'
existing futures positions and premiums paid for related options would exceed 5%
of the market value of each Fund's total assets.

RISKS. When the Funds write a call option, they risk not participating in
any rise in the value of the underlying security. In addition, when the
Funds use futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may
not correlate perfectly with the prices of the securities in the Funds'
portfolios. This may cause the futures contract and any related options to
react differently than the portfolio securities to market changes. In
addition, the Adviser could be incorrect in its expectations about the
direction or extent of market factors, such as interest rate and stock
price movements. In these events, the Funds may lose money on the futures
contract or option.

It is not certain that a secondary market for positions in futures
contracts or options will exist at all times. Although the Adviser will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market will exist for any particular
futures contract or option at any particular time. The Funds' ability to
establish and close out futures and options positions depends on this
secondary market.

REPURCHASE AGREEMENTS

With the exception of Municipal Income Fund, certain securities in which the
Funds invest may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities to the Funds and agree at
the time of sale to repurchase them at a mutually agreed upon time and price. To
the extent that the seller does not repurchase the securities from the Funds,
the Funds could receive less than the repurchase price on any sale of such
securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Funds purchase securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Funds to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Funds may pay more
or less than the market value of the securities on the settlement date.

The Funds may dispose of a commitment prior to settlement if the Adviser deems
it appropriate to do so. In addition, the Funds may enter into transactions to
sell their purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Funds may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Funds may lend portfolio securities
on a short-term or long-term basis, or both, to broker/dealers, banks, or other
institutional borrowers of securities. The Funds will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the Adviser
has determined are creditworthy under guidelines established by the Trustees,
and will receive collateral in the form of cash or U.S. government securities
equal to at least 100% of the value of the securities loaned at all times.

There is the risk that when lending portfolio securities, the securities may not
be available to the Funds on a timely basis and the Funds may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

TEMPORARY INVESTMENTS

For defensive purposes only, the Funds (with the exception of Municipal Income
Fund, which may invest in temporary investments described under "Municipal
Income Fund-Temporary Investments," and Money Market Fund) may invest
temporarily in cash and cash items during times of unusual market conditions and
to maintain liquidity. Cash items may include short-term obligations such as:

- commercial paper rated A-1 or A-2 by Standard & Poor's, Prime-1 or
Prime-2 by Moody's, or F-1 or F-2 by Fitch;

- obligations of the U.S. government or its agencies or instrumentalities;
and

- repurchase agreements.

FIXED INCOME SECURITIES

The Funds may invest in fixed income securities. The prices of fixed income
securities fluctuate inversely in relation to the direction of interest rates.
The prices of longer-term fixed income securities fluctuate more widely in
response to market interest rate changes. Bonds rated "BBB" by Standard & Poor's
or "Baa" by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than higher rated bonds. Downgraded
securities will be evaluated on a case by case basis by the Adviser. The Adviser
will determine whether or not the security continues to be an acceptable
investment. If not, the security may be sold.

INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------

The Funds will not:

- borrow money directly or through reverse repurchase agreements
(arrangements in which a Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Funds
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of their respective total assets and pledge
up to 15% of the value of their respective total assets to secure such
borrowings.

The above limitation cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

Except with respect to the Opportunity Fund, the Funds will not:

- invest more than 15% (10% in the case of Money Market Fund) of their
respective net assets in illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice and
certain restricted securities not determined by the Trustees to be
liquid.

The Equity Fund and Opportunity Fund will not:

- invest more than 5% of its net assets in warrants; however, no more than
2% of this 5% may be warrants which are not listed on the New York or
American Stock Exchange.

The Municipal Income Fund will not:

- invest more than 15% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933
and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.

DG INVESTOR SERIES INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Trustees'
responsibilities between meetings of the Trustees.

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Funds are made by Deposit Guaranty National Bank,
the Funds' investment adviser, subject to direction by the Trustees. The
Adviser, in consultation with the Sub-Adviser (except with respect to Money
Market Fund), continually conducts investment research and supervision for the
Funds and is responsible for the purchase and sale of portfolio instruments.

ADVISORY FEES. The Funds' Adviser receives an annual investment advisory
fee at annual rates equal to percentages of the relevant Fund's average net
assets as follows: Equity Fund-0.75%; Opportunity Fund-0.95%; Limited Term
Fund, Government Income Fund and Municipal Income Fund-0.60%; and Money
Market Fund-0.50%. The fee paid by the Equity Fund and Opportunity Fund,
while higher than the advisory fee paid by other mutual funds in general,
are comparable to fees paid by other mutual funds with similar objectives
and policies. The Adviser may voluntarily choose to waive a portion of its
fee or reimburse the Funds for certain operating expenses. The Adviser can
terminate this voluntary waiver of its advisory fees at any time at its
sole discretion. The Adviser has undertaken to reimburse the Funds, up to
the amount of the advisory fees, for operating expenses in excess of
limitations established by certain states.

ADVISER'S BACKGROUND. Deposit Guaranty National Bank, a national banking
association formed in 1925, is a subsidiary of Deposit Guaranty Corp.
("DGC"). Through its subsidiaries and affiliates, DGC offers a full range
of financial services to the public, including commercial lending,
depository services, cash management, brokerage services, retail banking,
mortgage banking, investment advisory services and trust services.

As of December 31, 1995, the Trust Division of Deposit Guaranty National
Bank had approximately $2.2 billion under administration, of which it had
investment discretion over $1.7 billion. Deposit Guaranty National Bank has
served as the Adviser since May 5, 1992.

As part of their regular banking operations, Deposit Guaranty National Bank
and Commercial National Bank, the sub-adviser to all of the Funds with the
exception of Money Market Fund, may make loans to public companies. Thus,
it may be possible, from time to time, for the Funds to hold or acquire the
securities of issuers which are also lending clients of Deposit Guaranty
National Bank or Commercial National Bank. The lending relationships will
not be a factor in the selection of securities.

William A. Womack is a Senior Vice President and Trust Investment Officer,
and has been with Deposit Guaranty National Bank since 1984. Mr. Womack
spent eight years prior to joining Deposit Guaranty in the investment
brokerage business. A graduate of Louisiana State University, he received a
B.S. in Finance, with a minor in Economics. Mr. Womack is a member of the
Mississippi Chapter of the Memphis Society of Financial Analysts. Mr.
Womack has managed Opportunity Fund since July 26, 1994 (the inception of
Opportunity Fund), and Municipal Income Fund since December 21, 1992 (the
inception of Municipal Income Fund). Mr. Womack is responsible for the day
to day management of each Fund's portfolio.

John Mark McKenzie has been with Deposit Guaranty National Bank since 1984
and is a Senior Vice President and Trust Investment Officer. Previously,
Mr. McKenzie was associated with a Jackson bank as a trust officer. He
received a B.B.A. in Banking and Finance from the University of
Mississippi. He is a member of the Mississippi Chapter of the Memphis
Society of Financial Analysts, and is a member of the Mississippi State and
Hinds County Bar Association. Mr. McKenzie has managed Limited Term Fund
and Government Income Fund since August 1, 1992 (the inception of Limited
Term Fund and Government Income Fund).

SUB-ADVISER. Except with respect to Money Market Fund, under the terms of a
sub-advisory agreement between Deposit Guaranty National Bank and Commercial
National Bank, the Sub-Adviser
will furnish to the Adviser such investment advice, statistical and other
factual information as may be requested by the Adviser. The portfolio managers
from the Trust Divisions of Deposit Guaranty National Bank and Commercial
National Bank (collectively, the "Banks") will form an investment committee (the
"DG Asset Management Group") to discuss investment strategies and evaluate
securities and the economic outlook.

SUB-ADVISORY FEES. For its services under the sub-advisory agreement, the
Sub-Adviser receives an annual fee from the Adviser equal to 0.25% of the
average daily net assets of each Fund with the exception of Money Market
Fund. The sub-advisory fee is accrued daily and paid monthly. In the event
that the fee due from the Trust to the Adviser on behalf of the Funds is
reduced in order to meet expense limitations imposed on the Funds by state
securities laws and regulations, the sub-advisory fee will be reduced by
one-half of said reduction in the fee due from the Trust to the Adviser on
behalf of the Funds. Notwithstanding any other provision in the
sub-advisory agreement, the Sub-Adviser may, from time to time and for such
periods as it deems appropriate, reduce its compensation (and, if
appropriate, assume expenses of the Funds or class of the Funds) to the
extent that the Funds' expenses exceed such lower expense limitation as the
Sub-Adviser may, by notice to the Trust on behalf of the Funds, voluntarily
declare to be effective.

SUB-ADVISER'S BACKGROUND. Commercial National Bank, a national banking
association which received its charter in 1886, is a subsidiary of DGC. As
of December 31, 1995, the Trust Division at Commercial National Bank had
approximately $1.5 billion in trust assets under administration, for which
it had investment discretion over $1.1 billion. Commercial National Bank
has served as sub-adviser to Equity Fund, Limited Term Fund, and Government
Income Fund since July 20, 1992. It has served as sub-adviser to Municipal
Income Fund since December 12, 1992, and Opportunity Fund since May 25,
1994. All of these Funds are portfolios of the Trust.

Ronald E. Lindquist, Senior Vice President and Trust Investment Officer,
has served as manager of Commercial National Bank's Trust Investment
Department for more than ten years. Mr. Lindquist's primary area of
responsibility is the management of the Equity Fund. He received his B.S.
in Finance from Florida State University and a M.S.M. in Finance from
Florida International University. Mr. Lindquist has managed Equity Fund
since August 1, 1992 (the inception of Equity Fund).

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the Funds.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.

DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with the
Investment Company Act Rule 12b-1 (the "Plan"), the Funds will pay to the
distributor an amount computed at an annual rate of 0.35% (0.25% in the case of
Money Market Fund) of the average daily net asset value of the Funds to finance
any activity which is principally intended to result in the sale of shares
subject to the Plan. The Funds will not accrue or pay 12b-1 fees until a
separate class of shares has been created for certain institutional investors.

The distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed such lower expense limitations as
the distributor may, by notice to the Trust, voluntarily declare to be
effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client inquiries;
assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as may reasonably be requested.

The distributor will pay financial institutions a fee based upon shares subject
to the Plan and owned by their clients or customers. The schedules of such fees
and the basis upon which such fees will be paid will be determined from time to
time by the distributor.

The Funds' Plan is a compensation type plan. As such, the Funds make no payments
to the distributor except as described above. Therefore, the Funds do not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Funds, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Funds
under the Plan.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings association) from being an underwriter or distributor of most
securities. In the event the Glass-Steagall Act is deemed to prohibit depository
institutions from acting in the administrative capacities described above or
should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.

SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions a fee with respect to the average net asset value of Shares held by
their customers for providing administrative services. This fee, if paid, will
be reimbursed by the Adviser and not the Funds.

SHAREHOLDER SERVICES PLAN (OPPORTUNITY FUND ONLY). Opportunity Fund has adopted
a Shareholder Services Plan (the "Services Plan") with respect to its shares.
Under the Services Plan, financial institutions will enter into shareholder
service agreements with Opportunity Fund to provide administrative support
services to their customers who from time to time may be owners of record or
beneficial owners of the shares. In return for providing these support services,
a financial institution may receive payments from Opportunity Fund at a rate not
exceeding 0.15% of the average daily net assets of the shares beneficially owned
by the financial institution's customers for whom it is holder of record or with
whom it has a servicing relationship. These administrative services may include,
but are not
limited to, the provision of personal services and maintenance of shareholder
accounts. Opportunity Fund will not accrue or pay shareholder services fees
until a separate class of shares has been added for certain institutional
investors.

ADMINISTRATION OF THE FUNDS
- --------------------------------------------------------------------------------

ADMINISTRATIVE SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Funds with the administrative
personnel and services necessary to operate the Funds. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- --------------------- ------------------------------------
<S> <C>
.150% of the first $250 million
.125% of the next $250 million
.100% of the next $250 million
.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall aggregate at least
$100,000 per Fund. Federated Administrative Services may choose voluntarily to
waive a portion of its fee at any time.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Funds and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.

NET ASSET VALUE
- --------------------------------------------------------------------------------

With respect to Equity Fund, Opportunity Fund, Limited Term Fund, Government
Income Fund, and Municipal Income Fund, net asset value per share fluctuates. It
is determined by dividing the sum of the market value of all securities and
other assets, less liabilities, by the number of shares outstanding.

With respect to Money Market Fund, it attempts to stabilize the net asset value
of shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting total
liabilities from total assets and dividing the remainder by the number of shares
outstanding. Money Market Fund, of course, cannot guarantee that its net asset
value will always remain at $1.00 per share.

INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------

SHARE PURCHASES

Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be ordered by
telephone through procedures established with Commercial National Bank, a
subsidiary of Deposit Guaranty Corp., and Deposit Guaranty National Bank
(collectively, the "Banks") in connection with qualified account relationships.
Such procedures may include arrangements under which certain accounts are swept
periodically and amounts exceeding an agreed upon minimum are invested
automatically in Fund shares. Texas residents must purchase shares of the Funds
through Federated Securities Corp. at 1-800-356-2805. The Funds reserve the
right to reject any purchase request.

THROUGH THE BANKS. To place an order to purchase shares of the Funds, open an
account by calling Deposit Guaranty National Bank at (800) 748-8500 or
Commercial National Bank at (800) 274-1907. Information needed to establish the
account will be taken over the telephone.

Payment may be made by either check, federal funds or by debiting a customer's
account at the Banks.

With the exception of Money Market Fund, purchase orders must be received by
4:00 p.m. (Eastern time). Payment is required before 4:00 p.m. (Eastern time) on
the next business day in order to earn dividends for that day.

In the case of Money Market Fund, purchase orders must be received by 11:00 a.m.
(Eastern time). Payment is required before 3:00 p.m. (Eastern time) on the same
business day in order to earn dividends for that day.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in the Funds is $1,000. Subsequent investments
may be in amounts of $100 or more. The Funds may waive the initial minimum
investment for employees of Deposit Guaranty Corp. and its affiliates from time
to time.

