DG
INVESTOR SERIES
o Equity Fund
o Opportunity Fund
o Limited Term Government
Income Fund
o Government Income Fund
o Municipal Income Fund
o U.S. Government
Money Market Fund
-----------------------------------
COMBINED [LOGO]
ANNUAL REPORT
Diversified Portfolios of
DG Investor Series,
an Open-End Management
Investment Company
ParkSouth
Corporation
Jackson, MS
Investment Adviser
An Affiliate of:
Deposit Guaranty
National Bank
Jackson, MS
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 Reserve Board, or
any other government agency.
Investment in these shares involves
investment risks including
investment risks including the
possible loss of principal.
FEBRUARY 28, 1997
-----------------------------------
[LOGO]
Cusip 23321N301 Cusip 23321N202
Cusip 23321N400 Cusip 23321N608
Cusip 23321N103 G00498-09 (4/97)
Cusip 23321N509
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for the DG Investor
Series mutual funds, which covers the twelve-month reporting period from March
1, 1996, through February 28, 1997. In this Report, you will find a discussion
with each fund's portfolio manager, as well as a complete list of investments
and financial statements for each fund.
Please note the following highlights for each fund in the DG Investor Series
over the twelve-month reporting period ended February 28, 1997:
- - Its high-quality portfolio of numerous household names helped DG EQUITY FUND
produce a total return of 18.79%.* Contributing to the total return were
dividends totaling $0.14 per share, capital gains of $0.35 per share, and a
15% increase in net asset value. Net assets reached $490.4 million at period
end.
- - In what continued to be a relatively favorable stock market climate, DG
OPPORTUNITY FUND achieved a total return of 12.08%.* The fund paid capital
gains totaling $0.83 per share, while its net asset value increased by 5%. At
the end of the reporting period, net assets has grown to $80.5 million.
- - DG LIMITED TERM GOVERNMENT INCOME FUND, a portfolio of shorter-maturity
government securities, paid dividends totaling $0.53 per share. The fund's
total return at period end was 4.66%.* Amid a degree of bond market
volatility, the fund's net asset value decreased by $0.09. The fund ended the
period with $84.4 million in net assets.
- - DG GOVERNMENT INCOME FUND, a portfolio of U.S. government securities, paid
dividends totaling $0.57 per share, while producing a total return of 4.07%.*
Bond market volatility impacted the fund's net asset value, which declined
from $9.87 to $9.69. Net assets reached $249.6 million at period end.
- - DG MUNICIPAL INCOME FUND, a portfolio of high-quality municipal securities
issued across the U.S., produced federally tax-free** dividends totaling $0.48
per share and a total return of 4.12%.* The fund also paid a modest capital
gain totaling $0.01 per share. Its net asset value decreased by $0.07 in the
wake of bond market volatility. At the end of the reporting period, the fund's
net assets stood at $46.9 million.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than their original cost. Total returns quoted above
are based on net asset value and do not reflect the maximum sales charge.
Total returns based on the maximum sales charge for the twelve-month period
ended February 28, 1997 are as follows: DG Equity Fund, 14.60%; DG
Opportunity Fund, 8.19%; DG Limited Term Government Income Fund, 2.56%; DG
Government Income Fund, 2.00%; and DG Municipal Income Fund, 2.01%.
** Income may be subject to the federal alternative minimum tax and state and
local taxes.
- - Always a convenient way for investors to pursue daily income on their ready
cash, DG U.S. GOVERNMENT MONEY MARKET FUND paid dividends totaling $0.05 per
share. Net assets reached $273.4 million at the end of the reporting
period.***
Thank you for choosing the DG Investor Series to pursue your financial goals. We
will continue to provide the highest level of service as we keep you informed of
your progress on a regular basis.
Sincerely,
LOGO
Edward C. Gonzales
President
April 15, 1997
*** Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so. An
investment in the fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG EQUITY FUND
For the third straight year we have the pleasure of commenting on an exceptional
year's investment experience for the fund. The fund's average annual total
return based on net asset value for the twelve-month period ended February 28,
1997, was 18.8%.* For a "product related" comparison, the broad-style Lipper
Growth Fund Index**--the most commonly quoted Growth-Investment Objective mutual
fund index--returned about 17.9%. This return, as well as that reported for the
fund, reflects the various negative effects of the cash positions held in the
mutual funds as well as those effects related to fund management fees and other
attendant expenses. These returns do not, however, reflect any "load" charges.
While total returns of this magnitude must be considered exceptional by any
historically-based measure, we must point out that the Standard & Poor's 500
Index ("S&P 500")***--our long term benchmark--fared even better over the period
as it experienced a total return of nearly 26.2%. Although the standard
methodology of capitalization weighting employed in calculating this index's
return and the remarkable narrowness of the index's "winners" list clearly
accounted for much of the S&P 500 comparative out-performance, the important
point, we believe, is that most typically broad-based equity investors had the
benefits of a "great" stock market environment in which to invest--once again.
On reflection, one might be encouraged to inquire, "how long can this go on?"
Before any consideration of that question, however, a brief overview of our
short term outlook may be in order. During the second half of the fiscal year
the fund benefited from the relatively low, although choppy, interest rate
environment and enjoyed a rebound in the prices of important technology sector
issues. However, both of these formerly positive influences are now rapidly
dissipating. Moreover, with the nation's economy giving every sign of solid to
even better-than-solid strength, the Federal Reserve Board is likely to begin
"tightening the reigns" soon, which will in turn lead to increased interest
rate-related pressure on "long-duration" growth stocks. We view this developing
possibility as merely one more modest distraction or impediment during what we
believe will be a continuation of the current extended growth period in the
equity market and in the economy. While it is true that much of that which is
currently anticipated could go wrong, we believe a good deal more could go
right. An "even strain" is all that is required for continued success. We do not
need a miracle in order to flourish, only the absence of a disaster.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less that their original cost. The fund's total return
for the period based on offering price was 14.60%.
** Lipper Growth Fund Index is an average of the net asset-valuated total
returns for the top 30 growth funds tracked by Lipper Analytical Services,
Inc., an independent mutual fund rating service.
*** The S&P 500 is an unmanaged composite index of common stocks in industrial,
transportation, and financial and public utility companies. Investments
cannot be made in an index.
- --------------------------------------------------------------------------------
Now, to answer the question with which we closed the first paragraph, we must
first recall that historically, long-term equity returns have averaged between
9 1/2% and 10 1/2%, annually, depending on which set of 20-year periods you
review. Therefore, we can easily conclude that annual returns well in excess of
these long-term results are truly exceptional and seem almost certain to be
reversed so that once again the equity market may indeed average around the 10%
"expected" return. But as to just when "the worm will turn," that is currently
an unknown--much as it will always be an unknown. We, are managing the
accumulated wealth of others under the always difficult but classic conditions
of uncertainty. There is no proven investment strategy, ranging from the
mathematical to the metaphysical, that will either reverse or significantly
alter this unsettling truth. In the fund, we confront this challenge by
investing in large, high-quality companies which have proven records of success
both in their respective industries and as long term generators of above-average
earnings-per-share growth rates. Additionally, we invest primarily in companies
that are found in identifiable service or product sectors which are typically
the most consistently and rapidly growing segments of our economy. When combined
with our insistence on very conservative balance sheet qualities including low
levels of financial leverage in these companies' capitalization structures,
these characteristics reduce much of the possible range of investment
uncertainties we might otherwise experience. But, still, as to "how long will
this go on?"...there is no answer.
We believe that even by virtue of the consistent application of our long-term
focus and of our process of winnowing down our universe to those "very best"
investment choices, we can only hope to provide the most appropriate portfolio
for a future of continued uncertainty. Rising interest rates, or the portent of
much higher rates of inflation will continue to adversely impact our
however-well chosen portfolio of growth stocks. Dramatic nation-wide economic
cycle declines, when they occur, will also batter the prices of our growth
stocks. The fund's portfolio is not immune to shocks. But, we believe its
quality focus, issue size, and typical economic sector emphasis will assure its
resilience during periods of extended market distress and provide the
spring-board for its success in the long run.
DG EQUITY FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
DG EQUITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the DG
Equity Fund (the "Fund") from August 1, 1992 (start of performance) to February
28, 1997, compared to the Standard & Poor's 500 Index ("S&P 500").+
GRAPHIC-SEE APPENDIX
<TABLE>
<CAPTION>
Measurement Period DG Equity Fund - DG Equity Fund - Standard and
(Fiscal Year Covered) 2.00% 3.50% Poor's 500
<S> <C> <C> <C>
8/1/92 9800 9650 10000
2/28/93 10427 10268 10632
2/28/94 10948 10780 11512
2/28/95 11848 11667 12360
2/29/96 15845 15602 16648
2/28/97 18822 18534 21005
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 2.00% ($10,000 investment minus $200
sales charge = $9,800). The Fund's performance assumes the reinvestment of
all dividends and distributions. The S&P 500 has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Represents a hypothetical investment of $10,000 in the Fund after deducting
the current maximum sales charge of 3.50% (effective 5/1/95) ($10,000
investment minus $350 sales charge = $9,650). The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500
has been adjusted to reflect reinvestment of dividends on securities in the
index.
*** Total return quoted reflects all applicable current maximum sales charges.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This index is unmanaged.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG OPPORTUNITY FUND
The DG Opportunity Fund was established in July, 1994, to provide investors with
a diversified portfolio of mostly smaller-capitalized companies with at least
65% of the fund's total assets invested in equity securities of companies that
have a market value capitalization of less than $1 billion. The objective of the
fund is to provide capital appreciation. The majority of the small-cap universe
is less widely followed by institutional investors which creates the opportunity
to add value to the fund's portfolio through research. In targeted sectors, less
seasoned companies are identified and a fundamental/quantitative analysis is
performed to discern growth potential and risk factors. Current company
activities are monitored through analysts' reports and company conferences.
Technical factors are incorporated to derive a company-specific pattern of
economic movement and to complete the evaluation process. The holdings of the
fund are more speculative than stocks from more mature firms and lend
characteristics which include below-market dividend yields, above-market betas,
high residual risk relative to broad market indexes, higher price ratios, and
greater variability in the earnings number. These factors produce the potential
for market appreciation which exceeds that of larger-capitalization stocks.
In 1996, the fund's holdings were concentrated in the technology and retail
sectors with the energy, financial and health care areas well represented. The
portfolio fluctuated between 55 and 70 issues with a turnover rate of 116%. The
net asset base increased from $53.5 million as of February 29, 1996 to $80.5
million as of February 28, 1997. Total return based on net asset value for the
twelve months ended February 28, 1997 was 12.08%.*
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The fund's total return
based on offering price for the period was 8.19%. The quoted performance data
includes the performance of the collective trust fund for the period before
the date on which the fund commenced operations (August 1, 1994), as adjusted
to reflect the fund's then anticipated expenses as set forth in the "Expenses
of the Fund" section of the fund's initial prospectus. The collective trust
fund was not registered under the Investment Company Act of 1940 (the "1940
Act"), and therefore was not subject to certain investment restrictions that
are imposed by the 1940 Act. If the collective trust fund had been registered
under the 1940 Act, the performance may have been adversely affected.
