DG
Investor Series
Stock and Bond Funds
o DG Equity Fund
o DG Opportunity Fund
o DG Limited Term
Government Income Fund
o DG Government
Income Fund
o DG Municipal Income Fund
Combined
Semi-Annual Report
[DG INVESTOR SERIES LOGO]
Diversified Portfolios of
DG Investor Series,
an Open-End Management
Investment Company
ParkSouth
Corporation
Jackson, MS
Investment Adviser
Womack Asset
[LOGO] FEDERATED INVESTORS Management, Inc.
Jackson, MS
FEDERATED INVESTORS TOWER Sub-Adviser to
PITTSBURGH, PA 15222-3779 DG Opportunity Fund
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS
AND IS A SUBSIDIARY OF FEDERATED INVESTORS.
Cusip 23321N301 Cusip 23321N202
Cusip 23321N400 Cusip 23321N608
Cusip 23321N509 G00498-08(10/97) [RECYCLED PAPER]
August 31, 1997
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present the Semi-Annual Report to Shareholders for the
DG Investor Series--Stock and Bond Funds for the six-month period from
March 1, 1997 through August 31, 1997.
The Report begins with a discussion with each fund's portfolio
manager, followed by a complete list of fund holdings and financial
statements.
The following highlights cover each fund's activity over the six-month
period:
- - DG EQUITY FUND, consistent with an extremely favorable stock market
environment, delivered a very strong total return of 16.90%* for the
period. Contributing to the total return was income totaling $0.06
per share, and a 16% increase in net asset value. Net assets reached
$589.9 million at the end of the period.
- - DG OPPORTUNITY FUND produced an outstanding total return of 27.12%*
for the period through strong price increases among the fund's
smaller-capitalization holdings. The fund's net asset value rose
from $13.53 on the first day of the period to $17.20 on the last
day. Net assets topped the $100 million mark, reaching $106.7
million at the end of the period.
- - DG LIMITED TERM GOVERNMENT INCOME FUND paid dividends totaling $0.25
per share. The fund's conservative, shorter-maturity government
portfolio produced a total return of 2.97%* for the period. Net
assets stood at $80.6 million.
- - DG GOVERNMENT INCOME FUND, a portfolio of U.S. government securities, paid
dividends totaling $0.28 per share. The fund's total return was 3.88%* for the
period. Net assets stood at $269.3 million.
- - DG MUNICIPAL INCOME FUND rewarded tax-sensitive investors with
federally tax-free dividends totaling $0.24 per share and capital
gains of $0.02 per share.** Net asset value increased by $0.08 per
share. As a result of income, gains and net asset value increase,
the fund's total return was 3.29%.* At the end of the report period,
net assets reached $49.1 million.
Thank you for keeping your money working in one or more key financial
markets through DG Investor Series. You have our commitment to provide
the highest level of service as we keep you informed about your
progress.
Sincerely,
LOGO
Edward C. Gonzales
President
October 15, 1997
* Performance quoted represents past performance and is not
indicative of future results. 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 six-month period are as follows: DG Equity Fund, 12.84%, DG
Opportunity Fund, 22.68%; DG Limited Term government Income Fund,
0.89%; DG Government Income Fund, 1.78%; and DG Municipal Income
Fund, 1.18%.
** Income may be subject to the federal alternative minimum tax and state and
local taxes.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
DG EQUITY FUND
DG Equity Fund's first half of fiscal 1997 produced strong investment
results, reminiscent of the return of 16.78%* achieved by the fund in
the last half of fiscal 1996. Reflecting the positive effects of an
extended period of lower than expected long-term interest rates, stock
prices in the benchmark S&P 500 Index** ("S&P 500") rose 13.7% in the
fund's last six-month fiscal period. On a total return basis, the S&P
500 generated an unusually strong 14.8% increase from March 1st
through close of business August 29, 1997, while the fund earned an
even better 16.9%.* The fund's performance also compares favorably
with the 15.2% total return generated by the Lipper Growth (Mutual)
Fund Average*** over the period.
We believe that for the near term, the price/earnings ratios ("P/E")
of large-cap growth stocks, as a group, are likely to remain at or
near their current expanded levels. This assumes the continuation of
lower than normal interest rates. The expectational content
incorporated in the P/E current multiples, while possibly inflated,
appears justified on the basis of our own favorable economic/market
scenario projections. With gross domestic product likely to expand at
only a slightly higher than historical rate of some 3% to 3 1/2% (real
rate), there seems ample justification for some modest P/E "froth" to
be reflected in the valuation process. Should, as now seems generally
anticipated, the S&P 500 routinely begin to grow its earnings stream
at closer to a higher 8% rate than the long-term historical rate of 6
1/2%, and do so with no apparent inflationary economic effect, the per
share earnings (stream) "discounter" should tend to contract, thereby
expanding stock P/E multiples and raising stock prices. We are further
encouraged by the fact that growth stocks usually fare best of all
under these moderately expansive economic circumstances. We believe
that the fund's investors will benefit, over time, from the likely
persistence of these favorable market and economic conditions.
During the last six months we have made routine minor changes in the
fund's portfolio as we sought to improve its long-term growth
potential. We modestly increased the fund's position in the consumer
Non-Durable and the Health Care economic sectors, and we trimmed or
eliminated certain holdings whose price appreciation had inflated
their weighting in the portfolio or whose growth prospects had
diminished.
None of our views have changed regarding the long-term appeal of those
economic sectors we have long held as offering the greatest investment
potential for the future. For the long run, we still believe that the
true growth stock investor will find the greatest opportunities in the
classic growth segments of our economy. For us, those areas of most
interest are the Technology, Consumer Non-Durable, Health Care,
Business Equipment and Services, Retail, and the Capital Goods
economic sectors. The bulk of the fund's portfolio will continue to be
diversified within the various industries comprising these broad
economic sectors unless major and largely unpredictable secular
realignments occur with the economy. This relatively narrow strategic
focus may preclude the fund from investing in potentially rewarding
positions, but it affords the fund the benefits associated with a
commitment to time-tested and proven growth enterprises, while
minimizing the dangers associated with the "fad"-like influences
present in today's investment arena.
* Performance quoted reflects past performance and is not indicative
of future results. 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 the maximum sales charge for the one-year,
five-year, and since inception (8/3/92) periods ended August 31,
1997, was 35.25%, 17.02% and 16.43%, respectively.
