DG PRIME MONEY MARKET FUND
(A Portfolio of DG Investor Series)
- --------------------------------------------------------------------------------
SUPPLEMENT TO THE COMBINED PROSPECTUS DATED JUNE 30, 1997
A. Please insert the following "Financial Highlights" table for Prime
Money Market Fund immediately following the section entitled
"Financial Highlights" which begins on page 4 of the prospectus:
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, 1997
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------
Net investment income 0.02
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------
Distributions from net investment income (0.02)
- ------------------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------------- ---------
TOTAL RETURN (B) 1.51%
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------
Expenses 0.69%*
- -------------------------------------------------------------------------------------
Net investment income 4.93%*
- -------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.26%*
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $163,763
- -------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 10, 1997 (date of
initial public investment) to June 30, 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.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the third paragraph of the section entitled "Voting rights"
which begins on page 17 of the prospectus and replace it with the following:
"As of August 1, 1997, National Financial Services Corp., for the
exclusive benefit of its customers, was the owner of record of
148,923,506 shares (100%) of Prime Money Market Fund, and therefore,
may, for certain purposes, be deemed to control the Fund and be able
to affect the outcome of certain matters presented for vote of
shareholders."
C. Please insert the following "Financial Statements" for Prime Money
Market Fund immediately following the section entitled "Performance
Information" on page 19 of the prospectus.
DG PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--82.7%
- ------------------------------------------------------------------------------
BROKERAGE--3.6%
-----------------------------------------------------------
$ 6,000,000 Merrill Lynch & Co., Inc., 5.671%, 10/6/1997 $ 5,909,790
----------------------------------------------------------- ------------
CONSUMER PRODUCTS--3.0%
-----------------------------------------------------------
5,000,000 Gillette Co., 5.626%, 7/11/1997 4,992,264
----------------------------------------------------------- ------------
ELECTRICAL EQUIPMENT--3.0%
-----------------------------------------------------------
5,000,000 General Electric Co., 5.658%, 7/9/1997 4,993,789
----------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--9.1%
-----------------------------------------------------------
5,000,000 Daimler Benz North America Corp., 5.549%, 7/16/1997 4,988,500
-----------------------------------------------------------
5,000,000 Ford Motor Credit Corp., 5.649%, 7/2/1997 4,999,222
-----------------------------------------------------------
5,000,000 Toyota Motor Credit Corp., 5.562%, 8/26/1997 4,957,144
----------------------------------------------------------- ------------
Total 14,944,866
----------------------------------------------------------- ------------
FINANCE--COMMERCIAL--9.1%
-----------------------------------------------------------
5,000,000 CIT Group Holdings, Inc., 5.603%, 8/5/1997 4,973,021
-----------------------------------------------------------
5,000,000 IBM Credit Corp., 5.594%, 8/20/1997 4,961,528
-----------------------------------------------------------
5,000,000 MetLife Funding, Inc., 5.586%, 8/22/1997 4,960,061
----------------------------------------------------------- ------------
Total 14,894,610
----------------------------------------------------------- ------------
FINANCE--RETAIL--3.0%
-----------------------------------------------------------
5,000,000 Commercial Credit Co., 5.605%, 8/14/1997 4,966,083
----------------------------------------------------------- ------------
</TABLE>
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------
FINANCIAL SERVICES--3.3%
-----------------------------------------------------------
$ 5,400,000 National Rural Utilities Cooperative Finance Corp., 5.547%,
7/23/1997 $ 5,381,850
----------------------------------------------------------- ------------
FOOD & BEVERAGE--6.1%
-----------------------------------------------------------
5,000,000 Anheuser-Busch Cos., Inc., 5.625%, 8/18/1997 4,963,000
-----------------------------------------------------------
5,000,000 PepsiCo, Inc., 5.546%, 7/14/1997 4,990,069
----------------------------------------------------------- ------------
Total 9,953,069
----------------------------------------------------------- ------------
INDUSTRIAL--9.1%
-----------------------------------------------------------
5,000,000 Cargill, Inc., 5.665%, 9/30/1997 4,929,728
-----------------------------------------------------------
5,000,000 Engelhard Corp., 5.700%, 8/11/1997 4,967,997
-----------------------------------------------------------
5,000,000 Fluor Corp., 5.621%, 7/31/1997 4,976,792
----------------------------------------------------------- ------------
Total 14,874,517
----------------------------------------------------------- ------------
INSURANCE--9.1%
-----------------------------------------------------------
5,000,000 AIG Funding, Inc., 5.686%, 10/1/1997 4,928,700
-----------------------------------------------------------
5,000,000 Prudential Funding Corp., 5.599%, 8/28/1997 4,955,372
-----------------------------------------------------------
5,000,000 USAA Capital Corp., 5.697%, 7/21/1997 4,984,389
----------------------------------------------------------- ------------
Total 14,868,461
----------------------------------------------------------- ------------
PHARMACEUTICALS--HEALTH CARE--6.0%
-----------------------------------------------------------
5,000,000 Glaxo Wellcome PLC, 5.638%, 9/23/1997 4,935,133
-----------------------------------------------------------
5,000,000 Schering Plough Corp., 5.630%, 10/28/1997 4,908,767
----------------------------------------------------------- ------------
Total 9,843,900
----------------------------------------------------------- ------------
TELECOMMUNICATIONS--9.2%
-----------------------------------------------------------
5,000,000 AT&T Corp., 5.559%, 7/1/1997 5,000,000
-----------------------------------------------------------
5,000,000 NYNEX Corp., 5.536%, 7/18/1997 4,986,990
-----------------------------------------------------------
5,000,000 Southwestern Bell Telephone Co., 5.572%, 7/29/1997 4,978,533
----------------------------------------------------------- ------------
Total 14,965,523
----------------------------------------------------------- ------------
UTILITIES-ELECTRIC--9.1%
-----------------------------------------------------------
5,000,000 Alabama Power Co., 5.634%, 7/25/1997 4,981,433
-----------------------------------------------------------
</TABLE>
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------
UTILITIES-ELECTRIC--CONTINUED
-----------------------------------------------------------
$ 5,000,000 Florida Power & Light Co., 5.523%, 7/7/1997 $ 4,995,417
-----------------------------------------------------------
5,000,000 Southern California Edison Co., 5.623%, 9/19/1997 4,938,333
----------------------------------------------------------- ------------
Total 14,915,183
----------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 135,503,905
----------------------------------------------------------- ------------
GOVERNMENT AGENCIES--9.1%
- ------------------------------------------------------------------------------
(B) FEDERAL FARM CREDIT BANK, DISCOUNT NOTE--3.0%
-----------------------------------------------------------
5,000,000 5.485%, 9/4/1997 4,952,424
----------------------------------------------------------- ------------
(B) FEDERAL HOME LOAN BANK, DISCOUNT NOTE--3.0%
-----------------------------------------------------------
5,000,000 5.729%, 9/25/1997 4,934,306
----------------------------------------------------------- ------------
(B) FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTE--3.1%
-----------------------------------------------------------
5,000,000 5.452%, 8/7/1997 4,972,969
----------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES 14,859,699
----------------------------------------------------------- ------------
U.S. TREASURY NOTE--3.7%
- ------------------------------------------------------------------------------
6,000,000 6.500%, 8/15/1997 6,007,677
----------------------------------------------------------- ------------
(C)REPURCHASE AGREEMENTS--4.9%
- ------------------------------------------------------------------------------
8,047,100 Eastbridge Capital, 6.000%, dated 6/30/1997, due 7/1/1997 8,047,100
----------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $164,418,381
----------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for
discount issues, or the coupon for interest bearing issues.