WHAT SHARES COST

Shares of Equity Fund and Opportunity Fund are sold at their net asset value
next determined after an order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING NET AMOUNT INVESTED
------------------------------------------ --------------- -------------------
<S> <C> <C>
Less than $100,000........................ 3.50% 3.63%
$100,000 but less than $250,000........... 3.00% 3.09%
$250,000 but less than $500,000........... 2.50% 2.56%
$500,000 but less than $750,000........... 2.00% 2.04%
$750,000 but less than $1 million......... 1.50% 1.52%
$1 million but less than $2 million....... 0.50% 0.50%
$2 million or more........................ 0.25% 0.25%
</TABLE>

Shares of Limited Term Fund, Government Income Fund and Municipal Income Fund
are sold at their net asset value next determined after an order is received,
plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING NET AMOUNT INVESTED
------------------------------------------ --------------- -------------------
<S> <C> <C>
Less than $100,000........................ 2.00% 2.04%
$100,000 but less than $250,000........... 1.75% 1.78%
$250,000 but less than $500,000........... 1.50% 1.52%
$500,000 but less than $750,000........... 1.25% 1.27%
$750,000 but less than $1 million......... 1.00% 1.01%
$1 million but less than $2 million....... 0.50% 0.50%
$2 million or more........................ 0.25% 0.25%
</TABLE>

Shares of Money Market Fund are sold at their net asset value next determined
after an order is received. There is no sales charge imposed by the Money Market
Fund.

The net asset value for Equity Fund, Opportunity Fund, Limited Term Fund,
Government Income Fund and Municipal Income Fund is determined as of the close
of trading (normally 4:00 p.m., Eastern time), Monday through Friday, and the
net asset value for Money Market Fund is determined at 12:00 noon, 3:00 p.m.
(Eastern time), and as of the close of trading (normally 4:00 p.m., Eastern
time), except on: (i) days on which there are not sufficient changes in the
value of the Funds' portfolio securities that their net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day.

PURCHASES AT NET ASSET VALUE. Shares of Equity Fund, Opportunity Fund, Limited
Term Fund, Government Income Fund and Municipal Income Fund may be purchased at
net asset value, without a sales charge by: the Trust Division of the Banks for
funds which are held in a fiduciary, agency, custodial or similar capacity;
non-trust customers of financial advisers; Trustees and employees of the Funds,
the Banks or Federated Securities Corp. or their affiliates and their spouses
and children under 21; current and retired directors of the Banks; or any bank
or investment dealer who has a sales agreement with Federated Securities Corp.
with regard to the Funds.

SALES CHARGE REALLOWANCE. For sales of shares of Equity Fund, Opportunity Fund,
Limited Term Fund, Government Income Fund and Municipal Income Fund, the Banks
or any authorized dealer will normally receive up to 100% of the applicable
sales charge. Any portion of the sales charge which is not paid to the Banks or
authorized dealers will be retained by the distributor. The distributor will,
periodically, uniformly offer to pay additional amounts in the form of cash or
promotional incentives consisting of trips to sales seminars at luxury resorts,
tickets or other such items, to all dealers selling shares of the Funds. Such
payments, all or a portion of which may be paid from the sales charge it
normally retains or any other source available to it, will be predicated upon
the amount of shares of the Fund that are sold by the dealer.

The sales charge for shares sold other than through the Banks or authorized
dealers will be retained by the distributor. The distributor may pay fees to the
Banks out of the sales charge in exchange for sales and/or administrative
services performed on behalf of the Banks' customers in connection with the
initiation of customer accounts and purchases of Fund shares.

REDUCING THE SALES CHARGE

The sales charge can be reduced on the purchase of Equity Fund, Opportunity
Fund, Limited Term Fund, Government Income Fund and Municipal Income Fund shares
through:

- quantity discounts and accumulated purchases;

- signing a 13-month letter of intent;
- using the reinvestment privilege; or

- concurrent purchases.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. Each Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age 21
when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.

If an additional purchase of Fund shares is made, each Fund will consider the
previous purchase still invested in that Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 3.00%, not 3.50% with respect to Equity Fund and Opportunity Fund and
1.75% not 2.00% with respect to Limited Term Fund, Government Income Fund, and
Municipal Income Fund.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by the Banks at the time the purchase
is made that Fund shares are already owned or that purchases are being combined.
Each Fund will reduce the sales charge after it confirms the purchases.

LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Funds in the Trust over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
3.50% with respect to Equity Fund and Opportunity Fund and 2.00% with respect to
Limited Term Fund, Government Income Fund, and Municipal Income Fund, of the
total amount intended to be purchased in escrow (in shares) until such purchase
is completed.

The 3.50% held in escrow with respect to Equity Fund and Opportunity Fund and
2.00% held in escrow with respect to Limited Term Fund, Government Income Fund,
and Municipal Income Fund will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.

This letter of intent will not obligate the shareholder to purchase shares, but
if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased.

The current balance in the shareholder's account will provide a purchase credit
towards fulfillment of the letter of intent.

REINVESTMENT PRIVILEGE. If shares in a Fund have been redeemed, the shareholder
has a one-time right, within 30 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Federated Securities
Corp. must be notified by the shareholder in writing or by the Banks of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his shares in a Fund, there may be tax consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an investment company which was
sold with a sales charge or commission and was not distributed by Federated
Securities Corp. The purchase must be made within 60 days of the redemption, and
Federated Securities Corp. must be notified by the investor in writing, or by
his financial institution, at the time the purchase is made.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
Funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in another Fund, the sales
charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by the Banks at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares. A shareholder may apply for participation in this
program through the Banks.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Funds, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Funds.

With respect to Equity Fund and Opportunity Fund, detailed confirmations of each
purchase or redemption are sent to each shareholder. Quarterly confirmations are
sent to report dividends paid during the quarter.

With respect to Limited Term Fund, Government Income Fund and Municipal Income
Fund, detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.

With respect to Money Market Fund, monthly confirmations are sent to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

DIVIDENDS AND DISTRIBUTIONS

With respect to Equity Fund and Opportunity Fund, dividends are declared
quarterly and paid quarterly. With respect to Limited Term Fund, Government
Income Fund and Municipal Income Fund, dividends are declared and paid monthly.
Distribution of any realized long-term capital gains will be made at least once
every twelve months. Dividends are automatically reinvested in additional shares
of the corresponding Fund on payment dates at the ex-dividend date's net asset
value without a sales charge, unless cash payments are requested by writing to
the applicable Fund or the Banks, as appropriate.

With respect to Money Market Fund, dividends are declared daily and paid
monthly. Dividends will be reinvested on payment dates in additional shares of
the Money Market Fund unless cash payments are requested by writing to the Money
Market Fund or the Banks as appropriate. Purchase orders must be received by the
Banks before 11:00 a.m. (Eastern time). Payment is required before 3:00 p.m.
(Eastern time) on the same business day in order to earn dividends for that day.

CAPITAL GAINS

With respect to Money Market Fund, capital gains, if any, could result in an
increase in dividends. Capital losses, if any, could result in a decrease in
dividends. If for some extraordinary reason the Money Market Fund realizes net
long-term or short-term capital gains, it will distribute them at least once
every 12 months.

EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

All shareholders of the Funds are shareholders of DG Investor Series.
Shareholders in any of the Funds have easy access to all of the other Funds.

EXCHANGING SHARES

Shareholders of any Fund in DG Investor Series may exchange shares for the
shares of any other Fund in DG Investor Series. Prior to any exchange, the
shareholder must receive a copy of the current prospectus of the fund into which
an exchange is to be effected. Shares may be exchanged at net asset value, plus
the difference between the sales charge (if any) already paid and any sales
charge of the Fund into which shares are to be exchanged, if higher.

When an exchange is made from a Fund with a sales charge to a Fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges; thus, an exchange
of such shares for shares of a Fund with a sales charge would be at net asset
value.

The exchange privilege is available to shareholders residing in any state in
which the Fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value. Written
exchange instructions may require a signature guarantee. Exercise of this
privilege is treated as a sale for federal income tax purposes and, depending on
the circumstances, a short or long-term capital gain or loss may be realized.
The exchange privilege may be terminated at any time.

Shareholders will be notified of the termination of the exchange privilege. A
shareholder may obtain further information on the exchange privilege by calling
the Banks. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Funds, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.

REDEEMING SHARES
- --------------------------------------------------------------------------------

Shares are redeemed at their net asset value next determined after the Banks
receive the redemption request. Redemptions will be made on days on which the
Funds compute their net asset value. Redemption requests cannot be executed on
days on which the New York Stock Exchange is closed or on Federal holidays when
wire transfers are restricted. Requests for redemption can be made by telephone
or by mail.

THROUGH THE BANKS

BY TELEPHONE. A shareholder who is a customer of one of the Banks may redeem
shares of a Fund by calling Deposit Guaranty National Bank at (800) 748-8500 or,
with the exception of Money Market Fund, Commercial National Bank at (800)
274-1907.

For orders received before 4:00 p.m. (Eastern time) for Equity Fund, Opportunity
Fund, Limited Term Fund, Government Income Fund and Municipal Income Fund,
proceeds will normally be wired the next day to the shareholder's account at the
Banks or a check will be sent to the address of record.

With respect to Money Market Fund, for orders received before 11:00 a.m.
(Eastern time), proceeds will normally be wired the same day to the
shareholder's account at the Banks or a check will be sent to the address of
record. Those shares will not be entitled to the dividend declared on the day
the redemption request was received.

Proceeds from redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. In no event will proceeds
be sent more than seven days after a proper request for redemption has been
received. An authorization form permitting the Funds to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from the Banks. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Funds, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be utilized, such as a written request to Federated
Services Company or the Banks.

If at any time the Funds determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

BY MAIL. Any shareholder may redeem Fund shares by sending a written request to
the Banks. The written request should include the shareholder's name, the Fund
name, the account number, and the share or dollar amount requested, and should
be signed exactly as the shares are registered. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or

certified mail with the written request. Shareholders should call the Banks for
assistance in redeeming by mail.

SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than on record with the Funds, or a redemption payable other than
to the shareholder of record must have signatures on written redemption requests
guaranteed by:

- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");

- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC; or

- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Funds do not accept signatures guaranteed by a notary public.

The Funds and Federated Services Company have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and Federated Services Company
reserve the right to amend these standards at any time without notice.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments and the
amount of dividends paid with respect to Fund shares, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Funds. For this
reason, payments under this program should not be considered as yield or income
on the shareholders' investment in the Funds. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through the Banks. Due
to the fact that some of the Funds' shares are sold with a sales charge, it is
not advisable for shareholders to be purchasing shares of those Funds while
participating in this program.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Funds may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 because of changes in the Funds' net asset value.

Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

Each share of each Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Funds for vote. All shares of all
classes of each Fund in the Trust have equal voting rights, except that in
matters affecting only a particular Fund or class, only shareholders of that
Fund or class are entitled to vote. As a Massachusetts business trust, the Trust
is not required to hold annual shareholder meetings. Shareholder approval will
be sought only for certain changes in the Trust or Funds' operation and for the
election of Trustees under certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 19,508,242 shares (70.96%) of
Equity Fund, and therefore, may for certain purposes be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 3,887,054 shares (86.16%) of
Opportunity Fund, and therefore, may for certain purposes be deemed to control
the Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 7,406,922 shares (81.50%) of
Limited Term Fund, and therefore, may for certain purposes be deemed to control
the Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 14,351,915 shares (63.60%) and
Commercial National Bank, acting in various capacities for numerous accounts,
was the owner of record of 5,852,391 shares (25.93%) of Government Income Fund,
and therefore, may for certain purposes be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 4,126,799 shares (93.38%) of
Municipal Income Fund, and therefore, may for certain purposes be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.

As of June 3, 1996, Deposit Guaranty National Bank, acting in various capacities
for numerous accounts, was the owner of record of 128,105,766 shares (65.09%)
and Commercial National Bank, acting in various capacities for numerous
accounts, was the owner of record of 61,149,673 shares (31.07%) of Money Market
Fund, and therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders.

EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------

The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, and from issuing, underwriting, selling or
distributing securities in general. Such laws and regulations do not prohibit
such a holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customer. Deposit Guaranty National Bank and Commercial National Bank,
respectively, are subject to such banking laws and regulations.

The Banks believe, based on the advice of counsel, that they may perform the
investment advisory services for the Funds contemplated by the advisory
agreement with the Trust and the sub-advisory agreement between the Banks
without violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent the
Banks from continuing to perform all or a part of the above services. If this
happens, changes in the operation of the Funds may occur, including the possible
alteration or termination of any automatic or other Fund share investment and
redemption services then being provided, and the Trustees would consider
alternative investment advisers and other means of continuing available
investment services. It is not expected that Fund shareholders would suffer any
adverse financial consequences (if another adviser and/or sub-adviser with
equivalent abilities to Deposit Guaranty National Bank and/or Commercial
National Bank are found) as a result of any of these occurrences.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

The Funds will pay no federal income tax because they expect to meet
requirements, of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies.

The Funds will be treated as single, separate entities for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's portfolios will not be combined for tax purposes with those realized by
the individual Funds.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
are received in cash or as additional shares. The Funds will provide detailed
tax information for reporting purposes. With respect to Municipal Income Fund,
information on the tax status of dividends and distributions is provided
annually.

Shareholders are urged to consult their own tax advisers regarding the status of
their account under state and local tax laws.

ADDITIONAL TAX INFORMATION FOR MUNICIPAL INCOME FUND

With respect to Municipal Income Fund, shareholders are not required to pay the
federal regular income tax on any dividends received from Municipal Income Fund
that represent net interest on tax-exempt municipal securities. However, under
the Tax Reform Act of 1986, dividends representing net interest earned on
certain "private activity" bonds issued after August 7, 1986, may be included in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations. Municipal Income Fund may purchase all
types of municipal bonds, including private activity bonds.

The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.

Dividends of Municipal Income Fund representing net interest income earned on
some temporary investments and any realized net short-term gains are taxed as
ordinary income. Distributions representing net long-term capital gains realized
by Municipal Income Fund, if any, will be taxable as long-term capital gains
regardless of the length of time shareholders have held their shares.