** The S&P 500 Index is an unmanaged index of common stocks in industry,
transportation, and financial and public utility companies. Investments
cannot be made in an index.
*** Lipper figures represent the average of the total returns reported
by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into respective categories indicated.
These figures do not reflect sales charges.
- --------------------------------------------------------------------------------
DG OPPORTUNITY FUND
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. Companies are
identified and a fundamental/technical analysis is performed to
discern both potential growth and risk. Company activities are
monitored through analyst's research reports and company conferences.
Technical analysis is incorporated to derive company specific patterns
of price 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 return for
greater volatility.
For the six-month period ended August 31, 1997, the funds holdings
were concentrated in domestic energy and oil field services.
Technology, retail and restaurant sectors were well represented. The
portfolio fluctuated between 50 and 70 issues with an above average
portfolio turnover rate. The net asset base increased from $80.5
million as of February 28, 1997 to 106.7 million as of August 29,
1997. Total return based on net asset value for the twelve-month
period ended August 31, 1997 was 27.25%.**
* Small cap stocks have historically experienced greater volatility
than average.
** Performance quoted reflects past performance and is not indicative
of future results. 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 the maximum sales charge, for the one-year, five-year,
ten-year, and since inception periods ended August 31, 1997, was
22.79%, 23.69%, 18.17%, and 15.05%.
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. It the collective trust fund had been registered under the
1940 Act, the performance may have been adversely affected.
SHAREHOLDER MEETING RESULTS
- --------------------------------------------------------------------------------
A special meeting of the shareholders of DG Opportunity Fund was held
on July 21, 1997. On June 19, 1997, the record date for shareholders
voting at the meeting, there were 6,156,191 shares of DG Opportunity
Fund outstanding and entitled to vote. The following item was
considered by shareholders.
AGENDA ITEM: To approve or disapprove a Sub-Advisory Agreement and exhibits
thereto between ParkSouth Corporation and Womack Asset Management, Inc. on
behalf of DG Opportunity Fund.
The results of shareholders voting were as follows:
<TABLE>
<S> <C> <C>
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAINED
5,689,011 298 0
</TABLE>
- --------------------------------------------------------------------------------
DG LIMITED TERM GOVERNMENT INCOME FUND
Interest rates declined slightly for the six-month period ended August
31, 1997. Although reports showed an economy that continued to expand,
the typical inflationary pressures that accompany an expansion did not
surface. Investors believed that the Federal Reserve Board (the "Fed")
was still vigilant in watching for economic growth occurring at too
rapid a rate. The market has been anticipating rate increases by the
Fed to head off an expanding economy. Yields on 3-, 5-, and 1-year
Treasuries decreased by 14, 17, and 21 basis points, respectively
For the six-month period ended August 31, 1997, the fund's total
return was 2.97%, based on net asset value,* compared to the Merrill
Lynch 1-3 Year Treasury Index** total return of 3.38%. The fund's
duration of 1.59 years and average maturity of 1.79 years were
maintained during the reporting period. U.S. Treasury securities
continue to hold a majority position in the fund. U.S. agency
securities are being utilized more as spreads to Treasuries have
widened, helping to provide a more adequate return for the additional
risk. Corporate issues will also be utilized, as yield spreads should
be sustained with good corporate earnings. The fund's net assets
decreased during the six-month period from $84.4 to $80.6 million.
DG GOVERNMENT INCOME FUND
Interest rates declined slightly for the six-month period ended August
31, 1997. Although reports showed an economy that continued to expend,
the typical inflationary pressures that accompany an expansion did not
surface. Investors believed that the Fed was still vigilant in
watching for economic growth occurring at too rapid a rate. The market
has been anticipating rate increases by the Fed to head off an
expanding economy. Yields on 3-, 5-, and 10-year Treasuries decreased
by 14, 17, and 21 basis points, respectively.
For the six-month period ended August 31, 1997, the fund's total
return was 3.88%, based on net asset value,* compared to the Lehman
Brothers Government/Corporate Bond Index** total return of 4.36%. The
fund's duration of 4.67 years and average maturity of 7.91 years
continues to be shorter than the benchmark. U.S. agency securities are
being utilized more, as spreads to Treasuries have widened helping to
provide a more adequate return of the additional risk. Corporate
issues will also be utilized as yield spreads should be sustained with
good corporate earnings. The fund's net assets increased during the
six-month period from $249.6 to $269.3 million.
* Performance quoted represents past performance and is not
indicative of future results. 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.
** Merrill Lynch 1-3 Year Treasury Index is an unmanaged index tracking
short-term U.S. government securities between 1 and 2.99 years. The index is
produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
Lehman Brothers Government/Corporate Bond Index is an unmanaged
index 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.
Investments cannot be made in an index.
- --------------------------------------------------------------------------------
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 municipal issues. The investment objective of the fund is to
provide dividend income that is exempt from federal regular income
tax.*
Issues purchased by the fund during the last six months consisted
largely of general obligations of states, counties and cities. The
fund is currently managed with a 7.24 year average maturity. The
investment adviser believes that the value in the market is in higher
quality municipal issues and continues to reflect this strategy in the
fund's portfolio. The adviser anticipates the average maturity will be
lengthened during the next six months.
The total rate of return (income plus capital appreciation) for the
six-month period ended August 31, 1997, was 3.29%, based on net asset
value. As of August 31, 1997, the 30-day SEC yield was 3.93% based on
net asset value (3.85% taking into account the sales charge).**
The fund's 30-day distribution rate as of August 31, 1997, was 4.49%
for shares, based on net asset value (4.40% taking into account the
sales charge).*** The fund's net assets increased from $47.0 million
on February 28, 1997 to $49.1 million on August 31, 1997.
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Performance quoted represents past performance and is not
indicative of future results. 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.
