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. 18................................X
--- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 21...............................................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 October 30, 1997, 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.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of DG INVESTOR
SERIES which consists of nine portfolios: (1) DG Treasury Money Market
Fund (formerly, 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, (6) DG Opportunity Fund,
(7) DG Prime Money Market Fund, (8) DG International Equity Fund and
(9) DG Mid Cap Fund, relates only to portfolio (8) and is comprised of
the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
<TABLE>
<CAPTION>
Prospectus Heading
(RULE 404(C) CROSS REFERENCE)
<S> <C> <C>
Item 1. COVER PAGE (1-9) Cover Page.
Item 2. SYNOPSIS (1-6) Synopsis; (7,8,9) General Information;
(1-9) Summary of Fund Expenses;
(1-6) Financial Highlights.
--------
Item 3. CONDENSED FINANCIAL
INFORMATION (1-9) Performance Information.
Item 4. GENERAL DESCRIPTION OF
REGISTRANT (1-6) Objectives and Policies of Each Fund;
(7,8,9) Investment Information;
(8,9) Investment Objective;
(8,9) Investment Policies;
(1-6) Portfolio Investments and Strategies;
(8) Risks Associated With Financial Futures Contracts And
Options on Financial Futures Contracts; (8)
Non-Diversified; (1-9) Investment Limitations.
Item 5. MANAGEMENT OF THE FUND (1-6,9) DG Investor Series Information;(7,8) Trust
Information; (1-9) Management of the Trust; (1-9)
Distribution of Fund Shares; (1-6) Administration of the
Funds;(7,8,9) Administration of the Fund; (8,9)
Distribution and Shareholder Services Plans;
(8,9) Shareholder Servicing Arrangements; (6)
Shareholder Services Plan; (1-9) Brokerage Transactions;
(9) Expenses of the Fund.
Item 6. CAPITAL STOCK AND OTHER
SECURITIES (1-6,9) Dividends and Distributions; (7, 8) Dividends;
(1,7,8,9) Capital Gains; (1-6,9) Shareholder Information;
(7,8) Account & Shareholder Information; (1-9)
Voting Rights; (1-9) Tax Information; (1-9) Federal Income
Tax; (5) Additional Tax Information for Municipal Income
Fund; (5) Other State and Local Taxes; (9) State and
Local Taxes; (1-9) Effect of Banking Laws.
Item 7. PURCHASE OF SECURITIES BEING
OFFERED (1-9) Net Asset Value; (1-6) Investing in the Funds;
(7,8,9) Investing in the Fund; (1-9) Share Purchases;
(1-9) Minimum Investment Required; (1-9) What Shares
Cost; (2-6) Reducing the Sales Charge; (1-9) Systematic
Investment Program; (1-9) Certificates and Confirmations;
(1-9) Exchanging Shares; (1-9) Exchange
Privilege.
Item 8. REDEMPTION OR REPURCHASE (1-9) Redeeming Shares; (1-9) Through the Banks;
(1-9) Systematic Withdrawal Program; (1-9) Accounts
With Low Balances.
------------------------
Item 9. PENDING LEGAL PROCEEDINGS None.
-------------------------
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. COVER PAGE (1-9) Cover Page.
Item 11. TABLE OF CONTENTS (1-9) Table of Contents.
Item 12. GENERAL INFORMATION AND
HISTORY (1-6) General Information About the Funds;
(8,9) General Information About the Fund.
Item 13. INVESTMENT OBJECTIVES AND
POLICIES
(1-6,8,9) Investment Objective(s) and Policies;
(7) Investment 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; (1-9) Investment
Limitations;(1,7) Regulatory Compliance.
Item 14. MANAGEMENT OF THE FUND (1-9) DG Investor Series Management.
Item 15. CONTROL PERSONS AND PRINCIPAL
HOLDERS OF SECURITIES (1-6,9) Trust Ownership; (7,8) Share Ownership;
(1-9) Trustees' Compensation; (1-9) Trustee Liability.
---------------------
Item 16. INVESTMENT ADVISORY AND OTHER
SERVICES (1-9) Investment Advisory Services; (1-6) Adviser
to the Funds; (7,8,9) Investment Adviser;
(8,9) Sub-Adviser;(1-9) Advisory Fees;
(2-6) Sub-Adviser to the Funds; (8,9) Sub-Adviser;
(2-6,8,9) Sub-Advisory Fees; (1-8) Other Services;
(1-6) Administration of the Trust; (8,9) Fund Administration;(1-6)
Custodian; (7,8,9) Custodian & Portfolio Accountant; (1-6)
Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent; (7,8,9) Transfer Agent; (1-9) Independent
Auditors.
Item 17. BROKERAGE ALLOCATION (1-9) Brokerage Transactions.
Item 18. CAPITAL STOCK AND OTHER
SECURITIES Not Applicable.
Item 19. PURCHASE, REDEMPTION AND
PRICING OF SECURITIES BEING
OFFERED (1-9) Purchasing Shares; (1-9) Conversion to Federal Funds;
(1-9) Exchange Privilege; (1-9) Requirements for Exchange;
(1-9) Making an Exchange; (1-9) Determining Net Asset
Value; (2-4,6) Determining Market Value of Securities;
(5) Valuing Municipal Securities; (1) Use of the Amortized
Cost Method; (1-9) Redeeming Shares; (1-9) Redemption
in Kind; (1-9) Massachusetts Partnership Law.
Item 20. TAX STATUS (1-9) Tax Status (1-6) The Funds' Tax Status; (7,8,9) The Fund's
Tax Status; (1-9) Shareholders' Tax Status;
----------
Item 21. UNDERWRITERS (1-5,7) Distribution Plan; (6,8,9) Distribution and
Shareholder Services Plans;
Item 22. CALCULATION OF PERFORMANCE
DATA (1-9) Performance Comparisons; (1-9) Yield;
(1,7) Effective Yield; (1-9) Total Return; (5) Tax-Equivalent Yield;
(5) Tax-Equivalency Table;
Item 23. FINANCIAL STATEMENTS (1-6) Incorporated herein by reference to the Trust's Annual Report dated
February 28, 1997 (File Nos. 33-46431 and 811-6607); (7)
Incorporated by reference to Registrant's
Post-Effective Amendment No. 16 on Form N-1A filed August 25, 1997.
(File Nos. 33-46431 and 811-6607); (8) Filed in Supplement to Part A;
(9) To be filed by amendment.
</TABLE>
DG
Investor Series
o DG International Equity
Fund
Semi-Annual Report
and Supplement to
the Combined
Prospectus dated
June 30, 1997
[DG INVESTOR SERIES LOGO]
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
ParkSouth
Corporation
Jackson, MS
Investment Adviser
[LOGO] FEDERATED INVESTORS Lazard
Asset Management
FEDERATED INVESTORS TOWER New York, NY
PITTSBURGH, PA 15222-3779 Sub-Adviser
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS
AND IS A SUBSIDIARY OF FEDERATED INVESTORS.
Cusip 23321N806
G01258-17(10/97) [RECYCLED PAPER]
October 30, 1997
DG INTERNATIONAL EQUITY FUND
(A Portfolio of DG Investor Series)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE COMBINED PROSPECTUS DATED JUNE 30, 1997
A. Please insert the following "Financial Highlights" table for
International Equity Fund immediately following the section
entitled "Financial Highlights" which begins on page 6 of the
prospectus:
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
AUGUST 31, 1997(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------------
Net realized and unrealized (loss) on investments and foreign currency
transactions (0.33)
- ---------------------------------------------------------------------------- ------------
Total from investment operations (0.32)
- ---------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.68
- ---------------------------------------------------------------------------- ------------
TOTAL RETURN (B) (3.20)%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 1.77%*
- ----------------------------------------------------------------------------
Net investment income 2.96%*
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50%*
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,778
- ----------------------------------------------------------------------------
Average commission rate paid (d) $0.0205
- ----------------------------------------------------------------------------
Portfolio turnover 0%
- ----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 15, 1997 (date of
initial public investment) to August 31, 1997.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the fifth paragraph of the section entitled "Voting
rights" which begins on page 35 of the prospectus and replace it
with the following:
"As of October 1, 1997, Deposit Guaranty National Bank was the owner
of record of 1,124,587 shares (91.52%) of International 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 vote of shareholders."
C. Please insert the following "Financial Statements" for
International Equity Fund immediately following the section
entitled "Performance Information" on page 38 of the prospectus.
DG INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--94.4%
- -----------------------------------------------------------------------------------
ARGENTINA--1.6%
- -----------------------------------------------------------------------------------
ENERGY SOURCES--1.6%
----------------------------------------------------------------
5,200 YPF Sociedad Anonima, ADR $ 169,325
---------------------------------------------------------------- ------------
AUSTRALIA--0.9%
- -----------------------------------------------------------------------------------
BANKING--0.9%
----------------------------------------------------------------
16,300 Westpac Banking Corp. Ltd. 94,365
---------------------------------------------------------------- ------------
BRAZIL--1.5%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.5%
----------------------------------------------------------------
1,400 Telecomunicacoes Brasileiras SA, ADR 165,200
---------------------------------------------------------------- ------------
DENMARK--0.9%
- -----------------------------------------------------------------------------------
BANKING--0.9%
----------------------------------------------------------------
1,600 Unidanmark, Class A 93,607
---------------------------------------------------------------- ------------
FINLAND--0.4%
- -----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER--0.4%
----------------------------------------------------------------
2,000 UPM--Kymmene OY 47,437
---------------------------------------------------------------- ------------
FRANCE--11.4%
- -----------------------------------------------------------------------------------
BANKING--1.7%
----------------------------------------------------------------
4,400 Banque Nationale de Paris 187,610
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
FRANCE--CONTINUED
- -----------------------------------------------------------------------------------
BROADCASTING & PUBLISHING--0.5%
----------------------------------------------------------------
800 Havas SA $ 48,849
---------------------------------------------------------------- ------------
CHEMICALS--2.0%
----------------------------------------------------------------
6,000 Rhone-Poulenc, Class A 220,075
---------------------------------------------------------------- ------------
COMMERCIAL SERVICES--1.7%
----------------------------------------------------------------
1,650 Compagnie Generale des Eaux 184,170
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--1.5%
----------------------------------------------------------------
1,300 Alcatel Alsthom 159,228
---------------------------------------------------------------- ------------
ENERGY SOURCES--2.0%
----------------------------------------------------------------
1,900 Elf Aquitaine SA 211,136
---------------------------------------------------------------- ------------
INSURANCE--0.9%
----------------------------------------------------------------
1,500 AXA 95,567
---------------------------------------------------------------- ------------
MISCELLANEOUS MATERIALS & COMMODITIES--1.1%
----------------------------------------------------------------
850 Compagnie de St. Gobain 116,705
---------------------------------------------------------------- ------------
Total France 1,223,340
---------------------------------------------------------------- ------------
GERMANY--10.9%
- -----------------------------------------------------------------------------------
AUTOMOBILE--1.5%
----------------------------------------------------------------
2,200 (a) Daimler Benz AG 164,552
---------------------------------------------------------------- ------------
BANKING--1.9%
----------------------------------------------------------------
1,600 Deutsche Bank, AG 93,523
----------------------------------------------------------------
2,700 Dresdner Bank AG, Frankfurt 107,258
---------------------------------------------------------------- ------------
Total 200,781
---------------------------------------------------------------- ------------
CHEMICALS--1.7%
----------------------------------------------------------------
4,700 Hoechst AG 186,057
---------------------------------------------------------------- ------------
DIVERSIFIED OPERATIONS--0.7%
----------------------------------------------------------------
3,500 (a) Metallgesellschaft 78,536
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--1.0%
----------------------------------------------------------------
2,300 (a) Metro AG 105,130
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
GERMANY--CONTINUED
- -----------------------------------------------------------------------------------
MACHINERY & ENGINEERING--2.4%
----------------------------------------------------------------
320 Mannesmann SA $ 148,219
----------------------------------------------------------------
450 Thyssen AG 103,468
---------------------------------------------------------------- ------------
Total 251,687
---------------------------------------------------------------- ------------
UTILITIES--ELECTRICAL & GAS--1.7%
----------------------------------------------------------------
450 Viag AG 186,866
---------------------------------------------------------------- ------------
Total Germany 1,173,609
---------------------------------------------------------------- ------------
GREECE--3.1%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.1%
----------------------------------------------------------------
15,000 (b) Hellenic Telecommunications Organization 333,797
---------------------------------------------------------------- ------------
HONG KONG--2.3%
- -----------------------------------------------------------------------------------
BANKING--1.3%
----------------------------------------------------------------
4,800 HSBC Holdings PLC 146,177
---------------------------------------------------------------- ------------
MULTI-INDUSTRY--1.0%
----------------------------------------------------------------
14,000 Swire Pacific Ltd., Class A 107,039
---------------------------------------------------------------- ------------
Total Hong Kong 253,216
---------------------------------------------------------------- ------------
ITALY--5.1%
- -----------------------------------------------------------------------------------
AUTOMOBILE--1.5%
----------------------------------------------------------------
52,900 Fiat SPA 162,387
---------------------------------------------------------------- ------------
BANKING--0.9%
----------------------------------------------------------------
48,700 Credito Italiano 100,674
---------------------------------------------------------------- ------------
ENERGY--OIL & GAS--1.3%
----------------------------------------------------------------
25,500 Eni SPA 142,257
---------------------------------------------------------------- ------------
TELECOMMUNICATIONS--1.4%
----------------------------------------------------------------
41,600 Telecom Italia SPA 146,783
---------------------------------------------------------------- ------------
Total Italy 552,101
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
JAPAN--19.9%
- -----------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--2.0%
----------------------------------------------------------------
12,000 Matsushita Electric Industrial Co. $ 220,566
---------------------------------------------------------------- ------------
AUTOMOBILE--1.4%
----------------------------------------------------------------
5,000 Honda Motor Co. Ltd. 153,999
---------------------------------------------------------------- ------------
BANKING--1.8%
----------------------------------------------------------------
20,000 (a) Sumitomo Trust & Banking 193,741
---------------------------------------------------------------- ------------
BUILDING MATERIALS & COMPONENTS--1.0%
----------------------------------------------------------------
13,000 Sekisui Chemical Co. 109,786
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--2.5%
----------------------------------------------------------------
3,000 Omron Corp. 55,638
----------------------------------------------------------------
2,400 Sony Corp. 208,644
---------------------------------------------------------------- ------------
Total 264,282
---------------------------------------------------------------- ------------
FINANCE-LEASING--1.7%
----------------------------------------------------------------
2,400 Orix Corp 177,844
---------------------------------------------------------------- ------------
FINANCIAL SERVICES--0.7%
----------------------------------------------------------------
1,400 Promise Co. Ltd. 70,475
---------------------------------------------------------------- ------------
INSURANCE--0.3%
----------------------------------------------------------------
6,000 (a) Mitsui Marine & Fire Insurance Co. 34,824
---------------------------------------------------------------- ------------
MACHINERY & ENGINEERING--1.3%
----------------------------------------------------------------
21,000 Mitsubishi Heavy Industries Ltd. 138,922
---------------------------------------------------------------- ------------
MERCHANDISING--1.0%
----------------------------------------------------------------
2,000 Ito-Yokado Co., Ltd. 107,634
---------------------------------------------------------------- ------------
OFFICE EQUIPMENT--2.0%
----------------------------------------------------------------
16,000 (a) Ricoh Co. Ltd. 215,930
---------------------------------------------------------------- ------------
RECREATION, OTHER CONSUMER GOODS--1.5%
----------------------------------------------------------------
2,000 Nintendo Corp. Ltd. 164,597
---------------------------------------------------------------- ------------
TELECOMMUNICATIONS--1.8%
----------------------------------------------------------------
21 Nippon Telegraph & Telephone Corp. 196,473
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
JAPAN--CONTINUED
- -----------------------------------------------------------------------------------
TOBACCO--0.9%
----------------------------------------------------------------
12 (b) Japan Tobacco, Inc. $ 96,274
---------------------------------------------------------------- ------------
Total Japan 2,145,347
---------------------------------------------------------------- ------------
KOREA, REPUBLIC OF--1.4%
- -----------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS--1.4%
----------------------------------------------------------------
9,300 Korea Electric Power Corp., ADR 151,706
---------------------------------------------------------------- ------------
MALAYSIA--0.2%
- -----------------------------------------------------------------------------------
LEISURE & TOURISM--0.2%
----------------------------------------------------------------
7,000 Genting Berhad 23,942
---------------------------------------------------------------- ------------
MEXICO--1.3%
- -----------------------------------------------------------------------------------
BANKING--1.3%
----------------------------------------------------------------
52,000 (a) Grupo Financiero Banamex Accivel, Class B 139,295
---------------------------------------------------------------- ------------
NETHERLANDS--1.6%
- -----------------------------------------------------------------------------------
BEVERAGE & TOBACCO--0.7%
----------------------------------------------------------------
500 Heineken NV 78,844
---------------------------------------------------------------- ------------
ENERGY SOURCES--0.9%
----------------------------------------------------------------
1,800 Royal Dutch Petroleum Co., ADR 91,350
---------------------------------------------------------------- ------------
Total Netherlands 170,194
---------------------------------------------------------------- ------------
NEW ZEALAND--0.4%
- -----------------------------------------------------------------------------------
BREWERY--0.4%
----------------------------------------------------------------
19,200 Lion Nathan Ltd. 48,450
---------------------------------------------------------------- ------------
PHILIPPINES--1.2%
- -----------------------------------------------------------------------------------
BANKING--1.2%
----------------------------------------------------------------
30,000 (a) Philippine National Bank 129,412
---------------------------------------------------------------- ------------
SOUTH AFRICA--1.6%
- -----------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS--1.6%
----------------------------------------------------------------
14,200 (a) Barlow Ltd. 167,228
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
SPAIN--1.3%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.3%
----------------------------------------------------------------
5,600 Telefonica de Espana $ 145,168
---------------------------------------------------------------- ------------
SWEDEN--2.8%
- -----------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--1.1%
----------------------------------------------------------------
1,600 Electrolux AB, Class B 113,781
---------------------------------------------------------------- ------------
BANKING--1.1%
----------------------------------------------------------------
4,000 Svenska Handelsbanken, Stockholm 122,924
---------------------------------------------------------------- ------------
HEALTH & PERSONAL CARE--0.6%
----------------------------------------------------------------
4,300 Astra AB, Class B 64,979
---------------------------------------------------------------- ------------
Total Sweden 301,684
---------------------------------------------------------------- ------------
SWITZERLAND--5.8%
- -----------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS--0.9%
----------------------------------------------------------------
115 Holderbank Financiere Glaris AG, Class B 96,200
---------------------------------------------------------------- ------------
BUSINESS & PUBLIC SERVICES--0.8%
----------------------------------------------------------------
50 SGS Societe Generale de Surveillance Holding SA 90,372
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--0.9%
----------------------------------------------------------------
80 Nestle SA 92,992
---------------------------------------------------------------- ------------
HEALTH & PERSONAL CARE--1.4%
----------------------------------------------------------------
105 Novartis AG 148,720
---------------------------------------------------------------- ------------
INSURANCE--1.4%
----------------------------------------------------------------
415 Zurich Versicherungsgesellschaft 150,574
---------------------------------------------------------------- ------------
UNASSIGNED--0.4%
----------------------------------------------------------------
80 Societe Suisse pour la Microelectronique et l'Horlogerie 44,668
---------------------------------------------------------------- ------------
Total Switzerland 623,526
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
UNITED KINGDOM--18.8%
- -----------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNOLOGY--2.9%
----------------------------------------------------------------
13,100 British Aerospace $ 306,654
---------------------------------------------------------------- ------------
AUTOMOBILE--1.2%
----------------------------------------------------------------
40,500 (a) LucasVarity PLC 128,420
---------------------------------------------------------------- ------------
BANKING--1.4%
----------------------------------------------------------------
11,700 National Westminster Bank, PLC, London 149,649
---------------------------------------------------------------- ------------
BROADCASTING & PUBLISHING--0.4%
----------------------------------------------------------------
14,700 Mirror Group PLC 48,471
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--0.8%
----------------------------------------------------------------
14,600 General Electric Co. PLC 90,412
---------------------------------------------------------------- ------------
ENERGY SOURCES--0.9%
----------------------------------------------------------------
7,000 British Petroleum Co. PLC 97,817
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--3.4%
----------------------------------------------------------------
20,700 Cadbury Schweppes PLC 192,281
----------------------------------------------------------------
18,900 (a) Grand Metropolitan PLC 173,569
---------------------------------------------------------------- ------------
Total 365,850
---------------------------------------------------------------- ------------
INSURANCE--0.9%
----------------------------------------------------------------
10,300 Prudential Corp. PLC 101,353
---------------------------------------------------------------- ------------
LEISURE & TOURISM--1.9%
----------------------------------------------------------------
7,600 Granada Group PLC 100,411
----------------------------------------------------------------
18,000 Rank Group PLC 103,296
---------------------------------------------------------------- ------------
Total 203,707
---------------------------------------------------------------- ------------
MULTI-INDUSTRY--1.1%
----------------------------------------------------------------
34,000 BTR PLC 120,156
---------------------------------------------------------------- ------------
RECREATION, OTHER CONSUMER GOODS--0.8%
----------------------------------------------------------------
9,000 EMI Group PLC 81,120
---------------------------------------------------------------- ------------
TOBACCO--1.4%
----------------------------------------------------------------
18,200 B.A.T. Industries PLC 152,388
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS--1.7%
----------------------------------------------------------------
19,400 National Power Co. PLC $ 177,311
---------------------------------------------------------------- ------------
Total United Kingdom 2,023,308
---------------------------------------------------------------- ------------
Total Common Stocks (IDENTIFIED COST $10,586,666) 10,175,257
---------------------------------------------------------------- ------------
PREFERRED STOCKS--1.4%
- -----------------------------------------------------------------------------------
BRAZIL--1.4%
- -----------------------------------------------------------------------------------
BEVERAGE & TOBACCO--1.4%
----------------------------------------------------------------
223,000 Cia Cervejaria Brahma, Preference (IDENTIFIED COST $149,910) 149,579
---------------------------------------------------------------- ------------
(C) REPURCHASE AGREEMENT--4.1%
- -----------------------------------------------------------------------------------
$ 441,000 State Street Bank and Trust Co., 5.45%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 441,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $11,177,576)(D) $ 10,765,836
---------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At August 31, 1997, these
securities amounted to $430,071 which represents 4.0% of net
assets.