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
DG OPPORTUNITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the DG
Opportunity Fund (the "Fund") from January 1, 1982+ (start of performance) to
February 28, 1997, compared to the Russell 2000 Index.++
GRAPHIC-SEE APPENDIX
<TABLE>
<CAPTION>
Measurement Period DG Opportunity DG Opportunity Russell 2000
(Fiscal Year Covered) Fund - 2.00% Fund - 3.50% Index
<S> <C> <C> <C>
1/1/82 9800 9650 10000
2/28/82 9555 9409 9171
2/28/83 13582 13375 14284
2/29/84 15637 15398 14964
2/28/85 12771 12576 17395
2/28/86 12559 12367 21341
2/28/87 15855 15612 25076
2/29/88 15761 15520 21495
2/28/89 17566 17297 24837
2/28/90 19598 19298 25818
2/28/91 22740 22392 26776
2/29/92 34364 33838 35891
2/28/93 38670 38078 38579
2/28/94 50669 49894 46673
2/28/95 48850 48103 45861
2/29/96 64199 63216 58996
2/28/97 71954 70853 66405
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 2.00% ($10,000 investment minus $200
sales charge = $9,800). The Fund's performance assumes the reinvestment of
all dividends and distributions. The Russell 2000 Index has been adjusted to
reflect reinvestment of dividends on securities in the index.
** Represents a hypothetical investment of $10,000 in the Fund after deducting
the current maximum sales charge of 3.50% (effective 5/1/95) ($10,000
investment minus $350 sales charge = $9,650). The Fund's performance
assumes the reinvestment of all dividends and distributions. The Russell
2000 Index has been adjusted to reflect reinvestment of dividends on
securities in the index.
*** Total return quoted reflects all applicable current maximum sales charges.
+ The Fund is the successor to the portfolio of a collective trust fund
("CTF") formerly managed by the Adviser. On August 1, 1994, (the date of the
Fund's commencement of operations), the assets of the CTF were transferred
to the Fund in exchange for Fund shares. The quoted performance data
includes the performance of the CTF for periods before the Fund's
registration statement became effective. The CTF was not registered under
the Investment Company Act of 1940 and therefore was not subject to certain
investment restrictions that are imposed by the Act. If the CTF had been
registered under the 1940 Act, the performance may have been adversely
affected.
++ The Russell 2000 Index is not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG LIMITED TERM GOVERNMENT INCOME FUND
Yields on short-term securities rose during the twelve-month reporting period
ended February 28, 1997. Yields on 1, 3, and 5-Year Treasuries rose by 67, 97,
and 100 basis points, respectively, in the first half of the fiscal year and
declined by 22, 30 and 34 basis points, respectively, in the last six months as
bonds rallied on lessening fears of inflation. Corporate spreads continued to be
tight as the marketplace saw a steady economy and company profitability
continuing. Agency issuance increased with callable agencies continuing to come
to the market.
For the fiscal year ended February 28, 1997, the fund's total return was 4.66%
based on net asset value* compared to the Merrill Lynch 1-3 Year Treasury
Index** total return of 5.27%. The fund had an average coupon of 6.02%, an
average maturity of 1.86 years, and a duration of 1.65 years as of February 28,
1997.
The fund's net asset value declined from $9.80 to $9.71 on February 28, 1997,
reflecting the rise in interest rates and decline in bond market values.
The marketplace is anticipating Federal Reserve Board action in the form of an
increase in the target rate by 25-50 basis points. Short-term securities should
adjust accordingly in the spring of 1997 if interest rates rise.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The fund's total return
based on offering price for the period was 2.56%.
** Merrill Lynch 1-3 Year U.S. Treasury Index is an unmanaged index tracking
short-term U.S. government securities with maturities between 1 and 2.99
years. The index is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
Investments cannot be made in an index.
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
DG LIMITED TERM GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in DG Limited
Term Government Income Fund (the "Fund") from August 1, 1992 (start of
performance) to February 28, 1997, compared to the Merrill Lynch 1-3 Year
Treasury Index ("ML1-3").+
GRAPHIC-SEE APPENDIX
<TABLE>
<CAPTION>
Measurement Period DG Limited Term Merrill Lynch 1-3 Year
(Fiscal Year Covered) Government Income Fund Treasury Index
<S> <C> <C>
8/1/92 9800 10000
2/28/93 10234 10396
2/28/94 10594 10755
2/28/95 10883 11117
2/29/96 11681 12056
2/28/97 12226 12692
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge
= $9,800). The Fund's performance assumes the reinvestment of all dividends
and distributions. The ML1-3 has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The ML1-3 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG GOVERNMENT INCOME FUND
For the twelve months ended February 28, 1997, the fund's total return was 4.07%
based on net asset value* compared to the Lehman Brothers Government/Corporate
Bond Index** total return of 4.83%. We softened our barbell strategy during this
reporting period. The fund's duration of 4.29 years and average maturity of 7.10
years was further shortened reflecting our bearish view of interest rates. If
the market continues to anticipate a tightening of short-term rates, then this
interim strategy should benefit shareholders. We continue to emphasize Treasury
securities. Spreads on other investment vehicles have tightened to Treasury
securities and although the economy remains in good condition, it is difficult
to forecast further tightening in these securities. If agency securities
continue to be on the increase in issuance, we will utilize these securities
when they are appropriately priced. Total assets for the fund increased by over
35% during the reporting period as investors sought longer average maturities
anticipating a drop in interest rates.
February, 1996, to February, 1997, saw yields on intermediate and long-term
Treasury securities increase. The first half of this period saw yields on 5, 10,
and 30-year securities increase by 100, 84, and 65 basis points, respectively.
The last half of the period saw rate declines in the same securities of 34, 39,
and 31 basis points, respectively. The economy has continued to grow at a steady
pace and although inflationary pressures have not come to light, the Federal
Reserve Board's bias towards preemptive moves has kept the market's focus on an
impending tightening and a rise in rates. This should affect the shorter end of
the curve and we will attempt to take advantage of opportunities as they arise.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The fund's total return
based on offering price for the period was 2.00%
** Lehman Brothers Government/Corporate Total Index is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued,
fixed rate, non-convertible domestic bonds of companies in industry, public
utilities, and finance. This index is unmanaged. Investments cannot be made
in an index.
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
DG GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the DG
Government Income Fund (the "Fund") from August 1, 1992 (start of performance)
to February 28, 1997, compared to the Lehman Brothers Government/ Corporate
Total Index ("LBGCT").+
GRAPHIC-SEE APPENDIX
<TABLE>
<CAPTION>
Lehamn Brothers
Measurement Period DG Government Income Government/Corporate
(Fiscal Year Covered) Fund Total Index
<S> <C> <C>
8/1/92 9800 10000
2/28/93 10427 10674
2/28/94 10902 11285
2/28/95 11032 11437
2/29/96 12213 12879
2/28/97 12710 13501
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge
= $9,800). The Fund's performance assumes the reinvestment of all dividends
and distributions. The LBGCT has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The LBGCT is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG MUNICIPAL INCOME FUND
DG Municipal Income Fund was established in December, 1992, to provide investors
with the ability to invest in a diversified portfolio of quality longer-term
municipal issues. The investment objective of the fund is to provide dividend
income that is exempt from federal regular income tax.*
Issues purchased by the fund during the last twelve months consisted largely of
general obligations of states, counties and cities. The fund continued to
maintain its majority weighting in general obligation bonds. As of February 28,
1997, the fund had an average maturity of 8.92 years, a duration of 6.73 years
and an average coupon of 5.43%. If economic activity continues to move upward,
we will shorten the maturity and duration of the portfolio modestly.
The fund's total rate of return (income plus capital appreciation) for the
fiscal year ended February 28, 1997, was 4.12% based on net asset value. The
fund's net asset value was $10.66 on February 29, 1996, and ended at $10.59 on
February 28, 1997. For the same period, the 30-day SEC yield was 4.46% based on
net asset value.**
The fund's 30-day distribution rate as of February 28, 1997, was 4.59% for
shares based on net asset value (4.50% taking into account the sales charge).***
The fund's net assets increased from $44.5 million on February 29, 1996, to
$46.9 million as of February 28, 1997.
The majority of 1996 saw little net change in the municipal market. Interest
rates increased slightly during the period and issuers increased volume as tax
reform fears abated. Overall credit quality improved with exceptions in isolated
incidents. With the exception of a pickup in economic activity leading to
potentially higher rates, we believe most of the factors and trends in 1996
should continue in 1997.
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The fund's total return
based on offering price for the period was 2.01%.
*** Distribution rate reflects actual distribution made to shareholders. It is
calculated by dividing the monthly annualized dividend plus short-term
capital gains, if any, by the average 30-day offering price.