With respect to Municipal Income Fund, shareholders should consult their tax
adviser to determine whether they are subject to the alternative minimum tax or
the corporate alternative minimum tax and, if so, the tax treatment of dividends
paid by Municipal Income Fund.

OTHER STATE AND LOCAL TAXES

With respect to Municipal Income Fund, interest received may not be exempt from
all state and local income taxes. Shareholders may be required to pay state and
local taxes on dividends received from Municipal Income Fund. Shareholders are
urged to consult their own tax advisers regarding the status of their accounts
under state and local tax laws.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Funds advertise one or more of the following performance
numbers: total return, yield, effective yield and tax-equivalent yield.

Total return represents the change over a specified period of time in the value
of an investment in the Funds after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yield of Equity Fund, Opportunity Fund, Limited Term Fund, Government Income
Fund and Municipal Income Fund is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each Fund over a thirty-day period by the maximum offering price per share of
each Fund on the last day of the period. This number is then annualized using
semi-annual compounding.

The yield of Money Market Fund represents the annualized rate of income earned
on an investment in the Money Market Fund over a seven day period. It is the
annualized dividends earned during the period on the investment, shown as a
percentage of the investment.

The effective yield is calculated similarly to the yield, but, when annualized,
the income earned by an investment in Money Market Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

The tax-equivalent yield of Municipal Income Fund is calculated similarly to the
yield and effective yield, but is adjusted to reflect the taxable yield that
Municipal Income Fund would have had to earn to equal its actual yield, assuming
a specific tax rate.

The yield, effective yield and tax-equivalent yield do not necessarily reflect
income actually earned by the Funds and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The performance information reflects the effect of the maximum sales charge
which, if excluded, would increase the total return, yield, and tax-equivalent
yield.

From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Funds' performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
DG Investor Series
DG Equity Fund Federated Investors Tower
DG Opportunity Fund Pittsburgh, Pennsylvania 15222-3779
DG Limited Term Government Income Fund
DG Government Income Fund
DG Municipal Income Fund
DG U.S. Government Money Market Fund

- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Deposit Guaranty National Bank P.O. Box 23100
Jackson, Mississippi 39225-3100
- ------------------------------------------------------------------------------------------------
Sub-Adviser
Commercial National Bank P.O. Box 21119
Shreveport, Louisiana 71152
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 1713
Boston, Massachusetts 02105
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent,
and Shareholder Servicing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Independent Public Accountants
KPMG Peat Marwick LLP One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

DG INVESTOR SERIES
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information relates to the following six
portfolios (individually or collectively referred to as the "Fund" or
"Funds") of DG Investor Series (the "Trust"):
DG Equity Fund;
DG Opportunity Fund;
DG Limited Term Government Income Fund;
DG Government Income Fund;
DG Municipal Income Fund; and
DG U.S. Government Money Market Fund.
This Statement should be read with the prospectus of the Funds dated
June 30, 1996. This Statement is not a prospectus. You may request a
copy of a prospectus or a paper copy of this Statement, if you have
received it electronically, free of charge by calling 1-800-530-7377.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated June 30, 1996
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the Funds and is a
subsidiary of Federated Investors.
Cusip 23321N301
Cusip 23321N400
Cusip 23321N103
Cusip 23321N509
Cusip 23321N202
Cusip 23321N608
G00499-05 (6/96)

GENERAL INFORMATION ABOUT THE FUNDS 5

INVESTMENT OBJECTIVES AND POLICIES 5

EQUITY FUND AND OPPORTUNITY FUND 6

Types of Investments 6
Zero Coupon Convertible Securities 6
Convertible Securities 7
Money Market Instruments 8
Warrants 8
Futures and Options Transactions 8
Corporate Debt Securities 13
LIMITED TERM FUND AND GOVERNMENT INCOME FUND 14

Types of Investments 14
Weighted Average Portfolio Duration 14
Mortgage-Backed and Asset-Backed Securities
Risks 15
Option Transactions 16
MUNICIPAL INCOME FUND 19

Types of Investments 19
Temporary Investments 22
Other Investment Techniques 22
MONEY MARKET FUND 23

Types of Investments 23
INVESTMENT POLICIES AND STRATEGIES 24

Repurchase Agreements 24
Reverse Repurchase Agreements 24

When-Issued and Delayed Delivery Transactions25
Lending of Portfolio Securities 25
Portfolio Turnover 26
INVESTMENT LIMITATIONS 26

Regulatory Compliance 36
DG INVESTOR SERIES MANAGEMENT 37

Trust Ownership 45
Trustees Compensation 47
Trustee Liability 48
INVESTMENT ADVISORY SERVICES 48

Adviser to the Funds 48
Advisory Fees 49
Sub-Adviser to the Funds 49
Sub-Advisory Fees 50
OTHER SERVICES 51

Administration of the Trust 51
Custodian 52
Transfer Agent, Dividend Disbursing Agent, and
Shareholder Servicing Agent. 52
Independent Auditors. 52
BROKERAGE TRANSACTIONS 52

PURCHASING SHARES 54

Distribution Plan (Equity Fund, Limited Term
Fund, Government Income Fund, Municipal Income
Fund, and Money Market Fund) 54

Distribution and Shareholder Services Plans
(Opportunity Fund) 55
Conversion to Federal Funds 56
DETERMINING NET ASSET VALUE 56

Determining Market Value of Securities 57
Valuing Municipal Securities 57
Use of the Amortized Cost Method 58
EXCHANGE PRIVILEGE 60

Requirements for Exchange 60
Making an Exchange 60
REDEEMING SHARES 60

Redemption in Kind 61
Massachusetts Partnership Law 61
TAX STATUS 62

The Funds' Tax Status 62
Shareholders' Tax Status 62
TOTAL RETURN 63

YIELD 64

EFFECTIVE YIELD 65

TAX-EQUIVALENT YIELD 65

Tax-Equivalency Table 66
PERFORMANCE COMPARISONS 67

Economic and Market Information 71
FINANCIAL STATEMENTS 72

APPENDIX 72

GENERAL INFORMATION ABOUT THE FUNDS

The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated February 7, 1992. This Statement of Additional
Information relates to the following six portfolios: DG Equity Fund
("Equity Fund"), DG Opportunity Fund ("Opportunity Fund"), DG Limited Term
Government Income Fund ("Limited Term Fund"), DG Government Income Fund
("Government Income Fund"), DG Municipal Income Fund ("Municipal Income
Fund"), and DG U.S. Government Money Market Fund ("Money Market Fund").
The Funds are advised by Deposit Guaranty National Bank (the "Adviser") and
are sub-advised (with the exception of Money Market Fund) by Commercial
National Bank (the "Sub-Adviser").
INVESTMENT OBJECTIVES AND POLICIES

The prospectus discusses the objective of each Fund and the policies
employed to achieve those objectives. The following discussion supplements
the description of the Funds' investment policies in the prospectus. The
Funds' respective investment objectives cannot be changed without approval
of shareholders. Unless otherwise indicated, the investment policies
described below may be changed by the Board of Trustees ("Trustees")
without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
Additional information about investment limitations, strategies that one
or more Funds may employ, and certain investment policies mentioned below
appear in the prospectus section, "Investment Policies and Strategies."

EQUITY FUND AND OPPORTUNITY FUND

TYPES OF INVESTMENTS
Acceptable investments for Equity Fund and Opportunity Fund include but are
not limited to: convertible securities, money market instruments, common
stocks, preferred stocks, corporate bonds, notes and put options on stocks.

ZERO COUPON CONVERTIBLE SECURITIES
Zero coupon convertible securities are debt securities which are issued at
a discount to their face amount and do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, interest earned on
zero coupon convertible securities accretes at a stated yield until the
security reaches its face amount at maturity. Zero coupon convertible
securities are convertible into a specific number of shares of the issuer's
common stock. In addition, zero coupon convertible securities usually have
put features that provide the holder with the opportunity to put the bonds
back to the issuer at a stated price before maturity. Generally, the prices
of zero coupon convertible securities may be more sensitive to market
interest rate fluctuations than conventional convertible securities.

Federal income tax law requires the holder of a zero coupon convertible
security to recognize income with respect to the security prior to the
receipt of cash payments. To maintain its qualification as a regulated
investment company and avoid liability of federal income taxes, Equity Fund
will be required to distribute income accrued with respect to zero coupon
convertible securities which it owns, and may have to sell portfolio
securities (perhaps at disadvantageous times) in order to generate cash to
satisfy these distribution requirements.

CONVERTIBLE SECURITIES
Convertible securities are fixed income securities which may be exchanged
or converted into a predetermined number of the issuer's underlying common
stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and
warrants, or a combination of the features of several of these securities.
The investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different investment
objectives.

Equity Fund and Opportunity Fund will exchange or convert the convertible
securities held in their portfolios into shares of the underlying common
stock in instances in which, in the Adviser's opinion, the investment
characteristics of the underlying common shares will assist the Funds in
achieving their investment objectives. Otherwise, the Funds may hold or
trade convertible securities. In selecting convertible securities for the
Funds, the Adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security,
the Adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

MONEY MARKET INSTRUMENTS
Equity Fund and Opportunity Fund may invest in money market instruments of
domestic and foreign banks and savings associations if they have capital,
surplus, and undivided profits of over $100,000,000, or if the principal
amount of the instrument is insured in full by the Bank Insurance Fund or
the Savings Association Insurance Fund, both of which are administered by
the Federal Deposit Insurance Corporation.

WARRANTS
Warrants are basically options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock
at issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However,
most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the market
price of the optioned common stock.
FUTURES AND OPTIONS TRANSACTIONS

As a means of reducing fluctuations in the net asset value of shares of the
Funds, Equity Fund and Opportunity Fund may attempt to hedge all or a
portion of their portfolios by buying and selling financial futures and
stock index futures contracts, buying put options on portfolio securities
and listed put options on futures contracts, and writing call options on
futures contracts. The Funds may also write covered call options on

portfolio securities to attempt to increase their current income. The Funds
will maintain their positions in securities, option rights, and segregated
cash subject to puts and calls until the options are exercised, closed, or
have expired. An option position on financial futures contracts may be
closed out only on an exchange which provides a secondary market from
options of the same series.

FUTURES CONTRACTS
A futures contract is a firm commitment between the seller, who agrees
to make delivery of the specific type of security called for in the
contract ("going short"), and the buyer, who agrees to take delivery
of the security ("going long") at a certain time in the future.
When the Funds purchase futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Funds' custodian (or the broker, if
legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
Financial futures contracts call for the delivery of particular debt
instruments at a certain time in the future. The seller of the
contract agrees to make delivery of the type of instrument called for
in the contract and the buyer agrees to take delivery of the
instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the
market value of common stock of the firms included in the indexes. An
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
differences between the value of the index at the close of the last

trading day of the contract and the price at which the index contract
was originally written.

PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Funds may purchase listed put options on financial futures
contracts. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at
a specified price, the purchase of a put option on a futures contract
entitles (but does not obligate) its purchaser to decide on or before
a future date whether to assume a short position at the specified
price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Funds will normally close out their options by selling
identical options. If the hedge is successful, the proceeds received
by the Funds upon the sale of the second option will be large enough
to offset both the premiums paid by the Funds for the original option
plus the decrease in value of the hedged securities.
Alternatively, the Funds may exercise their put options to close out
the position. To do so, they would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Funds would
then deliver the futures contract in return for payment of the strike
price. If the Funds neither close out nor exercise an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Funds may write
listed call options on futures contracts to hedge their portfolios.
When the Funds write a call option on a futures contract, they are
undertaking the obligation of assuming a short futures position
(selling a futures contract) at the fixed strike price at any time
during the life of the option if the option is exercised. As stock
prices fall, causing the prices of futures to go down, the Funds'
obligations under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Funds' call
option positions to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Funds keep the premiums received for the options.
This premium can substantially offset the drop in value of the Funds'
fixed income or indexed portfolios which are occurring as interest
rates rise.
Prior to the expiration of a call written by the Funds, or exercise of
it by the buyer, the Funds may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Funds for the
initial option. The net premium income of the Funds will then
substantially offset the decrease in value of the hedged securities.
The Funds will not maintain open positions in futures contracts they
have sold or call options they have written on futures contracts if,
in the aggregate, the value of the open positions (marked to market)
exceeds the current market value of their securities portfolio plus or
minus the unrealized gain or loss on those open positions, adjusted
for the correlation of volatility between the hedged securities and

the futures contracts. If this limitation is exceeded at any time, the
Funds will take prompt action to close out a sufficient number of open
contracts to bring their open futures and options positions within
this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Funds do not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Funds are required to deposit an amount of "initial margin" in
cash or U.S. Treasury bills with the custodian (or the broker, if
legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not
involve the borrowing of funds by the Funds to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to a Funds upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by the Funds is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Funds pay or receive cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known
as "marking to market." Variation margin does not represent a
borrowing or loan by the Funds but is instead settlement between the
Funds and the broker of the amount one would owe the other if the
futures contract expired. In computing their respective daily net
asset value, the Funds will mark to market their open futures
positions.
The Funds are also required to deposit and maintain margin when they
write call options on futures contracts.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Funds may purchase put options on portfolio securities to protect
against price movements in particular securities in their portfolios.
A put option gives the Funds, in return for a premium, the right to
sell the underlying security to the writer (seller) at a specified
price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Funds may also write covered call options to generate income. As
writer of a call option, the Funds have the obligation upon exercise
of the option during the option period to deliver the underlying
security upon payment of the exercise price. The Funds may only sell
call options either on securities held in their portfolios or on
securities which they have the right to obtain without payment of
further consideration (or has segregated cash in the amount of any
additional consideration).
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or variable
rates of interest. They may involve equity features such as conversion or
exchange rights, warrants for the acquisition of common stock of the same
or different issuer, participations based on revenues, sales, or profits,
or the purchase of common stock in a unit transaction (where corporate debt
securities and common stock are offered as a unit).