(c) The repurchase agreement is fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio.
(d) The cost of investments for federal tax purposes amounts to
$11,177,576. The net unrealized depreciation of investments on a
federal tax basis amounts to $411,740 which is comprised of
$19,293 appreciation and $431,033 depreciation at August 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($10,777,646) at August 31, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $11,177,576) $10,765,836
- --------------------------------------------------------------------------------
Cash 911,596
- --------------------------------------------------------------------------------
Receivable for shares sold 34,571
- -------------------------------------------------------------------------------- -----------
Total assets 11,712,003
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $926,759
- ---------------------------------------------------------------------
Payable for taxes withheld 41
- ---------------------------------------------------------------------
Accrued expenses 7,557
- --------------------------------------------------------------------- --------
Total liabilities 934,357
- -------------------------------------------------------------------------------- -----------
Net Assets for 1,113,491 shares outstanding $10,777,646
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $11,134,671
- --------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets
and
liabilities in foreign currency (413,176)
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 43,545
- --------------------------------------------------------------------------------
Undistributed net investment income 12,606
- -------------------------------------------------------------------------------- -----------
Total net assets $10,777,646
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$10,777,646 / 1,113,491 shares outstanding $9.68
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1997 (UNAUDITED)*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $41) $ 1,373
- ----------------------------------------------------------------------------------
Interest 18,790
- ---------------------------------------------------------------------------------- ---------
Total income 20,163
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $ 4,262
- ------------------------------------------------------------------------
Administrative personnel and services fee 421
- ------------------------------------------------------------------------
Custodian fees 2,057
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 460
- ------------------------------------------------------------------------
Directors'/Trustees' fees 38
- ------------------------------------------------------------------------
Legal fees 47
- ------------------------------------------------------------------------
Portfolio accounting fees 1,129
- ------------------------------------------------------------------------
Shareholder services fee 639
- ------------------------------------------------------------------------
Share registration costs 311
- ------------------------------------------------------------------------
Printing and postage 107
- ------------------------------------------------------------------------
Insurance premiums 55
- ------------------------------------------------------------------------
Miscellaneous 162
- ------------------------------------------------------------------------ -------
Total expenses 9,688
- ------------------------------------------------------------------------
Waiver of investment advisory fee (2,131)
- ------------------------------------------------------------------------ -------
Net expenses 7,557
- ---------------------------------------------------------------------------------- ---------
Net investment income 12,606
- ---------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ----------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 43,545
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (413,176)
- ---------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments and foreign currency (369,631)
- ---------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $(357,025)
- ---------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
AUGUST 31, 1997*
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------
Net investment income $ 12,606
- ----------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
($43,545, as computed for federal tax purposes) 43,545
- ----------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation
of
assets and liabilities in foreign currency (413,176)
- ---------------------------------------------------------------------- ----------------
Change in net assets resulting from operations (357,025)
- ---------------------------------------------------------------------- ----------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------
Proceeds from sale of shares 11,134,671
- ---------------------------------------------------------------------- ----------------
Change in net assets resulting from share transactions 11,134,671
- ---------------------------------------------------------------------- ----------------
Change in net assets 10,777,646
- ----------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------- ----------------
End of period (including undistributed net investment income of
$12,606) $10,777,646
- ---------------------------------------------------------------------- ----------------
</TABLE>
* For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The
financial statements included herein are only those of DG
International Equity Fund (the "Fund"), a non-diversified portfolio.
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to seek capital
appreciation.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the
last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair
market value. With respect to valuation of foreign securities,
trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore,
foreign securities are valued at the latest closing price on the
exchange on which they are traded prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. Dollars at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Trustees (the "Trustees"). Risks
may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Fund
could receive less than the repurchase price on the sale of
collateral securities.
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Dividend income and distributions
to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.
Withholding taxes on foreign interest and dividends have been
provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign
currency commitments for the delayed delivery of securities or
foreign currency exchange transactions. Purchased contracts are
used to acquire exposure to foreign currencies; whereas,
contracts to sell are used to hedge the Fund's securities against
currency fluctuations. Risks may arise upon entering these
transactions from the potential inability of counter-parts to
meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The
foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are
recorded for financial statement purpose as unrealized until the
settlement date. At August 31, 1997, the Fund had outstanding
foreign currency commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN CURRENCY UNITS IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE TO DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
--------------- --------------------------- ----------- --------- --------------
<C> <S> <C> <C> <C>
8/29/97 472,743 Sterling Pound $ 761,116 $766,364 $5,248
8/29/97 4,950,048 Philippine Peso $ 166,109 $161,766 (4,343)
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund
are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies ("FC") are translated into U.S.
dollars based on the rate of exchange of such currencies against
U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded
and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from
sales of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized
between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on theFund's
books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that
may only be resold upon registration under federal securities
laws or in transactions exempt from such registration. In some
cases, the issuer of restricted securities has agreed to register
such securities for resale, at the issuer's expense either upon
demand by the Fund or in connection with another registered
offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The
Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at August
31, 1997 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
---------------------------------------------- ----------------- -----------------
<S> <C> <C>
Hellenic Telecommunications Organization 8/22/97--8/26/97 $ 339,752
Japan Tobacco, Inc. 8/18/97--8/22/97 $ 97,306
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade
date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares sold 1,113,491
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 0
- -------------------------------------------------------------------------
Shares redeemed 0
- ------------------------------------------------------------------------- --------------
Net change resulting from Institutional Shares transactions 1,113,491
- ------------------------------------------------------------------------- --------------
</TABLE>
*For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--ParkSouth Corporation, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net
assets. For the period ended August 31, 1997, ParkSouth Corporation
earned an advisory fee of $2,131, all of which was voluntarily waived.
Under the terms of a sub-advisory agreement between the Adviser and
Lazard Asset Management, Lazard Asset Management receives an annual
fee from the Adviser equal to 0.50% of the Fund's average daily net
assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Fund with certain administrative personnel and services. The fee
paid to FAS is based on the level of average aggregate net assets of
the Trust for the period. The administrative fee received during any
fiscal year shall be at least $100,000.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with FAS, the Fund will pay FAS up to 0.15% of average daily
net assets of the Fund for the period. The fee paid to FAS is used to
finance certain services for shareholders and to maintain shareholder
accounts.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp., the
principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Fund shares.
The Plan provides that the Fund may incur distribution expenses up to
0.25% of the average daily net assets of the Fund shares, annually, to
compensate Federated Securities Corp.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and
transactions made by shareholders.
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--Federated Services Company maintains the
Trust's accounting records for which it receives a fee. The fee is
based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities
(and in-kind contributions), for the period ended August 31, 1997,
were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $10,736,576
- ------------------------------------------------------------------------------- -----------
SALES $ 0
- ------------------------------------------------------------------------------- -----------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. The political or
economic developments within a particular country or region may have
an adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
DG INTERNATIONAL EQUITY FUND
(A Portfolio of DG Investor Series)
SUPPLEMENT TO PROSPECTUS DATED JUNE 30, 1997
1. The following is to be inserted as the second sentence under the
section entitled "Acceptable Investments," on page 10:
"In addition, International Equity Fund may invest up to 40%
of its total assets in equity securities of established companies
located in countries having emerging markets."
2. The following is to be inserted after the section entitled "Short
Sales," on page 13:
"EMERGING MARKET SECURITIES. International Equity Fund may
invest up to 40% of its total assets in equity securities of
established companies located in countries having emerging
markets. International Equity Fund's sub-adviser considers
countries having emerging markets to be all countries that are
generally considered to have developing or emerging markets or
economies. Furthermore, the sub-adviser considers emerging
market countries to be all countries considered by the
International Bank for Reconstruction and Development (more
commonly known as the World Bank) and the International
Finance Corporation, as well as countries that are classified
by the United Nations or otherwise regarded by their
authorities, as developing.
Generally included in emerging markets are all countries in
the world except Australia, Canada, Japan, New Zealand, the
United States, and most western European countries. The
International Equity Fund will focus on countries which the
sub-adviser believes to have strongly developing economies and
markets including, among others, the following countries:
Argentina, Bolivia, Botswana, Brazil, Chile, China, Colombia,
Cyprus, Czech Republic, Ecuador, Egypt, Ghana, Greece, Hong
Kong, Hungary, India, Indonesia, Jamaica, Jordan, Kenya,
Korea, Malaysia, Mauritius, Mexico, Morocco, Nigeria, Oman,
Pakistan, Peru, Philippines, Poland, Russia, Singapore,
Slovakia, South Africa, Sri Lanka, Swaziland, Taiwan,
Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe.
International Equity Fund may invest in countries other than
those defined above, if , in the opinion of the sub-adviser,
they are considered to be emerging markets. While the
sub-adviser considers the above-mentioned countries eligible
for investment, International Equity Fund will not be invested
in all such markets at all times. Furthermore, International
Equity Fund may not pursue investment in such countries due to
lack of adequate custody of the Fund's assets, overly
burdensome restrictions and repatriation, lack of an organized
and liquid market, or unacceptable political or other risks.
Emerging markets companies are defined as (i) those for which
the principal securities trading market is an emerging market
country, as described above; (ii) those which are organized
under the laws of, or with a principal office in, an emerging
market country; or (iii) those, wherever organized or traded,
who derive (directly or indirectly through subsidiaries) at
least 50% of their total assets, capitalization, gross revenue
or profit from its most current year from goods produced,
services performed, or sales made in such emerging market
countries."
<PAGE>
3. The first paragraph under the section entitled "Risks Associated
With Investing in Foreign Companies," on page 13, is hereby
amended to read in its entirety as follows: "Investing in
non-U.S. securities carries substantial risks in addition to
those associated with domestic investments. In an attempt to
reduce these risks, International Equity Fund diversifies its
investments broadly among foreign countries. At least three
different countries will always be represented."
4. The second paragraph under the section entitled "Risks Associated
With Investing in Foreign Companies," on page 13, is hereby deleted.
5. The following is to be inserted after the section entitled "Risks
Associated With Investing in Foreign Companies," on page 15:
"ADDITIONAL RISKS ASSOCIATED WITH INVESTING IN EMERGING MARKETS
Investing in securities of issuers in emerging market
countries involves exposure to significantly higher risk than
investing in countries with developed markets. Emerging market
countries may have economic structures that are generally less
diverse and mature and political systems that can be expected
to be less stable than those of developed countries.
Securities prices in emerging market countries can be
significantly more volatile than in developed countries,
reflecting the greater uncertainties of investing in lesser
developed markets and economies. In particular, emerging
market countries may have relatively unstable governments, and
may present a greater risk of nationalization of businesses,
expropriation, confiscatory taxation or, in certain instances,
reversion to closed market, centrally planned economies. Such
countries may also have greater restrictions on foreign
ownership or prohibitions on the repatriation of assets, and
may have less protection of property rights, than developed
countries. The economies of emerging market countries may be
predominantly based on only a few industries or dependent on
revenues from particular commodities or on international aid
or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. In
addition, securities markets in emerging market countries may
trade a small number of securities and may be unable to
respond effectively to increases in trading volume,
potentially resulting in a lack of liquidity and in volatility
in the price of securities traded on those markets. Also,
securities markets in emerging market countries typically
offer less regulatory protection for investors."
October 30, 1997
[GRAPHIC OMITTED]
Cusip 23321N806
G01258-24 (10/97)
[GRAPHIC OMITTED]
DG EQUITY FUND
DG OPPORTUNITY FUND
DG INTERNATIONAL EQUITY FUND
DG LIMITED TERM GOVERNMENT INCOME FUND
DG GOVERNMENT INCOME FUND
DG MUNICIPAL INCOME FUND
(Portfolios of DG Investor Series)
SUPPLEMENT TO THE COMBINED PROSPECTUS DATED JUNE 30, 1997
Effective August 1, 1997, DG Equity Fund, DG Opportunity Fund, DG
International Equity Fund, DG Limited Term Government Income Fund, DG
Government Income Fund and DG Municipal Income Fund (the "Funds")
will, pursuant to the existing Shareholder Services Plan, accrue and
pay shareholder services fees of 0.15% of each Fund's average daily
net assets. Effective July 21, 1997, Womack Asset Management, Inc.
(the "sub-adviser") became the sub-adviser to DG Opportunity Fund (the
"Opportunity Fund"). Under the terms of the Sub-Advisory Agreement
between ParkSouth Corporation (the "Adviser") and the sub-adviser, the
sub-adviser will determine whether to purchase or sell securities for
Opportunity Fund, and upon making any purchase or sale decision for
Opportunity Fund, will place orders for the execution of such
portfolio transactions. For its services under the Sub-Advisory
Agreement, the sub-adviser receives a monthly fee based on the average
daily net assets of Opportunity Fund under management by the
sub-adviser during the preceding month, as described below. The
sub-advisory fee shall be the sum of: 0.32% of the average daily net
assets up to $50 million; 0.075% of the average daily net assets in
excess of $50 million and up to $70 million; and 0.25% of the average
daily net assets in excess of $70 million. The sub-advisory fee will
be accrued daily, and for any period in which the sub-adviser provides
portfolio management services for less than one full month, the
sub-advisory fee will be prorated by the number of days of the month
during which the services were rendered. Womack Asset Management,
based in Jackson, Mississippi, is a registered investment adviser
formed in 1997 by William A. Womack, who also became the portfolio
manager for Opportunity Fund on July 21, 1997, replacing Gerald L.
White. Mr. Womack, until February 1997, had been Senior Vice President
and Trust Investment Officer of Deposit Guaranty National Bank
("DGNB"), which is the parent corporation of the Adviser and which,
prior to March 1, 1997, was the adviser to the Funds. From March 1984
to August 1994, Mr. Womack served as portfolio manager of Opportunity
Fund's predecessor, a common trust fund, formerly managed by DGNB. Mr.
Womack was Opportunity Fund's portfolio manager from
<PAGE>
August 1994 to February 1997, and DG Municipal Income Fund's portfolio
manager from December 1992 to February 1997. In February 1997, Mr.
Womack left DGNB in order to establish and operate the sub-adviser.
July 24, 1997
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 23321N301 Cusip 23321N400 Cusip 23321N103 Cusip
23321N509 Cusip 23321N202 Cusip 23321N806 G01258-15 (7/97)
[GRAPHIC OMITTED]
DG INVESTOR SERIES
STOCK AND BOND FUNDS
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
(individually or collectively referred to as the "Fund" or "Funds" as
the context requires), each having a distinct investment objective and
policies:
- DG Equity Fund;
- DG Opportunity Fund;
- DG International Equity Fund;
- DG Limited Term Government Income Fund;
- DG Government Income Fund; and
- DG Municipal Income 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, ARE NOT ENDORSED OR GUARANTEED BY
DEPOSIT GUARANTY 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 THE POSSIBLE LOSS OF PRINCIPAL.