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
DG MUNICIPAL INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the DG
Municipal Income Fund (the "Fund") from December 21, 1992 (start of performance)
to February 28, 1997, compared to the Lehman Brothers Municipal Bond Index
("LBMBI").+
GRAPHIC-SEE APPENDIX
<TABLE>
<CAPTION>
Measurement Period DG Municipal Income Lehamn Brothers
(Fiscal Year Covered) Fund Municipal Bond Index
<S> <C> <C>
12/21/92 9800 10000
2/28/93 10354 10482
2/28/94 10907 11063
2/28/95 10995 11271
2/29/96 12090 12516
2/28/97 12588 13206
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge
= $9,800). The Fund's performance assumes the reinvestment of all dividends
and distributions. The LBMBI has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The LBMBI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
DG EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--92.5%
BUSINESS EQUIPMENT &
SERVICES--6.9%
250,000 Automatic Data Processing, Inc. $ 10,656,250
125,000 Donnelley (R.R.) & Sons Co. 3,859,375
70,000 Dun & Bradstreet Corp. 1,715,000
120,000 Electronic Data Systems Corp. 5,415,000
200,000 Pitney Bowes, Inc. 12,425,000
-------------
Total 34,070,625
-------------
CAPITAL GOODS--8.6%
260,000 Dover Corp. 12,902,500
150,000 General Electric Co. 15,431,250
120,000 PPG Industries, Inc. 6,720,000
120,000 Tyco International, Ltd. 7,080,000
-------------
Total 42,133,750
-------------
CONSUMER NON-DURABLES--21.5%
75,000 CPC International, Inc. 6,309,375
250,000 Coca-Cola Co. 15,250,000
60,000 Eastman Kodak Co. 5,377,500
100,000 Gillette Co. 7,912,500
120,000 Heinz (H.J.) Co. 4,995,000
220,000 International Flavors &
Fragrances, Inc. 10,202,500
400,000 PepsiCo, Inc. 13,150,000
100,000 Philip Morris Cos., Inc. 13,512,500
100,000 Procter & Gamble Co. 12,012,500
200,000 Sara Lee Corp. 7,750,000
160,000 Sysco Corp. 5,560,000
75,000 Tambrands, Inc. 3,225,000
-------------
Total 105,256,875
-------------
CONSUMER SERVICES--3.0%
200,000 Disney (Walt) Co. 14,850,000
-------------
HEALTHCARE--18.0%
180,000 Abbott Laboratories 10,125,000
11,230 Aetna Services, Inc. 930,686
50,000 Bristol-Myers Squibb Co. 6,525,000
70,000 Hillenbrand Industries, Inc. 2,633,750
240,000 Johnson & Johnson 13,830,000
160,000 Medtronic, Inc. 10,360,000
160,000 Merck & Co., Inc. 14,720,000
140,000 Pfizer, Inc. 12,827,500
170,000 Schering Plough Corp. 13,026,250
70,000 United Healthcare Corp. 3,491,250
-------------
Total 88,469,436
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
======================================================
<C> <S> <C>
COMMON STOCKS (continued)
MULTI-INDUSTRY--0.6%
23,333 (b) ACNielsen Corp. $ 344,166
70,000 (b) Cognizant Corp. 2,441,250
-------------
Total 2,785,416
-------------
RAW MATERIALS--2.4%
75,000 Great Lakes Chemical Corp. 3,478,125
90,000 Lubrizol Corp. 3,116,250
120,000 Morton International, Inc. 4,950,000
-------------
Total 11,544,375
-------------
RETAIL--9.8%
200,000 Albertsons, Inc. 7,050,000
150,000 Home Depot, Inc. 8,175,000
275,000 McDonald's Corp. 11,893,750
240,000 Wal-Mart Stores, Inc. 6,330,000
340,000 Walgreen Co. 14,535,000
-------------
Total 47,983,750
-------------
TECHNOLOGY--20.0%
150,000 AMP, Inc. 5,831,250
100,000 (b) Applied Materials, Inc. 5,062,500
85,000 Boeing Co. 8,648,750
170,000 (b) Compaq Computer Corp. 13,472,500
130,000 (b) Digital Equipment Corp. 4,257,500
270,000 Hewlett-Packard Co. 15,120,000
100,000 Intel Corp. 14,187,500
100,000 International Business Machines
Corp. 14,375,000
32,408 Lucent Technologies, Inc. 1,745,981
100,000 (b) Microsoft Corp. 9,750,000
100,000 Motorola, Inc. 5,587,500
6,250 (b) NCR Corp. 206,250
-------------
Total 98,244,731
-------------
UTILITIES--1.7%
100,000 AT&T Corp. 3,987,500
80,000 Central & SouthWest Corp. 1,950,000
40,000 SBC Communications, Inc. 2,300,000
-------------
Total 8,237,500
-------------
TOTAL COMMON STOCKS (identified
cost $282,311,302) 453,576,458
-------------
(A) REPURCHASE AGREEMENTS--7.4%
$ 36,116,589 Cantor Fitzgerald Securities,
5.35%, dated 2/28/1997, due
3/3/1997 (at amortized cost) $ 36,116,589
-------------
TOTAL INVESTMENTS (identified cost
$318,427,891) $ 489,693,047
==============
</TABLE>
(See Notes to Portfolios of Investments)
DG OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--91.1%
BUSINESS EQUIPMENT &
SERVICES--6.6%
67,400 (b) AccuStaff, Inc. $ 1,398,550
90,000 (b) Affinity Technology 523,125
51,000 (b) CSG Systems International,
Inc. 949,875
40,600 NOVA Corp. 664,825
50,000 Stewart Enterprises, Inc.,
Class A 1,765,625
-------------
Total 5,302,000
-------------
CAPITAL GOODS--2.4%
160,000 (b) Terex Corp. 1,920,000
-------------
CAPITAL GOODS/ELECTRONICS--2.4%
82,100 Kuhlman Corp. 1,929,350
-------------
CONSUMER DURABLES--2.1%
70,400 (b) Speedway Motorsports, Inc. 1,654,400
-------------
ENERGY/OIL-DOMESTIC--4.6%
160,000 (b) Ensearch Exploration, Inc. 1,540,000
30,000 (b) Nuevo Energy Co. 1,245,000
69,100 Quaker State Corp. 1,010,588
-------------
Total 3,795,588
-------------
ENERGY/OIL SERVICES--9.6%
35,000 (b) American Outfield Divers,
Inc. 402,500
45,000 (b) Energy Ventures, Inc. 2,295,000
95,800 (b) Input/Output, Inc. 2,047,725
100,000 (b) Pride Petroleum Services,
Inc. 1,675,000
32,500 (b) Trico Marine Services,
Inc. 1,316,250
-------------
Total 7,736,475
-------------
FINANCIAL SERVICES--14.6%
37,500 Alex Brown, Inc. 2,179,688
85,200 AmVestors Financial Corp. 1,501,650
50,000 Edwards(AG), Inc. 1,775,000
43,250 Morgan Keegan, Inc. 805,531
100,000 (b) Olympic Financial Ltd. 1,100,000
66,000 T. Rowe Price Associates 2,912,250
56,000 United Companies Financial
Corp. 1,456,000
-------------
Total 11,730,119
-------------
(See Notes to Portfolios of Investments)
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
HEALTHCARE--6.6%
150,000 (b) American Healthcorp, Inc. $ 1,950,000
70,000 (b) ClinTrials, Inc. 682,500
65,500 (b) Envoy Corp. 1,572,000
70,800 (b) KeraVision, Inc. 867,300
12,500 (b) TheraTx, Inc. 206,250
-------------
Total 5,278,050
-------------
HOTEL & GAMING--0.4%
100,900 (b) Casino American, Inc. 309,006
-------------
RECYCLING--2.6%
130,000 (b) Philip Environmental, Inc 2,128,750
-------------
RESTAURANTS--12.2%
120,000 Apple South, Inc. 1,620,000
90,000 CKE Restaurants, Inc. 1,743,750
85,000 Cooker Restaurant Corp. 977,500
176,400 (b) Foodmaker, Inc. 1,697,850
70,000 (b) Papa Johns International,
Inc. 1,706,250
38,700 (b) Rainforest Cafe Inc. 788,513
90,000 (b) Rare Hospitality
International, Inc. 1,327,500
-------------
Total 9,861,363
-------------
RETAIL/COLLECTIVES--2.7%
100,000 (b) Action Performance
Companies, Inc. 2,150,000
-------------
RETAIL/CONSUMER--4.2%
20,000 (b) Goody's Family Clothing,
Inc. 362,500
50,000 (b) Hot Topic, Inc. 921,875
15,100 (b) Sports Authority, Inc. 288,788
44,000 St. John Knits, Inc. 1,804,000
-------------
Total 3,377,163
-------------
SHELTER/MOBILE HOMES--1.3%
50,000 Coachmen Industries, Inc. 1,012,500
-------------
TECHNOLOGY/COMMUNICATION--3.1%
160,000 (b) Network Computing Devices 2,020,000
20,000 (b) Nichols Research Corp. 505,000
-------------
Total 2,525,000
-------------
TECHNOLOGY/COMPUTERS--12.8%
85,000 (b) Datastream Systems, Inc. 1,615,000
58,700 (b) Emulex Corp. 909,850
</TABLE>
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
TECHNOLOGY COMPUTERS (continued)
97,500 (b) Harbinger Corp. $ 2,388,750
73,200 (b) Interphase Corp. 640,500
50,000 (b) MICROS Systems Corp. 1,931,250
96,400 (b) Periphonics Corp. 1,156,800
85,000 (b) Structural Dynamics
Research Corp. 1,689,374
-------------
Total 10,331,524
-------------
TECHNOLOGY/TELECOMMUNI-
CATIONS--1.0%
50,000 (b) Symmetricom, Inc. 806,250
-------------
UTILITIES-TELECOMMUNI-
CATIONS--1.9%
55,000 (b) ACC Corp. 1,540,000
-------------
TOTAL COMMON STOCKS
(identified cost
$63,672,933) 73,387,538
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--8.8%
$ 7,133,000 Cantor Fitzgerald Securities,
5.34%, dated 2/28/1997, due
3/3/1997 (at amortized cost) $ 7,133,000
-------------
TOTAL INVESTMENTS (identified
cost $70,805,933) $ 80,520,538
===========
</TABLE>
(See Notes to Portfolios of Investments)
DG LIMITED TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--19.2%
BUSINESS EQUIPMENT &
SERVICES--1.2%
$ 1,000,000 International Business
Machines Corp., 6.375%,
11/1/1997 $ 1,004,670
-------------
CONSUMER NON-DURABLES--2.6%
1,447,000 Kellogg Co., 5.900%, 7/15/1997 1,450,010
725,000 Philip Morris Cos., Inc.,
7.500%, 3/15/1997 725,805
-------------
Total 2,175,815
-------------
FINANCIAL SERVICES--2.8%
905,000 American General Finance
Corp., 7.150%, 5/15/1997 908,376
1,500,000 Ford Motor Credit Corp.,
5.625%, 3/3/1997 1,500,945
-------------
Total 2,409,321
-------------
HEALTHCARE--1.5%
1,250,000 Upjohn Co., 5.875%, 4/15/2000 1,227,887
-------------
PHARMACEUTICALS--1.2%
1,000,000 American Home Products Corp.,
7.700%, 2/15/2000 1,031,570
-------------
POLLUTION CONTROL--0.9%
723,000 Waste Management, Inc.,
6.375%, 7/1/1997 725,263
-------------
PUBLISHING--1.2%
1,000,000 Gannett, Inc., 5.250%,
3/1/1998 994,490
-------------
RETAIL--1.3%
1,136,000 Wal-Mart Stores, Inc., 5.500%,
9/15/1997 1,135,250
-------------
UTILITIES--6.5%
1,000,000 GTE California, Inc., 6.250%,
1/15/1998 1,003,500
1,000,000 New England Telephone &
Telegraph, 6.250%,
12/15/1997 1,004,090
1,500,000 Northern States Power Co.,
5.500%, 2/1/1999 1,478,385
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (continued)
UTILITIES (continued)
$ 1,000,000 Pacific Gas & Electric Co.,
5.375%, 8/1/1998 $ 989,400
1,000,000 Southern California Edison
Co., 5.600%, 12/15/1998 987,870
-------------
Total 5,463,245
-------------
TOTAL CORPORATE BONDS
(identified cost
$16,048,500) 16,167,511
-------------
GOVERNMENT AGENCIES--1.2%
1,000,000 Federal Home Loan Bank System,