LIMITED TERM FUND AND GOVERNMENT INCOME FUND

TYPES OF INVESTMENTS
Limited Term Fund invests primarily in a portfolio of government and
corporate securities and Government Income Fund invests primarily in a
portfolio of government and corporate securities. The investment
portfolios include the following securities:
o U.S. government securities, including Treasury bills, notes, bonds,
and securities issued by agencies and instrumentalities of the U.S.
government;
o mortgage-backed securities;
o corporate debt securities rated within the three highest categories by
a nationally recognized statistical rating organization, including
bonds, notes, and debentures;
o asset-backed securities; and
o bank instruments.
WEIGHTED AVERAGE PORTFOLIO DURATION
With respect to Limited Term Fund, duration is a commonly used measure of
the potential volatility of the price of a debt security, or the aggregate
market value of a portfolio of debt securities, prior to maturity. Duration
measures the magnitude of the change in the price of a debt security
relative to a given change in the market rate of interest. The duration of
a debt security depends upon three primary variables: the security's coupon
rate, maturity date and the level of market interest rates for similar debt
securities. Generally, debt securities with lower coupons or longer
maturities will have a longer duration than securities with higher coupons
or shorter maturities.

Duration is calculated by dividing the sum of the time-weighted values of
cash flows of a security or portfolio of securities, including principal
and interest payments, by the sum of the present values of the cash flows.
Certain debt securities, such as asset-backed securities, may be subject to
prepayment at irregular intervals. The duration of these instruments will
be calculated based upon assumptions established by the Adviser as to the
probable amount and sequence of principal prepayments.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES RISKS
Mortgage-backed and asset-backed securities generally pay back principal
and interest over the life of the security. At the time the Funds reinvest
the payments and any unscheduled prepayments of principal received, the
Funds may receive a rate of interest which is actually lower than the rate
of interest paid on these securities ("prepayment risks"). Mortgage-backed
and asset-backed securities are subject to higher prepayment risks than
most other types of debt instruments with prepayment risks because the
underlying mortgage loans or the collateral supporting asset-backed
securities may be prepaid without penalty or premium. Prepayment risks on
mortgaged-backed securities tend to increase during periods of declining
mortgage interest rates because many borrowers refinance their mortgages to
take advantage of the more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the frequency with
which people sell their homes or elect to make unscheduled payments on
their mortgages. Although asset-backed securities generally are less likely
to experience substantial prepayments than are mortgage-backed securities,
certain of the factors that affect the rate of prepayments on mortgage-
backed securities also affect the rate of prepayments on asset-backed
securities.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit
card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many
of which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of asset-
backed securities backed by motor vehicle installment purchase obligations
permit the servicer of such receivables to retain possession of the
underlying obligations. If the servicer sells these obligations to another
party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities.
Further, if a vehicle is registered in one state and is then reregistered
because the owner and obligor moves to another state, such reregistration
could defeat the original security interest in the vehicle in certain
cases. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee
for the holders of asset-backed securities backed by automobile receivables
may not have a proper security interest in all of the obligations backing
such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
OPTION TRANSACTIONS

As a means of reducing fluctuations in the net asset value of shares of
Limited Term Fund and Government Income Fund, the Funds may attempt to
hedge all or a portion of their portfolios through the purchase of put
options on portfolio securities and listed put options on financial futures
contracts for portfolio securities. The Funds may also write covered call

options on their portfolio securities to attempt to increase their current
income.
Limited Term Fund and Government Income Fund will maintain their positions
in securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired.

An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Funds may purchase listed put options on financial futures
contracts. These options will be used only to protect portfolio
securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of instrument called for
in the contract ("going short") and the buyer who agrees to take
delivery of the instrument ("going long") at a certain time in the
future.
Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specified
agencies or instrumentalities of the U.S. government. If the Funds
could enter into financial futures contracts directly to hedge their
holdings of fixed income securities, they would enter into contracts
to deliver securities at a predetermined price (i.e., "go short") to
protect itself against the possibility that the prices of their fixed
income securities may decline during the Funds' anticipated holding
period.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified

price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future
date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Funds will normally close out their options by selling
identical options. If the hedge is successful, the proceeds received
by the Funds upon the sale of the second option will be large enough
to offset both the premium paid by the Funds for the original option
plus the realized decrease in value of the hedged securities.
Alternately, the Funds may exercise their put option to close out the
position. To do so, they would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Funds would
then deliver the futures contract in return for payment of the strike
price.
Currently, the Funds will only enter into futures contracts in order
to exercise put options in their portfolios. If the Funds neither
close out nor exercise an option, the option will expire on the date
provided in the option contract, and only the premium paid for the
contract will be lost.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Funds may purchase put options on portfolio securities to protect
against price movements in particular securities in their portfolios.
Put options give the Funds, in return for a premium, the right to sell
the underlying security to the writer (seller) at a specified price
during the term of the option.

WRITING COVERED CALL OPTIONS
The Funds may also write covered call options to generate income. As
writer of a call option, the Funds have the obligation upon exercise
of the option during the option period to deliver the underlying
security upon payment of the exercise price.
The Funds may only sell listed call options either on securities held
in their portfolios or on securities which they have the right to
obtain without payment of further consideration (or has segregated
cash in the amount of any such additional consideration).

MUNICIPAL INCOME FUND

TYPES OF INVESTMENTS
Municipal Income Fund will invest in a diversified portfolio of municipal
securities.
CHARACTERISTICS
The municipal securities in which Municipal Income Fund invests have
the characteristics set forth in the prospectus. Municipal Income Fund
may use similar services or ratings other than Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"), or
Fitch Investors Service, Inc. ("Fitch"). If a security's rating is
reduced below the required minimum after the Fund has purchased it,
the Fund is not required to sell the security, but may consider doing
so. If ratings made by Moody's, S&P, or Fitch change because of
changes in those organizations or in their rating systems, the Fund
will try to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.

PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution irrevocable letters of credit or guarantees and give the
Fund the right to demand payment of the principal amounts of the
participation interests, plus accrued interest, on short notice
(usually within seven days). These financial institutions may charge
certain fees in connection with their repurchase commitments,
including a fee equal to the excess of the interest paid on the
municipal securities over the negotiated yield at which the
participation interests were purchased by the Fund. By purchasing
participation interests having a seven-day demand feature, the Fund is
buying a security meeting the maturity and quality requirements of the
Fund and also is receiving the tax-free benefits of the underlying
securities.

VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value
of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations. Many municipal
securities with variable interest rates purchased by the Fund are
subject to repayment of principal (usually within seven days) on the
Fund's demand. The terms of these variable rate demand instruments
require payment of principal and accrued interest from the issuer of
the municipal obligations, the issuer of the participation interests,
or a guarantor of either issuer.

MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of
participation interests that represent an undivided proportional
interest in lease payments by a governmental or non-profit entity. The
lease payments and other rights under the lease provide for and secure
payments on the certificates. Lease obligations may be limited by
municipal charter or the nature of the appropriation for the lease. In
particular, lease obligations may be subject to periodic
appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the participants cannot
accelerate lease obligations upon default. The participants would only
be able to enforce lease payments as they became due. In the event of
a default or failure of appropriation, unless the participation
interests are credit enhanced, it is unlikely that the participants
would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the
Adviser, under the authority delegated by the Trustees, will base its
determination on the following factors:
owhether the lease can be terminated by the lessee;
othe potential recovery, if any, from a sale of the leased property;
oupon termination of the lease;
othe lessee's general credit strength (e.g., its debt,
administrative, economic and financial characteristics and
prospects);
othe likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer
deemed essential to its operations (e.g., the potential for an
"event of non-appropriation");

oany credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes.
BANK INSTRUMENTS
The Fund only invests in Bank Instruments (as defined in the
prospectus) either issued by an institution having capital, surplus,
and undivided profits over $100 million or insured by the Bank
Insurance Fund or the Savings Association Insurance Fund, both of
which are administered by the Federal Deposit Insurance Corporation.
OTHER INVESTMENT TECHNIQUES
The Fund may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand feature may
be issued by the issuer of the underlying securities, a dealer in the
securities or by another third party, and may not be transferred separately
from the underlying security. The Fund uses these arrangements to provide
the Fund with liquidity and not to protect against changes in the market
value of the underlying securities. The bankruptcy, receivership or default
by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.

MONEY MARKET FUND

TYPES OF INVESTMENTS
Money Market Fund invests primarily in short-term U.S. government
securities.

VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may
purchase have variable interest rates. These securities have a rate of
interest subject to adjustment at least annually. This adjusted
interest rate is ordinarily tied to some objective standard, such as
the 91-day U.S. Treasury bill rate.
Variable interest rates will reduce the changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not
be greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon
the determination by the Trustees that the interest rate as adjusted
will cause the instrument to have a current market value that
approximates its par value on the adjustment date.

INVESTMENT POLICIES AND STRATEGIES

REPURCHASE AGREEMENTS
The Funds or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Funds, the Funds could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Funds might be delayed pending court action. The Funds
believe that under the regular procedures normally in effect for custody of
the Funds' portfolio securities subject to repurchase agreements, a court
of competent jurisdiction would rule in favor of the Funds and allow
retention or disposition of such securities. The Funds will only enter into
repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In reverse repurchase
agreements, the Funds transfer possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and agree
that on a stipulated date in the future the Funds will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Funds,
in a dollar amount sufficient to make payment for the obligations to be

purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
The use of reverse repurchase agreements may enable the Funds to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Funds will be able to avoid selling
portfolio instruments at a disadvantageous time.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Funds. Settlement dates may be a month
or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices. No fees or
other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Funds sufficient to make payment for the
securities to be purchased are segregated on the Funds' records at the
trade date. These assets are marked to market daily and are maintained
until the transaction has been settled. The Funds do not intend to engage
in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of their
respective assets.

With the exception of Municipal Income Fund, during the current year, the
Funds do not anticipate investing more than 10% (5% in the case of Money
Market Fund) of their respective total assets in when-issued and delayed
delivery transactions.

LENDING OF PORTFOLIO SECURITIES
The collateral received when the Funds lend portfolio securities must be
valued daily and, should the market value of the loaned securities

increase, the borrower must furnish additional collateral to the Funds.
During the time portfolio securities are on loan, the borrower pays the
Funds any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Funds or the borrower. The Funds may
pay reasonable administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
PORTFOLIO TURNOVER

The Funds do not intend to invest for the purpose of seeking short-term
profits. Securities in the portfolio will be sold whenever the Adviser
believes it is appropriate to do so in light of each Fund's investment
objective, without regard to the length of time a particular security may
have been held. The Adviser does not anticipate that any Fund's portfolio
turnover rate will exceed 100%. For the fiscal years ended February 29,
1996, the portfolio turnover rates for Equity Fund, Opportunity Fund,
Limited Term Fund, Government Income Fund and Municipal Income Fund were
15%, 154%, 56%, 87% and 20%, respectively. For the fiscal year ended
February 28, 1995, the portfolio turnover rate for Equity Fund, Limited
Term Fund, Government Income Fund and Municipal Income Fund were 1%, 14%,
-
31% and 9%, respectively. For the period from August 1, 1994 (date of
initial public investment) to February 28, 1995, the portfolio turnover
rate for Opportunity Fund was 45%.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as may be

necessary for clearance of purchases and sales of portfolio
securities. The deposit or payment by the Funds of initial or
variation margin in connection with financial futures contracts or
related options transactions is not considered the purchase of a
security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY

Equity Fund, Opportunity Fund and Municipal Income Fund will not issue
senior securities except that they may borrow money directly or
through reverse repurchase agreements as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of one-third of the value of their respective total assets;
provided that, while borrowings exceed 5% of each Fund's total assets,
any such borrowings will be repaid before additional investments are
made. The Funds will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
Limited Term Fund, Government Income Fund and Money Market Fund will
not issue senior securities, except that they may borrow money
directly or through reverse repurchase agreements in amount up to one-
third of the value of their respective total assets including the
amount borrowed. The Funds will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolios by enabling the Funds to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Funds will not purchase any
securities while borrowings in excess of 5% of their respective total
assets are outstanding.

CONCENTRATION OF INVESTMENTS
Equity Fund, Opportunity Fund and Municipal Income Fund will not
purchase securities if, as a result of such purchase, 25% or more of
the value of their respective total assets would be invested in any
one industry. However, the Funds may at times invest 25% or more of
the value of their respective total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
Municipal Income Fund will not purchase securities if, as a result of
such purchase, 25% or more of its total assets would be invested in
any one industry or in industrial development bonds or other
securities, the interest upon which is paid from revenues of similar
type projects. Municipal Income Fund may invest, as temporary
investments, 25% or more of its total assets in cash or cash items,
securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
Municipal Income Fund does not intend to purchase securities that
would increase the percentage of its total assets invested in the
securities of governmental subdivisions located in any one state,
territory, or U.S. possession to 25% or more. However, it may invest
25% or more of its assets in tax-exempt project notes guaranteed by
the U.S. government, regardless of the location of the issuing
municipality. If the value of Municipal Income Fund assets invested in
the securities of a governmental subdivision changes because of
changing values, the Fund will not be required to make any reduction
in its holdings.

INVESTING IN COMMODITIES
Equity Fund and Opportunity Fund will not purchase or sell commodity
contracts, or commodity futures contracts except that they may
purchase and sell financial futures and stock index futures contracts
and related options.
Limited Term Fund and Government Income Fund will not buy or sell
commodities. However, these Funds may purchase put options on
portfolio securities and on financial futures contracts. In addition,
Limited Term Fund and Government Income Fund reserve the right to
hedge their portfolios by entering into financial futures contracts
and selling calls on financial futures contracts.
Municipal Income Fund and Money Market Fund will not purchase or sell
commodity contracts or commodity futures contracts.
INVESTING IN REAL ESTATE
Equity Fund, Opportunity Fund, Limited Term Fund, Government Income
Fund and Money Market Fund will not purchase or sell real estate,
including limited partnership interests in real estate, although they
may invest in securities secured by real estate or interests in real
estate.
Municipal Income Fund will not purchase or sell real estate, including
limited partnership interests in real estate, although it may invest
in securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
INVESTING TO EXERCISE CONTROL
Equity Fund will not purchase securities for the purpose of exercising
control over the issuer of securities.