The Funds have also filed a Statement of Additional Information dated
June 30, 1997 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, or you can visit the DG
Investors Series' Internet site on the World Wide Web at
(www.dgb.com). The Statement of Additional Information, material
incorporated by reference into this document, and other information
regarding the Funds 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 NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated June 30, 1997
TABLE OF CONTENTS
- -------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES 3
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 6
- ------------------------------------------------------
OBJECTIVE AND POLICIES OF EACH FUND 8
- ------------------------------------------------------
Equity Fund 8
Opportunity Fund 9
International Equity Fund 10
Limited Term Fund 16
Government Income Fund 18
Municipal Income Fund 18
PORTFOLIO INVESTMENTS AND STRATEGIES 21
- ------------------------------------------------------
Put and Call Options 21
Futures Contracts and Options
on Futures 21
Repurchase Agreements 22
When-Issued and Delayed
Delivery Transactions 23
Lending of Portfolio Securities 23
Temporary Investments 23
Investing in Securities of
Other Investment Companies 23
Restricted and Illiquid Securities 24
Fixed Income Securities 24
INVESTMENT LIMITATIONS 24
- ------------------------------------------------------
DG INVESTOR SERIES INFORMATION 25
- ------------------------------------------------------
Management of the Trust 25
Distribution of Fund Shares 26
ADMINISTRATION OF THE FUNDS 27
- ------------------------------------------------------
Brokerage Transactions 28
Expenses of the Fund 28
NET ASSET VALUE 28
- ------------------------------------------------------
INVESTING IN THE FUNDS 29
- ------------------------------------------------------
Share Purchases 29
Minimum Investment Required 29
What Shares Cost 29
Reducing the Sales Charge 31
Systematic Investment Program 32
Certificates and Confirmations 32
Dividends and Distributions 32
EXCHANGE PRIVILEGE 33
- ------------------------------------------------------
Exchanging Shares 33
REDEEMING SHARES 33
- ------------------------------------------------------
Through the Bank 34
Systematic Withdrawal Program 35
Accounts With Low Balances 35
SHAREHOLDER INFORMATION 35
- ------------------------------------------------------
Voting Rights 35
EFFECT OF BANKING LAWS 36
- ------------------------------------------------------
TAX INFORMATION 37
- ------------------------------------------------------
Federal Income Tax 37
Additional Tax Information for
Municipal Income Fund 37
Other State and Local Taxes 37
PERFORMANCE INFORMATION 38
- ------------------------------------------------------
ADDRESSES 39
- ------------------------------------------------------
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 its affiliates as a convenient
means of participating in professionally managed, diversified
portfolios.
As of the date of this prospectus, the Trust is composed of eight
portfolios. The following six portfolios are offered in this
prospectus:
-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 International Equity Fund ("International Equity
Fund")--seeks to provide capital appreciation by investing
primarily in a portfolio of non-U.S. securities, of which a
substantial portion will be equity securities of established
companies in economically developed countries;
-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; and
-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.
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 ParkSouth Corporation (the
"Adviser"). The International Equity Fund is sub-advised by Lazard
Freres Asset Management (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 INTERNATIONAL LIMITED TERM INCOME INCOME
FUND FUND EQUITY 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% None 2.00% 2.00% 2.00%
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% 0.85% 1.00% 0.45% 0.55% 0.30%
12b-1 Fees(2)....................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Other Expenses................ 0.17% 0.29% 1.38% 0.26% 0.18% 0.39%
Shareholder Services Fees(3)........ 0.00% 0.00% 0.15% 0.00% 0.00% 0.00%
Total Fund Operating
Expenses(4)................... 0.92% 1.14% 2.53% 0.71% 0.73% 0.69%
</TABLE>
(1) The management fees of Opportunity Fund, Limited Term Fund,
Government Income Fund and Municipal Income 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%,
and 0.60%, 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. The Funds, except for International Equity Fund could each
pay 0.35% as a 12b-1 fee to the distributor. The International Equity
Fund could pay 0.25% as a 12b-1 Fee to the distributor.
(3) As of the date of this prospectus, Equity Fund, Opportunity Fund,
Limited Term Fund, Government Income Fund and Municipal Income Fund
are not paying or accruing shareholder services fees. If these Funds
were paying or accruing the shareholder services fee, the Funds would
be able to pay up to 0.15% of their average daily net assets for the
shareholder services fee.
(4) Total Fund Operating Expenses above for the Equity Fund reflect
those for the year ended February 28, 1997. Total Fund Operating
Expenses above for the Opportunity Fund, International Equity Fund,
Limited Term Fund, Government Income Fund and Municipal Income Fund
are based on expenses expected during the fiscal year ending February
28, 1998. Total Fund Operating Expenses for Opportunity Fund, Limited
Term Fund, and Government Income Fund would be, 1.24%, 0.86%, and
0.78%, respectively, absent the voluntary waivers described above in
note (1). Total Fund Operating Expenses for Municipal Income Fund
would be 1.06% absent the voluntary waiver described above in note (1)
and the voluntary waiver of a portion of the administrative personnel
and services fee. Total Fund Operating Expenses for the Opportunity
Fund, Limited Term Fund, Government Income Fund, and Municipal Income
Fund were 1.14%, 0.68%, 0.70% and 0.70%, respectively, for the year
ended February 28, 1997.
* Annual Fund Operating Expenses for International Equity Fund are
based on projected average net assets for the fiscal year ending
February 28, 1998.
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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<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 $ 63 $ 84 $ 144
Opportunity Fund............................................................. $ 46 $ 70 $ 96 $ 169
International Equity Fund.................................................... $ 26 $ 79 -- --
Limited Term Fund............................................................ $ 27 $ 42 $ 59 $ 106
Government Income Fund....................................................... $ 27 $ 43 $ 60 $ 109
Municipal Income Fund........................................................ $ 27 $ 42 $ 58 $ 104
</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. THE OPPORTUNITY FUND, INTERNATIONAL EQUITY FUND, LIMITED
TERM FUND, GOVERNMENT INCOME FUND, AND THE MUNICIPAL INCOME FUND
EXAMPLES ARE BASED ON EXPENSES EXPECTED TO BE INCURRED FOR THE FUND'S
FISCAL YEAR ENDING FEBRUARY 28, 1998.
NOTES
------------
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 11, 1997, on
the Fund's financial statements for the year ended February 28, 1997,
and on the following table for each of the periods presented, is
included in the Annual Report, which is incorporated by reference.
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>
DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS DISTRIBUTIONS IN EXCESS OF
YEAR ENDED VALUE, NET AND UNREALIZED TOTAL FROM FROM NET FROM NET NET REALIZED
FEBRUARY 28 OR BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED GAIN GAIN ON
29, OF PERIOD INCOME(LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
1993(a) $ 10.00 0.12 0.52 0.64 (0.10) -- --
1994 $ 10.54 0.14 0.38 0.52 (0.14) (0.05) --
1995 $ 10.87 0.16 0.71 0.87 (0.16) (0.17) --
1996 $ 11.41 0.16 3.63 3.79 (0.17) (0.54) --
1997 $ 14.49 0.14 2.54 2.68 (0.14) (0.35) --
OPPORTUNITY FUND
1995(b) $ 10.00 0.02 1.17 1.19 (0.02) (0.02) --
1996 $ 11.15 -- 3.30 3.30 -- (1.66) --
1997 $ 12.79 (.03) 1.60 1.57 -- (0.83) --
LIMITED TERM FUND
1993(a) $ 10.00 0.36 0.07 0.43 (0.36) -- --
1994 $ 10.07 0.52 (0.17) 0.35 (0.52) (0.03) --
1995 $ 9.87 0.49 (0.23) 0.26 (0.48) -- --
1996 $ 9.65 0.54 0.15 0.69 (0.54) -- --
1997 $ 9.80 0.52 (0.08) 0.44 (0.53) -- --
GOVERNMENT INCOME FUND
1993(a) $ 10.00 0.37 0.25 0.62 (0.37) -- --
1994 $ 10.25 0.55 (0.09) 0.46 (0.55) (0.25) (0.01)(g)
1995 $ 9.90 0.54 (0.44) 0.10 (0.53) -- --
1996 $ 9.47 0.58 0.41 0.99 (0.59) -- --
1997 $ 9.87 0.57 (0.18) 0.39 (0.57) -- --
MUNICIPAL INCOME FUND
1993(c) $ 10.00 0.07 0.49 0.56 (0.05) -- --
1994 $ 10.51 0.48 0.08 0.56 (0.49) (0.01) --
1995 $ 10.57 0.49 (0.43) 0.06 (0.48) -- --
1996 $ 10.15 0.49 0.50 0.99 (0.48) -- --
1997 $ 10.66 0.49 (0.07) 0.42 (0.48) (0.01) --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 3, 1992 (date of
initial public investment) to February 28, 1993.
(b) Reflects operations for the period from August 1, 1994 (date of
initial public investment) to February 28, 1995.
(c) Reflects operations for the period from December 29, 1992 (date of
initial public investment) to February 28, 1993.
(d) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(e) Computed on an annualized basis.
(f) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(g) This distribution does not represent a return of capital for
federal tax purposes.
(h) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
Further information about the Funds' performance is contained in the
Funds' Annual Report, dated February 28, 1997, which can be obtained
free of charge. The International Equity Fund had not yet commenced
operations at February 28, 1997.
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------
NET ASSET NET NET ASSETS, PORTFOLIO
TOTAL VALUE, TOTAL INVESTMENT EXPENSE END OF PERIOD TURNOVER
DISTRIBUTIONS END OF PERIOD RETURN (D) EXPENSES INCOME WAIVER (F) (000 OMITTED) RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.10) $ 10.54 6.40% 0.51%(e) 2.15%(e) 0.53%(e) $ 181,239 28%
(0.19) $ 10.87 4.99% 0.96% 1.38% 0.01% $ 284,203 7%
(0.33) $ 11.41 8.23% 0.95% 1.54% -- $ 259,998 1%
(0.71) $ 14.49 33.73% 0.94% 1.24% -- $ 385,145 15%
(0.49) $ 16.68 18.79% 0.92% 0.95% -- $ 490,392 7%
(0.04) $ 11.15 11.84% 0.79%(e) 0.06%(e) 1.34%(e) $ 36,664 45%
(1.66) $ 12.79 31.42% 1.17% -- 0.35% $ 53,477 154%
(0.83) $ 13.53 12.08% 1.14% (0.24)% 0.16% $ 80,527 116%
(0.36) $ 10.07 4.43% 0.50%(e) 6.25%(e) 0.42%(e) $ 99,921 18%
(0.55) $ 9.87 3.52% 0.59% 5.21% 0.29% $ 116,600 76%
(0.48) $ 9.65 2.72% 0.63% 5.00% 0.25% $ 96,216 14%
(0.54) $ 9.80 7.34% 0.69% 5.49% 0.20% $ 93,276 56%
(0.53) $ 9.71 4.66% 0.68% 5.39% 0.20% $ 84,385 28%
(0.37) $ 10.25 6.40% 0.50%(e) 6.45%(e) 0.41%(e) $ 111,435 78%
(0.81) $ 9.90 4.55% 0.70% 5.34% 0.19% $ 118,695 49%
(0.53) $ 9.47 1.20% 0.68% 5.79% 0.15% $ 168,313 31%
(0.59) $ 9.87 10.70% 0.72% 5.96% 0.10% $ 184,226 87%
(0.57) $ 9.69 4.07% 0.70% 5.82% 0.10% $ 249,618 7%
(0.05) $ 10.51 5.65% 0.48%(e) 4.11%(e) 1.02%(e) $ 15,644 93%
(0.50) $ 10.57 5.34% 0.74% 4.60% 0.67% $ 34,435 9%
(0.48) $ 10.15 0.81% 0.75% 4.93% 0.41% $ 41,542 9%
(0.48) $ 10.66 9.96% 0.70% 4.65% 0.47% $ 44,578 20%
(0.49) $ 10.59 4.12% 0.70% 4.69% 0.46% $ 46,928 9%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE
COMMISSION
TOTAL RATE PAID
DISTRIBUTIONS (H)
- -------------
<S> <C>
(0.10) --
(0.19) --
(0.33) --
(0.71) $ 0.0653
(0.49) $ 0.0761
(0.04) --
(1.66) $ 0.0098
(0.83) $ 0.0568
(0.36) --
(0.55) --
(0.48) --
(0.54) --
(0.53) --
(0.37) --
(0.81) --
(0.53) --
(0.59) --
(0.57) --
(0.05) --
(0.50)
(0.48) --
(0.48) --
(0.49) --
- -------------
</TABLE>
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.
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. (For a description of certain risks
associated with investing in foreign companies, see
"International Equity Fund-Risks Associated with Investing in
Foreign Securities.");
- convertible bonds rated at least BBB by Standard & Poor's ("S&P") 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 S&P, 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 S&P 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, temporary investments and
securities of other investment companies. 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
S&P 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." (For a description of certain risks
associated with investing in foreign companies, see "International
Equity Fund--Risks Associated with Investing in Foreign Securities.")
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 S&P 500 Composite
Stock Price Index ("S&P 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 S&P 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 the fiscal years ended
February 28, 1997 and February 29, 1996, Opportunity Fund's portfolio
turnover rate was 116% and 154%, respectively.
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, temporary investments and
securities of other investment companies. See "Portfolio Investments and
Strategies."
INTERNATIONAL EQUITY FUND
The investment objective of International Equity Fund is to seek
capital appreciation. International Equity pursues its investment
objective by investing primarily in non-U.S. securities. A substantial
portion of these will be equity securities of established companies in
economically developed countries.
ACCEPTABLE INVESTMENTS. The International Equity Fund will invest at
least 65%, and under normal market conditions substantially all, of
its total assets in equity securities denominated in foreign
currencies, including European Currency Units, of issuers located in
at least three countries outside of the United States and sponsored or
unsponsored American Depositary Receipts ("ADRs"), Global Depositary
Receipts ("GDRs"), and European Depositary Receipts ("EDRs"),
collectively, "Depositary Receipts." International Equity Fund may
also purchase corporate and government fixed income securities
denominated in currencies other than U.S. Dollars; enter into forward
commitments,
repurchase agreements, and foreign currency transactions; maintain reserves in
foreign or U.S. money market instruments; and purchase options and financial
futures contracts.
EQUITY SECURITIES. International Equity Fund will commit its assets
primarily to equity securities. In selecting investments for
International Equity Fund, Lazard Freres Asset Management attempts to
identify inexpensive markets worldwide through traditional measures of
value, including low price to earnings ratio, high yield, unrecognized
assets, potential for management change and/or the potential to
improve profitability. In addition, the Sub-Adviser seeks to identify
companies that it believes are financially productive and undervalued
in those markets. The Sub-Adviser focuses on individual stock
selection (a "bottom-up" approach) rather than on forecasting stock
market trends (a "top-down" approach).
The Sub-Adviser recognizes that some of the best opportunities are in
securities not generally followed by investment professionals. Thus,
the Sub-Adviser relies on its research capabilities and also maintains
a dialogue with foreign brokers and with the management of foreign
companies in an effort to gather the type of "local knowledge" that it
believes is critical to successful investment abroad. To this end, the
Sub-Adviser communicates with its affiliates, Lazard Freres & Cie. in
Paris, Lazard Brothers & Co. Ltd. in London and Lazard Japan Asset
Management K.K. in Tokyo, for information concerning current business
trends, as well as for a better understanding of the management of
local businesses. The information supplied by these affiliates of the
Sub-Adviser will be limited to statistical and factual information,
advice regarding economic factors and trends or advice as to
occasional transactions in specific securities.
FIXED INCOME AND OTHER SECURITIES. As a temporary defensive position,
International Equity Fund may invest up to 100% of its total assets in
fixed income securities, warrants, or other obligations of foreign
companies or governments, if they appear to offer potential higher
return. Fixed income securities include preferred stock, convertible
securities, bonds, notes, or other debt securities which are
investment grade or higher. However, in no event will International
Equity Fund invest more than 25% of its total assets in the debt
securities of any one foreign country.
The high-quality debt securities in which International Equity Fund
will invest will possess a minimum credit rating of A as assigned by
S&P or A by Moody's, or, if unrated, will be judged by the Adviser or
Sub-Adviser to be of comparable quality. Because the average quality
of International Equity Fund's debt securities should remain
constantly between A and AAA, International Equity Fund will seek to
avoid the adverse consequences that may arise for some debt securities
in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the Sub-Adviser. The Sub-Adviser
will determine whether or not the security continues to be an
acceptable investment.
If not, the security will be sold.
The prices of fixed income securities generally fluctuate inversely to
the direction of interest rates.
DEPOSITARY RECEIPTS. International Equity Fund may invest in foreign
issuers by purchasing sponsored or unsponsored ADRs, GDRs, and EDRs.
ADRs are depositary receipts typically issued by a United States bank
or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs and GDRs are typically issued by
foreign banks or trust companies, although they also may be issued by
United States banks or trust companies, and evidence ownership of
underlying securities issued by either a foreign or a United States
corporation. Generally, depositary
receipts in registered form are designed for use in the United States
securities market and depositary receipts in bearer form are designed
for use in securities markets outside the United States. Depositary
receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Ownership
of unsponsored depositary receipts may not entitle International
Equity Fund to financial or other reports from the issuer of the
underlying security, to which it would be entitled as the owner of
sponsored depositary receipts.
FORWARD COMMITMENTS. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement
time. International Equity Fund may enter into these contracts if
liquid securities in amounts sufficient to meet the purchase price are
segregated on International Equity Fund's records at the trade date
and maintained until the transaction has been settled. Risk is
involved if the value of the security declines before settlement.
Although International Equity Fund enters into forward commitments
with the intention of acquiring the security, it may dispose of the
commitment prior to settlement and realize short-term profit or loss.
MONEY MARKET INSTRUMENTS. International Equity Fund may invest in U.S.
and foreign short-term money market instruments, including
interest-bearing call deposits with banks, government obligations,
certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate debt securities, and repurchase agreements. The
commercial paper in which International Equity Fund invests will be
rated A-1 by S&P or P-1 by Moody's. These investments may be used to
temporarily invest cash received from the sale of International Equity
Fund shares, to establish and maintain reserves (up to 100% of
International Equity Fund's assets) for temporary defensive purposes,
or to take advantage of market opportunities. Investments in the World
Bank, Asian Development Bank, or Inter-American Development Bank are
not anticipated.
FOREIGN CURRENCY TRANSACTIONS. International Equity Fund will enter
into foreign currency transactions to obtain the necessary currencies
to settle securities transactions. Currency transactions may be
conducted either on a spot or cash basis at prevailing rates or
through forward foreign currency exchange contracts.
International Equity Fund may also enter into foreign currency
transactions to protect Fund assets against adverse changes in foreign
currency exchange rates or exchange control regulations. Such changes
could unfavorably affect the value of Fund assets which are
denominated in foreign currencies, such as foreign securities or funds
deposited in foreign banks, as measured in U.S. Dollars. Although
foreign currency exchanges may be used by International Equity Fund to
protect against a decline in the value of one or more currencies, such
efforts may also limit any potential gain that might result from a
relative increase in the value of such currencies and might, in
certain cases, result in losses to International Equity Fund.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign
currency exchange contract ("forward contract") is an obligation to
purchase or sell an amount of a particular currency at a specific
price and on a future date agreed upon by the parties.
Generally, no commission charges or deposits are involved. At the time
International Equity Fund enters into a forward contract, Fund assets
with a value equal to the Fund's obligation under the forward contract
are segregated on the Fund's records and are maintained until the
contract has been settled. International Equity Fund will not enter
into a forward contract with a term of more than one
year. International Equity Fund will generally enter into a forward
contract to provide the proper currency to settle a securities
transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24
hours and 30 days, depending upon local custom.