(b) Discount rate at time of purchase.
(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) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($163,763,466) at June 30, 1997.
The following acronym is used throughout this portfolio:
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
DG PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $164,418,381
- -------------------------------------------------------------------------------
Cash 84
- -------------------------------------------------------------------------------
Income receivable 147,861
- ------------------------------------------------------------------------------- ------------
Total assets 164,566,326
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Income distribution payable 658,830
- --------------------------------------------------------------------
Accrued expenses 144,030
- -------------------------------------------------------------------- --------
Total liabilities 802,860
- ------------------------------------------------------------------------------- ------------
Net Assets for 163,763,466 shares outstanding $163,763,466
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
$163,763,466 / 163,763,466 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 1997 (UNAUDITED)*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------
Interest $2,561,615
- ---------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------
Investment advisory fee $ 227,862
- --------------------------------------------------------------------------------
Administrative personnel and services fee 46,525
- --------------------------------------------------------------------------------
Custodian fees 7,048
- --------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 4,527
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 757
- --------------------------------------------------------------------------------
Auditing fees 2,448
- --------------------------------------------------------------------------------
Legal fees 1,166
- --------------------------------------------------------------------------------
Portfolio accounting fees 13,061
- --------------------------------------------------------------------------------
Distribution services fee 113,931
- --------------------------------------------------------------------------------
Share registration costs 11,022
- --------------------------------------------------------------------------------
Printing and postage 1,619
- --------------------------------------------------------------------------------
Insurance premiums 1,262
- --------------------------------------------------------------------------------
Miscellaneous 1,005
- -------------------------------------------------------------------------------- ---------
Total expenses 432,233
- --------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee $(91,145)
- ---------------------------------------------------------------------
Waiver of administrative personnel and services fee (25,547)
- --------------------------------------------------------------------- --------
Total waivers (116,692)
- -------------------------------------------------------------------------------- ---------
Net expenses 315,541
- --------------------------------------------------------------------------------------------- ----------
Net investment income $2,246,074
- --------------------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from March 10, 1997 (date of initial public
investment) to June 30, 1997.
(See Notes which are an integral part of the Financial Statements)
DG PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
JUNE 30, 1997*
---------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 2,246,074
- --------------------------------------------------------------------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income (2,246,074)
- --------------------------------------------------------------------------- --------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 225,989,469
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 1,587,242
- ---------------------------------------------------------------------------
Cost of shares redeemed (63,813,245)
- --------------------------------------------------------------------------- --------------
Change in net assets resulting from share transactions 163,763,466
- --------------------------------------------------------------------------- --------------
Change in net assets 163,763,466
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------- --------------
End of period $ 163,763,466
- --------------------------------------------------------------------------- --------------
</TABLE>
* For the period from March 10, 1997 (date of initial public
investment) to June 30, 1997.
(See Notes which are an integral part of the Financial Statements)
DG PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 Prime Money
Market Fund (the "Fund"), a 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 Fund's
investment objective is current income consistent with stability of
principal.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--The Fund uses the amortized cost method to
value its portfolio securities in accordance with Rule 2a-7 under
the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Trustees (the "Trustees"). 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
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). At June
30, 1997, capital paid-in aggregated $163,763,466.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1997*
----------------
<S> <C>
Shares sold 225,989,469
- ---------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 1,587,242
- ---------------------------------------------------------------------------
Shares redeemed (63,813,245)
- --------------------------------------------------------------------------- --------------
Net change resulting from Institutional Shares transactions 163,763,466
- --------------------------------------------------------------------------- --------------
</TABLE>
* For the period from March 10, 1997 (date of initial public
investment) to June 30, 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 0.50% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its
fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Fund with certain administrative personnel and services. The fee
paid to FAS is based on the level of average aggregate net assets of
the Trust for the period. FAS may voluntarily choose to waive a
portion of its fee.
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
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. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The
Plan provides that the Fund may incur distribution expenses up to
0.25% of the average daily net assets of the Fund, annually, to
compensate FSC.
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.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational and start-up administrative
service expenses of $30,000 were borne initially by FAS. The Fund has
agreed to reimburse FAS for the organizational and start-up
administrative expenses during the five year period following
effective date. For the period ended June 30, 1997, the Fund paid $0
pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
August 31, 1997
DG INVESTOR SERIES
DG PRIME MONEY MARKET FUND
LOGO
SUPPLEMENT TO THE COMBINED PROSPECTUS
A Portfolio of DG Investor Series,
an Open-End Management Investment Company
ParkSouth Corporation
Jackson, MS
Investment Adviser
August 31, 1997
LOGO FEDERATED INVESTORS
Cusip 23321N707
G01258-17 (8/97)
LOGO
DG U.S. GOVERNMENT MONEY MARKET FUND
(A Portfolio of DG Investor Series)
SUPPLEMENT TO THE COMBINED PROSPECTUS DATED JUNE 30, 1997
Effective August 1, 1997, DG U.S. Government Money Market Fund (the
"Fund") will, pursuant to the existing Shareholder Services Plan,
accrue and pay shareholder services fees of 0.15% of the Fund's
average daily net assets.
July 24, 1997
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 23321N608
G01258-16 (7/97)
DG INVESTOR SERIES
MONEY MARKET 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 two 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 Prime Money Market Fund; and
- DG U.S. Government Money Market Fund.
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 POSSIBLE LOSS OF PRINCIPAL. THE FUNDS ATTEMPT TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO
ASSURANCE THAT THE FUNDS WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know
before you invest in the Funds. Keep this prospectus for future
reference.