LENDING CASH OR SECURITIES
Equity Fund, Limited Term Fund and Government Income Fund will not
lend any of their respective assets, except that they may purchase or
hold corporate or government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Funds'
investment objectives and policies or the Trust's Declaration of
Trust, or lend portfolio securities valued at not more than 5% of
their respective total assets to brokers/dealers.
Opportunity Fund and Money Market Fund will not lend any of their
respective assets except portfolio securities and except that they may
purchase or hold corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
repurchase agreements, or other transactions which are permitted by
each Fund's investment objectives and policies or the Trust's
Declaration of Trust.

Municipal Income Fund will not lend any of its assets, except
portfolio securities up to one-third of the value of its total assets.
This shall not prevent Municipal Income Fund from purchasing or
holding corporate or government bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, entering into
repurchase agreements or engaging in other transactions which are
permitted by Municipal Income Fund's investment objective and policies
or the Trust's Declaration of Trust.

UNDERWRITING
The Funds will not underwrite any issue of securities, except as a
Fund may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with a
Fund's investment objectives, policies, and limitations.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, the Funds may pledge
assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 15% of the value of total assets at the time of
the pledge. For purposes of this limitation, the following are not
deemed to be pledges: margin deposits for the purchase and sale of
financial futures contracts and related options, and segregation or
collateral arrangements made in connection with options activities or
the purchase of securities on a when-issued basis.
DIVERSIFICATION OF INVESTMENTS

With respect to 75% of the value of their respective assets, Equity
Fund, Opportunity Fund, Limited Term Fund and Government Income Fund
will not purchase the securities of any issuer (other than cash, cash
items, or securities issued or guaranteed by U.S. government, its
agencies or instrumentalities, and with respect to Municipal Income
Fund, repurchase agreements) if, as a result, more than 5% of the
value of the Funds' respective total assets would be invested in the
securities of that issuer. Also, the Funds will not purchase more than
10% of the outstanding voting securities of any one issuer.
With respect to 75% of its assets, Municipal Income Fund will not
invest more than 5% of its total assets in any one issuer (except cash
and cash items, repurchase agreements, and U.S. government

obligations). Also, Municipal Income Fund will not purchase more than
10% of the outstanding voting securities of any one issuer.
Municipal Income Fund considers common stock and all preferred stock
of an issuer each as a single class, regardless of priorities, series,
designations, or other differences. Under this limitation, each
governmental subdivision, including states and the District of
Columbia, territories and possessions of the United States or their
political subdivisions, agencies, authorities, instrumentalities, or
similar entities, will be considered a separate issuer if its assets
and revenues are separate from those of the governmental body creating
it and the security is backed only by its own assets and revenues.

Private activity bonds backed only by the assets and revenues of a
non-governmental user are considered to be issued solely by that user.
If, in the case of a private activity bond or government-issued
security, a governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by the
guarantor as well as the other issuer, subject to limited exclusions
allowed by the Investment Company Act of 1940.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material changes in these limitations become effective.
RESTRICTED SECURITIES

The Funds will not invest more than 5% of the value of their
respective total assets in securities subject to restrictions on
resale issued under the Securities Act of 1933, except (with respect
to Municipal Income Fund) for commercial paper issued under the

Securities Act of 1933, and except (with respect to all Funds) for
certain restricted securities which meet the criteria for liquidity as
established by the Trustees.

INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 15% of the value of their
respective net assets (10% with respect to Money Market Fund) in
illiquid securities, including repurchase agreements providing for
settlement more than seven days after notice; with respect to Equity
Fund and Opportunity Fund only, over-the-counter options; and certain
restricted securities not determined by the Trustees to be liquid.
Municipal Income Fund, to comply with certain state restrictions, will
limit these transactions to 10% of its net assets. (If state
restrictions change, this latter restriction may be revised without
shareholder approval or notification.)
INVESTING IN MINERALS
The Funds will not purchase interests in oil, gas, other mineral
exploration or development programs, or leases, although, Equity Fund,
Opportunity Fund and Municipal Income Fund may purchase the publicly
traded securities of companies engaging in, investing in, or
sponsoring such activities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds will limit their investments in other investment companies
to no more than 3% of the total outstanding voting stock of any
investment company, will not invest more than 5% of their respective
total assets in any one investment company, or invest more than 10% of
their respective total assets in investment companies in general. The
Funds will purchase securities of investment companies only in open-

market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, or acquisition of assets. It
should be noted that investment companies incur certain expenses, such
as management fees, and, therefore, any investment by a Fund in shares
of another investment company would be subject to such duplicate
expenses. With the exception of Money Market Fund, the Funds will
invest in other investment companies primarily for the purpose of
investing their short-term cash on a temporary basis. The Adviser will
waive its investment advisory fee on assets invested in securities of
open-end investment companies.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
OF THE TRUST
Equity Fund, Opportunity Fund, Limited Term Fund, Government Income
Fund and Municipal Income Fund will not purchase or retain the
securities of any issuer if the officers and Trustees of the Trust or
the Adviser owning individually more than 1/2 of 1% of the issuer's
securities together own more than 5% of the issuer's securities.
INVESTING IN NEW ISSUERS
Equity Fund, Opportunity Fund, Limited Term Fund, and Government
Income Fund will not invest more than 5% of the value of their
respective total assets in securities of issuers which have records of
less than three years of continuous operations, including the
operation of any predecessor.
Municipal Income Fund will not invest more than 5% of its total;
assets in industrial development bonds where the payment of principal
and interest is the responsibility of companies, including their
predecessors, with less than three years of operating history.

INVESTING IN WARRANTS
Equity Fund and Opportunity Fund will not invest more than 5% of their
respective net assets in warrants. No more than 2% of their respective
net assets, to be included within the overall 5% limit on investments
in warrants, may be warrants which are not listed on the New York
Stock Exchange or the American Stock Exchange.
ARBITRAGE TRANSACTIONS
Equity Fund, Opportunity Fund and Municipal Income Fund will not enter
into transactions for the purpose of engaging in arbitrage.

INVESTING IN PUT OPTIONS AND WRITING COVERED PUT OPTIONS
Equity Fund, Opportunity Fund and Limited Term Fund will not purchase
put options on securities, unless the securities are held in each
Fund's portfolio and, with respect to Equity Fund and Opportunity
Fund, not more than 5% of the value of each Fund's total assets would
be invested in premiums on open put option positions.
When writing put options, Limited Term Fund and Government Income Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
Limited Term Fund and Government Income Fund will not purchase put
options on securities unless the securities are held in a Fund's
portfolio.
WRITING COVERED CALL OPTIONS
Equity Fund, Opportunity Fund, Limited Term Fund and Government Income
Fund will not write call options on securities unless the securities
are held in the Funds' portfolio or unless the Funds are entitled to
them in deliverable form without further payment or after segregating
cash in the amount of any further payment.

DEALING IN PUTS AND CALLS
Money Market Fund will not buy or sell puts, calls, straddles,
spreads, or any combination of these.
INVESTING TO EXERCISE CONTROL
Opportunity Fund will not purchase securities for the purpose of
exercising control over the issuer of securities.

Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
Opportunity Fund does not expect to borrow money in excess of 5% of the
value of its net assets during the coming year.
For the purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."
REGULATORY COMPLIANCE

Money Market Fund may follow non-fundamental operational policies that are
more restrictive than its fundamental investment limitations, as set forth
in the Prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. For example, with
limited exceptions, Rule 2a-7 prohibits the investment of more than 5% of
its assets in the securities of any one issuer, although Money Market
Fund's investment limitation only requires such 5% diversification with
respect to 75% of its assets. Money Market Fund will invest more than 5%

of its assets in any one issuer only under the circumstances permitted by
Rule 2a-7. Money Market Fund will also determine the effective maturity of
its investments, as well as its ability to consider a security as having
received the requisite short-term ratings by NRSROs, according the Rule 2a-
7. Money Market Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its
shareholders.

DG INVESTOR SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with DG Investor Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .

Thomas G. Bigley
28th Floor, One Oxford Centre

Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director or Trustee of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.

Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer and Trustee
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee

Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of

some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960

Vice President and Assistant Treasurer

Vice President and Assistant Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;

Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; Newpoint
Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.

TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Equity Fund: Deposit Guaranty National Bank,
acting in various capacities for numerous accounts was the owner of record
of approximately 19,508,242 shares (70.96%) and Commercial National Bank,
acting in various capacities for numerous accounts, was the owner of record
of approximately 6,087,946 shares (22.14%).

As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Opportunity Fund: Deposit Guaranty National
Bank, acting in various capacities for numerous accounts was the owner of
record of approximately 3,887,054 shares (86.16%).
As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Limited Term Fund: Deposit Guaranty National
Bank, acting in various capacities for numerous accounts was the owner of
record of approximately 7,406,922 shares (81.50%) and Commercial National
Bank, acting in various capacities for numerous accounts, was the owner of
record of approximately 1,052,572 shares (11.58%).
As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Government Income Fund: Deposit Guaranty
National Bank, acting in various capacities for numerous account was the
owner of record of approximately 14,351,915 shares (63.60%) and Commercial
National Bank, acting in various capacities for numerous accounts, was the
owner of record of approximately 5,852,390 shares (25.93%)..
As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Municipal Income Fund: Deposit Guaranty
National Bank, acting in various capacities for numerous account was the
owner of record of approximately 4,126,799 shares (93.38%).
As of June 3, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of Money Market Fund: Deposit Guaranty National
Bank, acting in various capacities for numerous accounts was the owner of
record of approximately 128,105,766 shares (65.09%) and Commercial National
Bank, acting in various capacities for numerous accounts, was the owner of
record of approximately 61,149,673 shares (31.07%).

TRUSTEES COMPENSATION

Name , Aggregate
Position With Compensation From
Trust Trust+

John F. Donahue, $0
Chairman and Trustee
Thomas G. Bigley, $1,781
Trustee
John T. Conroy, Jr., $1,914
Trustee
William J. Copeland, $1,914
Trustee
James E. Dowd, $1,914
Trustee
Lawrence D. Ellis, M.D., $1,781
Trustee
Edward L. Flaherty, Jr., $1,781
Trustee
Edward C. Gonzales, $0
President, Treasurer and Trustee
Peter E. Madden, $1,781
Trustee
Gregor F. Meyer, $1,781
Trustee
John E. Murray, Jr., $ 1,781
Trustee

Wesley W. Posvar, $1,781
Trustee
Marjorie P. Smuts, $1,781
Trustee
+The aggregate compensation is provided for the Trust which is comprised
of six portfolios. Information is furnished for the fiscal year ended
February 29, 1996.

TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be
liable for their own willful defaults. If reasonable care has been
exercised in the selection of officers, agents, employees, or investment
advisers, a Trustee shall not be liable for any neglect or wrong doing of
any such person. However, they are not protected against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUNDS
The Funds' investment adviser is Deposit Guaranty National Bank (the
"Adviser"), a subsidiary of Deposit Guaranty Corp. The Adviser shall not be
liable to the Trust, the Funds or any shareholder of any of the Funds for
any losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

Because of the internal controls maintained by Deposit Guaranty National
Bank and Commercial National Bank, the sub-adviser for all of the Funds
(with the exception of Money Market Fund) to restrict the flow of non-
public information, Fund investments are typically made without any
knowledge of Deposit Guaranty National Bank's or its affiliates' lending
relationships with an issuer.

ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended February 29, 1996, February 28, 1995 and 1994,
the Adviser earned fees from: Equity Fund of $2,568,435, $1,907,646, and
$1,915,318, of which $0, $0, and $27,126, respectively, were voluntarily
waived; Limited Term Fund of $572,084, $642,168, and $693,635, of which
$190,371, $267,570, and $338,182, respectively, were voluntarily waived;
Government Income Fund of $892,734, $926,421, and $575,982, of which
$148,789, $231,605, and $184,327, respectively, were voluntarily waived;
Municipal Income Fund of $262,552, $225,528, and $154,612, of which
$155,258, $154,111, and $154,612, respectively, were voluntarily waived;
and Money Market Fund of $1,044,577, $837,617, and $805,013, of which
$417,831, $335,047, and $322,005, respectively, were voluntarily waived.
For the fiscal years ended February 29, 1996 and the period from August 1,
1994 (date of initial public investment) to February 28, 1995, the Adviser
earned fees from Opportunity Fund of $441,513 and $131,668, of which
$162,538 and $105,660 were waived, respectively.

SUB-ADVISER TO THE FUNDS

With the exception of Money Market Fund, the Funds' sub-adviser is
Commercial National Bank (the "Sub-Adviser"), a subsidiary of Deposit
Guaranty Corp.

SUB-ADVISORY FEES
For its sub-advisory services, the Sub-Adviser receives an annual sub-
advisory fee as described in the prospectus.

For the fiscal years ended February 29, 1996, February 28, 1995, and 1994,
the Sub-Adviser earned fees from: Equity Fund of $856,145, $635,882, and
$638,439, respectively, all of which were voluntarily waived; Limited Term
Fund of $238,368, $267,570, and $289,015, respectively, all of which were
voluntarily waived; Government Income Fund of $371,923, $386,009, and
$239,992, respectively, all of which were voluntarily waived; and Municipal
Income Fund of $109,397, $93,970, and $64,421 , respectively, all of which
were voluntarily waived. For the fiscal years ended February 29, 1996 and
the period from August 1, 1994 (date of initial public investment) to
February 28, 1995, the Sub-Adviser earned fees from Opportunity Fund of
$116,188 and $34,649, respectively, all of which was voluntarily waived.

STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares
are registered for sale in those states. If a Funds' normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%

per year of the remaining average net assets, the Adviser will
reimburse the Funds for their expenses over the limitation.
If the Funds' monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.