International Equity Fund may also protect against the decline of a
particular foreign currency by entering into a forward contract to
sell an amount of that currency approximating the value of all or a
portion of International Equity Fund's assets denominated in that
currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting
short-term currency market movements and of precisely matching forward
contract amounts and the constantly changing value of the securities
involved. Although the Adviser will consider the likelihood of changes
in currency values when making investment decisions, the Adviser
believes that it is important to be able to enter into forward
contracts when it believes the interests of International Equity Fund
will be served. International Equity Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount
in excess of the Fund's assets denominated in that currency.
SHORT SALES. International Equity Fund intends to sell securities it
owns or has a right to acquire short from time to time, subject to
certain restrictions. A short sale occurs when a borrowed security is
sold in anticipation of a decline in its price. If the decline occurs,
shares equal in number to those sold short can be purchased at the
lower price. If the price increases, the higher price must be paid.
The purchased shares are then returned to the original lender. Risk
arises because no loss limit can be placed on the transaction. When
International Equity Fund enters into a short sale, assets, equal to
the market price of the securities sold short or any lesser price at
which the Fund can obtain such securities, are segregated on the
Fund's records and maintained until the Fund meets its obligations
under the short sale.
RISKS ASSOCIATED WITH INVESTING IN FOREIGN COMPANIES. Investing in
non-U.S. securities carries substantial risks in addition to those
associated with domestic investments. In an attempt to reduce some of
these risks, International Equity Fund diversifies its investments
broadly among foreign countries, including both developed and
developing countries. At least three different countries will always
be represented.
International Equity Fund occasionally takes advantage of the unusual
opportunities for higher returns available from investing in
developing countries. As discussed in the Statement of Additional
Information, however, these investments carry considerably more
volatility and risk because they are associated with less mature
economies and less stable political systems.
The economies of foreign countries may differ from the U.S. economy in
such respects as growth of gross domestic product, rate of inflation,
currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Further, the
economies of developing countries generally are heavily dependent on
international trade and, accordingly, have been, and may continue to
be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade.
These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.
Prior governmental approval for foreign investments may be required
under certain circumstances in some countries, and the extent of
foreign investment in certain debt securities and domestic companies
may be subject to limitation. Foreign ownership limitations also may
be imposed by the charters of individual companies to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital, and the proceeds of sales
by foreign investors may require governmental registration and/or
approval in some countries. International Equity Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental registration or approval for such repatriation. Any
investment subject to such repatriation controls will be considered
illiquid if it appears reasonably likely that this process will take
more than seven days.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political
changes, governmental regulation, social instability or diplomatic
developments (including war) which could affect adversely the
economies of such countries or the value of International Equity
Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the
United States.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign
markets may have different clearance and settlement procedures and in
certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making
it difficult to conduct such transactions. The inability of
International Equity Fund to make intended security purchases due to
settlement problems could cause International Equity Fund to miss
attractive investment opportunities. Inability to dispose of a
portfolio security due to settlement problems could result either in
losses to International Equity Fund due to subsequent declines in
value of the portfolio security or, if International Equity Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser.
Other differences between investing in foreign and U.S. companies include:
- less publicly available information about foreign companies;
- the lack of uniform accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. companies;
- less readily available market quotations on foreign companies;
- differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
- differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
- the limited size of many foreign securities markets and limited
trading volume in issuers compared to the volume of trading in
U.S. securities, which could cause prices to be erratic for
reasons apart from factors that affect the quality of
securities;
- the likelihood that foreign securities may be less liquid or more
volatile;
- higher foreign brokerage commissions;
- unreliable mail service between countries;
- political or financial changes which adversely affect investments in some
countries;
- increased risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities;
- requirements of certain markets that payment for securities be made
before delivery;
- religious and ethnic instability; and
- certain national policies which may restrict the Fund's
investment opportunities, including those restricting
investment in issuers or industries deemed sensitive to
national interests.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as
International Equity Fund. Investors are advised that when such policies are
instituted, International Equity Fund will abide by them.
CURRENCY RISKS. Because the majority of the securities purchased by
International Equity Fund are denominated in currencies other than the
U.S. Dollar, changes in foreign currency exchange rates will affect
International Equity Fund's net asset value; the value of interest
earned; gains and losses realized on the sales of securities; and net
investment income and capital gain, if any, to be distributed to
shareholders by International Equity Fund. If the value of a foreign
currency rises against the U.S. Dollar, the value of International
Equity Fund's assets denominated in that currency will increase;
correspondingly, if the value of a foreign currency declines against
the U.S. Dollar, the value of International Equity Fund's assets
denominated in that currency will decrease.
The exchange rates between the U.S. Dollar and foreign currencies are
a function of such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental
interpretation, speculation and other economic and political
conditions. Although International Equity Fund values its assets daily
in U.S. Dollars, International Equity Fund will not convert its
holdings of foreign currencies to U.S. Dollars daily. When
International Equity Fund converts its holdings to another currency,
it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.
NON-DIVERSIFICATION. International Equity Fund is a non-diversified
investment portfolio. As such, there is no limit on the percentage of
assets which can be invested in any single issuer. An investment in
International Equity Fund, therefore, will entail greater risk than
would exist in a diversified portfolio of securities because the
higher percentage of investments among fewer issuers may result in
greater fluctuation in the total market value of International Equity
Fund's portfolio. Any economic, political, or regulatory developments
affecting the value of the securities in International Equity Fund's
portfolio will have a greater impact on the total value of the
portfolio than would be the case if the portfolio was diversified
among more issuers.
International Equity Fund intends to comply with Subchapter M of the
Internal Revenue Code, as amended. This undertaking requires that at
the end of each quarter of the taxable year, with regard to at least
50% of International Equity Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer;
and beyond that, that no more than 25% of its total assets are
invested in the securities of a single issuer.
CERTAIN PORTFOLIO STRATEGIES. International Equity Fund may also invest or
engage in put and call options, futures contracts and options on futures,
repurchase agreements, lending of portfolio securi-
ties, when-issued and delayed delivery transactions and securities of other
investment companies. 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.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which Limited Term
Fund will invest include:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
- notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
- notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government 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.
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 S&P 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 BIF or 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, when-issued and delayed delivery transactions and
securities of other investment companies. 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, when-issued and delayed delivery transactions
and securities of other investment companies. 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 S&P 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, lending of portfolio
securities and securities of other investment companies. See "Portfolio
Investments and Strategies."
PORTFOLIO INVESTMENTS AND STRATEGIES
- --------------------------------------------------------------------------------
PUT AND CALL OPTIONS
Equity Fund, Opportunity Fund, International Equity Fund, Limited Term
Fund and Government Income Fund may purchase and sell (write) put and
call options on their portfolio of securities either as a hedge to
attempt to protect securities which the Funds hold, or will be
purchasing, against decreases or increases in value, or to generate
income for the Fund. The Funds may write call options on securities
either held in their portfolio or which they have the right to obtain
without payment of further consideration or for which they have
segregated cash in the amount of any additional consideration. In the
case of put options written by the Funds, the Trust's custodian will
segregate cash, U.S. Treasury obligations, or highly liquid debt
securities with a value equal to or greater than the exercise price of
the underlying securities.
The Funds are authorized to invest in put and call options that are
traded on securities exchanges. The Funds may also purchase and write
over-the-counter options ("OTC options") on portfolio securities in
negotiated transactions with the buyers or writers of the options when
options on some of the portfolio securities held by the Funds are not
traded on an exchange. The Funds will purchase and write OTC options
only with investment dealers and other financial institutions (such as
commercial banks or savings associations) deemed creditworthy by the
Adviser or Sub-Adviser.
OTC 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 OTC 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, Opportunity Fund and International Equity Fund may
purchase and sell financial futures contracts and stock index futures
contracts to hedge all or a portion of their respective portfolio
securities against changes in interest rates or securities prices.
Financial futures contracts on securities call for the delivery of
particular securities 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. A financial futures contract
on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based
on changes in the securities index. 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, Opportunity Fund, International Equity Fund, Limited Term
Fund and Government Income Fund may also write call options and
purchase put options on financial futures contracts as a hedge to
attempt to protect securities in their respective portfolio against
decreases in value resulting
from anticipated increases in market interest rates or broad declines
in securities prices. When a Fund writes a call option on a financial
futures contract, it is undertaking the obligation of selling the
financial futures contract at a fixed price at any time during a
specified period if the option is exercised. Conversely, as a
purchaser of a put option on a financial futures contract, a Fund is
entitled (but not obligated) to sell a financial futures contract at
the fixed price during the life of the option.
Equity Fund, Opportunity Fund, International Equity Fund, Limited Term
Fund and Government Income Fund Fund may also write put options and
purchase call options on financial futures contracts as a hedge
against rising purchase prices of securities eligible for purchase by
a Fund. A Fund will use these transactions to attempt to protect its
ability to purchase securities in the future at price levels existing
at the time it enters into the transactions. When a Fund writes a put
option on a futures contract, it is undertaking to buy a particular
futures contract at a fixed price at any time during a specified
period if the option is exercised. As a purchaser of a call option on
a futures contract, a Fund is entitled (but not obligated) to purchase
a futures contract at a fixed price at any time during the life of the
option.
A Fund may not purchase or sell financial futures contracts or options
on financial futures contracts if, immediately thereafter, the sum of
the amount of initial margin deposits on a Fund's existing financial
futures positions and premiums paid for related options would exceed
5% of the fair market value of a Fund's total assets, after taking
into account the unrealized profits and losses on those contracts it
has entered into. When a Fund purchases financial futures contracts,
an amount of cash and cash equivalents, equal to the underlying
commodity value of the financial futures contracts (less any related
margin deposits), will be deposited in a segregated account with the
Fund's custodian to collateralize the position and, thereby, insure
that the use of such financial futures contracts is unleveraged.
RISKS. 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.
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 or Sub-Adviser (with
respect to International Equity Fund) 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.
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
International Equity Fund, which may invest in temporary investments
described under "International Equity Fund--Money Market Instruments"
and "Fixed Income and Other Securities") 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 S&P, 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.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds may invest in securities of other investment companies. A
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. A 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. 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. The
Funds will
invest in other investment companies primarily for the purpose of
investing short-term cash on a temporary basis.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities. Restricted securities
are any securities in which a Fund may otherwise invest pursuant to
its investment objective and policies but which are subject to
restrictions on resale under federal securities law. However, the
Funds will not invest more than 15% of their respective net assets in
illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid; over-the-counter options (for
those Funds which are permitted to invest in options); and repurchase
agreements providing for settlement in more than seven days after
notice.
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 S&P 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
- --------------------------------------------------------------------------------
Equity Fund, Opportunity Fund, Limited Term Fund, Government Income
Fund and Municipal Income Fund 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.
International Equity Fund will not:
- borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value
of its total assets and pledge up to 15% of the value of those
assets to secure such borrowings; or
- permit margin deposits for financial futures contracts held by
the Fund, plus premiums paid by it for open options on
financial futures contracts, to exceed 5% of the fair market
value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts.
The above limitations cannot be changed without shareholder approval.
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 the Funds'
investment adviser, ParkSouth Corporation, subject to direction by the
Trustees. The Adviser (in consultation with Lazard Freres Asset
Management, the Sub-Adviser with respect to International Equity
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%; International Equity Fund--1.00%; and Limited Term Fund,
Government Income Fund and Municipal Income Fund--0.60%. 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.
ADVISER'S BACKGROUND. ParkSouth Corporation is a registered investment
adviser providing investment management services to individuals and
institutional clients. ParkSouth Corporation is a subsidiary of
Deposit Guaranty National Bank (the "Bank"), a national banking
association founded in 1925 which, in turn, 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. DGC is listed on the New York Stock
Exchange under the symbol "DEP."
The Adviser manages, in addition to the Funds in the DG Investor
Series, $630 million in common trust fund assets as of December 31,
1996. The Adviser (which succeeded to the investment advisory business
of the Bank in 1997), or the Bank, have served as the adviser to the
Trust since May 5, 1992.
As part of its regular banking operations, the Bank 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 the Bank. The lending relationships will not be a
factor in the selection of securities.
John Mark McKenzie has been with the Bank since 1984 and is a Senior Vice
President with the Adviser. Previously, Mr. McKenzie was associated with a
Jackson bank as a trust officer. He received a B.B.A. in Banking and Finance and
a J.D. 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 Associations. Mr. McKenzie has managed
Limited Term Fund and Government Income Fund since August 1, 1992, and has
managed the Municipal Income Fund since February, 1997.
Gerald L. White has been with the Bank since 1978 and is a Senior Vice President
and Senior Investment Officer of the Bank and a Senior Vice President of the
Adviser. He received a B.A. from the University of Mississippi, and a J.D. from
Mississippi College and is a graduate of the National Graduate Trust School at
Northwestern University. He is a member of the Mississippi State and Hinds
County Bar Associations and a Certified Financial Service Counselor. Mr. White
has managed the Opportunity Fund since February, 1997. Mr. White previously
served as manager of the Opportunity Fund's predecessor Common Trust Fund from
1982 through 1984.
Ronald E. Lindquist has been with the Bank since 1978 and is a Senior Vice
President with the Adviser. 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 the Equity Fund since its inception on August 1, 1992.
SUB-ADVISER. With respect to International Equity Fund, under the
terms of a sub-advisory agreement between the Adviser and the
Sub-Adviser, the Sub-Adviser will make all determinations with respect
to the investment of assets of the Fund, and shall take such steps as
may be necessary to implement the same, including the placement of
purchase and sale orders on behalf of the Fund.
SUB-ADVISORY FEES. For its services under the sub-advisory agreement,
the Sub-Adviser receives an annual fee from the Adviser equal to 0.50%
of the average daily net assets of the Fund. The sub-advisory fee is
accrued daily and paid monthly.
SUB-ADVISER'S BACKGROUND. Lazard Freres Asset Management is a division
of Lazard Freres & Co. LLC, a New York limited liability company,
which is registered as an investment adviser with the SEC and is a
member of the New York, American and Midwest Stock Exchanges. The
Sub-Adviser provides investment management services to client
discretionary accounts with assets totaling approximately $38.1
billion as of December 31, 1996. Its clients are both individuals and
institutions.
Herbert W. Gullquist is a Managing Director of the Sub-Adviser and has
been with the Sub-Adviser since 1982, during which time he has managed
various client discretionary accounts. Mr. Gullquist has co-managed
International Equity Fund since March 31, 1997 (the Fund's inception
date).
John R. Reinsberg is a Managing Director of the Sub-Adviser and has been with
the Sub-Adviser since 1992, during which time he has managed various client
discretionary accounts. Prior thereto, Mr. Reinsberg was Executive Vice
President of General Electric Investment Company. Mr. Reinsberg has co-managed
International Equity Fund since March 31, 1997.
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 AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted in accordance with the Investment Company Act Rule 12b-1 (the
"Plan"), the Funds may pay to the distributor an amount computed at an
annual rate of 0.35% (0.25% in the case of International Equity 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 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. 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 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.
In addition, the Funds have 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 the Funds 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 each 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.
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.
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.
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>
.15% on the first $250 million
.125% on the next $250 million
.10% on 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 (and Sub-Adviser, with respect to
International Equity Fund) look for prompt execution of the order at a
favorable price. In working with dealers, the Adviser and Sub-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 and Sub-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 and Sub-Adviser make decisions on portfolio transactions
and selects brokers and dealers subject to review by the Trustees.
EXPENSES OF THE FUNDS
Each Fund pays all of its own expenses and its allocable share of
Trust expenses. These expenses include, but are not limited to the
cost of: organizing the Trust and continuing its existence;
registering the Trust and its shares; Trustees' fees; meetings of
Trustees and shareholders and proxy solicitations therefor; auditing,
accounting, and legal services; investment advisory and administrative
services; custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; issuing, purchasing,
repurchasing, and redeeming shares; reports to government agencies;
preparing, printing and mailing documents to shareholders such as
financial statements, prospectuses and proxies; taxes and commissions;
insurance premiums; association membership dues; and such
non-recurring and extraordinary items as may arise.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds' 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.
The net asset value for the Funds is determined as of the close of
trading (normally 4:00 p.m., Eastern time), on the New York Stock
Exchange, Monday through Friday, 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.
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 the Bank
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. 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. 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 Bank.
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.
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 International Equity Fund are sold at their net asset value,
without a sales charge, next determined after an order is received.
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 Bank 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 Bank or
Federated Securities Corp. or their affiliates and their spouses and
children under 21; current and retired directors of the Bank; or any
bank or investment dealer who has a sales agreement with Federated
Securities Corp. with regard to the Funds.
In addition, no sales charge is imposed for Fund shares purchased
through financial intermediaries that do not receive a reallowance of
a sales charge. However, investors who purchase Fund shares through a
trust department, investment adviser, or other financial intermediary
may be charged a service or other fee by the financial intermediary.
Furthermore, no sales charge is imposed on Fund shares purchased
through "wrap accounts" or similar programs under which clients pay a
fee for services.
SALES CHARGE REALLOWANCE. For sales of shares of Equity Fund,
Opportunity Fund, Limited Term Fund, Government Income Fund and
Municipal Income Fund, the Bank 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 Bank 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 Bank 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 Bank 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 Bank 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
Bank.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Shareholder Services
Company maintains a share account for each shareholder. Share
certificates are not issued unless requested by contacting the Funds
or Federated Shareholder Services Company in writing.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. With respect to Equity Fund and Opportunity Fund,
quarterly confirmations are sent to report dividends paid during the
quarter.
With respect to Limited Term Fund, Government Income Fund and
Municipal Income Fund, monthly confirmations are sent to report
dividends paid during the month.
With respect to International Equity Fund, annual confirmations are
sent to report dividends paid during the year.
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. With respect to International Equity Fund
dividends are declared and paid annually. All shareholders on the
record date are entitled to the dividend. If shares
are redeemed or exchanged prior to the record date, or purchased after
the record date, those shares are not entitled to that year's
dividend.
Distribution of any realized net 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 Bank, as appropriate.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Funds are shareholders of DG Investor Series,
which, in addition to the Funds, is composed of the following two
portfolios: DG Prime Money Market Fund and DG U.S. Government Money
Market Fund.
Shareholders in any of the Funds have easy access to all of the other
Funds.
EXCHANGE 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.
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 Bank. 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
Bank receives 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 BANK
BY TELEPHONE. A shareholder who is a customer of the Bank may redeem shares of
a Fund by calling Deposit Guaranty National Bank at (800) 748-8500.
For orders received before 4:00 p.m. (Eastern time), proceeds will
normally be wired the next day to the shareholder's account at the
Bank or a check will be sent to the address of record.
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 Bank. 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 Shareholder Services Company or the Bank.