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 the Funds, contact the Trust at the address
listed in 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 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------------
OBJECTIVE AND POLICIES OF EACH FUND 6
- ------------------------------------------------------
Prime Money Market Fund 6
Investment Risks 8
Government Money Market Fund 9
PORTFOLIO INVESTMENT AND STRATEGIES 10
- ------------------------------------------------------
Repurchase Agreements 10
When-Issued and Delayed
Delivery Transactions 10
Lending of Portfolio Securities 10
INVESTMENT LIMITATIONS 10
- ------------------------------------------------------
DG INVESTOR SERIES INFORMATION 11
- ------------------------------------------------------
Management of the Trust 11
Distribution of Fund Shares 12
Administration of the Funds 13
Expenses of the Funds 13
NET ASSET VALUE 13
- ------------------------------------------------------
INVESTING IN THE FUNDS 14
- ------------------------------------------------------
Share Purchases 14
Minimum Investment Required 14
Systematic Investment Program 14
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
Exchanging Shares 15
REDEEMING SHARES 15
- ------------------------------------------------------
Through the Banks 15
Systematic Withdrawal Program 17
ACCOUNT AND SHARE INFORMATION 17
- ------------------------------------------------------
EFFECT OF BANKING LAWS 18
- ------------------------------------------------------
TAX INFORMATION 18
- ------------------------------------------------------
Federal Income Tax 18
State and Local Taxes 19
PERFORMANCE INFORMATION 19
- ------------------------------------------------------
ADDRESSES 20
- ------------------------------------------------------
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 portfolios.
As of the date of this prospectus, the Trust is composed of eight
portfolios. The following two portfolios are offered in this
prospectus:
- DG Prime Money Market Fund ("Prime Money Market Fund")--seeks
to provide current income consistent with stability of
principal; and
- DG U.S. Government Money Market Fund ("Government Money Market
Fund")--seeks to provide current income consistent with stability of
principal and liquidity by investing primarily in a portfolio of
short-term U.S. government securities.
For information on how to purchase shares of either 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 $50.
The Funds attempt to stabilize the value of a share at $1.00. Shares
are currently sold and redeemed at that price.
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
U.S. GOVERNMENT
PRIME MONEY MONEY MARKET
MARKET FUND FUND
------------ ---------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price)................................................... None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price)..................................... None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............. None None
Redemption Fee (as a percentage of amount redeemed, if
applicable)....................................................... None None
Exchange Fee........................................................ None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(1).................................... 0.30% 0.30%
12b-1 Fee(2)........................................................ 0.25% 0.00%
Total Other Expenses................................................ 0.15% 0.20%
Shareholder Services Fee(3)......................................... 0.00% 0.00%
Total Fund Operating Expenses(4)................................ 0.70% 0.50%
</TABLE>
(1) The management fees of Prime Money Market Fund and U.S. Government
Money Market Fund have been reduced to reflect the voluntary waivers
by the Adviser. The Adviser can terminate these voluntary waivers at
any time at its sole discretion. The maximum management fee for these
Funds is 0.50%.
(2) As of the date of this prospectus U.S. Government Money Market
Fund is not paying or accruing 12b-1 fees. The Fund will not accrue or
pay 12b-1 fees until a separate class of shares has been created for
certain institutional investors. U.S. Government Money Market Fund
could pay 0.25% as a 12b-1 fee to the distributor.
(3) As of the date of this prospectus, the Funds are not paying or
accruing shareholder services fees. If the 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 for Prime Money Market Fund in the
table above are based on expenses expected during the fiscal year
ended February 28, 1998. Total Fund Operating Expenses above for U.S.
Government Money Market Fund reflect those for the period ended
February 28, 1997. Total Fund Operating Expenses for U.S. Government
Money Market Fund were 0.70% absent the voluntary waiver described
above in note (1).
* Annual Fund Operating Expenses for Prime Money Market 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.
<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.
Prime Money Market Fund.......................................... $ 7 $ 22 -- --
U.S. Government Money Market Fund................................ $ 5 $ 16 $ 28 $ 63
</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
PRIME MONEY MARKET FUND EXAMPLE IS 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
Government Money Market 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 Government Money Market Fund's financial statements and notes
thereto, which may be obtained from the Government Money Market Fund.
<TABLE>
<CAPTION>
DISTRIBUTIONS
TO
NET ASSET SHAREHOLDERS
VALUE, NET FROM NET
YEAR ENDED BEGINNING INVESTMENT INVESTMENT
FEBRUARY 28 OR 29, OF PERIOD INCOME (LOSS) INCOME
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT MONEY MARKET FUND
1993(a).................................. $1.00 0.02 (0.02)
1994..................................... $1.00 0.03 (0.03)
1995..................................... $1.00 0.04 (0.04)
1996..................................... $1.00 0.05 (0.05)
1997..................................... $1.00 0.05 (0.05)
</TABLE>
(a) Reflects operations for the period from July 1, 1992 (date of
initial public investment) to February 28, 1993. For the period
from March 31, 1992 (start of business) to June 30, 1992, all
income was distributed to the administrator.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
The Prime Money Market Fund had no public investment at February 28,
1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
----------------------------------------
NET ASSET NET NET ASSETS,
VALUE, END TOTAL INVESTMENT EXPENSE END OF PERIOD
OF PERIOD RETURN (B) EXPENSES INCOME WAIVER (D) (000 OMITTED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 1.97% 0.41%(c) 2.88%(c) 0.38%(c) $189,024
$ 1.00 2.74% 0.54% 2.70% 0.20% $189,315
$ 1.00 4.06% 0.53% 3.96% 0.20% $162,515
$ 1.00 5.48% 0.51% 5.33% 0.20% $245,647
$ 1.00 4.83% 0.50% 4.74% 0.20% $273,453
</TABLE>
OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
The investment objective of Prime Money Market Fund is current income
consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no
assurance that Prime Money Market Fund will achieve its investment
objective, it endeavors to do so by complying with the diversification
and other requirements of Rule 2a-7 under the Investment Company Act
of 1940 which regulates money market mutual funds and by following the
investment policies described in this prospectus.
Prime Money Market Fund pursues its investment objective by investing
in a portfolio of money market securities maturing in 13 months or
less. The average maturity of the securities in Prime Money Market
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days
or less. Unless indicated otherwise, the investment policies may be
changed by the Board of Trustees without shareholder approval.
Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. Prime Money Market Fund invests in high
quality money market instruments that are either rated in the highest
short-term rating category by one or more nationally recognized
statistical rating organizations ("NRSROs") or are of comparable
quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks
and other deposit institutions ("Bank Instruments");
- short-term credit facilities;
- asset-backed securities;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities; and
- other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are
long-term debt instruments that have variable or floating
interest rates and provide Prime Money Market Fund with the right
to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to
trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is
normally based on a published interest rate or interest rate
index. Most variable rate demand notes allow Prime Money Market
Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit Prime Money
Market Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand
Features." Prime Money Market Fund treats variable rate demand
notes as maturing on the later of the date of the
next interest rate adjustment or the date on which the Fund may
next tender the security for repurchase.
BANK INSTRUMENTS. Prime Money Market Fund only invests in Bank
Instruments either issued by an institution having capital,
surplus and undivided profits over $100 million, or insured by
the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF"). Bank Instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). Prime Money
Market Fund will treat securities credit-enhanced with a bank's
letter of credit as Bank Instruments.