*** 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 EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--93.0%
- -----------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--7.6%
----------------------------------------------------------------
280,000 Automatic Data Processing, Inc. $ 12,757,500
----------------------------------------------------------------
74,600 Cognizant Corp. 3,133,200
----------------------------------------------------------------
133,600 Donnelley (R.R.) & Sons Co. 5,202,050
----------------------------------------------------------------
74,600 Dun & Bradstreet Corp. 2,088,800
----------------------------------------------------------------
150,000 Electronic Data Systems Corp. 5,671,875
----------------------------------------------------------------
207,700 Pitney Bowes, Inc. 15,863,088
---------------------------------------------------------------- ------------
Total 44,716,513
---------------------------------------------------------------- ------------
CAPITAL GOODS--9.3%
----------------------------------------------------------------
260,000 Dover Corp. 17,956,250
----------------------------------------------------------------
311,000 General Electric Co. 19,437,500
----------------------------------------------------------------
127,500 PPG Industries, Inc. 8,032,500
----------------------------------------------------------------
120,000 Tyco International, Ltd. 9,412,500
---------------------------------------------------------------- ------------
Total 54,838,750
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--19.1%
----------------------------------------------------------------
75,000 CPC International, Inc. 6,684,375
----------------------------------------------------------------
280,000 Coca-Cola Co. 16,047,500
----------------------------------------------------------------
60,000 Eastman Kodak Co. 3,922,500
----------------------------------------------------------------
120,000 Gillette Co. 9,937,500
----------------------------------------------------------------
129,450 Heinz (H.J.) Co. 5,388,356
----------------------------------------------------------------
250,000 International Flavors & Fragrances, Inc. 12,781,250
----------------------------------------------------------------
411,200 PepsiCo, Inc. 14,803,200
----------------------------------------------------------------
309,000 Philip Morris Cos., Inc. 13,480,125
----------------------------------------------------------------
115,000 Procter & Gamble Co. 15,302,188
----------------------------------------------------------------
209,800 Sara Lee Corp. 8,444,450
----------------------------------------------------------------
160,000 Sysco Corp. 5,680,000
---------------------------------------------------------------- ------------
Total 112,471,444
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER SERVICES--2.7%
----------------------------------------------------------------
204,500 Disney (Walt) Co. $ 15,708,156
---------------------------------------------------------------- ------------
HEALTHCARE--18.7%
----------------------------------------------------------------
187,300 Abbott Laboratories 11,226,294
----------------------------------------------------------------
100,000 American Home Products Corp. 7,200,000
----------------------------------------------------------------
100,000 Bristol-Myers Squibb Co. 7,600,000
----------------------------------------------------------------
100,000 Hillenbrand Industries, Inc. 4,393,750
----------------------------------------------------------------
240,000 Johnson & Johnson 13,605,000
----------------------------------------------------------------
160,000 Medtronic, Inc. 14,460,000
----------------------------------------------------------------
166,000 Merck & Co., Inc. 15,240,875
----------------------------------------------------------------
280,000 Pfizer, Inc. 15,505,000
----------------------------------------------------------------
340,000 Schering Plough Corp. 16,320,000
----------------------------------------------------------------
100,000 United Healthcare Corp. 4,862,500
---------------------------------------------------------------- ------------
Total 110,413,419
---------------------------------------------------------------- ------------
RAW MATERIALS--1.3%
----------------------------------------------------------------
90,000 Lubrizol Corp. 3,943,125
----------------------------------------------------------------
120,000 Morton International, Inc. 3,990,000
---------------------------------------------------------------- ------------
Total 7,933,125
---------------------------------------------------------------- ------------
RETAIL--10.1%
----------------------------------------------------------------
200,000 Albertsons, Inc. 6,875,000
----------------------------------------------------------------
225,000 Home Depot, Inc. 10,617,187
----------------------------------------------------------------
320,000 McDonald's Corp. 15,140,000
----------------------------------------------------------------
240,000 Wal-Mart Stores, Inc. 8,520,000
----------------------------------------------------------------
680,000 Walgreen Co. 18,317,500
---------------------------------------------------------------- ------------
Total 59,469,687
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
TECHNOLOGY--22.9%
----------------------------------------------------------------
150,000 AMP, Inc. $ 7,500,000
----------------------------------------------------------------
100,000 (b) Applied Materials, Inc. 9,437,500
----------------------------------------------------------------
177,200 Boeing Co. 9,646,325
----------------------------------------------------------------
370,000 (b) Compaq Computer Corp. 24,235,000
----------------------------------------------------------------
130,000 (b) Digital Equipment Corp. 5,590,000
----------------------------------------------------------------
277,200 Hewlett-Packard Co. 16,995,825
----------------------------------------------------------------
200,000 Intel Corp. 18,425,000
----------------------------------------------------------------
200,000 International Business Machines Corp. 20,175,000
----------------------------------------------------------------
33,639 Lucent Technologies, Inc. 2,619,637
----------------------------------------------------------------
100,000 (b) Microsoft Corp. 13,218,750
----------------------------------------------------------------
100,000 Motorola, Inc. 7,337,500
---------------------------------------------------------------- ------------
Total 135,180,537
---------------------------------------------------------------- ------------
UTILITIES--1.3%
----------------------------------------------------------------
103,800 AT&T Corp. 4,048,200
----------------------------------------------------------------
87,000 Central & SouthWest Corp. 1,799,812
----------------------------------------------------------------
40,000 SBC Communications, Inc. 2,175,000
---------------------------------------------------------------- ------------
Total 8,023,012
---------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $291,729,044) 548,754,643
---------------------------------------------------------------- ------------
(A) REPURCHASE AGREEMENT--6.7%
- -----------------------------------------------------------------------------------
$39,551,500 Cantor Fitzgerald Securities, 5.49%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 39,551,500
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $331,280,544) $588,306,143
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--95.6%