OTHER SERVICES

ADMINISTRATION OF THE TRUST
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Funds for a fee as
set forth in the prospectus. For the fiscal years ended February 29, 1996,
February 28, 1995, and 1994, administrative services fees were incurred on
behalf of Equity Fund of $401,890, $319,181, and $328,534, none of which
were voluntarily waived; Limited Term Fund of $112,018, $134,312, and
$148,906, none of which were voluntarily waived; Government Income Fund of
$174,394, $193,697, and $123,503, none of which were voluntarily waived;
Municipal Income Fund of $100,000, $47,162, and $50,000, of which $48,579,
$0, and $16,903, respectively, were voluntarily waived; and Money Market
Fund of $244,926, $210,182, and $207,210, none of which were voluntarily
waived. For the fiscal years ended February 29, 1996 and the period from
August 1, 1994 (date of initial public investment) to February 28, 1995,
the Administrator earned fees from Opportunity Fund of $100,000 and
$100,000, of which $0 and $80,736, respectively, were voluntarily waived.

CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Funds.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND SHAREHOLDER SERVICING AGENT.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, serves as transfer agent for the shares of the Funds,
dividend disbursing agent for the Funds, and shareholder servicing agent
for the Funds.
INDEPENDENT AUDITORS.
The independent auditors for the Funds are KPMG Peat Marwick LLP,
Pittsburgh, Pennsylvania.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Trustees. The Adviser
may select brokers and dealers who offer brokerage and research services.
These services may be furnished directly to the Funds or to the Adviser and
may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt
of quotations for portfolio evaluations; and similar services. Research
services provided by brokers may be used by the Adviser in advising the

Funds and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser or its affiliates might otherwise
have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided.

For the years ended February 29, 1996, February 28, 1995, and 1994, Equity
Fund paid total commissions of $158,777, $65,931, and $159,709,
respectively, on brokerage transactions. For the fiscal year ended
February 29, 1996, and the period from August 1, 1994 to February 28, 1995,
Opportunity Fund paid total commissions of $161,370, and $36,029,
respectively, in brokerage commissions on brokerage transactions.

Although investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Funds may make may also be made by those other accounts. When the Funds
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Funds or
the size of the position obtained or disposed of by the Funds. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Funds.

PURCHASING SHARES

Shares of the Funds are sold at their net asset value next determined after
an order is received, plus any applicable sales charge on days the New York
Stock Exchange and Federal Reserve Wire System are open for business. The
procedure for purchasing shares is explained in the prospectus under
"Investing in the Funds."

DISTRIBUTION PLAN (EQUITY FUND, LIMITED TERM FUND, GOVERNMENT INCOME FUND,
MUNICIPAL INCOME FUND, AND MONEY MARKET FUND)

With respect to Equity Fund, Limited Term Fund, Government Income Fund,
Municipal Income Fund, and Money Market Fund, the Trust has adopted a Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940. The Plan
provides for payment of fees to Federated Securities Corp. to finance any
activity which is principally intended to result in the sale of the Funds'
shares subject to the Plan. Such activities may include the advertising and
marketing of shares of the Funds; preparing, printing, and distributing
prospectuses and sales literature to prospective shareholders, brokers, or
administrators; and implementing and operating the Plan. Pursuant to the
Plan, Federated Securities Corp. may pay fees to brokers for distribution
and administrative services and to administrators for administrative
services provided to the Funds. The administrative services are provided by
a representative who has knowledge of the shareholder's particular
circumstances and goals, and include, but are not limited to: communicating
account openings; communicating account closings; entering purchase
transactions; entering redemption transactions; providing or arranging to
provide accounting support for all transactions, wiring funds and receiving

funds for purchases and redemptions of Fund shares, confirming and
reconciling all transactions, reviewing the activity in Fund accounts and
providing training and supervision of broker personnel; posting and
reinvesting dividends to Fund accounts or arranging for this service to be
performed by the Funds' transfer agent; and maintaining and distributing
current copies of prospectuses and shareholder reports to the beneficial
owners of Fund shares and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale
of a sufficient number of shares so as to allow the Funds to achieve
economic viability. It is also anticipated that an increase in the size of
any Fund will facilitate more efficient portfolio management and assist the
Funds in seeking to achieve their respective investment objectives.

For the fiscal year ended February 29, 1996, brokers and administrators
(financial institutions) received no fees pursuant to the Plan.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS (OPPORTUNITY FUND)
With respect to Opportunity Fund, these arrangements permit the payment of
fees to financial institutions to stimulate distribution activities and
services to shareholders provided by a representative who has knowledge of
the shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to, marketing efforts; providing
office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing
purchase and redemption transactions and automatic investments of client
account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that Opportunity
Fund will be able to achieve a more predictable flow of cash for investment

purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
Opportunity Fund's objectives, and properly servicing these accounts, it
may be possible to curb sharp fluctuations in rates of redemptions and
sales.

Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; and
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.

For the fiscal year ended February 29, 1996, no payments were made pursuant
to the Distribution Plan. In addition, for the fiscal year ended February
29, 1996, no payments were made pursuant to the Shareholder Services Plan.

CONVERSION TO FEDERAL FUNDS
It is each Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders
must be in federal funds or be converted into federal funds. Deposit
Guaranty National Bank and Commercial National Bank (the "Banks"), as well
as Federated Services Company, act as the shareholder's agent in depositing
checks and converting them to federal funds.
DETERMINING NET ASSET VALUE

With respect to Equity Fund, Opportunity Fund, Limited Term Fund,
Government Income Fund and Municipal Income Fund, the net asset value

generally changes each day and with respect to Municipal Income Fund is
based on market value of securities and other assets held by Municipal
Income Fund. Money Market Fund attempts to stabilize the value of a share
at $1.00. The days on which the net asset value is calculated by the Funds
are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

Market value of the portfolio securities for Equity Fund, Opportunity Fund,
Limited Term Fund and Government Income Fund are determined as follows:

o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;
o in the absence of recorded sales of equity securities, according to
the mean between the last closing bid and asked prices, and for bonds
and other fixed income securities as determined by an independent
pricing service;
o for unlisted equity securities, the latest bid prices;
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service or for
short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
VALUING MUNICIPAL SECURITIES

With respect to Municipal Income Fund, the Trustees use an independent
pricing service to value municipal securities. The independent pricing
service takes into consideration: yield; stability; risk; quality; coupon
rate; maturity; type of issue; trading characteristics; special
circumstances of a security or trading market; and any other factors or
market data it considers relevant in determining valuations for normal
institutional size trading units of debt securities and does not rely
exclusively on quoted prices.
USE OF THE AMORTIZED COST METHOD
With respect to Money Market Fund, the Trustees have decided that the best
method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the
acquisition cost as adjusted for amortization of premium or accumulation of
discount rather than at current market value.
Money Market Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions contained in
Rule 2a-7 (the "Rule") under the Investment Company Act of 1940. Under the
Rule, the Trustees must establish procedures reasonably designed to
stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account
current market conditions and the investment objective.

MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share
based upon available indications of market value. The Trustees will
decide what, if any, steps should be taken if there is a difference of
more than .5 of 1% between the two values. The Trustees will take any
steps they consider appropriate (such as redemption in kind or

shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the
two methods of determining net asset value.
INVESTMENT RESTRICTIONS

The Rule requires that Money Market Fund limit its investments to
instruments that, in the opinion of the Trustees, present minimal
credit risks. The Rule also requires Money Market Fund to maintain a
dollar-weighted average portfolio maturity (not more than 90 days)
appropriate to the objective of maintaining a stable net asset value
of $1.00 per share. In addition, no instrument with a remaining
maturity of more than thirteen months can be purchased by Money Market
Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, Money Market
Fund will invest its available cash to reduce the average maturity to
90 days or less as soon as possible.
Money Market Fund may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations. This
policy may, from time to time, result in high portfolio turnover.
Under the amortized cost method of valuation, neither the amount of
daily income nor the net asset value is affected by any unrealized
appreciation or depreciation of the portfolio.

In periods of declining interest rates, the indicated daily yield on
shares of Money Market Fund computed by dividing the annualized daily
income on Money Market Fund's portfolio by the net asset value
computed as above may tend to be higher than a similar computation

made by using a method of valuation based upon market prices and
estimates.
In periods of rising interest rates, the indicated daily yield on
shares of Money Market Fund computed the same way may tend to be lower
than a similar computation made by using a method of calculation based
upon market prices and estimates.

EXCHANGE PRIVILEGE

REQUIREMENTS FOR EXCHANGE
Before the exchange, the shareholder must receive a prospectus of the fund
for which the exchange is being made. This privilege is available to
shareholders resident in any state in which the fund shares being acquired
may be sold. Upon receipt of proper instructions and required supporting
documents, shares submitted for exchange are redeemed and the proceeds
invested in shares of the other fund.
Further information on the exchange privilege may be obtained by calling
the Funds.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions
may require a signature guarantee.
REDEEMING SHARES

Shares of the Funds are redeemed at the next computed net asset value after
the Banks receive the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Redemption requests
cannot be executed on days on which the New York Stock Exchange is closed
or on federal holidays when wire transfers are restricted.

Although State Street Bank does not charge for telephone redemptions, it
reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Funds intend to redeem shares in cash, they reserve the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from each Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Trustees determine to be fair and equitable.
The Funds have elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which each Fund is obligated to redeem shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of each
Fund's net asset value during any 90-day period.

MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders for
such acts or obligations of the Trust. These documents require notice of
this disclaimer to be given in each agreement, obligation, or instrument
the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting

from liability as a shareholder will occur only if the Trust itself cannot
meet its obligations to indemnify shareholders and pay judgments against
them from its assets.

TAX STATUS

THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS

Shareholders of Equity Fund, Opportunity Fund, Limited Term Fund,
Government Income Fund and Money Market Fund are subject to federal income
tax on dividends received as cash or additional shares. These dividends,
and any short-term capital gains, are taxable as ordinary income. With
respect to Limited Term Fund, Government Income Fund and Money Market Fund,
no portion of any income dividend paid by one of these Funds is eligible
for the dividends received deduction available to corporations.

TOTAL RETURN

The average annual total returns for the fiscal year ended February 29,
1996, for Equity Fund, Opportunity Fund, Limited Term Fund, Government
Income Fund, Municipal Income Fund and Money Market Fund were
29.09%, 26.87%, 5.16%, 8.52%, 7.73%, and 5.48%, respectively. For the
- -
period from August 3, 1992 (date of initial public investment) to February
29, 1996, the average annual total returns for Equity Fund, Limited Term
Fund, and Government Income Fund were 13.25%, 4.45%, and 5.75%. For the
period from December 21, 1992 (date of initial public investment) to
February 29, 1996, the average annual total return for Municipal Income
Fund was 6.13%. For the period from March 31, 1992 (date of initial public
investment) to February 29, 1996, the average annual total return for Money
Market Fund was 3.88%. For the period from August 1, 1994 (date of initial
public investment) to February 29, 1996, the average annual total return
for Opportunity Fund was 24.77%.

The average annual total return for the Funds is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at
the end of the period by the maximum offering price per share at the end of
the period. The number of shares owned at the end of the period is based on
the number of shares purchased at the beginning of the period with $1,000,
less any applicable sales charge, adjusted over the period by any
additional shares, assuming the quarterly reinvestment of all dividends and
distributions.

YIELD

The yields for the thirty-day period ended February 29, 1996, for Equity
Fund, Opportunity Fund, Limited Term Fund, Government Income Fund and
Municipal Income Fund were 0.88%, (0.04%), 4.38%, 4.82%, and 4.27%,
respectively.
The yield for the seven-day period ended February 29, 1996, for Money
Market Fund was 4.75%.
The yield for Equity Fund, Opportunity Fund, Limited Term Fund, Government
Income Fund and Municipal Income Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by each Fund over a thirty-day period by the offering
price per share of each Fund on the last day of the period. This value is
then annualized using semi-annual compounding. This means that the amount
of income generated during the thirty-day period is assumed to be generated
each month over a 12-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Funds
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

Money Market Fund calculates its yield daily, based upon the seven days
ending on the day of the calculation, called the "base period." This yield
is computed by: determining the net change in the value of a hypothetical
account with a balance of one share at the beginning of the base period,
with the net change excluding capital changes but including the value of
any additional shares purchase with dividends earned from the original one

share and all dividends declared on the original and any purchased shares;
dividing the net change in the account's value by the value of the account
at the beginning of the base period to determine the base period return;
and multiplying the base period return by (365/7).

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with investments in the
Funds, performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD

Money Market Fund's effective yield for the seven-day period ended February
29, 1996, was 4.87%.
Money Market Fund's effective yield is computed by compounding the
unannualized base period return by:

o adding 1 to the base period return;
o raising the sum to the (365/7)th power; and
o subtracting 1 from the result.
TAX-EQUIVALENT YIELD

Municipal Income Fund's tax-equivalent yield for the thirty-day period
ended February 29, 1996 was 6.19%.
The tax-equivalent yield of Municipal Income Fund is calculated similarly
to the yield, but is adjusted to reflect the taxable yield that Municipal
Income Fund would have had to earn to equal its actual yield, assuming a
31% tax rate (the maximum effective federal rate for individuals) and
assuming that the income of Municipal Income Fund is 100% tax-exempt.

TAX-EQUIVALENCY TABLE
Municipal Income Fund may also use a tax-equivalency table in advertising
and sales literature. The interest earned by the municipal securities in
Municipal Income Fund's portfolio generally remains free from federal
regular income tax,* and is often free from state and local taxes as well.
As the table below indicates, a "tax-free" investment is an attractive
choice for investors, particularly in times of narrow spreads between tax-
free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1996
MULTISTATE MUNICIPAL FUNDS

FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750

SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750

Tax-Exempt
Yield Taxable Yield Equivalent

1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%

2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Municipal Income Fund
shares.
* Some portion of Municipal Income Fund's income may be subject to
the federal alternative minimum tax and state and local income taxes.

PERFORMANCE COMPARISONS

The Funds' performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;

o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Funds' expenses; and
o various other factors.