ASSET-BACKED SECURITIES. Asset-backed securities are securities
issued by special purpose entities whose primary assets consist
of a pool of loans or accounts receivable. The securities may
take the form of beneficial interests in special purpose trusts,
limited partnership interests, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities often have some form of credit or liquidity
enhancement, payments on the securities depend predominantly upon
collections of the loans and receivables held by the issuer.
SHORT-TERM CREDIT FACILITIES. Prime Money Market Fund may enter
into, or acquire participations in, short-term borrowing
arrangements with corporations, consisting of either a short-term
revolving credit facility or a master note agreement payable upon
demand. Under these arrangements, the borrower may reborrow funds
during the term of the facility. Prime Money Market Fund treats
any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
CREDIT ENHANCEMENT. Certain of Prime Money Market Fund's acceptable
investments may be credit-enhanced by a guaranty, letter of credit, or
insurance. Any bankruptcy, receivership, default, or change in the
credit quality of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying
security and could cause losses to Prime Money Market Fund and affect
its share price.
DEMAND FEATURES. Prime Money Market 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 Prime Money Market 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. Prime Money Market Fund uses
these arrangements to provide Prime Money Market 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. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
RESTRICTED AND ILLIQUID SECURITIES. Prime Money Market Fund may invest
in restricted securities. Restricted securities are any securities in
which Prime Money Market Fund may invest pursuant to its investment
objective and policies but which are subject to restrictions on resale
under federal securities law. Under criteria established by the
Trustees, certain restricted securities are determined to be liquid.
To the extent that restricted securities are not determined to be
liquid, Prime Money Market Fund will
limit their purchase, together with other illiquid securities
including non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 10%
of its net assets.
Prime Money Market Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Section 4(2) commercial paper is
restricted as to disposition under federal securities law, and is
generally sold to institutional investors, such as Prime Money Market
Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial
paper is normally resold to other institutional investors like Prime
Money Market Fund through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. Prime Money Market Fund believes that
Section 4(2) commercial paper and possibly certain other restricted
securities which meet the criteria for liquidity established by the
Trustees of Prime Money Market Fund are quite liquid. Prime Money
Market Fund intends, therefore, to treat the restricted securities
which meet the criteria for liquidity established by the Trustees,
including Section 4(2) commercial paper, as determined by Prime Money
Market Fund's Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities.
CONCENTRATION OF INVESTMENTS. As a matter of policy which cannot be
changed without shareholder approval, Prime Money Market Fund may
invest 25% or more of its total assets in commercial paper issued by
finance companies. The finance companies in which Prime Money Market
Fund intends to invest can be divided into two categories, commercial
finance companies and consumer finance companies. Commercial finance
companies are principally engaged in lending to corporations or other
businesses. Consumer finance companies are primarily engaged in
lending to individuals. Captive finance companies or finance
subsidiaries which exist to facilitate the marketing and financial
activities of their parent will, for purposes of industry
concentration, be classified in the industry of their parent's
corporation. In addition, Prime Money Market Fund may invest 25% or
more of the value of its total assets in instruments 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. Concentrating investments in one industry may subject
Prime Money Market Fund to more risk than if it did not concentrate.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks
or corporations. Examples of these risks include international
economic and political developments, foreign governmental restrictions
that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in
obtaining or enforcing a judgment against the issuing entity, and the
possible impact of interruptions in the flow of international currency
transactions. Risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or
foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping, and the public availability of information. These
factors will be carefully considered by Prime Money Market Fund's
Adviser in selecting investments for the Fund.
CERTAIN OTHER PORTFOLIO STRATEGIES. Prime Money Market Fund may also invest or
engage in repurchase agreements, lending of portfolio securities and when-issued
and delayed delivery transactions. See "Portfolio Investments and Strategies."
GOVERNMENT MONEY MARKET FUND
The investment objective of Government Money Market Fund is current
income consistent with stability of principal and liquidity. While
there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by complying with the diversification
and other requirements of Rule 2a-7 under the Investment Company Act
of 1940 which regulates money market mutual funds and by following the
investment policies described in this prospectus.
Government Money Market Fund pursues its investment objective by
investing primarily in a portfolio of short-term U.S. government
securities. The average maturity of U.S. government securities in its
portfolio, computed on a dollar-weighted basis, will be 90 days or
less, and the Fund will invest only in securities with remaining
maturities of 13 months or less at the time of purchase.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which Government
Money Market Fund invests are either issued or guaranteed by the U.S.
government, its agencies, or instrumentalities. These securities include, but
are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of certain U.S. government
agencies or instrumentalities, such as the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit
Banks, and Banks for Cooperatives; Federal Home Loan Banks; and
Student Loan Marketing Association.
The obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government in which Government Money Market Fund invests are not 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 these agencies or
instrumentalities, since it is not obligated to do so. These agencies and
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.
Not more than 50% of Government Money Market Fund's net assets will be
invested in obligations issued or guaranteed by agencies or
instrumentalities of the U.S.
government.
CERTAIN OTHER PORTFOLIO STRATEGIES. Government Money Market Fund may also
invest or engage in repurchase agreements, lending of portfolio securities and
when-issued and delayed delivery transactions. See "Portfolio Investments and
Strategies."
PORTFOLIO INVESTMENTS AND STRATEGIES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
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 securities to the Funds and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. To
the extent that the seller does not repurchase the securities from the
Funds, the Funds could receive less than the repurchase price on any
sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Funds to
miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the
market values of the securities purchased may vary from the purchase
prices. Accordingly, the Funds may pay more or less than the market
value of the securities on the settlement date.
The Funds may dispose of a commitment prior to settlement if the
Adviser deems it appropriate to do so. In addition, the Funds may
enter into transactions to sell their purchase commitments to third
parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. The Funds
may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Funds may lend portfolio
securities on a short-term or long-term basis, or both, to
broker/dealers, banks, or other institutional borrowers of securities.
The Funds will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the Adviser has determined are
creditworthy under guidelines established by the Trustees, and will
receive collateral at all times equal to at least 100% of the value of
the securities loaned.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Funds will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which a Fund sells a portfolio instrument for
a percentage of its cash value with an agreement to buy it back
on a set date) or pledge securities except, under the following
certain circumstances: the Government Money Market Fund may
borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of its total assets and
pledge up to 15% of the value of its total assets to secure
such borrowings; and the Prime Money Market Fund may borrow up
to one-third of the value of its total assets and pledge assets
to secure such borrowings.
The above limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Government Money Market Fund will not:
- invest more than 10% of its respective net assets in illiquid
securities, including repurchase agreements providing for
settlement more than seven days after notice and certain
restricted securities not determined by the Trustees to be
liquid.