- -----------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--8.4%
-----------------------------------------------------------------
85,000 (b) Corestaff, Inc. $ 2,528,750
-----------------------------------------------------------------
126,000 (b) Dycom Industries, Inc. 2,543,625
-----------------------------------------------------------------
200,000 (b) Employee Solutions, Inc. 1,050,000
-----------------------------------------------------------------
160,000 (b) Philip Services Corp. 2,870,000
----------------------------------------------------------------- ------------
Total 8,992,375
----------------------------------------------------------------- ------------
CAPITAL GOODS--3.2%
-----------------------------------------------------------------
160,000 (b) Terex Corp. 3,460,000
----------------------------------------------------------------- ------------
CAPITAL GOODS/ELECTRONICS--1.3%
-----------------------------------------------------------------
50,050 Kuhlman Corp. 1,420,169
----------------------------------------------------------------- ------------
COMPUTERS-PERIPHERALS & SOFTWARE--2.2%
-----------------------------------------------------------------
54,000 (b) Insight Enterprises, Inc. 2,335,500
----------------------------------------------------------------- ------------
CONSUMER DURABLES--2.0%
-----------------------------------------------------------------
93,000 (b) Speedway Motorsports, Inc. 2,080,875
----------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--1.5%
-----------------------------------------------------------------
100,000 (b) Hollywood Entertainment Corp. 1,637,500
----------------------------------------------------------------- ------------
ENERGY/OIL-DOMESTIC--4.0%
-----------------------------------------------------------------
200,000 (b) Ensearch Exploration, Inc. 1,800,000
-----------------------------------------------------------------
22,000 (b) Nuevo Energy Co. 1,117,875
-----------------------------------------------------------------
45,000 (b) Stone Energy Corp. 1,372,500
----------------------------------------------------------------- ------------
Total 4,290,375
----------------------------------------------------------------- ------------
ENERGY/OIL FIELD SERVICES--18.3%
-----------------------------------------------------------------
54,400 (b) EVI, Inc. 2,859,400
-----------------------------------------------------------------
34,500 (b) Friede Goldman International, Inc. 1,388,625
-----------------------------------------------------------------
27,000 (b) Gulf Island Fabrication, Inc. 1,093,500
-----------------------------------------------------------------
80,000 (b) J. Ray McDermott, S.A. 3,160,000
-----------------------------------------------------------------
125,100 (b) Key Energy Group, Inc. 3,236,963
-----------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
72,500 (b) Oceaneering International, Inc. $ 1,690,156
-----------------------------------------------------------------
120,000 (b) Pride International, Inc. 3,840,000
-----------------------------------------------------------------
270,000 (b) Superior Energy Services, Inc. 2,244,375
----------------------------------------------------------------- ------------
Total 19,513,019
----------------------------------------------------------------- ------------
ENERGY/OIL SERVICES--6.1%
-----------------------------------------------------------------
68,900 (b) American Outfield Divers, Inc. 1,301,488
-----------------------------------------------------------------
100,000 (b) Input/Output, Inc. 2,100,000
-----------------------------------------------------------------
130,000 (b) Marine Drilling Cos., Inc. 3,120,000
----------------------------------------------------------------- ------------
Total 6,521,488
----------------------------------------------------------------- ------------
FINANCIAL SERVICES--4.8%
-----------------------------------------------------------------
41,000 Edwards(AG), Inc. 1,629,750
-----------------------------------------------------------------
63,000 T. Rowe Price Associates 3,465,000
----------------------------------------------------------------- ------------
Total 5,094,750
----------------------------------------------------------------- ------------
FOOD & RELATED--0.7%
-----------------------------------------------------------------
51,000 Sanderson Farms, Inc. 765,000
----------------------------------------------------------------- ------------
HEALTHCARE--5.5%
-----------------------------------------------------------------
30,000 (b) Arterial Vascular Engineering, Inc. 1,110,000
-----------------------------------------------------------------
72,000 (b) Envoy Corp. 1,944,000
-----------------------------------------------------------------
65,500 (b) KeraVision, Inc. 499,438
-----------------------------------------------------------------
99,600 (b) Neotherapeutics, Inc. 1,245,000
-----------------------------------------------------------------
90,000 (b) PhyMatrix Corp. 1,091,250
----------------------------------------------------------------- ------------
Total 5,889,688
----------------------------------------------------------------- ------------
MANUFACTURED HOUSING--2.8%
-----------------------------------------------------------------
122,500 Cavalier Homes, Inc. 1,255,625
-----------------------------------------------------------------
93,600 Coachmen Industries, Inc. 1,731,600
----------------------------------------------------------------- ------------
Total 2,987,225
----------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
RESTAURANTS--11.7%
-----------------------------------------------------------------
65,000 (b) Brinker International, Inc. $ 1,088,750
-----------------------------------------------------------------
35,000 (b) Casa Ole Restaurants, Inc. 308,438
-----------------------------------------------------------------
151,400 (b) Foodmaker, Inc. 2,971,225
-----------------------------------------------------------------
100,000 (b) Outback Steakhouse, Inc. 2,412,500
-----------------------------------------------------------------
80,000 (b) Papa Johns International, Inc. 2,730,000
-----------------------------------------------------------------
80,000 (b) Planet Hollywood International, Inc., Class A 1,570,000
-----------------------------------------------------------------
110,000 (b) Rare Hospitality International, Inc. 1,375,000
----------------------------------------------------------------- ------------
Total 12,455,913
----------------------------------------------------------------- ------------
RETAIL/COLLECTIVES--2.3%
-----------------------------------------------------------------
75,000 (b) Action Performance Cos., Inc. 2,446,875
----------------------------------------------------------------- ------------
RETAIL/CONSUMER--7.1%
-----------------------------------------------------------------
70,000 (b) Regal Cinemas, Inc. 1,978,374
-----------------------------------------------------------------
44,000 St. John Knits, Inc. 1,853,500
-----------------------------------------------------------------
80,000 (b) Stage Stores, Inc. 2,475,000
-----------------------------------------------------------------
90,000 (b) Ugly Duckling Corp. 1,248,750
----------------------------------------------------------------- ------------
Total 7,555,624
----------------------------------------------------------------- ------------
TECHNOLOGY/COMMUNICATIONS--0.7%
-----------------------------------------------------------------
27,000 (b) Nichols Research Corp. 688,500
----------------------------------------------------------------- ------------
TECHNOLOGY/COMPUTERS--9.8%