The performance of Equity Fund, Opportunity Fund, Limited Term Fund,
Government Income Fund and Municipal Income Fund fluctuates on a daily
basis largely because net earnings and offering price per share fluctuate
daily. Both net earnings and offering price per share are factors in the
computation of yield and total return.

Investors may use financial publications and/or indices to obtain a more
complete view of the Funds' performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Funds
use in advertising may include:

O LIPPER ANALYTICAL SERVICES, INC.(EQUITY FUND, OPPORTUNITY FUND,
LIMITED TERM FUND, GOVERNMENT INCOME FUND AND MONEY MARKET FUND),
ranks funds in various fund categories by making comparative
calculations using total return. Total return assumes the reinvestment
of all income dividends and capital gains distributions, if any. From
time to time, the Equity Fund and Opportunity Fund will quote its
Lipper ranking in the "equity, growth and income" category in
advertising and sales literature.
O DOW JONES INDUSTRIAL AVERAGE ("DJIA")(EQUITY FUND AND OPPORTUNITY
FUND) represents share prices of selected blue-chip industrial

corporations as well as public utility and transportation companies.
The DJIA indicates daily changes in the average price of stocks in any
of its categories. It also reports total sales for each group of
industries. Because it represents the top corporations of America, the
DJIA's index movements are leading economic indicators for the stock
market as a whole.
O STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (EQUITY
FUND AND OPPORTUNITY FUND), a composite index of common stocks in
industry, transportation, and financial and public utility companies
can be used to compare to the total returns of funds whose portfolios
are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestments of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated, in Standard &
Poor's figures.
o RUSSELL 2000 SMALL STOCK INDEX (OPPORTUNITY FUND) is a broadly
diversified index consisting of approximately 2,000 small
capitalization common stocks that can be used to compare to the total
returns of funds whose portfolios are invested primarily in small
capitalization common stocks.
O MORNINGSTAR, INC. (OPPORTUNITY FUND), an independent rating service,
is the publisher of the bi-weekly Mutual Fund Values. Mutual Fund
Values rates more than 1,000 NASDAQ-listed mutual funds of all types,
according to their risk-adjusted returns. The maximum rating is five
stars, and ratings are effective for two weeks.
O NASDAQ OVER-THE-COUNTER COMPOSITE INDEX (OPPORTUNITY FUND) covers
4,500 stocks traded over the counter. It represents many small company
stocks but is heavily influenced by about 100 of the largest NASDAQ

stocks. It is a value-weighted index calculated on price change only
and does not include income.
O MERRILL LYNCH 1-3 YEAR TREASURY INDEX (LIMITED TERM FUND) is an
unmanaged index tracking short-term U.S. government securities with
maturities between 1 and 2.99 years. The index is produced by Merrill
Lynch, Pierce, Fenner & Smith, Inc.
O LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX (GOVERNMENT INCOME
FUND) is comprised of approximately 5,000 issues which include: non-
convertible bonds publicly issued by the U.S. government or its
agencies; corporate bonds guaranteed by the U.S. government and quasi-
federal corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine years.
Tracked by Lehman Brothers, Inc., the index calculates total returns
for one month, three month, twelve month, and ten year periods and
year-to-date.

o LEHMAN BROTHERS MUNICIPAL BOND INDEX (MUNICIPAL INCOME FUND) is a
total return performance benchmark for the long-term, investment
grade, tax-exempt bond market. Returns and attributes for this index
are calculated semi-monthly using municipal bonds classified as
General Obligation Bonds (state and local), Revenue Bonds (excluding
insured revenue bonds), Insured Bonds (includes all bond insurers with
Aaa/AAA ratings), and Prerefunded Bonds.
O DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES (MONEY MARKET
FUND), for example, is a weekly quote of the average daily offering
price for selected federal agency issues maturing in 30 days.

O SALOMON 30-DAY TREASURY BILL INDEX (MONEY MARKET FUND) is a weekly
quote of the most representative yields for selected securities issued
by the U.S. Treasury, maturing in 30 days.
Advertisements and other sales literature for the Funds may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the change, over a specified period of time, in the value
of an investment in the Funds based on monthly reinvestment of dividends
and other investments.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Funds. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute ("ICI"). For example,
according to the ICI, twenty-seven percent of American households are
pursuing their financial goals through mutual funds. These investors, as
well as businesses and institutions, have entrusted over $3 trillion to the
more than 5,500 funds available.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended February 29, 1996 are
incorporated herein by reference to the Annual Reports of the Funds dated
February 29, 1996 (File Nos. 33-46431 and 811-6607). A copy of the Funds'
Annual Report may be obtained without charge by contacting the Trust.

APPENDIX

STANDARD AND POOR'S RATINGS GROUP CORPORATE/MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.

PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE/MUNICIPAL BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+".
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.

NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the "AAA" category.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC., SHORT-TERM MUNICIPAL OBLIGATIONS RATINGS
MIG1/VMIG1--This designation denotes best quality. There is a present
strong protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries;
high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad

margins in earning coverage of fixed financial charges and high internal
cash generation; and well-established access to a range of financial
markets and assured sources of alternative liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
F-1+(Exceptionally Strong Credit Quality)Issues assigned this rating is
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2--(Very Good Grade) Issued assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Incorporated by reference into the
Annual Reports of the Trust dated
February 29, 1996 (File Nos. 33-46431
and 811-6607)

(b) Exhibits:
(1) Conformed copy of Declaration of Trust of the
Registrant (1.);
(i)Conformed copy of Amendment No. 1 of Declaration
of Trust of the Registrant (2.);
(ii)Conformed copy of Amendment No. 3 of Declaration
of Trust of the Registrant (4.);
(iii)Conformed copy of Amendment to the Declaration of
Trust of the Registrant dated May 17, 1994 (8.);
(2) Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) (i)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG U.S. Government Money
Market Fund (3.);
(ii)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG Limited Term Government
Income Fund (3.);
(iii)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG Government Income Fund
(3.);
(iv)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG Equity Fund (3.);
(v)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG Municipal Income (6.);
(vi)Copy of Specimen Certificate for Shares of
Beneficial Interest of DG Opportunity Fund (8.);
(5) (i)Conformed Copy of Investment Advisory Contract of
Registrant (7.);

(a) Conformed copy of Exhibit A for DG U.S.
Government Money Market Fund (8.);
(b) Conformed copy of Exhibit B for DG
Limited Term Government Income Fund
(8.);

+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed March 18, 1992. (File Nos.
33-46431 and 811-6607)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed April 29, 1992. (File Nos. 33-
46431 and 811-6607)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 22, 1992. (File Nos. 33-46431
and 811-6607)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.2 on Form N-1A filed October 14, 1992. (File Nos. 33-
46431 and 811-6607)
6. Response is incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed April 23, 1993. (File Nos. 33-
46431 and 811-6607)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed May 26, 1994. (File Nos. 33-46431
and 811-6607)

(d) Conformed copy of Exhibit D for DG Equity
Fund (8.);
(e) Conformed copy of Exhibit E for DG Municipal
Income Fund (8.);
(f) Conformed copy of Exhibit F for DG
Opportunity Funds; (9.)
(ii)Conformed Copy of Sub-Advisory Agreement between
Deposit Guaranty National Bank and Commercial
National Bank (6.);
(a) Conformed copy of Exhibit A for DG Equity
Fund (8.);
(b) Conformed copy of Exhibit B for DG Government
Income Fund (8.);
(c) Conformed copy of Exhibit C for DG Limited
Term Government Income Fund (8.);
(d) Conformed copy of Exhibit D for DG Municipal
Income Fund (8.);
(e) Conformed copy of Exhibit E for DG
Opportunity Fund; (9.)
(6) Conformed Copy of Distributor's Contract of the
Registrant (3.);
(i)Conformed copy of Exhibit A for DG vs Government
Money Market Fund (8.);
(ii) Copy of Exhibit B for DG Limited Term Government
Income Fund (8.);
(iii) Conformed copy of Exhibit C for DG Government
Income Fund (8.);
(iv)Conformed copy of Exhibit D for DG Equity Income
Fund (8.);

(v)Conformed copy of Exhibit E for DG Municipal
Income Fund (8.);
(vi)Conformed copy of Exhibit F for DG Opportunity
Fund;(9.)
(7) Not applicable
(8) Conformed Copy of Custodian Agreement of the Registrant
(6.);
(9) (i)Conformed Copy of Transfer Agency and Service
Agreement of Registrant (6.);
(ii) Conformed copy of Administrative Services
Agreement (7.);

+ All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 22, 1992. (File Nos. 33-46431
and 811-6607)
6. Response is incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed April 23, 1993. (File Nos. 33-
46431 and 811-6607)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 27, 1994. (File Nos. 33-
46431 and 811-6607)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed May 26, 1994. (File Nos. 33-46431
and 811-6607)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed February 10, 1995. (File Nos. 33-
46431 and 811-6607);

(iii)Conformed Copy of Shareholder Services Agreement
(8.);
(iv)Conformed copy of Shareholder Services Plan; (9.)
(v)Conformed copy of Exhibit A to Shareholder
Services Plan; (9.)
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered;+
(11) Conformed copy of consent of independent auditors; +
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (2.);.
(14) Not applicable;
(15) (i)Copy of Distribution Plan of the Registrant (2.);
(a) Conformed copy of Exhibit A for D.G. U.S.
Government Money Market Fund (8.);
(b) Conformed copy of Exhibit B for DG Limited
Term Government Income Fund (8.);
(c) Conformed copy of Exhibit C for DG Government
Income Fund (8.);
(d) Conformed copy of Exhibit D for DG Equity
Fund (8.);
(e) Conformed copy of Exhibit E for DG Municipal
Income Fund (8.);
(f) Conformed copy of Exhibit F for DG
Opportunity Fund; (9.)
(ii)Copy of Rule 12b-1 Agreement of the Registrant
(8.);
(16) Schedule for Computation of Fund Performance Data;

(i)DG Equity Fund(5.);
(ii)DG Government Income Fund(5.);
(iii)DG Limited Term Government Income Fund(5.);
(iv)DG U.S. Government Money Market Fund(5.);
(v)DG Municipal Income Fund (6.);
(vi)DG Opportunity Fund; (9.)
(17) Financial Data Schedules; +
(18) Conformed copy of Power of Attorney; (10.)

+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed April 29, 1992. (File Nos. 33-
46431 and 811-6607)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.3 on Form N-1A filed October 28, 1992. (File Nos. 33-
46431 and 811-6607)
6. Response is incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed April 23, 1993. (File Nos. 33-
46431 and 811-6607)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 27, 1994. (File Nos. 33-
46431 and 811-6607)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed May 26, 1994. (File Nos. 33-46431
and 811-6607)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed February 10, 1995. (File Nos. 33-
46431 and 811-6607);

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed April 25, 1995. (File Nos. 33-46431
and 811-6607)

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of June 3, 1996

Shares of beneficial interest
(no par value)

DG U.S. Government Money
Market Fund 82

DG Limited Term Government
Income Fund 170

DG Government Income Fund 135

DG Equity Fund 667

DG Municipal Income Fund 76

DG Opportunity Fund 471

Item 27. Indemnification: (4)

Item 28.Business and Other Connections of Investment Adviser:

(a)Deposit Guaranty National Bank, a national banking
association formed in 1925, is a subsidiary of Deposit
Guaranty Corp ("DGC"). Through its subsidiaries and
affiliates, DGC offers a full range of financial services to
the public, including commercial lending, depository
services, cash management, brokerage services, retail
banking, mortgage banking, investment advisory services and
trust services.

As of December 31, 1995, the Trust Division of Deposit
Guaranty National Bank had approximately $2.2 billion under
administration, of which it had investment discretion over
$1.7 billion. Deposit Guaranty National Bank has served as
the Trust's investment adviser since May 5, 1992.

The principal executive officers of the Fund's Investment
Adviser, and the Directors of the Fund's Adviser, are set
forth in the following tables. Unless otherwise noted, the
position listed under Other Substantial Business, Profession,
Vocation or Employment is with Deposit Guaranty National
Bank.

Other Substantial
Position With Business,Profession,
Name the Adviser Vocation or Employment

E.B. Robinson, Jr. Chairman of the Board
and Chief Executive

Howard L. McMillan, Jr. President and Chief
Operating Officer

William R. Boone Executive Vice President

Thomas M. Hontzas Executive Vice President

W. Parks Johnson Executive Vice President

James S. Lenoir Executive Vice President

W. Stanley Pratt Executive Vice President

Arlen L. McDonald Executive Vice President
and Chief Financial Officer

DIRECTORS

Haley R. Barbour Warren A. Hood, Jr. W.R. Newman, III

Michael B. Bemis Charles L. Irby John N. Palmer

W. Randolph James E.B. Robinson, Jr. Sharon S. Greener

Booker T. Jones Robert D. Robinson Robert L.T. Smith, Jr.

Howard L. McMillan, Jr. Douglas A. Herring
Richard.McRae,Jr.

J. Kelley Williams

(b) Commercial National Bank, a national banking association
which received its charter in 1886, is a subsidiary of DGC
and serves as Investment Sub-Adviser to DG Limited Term
Government Income Fund, DG Government Income Fund, DG Equity
Fund, DG Municipal Income Fund and DG Opportunity Fund. As
of December 31, 1995, the Trust Division at Commercial
National Bank had approximately $1.5 billion in trust assets
under administration, of which it had investment discretion
over $1.1 billion. Commercial National Bank has served as
sub-adviser to DG Limited Term Government Income Fund, DG
Government Income Fund, DG Equity Fund and DG Municipal
Income Fund since July 20, 1992 and for DG Opportunity Fund
since May 25, 1994.

The principal executive officers of the Investment Sub-
Adviser, and the Directors of the Investment Sub-Adviser, are
set forth in the following tables. Unless otherwise noted,
the position listed under Other Substantial Business,
Profession, Vocation or Employment is with Commercial
National Bank.