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 Bank. 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 Bank 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 Shareholder 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 Shareholder 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 Bank. 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 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of
19,039,344 shares (64.43%) 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 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of 4,533,888
shares (74.24%) 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 9, 1997, Federated ADM Services was the owner of record of
10 shares (100%) of International 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 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of 6,923,745
shares (80.31%) 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 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of
18,948,257 shares (70.26%) 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 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of 4,146,486
shares (91.02%) 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.
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.
Some entities providing services to the Funds are subject to such
banking laws and regulations. They believe, based on the advice of
counsel, that they may perform those services for the Funds
contemplated by any agreement entered into with the Trust 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 these entities from continuing
to perform all or a part of the above services. If this happens, the
Trustees would consider alternative means of continuing available
investment services. It is not expected that Fund shareholders would
suffer any adverse financial consequences 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 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 the Funds is calculated by dividing the net investment
income per share (as defined by the SEC) 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 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 specific tax rate.
The 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.
Opportunity Fund is the successor to the portfolio of a collective
trust fund formerly managed by the Adviser. On August 1, 1994 (the
date of the Opportunity Fund's commencement of operations), the assets
of the collective trust fund were transferred to the Opportunity Fund
in exchange for Opportunity Fund shares. The Adviser has represented
that the Opportunity Fund's investment objective, policies and
limitations are in all material respects identical to those of the
collective trust fund.
The Opportunity Fund's average annual compounded total returns for the
one-, five- and ten-year periods ended February 28, 1997, and since
inception (January 1, 1982), on a loaded basis, were 8.19%, 15.10%,
15.92%, and 13.77%, respectively. The Opportunity Fund's average
annual compounded total returns for the one-, five- and ten-year
periods ended February 28, 1997, and since inception, on a no-load
basis, were 12.08%, 15.93%, 16.33%, and 14.04%, respectively. The
quoted performance data includes the performance of the collective
trust fund for the period before the date on which the Opportunity
Fund commenced operations (August 1, 1994), as adjusted to reflect the
Opportunity Fund's then anticipated expenses as set forth in the
"Expenses of the Fund" section of the Opportunity Fund's initial
prospectus. The collective trust fund was not registered under the
Investment Company Act of 1940 (the "1940 Act"), and therefore was not
subject to certain investment restrictions that are imposed by the
1940 Act. If the collective trust fund had been registered under the
1940 Act, the performance may have been adversely affected.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
DG Investor Series
DG Equity Fund Federated Investors Tower
DG Opportunity Fund Pittsburgh, PA 15222-3779
DG International Equity Fund
DG Limited Term Government Income Fund
DG Government Income Fund
DG Municipal Income Fund
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
ParkSouth Corporation P.O. Box 1200
Jackson, MS 39215-1200
- ------------------------------------------------------------------------------------------------
Sub-Adviser for DG International Equity Fund
Lazard Freres Asset Management 30 Rockefeller Plaza
New York, NY 10020
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 1713
Boston, MA 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent,
and Shareholder Servicing Agent
Federated Shareholder Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Independent Public Accountants
KPMG Peat Marwick LLP One Mellon Bank Center
Pittsburgh, PA 15219
- ------------------------------------------------------------------------------------------------
Deposit Guaranty National Bank DGB-14
Mutual Funds Services P.O. Box 1200
Jackson, MS 39215-1200
- ------------------------------------------------------------------------------------------------
</TABLE>
DG INVESTOR SERIES
EQUITY FUND
OPPORTUNITY FUND
INTERNATIONAL EQUITY FUND
LIMITED TERM GOVERNMENT INCOME FUND
GOVERNMENT INCOME FUND
MUNICIPAL INCOME FUND
[LOGO]
DG INVESTORS SERIES
COMBINED PROSPECTUS
DIVERSIFIED PORTFOLIOS OF
DG INVESTOR SERIES,
AN OPEN-END MANAGEMENT
INVESTMENT COMPANY
PARKSOUTH
CORPORATION
JACKSON, MS
INVESTMENT ADVISER
LAZARD FRERES
ASSET MANAGEMENT
NEW YORK, NY
SUB-ADVISER TO
INTERNATIONAL EQUITY FUND
JUNE 30, 1997
[LOGO]
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 23321N301 Cusip 23321N400 Cusip 23321N103 Cusip 23321N509 Cusip
23321N202 Cusip 23321N806 G00499-11 (6/97)
DG INTERNATIONAL EQUITY FUND
(A PORTFOLIO OF DG INVESTOR SERIES)
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 1997
A. Please delete the fourth paragraph of the section entitled "Trust
Ownership" on page 17 of the Statement of Additional Information
and replace it with the following: "As of October 1, 1997, the
following shareholder of record owned 5% or more of the
outstanding shares of the Fund: Deposit Guaranty National Bank
was the owner of record of 1,124,587 shares (91.52%)."
B. Please add the following as the last sentence of the section
entitled "Portfolio Turnover" on page 9 of the Statement of
Additional Information:
"For the period from August 15, 1997 (start of business) to
August 31, 1997, the portfolio turnover rate for International Equity
Fund was 0%."
C. Please add the following as the third paragraph of the section
entitled "Investment Advisory Services-Sub-Advisory Fees" on page
19 of the Statement of Additional Information:
"For the period from August 15, 1997 (start of business) to
August 31, 1997, the Sub-Adviser earned advisory fees from
International Equity Fund of $2,131, none of which were waived."
D. Please add the following as the last sentence of the first
paragraph of the section entitled "Brokerage Transactions" which
begins on page 19 of the Statement of Additional Information:
"During the period from August 15, 1997 (start of business) to
August 31, 1997, International Equity Fund paid $20,599 in
brokerage commissions on brokerage transactions."
E. Please add the following as the last sentence of the paragraph
of the section entitled "Other Services-Administration of the
Trust" on page 20 of the Statement of Additional Information:
"For the period from August 15, 1997 (start of business) to
August 31, 1997, the administrator earned $421 on behalf of
International Equity Fund, none of which was waived."
F. Please add the following as the fifth paragraph of the section
entitled "Purchasing Shares-Distribution and Shareholder Services
Plans" beginning on page 20 of the Statement of Additional
Information: "For the period from August 15, 1997 (start of
business) to August 31, 1997, International Equity Fund made no
payments pursuant to the Distribution Plan."
G. Please add the following as the third paragraph of the section
entitled "Total Return" on page 23 of the Statement of Additional
Information and replace it with the following: "International
Equity Fund's cumulative total return for the period from August
15, 1997 (date of initial public investment) to September 30,
1997 was (3.20)%. Cumulative total return reflects the
International Equity Fund's total performance over a specific
period of time. International Equity Fund's cumulative total
return is representative of approximately 15 days of investment
activity since International Equity Fund's effective date."
October 30, 1997
[GRAPHIC OMITTED]
Cusp 23321N806
G01258-22 (10/97)
[GRAPHIC OMITTED]
DG INTERNATIONAL EQUITY FUND
(A Portfolio of DG Investor Series)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 1997
The following is to be inserted after the section entitled "Warrants,"
on page 3:
"SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS
Investing in equity securities of companies in
emerging markets may entail greater risks than
investing in equity securities in developed
countries. These risks include (i) less social,
political and economic stability; (ii) the small
current size of the markets for such securities and
the currently low or nonexistent volume of trading,
which result in a lack of liquidity and in greater
price volatility; (iii) certain national policies
which may restrict International Equity Fund's
investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive
to national interest; (iv) foreign taxation; and (v)
the absence of developed structures governing
private or foreign investment or allowing for
judicial redress for injury to private property.
Investing in the securities of companies in emerging
markets, may entail special risks relating to the
potential political and economic instability and the
risks of expropriation, nationalization,
confiscation or the imposition of restrictions on
foreign investment, convertibility of currencies
into U.S. dollars and on repatriation of capital
invested. In the event of such expropriation,
nationalization or other confiscation by any
country, International Equity Fund could lose its
entire investment in any such country.
Settlement mechanisms in emerging markets may be
less efficient and reliable than in more developed
markets. In such emerging securities markets there
may be share registration and delivery delays or
failures.
Most Latin American countries have experienced
substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates and
corresponding currency devaluations have had and may
continue to have negative effects on the economies
and securities markets of certain Latin American
countries."
"POLITICAL, SOCIAL AND ECONOMIC RISKS. Even though
opportunities for investment may exist in emerging
markets, any change in the leadership or policies of
the governments of those countries or in the
leadership or policies of any other government which
exercises a significant influence over these
countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now
occurring and thereby eliminate any investment
opportunities which may currently exist.
Investors should note that upon the accession to
power of authoritarian regimes, the governments of a
number of Latin American countries previously
expropriated large quantities of real and personal
property similar to the property which will be
represented by the securities purchased by
International Equity Fund. The claims of property
owners against those governments were never finally
settled. There can be no assurance that any property
represented by securities purchased by International
Equity Fund will not also be expropriated,
nationalized, or otherwise confiscated. If such
confiscation were to occur, International Equity
Fund could lose its entire investment in such
countries. International Equity Fund's investment
would similarly be adversely affected by exchange
control regulation in any of those countries.
Certain countries in which International Equity Fund
may invest may have groups that advocate radical
religious or revolutionary philosophies or support
ethnic independence. Any disturbance on the part of
such individuals could carry the potential for
widespread destruction or confiscation of property
owned by individuals and entities foreign to such
country and could cause the loss of International
Equity Fund's investment in those countries.
Instability may also result from, among other
things: (i) authoritarian governments or military
involvement in political and economic
decision-making, including changes in government
though extraconstitutional means; (ii) popular
unrest associated with demands for improved
political, economic and social conditions; and (iii)
hostile relations with neighboring or other
countries. Such political, social and economic
instability could disrupt the principal financial
markets in which International Equity Fund invests
and adversely affect the value of the Fund's
assets."
October 30, 1997
[GRAPHIC OMITTED]
Cusip 23321N806
G01258-19 (10/97)
DG INVESTOR SERIES
STOCK AND BOND FUNDS
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" as the context requires)
of DG Investor Series (the "Trust"):
DG Equity Fund;
DG Opportunity Fund;
DG International Equity Fund;
DG Limited Term Government Income Fund;
DG Government Income Fund; and
DG Municipal Income Fund.
This Statement should be read with the prospectus of the Funds
dated June 30, 1997. 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, or you can visit the DG
Investors Series' Internet site on the World Wide Web at
(www.dgb.com).
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1997
[GRAPHIC OMITTED]
Cusip 23321N301 Cusip 23321N400 Cusip 23321N806 Cusip 23321N103
Cusip 23321N509 Cusip 23321N202 G00499-13 (6/97)
<PAGE>
TABLE OF CONTENTS
I
GENERAL INFORMATION ABOUT THE FUNDS 1
INVESTMENT OBJECTIVES AND POLICIES 1
EQUITY FUND AND OPPORTUNITY FUND 1
Types of Investments 1
Zero Coupon Convertible Securities 1
Convertible Securities 1
Money Market Instruments 2
Warrants 2
Corporate Debt Securities 2
INTERNATIONAL EQUITY FUND 2
Types of Investments 2
Restricted and Illiquid Securities 3
Warrants 3
Additional Risk Considerations 3
Portfolio Turnover 3
LIMITED TERM FUND AND GOVERNMENT INCOME FUND 3
Types of Investments 3
Weighted Average Portfolio Duration 4
Mortgage-Backed and Asset-Backed Securities
Risks 4
MUNICIPAL INCOME FUND 4
Types of Investments 4
Temporary Investments 5
Other Investment Techniques 5
INVESTMENT POLICIES AND STRATEGIES 6
Futures and Options Transactions 6
Repurchase Agreements 8
Reverse Repurchase Agreements 8
When-Issued and Delayed Delivery Transactions 8
Lending of Portfolio Securities 9
Portfolio Turnover 9
INVESTMENT LIMITATIONS 9
DG INVESTOR SERIES MANAGEMENT 13
Trust Ownership 17
Trustees' Compensation 18
Trustee Liability 18
INVESTMENT ADVISORY SERVICES 18
Adviser to the Funds 18
Advisory Fees 19
Sub-Adviser to the International Equity Fund 19
Sub-Advisory Fees 19
BROKERAGE TRANSACTIONS 19
OTHER SERVICES 20
Administration of the Trust 20
Custodian 20
Transfer Agent, Dividend Disbursing Agent, and
Shareholder Servicing Agent 20
Independent Auditors 20
PURCHASING SHARES 20
Distribution and Shareholder Services Plans 20
Conversion to Federal Funds 21
DETERMINING NET ASSET VALUE 21
Determining Market Value of Securities 21
Trading in Foreign Securities 21
Valuing Municipal Securities 22
EXCHANGE PRIVILEGE 22
Requirements for Exchange 22
Making an Exchange 22
REDEEMING SHARES 22
Redemption in Kind 22
Massachusetts Partnership Law 22
TAX STATUS 23
The Funds' Tax Status 23
Foreign Taxes 23
Shareholders' Tax Status 23
TOTAL RETURN 23
YIELD 23
TAX-EQUIVALENT YIELD 24
Tax-Equivalency Table 25
PERFORMANCE COMPARISONS 26
Economic and Market Information 27
FINANCIAL STATEMENTS 27
APPENDIX 28
<PAGE>
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 International Equity Fund ("International Equity Fund"), DG Limited
Term Government Income Fund ("Limited Term Fund"), DG Government
Income Fund ("Government Income Fund"), and DG Municipal Income Fund
("Municipal Income Fund").
The Funds are advised by ParkSouth Corporation (the "Adviser") and are
sub-advised (with respect to International Equity Fund) by Lazard
Freres Asset Management (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 sections, "Objective and
Policies of Each Fund" and "Portfolio Investments 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.
<PAGE>
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.
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).
INTERNATIONAL EQUITY FUND
TYPES OF INVESTMENTS
International Equity Fund invests in a diversified portfolio composed
primarily of non-U.S. securities. A substantial portion of these
instruments will be equity securities of established companies in
economically developed countries. International Equity Fund Fund will
invest at least 65%, and under normal market conditions, substantially
all of its total assets, in equity securities denominated in foreign
currencies, including European Currency Units, of issuers located in
at least three countries outside of the United States and sponsored or
unsponsored American Depositary Receipts ("ADRs"), Global Depositary
Receipts ("GDRs"), and European Depositary Receipts ("EDRs"),
collectively, "Depositary Receipts." International Equity Fund Fund
may also purchase investment grade fixed income securities and foreign
government securities; enter into forward commitments, repurchase
agreements, and foreign currency transactions; and maintain reserves
in foreign or U.S. money market instruments.
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES
International Equity Fund expects that any restricted securities would
be acquired either from institutional investors who orginally acquired
the securities in private placements or directly from the issuers of
the securities in private placements. Restricted securities and
securities that are not readily marketable may sell at a discount from
the price they would bring if freely marketable.
The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When the International Equity Fund invests in certain restricted
securities determined by the Trustees to be liquid, such investments
could have the effect of increasing the level of International Equity
Fund illiquidity to the extent that the buyers in the secondary market
for such securities (whether in Rule 144A resales or other exempt
transactions) become, for a time, uninterested in purchasing these
securities.
WARRANTS
International Equity Fund may invest in warrants. For a description of these
securities, see "Equity Fund and Opportunity Fund-Warrants."
ADDITIONAL RISK CONSIDERATIONS
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions
which would affect the liquidity of the International Equity Fund's
assets maintained with custodians in foreign countries, as well as the
degree of risk from political acts of foreign governments to which
such assets may be exposed. The Trustees also consider the degree of
risk involved through the holding of portfolio securities in domestic
and foreign securities depositories. However, in the absence of
willful misfeasance, bad faith or gross negligence on the part of the
Adviser, any losses resulting from the holding of the International
Equity Fund's portfolio securities in foreign countries and/or with
securities depositories will be at the risk of shareholders. No
assurance can be given that the Trustees' appraisal of the risks will
always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.
PORTFOLIO TURNOVER
The International Equity Fund will not attempt to set or meet a
portfolio turnover rate since any turnover would be incidental to
transactions undertaken in an attempt to achieve the International
Equity Fund's investment objective. Portfolio securities will be sold
when the Adviser believes it is appropriate, regardless of how long
those securities have been held. The Adviser does not anticipate that
the Fund's portfolio turnover rate will exceed 50%.
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.
<PAGE>
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.
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:
o whether the lease can be terminated by the lessee; o the
potential recovery, if any, from a sale of the leased
property; o upon termination of the lease; o the lessee's
general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects); o the
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");
o any 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.
INVESTMENT POLICIES AND STRATEGIES
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares
of the Funds by hedging all or a portion of their portfolios, and in
the case of put and call options on portfolio securities, to increase
their current income, Equity Fund, Opportunity Fund, International
Equity Fund, Limited Term Fund and Government Income Fund may buy and
sell financial futures and stock index futures contracts, buy and
write put options on portfolio securities and listed put options on
futures contracts, and write and buy call options on portfolio
securities and on futures contracts. 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.
When the Fund sells a put on a futures contract, it receives
a cash premium which can be used in whatever way is deemed
most advantageous to the Fund. In exchange for such premium,
the Fund grants to the purchaser of the put the right to
receive from the Fund, at the strike price, a short position
in such futures contract, even though the strike price upon
exercise of the option is greater than the value of the
futures position received by such holder. If the value of the
underlying futures position is not such that exercise of the
option would be profitable to the option holder, the option
will generally expire without being exercised. The Fund has
no obligation to return premiums paid to it whether or not
the option is exercised. It will generally be the policy of
the Fund, in order to avoid the exercise of an option sold by
it, to cancel its obligation under the option by entering
into a closing purchase transaction, if available, unless it
is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction
consists of the purchase by the Fund of an option having the
same term as the option sold by the Fund, and has the effect
of canceling the Fund's position as a seller. The premium
which the Fund will pay in executing a closing purchase
transaction may be higher than the premium received when the
option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
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.
When the Fund purchases a call on a financial futures
contract, it receives in exchange for the payment of a cash
premium the right, but not the obligation, to enter into the
underlying futures contract at a strike price determined at
the time the call was purchased, regardless of the
comparative market value of such futures position at the time
the option is exercised. The holder of a call option has the
right to receive a long (or buyer's) position in the
underlying futures contract.
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.
<PAGE>
PURCHASING AND WRITING PUT OPTIONS ON PORTFOLIO SECURITIES
The Funds may purchase and write put options on portfolio
securities. The purchase of 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. When the Funds write a put, they
receive a premium and give the purchaser of the put the right
to sell the underlying security to the Funds at the exercise
price at any time during the option period.
WRITING AND PURCHASING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Funds may write and purchase call options. 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). As the purchaser of a call option, the Funds
have the right to purchase common stock at a specific price
(usually at a premium above the market value of the optioned
security at the date the option is issued) valid for a
specified period of time. If the market price of the security
does not exceed the option's exercise price during the life
of the option, the option will expire as worthless. The
percentage increase or decrease in the market price of the
option may tend to be greater than the percentage increase or
decrease of the market price of the optioned security.
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
or Sub-Adviser (with respect to International Equity Fund) 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. 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 and International Equity
Fund, during the current year, the Funds do not anticipate investing
more than 10% of their respective total assets in when-issued and
delayed delivery transactions.