-----------------------------------------------------------------
110,000 (b) Datastream Systems, Inc. 3,602,500
-----------------------------------------------------------------
100,000 (b) Harbinger Corp. 3,500,000
-----------------------------------------------------------------
55,600 (b) Interphase Corp. 576,850
-----------------------------------------------------------------
174,000 (b) Vanstar Corp. 2,729,625
----------------------------------------------------------------- ------------
Total 10,408,975
----------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
TRANSPORTATION--1.3%
-----------------------------------------------------------------
100,000 (b) RailAmerica, Inc. $ 500,000
-----------------------------------------------------------------
45,000 (b) Railtex, Inc. 860,623
----------------------------------------------------------------- ------------
Total 1,360,623
----------------------------------------------------------------- ------------
UTILITIES/TELECOMMUNICATIONS--1.9%
-----------------------------------------------------------------
70,000 (b) ACC Corp. 2,047,500
----------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $76,650,626) 101,951,974
----------------------------------------------------------------- ------------
(A) REPURCHASE AGREEMENT--2.4%
- -----------------------------------------------------------------------------------
$2,599,400 Cantor Fitzgerald Securities, 5.49%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 2,599,400
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $79,250,026)(B) $104,551,374
----------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG LIMITED TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--13.5%
- -----------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--1.2%
----------------------------------------------------------------
$ 1,000,000 International Business Machines Corp., 6.375%, 11/1/1997 $ 1,001,890
---------------------------------------------------------------- ------------
HEALTHCARE--1.5%
----------------------------------------------------------------
1,250,000 Upjohn Co., 5.875%, 4/15/2000 1,236,887
---------------------------------------------------------------- ------------
PHARMACEUTICALS--1.3%
----------------------------------------------------------------
1,000,000 American Home Products Corp., 7.70%, 2/15/2000 1,032,110
---------------------------------------------------------------- ------------
PRINTING & PUBLISHING--1.3%
----------------------------------------------------------------
1,000,000 Gannett Co., Inc., 5.25%, 3/1/1998 998,880
---------------------------------------------------------------- ------------
RETAIL--1.4%
----------------------------------------------------------------
1,136,000 Wal-Mart Stores, Inc., 5.50%, 9/15/1997 1,136,682
---------------------------------------------------------------- ------------
UTILITIES--6.8%
----------------------------------------------------------------
1,000,000 GTE California, Inc., 6.25%, 1/15/1998 1,002,630
----------------------------------------------------------------
1,000,000 New England Telephone & Telegraph, 6.25%, 12/15/1997 1,002,550
----------------------------------------------------------------
1,500,000 Northern States Power Co., 5.50%, 2/1/1999 1,490,070
----------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 5.375%, 8/1/1998 996,830
----------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.60%, 12/15/1998 994,920
---------------------------------------------------------------- ------------
Total 5,487,000
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $10,726,758) 10,893,449
---------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--13.7%
- -----------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--7.5%
----------------------------------------------------------------
2,000,000 5.50%, 9/2/1997 2,000,940
----------------------------------------------------------------
2,000,000 5.51%, 12/1/1997 1,999,800
----------------------------------------------------------------
2,000,000 5.69%, 10/1/1997 1,999,680
---------------------------------------------------------------- ------------
Total 6,000,420
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
GOVERNMENT AGENCIES--CONTINUED
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK SYSTEM--2.5%
----------------------------------------------------------------
$ 1,000,000 6.275%, 8/13/2001 $ 996,040
----------------------------------------------------------------
1,000,000 6.50%, 2/21/2001 996,321
---------------------------------------------------------------- ------------
Total 1,992,361
---------------------------------------------------------------- ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--2.5%
----------------------------------------------------------------
1,000,000 6.79%, 5/24/2001 1,006,240
----------------------------------------------------------------
1,000,000 6.93%, 9/5/2000 1,001,030
---------------------------------------------------------------- ------------
Total 2,007,270
---------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.2%
----------------------------------------------------------------
1,000,000 6.50%, 2/25/2002 998,780
---------------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $10,987,188) 10,998,831
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--66.2%
- -----------------------------------------------------------------------------------
4,000,000 5.125%, 12/31/1998 3,964,440
----------------------------------------------------------------
6,000,000 5.125%, 3/31/1998 5,987,880
----------------------------------------------------------------
4,000,000 5.25%, 7/31/1998 3,984,640
----------------------------------------------------------------
5,000,000 5.625%, 11/30/2000 4,929,000
----------------------------------------------------------------
4,000,000 5.75%, 10/31/1997 4,003,360
----------------------------------------------------------------
2,000,000 6.125%, 7/31/2000 2,002,980
----------------------------------------------------------------
5,000,000 6.25%, 8/31/2000 5,022,000
----------------------------------------------------------------
3,000,000 6.25%, 10/31/2001 3,005,910
----------------------------------------------------------------
4,000,000 6.625%, 7/31/2001 4,062,280
----------------------------------------------------------------
4,000,000 6.75%, 6/30/1999 4,056,040
----------------------------------------------------------------
4,000,000 7.125%, 10/15/1998 4,057,440
----------------------------------------------------------------
2,000,000 7.50%, 10/31/1999 2,060,180
----------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
DG LIMITED TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
- -----------------------------------------------------------------------------------
$ 4,000,000 7.50%, 11/15/2001 $ 4,189,400
----------------------------------------------------------------
2,000,000 7.875%, 1/15/1998 2,017,440
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $53,174,609) 53,342,990
---------------------------------------------------------------- ------------
(A) REPURCHASE AGREEMENT--7.7%
- -----------------------------------------------------------------------------------
6,195,600 Cantor Fitzgerald Securities, 5.490%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 6,195,600
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $81,084,155) $ 81,430,870
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--7.7%
- -----------------------------------------------------------------------------------
BANKING--0.4%
----------------------------------------------------------------
$ 1,000,000 NationsBank Corp., 5.375%, 4/15/2000 $ 976,470