6.500%, 2/21/2001
(identified cost $995,000) 992,002
-------------
U.S. TREASURY NOTES--70.0%
6,000,000 5.125%, 3/31/1998 5,963,820
4,000,000 5.125%, 12/31/1998 3,939,600
4,000,000 5.25%, 7/31/1998 3,966,400
5,000,000 5.625%, 6/30/1997 5,005,900
5,000,000 5.625%, 11/30/2000 4,888,100
4,000,000 5.75%, 10/31/1997 4,005,480
2,000,000 6.125%, 7/31/2000 1,991,720
5,000,000 6.25%, 8/31/2000 4,995,400
3,000,000 6.25%, 10/31/2001 2,984,160
7,000,000 6.50%, 4/30/1997 7,015,330
4,000,000 6.625%, 7/31/2001 4,037,920
4,000,000 6.75%, 6/30/1999 4,053,760
2,000,000 7.50%, 10/31/1999 2,063,680
4,000,000 7.50%, 11/15/2001 4,179,040
-------------
TOTAL U.S. TREASURY NOTES
(identified cost
$59,135,977) 59,090,310
-------------
(A) REPURCHASE AGREEMENT--8.4%
7,102,000 Cantor Fitzgerald Securities,
5.340%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 7,102,000
-------------
TOTAL INVESTMENTS (identified
cost $83,281,477) $ 83,351,823
===========
</TABLE>
(See Notes to Portfolios of Investments)
DG GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--8.3%
BANKING--0.4%
$ 1,000,000 NationsBank Corp., 5.375%,
4/15/2000 $ 967,900
-------------
BUSINESS EQUIPMENT &
SERVICES--0.6%
1,500,000 International Business
Machines Corp., 6.375%,
11/1/1997 1,507,005
-------------
CONSUMER NON-DURABLES--0.8%
889,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/2002 890,849
1,000,000 H. J. Heinz Co., 6.75%,
10/15/1999 1,008,380
-------------
Total 1,899,229
-------------
FINANCIAL SERVICES--0.6%
1,500,000 Ford Motor Credit Corp.,
5.625%, 3/3/1997 1,500,945
-------------
HEALTHCARE--0.4%
1,000,000 Upjohn Co., 5.875%, 4/15/2000 982,310
-------------
PHARMACEUTICALS-HEALTH
CARE--0.6%
1,400,000 American Home Products Corp.,
7.70%, 2/15/2000 1,444,198
-------------
PRINTING & PUBLISHING--0.6%
1,500,000 Gannett, Inc., 5.25%, 3/1/1998 1,491,735
-------------
RAW MATERIALS--0.5%
889,000 Du Pont (E.I.) de Nemours &
Co., 6.75%, 10/15/2002 892,823
437,000 Du Pont (E.I.) de Nemours &
Co., 9.15%, 4/15/2000 469,849
-------------
Total 1,362,672
-------------
RETAIL TRADE--0.5%
1,200,000 Wal-Mart, Inc., 5.50%,
9/15/1997 1,199,208
-------------
SHELTER--0.2%
437,000 Kimberly Clark Corp., 9.125%,
6/1/1997 441,012
-------------
TECHNOLOGY SERVICES--0.2%
437,000 Texas Instruments, Inc.,
9.25%, 6/15/2003 490,257
-------------
(See Notes to Portfolios of Investments)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (continued)
UTILITIES--2.9%
$ 1,000,000 Alabama Power Co., 6.75%,
2/1/2003 $ 984,720
1,500,000 GTE California, Inc., 6.25%,
1/15/1998 1,505,250
1,500,000 New England Telephone &
Telegraph Co., 6.25%,
12/15/1997 1,506,135
1,500,000 Northern States Power Co.,
5.50%, 2/1/1999 1,478,385
1,000,000 Pacific Gas & Electric Co.,
6.25%, 3/1/2004 964,950
1,000,000 Southern California Edison
Co., 5.625%, 10/1/2002 945,640
-------------
Total 7,385,080
-------------
TOTAL CORPORATE BONDS
(identified cost
$20,560,015) 20,671,551
-------------
GOVERNMENT AGENCIES--0.8%
FEDERAL HOME LOAN BANK--0.8%
2,000,000 6.790%, 2/5/2002 (identified
cost $2,000,000) 1,998,780
-------------
U.S. TREASURY
OBLIGATIONS--78.2%
TREASURY BONDS--20.8%
10,000,000 6.875%, 8/15/2025 9,975,900
9,000,000 7.125%, 2/15/2023 9,211,680
7,000,000 7.25%, 8/15/2022 7,264,810
7,000,000 7.500%, 11/15/2016 7,448,770
10,000,000 7.50%, 5/15/2002 10,485,600
7,000,000 7.625%, 11/15/2022 7,579,040
-------------
Total 51,965,800
-------------
TREASURY NOTES--57.4%
8,000,000 5.75%, 10/31/2000 7,860,160
10,000,000 5.75%, 8/15/2003 9,636,300
9,000,000 5.75%, 9/30/1997 9,014,130
10,000,000 5.875%, 11/15/2005 9,552,200
8,000,000 5.875%, 2/15/2004 7,733,760
10,000,000 5.875%, 7/31/1997 10,021,700
9,000,000 6.125%, 5/15/1998 9,033,210
10,000,000 6.125%, 7/31/2000 9,958,600
9,000,000 6.50%, 8/15/2005 8,971,740
5,000,000 7.00%, 7/15/2006 5,142,400
9,000,000 7.125%, 10/15/1998 9,159,120
10,000,000 7.50%, 10/31/1999 10,318,400
</TABLE>
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS
(continued)
TREASURY NOTES (continued)
$ 10,000,000 7.75%, 1/31/2000 $ 10,405,700
9,000,000 7.75%, 2/15/2001 9,445,950
7,000,000 7.875%, 8/15/2001 7,403,760
9,000,000 8.00%, 5/15/2001 9,544,410
-------------
Total 143,201,540
-------------
TOTAL U.S. TREASURY
OBLIGATIONS (identified cost
$196,620,725) 195,167,340
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--11.6%
$ 29,054,000 Cantor Fitzgerald, 5.34%,
dated 2/28/1997, due
3/3/1997 (at amortized cost) $ 29,054,000
-------------
TOTAL INVESTMENTS (identified
cost $248,234,740) $ 246,891,671
===========
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES--94.3%
ALABAMA--3.3%
$ 500,000 Huntsville, AL, GO LT
Warrants (Series A), 6.00%
(Original Issue Yield:
6.325%), 11/1/2012 AA $ 522,275
1,000,000 Jefferson County, AL, Sewer
Revenue Bonds, 6.00%
(Original Issue Yield:
6.30%), 9/1/2013 AA- 1,030,720
------------
Total 1,552,995
------------
ARIZONA--2.1%
1,000,000 Phoenix, AZ, GO UT
Refunding Bonds (Series
C), 4.90% (Original Issue
Yield: 5.00%), 7/1/2008 AA+ 989,230
------------
CALIFORNIA--2.3%
1,000,000 California State, GO UT
Public Improvement Bonds,
5.75%, 5/1/2007 A+ 1,058,720
------------
CONNECTICUT--2.3%
1,000,000 Connecticut State, GO UT
Public Improvement Bonds
(Series C), 5.80%,
8/15/2008 AA- 1,055,010
------------
FLORIDA--8.5%
1,000,000 Broward County, FL School
District, GO UT Refunding
Bonds, 5.60% (Original
Issue Yield: 5.80%),
2/15/2007 AA- 1,045,340
1,000,000 Florida State Board of
Education Administration,
GO UT Refunding Bonds
(Series (D), 5.00%
(Original Issue Yield:
5.15%), 6/1/2015 AA 947,730
1,000,000 Jacksonville, FL Electric
Authority, Refunding
Revenue Bonds (Issue 2-
Series 8), 5.50% (St.
John's River)/(Original
Issue Yield: 5.582%),
10/1/2013 AA 992,960
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
FLORIDA--CONTINUED
$ 1,000,000 St. Petersburg, FL Public
Utility, Water & Sewer
Revenue Bonds, 5.50%,
10/1/2009 AA- $ 1,023,650
------------
Total 4,009,680
------------
HAWAII--3.3%
500,000 Hawaii State, GO UT Bonds
(Series CB), 5.75%
(Original Issue Yield:
5.95%), 1/1/2008 AA 532,130
1,000,000 Honolulu, HI City & County,
GO UT Improvement
Refunding Bonds (Series
B), 5.50% (Original Issue
Yield: 5.70%), 10/1/2011 AA 1,023,670
------------
Total 1,555,800
------------
ILLINOIS--3.3%
1,000,000 Illinois State, GO UT
Bonds, 5.60% (Original
Issue Yield: 5.65%),
4/1/2008 AA- 1,029,950
500,000 Illinois State, GO UT
Refunding Bonds, 5.875%
(Original Issue Yield:
6.05%), 6/1/2011 AA- 511,200
------------
Total 1,541,150
------------
INDIANA--1.1%
500,000 Indianapolis, IN, Local
Public Improvement Revenue
Bonds, 6.00% (Original
Issue Yield: 6.40%),
7/1/2010 AA- 521,770
------------
KENTUCKY--2.1%
1,000,000 Kentucky State Property &
Buildings Commission,
(Project No. 55) Refunding
Revenue Bonds, 5.00%
(Original Issue Yield:
5.20%), 9/1/2009 A+ 984,030
------------
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
LOUISIANA--1.1%
$ 500,000 Louisiana PFA, Hospital
Refunding Revenue Bonds
(Series C), 6.05% Our Lady
of Lake Regional)/(MBIA
INS)/(Original Issue
Yield: 6.15%), 12/1/2008 AAA $ 524,200
------------
MARYLAND--2.2%
1,000,000 Maryland State, GO UT Bonds
(Series BB), 5.50%,
6/1/2009 AAA 1,037,760
------------
MASSACHUSETTS--3.3%
450,000 Commonwealth of
Massachusetts, GO UT Bonds
(Series A), 6.00% (CGIC
LOC)/(Original Issue
Yield: 7.618%), 6/1/2011 AAA 477,914
1,000,000 Commonwealth of
Massachusetts, GO UT
Refunding Revenue Bonds
(Series A), 6.25%,
7/1/2003 AAA 1,088,360
------------
Total 1,566,274
------------
MINNESOTA--2.1%
1,000,000 Minnesota State, GO UT,
5.00% (Original Issue
Yield: 5.15%), 11/1/2008 AA+ 999,490
------------
MISSISSIPPI--13.3%
1,000,000 Hinds County, MS, GO UT
Refunding Bonds, 5.50%
(MBIA INS)/(Original Issue
Yield: 5.75%), 3/1/2008 AAA 1,040,640
1,125,000 Jackson, MS, GO UT
Refunding Bonds (Series
A), 5.85% (MBIA INS),
5/1/2006 AAA 1,174,342
1,000,000 Madison County, MS School
District, GO UT Refunding
Bonds, 5.10% (AMBAC
INS)/(Original Issue
Yield: 5.10%), 6/1/2008 AAA 1,000,040
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
MISSISSIPPI continued
$ 1,000,000 Mississippi Hospital
Equipment & Facilities
Authority, Refunding
Revenue Bonds, 5.50%
(North Mississippi Health
Services-1)/(AMBAC
INS)/(Original Issue
Yield: 5.93%), 5/15/2009 AAA $ 1,013,760
1,000,000 Mississippi State, GO UT
Bonds, 5.125% (Original
Issue Yield: 5.30%),
12/1/2011 AA 987,590
1,000,000 Tupelo, MS Public School
District, GO UT Refunding
Bonds, 5.00% (AMBAC
INS)/(Original Issue
Yield: 5.10%), 12/1/2007 AAA 1,002,030
------------
Total 6,218,402
------------
MISSOURI--2.1%
1,000,000 Missouri State, Water
Pollution Control
Refunding Bonds (Series
B), 5.00% (Original Issue
Yield: 5.60%), 8/1/2010 AAA 992,720
------------
MONTANA--2.1%
1,000,000 Montana State, GO UT Bonds
(Series A), 4.875% (Long
Range Building
Program)/(Original Issue
Yield: 4.95%), 8/1/2009 AA- 989,860
------------
NEVADA--3.2%
500,000 Las Vegas Valley, NV Water
District, GO LT Refunding
Revenue Bonds, 5.75% (MBIA
INS)/ (Original Issue
Yield: 5.90%), 9/1/2008 AAA 514,350
1,000,000 Nevada State, (Project R-5)
GO LT Bonds (Series A),
4.90% (Original Issue
Yield: 5.00%), 11/1/2007 AA 996,070
------------
Total 1,510,420
------------
NEW JERSEY--1.1%
500,000 New Jersey State, GO UT
Refunding Bonds (Series
D), 5.90% (Original Issue
Yield: 6.05%), 2/15/2008 AA+ 530,975
------------
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
NEW YORK--2.2%
$ 1,000,000 New York State, GO UT
Bonds, 5.50% (Original
Issue Yield: 5.55%),
7/15/2011 A- $ 1,007,510
------------
NORTH DAKOTA--1.1%
500,000 North Dakota State Building
Authority, Lease Revenue
Bonds (Series A), 6.00%
(Original Issue Yield:
6.05%), 6/1/2010 AAA 524,030
------------
OREGON--2.1%
1,000,000 Portland, OR, GO UT