<PAGE>
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 year ended February 28, 1997, the portfolio turnover
rates for Equity Fund, Limited Term Fund, Government Income Fund and
Municipal Income Fund were 7%, 28%, 7% and 9%, respectively. For the
fiscal year ended February 29, 1996, the portfolio turnover rate for
Equity Fund, Limited Term Fund, Government Income Fund and Municipal
Income Fund were 15%, 56%, 87% and 20%, respectively.
INVESTMENT LIMITATIONS
ACQUIRING SECURITIES
International Equity Fund will not acquire more than 10% of
the outstanding voting securities of any one issuer, or acquire any
securities of Deposit Guaranty Corp. or its affiliates.
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short (except as noted
below with respect to International Equity Fund) 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.
International Equity Fund will not sell securities short
unless (1) it owns, or has a right to acquire, an equal
amount of such securities, or (2) it has segregated an amount
of its other assets equal to the lesser of the market value
of the securities sold short or the amount required to
acquire such securities. The segregated amount will not
exceed 10% of the International Equity Fund's net assets.
While in a short position, the International Equity Fund will
retain the securities, rights, or segregated assets.
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 and Government Income Fund will not issue
senior securities, except that they may borrow money directly
or through reverse repurchase agreements in amounts 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.
International Equity Fund will not issue senior securities
except in connection with transactions described in other investment
limitations or as required by forward commitments to purchase
securities or currencies.
International Equity Fund will not borrow money except as a
temporary measure for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of its
total assets, including the amount borrowed. International
Equity Fund will not purchase securities while outstanding
borrowings exceed 5% of the value of its total assets. (This
borrowing provision is not for investment leverage but solely
to facilitate management of the portfolio by enabling
International Equity Fund to meet redemption requests when
the liquidation of portfolio securities would be inconvenient
or disadvantageous. )
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, Equity Fund,
Opportunity Fund and Municipal Income 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.
International Equity Fund will not invest more than 25% of
its total assets in securities of issuers having their principal
business activities in the same industry.
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 will not purchase or sell commodity
contracts or commodity futures contracts.
International Equity Fund will not purchase or sell
commodities or commodity contracts, except that the
International Equity Fund may purchase and sell financial
futures contracts and options on financial futures contracts,
provided that the sum of its initial margin deposits for
financial futures contracts held by the International Equity
Fund, plus premiums paid by it for open options on financial
futures contracts may not exceed 5% of the fair market value
of the International Equity Fund's total assets, after taking
into account the unrealized profits and losses on those
contracts. Further, the International Equity Fund may engage
in foreign currency transactions and purchase or sell forward
contracts with respect to foreign currencies and related
options.
INVESTING IN REAL ESTATE
Equity Fund, Opportunity Fund, Limited Term Fund and
Government Income 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.
International Equity Fund will not invest in real estate,
although it may invest in securities secured by real estate
or interests in real estate or issued by companies, including
real estate investment trusts, which invest in real estate or
interests therein.
INVESTING TO EXERCISE CONTROL
Equity Fund will not purchase securities for the purpose of
exercising control over the issuer of securities.
INVESTING IN MINERALS
International Equity Fund will not invest in interests in
oil, gas, or other mineral exploration or development programs, other
than debentures or equity stock interests.
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 International Equity Fund will not lend
any of their respective assets except portfolio securities
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 or
participate in the marketing of securities of other issuers
(with respect to the International Equity Fund), 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.
International Equity Fund will not mortgage, pledge, or
hypothecate assets, except when necessary for permissible
borrowings. In those cases, it may pledge assets having a
value of 15% of its assets taken at cost. Neither the deposit
of underlying securities or other assets in escrow in
connection with the writing of put or call options or the
purchase of securities on a when-issued basis, nor margin
deposits for the purchase and sale of financial futures
contracts and related options are deemed to be a pledge.
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.
Except as noted, 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.
INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 15% of the value of their
respective net assets in illiquid securities, including
repurchase agreements providing for settlement more than
seven days after notice; over-the-counter options (for those
Funds which are permitted to invest in options); and certain
restricted securities not determined by the Trustees to be
liquid.
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 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. The Funds will invest in other
investment companies primarily for the purpose of investing
their short-term cash on a temporary basis.
ARBITRAGE TRANSACTIONS
Equity Fund, Opportunity Fund and Municipal Income Fund will
not enter into transactions for the purpose of engaging in arbitrage.
INVESTING TO EXERCISE CONTROL
Opportunity Fund and International Equity 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 and International Equity Fund has no present intent
to borrow money or pledge securities in excess of 5% of the value of
its total assets during the coming fiscal 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."
<PAGE>
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 Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh;
Director or Trustee of the Funds.
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; Partner
or Trustee in private real estate ventures in Southwest Florida;
formerly, President, Naples Property Management, Inc. and Northgate
Village Development Corporation; Director or Trustee of the Funds.
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.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
<PAGE>
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, 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.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N
Park Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A.,
Western Region; Director or Trustee of the Funds.
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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.
<PAGE>
Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Former Attorney, Member of Miller, Ament, Henny & Kochuba; 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; 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; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University and U.S.
Space Foundation; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy
and Technology, Federal Emergency Management Advisory Board and Czech
Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning; 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 Company.
<PAGE>
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; Treasurer of some 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 referred to in the list of Trustees and Officers, "Funds" includes
the following investment companies:111 Corcoran Funds; 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 Investment Portfolios; Federated Investment Trust;
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.; 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;
Wesmark Funds; and World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding
shares.
As of June 9, 1997, 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 19,039,344 shares (64.43%) and
Commercial National Bank, acting in various capacities for numerous
accounts, was the owner of record of approximately 6,975,159 shares
(23.60%).
As of June 9, 1997, 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 4,533,888 shares (74.24%) and
Commercial National Bank, acting in various capacities for numerous
accounts, was the owner of record of approximately 410,729 shares
(6.73%).
As of June 9, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of International Equity Fund: Federated
ADM Services was the owner of record of approximately 10 shares
(100%).
As of June 9, 1997, 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 6,923,745 shares (80.31%) and
Commercial National Bank, acting in various capacities for numerous
accounts, was the owner of record of approximately 1,046,262 shares
(12.14%).
As of June 9, 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
accounts was the owner of record of approximately 18,948,257 shares
(70.26%) and Commercial National Bank, acting in various capacities
for numerous accounts, was the owner of record of approximately
6,637,093 shares (24.61%).
As of June 9, 1997, 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
accounts was the owner of record of approximately 4,146,486 shares
(91.02%) and Commercial National Bank, acting in various capacities
for numerous accounts, was the owner of record of approximately
250,837 shares (5.51%).
<PAGE>
TRUSTEES' COMPENSATION
Name , Aggregate
Position With Compensation From
Trust Trust+
John F. Donahue, $0
Chairman and Trustee
Thomas G. Bigley, $1,958
Trustee
John T. Conroy, Jr., $2,155
Trustee
William J. Copeland, $2,155
Trustee
James E. Dowd, $2,155
Trustee
Lawrence D. Ellis, M.D., $1,958
Trustee
Edward L. Flaherty, Jr., $2,155
Trustee
Edward C. Gonzales, $0
President, Treasurer and Trustee
Peter E. Madden, $1,958
Trustee
Gregor F. Meyer, $1,958
Trustee
John E. Murray, Jr., $1,958
Trustee
Wesley W. Posvar, $1,958
Trustee
Marjorie P. Smuts, $1,958
Trustee
+ The aggregate compensation is provided for the Trust which is
currently comprised of eight portfolios. Information is furnished
for the fiscal year ended February 28, 1997, and the seven
portfolios that were effective as of that date.
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 ParkSouth Corporation (the
"Adviser"), a subsidiary of Deposit Guaranty National Bank, a national
banking association founded in 1925 which, in turn, is 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 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 28, 1997, February 29, 1996, and
February 28, 1995, the Adviser earned fees from: Equity Fund of
$3,213,522, $2,568,435 and $1,907,646, respectively, none of which
were waived; Limited Term Fund of $527,974, $572,084 and $642,168,
respectively, of which $175,992, $190,371, and $267,570, respectively,
were voluntarily waived; Government Income Fund of $1,369,096,
$892,734 and $926,421, respectively, of which $228,183, $148,789 and
$231,605, respectively, were voluntarily waived; and Municipal Income
Fund of $279,232, $262,552 and $225,528, respectively, of which
$162,886, $155,258 and $154,111, respectively, were voluntarily
waived. For the fiscal years ended February 28, 1997, 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 $684,142, $441,513 and $131,668, respectively, of
which $115,580, $162,538 and $105,660, respectively, were voluntarily
waived.
SUB-ADVISER TO THE INTERNATIONAL EQUITY FUND
The International Equity Fund's sub-adviser is Lazard Freres
Asset Management (the "Sub-Adviser"), a division of Lazard Freres &
Co. LLC.
Prior to March 1, 1997, the Funds (with the exception of International
Equity Fund) were sub-advised by Commercial National Bank, 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 its sub-advisory services, Commercial National Bank, the Funds
former sub-adviser received annual sub-advisory fees as follows: For
the fiscal year ended February 28, 1997, the previous sub-adviser
collected fees net of any waivers from: Equity Fund of $779,409;
Limited Term Fund of $41,294; Government Income Fund of $310,466;
Opportunity Fund of 29,876; and Municipal Income Fund of $5,098.
For the fiscal years ended February 29, 1996 and February 28, 1995,
the previous sub-adviser earned fees from: Equity Fund of $856,145 and
$635,882, respectively, none of which were waived; Limited Term Fund
of $238,368 and $267,570, all of which were voluntarily waived;
Government Income Fund of $371,923 and $386,009, respectively, all of
which were voluntarily waived; and Municipal Income Fund of $109,397
and $93,970, 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
previous sub-adviser earned fees from Opportunity Fund of $116,188 and
$34,649, respectively, all of which was voluntarily waived.
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 fiscal years
ended February 28, 1997, February 29, 1996, and February 28, 1995,
Equity Fund paid $75,624, $158,777, and $65,931, respectively, in
brokerage commissions on brokerage transactions. For the fiscal years
ended February 28, 1997, February 29, 1996, and the period from August
1, 1994 to February 28, 1995, Opportunity Fund paid $315,139, $161,370
and $36,029, respectively, in brokerage commissions on brokerage
transactions. For the fiscal years ended February 28, 1997, February
29, 1996, and February 28, 1995, Limited Term Fund, Government Income
Fund and Municipal Income Fund paid no 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.
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 28, 1997, February 29, 1996, and February 28, 1995,
administrative services fees were incurred on behalf of Equity Fund of
$467,226, $401,890, and $319,181, none of which were voluntarily
waived; Limited Term Fund of $96,156, $112,018, and $134,312, none of
which were voluntarily waived; Government Income Fund of $248,963,
$174,394, and $193,697, none of which were voluntarily waived; and
Municipal Income Fund of $100,000, $100,000, and $47,162, of which
$49,179, $48,579, and $0, respectively, were voluntarily waived. For
the fiscal years ended February 28, 1997, February 29, 1996, and the
period from August 1, 1994 (date of initial public investment) to
February 28, 1995, administrative services fees of $100,000, $100,000
and $100,000 respectively, were incurred on behalf of Opportunity
Fund, of which $0, $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 Shareholder 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.
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 AND SHAREHOLDER SERVICES PLANS
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 the Funds
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 Funds in pursuing their investment
objectives. By identifying potential investors whose needs are served
by the Funds' 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 28, 1997, the Funds made no
payments pursuant to the Distribution Plan. In addition, for the
fiscal year ended February 28, 1997, Opportunity Fund made no payments
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 (the "Bank"), as well as
Federated Shareholder Services Company, act as the shareholder's agent
in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
The Funds 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. The days on which the net
asset value is calculated by the Funds are described in the
prospectus.
With respect to International Equity Fund, dividend income is recorded
on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as
soon as the Fund is informed of the ex-dividend date.
DETERMINING MARKET VALUE OF SECURITIES
Market value of the portfolio securities for Equity Fund, Opportunity
Fund, International Equity 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 in the market in
which they are primarily traded (either national securities
exchange or the OTC), 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, unless the
Trustees determine that particular circumstances of the security
indicate otherwise; or
o for all other securities, at fair value as determined in good
faith by the Trustees.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider:
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and
other market data. The International Equity Fund will value futures
contracts and options at their market values established by the
exchanges on which they are traded at the close of trading on such
exchanges unless the Trustees determine in good faith that another
method of valuing such investments is necessary. TRADING IN FOREIGN
SECURITIES
With respect to International Equity Fund, trading in foreign
securities may be completed at times which vary from the closing of
the New York Stock Exchange. In computing the net asset value,
International Equity Fund values foreign securities at the latest
closing price on the exchange on which they are traded immediately
prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S.
dollars at current rates. Occasionally, events that affect these
values and exchange rates may occur between the times at which they
are determined and the closing of the New York Stock Exchange. If such
events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good
faith by the Trustees, although the actual calculation may be done by
others.
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.
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 Bank receives 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.
<PAGE>
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.
FOREIGN TAXES
With respect to the International Equity Fund, investment income on
certain foreign securities in which the Fund may invest may be subject
to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign
countries, however, may reduce or eliminate the amount of foreign
taxes to which the Fund would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders of Equity Fund, Opportunity Fund, International Equity
Fund, Limited Term Fund and Government Income 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 International Equity Fund, Limited
Term Fund and Government Income 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
28, 1997, for Equity Fund, Opportunity Fund, Limited Term Fund,
Government Income Fund and Municipal Income Fund were 14.60%, 8.19%,
2.56%, 2.00%, and 2.01%, respectively. For the period from August 3,
1992 (date of initial public investment) to February 28, 1997, the
average annual total returns for Equity Fund, Limited Term Fund and
Government Income Fund were 14.44%, 4.49% and 5.38%, respectively. For
the period from December 21, 1992 (date of initial public investment)
to February 28, 1997, the average annual total return for Municipal
Income Fund was 5.65%. For the period from August 1, 1994 (date of
initial public investment) to February 28, 1997, the average annual
total return for Opportunity Fund was 19.70%. International Equity
Fund had not commenced operations at February 28, 1997.
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 28, 1997, for
Equity Fund, Opportunity Fund, Limited Term Fund, Government Income
Fund and Municipal Income Fund were 0.74%, 0.00%, 4.92%, 5.28% and
4.37%, respectively. International Equity Fund had not commenced
operations at February 28, 1997.
The yield for the Funds 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.
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.
TAX-EQUIVALENT YIELD
Municipal Income Fund's tax-equivalent yield for the thirty-day period
ended February 28, 1997 was 6.33%.
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.
<PAGE>
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 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
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 Fund shares. *
Some portion of the 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, International Equity
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 but are not limited to:
o LIPPER ANALYTICAL SERVICES, INC.(EQUITY FUND, OPPORTUNITY
FUND, INTERNATIONAL EQUITY FUND, LIMITED TERM FUND AND
GOVERNMENT INCOME FUND), ranks funds in various fund
categories by making comparative calculations for
one-month, three-month, one-year, and five-year periods
using total return, and assumes the reinvestment of all
capital gains distributions and income dividends. Total
return assumes the reinvestment of all income dividends
and capital gains distributions, if any. From time to
time, the Equity Fund, International Equity Fund and
Opportunity Fund will quote its Lipper ranking in the
"equity, growth and income, equity, growth equity,
international equity and small company" category in
advertising and sales literature.
o EUROPE, AUSTRALIA, AND FAR EAST (EAFE) INDEX
(INTERNATIONAL EQUITY FUND) is a market capitalization
weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New
Zealand and Far Eastern stock markets. The index covers
approximately 1,020 companies drawn from 18 countries in
the above regions. The index values its securities daily
in both U.S. dollars and local currency and calculates
total returns monthly. EAFE U.S. dollar total return is a
net dividend figure less Luxembourg withholding tax. The
EAFE is monitored by Capital International, S.A., Geneva,
Switzerland.
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. (EQUITY FUND AND 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.
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, thirty-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 6,000
funds available.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended February 28,
1997, are incorporated herein by reference to the Annual Reports of
the Funds dated February 28, 1997 (File Nos. 33-46431 and 811-6607). A
copy of the Funds' Annual Report may be obtained without charge by
contacting the Trust.
<PAGE>
APPENDIX
STANDARD AND POOR'S 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.
STANDARD AND POOR'S COMMERCIAL PAPER RATING DEFINITIONS
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.
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: (1-6) Incorporated
herein by reference to the Trust's Annual
Report dated February 28, 1997 (File Nos.
33-46431 and 811-6607); (7) Incorporated by
reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed August
25, 1997 (File Nos. 33-46431 and 811-6607);
(8) Filed in Supplement to Part A; (9) To
be filed by amendment.
(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.); (vii)
Copy of Specimen Certificate for
Shares of Beneficial Interest of
DG Prime Money Market Fund (12.);
+ 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)
12. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 11 on Form N-1A filed November 15,
1996. (File Nos. 33-46431 and 811-6607)
<PAGE>
(viii) Copy of Specimen Certificate for
Shares of Beneficial Interest of
DG Mid Cap Fund; +
(ix) Copy of Specimen Certificate for
Shares of Beneficial Interest of
DG International Equity Fund
(13.);
(5) Conformed copy of Investment Advisory
Contract of Registrant (13.);
(i) Conformed copy of Exhibit I
to the Investment Advisory
Contract of Registrant to add DG
Mid Cap Fund (15); (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.);
(iii) Conformed copy of
Sub-Advisory Agreement between
ParkSouth Corporation and Lazard
Frere Asset Management (13.);
(iv) Conformed copy of
Sub-Advisory Agreement between
ParkSouth Corporation and Bennett
Lawrence Management, LLC; +
(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.);
+ 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)
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)
13. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed June 20, 1997.
(File Nos. 33-46431 and 811-6607)
15. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 15 on Form N-1A filed August 22,
1997. (File Nos. 33-46431 and 811-6607)
(vii) Conformed copy of Exhibit G
for DG Prime Money Market Fund
(13.); (viii) Conformed copy of
Exhibit H for DG International
Equity Fund (13.); (ix) Conformed
copy of Exhibit I for DG Mid Cap
Fund (14);
(7) Not applicable
(8) Conformed copy of Custodian Agreement of
the Registrant (6.);
(i) Conformed copy of Domestic Custody
Fee Schedule; +
(9) (i) Conformed copy of Transfer Agency
and Service Agreement of
Registrant (6.);
(ii) Conformed copy of Administrative
Services Agreement (7.);
(iii) Conformed copy of Shareholder
Services Agreement (13.);
(iv) Conformed copy of
Shareholder Services Plan (9.);
(v) Conformed copy of Exhibit A
to Shareholder Services Plan
(9.); (vi) Conformed copy of
Exhibits B, C, D, E, F, G, H,
and I to Shareholder Services
Plan (13.);
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered (11.);
(11) Conformed copy of consent of Independent
Auditors; +
(12) Not applicable;
(13) Conformed copy of Initial Capital
Understanding (2.);.