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--0.7%
----------------------------------------------------------------
889,000 Anheuser-Busch Cos., Inc., 6.900%, 10/1/2002 897,277
----------------------------------------------------------------
1,000,000 Heinz (H.J.) Co., 6.750%, 10/15/1999 1,010,710
---------------------------------------------------------------- ------------
Total 1,907,987
---------------------------------------------------------------- ------------
FINANCE--0.7%
----------------------------------------------------------------
2,000,000 Private Export Funding Corp., 6.490%, 7/15/2007 1,991,352
---------------------------------------------------------------- ------------
HEALTHCARE--0.9%
----------------------------------------------------------------
1,400,000 American Home Products Corp., 7.700%, 2/15/2000 1,444,954
----------------------------------------------------------------
1,000,000 Upjohn Co., 5.875%, 4/15/2000 989,510
---------------------------------------------------------------- ------------
Total 2,434,464
---------------------------------------------------------------- ------------
PRINTING & PUBLISHING--0.6%
----------------------------------------------------------------
1,500,000 Gannett Co., Inc., 5.250%, 3/1/1998 1,498,320
---------------------------------------------------------------- ------------
RAW MATERIALS--0.5%
----------------------------------------------------------------
889,000 Du Pont (E.I.) de Nemours & Co., 6.750%, 10/15/2002 899,944
----------------------------------------------------------------
437,000 Du Pont (E.I.) de Nemours & Co., 9.150%, 4/15/2000 467,136
---------------------------------------------------------------- ------------
Total 1,367,080
---------------------------------------------------------------- ------------
RETAIL--0.4%
----------------------------------------------------------------
1,200,000 Wal-Mart Stores, Inc., 5.500%, 9/15/1997 1,200,720
---------------------------------------------------------------- ------------
TECHNOLOGY--0.6%
----------------------------------------------------------------
1,500,000 International Business Machines Corp., 6.375%, 11/1/1997 1,502,835
---------------------------------------------------------------- ------------
TECHNOLOGY SERVICES--0.2%
----------------------------------------------------------------
437,000 Texas Instruments, Inc., 9.250%, 6/15/2003 488,924
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--2.7%
----------------------------------------------------------------
$ 1,000,000 Alabama Power Co., 6.750%, 2/1/2003 $ 991,990
----------------------------------------------------------------
1,500,000 GTE California, Inc., 6.250%, 1/15/1998 1,503,945
----------------------------------------------------------------
1,500,000 New England Telephone & Telegraph, 6.250%, 12/15/1997 1,503,825
----------------------------------------------------------------
1,500,000 Northern States Power Co., 5.500%, 2/1/1999 1,490,070
----------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 6.250%, 3/1/2004 977,670
----------------------------------------------------------------
1,000,000 Southern California Edison Co., 5.625%, 10/1/2002 958,120
---------------------------------------------------------------- ------------
Total 7,425,620
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $20,581,903) 20,793,772
---------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--6.3%
- -----------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--3.0%
----------------------------------------------------------------
4,000,000 5.510%, 12/1/1997 3,999,600
----------------------------------------------------------------
4,000,000 5.500%, 11/3/1997 4,003,240
---------------------------------------------------------------- ------------
Total 8,002,840
---------------------------------------------------------------- ------------
FEDERAL HOME LOAN BANK--1.5%
----------------------------------------------------------------
2,000,000 6.275%, 8/13/2001 1,992,080
----------------------------------------------------------------
2,000,000 6.790%, 2/5/2002 2,007,940
---------------------------------------------------------------- ------------
Total 4,000,020
---------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.8%
----------------------------------------------------------------
4,000,000 6.500%, 2/25/2002 3,995,120
----------------------------------------------------------------
1,000,000 6.820%, 12/13/2006 993,990
---------------------------------------------------------------- ------------
Total 4,989,110
---------------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $16,988,125) 16,991,970
---------------------------------------------------------------- ------------
U.S. TREASURY OBLIGATIONS--77.0%
- -----------------------------------------------------------------------------------
TREASURY BONDS--23.5%
----------------------------------------------------------------
10,000,000 6.750%, 8/15/2026 10,115,100
----------------------------------------------------------------
10,000,000 6.875%, 8/15/2025 10,246,200
----------------------------------------------------------------
9,000,000 7.125%, 2/15/2023 9,460,440
----------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
DG GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- -----------------------------------------------------------------------------------
$ 7,000,000 7.250%, 8/15/2022 $ 7,458,290
----------------------------------------------------------------
7,000,000 7.500%, 11/15/2016 7,611,240
----------------------------------------------------------------
10,000,000 7.500%, 5/15/2002 10,517,800
----------------------------------------------------------------
7,000,000 7.625%, 11/15/2022 7,776,790
---------------------------------------------------------------- ------------
Total 63,185,860
---------------------------------------------------------------- ------------
TREASURY NOTES--53.5%
----------------------------------------------------------------
8,000,000 5.750%, 10/31/2000 7,920,240
----------------------------------------------------------------
10,000,000 5.750%, 8/15/2003 9,744,400
----------------------------------------------------------------
9,000,000 5.750%, 9/30/1997 9,005,310
----------------------------------------------------------------
10,000,000 5.875%, 11/15/2005 9,682,000
----------------------------------------------------------------
8,000,000 5.875%, 2/15/2004 7,827,520
----------------------------------------------------------------
9,000,000 6.125%, 5/15/1998 9,030,690
----------------------------------------------------------------
10,000,000 6.125%, 7/31/2000 10,014,900
----------------------------------------------------------------
9,000,000 6.500%, 8/15/2005 9,070,650
----------------------------------------------------------------
15,000,000 7.000%, 7/15/2006 15,592,500
----------------------------------------------------------------
9,000,000 7.125%, 10/15/1998 9,129,240
----------------------------------------------------------------
10,000,000 7.500%, 10/31/1999 10,300,900
----------------------------------------------------------------
10,000,000 7.750%, 1/31/2000 10,378,700
----------------------------------------------------------------
9,000,000 7.750%, 2/15/2001 9,448,380
----------------------------------------------------------------
7,000,000 7.875%, 8/15/2001 7,409,990
----------------------------------------------------------------
9,000,000 8.000%, 5/15/2001 9,537,480
---------------------------------------------------------------- ------------
Total 144,092,900
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $206,354,450) 207,278,760