Refunding Revenue Bonds,
4.90% (Original Issue
Yield: 5.00%), 10/1/2007 NR 1,003,250
------------
RHODE ISLAND--1.1%
500,000 Providence, RI, GO UT
Bonds, 5.90% (MBIA
INS)/(Original Issue
Yield: 6.05%), 1/15/2009 AAA 523,970
------------
TENNESSEE--2.2%
1,000,000 Memphis, TN, GO UT
Refunding Bonds, 4.90%
(Original Issue Yield:
5.05%), 8/1/2006 AA 1,007,100
------------
TEXAS--8.8%
500,000 Corpus Christi, TX, GO UT
Refunding Bonds, 6.00%
(FGIC INS)/(Original Issue
Yield: 6.15%), 3/1/2010 AAA 521,590
500,000 El Paso, TX Independent
School District, GO UT
Refunding Bonds (Series
A), 5.75% (PSFG
INS)/(Original Issue
Yield: 6.15%), 7/1/2007 AAA 519,605
500,000 Harris County, TX Flood
Control District, GO LT
Bonds (Series B), 6.20%
(Original Issue Yield:
6.25%), 10/1/2002 (@100) AA 542,175
1,000,000 Houston, TX Independent
School District, GO UT
Refunding Bonds, 5.50%
(PSFG INS)/(Original Issue
Yield: 5.55%), 8/15/2008 AAA 1,021,490
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
TEXAS (continued)
$ 500,000 Texas State Public Finance
Authority, GO UT Refunding
Bonds (Series A), 5.90%
(Original Issue Yield:
6.00%), 10/1/2011 AA $ 520,205
1,000,000 Texas State, GO UT Water
Development Bonds, 5.20%
(Original Issue Yield:
5.25%), 8/1/2010 AA 997,090
------------
Total 4,122,155
------------
VIRGINIA--3.3%
1,000,000 Fairfax County, VA, GO UT
Bonds (Series A), 5.50%
(Original Issue Yield:
5.70%), 6/1/2008 AAA 1,032,190
500,000 Virginia State
Transportation Board,
Refunding Revenue Bonds,
6.00% (Original Issue
Yield: 6.45%), 4/1/2010 AA 517,900
------------
Total 1,550,090
------------
WASHINGTON--10.3%
1,500,000 King County, WA Library
System, UT GO Bonds,
6.15%, 12/1/2010 AA- 1,588,395
500,000 King County, WA, GO UT
Refunding Bonds (Series
A), 6.00%, 12/1/2010 AA+ 522,645
500,000 Port of Seattle, WA,
Revenue Bonds, 6.25%
(Original Issue Yield:
6.566%), 11/1/2010 AA- 520,795
650,000 Tacoma, WA Electric System,
Refunding Revenue Bonds,
6.25% (AMBAC
INS)/(Original Issue
Yield: 6.60%), 1/1/2011 AAA 686,329
500,000 Washington State, GO LT
Refunding Revenue Bonds
(Series R92-B), 6.25%
(Original Issue Yield:
6.80%), 9/1/2009 AA 525,460
1,000,000 Washington State, GO UT
Refunding Bonds (Series
R-96B), 5.00% (Original
Issue Yield: 5.45%),
7/1/2010 AA 977,570
------------
Total 4,821,194
------------
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
SECURITIES (continued)
WISCONSIN--4.4%
$ 500,000 Green Bay, WI Area Public
School District, GO UT
Bonds (Series F), 6.00%
(Original Issue Yield:
6.10%), 4/1/2010 NR $ 530,115
500,000 Wisconsin State, GO UT
Bonds (Series A), 6.30%
(Original Issue Yield:
6.60%), 5/1/2012 AA 542,180
1,000,000 Wisconsin State, GO UT
Bonds (Series C), 5.25%
(Original Issue Yield:
5.45%), 5/1/2011 AA 997,450
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
------------
Total $ 2,069,745
------------
TOTAL LONG-TERM MUNICIPAL
SECURITIES (identified
cost $43,080,804) 44,267,530
=============
</TABLE>
<TABLE>
<CAPTION>
CREDIT
SHARES RATING* VALUE
------------------------------------------------------
<C> <S> <C> <C>
MUTUAL FUND SHARES--2.5%
1,152,558 Dreyfus Tax Exempt Cash
Management (at net asset
value) -- 1,152,558
------------
TOTAL INVESTMENTS
(identified cost
$44,233,362) $ 45,420,088
=============
</TABLE>
(See Notes to Portfolios of Investments)
DG U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--72.4%
U.S. TREASURY BILLS--61.4%
$ 10,000,000 3/13/1997 $ 9,983,283
10,000,000 3/20/1997 9,973,558
10,000,000 4/10/1997 9,944,167
10,000,000 4/17/1997 9,934,135
10,000,000 4/24/1997 9,924,625
10,000,000 5/1/1997 9,915,447
10,000,000 5/8/1997 9,905,933
10,000,000 5/22/1997 9,884,858
10,000,000 5/29/1997 9,874,906
10,000,000 6/5/1997 9,864,800
10,000,000 6/12/1997 9,854,942
10,000,000 6/19/1997 9,847,833
10,000,000 6/26/1997 9,837,521
10,000,000 7/3/1997 9,828,983
10,000,000 7/10/1997 9,820,057
10,000,000 7/17/1997 9,806,800
10,000,000 7/24/1997 9,795,792
-------------
Total 167,997,640
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
U.S. TREASURY NOTES--11.0%
$ 10,000,000 6.500%, 5/15/1997 $ 10,024,127
10,000,000 6.625%, 3/31/1997 10,011,102
10,000,000 6.875%, 3/31/1997 10,012,363
-------------
Total 30,047,592
-------------
TOTAL U.S. TREASURY
OBLIGATIONS 198,045,232
-------------
(A) REPURCHASE AGREEMENTS--27.6%
40,000,000 Cantor Fitzgerald Securities,
5.340%, dated 2/28/1997, due
3/3/1997 40,000,000
35,576,900 HSBC Securities, Inc., 5.300%,
dated 2/28/1997, due
3/3/1997 35,576,900
-------------
TOTAL REPURCHASE AGREEMENTS 75,576,900
-------------
TOTAL INVESTMENTS
(at amortized cost) $ 273,622,132
===========
</TABLE>
(See Notes to Portfolios of Investments)
NOTES TO PORTFOLIOS OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Non-income producing security.
(*) Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
The following acronyms are used throughout the portfolios:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
CGIC --Capital Guaranty Insurance Corporation
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
INS --Insured
LOC --Letter of Credit
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PCR --Pollution Control Revenue
PFA --Public Facility Authority
PRF --Prerefunded
PSFG --Permanent School Fund Guarantee
UT --Unlimited Tax
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<CAPTION>
COST OF NET
INVESTMENTS FOR UNREALIZED GROSS GROSS
FEDERAL TAX APPRECIATION UNREALIZED UNREALIZED TOTAL NET
DG INVESTOR SERIES PURPOSES (DEPRECIATION) APPRECIATION DEPRECIATION ASSETS**
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Equity Fund $ 318,427,891 $ 171,265,156 $ 177,348,434 $6,083,278 $ 490,391,901
Opportunity Fund 70,806,433 9,714,105 14,728,929 5,014,824 80,527,148
Limited Term Fund 83,281,477 70,346 470,785 400,439 84,385,427
Government Income Fund 248,234,740 (1,343,069) 2,473,937 3,817,006 249,618,442
Municipal Income Fund 44,233,362 1,186,726 1,250,386 63,660 46,927,926
Money Market Fund 273,622,132*** -- -- -- 273,452,926
</TABLE>
** The categories of investments are shown as a percentage of net assets at
February 28, 1997.
*** At amortized cost.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED
DG TERM
DG EQUITY OPPORTUNITY GOVERNMENT
FUND FUND INCOME FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Investments in repurchase agreements $ 36,116,589 $7,133,000 $7,102,000
- ------------------------------------------------------------------
Investments in other securities 453,576,458 73,387,538 76,249,823
- ------------------------------------------------------------------ ----------- ----------- -----------
Total investments in securities, at value 489,693,047 80,520,538 83,351,823
- ------------------------------------------------------------------
Cash 200 -- --
- ------------------------------------------------------------------
Income receivable 649,673 8,041 1,070,531
- ------------------------------------------------------------------
Receivable for investments sold -- -- --
- ------------------------------------------------------------------
Receivable for shares sold 188,737 34,104 --
- ------------------------------------------------------------------
Deferred expenses 5,506 1,271 473
- ------------------------------------------------------------------ ----------- ----------- -----------
Total assets 490,537,163 80,563,954 84,422,827
- ------------------------------------------------------------------ ----------- ----------- -----------
LIABILITIES:
- ------------------------------------------------------------------
Payable for shares redeemed 109,799 7,639 12,799
- ------------------------------------------------------------------
Income distribution payable -- -- --
- ------------------------------------------------------------------
Accrued expenses 35,463 29,167 24,601
- ------------------------------------------------------------------ ----------- ----------- -----------
Total liabilities 145,262 36,806 37,400
- ------------------------------------------------------------------ ----------- ----------- -----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------
Paid in capital 318,556,876 71,063,479 87,809,218
- ------------------------------------------------------------------
Net unrealized appreciation of investments 171,265,156 9,714,605 70,346
- ------------------------------------------------------------------
Accumulated net realized gain (loss) on investments 15,884 (250,936) (3,529,690)
- ------------------------------------------------------------------
Undistributed net investment income 553,985 -- 35,553
- ------------------------------------------------------------------ ----------- ----------- -----------
Total Net Assets $490,391,901 $80,527,148 $84,385,427
- ------------------------------------------------------------------ ----------- ----------- -----------
NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share (net
assets / shares outstanding) $ 16.68 $ 13.53 $ 9.71
- ------------------------------------------------------------------ ----------- ----------- -----------
Offering Price Per Share*** $ 17.28* $ 14.02 * $ 9.91 **
- ------------------------------------------------------------------ ----------- ----------- -----------
Shares Outstanding 29,394,313 5,951,609 8,689,448
- ------------------------------------------------------------------ ----------- ----------- -----------
Investments, at identified cost $318,427,891 $70,805,933 $83,281,477
- ------------------------------------------------------------------ ----------- ----------- -----------
Investments, at tax cost $318,427,891 $70,806,433 $83,281,477
- ------------------------------------------------------------------ ----------- ----------- -----------
</TABLE>
* Computation of offering price: 100/96.5 of net asset value.