(14) Not applicable;
+ 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)
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)
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);
11. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 10 on Form N-1A filed June 24, 1996.
(File Nos. 33-46431 and 811-6607)
13. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed June 20, 1997.
(File Nos. 33-46431 and 811-6607)
14. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 14 on Form N-1A filed June 26, 1997.
(File Nos. 33-46431 and 811-6607)
<PAGE>
(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.);
(g) Conformed copy of Exhibit G for DG Prime Money
Market Fund (13.);
(h) Conformed copy of Exhibit H for DG
International Equity Fund (13.);
(i) Conformed copy of Exhibit I for DG Mid Cap
Fund (13.);
(ii) Copy of Rule 12b-1 Agreement
of the Registrant (8.); (16) Schedule for
Computation of Fund Performance Data for:
(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.);
(vii) DG Prime Money Market Fund (16.);
(viii) DG International Equity Fund; +
(17) Copy of Financial Data Schedules; +
(18) Conformed copy of Power of Attorney. +
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
None
+ 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)
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)
13. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed June 20, 1997.
(File Nos. 33-46431 and 811-6607)
16. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 16 on Form N-1A filed August 25,
1997. (File Nos. 33-46431 and 811-6607)
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES:
Number of Record Holders
TITLE OF CLASS AS OF OCTOBER 1, 1997
-------------- ----------------------
Shares of beneficial interest
(no par value)
DG Treasury Money Market Fund (formerly,
DG U.S. Government Money Market Fund) 89
DG Limited Term Government
Income Fund 146
DG Government Income Fund 171
DG Equity Fund 2,449
DG Municipal Income Fund 94
DG Opportunity Fund 719
DG Prime Money Market Fund 9
DG International Equity Fund 26
DG Mid Cap Fund............................. 1
Item 27. INDEMNIFICATION: (4)
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
(a) ParkSouth Corporation is a registered
investment adviser providing investment
management services to individuals and
institutional clients. ParkSouth Corporation
is a subsidiary of Deposit Guaranty National
Bank, a national banking association formed
in 1925, which, in turn, 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.
ParkSouth Corporation manages, in addition to
the Funds in the DG Investor Series, $630
million in common trust fund assets as of
December 31, 1996. ParkSouth Corporation
(which suceeded to the investment advisory
business of Deposit Guaranty National Bank in
1997) or Deposit Guaranty National Bank have
served as the Trust's investment adviser
since May 5, 1992.
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)
<PAGE>
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.
<TABLE>
<CAPTION>
Other Substantial
Position With Business,Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
<S> <C> <C>
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
</TABLE>
(b) Lazard Freres Asset Management, a division of
Lazard Freres & Co. LLC, a New York limited
liability company, which is registered as an
investment adviser with the Securities and
Exchange Commission and is a member of the New
York, American and Midwest Stock Exchanges.
Lazard Freres Asset Management provides
investment management services to client
discretionary accounts with assets totalling
approximately $38.1 billion as of December 31,
1996. Lazard Freres Asset Management serves as
Sub-Adviser to DG International Equity Fund.
Lazard Freres Asset Management is managed by members
who are referred to as Managing Directors and are
as follows: Norman Eig; Herbert W. Gullquist;
Thomas F. Dunn; Robert P. Morgenthau; John R.
Reese; John R. Reinsberg; Michael S. Rome;
Alexander E. Zagoreos; Larry Kohn; and Eileen
Alexanderson.
<PAGE>
(c) Bennett Lawrence Management, LLC, a New York
limited liability company, which is registered
as an investment adviser with the Securities and
Exchange Commission. Bennett Lawrence
Management, LLC provides investment management
services to client discretionary accounts with
assets totalling approximately $634 million as
of December 31, 1996. Bennett Lawrence
Management, LLC serves as Sub-Adviser to DG Mid
Cap Fund.
Bennett Lawrence Management, LLC is managed by S.
Van Zandt Schreiber, Managing Member and
Chief Portfolio Manager, Robert W. Deaton,
Member and Associate Portfolio Manager,
Brendan J. Contant, Member and Marketing
Director and Jane H. Fisher, Member and
Operations Director.
(d) Womack Asset Management, Inc. is registered as
an investment adviser with the Securities and
Exchange Commission. Womack Asset Management,
Inc. provides investment management services to
client discretionary accounts with assets
totaling approximately $106.7 million as of
August 31, 1997. Womack Asset Management, Inc.
serves as Sub-Adviser to DG Opportunity Fund.
Womack Asset Management, Inc. is managed by William A.
Womack, President and Director.
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
111 Corcoran Funds; 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 Investment Portfolios;
Federated Investment Trust; 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.; 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
Obligations Trust II; 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 Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal
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.;
and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust, Inc.-
1999.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
<S> <C> <C>
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 Vice President,
Federated Investors Tower President, Federated, Treasurer, and
Pittsburgh, PA 15222-3779 Securities Corp. Trustee
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
Laura M. Deger 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
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
Teresa M. Antoszyk 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
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
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 Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle 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
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher 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
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
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
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III 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
Richard A. Recker 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
George D. Riedel 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 Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith 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
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
John A. Staley 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
Richard Suder 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
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin 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
Edward J. Wojnarowski 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
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant 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
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
</TABLE>
<PAGE>
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 through 31a-3 promulgated
thereunder are maintained at one of the following
locations:
DG Investor Series Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder 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
ParkSouth Corporation P.O. Box 1200
Adviser Jackson,MS 39215-1200
Lazard Freres Asset Management 30 Rockefeller Plaza
Sub-Adviser to DG International New York, NY 10020
Equity Fund only
Bennett Lawrence Management, LLC 757 Third Avenue, 19th Floor
Sub-Adviser to DG Mid Cap New York, NY 10017
Fund only
Womack Asset Management, Inc. 2120 Deposit Guaranty Plaza
Sub-Adviser to DG Opportunity Jackson, MS 39201
Fund only
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 is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to file a
post-effective amendment on behalf of DG Mid Cap
Fund, using financial statments for DG Mid Cap Fund,
which need not be certified, within four to six
months from the effective date of Post-Effective
Amendment No. 13.
<PAGE>
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 29th day of
October, 1997.
DG INVESTOR SERIES
BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
October 29, 1997
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 October 29, 1997
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
* By Power of Attorney
Exhibit 4(viii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K
DG INVESTOR SERIES
DG MID CAP FUND
Number Shares
- ----- -----
Account No. Alpha Code Organized Under See Reverse Side For
the Laws of the Certain Definitions
Commonwealth of
Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP 23321N889
Fully Paid and Non-Assessable Shares of beneficial interest of the DG
MID CAP FUND Portfolio of DG INVESTOR SERIES hereafter called the
"Trust," transferable on the books of the Trust by the owner, in
person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed.
The shares represented hereby are issued and shall be held
subject to the provisions of the Declaration of Trust and By-Laws of
the Trust, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the
Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to
be signed in its name by its proper officers and to be sealed with its
Seal.
Dated: DG INVESTOR SERIES
Trust Seal
(1992)
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
President & Treasurer Chairman
Countersigned: Federated Shareholder
Services Company
(Pittsburgh) Transfer Agent
By:
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written
out in full according to applicable laws or regulations; TEN COM - as
tenants in common UNIF GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act
in common (State)
Additional abbreviations may also be used though not in the
above list.
For value received__________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
- --------------------------------------
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
______________________________________________________________________ shares
of beneficial interest represented by the within Certificate, and
do hereby irrevocably constitute and appoint
__________________________________________
___________________________________________________________________
Attorney to transfer the said shares on the books of the within named
Trust with full power of substitution in the premises.
Dated______________________
NOTICE:_________________
The signature to
this assignment
must correspond
with the name as
written upon the
face of the
certificate in
every particular,
without
alteration or
enlargement or
any change
whatever.
All persons dealing with DG Investor Series, A Massachusetts Business
Trust, must look solely to the Trust Property for the enforcement of
any claim against the Trust as the trustees, officers, agents or
shareholders of the Trust assume no personal liability whatsoever for
obligations entered into on behalf of the Trust.
This space must not be covered in any way
<PAGE>
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
PAGE ONE
A. The Certificate is outlined by an Purple one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Massachusetts Trust seal appears in the bottom middle of the
page.
PAGE TWO
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 5(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
DG INVESTOR SERIES
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made between ParkSouth Corporation, a
Mississippi corporation (hereinafter referred to as "Adviser") and
Bennett Lawrence Management, LLC, a New York limited liability company
(hereinafter referred to as the "Sub-Adviser").
WITNESSETH
That the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Adviser in its capacity as investment adviser to DG
Mid-Cap Fund (the "Fund"), a portfolio of DG Investor Series
("Trust"), under the Investment Advisory Contract dated as of March
31, 1997, appoints the Sub-Adviser as a discretionary investment
sub-adviser to the Fund pursuant to the terms set forth in this
Agreement.
2. (a) The Sub-Adviser will deal in good faith and with due
diligence and will use professional skill, care and judgment in the
performance of its duties under this Agreement. In so doing, the
Sub-Adviser shall formulate and implement a continuing program for the
management of the assets of the Fund. The Sub-Adviser shall amend and
update such program from time to time as financial and other economic
conditions warrant. The Sub-Adviser shall make all determinations with
respect to the investment of the assets of the Fund and shall take
such steps as may be necessary to implement the same, including the
placement of purchase and sale orders on behalf of the Fund; PROVIDED,
HOWEVER, that any assets of the Fund that the Sub-Adviser has
determined are to be held in cash and cash equivalents shall be
managed by the Adviser. The Adviser shall be responsible for the
administration of the investment activities of the Fund, including
compliance with the requirements of the Investment Company Act of
1940, except for the investment management activities specifically
delegated to the Sub-Adviser pursuant to this Agreement. The
Sub-Adviser's activities hereunder shall comply with: (i) the
Declaration and By-Laws of the Trust; (ii) the Registration Statement
of the Trust, as it may be amended from time to time, including the
investment objectives and policies set forth therein; (iii) the
Investment Company Act of 1940 and the Investment Advisers Act of 1940
and the regulations thereunder; (iv) the Internal Revenue Code and the
regulations thereunder applicable to regulated investment companies;
(v) any other applicable laws or regulations; and (vi) such other
limitations as the Adviser or the Board of Trustees of the Trust may
adopt.
(b) The Sub-Adviser will adopt or has adopted a
written code of ethics complying with the requirements of Rule 17j-1
under the Investment Company Act of 1940, will provide the Adviser
with a copy of the code of ethics and evidence of its adoption, and
will make such reports to the Trust or other persons as required by
Rule 17j-1. The Sub-Adviser will also adopt or has adopted policies
and procedures sufficient to enable the Sub-Adviser to detect and
prevent the misuse of material, nonpublic information by the
Sub-Adviser or any person associated with the Sub-Adviser, in
compliance with federal and state securities laws.
(c) The Sub-Adviser will prepare, maintain, keep
current and preserve on behalf of the Trust and the Adviser all
records concerning the Sub-Adviser's activities in connection with the
Fund that the Fund is required by law to maintain, including, but not
limited to, records required under paragraphs (b)(5), (b)(6), (b)(9),
(b)(10), and (f) of rule 31a-1 under the Investment Company Act. Any
records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 under the Investment Company
Act of 1940 that are prepared by the Sub-Adviser on behalf of the Fund
are the property of the Fund and will be surrendered promptly on
request to the Fund or any person acting on behalf of the Trust during
the term of this Agreement and at any time after the termination of
this Agreement; provided, however, that the Sub-Adviser has the right
to make and retain copies. The Sub-Adviser will comply with all
reasonable requests for information by the Adviser or the Trust's
officers or Board of Trustees, including information required for the
Fund's filings with the Securities and Exchange Commission and state
securities commissions.
(d) The Sub-Adviser will promptly after filing with the
Securities and Exchange Commission an amendment to its Form ADV furnish a copy
of such amendment to the Trust and the Adviser.
(e) The Sub-Adviser will immediately notify the
Adviser of the occurrence of any event which would disqualify the
Sub-Adviser from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the Investment Company Act of 1940
or otherwise.
3. (a) The Sub-Adviser's power to direct the investment and
reinvestment of the assets of the Fund shall be exercised in
accordance with applicable law, the Fund's governing documents and the
investment objectives, policies and restrictions set forth in the
then-current Prospectus and Statement of Additional Information
(collectively the "Prospectus") relating to the Fund contained in the
Trust's Registration Statement under the Investment Company Act of
1940 and the Securities Act of 1933, as amended. The Adviser may also
place additional limitations on the Sub-Adviser's investment decisions
by written notice to the Sub-Adviser. The Adviser agrees to provide
promptly, or cause to be provided promptly, to the Sub-Adviser a copy
of the documents mentioned above and all changes made to such
documents.
(b) While the Sub-Adviser will have day-to-day
responsibility for the discretionary investment decisions to be made
on behalf of the Fund, the Sub-Adviser will be subject to oversight by
the Adviser. Such oversight, however, shall not require prior approval
of discretionary investment decisions made by the Sub-Adviser by the
Adviser pursuant to the preceding sentence.
(c) The Trust retains the right, on reasonable prior
written notice to the Adviser and the Sub-Adviser, to amend the Fund's
investment objectives, policies and restrictions placed on the
Sub-Adviser's investment decisions. Similarly, the Adviser retains the
right, on reasonable prior written notice to the Sub-Adviser, to amend
any additional limitations, if any, that have been placed on the
Sub-Adviser's investment decisions with respect to the Fund. Upon
receipt of such prior notice from either the Trust or the Adviser, the
Sub-Adviser will promptly notify both the Fund and the Adviser if
adoption of such amendment would interfere with the completion of any
transaction commenced on behalf of the Fund prior to the Sub-Adviser's
receipt of the notice. In the event that the Trust or the Adviser
proceeds to amend the Fund's investment objectives, policies and
restrictions or any additional limitations after being notified by the
Sub-Adviser of the pending transaction commenced on behalf of the
Fund, or in the event that the Trust or the Adviser amends the Fund's
investment objectives, policies and restrictions or any additional
limitations without providing reasonable prior notice to the
Sub-Adviser, the Sub-Adviser may complete such transaction unless
doing so would violate any applicable law, rule or regulation. In such
an event, the Sub-Adviser will not be responsible for any loss that
may result from the completion of the transaction.
(d) Except as may be qualified elsewhere in this
Agreement, the Sub-Adviser is hereby authorized, for and on behalf of the Fund,
in its discretion, to:
(i) exercise any conversion and/or
subscription rights available in connection with any securities or
other investments held in the Fund;
(ii) maintain all or part of the Fund's assets
uninvested in short-term income-producing instruments for such periods of time
as shall be deemed reasonable and prudent by the Sub-Adviser;
(iii) instruct the Custodian, to deliver for cash
received, securities or other cash and/or securities instruments sold,
exchanged, redeemed or otherwise disposed of from the Fund, and to pay
cash for securities or other cash and/or securities instruments
delivered to the Custodian and/or credited to the Fund upon
acquisition of the same for the Fund;
(iv) determine how to vote all proxies received
with respect to securities held in the Fund and direct the Custodian as to the
voting of such proxies; and
(v) generally, perform any other act
necessary to enable the Sub-Adviser to carry out its obligations under
the Agreement.
4. (a) The Sub-Adviser shall select the brokers and dealers
through which transactions on behalf of the Fund will be executed and
the markets on or in which such transactions will be executed. The
Sub-Adviser shall place, in the name of the Fund or its nominee (or
appropriate foreign equivalent), all such orders for the purchase or
sale or of securities due to or forth below and in accordance with
such operational procedures as may be agreed to from time to time by
the Adviser and the Sub-Adviser.
(b) In placing orders with brokers and/or dealers,
the Sub-Adviser shall use its best efforts to obtain the best net
price and the most favorable execution of its orders, after taking
into account all factors it deems relevant, including the breadth of
the market in the security, the price of the security, the financial
condition and execution capability of the broker and/or dealer, and
the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities using brokers that provide
brokerage and research services (within the meaning of Section 28(e)
of the Securities and Exchange Act of 1934) to or for the benefit of
the Fund and/or other accounts over which the Sub-Adviser or the
Adviser exercises investment discretion. The Sub-Adviser is authorized
to pay a broker that provides such brokerage and research services a
commission for effecting a securities transaction which is in excess
of the amount of commission another broker would have charged for
effecting that transaction, if the Sub-Adviser determines in good
faith that such commission was reasonable in relation to the value of
brokerage and research services provided by such broker. This
determination may be viewed in terms of either that particular
transaction or of the overall responsibilities of the Sub-Adviser with
respect to the accounts as to which it exercises investment
discretion.
(c) Notwithstanding for foregoing, the Board of
Trustees and the Adviser periodically shall review the commissions
paid by the Fund and determine whether those commissions were
reasonable in relation to the brokerage and research services
received.
5. It is understood that certain other clients (including
other funds, portfolios and accounts) of the Sub-Adviser may have
investment objectives and policies similar to those of the Fund and
that the Sub-Adviser may, from time to time, make recommendations that
result in the purchase (or sale) or a particular security by its other
clients and the Fund during the same period of time. If transactions
on behalf of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. In
such event, the Sub-Adviser shall allocate the securities or
investments to be purchased or sold, as well as the expense incurred
in the transactions (including price) in a manner the Sub-Adviser
considers equitable and consistent with its obligations to the Fund
and the Sub-Adviser's other clients.
6. The Sub-Adviser agrees that it will only enter into
transactions that are covered by Section 10(f) or Section 17(e) of the
Investment Company Act of 1940 if it has (i) complied with Rule 10f-3
or Rule 17e-1 thereunder, respectively, or the terms of an appropriate
exemptive order issued to the Fund by the SEC, and (ii) has complied
with the procedures adopted thereunder by the Board of Trustees of the
Trust, which may, pursuant to authority granted by the Trust, be
supplemented by interpretive guidelines of the Adviser. Aside from
parties that are known or should be known by the Sub-Adviser, the
Adviser shall promptly notify the Sub-Adviser of any additional
parties with whom engaging in a transaction for the Fund would result
in a violation of the Investment Company Act of 1940.
7. For its services under this Agreement, Sub-Adviser shall
receive from Adviser an annual fee ("the Sub-Advisory Fee"), as set forth in
Exhibit A hereto.
8. This Agreement shall take effect on the date that the
parties execute the exhibit to this Agreement relating to such Fund
and shall continue in effect for the Fund for two years from the date
of its execution and from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions
hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Agreement or interested persons of any such party (other than as
Trustees of the Trust) cast in person at a meeting called for that
purpose; and (b) the Adviser shall not have notified the Trust in
writing at least sixty (60) days prior to the anniversary date of this
Agreement in any year thereafter that it does not desire such
continuation with respect to the Fund.