Other Substantial
Position With Business, Profession,
Name the Sub-Adviser Vocation or Employment

Steven C. Walker President and Chief
Executive Officer

P. Michael Adkins Executive Vice President

C. David Barrentine, Jr. Executive Vice President

David H. Nordyke Executive Vice President

Robert H. Boehmler, Jr. Executive Vice President

Richard H. Sale Senior Vice President

Ronald E. Yrjanson Vice President

DIRECTORS

Willis L. Meadows Dewey W. Corley C. W. Holtsclaw, Jr.

William C. Peatross E. B. Robinson, Jr. Steven C. Walker

N. H. Wheless, Jr. Richard H. Bremer L. MichaelAshbrook

Darrell Finney Peggy R. Newell Chris Gabriel

Dr. Kenneth L. Schwab Robert B. Hamm Ivan I. Smith, Jr.

Item 29. Principal Underwriters:

(a) 111 Corcoran Funds; Annuity Management Series; Arrow Funds;
Automated Government Money Trust; BayFunds; Blanchard Funds;
Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity
Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income
Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund,

Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund,
Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Independence
One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds;
Star Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Biltmore Funds; The Biltmore Municipal Funds; The Monitor
Funds; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Vision Group of Funds, Inc.; andWorld
Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive VicePresident,
Federated Investors Tower President, Federated, Treasurer and
Pittsburgh, PA 15222-3779 Securities Corp. Trustee

John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Scott A. Hutton Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.

Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.

Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.

Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Assistant Secretary, Assistant
Federated Investors Tower Federated Securities Corp. Treasurer
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
throught 31a-3 promulgated thereunder are maintained at one of
the following locations:

DG Investor Series Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Services Company P.O. Box 8600
Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and
Shareholder Servicing Agent

Federated Administrative Services Federated Investors Tower
Administrator Pittsburgh, PA 15222-3779

Deposit Guaranty National Bank P.O. Box 1200
Adviser Jackson,MS 39215-1200

Commercial National Bank P.O. Box 21119
Sub-Adviser Shreveport, LA 71152
(except DG U.S. Government Money
Market Fund)

State Street Bank and Trust Company P.O. Box 8600
Custodian Boston, MA 02266-8600

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of

Trustees and the calling of special shareholder meetings by
shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus for each portfolio of the Trust is delivered with a
copy of Registrant's latest annual report to shareholders upon
request and without charge.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, DG Investor Series,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 24th day of June, 1996.

DG INVESTOR SERIES

BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
June24, 1996

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:

NAME TITLE DATE

By:/s/C. Grant Anderson
C. Grant Anderson Attorney In Fact June 24, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Edward C. Gonzales* President, Treasurer and Trustee
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr.* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K

INDEPENDENT AUDITORS' CONSENT

The Board of Trustees
DG Investor Series

With respect to this Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A of the DG Investor Series, we consent to the use of our
reports dated April 8, 1996, on the financial statements of the funds listed
below, included herein and to the references to our Firm under the headings
"Financial Highlights" in Part A of the Registration Statement and "Other
Services-Independent Auditors" in Part B of the Registration Statement.

. DG Equity Fund;
. DG Opportunity Fund;
. DG Limited Term Government Income Fund;
. DG Government Income Fund;
. DG Municipal Income Fund; and
. DG U.S. Government Money Market Fund

Pittsburgh, Pennsylvania KPMG Peat Marwick LLP

Exhibit 10 under Form N-1A
Exhibit 5 under Item 601/Reg. S-K

HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
PITTSBURGH, PA 15222
William McC Houston
Fred Chalmers Houston, Jr. (412) 471-5828 Fred Chalmers
Houston
Thomas J. Donnelly FAX (412) 471-0738 (1914-1971)
John J. Heck

Mario Santillo, Jr.
Theodore M. Hammer
April 28, 1992
The Trustees of
DG Investor Series
Federated Investors Tower
Pittsburgh, PA 15222-3779

Gentlemen:

DG Investor Series ("Trust") proposes to offer and sell one separate series
of Shares of Beneficial Interest representing interests in a separate portfolio
of securities known as DG U.S. Government Money Market Fund (all such shares of
beneficial interest being herein referred to as "Shares") in the manner and on
the terms set forth in its Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. (File Nos. 33-
46431.)

As counsel we have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940 and the preparation and
filing of its Registration Statement under the Securities Act of 1933. We have
examined and are familiar with the provisions of the written Declaration of
Trust dated February 7, 1992 ("Declaration of Trust"), the Bylaws of the Trust
and such other documents and records deemed relevant. We have also reviewed
questions of law and consulted with counsel thereon as deemed necessary or
appropriate by us for the purposes of this opinion.

Based upon the foregoing, it is our opinion that:

1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust.

2. The Shares which are currently being registered by the Registration
Statement referred to above may be legally and validly issued from time to time
in accordance with the Declaration of Trust upon receipt of consideration
sufficient to comply with the provisions of Article III, Section 3, of the
Declaration of Trust and subject to compliance with the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such Shares, when so issued, will be
fully paid and non-assessable.

We consent to your filing this opinion as an exhibit to the Registration
Statement referred to above and to any application or registration statement
filed under the securities laws of any of the States of the United States. We
further consent to the reference to our firm under the caption Legal Counsel in
the prospectus filed as a part of such Registration Statement, applications and
registration statements.

Very truly yours,

HOUSTON, HOUSTON & DONNELLY

By: /s/Thomas J. Donnelly

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> DG Investor Series
DG Equity Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 276,633,598
<INVESTMENTS-AT-VALUE> 384,151,539
<RECEIVABLES> 1,080,578
<ASSETS-OTHER> 18,719
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 385,250,836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,799
<TOTAL-LIABILITIES> 105,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 277,190,330
<SHARES-COMMON-STOCK> 26,583,091
<SHARES-COMMON-PRIOR> 22,777,372
<ACCUMULATED-NII-CURRENT> 435,582
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,184
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,517,941
<NET-ASSETS> 385,145,037
<DIVIDEND-INCOME> 6,053,305
<INTEREST-INCOME> 1,433,292
<OTHER-INCOME> 0
<EXPENSES-NET> 3,230,409
<NET-INVESTMENT-INCOME> 4,256,188
<REALIZED-GAINS-CURRENT> 13,664,210
<APPREC-INCREASE-CURRENT> 81,182,937
<NET-CHANGE-FROM-OPS> 99,103,335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,438,344
<DISTRIBUTIONS-OF-GAINS> 13,575,996
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,299,860
<NUMBER-OF-SHARES-REDEEMED> 7,276,853
<SHARES-REINVESTED> 782,712
<NET-CHANGE-IN-ASSETS> 125,147,113
<ACCUMULATED-NII-PRIOR> 617,738
<ACCUMULATED-GAINS-PRIOR> (87,030)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,568,435
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,230,409
<AVERAGE-NET-ASSETS> 340,671,942
<PER-SHARE-NAV-BEGIN> 11.410
<PER-SHARE-NII> 0.160
<PER-SHARE-GAIN-APPREC> 3.630
<PER-SHARE-DIVIDEND> 0.170
<PER-SHARE-DISTRIBUTIONS> 0.540
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.490
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> DG Investor Series
DG Government Income Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 180,051,032
<INVESTMENTS-AT-VALUE> 181,509,478
<RECEIVABLES> 2,735,547
<ASSETS-OTHER> 11,120
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184,256,145
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,039
<TOTAL-LIABILITIES> 30,039
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 183,293,842
<SHARES-COMMON-STOCK> 18,659,694
<SHARES-COMMON-PRIOR> 17,772,717
<ACCUMULATED-NII-CURRENT> 62,896
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (589,078)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,458,446
<NET-ASSETS> 184,226,106
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,006,589
<OTHER-INCOME> 0
<EXPENSES-NET> 1,073,467
<NET-INVESTMENT-INCOME> 8,933,122
<REALIZED-GAINS-CURRENT> 1,713,476
<APPREC-INCREASE-CURRENT> 4,322,771
<NET-CHANGE-FROM-OPS> 14,969,369
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,982,698
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,482,495
<NUMBER-OF-SHARES-REDEEMED> 14,897,666
<SHARES-REINVESTED> 302,148
<NET-CHANGE-IN-ASSETS> 15,912,621
<ACCUMULATED-NII-PRIOR> 173,076
<ACCUMULATED-GAINS-PRIOR> (2,363,158)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 892,734
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,222,256
<AVERAGE-NET-ASSETS> 151,953,768
<PER-SHARE-NAV-BEGIN> 9.470
<PER-SHARE-NII> 0.580
<PER-SHARE-GAIN-APPREC> 0.410
<PER-SHARE-DIVIDEND> 0.590
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.870
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> DG Investor Series
DG Limited Term Government Income Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 92,087,641
<INVESTMENTS-AT-VALUE> 91,864,535
<RECEIVABLES> 1,439,579
<ASSETS-OTHER> 12,906
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,317,020
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,409
<TOTAL-LIABILITIES> 41,409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,908,440
<SHARES-COMMON-STOCK> 9,513,347
<SHARES-COMMON-PRIOR> 9,975,150
<ACCUMULATED-NII-CURRENT> 56,525
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,466,248)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (223,106)
<NET-ASSETS> 93,275,611
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,931,201
<OTHER-INCOME> 0
<EXPENSES-NET> 652,214
<NET-INVESTMENT-INCOME> 5,278,987
<REALIZED-GAINS-CURRENT> (677,996)
<APPREC-INCREASE-CURRENT> 2,272,579
<NET-CHANGE-FROM-OPS> 6,873,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,261,106
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,675,393
<NUMBER-OF-SHARES-REDEEMED> 3,365,918
<SHARES-REINVESTED> 228,722
<NET-CHANGE-IN-ASSETS> (2,940,823)
<ACCUMULATED-NII-PRIOR> 93,936
<ACCUMULATED-GAINS-PRIOR> (1,843,544)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 572,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 842,585
<AVERAGE-NET-ASSETS> 95,275,758
<PER-SHARE-NAV-BEGIN> 9.650
<PER-SHARE-NII> 0.540
<PER-SHARE-GAIN-APPREC> 0.150
<PER-SHARE-DIVIDEND> 0.540
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.800
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> DG Investor Series
DG Municipal Income Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 43,200,664
<INVESTMENTS-AT-VALUE> 44,818,039
<RECEIVABLES> 746,993
<ASSETS-OTHER> 1,740
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,566,772
<PAYABLE-FOR-SECURITIES> 964,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,548
<TOTAL-LIABILITIES> 988,448
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,856,552
<SHARES-COMMON-STOCK> 4,182,389
<SHARES-COMMON-PRIOR> 4,090,893
<ACCUMULATED-NII-CURRENT> 68,418
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 35,979
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,617,375
<NET-ASSETS> 44,578,324
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,337,615
<OTHER-INCOME> 0
<EXPENSES-NET> 304,544
<NET-INVESTMENT-INCOME> 2,033,071
<REALIZED-GAINS-CURRENT> 36,102
<APPREC-INCREASE-CURRENT> 2,105,078
<NET-CHANGE-FROM-OPS> 4,174,251
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,990,513
<DISTRIBUTIONS-OF-GAINS> 11,600
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,716,250
<NUMBER-OF-SHARES-REDEEMED> 1,627,203
<SHARES-REINVESTED> 2,449
<NET-CHANGE-IN-ASSETS> 3,036,181
<ACCUMULATED-NII-PRIOR> 25,860
<ACCUMULATED-GAINS-PRIOR> 11,477
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 262,552
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 508,381
<AVERAGE-NET-ASSETS> 43,719,933
<PER-SHARE-NAV-BEGIN> 10.150
<PER-SHARE-NII> 0.490
<PER-SHARE-GAIN-APPREC> 0.500
<PER-SHARE-DIVIDEND> 0.480
<PER-SHARE-DISTRIBUTIONS> 0.003
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.660
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> DG Investor Series
DG Opportunity Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 45,347,524
<INVESTMENTS-AT-VALUE> 54,054,250
<RECEIVABLES> 27,059
<ASSETS-OTHER> 1,737
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,083,046
<PAYABLE-FOR-SECURITIES> 564,765
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,956
<TOTAL-LIABILITIES> 605,721
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,828,705
<SHARES-COMMON-STOCK> 4,181,974
<SHARES-COMMON-PRIOR> 3,287,942
<ACCUMULATED-NII-CURRENT> 239
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,058,345)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,706,726
<NET-ASSETS> 53,477,325
<DIVIDEND-INCOME> 221,593
<INTEREST-INCOME> 321,994
<OTHER-INCOME> 0
<EXPENSES-NET> 543,446
<NET-INVESTMENT-INCOME> 141
<REALIZED-GAINS-CURRENT> 4,440,660
<APPREC-INCREASE-CURRENT> 7,971,651
<NET-CHANGE-FROM-OPS> 12,412,452
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 5,952,830
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,579,949
<NUMBER-OF-SHARES-REDEEMED> 1,054,805
<SHARES-REINVESTED> 368,888
<NET-CHANGE-IN-ASSETS> 16,813,772
<ACCUMULATED-NII-PRIOR> 98
<ACCUMULATED-GAINS-PRIOR> 453,825
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 441,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 705,984
<AVERAGE-NET-ASSETS> 46,569,675
<PER-SHARE-NAV-BEGIN> 11.150
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 3.300
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 1.660
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.790
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> DG Investor Series
DG U.S. Government Money Market Fund

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
<INVESTMENTS-AT-COST> 245,950,372
<INVESTMENTS-AT-VALUE> 245,950,372
<RECEIVABLES> 585,112
<ASSETS-OTHER> 24,202
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 246,559,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 912,456
<TOTAL-LIABILITIES> 912,456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245,647,230
<SHARES-COMMON-STOCK> 245,647,230
<SHARES-COMMON-PRIOR> 162,514,706
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 245,647,230
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,196,878
<OTHER-INCOME> 0
<EXPENSES-NET> 1,064,186
<NET-INVESTMENT-INCOME> 11,132,692
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11,132,692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,132,692
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 505,711,379
<NUMBER-OF-SHARES-REDEEMED> 422,693,644
<SHARES-REINVESTED> 114,789
<NET-CHANGE-IN-ASSETS> 83,132,524
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,044,577
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,482,017
<AVERAGE-NET-ASSETS> 208,915,416
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>