** Computation of offering price: 100/98.0 of net asset value.
*** See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG U.S.
DG GOVERNMENT
DG MUNICIPAL MONEY
GOVERNMENT INCOME MARKET
INCOME FUND FUND FUND
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Investments in repurchase agreements $29,054,000 $ -- $75,576,900
- ------------------------------------------------------------------
Investments in other securities 217,837,671 45,420,088 198,045,232
- ------------------------------------------------------------------ ------------ ---------- ------------
Total investments in securities, at value 246,891,671 45,420,088 273,622,132
- ------------------------------------------------------------------
Cash -- -- --
- ------------------------------------------------------------------
Income receivable 2,715,430 660,496 765,275
- ------------------------------------------------------------------
Receivable for investments sold -- 992,875 --
- ------------------------------------------------------------------
Receivable for shares sold 90,854 -- --
- ------------------------------------------------------------------
Deferred expenses 3,766 435 2,418
- ------------------------------------------------------------------ ------------ ---------- ------------
Total assets 249,701,721 47,073,894 274,389,825
- ------------------------------------------------------------------ ------------ ---------- ------------
LIABILITIES:
- ------------------------------------------------------------------
Payable for shares redeemed 49,040 116,720 7,588
- ------------------------------------------------------------------
Income distribution payable -- -- 901,557
- ------------------------------------------------------------------
Accrued expenses 34,239 29,248 27,754
- ------------------------------------------------------------------ ------------ ---------- ------------
Total liabilities 83,279 145,968 936,899
- ------------------------------------------------------------------ ------------ ---------- ------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------
Paid in capital 252,978,362 45,525,103 273,452,926
- ------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (1,343,069) 1,186,726 --
- ------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (2,062,645) 104,977 --
- ------------------------------------------------------------------
Undistributed net investment income 45,794 111,120 --
- ------------------------------------------------------------------ ------------ ---------- ------------
Total Net Assets $249,618,442 $46,927,926 $273,452,926
- ------------------------------------------------------------------ ------------ ---------- ------------
NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share (net
assets / shares outstanding) $ 9.69 $ 10.59 $ 1.00
- ------------------------------------------------------------------ ------------ ---------- ------------
Offering Price Per Share** $ 9.89 * $ 10.81* $ 1.00
- ------------------------------------------------------------------ ------------ ---------- ------------
Shares Outstanding 25,761,234 4,433,345 273,452,926
- ------------------------------------------------------------------ ------------ ---------- ------------
Investments, at identified cost $248,234,740 $44,233,362 $273,622,132
- ------------------------------------------------------------------ ------------ ---------- ------------
Investments, at tax cost $248,234,740 $44,233,362 $273,622,132
- ------------------------------------------------------------------ ------------ ---------- ------------
</TABLE>
* Computation of offering price: 100/98.0 of net asset value.
** See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED
DG TERM
DG EQUITY OPPORTUNITY GOVERNMENT
FUND FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Dividends $ 6,283,804 $ 234,802 $ --
- -------------------------------------------------------------------
Interest 1,755,374 418,540 5,339,716
- ------------------------------------------------------------------- ---------- ----------- -----------
Total income 8,039,178 653,342 5,339,716
- ------------------------------------------------------------------- ---------- ----------- -----------
EXPENSES:
- -------------------------------------------------------------------
Investment advisory fee 3,213,522 684,142 527,974
- -------------------------------------------------------------------
Administrative personnel and services fee 467,226 100,000 96,156
- -------------------------------------------------------------------
Custodian fees 58,229 23,801 18,237
- -------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 59,314 43,753 31,723
- -------------------------------------------------------------------
Directors'/Trustees' fees 5,513 2,920 4,729
- -------------------------------------------------------------------
Auditing fees 12,252 13,083 12,252
- -------------------------------------------------------------------
Legal fees 2,191 1,480 2,001
- -------------------------------------------------------------------
Portfolio accounting fees 85,171 44,796 45,829
- -------------------------------------------------------------------
Share registration costs 33,551 17,460 17,995
- -------------------------------------------------------------------
Printing and postage 3,656 4,944 4,662
- -------------------------------------------------------------------
Insurance premiums 4,400 455 2,768
- -------------------------------------------------------------------
Miscellaneous 11,027 1,482 9,113
- ------------------------------------------------------------------- ---------- ----------- -----------
Total expenses 3,956,052 938,316 773,439
- -------------------------------------------------------------------
WAIVERS--
- -------------------------------------------------------------------
Waiver of investment advisory fee -- (115,580) (175,992)
- -------------------------------------------------------------------
Waiver of administrative personnel and services fee -- -- --
- ------------------------------------------------------------------- ---------- ----------- -----------
Total waivers -- (115,580) (175,992)
- ------------------------------------------------------------------- ---------- ----------- -----------
Net expenses 3,956,052 822,736 597,447
- ------------------------------------------------------------------- ---------- ----------- -----------
Net investment income (loss) 4,083,126 (169,394) 4,742,269
- ------------------------------------------------------------------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain (loss) on investments 10,108,185 5,530,831 (1,008,150)
- -------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 63,747,215 1,007,879 293,452
- ------------------------------------------------------------------- ---------- ----------- -----------
Net realized and unrealized gain (loss) on investments 73,855,400 6,538,710 (714,698)
- ------------------------------------------------------------------- ---------- ----------- -----------
Change in net assets resulting from operations $77,938,526 $6,369,316 $4,027,571
- ------------------------------------------------------------------- ---------- ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG DG U.S.
DG MUNICIPAL GOVERNMENT
GOVERNMENT INCOME MONEY
INCOME FUND FUND MARKET FUND
----------- ---------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Dividends $ -- $ -- $ --
- -------------------------------------------------------------------
Interest 14,877,668 2,508,540 11,924,422
- ------------------------------------------------------------------- ----------- --------- -----------
Total income 14,877,668 2,508,540 11,924,422
- ------------------------------------------------------------------- ----------- --------- -----------
EXPENSES:
- -------------------------------------------------------------------
Investment advisory fee 1,369,096 279,232 1,138,567
- -------------------------------------------------------------------
Administrative personnel and services fee 248,963 100,000 248,304
- -------------------------------------------------------------------
Custodian fees 26,537 25,603 36,024
- -------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 43,173 30,773 45,617
- -------------------------------------------------------------------
Directors'/Trustees' fees 5,693 3,084 3,613
- -------------------------------------------------------------------
Auditing fees 12,000 12,254 12,252
- -------------------------------------------------------------------
Legal fees 1,590 1,975 2,001
- -------------------------------------------------------------------
Portfolio accounting fees 65,951 53,219 55,764
- -------------------------------------------------------------------
Share registration costs 43,000 16,610 33,651
- -------------------------------------------------------------------
Printing and postage 4,767 4,892 4,571
- -------------------------------------------------------------------
Insurance premiums 4,907 2,809 4,173
- -------------------------------------------------------------------
Miscellaneous 8,743 7,028 11,913
- ------------------------------------------------------------------- ----------- --------- -----------
Total expenses 1,834,420 537,479 1,596,450
- -------------------------------------------------------------------
WAIVERS--
- -------------------------------------------------------------------
Waiver of investment advisory fees (228,183) (162,886) (455,427)
- -------------------------------------------------------------------
Waiver of administrative personnel and services fee -- (49,179) --
- ------------------------------------------------------------------- ----------- --------- -----------
Total waivers (228,183) (212,065) (455,427)
- ------------------------------------------------------------------- ----------- --------- -----------
Net expenses 1,606,237 325,414 1,141,023
- ------------------------------------------------------------------- ----------- --------- -----------
Net investment income 13,271,431 2,183,126 10,783,399
- ------------------------------------------------------------------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain (loss) on investments (1,412,964) 116,120 --
- -------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (2,801,515) (430,649) --
- ------------------------------------------------------------------- ----------- --------- -----------
Net realized and unrealized gain (loss) on investments (4,214,479) (314,529) --
- ------------------------------------------------------------------- ----------- --------- -----------
Change in net assets resulting from operations $9,056,952 $1,868,597 $10,783,399
- ------------------------------------------------------------------- ----------- --------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG DG
EQUITY FUND OPPORTUNITY FUND
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------
OPERATIONS--
- ----------------------------------------------------
Net investment income (loss) $ 4,083,126 $ 4,256,188 $ (169,394) $ 141
- ----------------------------------------------------
Net realized gain on investment transactions 10,108,185 13,664,210 5,530,831 4,440,660
- ----------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments 63,747,215 81,182,937 1,007,879 7,971,651
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from operations 77,938,526 99,103,335 6,369,316 12,412,452
- ---------------------------------------------------- ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------
Distributions from net investment income (3,964,723) (4,438,344) -- --
- ----------------------------------------------------
Distributions from net realized gain on investments (10,093,485) (13,575,996) (4,554,267) (5,952,830)
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (14,058,208) (18,014,340) (4,554,267) (5,952,830)
- ---------------------------------------------------- ------------ ------------ ------------ ------------
SHARE TRANSACTIONS--
- ----------------------------------------------------
Proceeds from sale of shares 102,599,959 129,890,889 35,538,237 19,841,733
- ----------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 8,350,813 10,503,917 3,267,077 4,248,370
- ----------------------------------------------------
Cost of shares redeemed (69,584,226) (96,336,688) (13,570,540) (13,735,953)
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets from share transactions 41,366,546 44,058,118 25,234,774 10,354,150
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets 105,246,864 125,147,113 27,049,823 16,813,772