9. Notwithstanding any provision in this Agreement, it may be
terminated at any time without the payment of any penalty: (a) by the
Trustees of the Trust or by a vote of a majority of the outstanding
voting securities (as defined in Section 2(a)(42) of the Act) of the
Fund on sixty (60) days' written notice to the Adviser; (b) by the
Sub-Adviser or the Adviser upon sixty (60) days' written notice to the
other party to the Agreement. Termination of this Agreement will not
affect (i) the validity of any action previously taken by the Adviser
or the Sub-Adviser under this Agreement or (ii) liabilities or
obligations of the parties from transactions initiated before
termination of this Agreement.
10. This Agreement shall automatically terminate:
(a) in the event of its assignment (as defined in the
Investment Company Act of 1940); or
(b) in the event of termination of the Investment
Advisory Contract for any reason whatsoever.
11. So long as both the Adviser and the Sub-Adviser shall be
legally qualified to act as an investment adviser, neither the Adviser
nor the Sub-Adviser shall act as an investment adviser (as such term
is defined in the Investment Company Act of 1940) to the Fund except
as provided herein and in the Investment Advisory Contract or in such
other manner as may be expressly agreed between the Adviser and the
Sub-Adviser.
Provided, however, that if the Adviser or Sub-Adviser shall
resign prior to the end of any term of this Agreement or for any
reason by unable or unwilling to serve for a successive term which has
been approved by the Trustees of the Trust pursuant to the provisions
of Paragraph 8 of this Agreement or Paragraph 6 of the Investment
Advisory Contract, the remaining party, the Sub-Adviser or the
Adviser, as the case may be, shall not be prohibited from serving as
an investment adviser to such Fund by reason of the provisions of this
Paragraph 11.
12. This Agreement may be amended from time to time by
agreement of the parties hereto provided that such amendment shall be
approved both by the vote of a majority of Trustees of the Trust,
including a majority of Trustees who are not parties to this Agreement
or interested persons, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, of any such party at a meeting called
for that purpose, and, where required by Section 15(a)(2) of the
Investment Company Act of 1940, by the holders of a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the
Investment Company Act of 1940) of the Fund.
<PAGE>
13. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania without giving effect to the
choice of law previsions thereof, to the extent that such laws are
consistent with provisions of the Investment Company Act of 1940 and
the regulations thereunder. The failure of either party to insist, in
one or more instances, upon strict performance of the obligations of
this Agreement, or to exercise any rights contained herein, shall not
be construed as a waiver, or relinquishment for the future of such
obligation or right, which shall remain and continue in full force and
effect. Should any part of this Agreement be held or made invalid by a
court decision, statute, regulation, or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
<PAGE>
EXHIBIT A
DG INVESTOR SERIES
DG MID-CAP FUND
Sub-Advisory Agreement
For all services rendered by Sub-Adviser hereunder, the
Adviser shall pay the Sub-Adviser a Sub-Advisory Fee based on the
average daily net assets of the Fund, as follows:
FUND ASSETS ANNUAL RATE
Any assets up to and including $5 million 0.75%
Any assets over $5 million up to and including $10 million 0.65%
Any assets over $10 million 0.55%
The Sub-Advisory Fee shall be calculated by the Adviser and shall be
accrued daily, and paid quarterly in arrears, as set forth in the
Investment Advisory Contract dated March 31, 1997.
This Exhibit incorporates by reference the Sub-Advisory
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Exhibit to be executed on their behalf by their duly authorized
officers, and their corporate seals to be affixed hereto this 6th day
of August, 1997.
ATTEST: ParkSouth Corporation
/S/J. CLIFFORD HARRISON By: /S/RAYMOND F. THOMPSON, JR.
Secretary Chief Executive Officer
Bennett Lawrence Management, LLC
/S/KELLY MARIE HORAN By: /S/ VAN SCHREIBER
Name: Kelly Marie Horan Managing Member
Title: Director of Administration
Exhibit 8(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
FEDERATED FUNDS
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases
and sales. Report buy and sell fails. Determine and
collect portfolio income. Make cash disbursements and
report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
Per Fund 25 Basis Points
Wire Fees $3.00 per wire
Settlements:
oEach DTC Transaction $5.00
oEach Federal Reserve Book Entry Transaction $3.75
oEach Repo Transaction (All Repo) $3.75
oEach Physical Transaction (NY/Boston, Private Placement) $15.00
oEach Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
oGovernment Paydowns $5.00
oMaturity Collections $8.00
oPTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund
consolidation or reorganization, extraordinary security shipments and
the preparation of special reports will be subject to negotiation.
III. Balance Credit
MUNICIPAL FUNDS
A balance credit equal to 75% of the average demand
deposit account balance in the custodian account for
the month billed times the 30 day T-Bill Rate on the
last Monday of the month billed, will be applied
against the month's custodian bill.
TRANSFER AGENT
A balance credit equal to 100% of the average balance in the
transfer agent demand deposit accounts, less the reserve requirement
and applicable related expenses, times 75% of the 30 average Fed Funds
Rate.
IV. Payment
The above fees will be charged against the funds' custodian
checking account thirty (30) days after the invoice is mailed to the
funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become
effective January 1, 1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /S/ DOUGLAS L. HEIN BY: /S/ MICHAEL E. HAGERTY
TITLE: SENIOR VICE PRESIDENT TITLE: VICE PRESIDENT
DATE: APRIL 15, 1997 DATE: APRIL 8, 1997
--------------------------------- -------------
Exhibit 16(viii) under Form N-1A
Exhibit 16(viii) under Form N-1A
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
DG INTERNATIONAL Price/
EQUITY FUND Share= $10.00
Return Since Inception
ending 8/31/97 NAV= $10.00
<TABLE>
<CAPTION>
FYE: February 28
Begin Capital Reinvest Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares Price Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100.000 100.000 $9.68 $968.00
100.000 100.000 $0.00
100.000 100.000 $0.00
$1,000 (1+T) = End Value
T = -3.20%
</TABLE>
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. 18 to the
Registration Statement (No. 33-46431) on Form N-1A of the DG Investor
Series, we consent to the use of our report dated April 11, 1997, on
the financial statements of the funds listed below, incorporated by
reference, 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.
o DG Equity Fund
o DG Opportunity Fund
o DG Limited Term Government Income Fund
o DG Government Income Fund
o DG Municipal Income Fund
o DG U.S. Government Money Market Fund
By: KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 28, 1997
Exhibit 18 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints the Secretary and Assistant Secretary of DG INVESTOR
SERIES
___ and the Deputy General Counsel of Federated Services Company, and
each of them, their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for them and in their
names, place and stead, in any and all capacities, to sign any and all
documents to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, the Securities Exchange Act of
1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each
and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as each of
them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
SIGNATURES TITLE DATE
/S/ JOHN F. DONAHUE Chairman and Trustee October 2, 1997
John F. Donahue (Chief Executive Officer)
/S/ EDWARD C. GONZALES President and Treasurer October 2, 1997
- ------------------------------
EDWARD C. GONZALES and Trustee
- ------------------
(Principal Financial
and Accounting Officer)
/S/ THOMAS G. BIGLEY Trustee October 2, 1997
- ------------------------------
Thomas G. Bigley
/S/ JOHN T. CONROY, JR. Trustee October 2, 1997
- ------------------------------
John T. Conroy, Jr.
/S/ WILLIAM J. COPELAND Trustee October 2, 1997
- ------------------------------
William J. Copeland
<PAGE>
SIGNATURES TITLE DATE
/S/ JAMES E. DOWD Trustee October 2, 1997
- ------------------------------
James E. Dowd
/S/ LAWRENCE D. ELLIS, M.D. Trustee October 2, 1997
Lawrence D. Ellis, M.D.
/S/ EDWARD L. FLAHERTY, JR. Trustee October 2, 1997
- ------------------------------
Edward L. Flaherty, Jr.
/S/ PETER E. MADDEN Trustee October 2, 1997
- ------------------------------
Peter E. Madden
/S/ GREGOR F. MEYER Trustee October 2, 1997
- ------------------------------
Gregor F. Meyer
/S/ JOHN E. MURRAY, JR. Trustee October 2, 1997
- ------------------------------
John E. Murray, Jr.
/S/ WESLEY W. POSVAR Trustee October 2, 1997
- ------------------------------
Wesley W. Posvar
/S/ MARJORIE P. SMUTS Trustee October 2, 1997
- ------------------------------
Marjorie P. Smuts
Sworn to and subscribed before me this 2ND day of October, 1997
----------------------------
/S/ MARIE M. HAMM
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
<TABLE> <S> <C>
<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-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 273,622,132
<INVESTMENTS-AT-VALUE> 273,622,132
<RECEIVABLES> 765,275
<ASSETS-OTHER> 2,418
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 274,389,825
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 936,899
<TOTAL-LIABILITIES> 936,899
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 273,452,926
<SHARES-COMMON-STOCK> 273,452,926
<SHARES-COMMON-PRIOR> 245,647,230
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 273,452,926
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,924,422
<OTHER-INCOME> 0
<EXPENSES-NET> 1,141,023
<NET-INVESTMENT-INCOME> 10,783,399
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,783,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,783,399
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 550,619,637
<NUMBER-OF-SHARES-REDEEMED> 522,981,171
<SHARES-REINVESTED> 167,230
<NET-CHANGE-IN-ASSETS> 27,805,696
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,138,567
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,596,450
<AVERAGE-NET-ASSETS> 227,713,430
<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> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<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-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 83,281,477
<INVESTMENTS-AT-VALUE> 83,351,823
<RECEIVABLES> 1,070,531
<ASSETS-OTHER> 473
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,422,827
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,400
<TOTAL-LIABILITIES> 37,400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,809,218
<SHARES-COMMON-STOCK> 8,689,448
<SHARES-COMMON-PRIOR> 9,513,347
<ACCUMULATED-NII-CURRENT> 35,553
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,529,690)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 70,346
<NET-ASSETS> 84,385,427
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,339,716
<OTHER-INCOME> 0
<EXPENSES-NET> 597,447
<NET-INVESTMENT-INCOME> 4,742,269
<REALIZED-GAINS-CURRENT> (1,008,150)
<APPREC-INCREASE-CURRENT> 293,452
<NET-CHANGE-FROM-OPS> 4,027,571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,818,533
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,953,124
<NUMBER-OF-SHARES-REDEEMED> 3,986,837
<SHARES-REINVESTED> 209,814
<NET-CHANGE-IN-ASSETS> (8,890,184)
<ACCUMULATED-NII-PRIOR> 56,525
<ACCUMULATED-GAINS-PRIOR> (2,466,248)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 527,974
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 773,439
<AVERAGE-NET-ASSETS> 87,995,684
<PER-SHARE-NAV-BEGIN> 9.800
<PER-SHARE-NII> 0.520
<PER-SHARE-GAIN-APPREC> (0.080)
<PER-SHARE-DIVIDEND> 0.530
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.710
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> DG Investor Series
DG Government Income Fund
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 248,234,740
<INVESTMENTS-AT-VALUE> 246,891,671
<RECEIVABLES> 2,806,284
<ASSETS-OTHER> 3,766
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 249,701,721
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83,279
<TOTAL-LIABILITIES> 83,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 252,978,362
<SHARES-COMMON-STOCK> 25,761,234
<SHARES-COMMON-PRIOR> 18,659,694
<ACCUMULATED-NII-CURRENT> 45,794
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,062,645)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,343,069)
<NET-ASSETS> 249,618,442
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,877,668
<OTHER-INCOME> 0
<EXPENSES-NET> 1,606,237
<NET-INVESTMENT-INCOME> 13,271,431
<REALIZED-GAINS-CURRENT> (1,412,964)
<APPREC-INCREASE-CURRENT> (2,801,515)
<NET-CHANGE-FROM-OPS> 9,056,952
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,349,136
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,623,519
<NUMBER-OF-SHARES-REDEEMED> 5,043,232
<SHARES-REINVESTED> 521,253
<NET-CHANGE-IN-ASSETS> 65,392,336
<ACCUMULATED-NII-PRIOR> 62,896
<ACCUMULATED-GAINS-PRIOR> (589,078)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,369,096
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,834,420
<AVERAGE-NET-ASSETS> 226,453,311
<PER-SHARE-NAV-BEGIN> 9.870
<PER-SHARE-NII> 0.570
<PER-SHARE-GAIN-APPREC> (0.180)
<PER-SHARE-DIVIDEND> 0.570
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.690
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> DG Investor Series
DG Equity Fund
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 318,427,891
<INVESTMENTS-AT-VALUE> 489,693,047
<RECEIVABLES> 838,410
<ASSETS-OTHER> 5,706
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 490,537,163
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145,262
<TOTAL-LIABILITIES> 145,262
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 318,556,876
<SHARES-COMMON-STOCK> 29,394,313
<SHARES-COMMON-PRIOR> 26,583,091
<ACCUMULATED-NII-CURRENT> 553,985
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,884
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 171,265,156
<NET-ASSETS> 490,391,901
<DIVIDEND-INCOME> 6,283,804
<INTEREST-INCOME> 1,755,374
<OTHER-INCOME> 0
<EXPENSES-NET> 3,956,052
<NET-INVESTMENT-INCOME> 4,083,126
<REALIZED-GAINS-CURRENT> 10,108,185
<APPREC-INCREASE-CURRENT> 63,747,215
<NET-CHANGE-FROM-OPS> 77,938,526
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,964,723
<DISTRIBUTIONS-OF-GAINS> 10,093,485
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,852,631
<NUMBER-OF-SHARES-REDEEMED> 4,578,933
<SHARES-REINVESTED> 537,524
<NET-CHANGE-IN-ASSETS> 105,246,864
<ACCUMULATED-NII-PRIOR> 435,582
<ACCUMULATED-GAINS-PRIOR> 1,184
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,213,522
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,956,052
<AVERAGE-NET-ASSETS> 428,699,511
<PER-SHARE-NAV-BEGIN> 14.490
<PER-SHARE-NII> 0.140
<PER-SHARE-GAIN-APPREC> 2.540
<PER-SHARE-DIVIDEND> 0.140
<PER-SHARE-DISTRIBUTIONS> 0.350
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.680
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> DG Investor Series
DG Municipal Income Fund
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 44,233,362
<INVESTMENTS-AT-VALUE> 45,420,088
<RECEIVABLES> 1,653,371
<ASSETS-OTHER> 435
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47,073,894
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145,968
<TOTAL-LIABILITIES> 145,968
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,525,103
<SHARES-COMMON-STOCK> 4,433,345
<SHARES-COMMON-PRIOR> 4,182,389
<ACCUMULATED-NII-CURRENT> 111,120
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,977
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,186,726
<NET-ASSETS> 46,927,926
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,508,540
<OTHER-INCOME> 0
<EXPENSES-NET> 325,414
<NET-INVESTMENT-INCOME> 2,183,126
<REALIZED-GAINS-CURRENT> 116,120
<APPREC-INCREASE-CURRENT> (430,640)
<NET-CHANGE-FROM-OPS> 1,868,597
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,140,424
<DISTRIBUTIONS-OF-GAINS> 47,122
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,331,086
<NUMBER-OF-SHARES-REDEEMED> 1,083,418
<SHARES-REINVESTED> 3,288
<NET-CHANGE-IN-ASSETS> 2,349,602
<ACCUMULATED-NII-PRIOR> 68,418
<ACCUMULATED-GAINS-PRIOR> 35,979
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 279,232
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 537,479
<AVERAGE-NET-ASSETS> 46,538,898
<PER-SHARE-NAV-BEGIN> 10.660
<PER-SHARE-NII> 0.490
<PER-SHARE-GAIN-APPREC> (0.070)
<PER-SHARE-DIVIDEND> 0.480
<PER-SHARE-DISTRIBUTIONS> 0.010
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.590
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> DG Investor Series
DG Opportunity Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-END> Feb-28-1997
<INVESTMENTS-AT-COST> 70,805,933
<INVESTMENTS-AT-VALUE> 80,520,538
<RECEIVABLES> 42,145
<ASSETS-OTHER> 1,271
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80,563,954
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,806
<TOTAL-LIABILITIES> 36,806
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,063,479
<SHARES-COMMON-STOCK> 5,951,609
<SHARES-COMMON-PRIOR> 4,181,974
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (250,936)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,714,605
<NET-ASSETS> 80,527,148
<DIVIDEND-INCOME> 234,802
<INTEREST-INCOME> 418,540
<OTHER-INCOME> 0
<EXPENSES-NET> 822,736
<NET-INVESTMENT-INCOME> (169,394)
<REALIZED-GAINS-CURRENT> 5,530,831
<APPREC-INCREASE-CURRENT> 1,007,879
<NET-CHANGE-FROM-OPS> 6,369,316
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,464,715
<NUMBER-OF-SHARES-REDEEMED> 929,615
<SHARES-REINVESTED> 234,535
<NET-CHANGE-IN-ASSETS> 27,049,823
<ACCUMULATED-NII-PRIOR> 239
<ACCUMULATED-GAINS-PRIOR> (1,058,345)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 684,142
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 938,316
<AVERAGE-NET-ASSETS> 72,014,945
<PER-SHARE-NAV-BEGIN> 12.790
<PER-SHARE-NII> (0.040)
<PER-SHARE-GAIN-APPREC> 1.610
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.830
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.530
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> DG Investors Series
DG Prime Money Market Fund
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<INVESTMENTS-AT-COST> 164,418,381
<INVESTMENTS-AT-VALUE> 164,418,381
<RECEIVABLES> 147,861
<ASSETS-OTHER> 84
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 164,566,326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 802,860
<TOTAL-LIABILITIES> 802,860
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 163,763,466
<SHARES-COMMON-STOCK> 163,763,466
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 163,763,466
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,561,615
<OTHER-INCOME> 0
<EXPENSES-NET> 315,541
<NET-INVESTMENT-INCOME> 2,246,074
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,246,074
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,246,074
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 225,989,469
<NUMBER-OF-SHARES-REDEEMED> 63,813,245
<SHARES-REINVESTED> 1,587,242
<NET-CHANGE-IN-ASSETS> 163,763,466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 227,862
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 432,233
<AVERAGE-NET-ASSETS> 148,517,187
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.020
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> DG Investor Series
DG International Equity Fund
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 11,177,576
<INVESTMENTS-AT-VALUE> 10,765,836
<RECEIVABLES> 34,571
<ASSETS-OTHER> 911,596
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,712,003
<PAYABLE-FOR-SECURITIES> 926,759
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,598
<TOTAL-LIABILITIES> 934,357
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,134,671
<SHARES-COMMON-STOCK> 1,113,491
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 12,606
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 43,545
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (413,176)
<NET-ASSETS> 10,777,646
<DIVIDEND-INCOME> 1,373
<INTEREST-INCOME> 18,790
<OTHER-INCOME> 0
<EXPENSES-NET> 7,557
<NET-INVESTMENT-INCOME> 12,606
<REALIZED-GAINS-CURRENT> 43,545
<APPREC-INCREASE-CURRENT> (413,176)
<NET-CHANGE-FROM-OPS> (357,025)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,113,491
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,777,646
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,262
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,688
<AVERAGE-NET-ASSETS> 2,155,824
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.010
<PER-SHARE-GAIN-APPREC> (0.330)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.680
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