---------------------------------------------------------------- ------------
(A)REPURCHASE AGREEMENT--9.4%
- -----------------------------------------------------------------------------------
25,434,100 Cantor Fitzgerald Securities, 5.490%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 25,434,100
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $269,358,578) $270,498,602
---------------------------------------------------------------- ------------
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--95.2%
- ------------------------------------------------------------------------
ALABAMA--3.3%
----------------------------------------------------------
$ 500,000 Huntsville, AL, GO LT Warrants (Series A), 6.00% (Original
Issue Yield: 6.325%), 11/1/2012 AA $ 531,640
----------------------------------------------------------
1,000,000 Jefferson County, AL, Sewer Revenue Bonds, 6.00% (Original
Issue Yield: 6.30%), 9/1/2013 NR 1,082,810
---------------------------------------------------------- -----------
Total 1,614,450
---------------------------------------------------------- -----------
ARIZONA--2.0%
----------------------------------------------------------
1,000,000 Phoenix, AZ, GO UT Refunding Bonds (Series C), 4.90%
(Original Issue Yield: 5.00%), 7/1/2008 AA+ 1,005,500
---------------------------------------------------------- -----------
CALIFORNIA--2.2%
----------------------------------------------------------
1,000,000 California State, GO UT Public Improvement Bonds, 5.75%,
5/1/2007 A+ 1,076,530
---------------------------------------------------------- -----------
CONNECTICUT--2.2%
----------------------------------------------------------
1,000,000 Connecticut State, GO UT Public Improvement Bonds (Series
C), 5.80%, 8/15/2008 AA- 1,063,310
---------------------------------------------------------- -----------
FLORIDA--8.3%
----------------------------------------------------------
1,000,000 Broward County, FL School District, GO UT Refunding Bonds,
5.60% (Original Issue Yield: 5.80%), 2/15/2007 AA- 1,054,140
----------------------------------------------------------
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+ 956,800
----------------------------------------------------------
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 1,007,140
----------------------------------------------------------
1,000,000 St. Petersburg, FL Public Utility, Water & Sewer Revenue
Bonds, 5.50%, 10/1/2009 AA- 1,035,570
---------------------------------------------------------- -----------
Total 4,053,650
---------------------------------------------------------- -----------
GEORGIA--2.1%
----------------------------------------------------------
1,000,000 Fulton County, GA, GO UT Refunding Bonds, 4.60%, 1/1/2001 AA 1,010,430
---------------------------------------------------------- -----------
</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
- ------------------------------------------------------------------------
HAWAII--3.2%
----------------------------------------------------------
$ 500,000 Hawaii State, GO UT Bonds (Series CB), 5.75% (Original
Issue Yield: 5.95%), 1/1/2008 A+ $ 537,055
----------------------------------------------------------
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 1,033,700
---------------------------------------------------------- -----------
Total 1,570,755
---------------------------------------------------------- -----------
ILLINOIS--3.2%
----------------------------------------------------------
1,000,000 Illinois State, GO UT Bonds, 5.60% (Original Issue Yield:
5.65%), 4/1/2008 AA- 1,046,830
----------------------------------------------------------
500,000 Illinois State, GO UT Refunding Bonds, 5.875% (Original
Issue Yield: 6.05%), 6/1/2011 AA- 520,415
---------------------------------------------------------- -----------
Total 1,567,245
---------------------------------------------------------- -----------
INDIANA--1.1%
----------------------------------------------------------
500,000 Indianapolis, IN, Local Public Improvement Revenue Bonds,
6.00% (Original Issue Yield: 6.40%), 7/1/2010 AA- 527,415
---------------------------------------------------------- -----------
KENTUCKY--2.0%
----------------------------------------------------------
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+ 996,430
---------------------------------------------------------- -----------
LOUISIANA--1.1%
----------------------------------------------------------
500,000 Louisiana PFA, Hospital Refunding Revenue Bonds (Series
C), 6.05% (Our Lady of Lake Regional)/(MBIA Insurance
Corporation INS)/(Original Issue Yield: 6.15%), 12/1/2008 AAA 527,860
---------------------------------------------------------- -----------
MARYLAND--2.1%
----------------------------------------------------------
1,000,000 Maryland State, GO UT Bonds (Series BB), 5.50%, 6/1/2009 AAA 1,050,860
---------------------------------------------------------- -----------
</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
- ------------------------------------------------------------------------
MASSACHUSETTS--3.2%
----------------------------------------------------------
$ 450,000 Commonwealth of Massachusetts, GO UT Bonds (Series A),
6.00% (FSA INS)/(Original Issue Yield: 7.618%), 6/1/2011 AAA $ 475,835
----------------------------------------------------------
1,000,000 Commonwealth of Massachusetts, GO UT Refunding Revenue
Bonds (Series A), 6.25%, 7/1/2003 A+ 1,085,710
---------------------------------------------------------- -----------
Total 1,561,545
---------------------------------------------------------- -----------
MINNESOTA--2.1%
----------------------------------------------------------
1,000,000 Minnesota State, GO UT, 5.00% (Original Issue Yield:
5.15%), 11/1/2008 AA+ 1,011,670
---------------------------------------------------------- -----------
MISSISSIPPI--12.8%
----------------------------------------------------------
1,000,000 Hinds County, MS, GO UT Refunding Bonds, 5.50% (MBIA
Insurance Corporation INS)/(Original Issue Yield: 5.75%),
3/1/2008 AAA 1,054,690
----------------------------------------------------------
1,125,000 Jackson, MS, GO UT Refunding Bonds (Series A), 5.85% (MBIA
Insurance Corporation INS), 5/1/2006 AAA 1,177,661
----------------------------------------------------------
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 1,009,700
----------------------------------------------------------
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 1,024,520
----------------------------------------------------------
1,000,000 Mississippi State, GO UT Bonds, 5.125% (Original Issue
Yield: 5.30%), 12/1/2011 AA 1,003,940
----------------------------------------------------------
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 1,010,770
---------------------------------------------------------- -----------
Total 6,281,281
---------------------------------------------------------- -----------
MISSOURI--2.0%
----------------------------------------------------------
1,000,000 Missouri State, Water Pollution Control Refunding Bonds
(Series B), 5.00% (Original Issue Yield: 5.60%), 8/1/2010 AAA 1,002,550
---------------------------------------------------------- -----------
</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
- ------------------------------------------------------------------------
MONTANA--2.0%
----------------------------------------------------------
$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- $ 1,003,520
---------------------------------------------------------- -----------
NEVADA--3.1%
----------------------------------------------------------