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 Funds' business affairs and
for exercising all the Trust's powers except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles
the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with
the Trust, investment decisions for the Funds are made by ParkSouth
Corporation, (the "Adviser"), subject to direction by the Trustees.
The Adviser continually conducts investment research and supervision
for the Funds and is responsible for the purchase and sale of
portfolio instruments.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .50% of the Funds' average daily net assets. 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 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."
ParkSouth manages, in addition to the Funds in the DG Investor Series,
$630 million in common trust fund assets as of December 31, 1996.
ParkSouth (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.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for 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 0.25% 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. Government Money Market Fund 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 and loan 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, a
subsidiary of Federated Investors, provides administrative personnel
and services (including certain legal and financial reporting
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
ADMINISTRATIVE FEE DAILY 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 be at
least $100,000 per portfolio. Federated Administrative Services may
choose voluntarily to waive a portion of its fee at any time.
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 Fund 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 attempt to stabilize the net asset value of shares at $1.00
by valuing their portfolio securities using the amortized cost method.
The net asset value per share is determined by subtracting total
liabilities from total assets and dividing the remainder by the number
of shares outstanding. The Funds cannot guarantee that its net asset
value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern
time), and as of the close of trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange, Monday through Friday, except on
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 Fund reserves 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 Banks.
Purchase orders must be received by 11:00 a.m. (Eastern time). Payment
is required before 3:00 p.m. (Eastern time) on the same business day
in order to earn dividends for that day.
CASH SWEEP PROGRAM. Shareholders of Prime Money Market Fund and
Government Money Market Fund can have cash accumulations in demand
deposit accounts with subsidiaries or affiliates of the Bank
automatically invested in Prime Money Market Fund or Government Money
Market Fund on a day selected by the institution and its customer or
when the demand deposit account reaches a predetermined dollar amount.
Participating financial institutions are responsible for prompt
transmission of orders relating to the program, and they may charge
for their services. Investors should read this prospectus along with
the financial institution's agreement or literature describing these
services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Funds is $1,000. Subsequent
investments may be in amounts of $50 or more with regard to the Prime
Money Market Fund, and $100 or more with regard to the Government
Money Market Fund. The Funds may waive the initial minimum investment
for employees of Deposit Guaranty Corp. and its affiliates from time
to time.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $50. 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.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Funds are shareholders of DG Investor Series,
which, in addition to the Funds, is composed of the following six
portfolios: 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.
Shareholders in any of the Funds have easy access to all of the other
Funds.
EXCHANGING SHARES
Shareholders of any Fund in DG Investor Series may exchange shares for
the shares of any other Fund in DG Investor Series. Prior to any
exchange, the shareholder must receive a copy of the current
prospectus of the Fund into which an exchange is to be effected.
Shares may be exchanged at net asset value, plus the difference
between the sales charge (if any) already paid and any sales charge of
the Fund into which shares are to be exchanged, if higher.
When an exchange is made from a Fund with a sales charge to a Fund
with no sales charge, the shares exchanged and additional shares which
have been purchased by reinvesting dividends on such shares retain the
character of the exchanged shares for purposes of exercising further
exchange privileges; thus, an exchange of such shares for shares of a
Fund with a sales charge would be at net asset value.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange will be redeemed at the
next-determined net asset value. Written exchange instructions may
require a signature guarantee. Exercise of this privilege is treated
as a sale for federal income tax purposes and, depending on the
circumstances, a short or long-term capital gain or loss may be
realized. The exchange privilege may be terminated at any time.
Shareholders will be notified of the termination of the exchange
privilege. A shareholder may obtain further information on the
exchange privilege by calling the Banks. Telephone exchange
instructions may be recorded. If reasonable procedures are not
followed by the Funds, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the
Bank receives the redemption request. Redemptions will be made on days
on which the Funds computes their net asset value. Redemption requests
cannot be executed on days on which the New York Stock Exchange is
closed or on Federal holidays when wire transfers are restricted.
Requests for redemption can be made by telephone or by mail.
THROUGH THE BANKS
BY TELEPHONE. A shareholder who is a customer of the Bank may redeem shares of
a Fund by calling Deposit Guaranty National Bank at (800) 748-8500.
For orders received before 11:00 a.m. (Eastern time), proceeds will
normally be wired the same day to the shareholder's account at the
Bank or a check will be sent to the address of record. Those shares
will not be entitled to the dividend declared on the day the
redemption request was received.
Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. In
no event will proceeds be sent more than seven days after a proper
request for redemption has been received. An authorization form
permitting the Funds to accept telephone requests must first be
completed. Authorization forms and information on this service are
available from the 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 Banks. The written request should include the
shareholder's name, the Fund name, the account number, and the share
or dollar amount requested, and should be signed exactly as the shares
are registered. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified
mail. Shareholders should call the Banks for assistance in redeeming
by mail.
SIGNATURES. Shareholders requesting a redemption of any amount to be
sent to an address other than on record with the Funds, or a
redemption payable other than to the shareholder of record must have
signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured
by the Bank Insurance Fund, which is administered by the
Federal Deposit Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings association whose deposits are
insured by the Savings Association Insurance Fund, which is
administered by the FDIC; or
- any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and Federated 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 Fund. For this reason,
payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. 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.
ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS. Dividends are declared daily and paid monthly. Dividends
are automatically reinvested on payment dates in additional shares of
the Funds unless cash payments are requested by writing to the Funds
or the Banks as appropriate. Purchase orders must be received by the
Bank before 11:00 a.m. (Eastern time). Payment is required before 3:00
p.m. (Eastern time) on the same business day in order to earn
dividends for that day.
CAPITAL GAINS. The Funds do not expect to realize any capital gains or
losses. If capital gains or losses were to occur, they could result in
an increase or decrease in dividends. The Funds will distribute in
cash or additional shares any realized net long-term capital gains at
least once every 12 months.
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. Monthly confirmations are sent to report all transactions as
well as dividends paid during the month.
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.
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.
VOTING RIGHTS. Each share of each Fund gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for
vote. All shares of each portfolio in the Trust have equal voting
rights, except that in matters affecting only a particular portfolio,
only shareholders of that portfolio are entitled to vote. The Trust is
not required to hold annual shareholder meetings. Shareholder approval
will be sought only for certain changes in the Trust's or the Funds'
operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a
special meeting. A special meeting shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
As of June 9, 1997, National Financial Services Corp., for the
exclusive benefit of its customers, was the owner of record of
161,600,157 shares (100%)of Prime Money Market Fund, and therefore,
may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of
shareholders.
As of June 9, 1997, Deposit Guaranty National Bank, acting in various
capacities for numerous accounts, was the owner of record of
170,595,340 shares (72%) of Government Money Market Fund, and
therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote
of shareholders.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company registered under the Bank
Holding Company Act of 1956 or any bank or non-bank affiliate thereof
from sponsoring, organizing or controlling a registered, open-end
investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in
general. Such laws and regulations do not prohibit such a holding
company or bank or non-bank affiliate from acting as investment
adviser, transfer agent or custodian to such an investment company or
from purchasing shares of such a company as agent for and upon the
order of their customer.