- ----------------------------------------------------
NET ASSETS:
- ----------------------------------------------------
Beginning of period 385,145,037 259,997,924 53,477,325 36,663,553
- ---------------------------------------------------- ------------ ------------ ------------ ------------
End of period $490,391,901 $385,145,037 $80,527,148 $53,477,325
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Undistributed net investment income included in net
assets at end of period $ 553,985 $ 435,582 $ -- $ 239
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Net realized gain as computed for federal tax
purposes $10,108,185 $13,575,513 $ 4,663,970 $ 5,471,469
- ---------------------------------------------------- ------------ ------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED TERM DG
GOVERNMENT INCOME FUND GOVERNMENT INCOME FUND
---------------------------- -----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 4,742,269 $ 5,278,987 $13,271,431 $ 8,933,122
- ---------------------------------------------------
Net realized gain (loss) on investment transactions (1,008,150) (677,996) (1,412,964) 1,713,476
- ---------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments 293,452 2,272,579 (2,801,515) 4,322,771
- --------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from operations 4,027,571 6,873,570 9,056,952 14,969,369
- --------------------------------------------------- ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (4,818,533) (5,261,106) (13,349,136) (8,982,698)
- ---------------------------------------------------
Distributions from net realized gain on investments -- -- -- --
- --------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (4,818,533) (5,261,106) (13,349,136) (8,982,698)
- --------------------------------------------------- ------------ ------------ ------------ ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 28,760,569 26,209,467 113,591,135 153,671,801
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 2,038,161 2,236,332 5,048,640 2,976,364
- ---------------------------------------------------
Cost of shares redeemed (38,897,952) (32,999,086) (48,955,255) (146,722,215)
- --------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets from share transactions (8,099,222) (4,553,287) 69,684,520 9,925,950
- --------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets (8,890,184) (2,940,823) 65,392,336 15,912,621
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 93,275,611 96,216,434 184,226,106 168,313,485
- --------------------------------------------------- ------------ ------------ ------------ ------------
End of period $84,385,427 $93,275,611 $249,618,442 $ 184,226,106
- --------------------------------------------------- ------------ ------------ ------------ ------------
Undistributed net investment income included in net
assets at end of period $ 35,553 $ 56,525 $ 45,794 $ 62,896
- --------------------------------------------------- ------------ ------------ ------------ ------------
Net realized loss as computed for federal tax
purposes $ (758,580) $(1,040,337) $ (498,409) $ (467,764)
- --------------------------------------------------- ------------ ------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG DG U.S. GOVERNMENT
MUNICIPAL INCOME FUND MONEY MARKET FUND
---------------------------- ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------
OPERATIONS--
- --------------------------------------------------
Net investment income $ 2,183,126 $ 2,033,071 $ 10,783,399 $ 11,132,692
- --------------------------------------------------
Net realized gain on investment transactions 116,120 36,102 -- --
- --------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments (430,649) 2,105,078 -- --
- -------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from operations 1,868,597 4,174,251 10,783,399 11,132,692
- -------------------------------------------------- ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------
Distributions from net investment income (2,140,424) (1,990,513) (10,783,399) (11,132,692)
- --------------------------------------------------
Distributions from net realized gain on
investments (47,122) (11,600) -- --
- -------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (2,187,546) (2,002,113) (10,783,399) (11,132,692)
- -------------------------------------------------- ------------ ------------ ------------ ------------
SHARE TRANSACTIONS--
- --------------------------------------------------
Proceeds from sale of shares 13,965,127 17,982,143 550,619,637 505,711,379
- --------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 34,266 25,625 167,230 114,789
- --------------------------------------------------
Cost of shares redeemed (11,330,842) (17,143,725) (522,981,171) (422,693,644)
- -------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets from share transactions 2,668,551 864,043 27,805,696 83,132,524
- -------------------------------------------------- ------------ ------------ ------------ ------------
Change in net assets 2,349,602 3,036,181 27,805,696 83,132,524
- --------------------------------------------------
NET ASSETS:
- --------------------------------------------------
Beginning of period 44,578,324 41,542,143 245,647,230 162,514,706
- -------------------------------------------------- ------------ ------------ ------------ ------------
End of period $46,927,926 $44,578,324 $ 273,452,926 $ 245,647,230
- -------------------------------------------------- ------------ ------------ ------------ ------------
Undistributed net investment income included in
net assets at end of period $ 111,120 $ 68,418 -- --
- -------------------------------------------------- ------------ ------------ ------------ ------------
Net realized gain as computed for federal tax
purposes $ 116,120 $ 36,102 -- --
- -------------------------------------------------- ------------ ------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET
REALIZED DISTRIBUTIONS
AND DISTRIBUTIONS IN EXCESS OF
NET ASSET NET UNREALIZED TOTAL DISTRIBUTIONS FROM NET NET
YEAR ENDED VALUE, INVESTMENT GAIN/(LOSS) FROM FROM NET REALIZED REALIZED GAIN
FEBRUARY 28 OR BEGINNING INCOME ON INVESTMENT INVESTMENT GAIN ON ON
29, OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS INVESTMENTS
- --------------- ----------- ------------ ------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
1993(a) $ 10.00 0.12 0.52 0.64 (0.10) -- --
1994 $ 10.54 0.14 0.38 0.52 (0.14) (0.05) --
1995 $ 10.87 0.16 0.71 0.87 (0.16) (0.17) --
1996 $ 11.41 0.16 3.63 3.79 (0.17) (0.54) --
1997 $ 14.49 0.14 2.54 2.68 (0.14) (0.35) --
OPPORTUNITY
FUND
1995(b) $ 10.00 0.02 1.17 1.19 (0.02) (0.02) --
1996 $ 11.15 -- 3.30 3.30 -- (1.66) --
1997 $ 12.79 (.03) 1.60 1.57 -- (0.83) --
LIMITED TERM GOVERNMENT
INCOME FUND
1993(a) $ 10.00 0.36 0.07 0.43 (0.36) -- --
1994 $ 10.07 0.52 (0.17) 0.35 (0.52) (0.03) --
1995 $ 9.87 0.49 (0.23) 0.26 (0.48) -- --
1996 $ 9.65 0.54 0.15 0.69 (0.54) -- --
1997 $ 9.80 0.52 (0.08) 0.44 (0.53) -- --
GOVERNMENT INCOME FUND
1993(a) $ 10.00 0.37 0.25 0.62 (0.37) -- --
1994 $ 10.25 0.55 (0.09) 0.46 (0.55) (0.25) (0.01)(h)
1995 $ 9.90 0.54 (0.44) 0.10 (0.53) -- --
1996 $ 9.47 0.58 0.41 0.99 (0.59) -- --
1997 $ 9.87 0.57 (0.18) 0.39 (0.57) -- --
MUNICIPAL
INCOME FUND
1993(c) $ 10.00 0.07 0.49 0.56 (0.05) -- --
1994 $ 10.51 0.48 0.08 0.56 (0.49) (0.01) --
1995 $ 10.57 0.49 (0.43) 0.06 (0.48) -- --
1996 $ 10.15 0.49 0.50 0.99 (0.48) -- --
1997 $ 10.66 0.49 (0.07) 0.42 (0.48) (0.01) --
U.S. GOVERNMENT
MONEY MARKET
FUND
1993(d) $ 1.00 0.02 -- 0.02 (0.02) -- --
1994 $ 1.00 0.03 -- 0.03 (0.03) -- --
1995 $ 1.00 0.04 -- 0.04 (0.04) -- --
1996 $ 1.00 0.05 -- 0.05 (0.05) -- --
1997 $ 1.00 0.05 -- 0.05 (0.05) -- --
</TABLE>
(a) Reflects operations for the period from August 3, 1992 (date of initial
public investment) to February 28, 1993.
(b) Reflects operations for the period from August 1, 1994 (date of initial
public investment) to February 28, 1995.
(c) Reflects operations for the period from December 29, 1992 (date of initial
public investment) to February 28, 1993.
(d) 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.
(e) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(f) Computed on an annualized basis.
(g) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(h) This distribution does not represent a return of capital for federal tax
purposes.
(i) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
-------------------------------------- NET ASSETS,
NET ASSET NET END OF PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT EXPENSE PERIOD (000 TURNOVER
DISTRIBUTIONS OF PERIOD RETURN(E) EXPENSES INCOME WAIVER(G) OMITTED) RATE
- ------------ ---------- ---------- --------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.10) $10.54 6.40% 0.51%(f) 2.15%(f) 0.53%(f) $181,239 28%
(0.19) $10.87 4.99% 0.96% 1.38% 0.01% $284,203 7%
(0.33) $11.41 8.23% 0.95% 1.54% -- $259,998 1%
(0.71) $14.49 33.73% 0.94% 1.24% -- $385,145 15%
(0.49) $16.68 18.79% 0.92% 0.95% -- $490,392 7%
(0.04) $11.15 11.84% 0.79%(f) 0.06%(f) 1.34%(f) $ 36,664 45%
(1.66) $12.79 31.42% 1.17% -- 0.35% $ 53,477 154%
(0.83) $13.53 12.08% 1.14% (0.24)% 0.16% $ 80,527 116%
(0.36) $10.07 4.43% 0.50%(f) 6.25%(f) 0.42%(f) $ 99,921 18%
(0.55) $ 9.87 3.52% 0.59% 5.21% 0.29% $116,600 76%
(0.48) $ 9.65 2.72% 0.63% 5.00% 0.25% $ 96,216 14%
(0.54) $ 9.80 7.34% 0.69% 5.49% 0.20% $ 93,276 56%
(0.53) $ 9.71 4.66% 0.68% 5.39% 0.20% $ 84,385 28%
(0.37) $10.25 6.40% 0.50%(f) 6.45%(f) 0.41%(f) $111,435 78%
(0.81) $ 9.90 4.55% 0.70% 5.34% 0.19% $118,695 49%
(0.53) $ 9.47 1.20% 0.68% 5.79% 0.15% $168,313 31%
(0.59) $ 9.87 10.70% 0.72% 5.96% 0.10% $184,226 87%
(0.57) $ 9.69 4.07% 0.70% 5.82% 0.10% $249,618 7%
(0.05) $10.51 5.65% 0.48%(f) 4.11%(f) 1.02%(f) $ 15,644 93%
(0.50) $10.57 5.34% 0.74% 4.60% 0.67% $ 34,435 9%
(0.48) $10.15 0.81% 0.75% 4.93% 0.41% $ 41,542 9%
(0.48) $10.66 9.96% 0.70% 4.65% 0.47% $ 44,578 20%
(0.49) $10.59 4.12% 0.70% 4.69% 0.46% $ 46,928 9%
(0.02) $ 1.00 1.97% 0.41%(f) 2.88%(f) 0.38%(f) $189,024 --
(0.03) $ 1.00 2.74% 0.54% 2.70% 0.20% $189,315 --
(0.04) $ 1.00 4.06% 0.53% 3.96% 0.20% $162,515 --
(0.05) $ 1.00 5.48% 0.51% 5.33% 0.20% $245,647 --
(0.05) $ 1.00 4.83% 0.50% 4.74% 0.20% $273,453 --
<CAPTION>
AVERAGE
COMMISSION
TOTAL RATE
DISTRIBUTION PAID(I)
- ------------ -----------
<S> <C>
(0.10) --
(0.19) --
(0.33) --
(0.71) $0.0653
(0.49) $0.0761
(0.04) --
(1.66) $0.0098
(0.83) $0.0568
(0.36) --
(0.55) --
(0.48) --
(0.54) --
(0.53) --
(0.37) --
(0.81) --
(0.53) --
(0.59) --
(0.57) --
(0.05) --
(0.50) --
(0.48) --
(0.48) --
(0.49) --
(0.02) --
(0.03) --
(0.04) --
(0.05) --
(0.05) --
</TABLE>
DG INVESTOR SERIES
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
(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 seven diversified portfolios (individually referred to as
the "Fund", or collectively as the "Funds") which are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
- ------------------------------------------------------------------------------------------------------
Provide long term capital appreciation with
DG Equity Fund current
("Equity Fund") income as a secondary objective.
- ------------------------------------------------------------------------------------------------------
DG Opportunity Fund Provide capital appreciation.
("Opportunity Fund")
- ------------------------------------------------------------------------------------------------------
DG Limited Term Government Income Fund Provide current income.
("Limited Term Fund")
- ------------------------------------------------------------------------------------------------------
DG Government Income Fund Provide current income.
("Government Income Fund")
- ------------------------------------------------------------------------------------------------------
DG Municipal Income Fund Provide dividend income that is exempt from
("Municipal Income Fund") federal regular income tax.
- ------------------------------------------------------------------------------------------------------
DG U.S. Government Money Market Fund Current income consistent with stability of
("Money Market Fund") principal and liquidity.
- ------------------------------------------------------------------------------------------------------
DG Prime Money Market Fund Current income consistent with stability of
("Prime Money Market Fund")* principal.
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Prime Money Market Fund became effective January 30, 1997, however there was
no public investment in Prime Money Market Fund as of the fiscal year ended
February 28, 1997.