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 it expects 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 entity for federal
income tax purposes so that income (including capital gains) and
losses realized by the Trust's other 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 and distributions are received in cash or as
additional shares. The Funds will provide detailed tax information for
reporting purposes.
STATE AND LOCAL TAXES
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 advertises their yield, effective yield
and total return.
Yield represents the annualized rate of income earned on an investment
over a seven-day period. It is the annualized dividends earned during
the period on an investment shown as a percentage of the investment.
The effective yield is calculated similarly to the yield, but when
annualized, the income earned by an investment is assumed to be
reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Advertisements and sales literature may also refer to total return.
Total return represents the change, over a specified period of time,
in the value of an investment in the shares after reinvesting all
income distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
From time to time, advertisements for the Funds may refer to ratings,
rankings, and other information in certain financial publications
and/or compare the Funds' performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
DG Investor Series
DG Prime Money Market Fund Federated Investors Tower
DG U.S. Government Money Market Fund Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
ParkSouth Corporation P.O. Box 1200
Jackson, MS 39215-1200
- ------------------------------------------------------------------------------------------------
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 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
DG PRIME MONEY MARKET FUND
DG U.S. GOVERNMENT MONEY MARKET FUND
[LOGO]
DG INVESTOR SERIES
COMBINED PROSPECTUS
PORTFOLIOS OF DG INVESTOR SERIES,
AN OPEN-END MANAGEMENT
INVESTMENT COMPANY
PARKSOUTH
CORPORATION
JACKSON, MS
INVESTMENT ADVISER
JUNE 30, 1997
[LOGO]
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 23321N707
Cusip 23321N608
G00499-10 (6/97)
DG PRIME MONEY MARKET FUND
(A PORTFOLIO OF DG INVESTOR SERIES)
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 1997
A. Please delete the second paragraph of the section entitled "Trust
Ownership" on page 9 of the Statement of Additional Information
and replace it with the following: "As of August 1, 1997, the
following shareholders of record owned 5% or more of the
outstanding shares of the Fund: National Financial Services
Corp., for the exclusive benefit of its customers, was the owner
of record of 148,923,506 shares (100%)."
B. Please add the following as the third sentence of the paragraph
of the section entitled "Investment Advisory Services-Advisory
Fees" on page 10 of the Statement of Additional Information:
"For the period from March 10, 1997 (start of business) to June
30, 1997, the Adviser earned advisory fees from Prime Money Market
Fund of $227,862, of which $91,145 were voluntarily waived."
C. Please add the following as the last sentence of the first
paragraph of the section entitled "Brokerage Transactions" on
page 10 of the Statement of Additional Information: "During the
period from March 10, 1997 (start of business) to June 30, 1997,
Prime Money Market Fund paid no brokerage commissions on
brokerage transactions."
D. Please add the following as the last sentence of the paragraph
of the section entitled "Other Services-Fund Administration" on
page 10 of the Statement of Additional Information: "For the
period from March 10, 1997 (start of business) to June 30, 1997,
the administrator earned $46,525 on behalf of Prime Money Market
Fund, of which $25,547 was waived."
E. Please add the following as the fifth paragraph of the section
entitled "Purchasing Shares-Distribution and Shareholder
Services Plans" on page 11 of the Statement of Additional
Information: "For the period from March 10, 1997 (start of
business) to June 30, 1997, Prime Money Market Fund made
payments in the amount of $113,931 pursuant to the Distribution
Plan, none of which were waived."
F. Please add the following as the third paragraph of the section entitled
"Performance Information-Yield" on page 13 of the Statement of Additional
Information: "Prime Money Market Fund's yield for the seven-day
period ended June 30, 1997 was 5.02%."
G. Please add the following as the third paragraph of the section entitled
"Performance Information-Effective Yield" on page 13 of the Statement of
Additional Information: "Prime Money Market Fund's effective yield for
the seven-day period ended June 30, 1997 was 5.15%."
<PAGE>
H. Please add the following as the third paragraph of the section
entitled "Performance Information-Total Return" on page 13 of
the Statement of Additional Information and replace it with the
following: "Prime Money Market Fund's cumulative total return
for the period from March 10, 1997 (date of initial public
investment) to June 30, 1997 was 1.51%. Cumulative total return
reflects the Prime Money Market Fund's total performance over a
specific period of time. Prime Money Market Fund's cumulative
total return is representative of approximately 3 months of
investment activity since Prime Money Market Fund's effective
date."
August 31, 1997
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 23321N707
G01258-18 (8/97)
DG INVESTORS SERIES
MONEY MARKET FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the
following two portfolios (individually or collectively
referred to as the "Fund" or "Funds" as the context requires)
of DG Investor Series (the "Trust"):
DG Prime Money Market Fund ("Prime Money Market Fund"); and
DG U.S. Government Money Market Fund ("Government Money Market Fund").
This Statement of Additional Information 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 23321N707
Cusip 23321N608
G00499-12 (6/97)
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES 1
PRIME MONEY MARKET FUND 1
Acceptable Investments 1
U.S. Government Securities 1
Bank Instruments 1
Ratings 1
GOVERNMENT MONEY MARKET FUND 1
Types of Investments 1
INVESTMENT POLICIES AND STRATEGIES 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Credit Enhancement 2
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 3
INVESTMENT LIMITATIONS 3
Regulatory Compliance 4
DG INVESTOR SERIES MANAGEMENT 5
Trust Ownership 9
Trustees' Compensation 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 10
Investment Adviser 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10
OTHER SERVICES 10
Fund Administration 10
Custodian 10
Transfer Agent, Dividend Disbursing Agent, and
Shareholder Servicing Agent 11
Independent Auditors 11
PURCHASING SHARES 11
Distribution and Shareholder Services Plans 11
Conversion to Federal Funds 11
DETERMINING NET ASSET VALUE 11
EXCHANGE PRIVILEGE 12
Requirements for Exchange 12
Making an Exchange 12
REDEEMING SHARES 12
Redemption in Kind 12
MASSACHUSETTS PARTNERSHIP LAW 12
TAX STATUS 12
The Funds' Tax Status 12
Shareholders' Tax Status 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Total Return 13
Performance Comparisons 13
Economic and Market Information 14
FINANCIAL STATEMENTS 14
<PAGE>
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 indicated otherwise,
the 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.