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed
DG INVESTOR SERIES
- --------------------------------------------------------------------------------
corporate bonds, and other fixed income and asset-backed securities, are
generally valued at the mean of the latest bid and asked price as furnished
by an independent pricing service. Listed equity securities are valued at
the last sale price reported on a national securities exchange. The money
market funds within the Trust use the amortized cost method to value
portfolio securities, which is in accordance with Rule 2a-7 under the Act.
For all other funds within the Trust, short-term securities are valued at
the prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
REPURCHASE AGREEMENTS--It is the policy of the Funds 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 Funds 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 Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' 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 Funds
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"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing book/tax
treatments of net operating loss. The following reclassifications have been
made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
--------------------------------------
UNDISTRIBUTED
NET INVESTMENT ACCUMULATED
FUND NAME INCOME NET REALIZED LOSS
- ----------------- ----------------- -----------------
<S> <C> <C>
Opportunity Fund $ 169,155 ($169,155)
</TABLE>
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
DG INVESTOR SERIES
- --------------------------------------------------------------------------------
At February 28, 1997, the Funds, for federal tax purposes, had capital loss
carryforwards, as noted below, which will reduce each Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Funds of
any liability for federal tax.
Pursuant to the Code, such capital loss carryforwards will expire as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR
---------------------------------------- TOTAL CAPITAL
FUND 2003 2004 2005 LOSS CARRYFORWARD
-------------------------- ---------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
Government Income Fund $ 181,520 $ 467,764 $498,409 $ 1,147,693
Limited Term Fund $1,406,691 $1,040,337 $758,580 $ 3,205,608
</TABLE>
Additionally, net capital losses, as noted below, attributable to security
transactions incurred after October 31, 1996, are treated as arising on
March 1, 1997, the first day of the Funds' next taxable year.
<TABLE>
<CAPTION>
TAX LOSS
FUND PUSHFORWARD
----------------------- ----------------
<S> <C>
Government Income Fund $914,555
Limited Term Fund $324,507
Opportunity Fund $190,744
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed five years from each Fund's
commencement 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).
DG INVESTOR SERIES
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
EQUITY FUND OPPORTUNITY FUND
-------------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED
-------------------------------------- --------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 28, 1997 FEBRUARY 29, 1996
- --------------------------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 6,852,631 10,299,860 2,464,715 1,579,949
- --------------------------------------
Shares issued to shareholders in
payment of distributions declared 537,524 782,712 234,535 368,888
- --------------------------------------
Shares redeemed (4,578,933) (7,276,853) (929,615) (1,054,805)
- -------------------------------------- ------------ ------------ ------------ ------------
Net change resulting from share
transactions 2,811,222 3,805,719 1,769,635 894,032
- -------------------------------------- ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
LIMITED TERM FUND GOVERNMENT INCOME FUND
-------------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED
-------------------------------------- --------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 28, 1997 FEBRUARY 29, 1996
- --------------------------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 2,953,124 2,675,393 11,623,519 15,482,495
- --------------------------------------
Shares issued to shareholders in
payment of distributions declared 209,814 228,722 521,253 302,148
- --------------------------------------
Shares redeemed (3,986,837) (3,365,918) (5,043,232) (14,897,666)
- -------------------------------------- ------------ ------------ ----------- ------------
Net change resulting from share
transactions (823,899) (461,803) 7,101,540 886,977
- -------------------------------------- ------------ ------------ ------------ -------------
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND MONEY MARKET FUND
-------------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED
-------------------------------------- --------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 28, 1997 FEBRUARY 29, 1996
- --------------------------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,331,086 1,716,250 550,619,637 505,711,379
- --------------------------------------
Shares issued to shareholders in
payment of distributions declared 3,288 2,449 167,230 114,789
- --------------------------------------
Shares redeemed (1,083,418) (1,627,203) (522,981,171) (422,693,644)
- -------------------------------------- ------------ ------------ ------------- -------------
Net change resulting from share
transactions 250,956 91,496 27,805,696 83,132,524
- -------------------------------------- ------------ ------------ ------------- -------------
</TABLE>
DG INVESTOR SERIES
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Deposit Guaranty National Bank, the Funds' investment
adviser (the "Adviser"), received through February 28, 1997 for its services an
annual investment advisory fee equal to the percentage of each Fund's average
daily net assets as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FUND NAME FEE PERCENTAGE
- ------------------------ -------------------
<S> <C>
Equity Fund 0.75%
Opportunity Fund 0.95%
Limited Term Fund 0.60%
Government Income Fund 0.60%
Municipal Income Fund 0.60%
Money Market Fund 0.50%
Prime Money Market Fund 0.50%
</TABLE>
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
Under the terms of a sub-advisory agreement between the Adviser and the Trust
Division of Commercial National Bank, Commercial National Bank received through
February 28, 1997 an annual fee from the Adviser equal to 0.25% of each Fund's
average daily net assets (excluding Money Market Fund). In addition, Commercial
National Bank voluntarily chose to reduce its compensation for the year ended
February 28, 1997.
Effective March 1, 1997, ParkSouth Corporation, a subsidiary of Deposit Guaranty
National Bank, became the Funds' investment adviser and Commercial National Bank
no longer is a sub-adviser to the Funds.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Funds for the period. FAS
may voluntarily choose to waive a portion of its fee.
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 Funds.
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 Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
DG INVESTOR SERIES
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended February 28, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- -------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Equity Fund $51,522,588 $26,302,947
- --------------------------------------------------------------
Opportunity Fund $93,832,428 $73,476,869
- --------------------------------------------------------------
Limited Term Fund $23,172,734 $34,205,548
- --------------------------------------------------------------
Government Income Fund $61,658,672 $15,111,000
- --------------------------------------------------------------
Municipal Income Fund $ 5,593,867 $ 4,096,300
- --------------------------------------------------------------
</TABLE>
(6) SUBSEQUENT EVENT
Subsequent to the year ended February 28, 1997, the Trust added DG International
Equity Fund to the series, which became effective March 31, 1997.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
DG INVESTOR SERIES:
We have audited the statements of assets and liabilities, including the
portfolio of investments, of the DG Equity Fund, DG Opportunity Fund, DG Limited
Term Government Income Fund, DG Government Income Fund, DG Municipal Income
Fund, and the DG U.S. Government Money Market Fund (six portfolios of DG
Investor Series) as of February 28, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
the years ended February 28, 1997 and February 29, 1996, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to gain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights of the DG
Investor Series portfolios referred to above present fairly, in all material
respects, their financial position as of February 28, 1997, and the results of
their operations for the year then ended, and the changes in their net assets
and their financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
April 11, 1997
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and
Peter E. Madden Secretary
Gregor F. Meyer Richard B. Fisher
John E. Murray, Jr. Vice President
Wesley W. Posvar Charles L. Davis, Jr.
Marjorie P. Smuts Vice President and Assistant
Treasurer
C. Grant Anderson
Assistant Secretary
</TABLE>
Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
their objective and policies, management fees, expenses and other information.
APPENDIX
A. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. The solid black line represents the DG Equity Fund after deducting
the original maximum sales charge of 2.00% (the `Fund at 2.00%); the
dotted line represents the DG Equity Fund after deducting the current
maximum sales charge of 3.50% (the `Fund at 3.50%''); and the dashed line
represents the Standard & Poor's 500 Index (the `S&P 500''). The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund at 2.00%, the Fund and 3.50%,
and the S&P 500. The `y'' axis reflects the cost of the investment. The
`x'' axis reflects computation periods from the Fund's start of
performance, August 1, 1992, through February 28, 1997. The right margin
reflects the ending values of the hypothetical investments in the Fund at
2.00%, and the Fund at 3.50%, as compared to the S&P 500; the ending values
are $18,822, $18,534, and $21,005, respectively. There is also a legend
below the boxed legend which indicates Average Annual Total Return for the
Period Ended February 28, 1997, beginning with the date of Start of
Performance (8/1/92), and the one-year period; the Average Annual Total
Returns are 14.44% and 14.60%, respectively.
B. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. The solid black line represents the DG Opportunity Fund after
deducting the original maximum sales charge of 2.00% (the `Fund at 2.00%);
the dotted line represents the DG Opportunity Fund after deducting the
current maximum sales charge of 3.50% (the `Fund at 3.50%''); and the
dashed line represents the Russell 2000 Index. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
purchase in the Fund at 2.00%, the Fund and 3.50%, and the Russell 2000
Index. The `y'' axis reflects the cost of the investment. The ``x'' axis
reflects computation periods from the Fund's start of performance, January
1, 1982, through February 28, 1997. The right margin reflects the ending
values of the hypothetical investments in the Fund at 2.00%, and the Fund
at 3.50%, as compared to the Russell 2000 Index; the ending values are
$71,954, $70,853, and $66,405, respectively. There is also a legend below
the boxed legend which indicates Average Annual Total Return for the Period
Ended February 28, 1997, beginning with the date of Start of Performance
(1/1/82), the ten-year period, the five-year period, and the one-year
period; the Average Annual Total Returns are 13.77%, 15.92%, 15.10%, and
8.19%, respectively.
C. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. The solid black line represents the DG Limited Term Government
Income Fund (the `Fund''); and the dashed line represents the Merrill
Lynch 1-3 Year Treasury Index (`ML1-3''). The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
purchase in the Fund, and the ML1-3. The `y'' axis reflects the cost of
the investment. The `x'' axis reflects computation periods from the Fund's
start of performance, August 1, 1992, through February 28, 1997. The right
margin reflects the ending values of the hypothetical investments in the
Fund as compared to the ML1-3; the ending values are $12,226, and $12,692,
respectively. There is also a legend below the boxed legend which indicates
Average Annual Total Return for the Period Ended February 28, 1997,
beginning with the date of Start of Performance (8/1/92), and the one-year
period; the Average Annual Total Returns are 4.49%, and 2.56%,
respectively.
D. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. The solid black line represents the DG Government Income Fund (the
`Fund''); and the dashed line represents the Lehman Brothers
Government/Corporate Total Index (`LBGCT''). The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
purchase in the Fund, and the LBGCT. The `y'' axis reflects the cost of
the investment. The `x'' axis reflects computation periods from the Fund's
start of performance, August 1, 1992, through February 28, 1997. The right
margin reflects the ending values of the hypothetical investments in the
Fund as compared to the LBGCT; the ending values are $12,710, and $13,501,
respectively. There is also a legend below the boxed legend which indicates
Average Annual Total Return for the Period Ended February 28, 1997,
beginning with the date of Start of Performance (8/1/92), and the one-year
period; the Average Annual Total Returns are 5.38%, and 2.00%,
respectively.
E. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. The solid black line represents the DG Municipal Fund (the
`Fund''); and the dashed line represents the Lehman Brothers Municipal
Bond Index (`LBMBI''). The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 purchase in the
Fund, and the LBMBI. The `y'' axis reflects the cost of the investment.
The `x'' axis reflects computation periods from the Fund's start of
performance, December 21, 1992, through February 28, 1997. The right margin
reflects the ending values of the hypothetical investments in the Fund as
compared to the LBMBI; the ending values are $12,588, and $13,206,
respectively. There is also a legend below the boxed legend which indicates
Average Annual Total Return for the Period Ended February 28, 1997,
beginning with the date of Start of Performance (12/21/92), and the one-
year period; the Average Annual Total Returns are 5.65%, and 2.01%,
respectively.