PRIME MONEY MARKET FUND
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer
of the security; the issuer of any demand feature applicable to the
security; or any guarantor of either the security or any demand
feature.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Prime Money
Market Fund may invest generally include direct obligations of the
U.S. Treasury (such as U.S. Treasury bills, notes, and bonds) and
obligations issued or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
BANK INSTRUMENTS
The instruments of banks and savings associations whose deposits are
insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF"), such as certificates of deposit, demand and
time deposits, savings shares, and bankers' acceptances, are not
necessarily guaranteed by those organizations. In addition to domestic
bank instruments, the Prime Money Market Fund may invest in:
Eurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks; Eurodollar Time Deposits, which are U.S.
dollar-denominated deposits in foreign branches of U.S. or foreign
banks; Canadian Time Deposits, which are U.S. dollar-denominated
deposits issued by branches of major Canadian banks located in the
United States; and Yankee Certificates of Deposit, which are U.S.
dollar-denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the United States.
RATINGS
An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or
A-1+ by Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), or F-1 (+ or -) by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in the
highest short-term rating category. The Prime Money Market Fund will
follow applicable regulations in determining whether a security rated
by more than one NRSRO can be treated as being in the highest
short-term rating category; currently, such securities must be rated
by two NRSROs in their highest rating category. See "Regulatory
Compliance."
GOVERNMENT MONEY MARKET FUND
TYPES OF INVESTMENTS
Government Money Market Fund invests primarily in short-term U.S. government
securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the
Government Money Market Fund may purchase have variable
interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted
interest rate is ordinarily tied to some objective standard,
such as the 91-day U.S. Treasury bill rate.
Variable interest rates will reduce the changes in the market
value of such securities from their original purchase prices.
Accordingly, the potential for capital appreciation or
capital depreciation should not be greater than the potential
for capital appreciation or capital depreciation of fixed
interest rate U.S. government securities having maturities
equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Government Money Market Fund may purchase variable rate U.S.
government securities upon the determination by the Trustees that the
interest rate as adjusted will cause the instrument to have a current
market value that approximates its par value on the adjustment date.
INVESTMENT POLICIES AND STRATEGIES
REPURCHASE AGREEMENTS
The Funds or their custodian will take possession of the securities
subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not
repurchase the securities from the Funds, the Funds could receive less
than the repurchase price on any sale of such securities. In the event
that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Funds might be
delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of the Funds' portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Funds and allow retention or
disposition of such securities. The Funds will only enter into
repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Funds'
adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In reverse repurchase
agreements, the Funds transfer possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agree that on a stipulated date in the future the Funds will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the
Funds, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
securities are marked to market daily and are maintained until the
transaction is settled.
The use of reverse repurchase agreements may enable the Funds to avoid
selling portfolio instruments at a time when a sale may be deemed to
be disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Funds will be able to avoid
selling portfolio instruments at a disadvantageous time.
CREDIT ENHANCEMENT
The Prime Money Market Fund typically evaluates the credit quality and
ratings of credit-enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement
(the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit-enhanced securities as being issued by the
credit enhancer for diversification purposes. However, under certain
circumstances applicable regulations may require the Fund to treat
securities as having been issued by both the issuer and the credit
enhancer.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Funds. Settlement dates may be a
month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Funds sufficient to make
payment for the securities to be purchased are segregated on the
Funds' records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. The
Funds do not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more
than 20% of the total value of their respective assets.
The Government Money Market Fund does not anticipate investing more
than 5%of its respective total assets in when-issued and delayed
delivery transactions.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Funds lend portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the
Funds. During the time portfolio securities are on loan, the borrower
pays the Funds any dividends or interest paid on such securities.
Loans are subject to termination at the option of the Funds or the
borrower. The Funds may pay reasonable administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower
or placing broker.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits
as are necessary for clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Funds will not issue senior securities except that the
Funds may borrow money directly or through reverse repurchase
agreements in amounts up to one-third of the value of their
total assets, including the amounts 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 portfolio 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 the value of its total assets are
outstanding.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any
assets except as necessary to secure permitted borrowings.
LENDING CASH OR SECURITIES
The Funds will not lend any assets, except portfolio
securities and except that the Funds 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
permitted by their investment objective, policies, and
limitations or the Trust's Declaration of Trust.
INVESTING IN COMMODITIES
The Funds will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
INVESTING IN REAL ESTATE
Government Money Market Fund will not purchase or sell real
estate, including limited partnership interests in real
estate, although it may invest in securities secured by real
estate or interests in real estate.
UNDERWRITING
The Funds will not underwrite any issue of securities, except
as a Fund may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of
securities in accordance with a Fund's investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
Prime Money Market Fund will not invest 25% or more of the
value of its total assets in any one industry except that the
Fund will invest 25% or more of the value of its total assets
in commercial paper issued by finance companies. The Fund may
invest 25% or more of the value of its total assets in cash,
cash items, or securities issued or guaranteed by the
government of the United States or its agencies, or
instrumentalities and repurchase agreements collateralized by
such U.S. government securities. The U.S. government is not
considered to be an industry.
<PAGE>
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its
total assets, the Prime Money Market Fund will not purchase
securities of any one issuer (other than cash, cash items, or
securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and
repurchase agreements collateralized by such U.S. government
securities) if as a result more than 5% of the value of its
total assets would be invested in the securities of that
issuer, or if it would own more than 10% of the outstanding
voting securities of that issuer.
The above 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 change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 10% of the value of their
net assets in illiquid securities, including securities not
determined by the Trustee to be liquid and repurchase
agreementsproviding for settlement in more than seven days
after notice, and with respect to the Prime Money Market
Fund, non-negotiable time deposits.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Government Money Market Fund and Prime Money Market Fund will
limit their investments in other investment companies to no
more than 3% of the total outstanding voting stock of any
investment company, will not invest more than 5% of their
respective total assets in any one investment company, or
invest more than 10% of their respective total assets in
investment companies in general. The Funds will purchase
securities of investment companies only in open-market
transactions involving only customary broker's commissions.
However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, or
acquisition of assets. It should be noted that investment
companies incur certain expenses, such as management fees,
and, therefore, any investment by the Funds in shares of
another investment company would be subject to such duplicate
expenses. The Funds' adviser will waive its investment
advisory fee on assets invested in securities of open-end
investment companies.
INVESTING FOR CONTROL
Prime Money Market Fund will not invest in securities of a
company for the purpose of exercising control or management.
INVESTING IN OPTIONS
The Funds will not invest in puts, calls, straddles, spreads,
or any combination of them.
For purposes of the above 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." 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 limitation.
Prime Money Market Fund has no present intent to borrow money or
pledge securities in excess of 5% of the value of its net assets
during the coming fiscal year.
REGULATORY COMPLIANCE
The Funds may follow non-fundamental operational policies that are
more restrictive than their fundamental investment limitations, as set
forth in the prospectus and this Statement of Additional Information,
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of
1940. In particular, the Funds will comply with the various
requirements of Rule 2a-7, which regulates money market mutual funds.
For example, with limited exceptions, Rule 2a-7 prohibits the
investment of more than 5% of its assets in the securities of any one
issuer, although Government Money Market Fund's investment limitation
only requires such 5% diversification with respect to 75% of its
assets. Government Money Market Fund will invest more than 5% of its
assets in any one issuer only under the circumstances permitted by
Rule 2a-7. The Funds will also determine the effective maturity of
their investments , as well as their ability to consider a security as
having received the requisite short-term ratings by NRSROs, according
to Rule 2a-7. The Funds may change these operational policies to
reflect changes in the laws and regulations without the approval of
their shareholders.
<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.
<PAGE>
TRUST OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s
outstanding shares.
As of June 9, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of Prime Money Market Fund: National
Financial Services Corp., for the exclusive benefit of its customers,
was the owner of record of approximately 161,600,157 shares (100%).
As of June 9, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of U.S. Government Money Market Fund:
Deposit Guaranty National Bank, acting in various capacities for
numerous accounts was the owner of record of approximately 170,595,340
shares (72%) and Commercial National Bank, acting in various
capacities for numerous accounts, was the owner of record of
approximately 51,813,418 shares (21.87%).
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
INVESTMENT ADVISER
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 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 years
ended February 28, 1997, February 29, 1996, and February 28, 1995, the
Adviser earned fees from Government Money Market Fund of $1,138,567,
$1,044,577 and $837,617, respectively, of which $455,427, $417,831 and
$335,047, respectively, were 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 guidelines
established by the Trustees. The Adviser may select brokers and
dealers who offer brokerage and research services. These services may
be furnished directly to the Fund 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 and dealers may be used by the Adviser or
its affiliates in advising the Fund 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, Government Money Market Fund
paid no brokerage commissions on brokerage transactions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund 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 Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to the Fund
for a fee as described in the prospectus. For the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995, the
administrator earned $248,304, $244,926 and $210,182, respectively, on
behalf of the Government Money Market Fund, none of which was 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 Fund 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 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 Fund."
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, Government Money Market
Fund made no payments pursuant to the Distribution Plan.
CONVERSION TO FEDERAL FUNDS
It is the Funds' 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 Trustees have decided that the best method for determining the
value of portfolio instruments is amortized cost. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted
for amortization of premium or accumulation of discount rather than at
current market value. Accordingly, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio. In periods of declining interest rates,
the indicated daily yield on shares of the Funds computed by dividing
the annualized daily income on the Funds' portfolio by the net asset
value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the
opposite may be true.
The Funds' use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule
2a-7 (the "Rule") promulgated by the Securities and Exchange
Commission under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to
stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Funds' investment objective. The
procedures include monitoring the relationship between the amortized
cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what,
if any, steps should be taken if there is a difference of more than
0.5% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
EXCHANGE PRIVILEGE
REQUIREMENTS FOR EXCHANGE
Before the exchange, the shareholder must receive a prospectus of the
fund for which the exchange is being made. 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 the Funds' 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 obligations of the
Trust. To protect its shareholders, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
its shareholders for 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.
TAX STATUS
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet
the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, each Fund must, among other requirements:
o derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities; o derive less
than 30% of its gross income from the sale of securities held
less than three months; o invest in securities within certain
statutory limits; and o distribute to its shareholders at least
90% of its net income earned during the year.
SHAREHOLDERS' TAX STATUS
Shareholders of the Funds 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. No
portion of any income dividend paid by the Funds is eligible for the
dividends received deduction available to corporations.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates; changes in expenses; and the
relative amount of cash flow. To the extent that financial
institutions and broker/dealers charge fees in connection with
services provided in conjunction with an investment in shares of the
Funds, the performance will be reduced for those shareholders paying
those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with
a balance of one share at the beginning of the base period, with the
net change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original
one share and all dividends declared on the original and any purchased
shares; dividing the net change in the account's value by the value of
the account at the beginning of the base period to determine the base
period return; and multiplying the base period return by 365/7.
The Government Money Market Fund's yield for the seven-day period
ended February 28, 1997 was 4.72%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum
to the 365/7th power; and subtracting 1 from the result.
The Government Money Market Fund's effective yield for the seven-day
period ended February 28, 1997 was 4.83%.
TOTAL RETURN
Average annual total return 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 net asset value 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, adjusted over the period by any additional shares, assuming
the monthly reinvestment of all dividends and distributions.
The Government Money Market Fund's average annual total returns for
the fiscal year ended February 28, 1997, and for the period from March
31, 1992 (date of initial public investment) to February 28, 1997,
were 4.83% and 4.08% respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a
more complete view of the Funds' performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Funds use in advertising may
include:
O LIPPER ANALYTICAL SERVICES, INC. (PRIME MONEY MARKET FUND
GOVERNMENT MONEY MARKET FUND), ranks funds in various fund
categories based on total return, which assumes the
reinvestment of all income dividends and capital gains
distributions, if any.
o DONOGHUE'S MONEY FUND REPORT (PRIME MONEY MARKET FUND
GOVERNMENT MONEY MARKET FUND) publishes annualized yields
of money market funds weekly. Donoghue's MONEY MARKET
INSIGHT publication reports monthly and 12-month-to-date
investment results for the same money funds.
o MONEY (PRIME MONEY MARKET FUND GOVERNMENT MONEY MARKET
FUND), a monthly magazine, regularly ranks money market
funds in various categories based on the latest available
seven-day effective yield.
O BANK RATE MONITOR(C) NATIONAL INDEX (PRIME MONEY MARKET
FUND GOVERNMENT MONEY MARKET FUND), Miami Beach, Florida,
published weekly, is an average of the interest rates of
personal money market deposit accounts at ten of the
largest banks and thrifts in each of the five largest
Standard Metropolitan Statistical Areas. If more than one
rate is offered, the lowest rate is used. Account minimums
and compounding methods may vary.
O DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES
(GOVERNMENT MONEY MARKET FUND), for example, is a weekly
quote of the average daily offering price for selected
federal agency issues maturing in 30 days.
O SALOMON 30-DAY TREASURY BILL INDEX (GOVERNMENT MONEY
MARKET FUND) is a weekly quote of the most representative
yields for selected securities issued by the U.S.
Treasury, maturing in 30 days.
Advertisements and other sales literature for the Funds may quote
total returns which are calculated on non-standardized base periods.
These total returns represent the historic change in the value of an
investment in the Funds based on monthly reinvestment of dividends
over a specified period of time. Advertising and other promotional
literature may include charts, graphs and other illustrations using
the Funds' 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 its
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 $3.5 trillion to the more than 6,000
funds available.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended February 28, 1997,
for Government Money Market Fund are incorporated herein by reference
to the Annual Report of the Fund dated February 28, 1997 (File Nos.
33-46431 and 811-6607). A copy of Government Money Market Fund's
Annual Report may be obtained without charge by contacting the Trust.