500,000 Las Vegas Valley, NV Water District, GO LT Refunding
Revenue Bonds, 5.75% (MBIA Insurance Corporation INS)/
(Original Issue Yield: 5.90%), 9/1/2008 AAA 517,990
----------------------------------------------------------
1,000,000 Nevada State, (Project R-5) GO LT Bonds (Series A), 4.90%
(Original Issue Yield: 5.00%), 11/1/2007 AA 1,005,290
---------------------------------------------------------- -----------
Total 1,523,280
---------------------------------------------------------- -----------
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+ 534,500
---------------------------------------------------------- -----------
NEW YORK--2.1%
----------------------------------------------------------
1,000,000 New York State, GO UT Bonds, 5.50% (Original Issue Yield:
5.55%), 7/15/2011 A- 1,024,620
---------------------------------------------------------- -----------
NORTH CAROLINA--3.2%
----------------------------------------------------------
1,000,000 North Carolina State, GO UT Bonds, 5.10%, 3/1/2003 AAA 1,037,360
----------------------------------------------------------
500,000 Wake County, NC, General Obligation Unlimited, 4.90%,
3/1/2005 AAA 512,300
---------------------------------------------------------- -----------
Total 1,549,660
---------------------------------------------------------- -----------
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 526,920
---------------------------------------------------------- -----------
OREGON--2.1%
----------------------------------------------------------
1,000,000 Portland, OR, GO UT Refunding Revenue Bonds, 4.90%
(Original Issue Yield: 5.00%), 10/1/2007 NR 1,010,180
---------------------------------------------------------- -----------
RHODE ISLAND--1.0%
----------------------------------------------------------
500,000 Providence, RI, GO UT Bonds, 5.90% (MBIA Insurance
Corporation INS)/(Original Issue Yield: 6.05%), 1/15/2009 AAA 526,125
---------------------------------------------------------- -----------
</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
- ------------------------------------------------------------------------
TENNESSEE--2.0%
----------------------------------------------------------
$1,000,000 Memphis, TN, GO UT Refunding Bonds, 4.90% (Original Issue
Yield: 5.05%), 8/1/2006 AA $ 1,019,520
---------------------------------------------------------- -----------
TEXAS--8.5%
----------------------------------------------------------
500,000 Corpus Christi, TX, GO UT Refunding Bonds, 6.00% (FGIC
INS)/(Original Issue Yield: 6.15%), 3/1/2010 AAA 523,560
----------------------------------------------------------
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 521,575
----------------------------------------------------------
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 539,550
----------------------------------------------------------
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 1,031,710
----------------------------------------------------------
500,000 Texas State Public Finance Authority, GO UT Refunding
Bonds (Series A), 5.90% (Original Issue Yield: 6.00%),
10/1/2011 AA 524,885
----------------------------------------------------------
1,000,000 Texas State, GO UT Water Development Bonds, 5.20%
(Original Issue Yield: 5.25%), 8/1/2010 AA 1,009,620
---------------------------------------------------------- -----------
Total 4,150,900
---------------------------------------------------------- -----------
VIRGINIA--3.1%
----------------------------------------------------------
1,000,000 Fairfax County, VA, GO UT Bonds (Series A), 5.50%
(Original Issue Yield: 5.70%), 6/1/2008 AAA 1,041,660
----------------------------------------------------------
500,000 Virginia State Transportation Board, Refunding Revenue
Bonds, 6.00% (Original Issue Yield: 6.45%), 4/1/2010 AA 523,465
---------------------------------------------------------- -----------
Total 1,565,125
---------------------------------------------------------- -----------
WASHINGTON--8.8%
----------------------------------------------------------
1,000,000 King County, WA Library System, UT GO Bonds, 6.15%,
12/1/2010 AA- 1,077,370
----------------------------------------------------------
500,000 King County, WA, GO UT Refunding Bonds (Series A), 6.00%,
12/1/2010 AA+ 525,160
----------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
DG MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
WASHINGTON--CONTINUED
----------------------------------------------------------
$ 500,000 Port of Seattle, WA, Revenue Bonds, 6.25% (Original Issue
Yield: 6.566%), 11/1/2010 AA- $ 527,990
----------------------------------------------------------
650,000 Tacoma, WA Electric System, Refunding Revenue Bonds, 6.25%
(AMBAC INS)/(Original Issue Yield: 6.60%), 1/1/2011 AAA 695,468
----------------------------------------------------------
500,000 Washington State, GO LT Refunding Revenue Bonds (Series
R92-B), 6.25% (Original Issue Yield: 6.80%), 9/1/2009 AA 526,690
----------------------------------------------------------
1,000,000 Washington State, GO UT Refunding Bonds (Series R-96B),
5.00% (Original Issue Yield: 5.45%), 7/1/2010 AA 992,450
---------------------------------------------------------- -----------
Total 4,345,128
---------------------------------------------------------- -----------
WISCONSIN--4.2%
----------------------------------------------------------
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 527,765
----------------------------------------------------------
500,000 Wisconsin State, GO UT Bonds (Series A), 6.30% (Original
Issue Yield: 6.60%), 5/1/2012 AA 539,145
----------------------------------------------------------
1,000,000 Wisconsin State, GO UT Bonds (Series C), 5.25% (Original
Issue Yield: 5.45%), 5/1/2011 AA 1,008,240
---------------------------------------------------------- -----------
Total 2,075,150
---------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES (IDENTIFIED COST
$45,075,032) 46,776,109
---------------------------------------------------------- -----------
MUTUAL FUND SHARES--3.4%
- ------------------------------------------------------------------------
1,648,779 Dreyfus Tax Exempt Cash Management (AT NET ASSET VALUE) 1,648,779
---------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $46,723,811) $48,424,888
---------------------------------------------------------- -----------
</TABLE>
(See Notes to Portfolios of Investments)
NOTES TO PORTFOLIOS OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Non-income producing security.
(c) Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation CGIC -- Capital
Guaranty Insurance Corporation FGIC -- Financial Guaranty Insurance
Company FSA -- Financial Security Assurance 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>
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 $ 331,280,544 $257,025,599 $259,623,288 $2,597,689 $589,939,998
Opportunity Fund $ 79,250,026 $ 25,301,348 $28,443,065 $3,141,717 $106,693,848
Limited Term Fund $ 81,084,155 $ 346,715 $ 547,721 $ 201,006 $ 80,575,762
Government Income Fund $ 269,358,578 $ 1,140,024 $ 4,116,924 $2,976,900 $269,325,600
Municipal Income Fund $ 46,723,811 $ 1,701,077 $ 1,701,077 -- $ 49,100,104
</TABLE>
* The categories of investments are shown as a percentage of net
assets at August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED
DG TERM
DG EQUITY OPPORTUNITY GOVERNMENT
FUND FUND INCOME FUND
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS:
- -------------------------------------------------------------
Investments in securities, at value $588,306,143 $104,551,374 $81,430,870
- -------------------------------------------------------------
Cash 32 15 27
- -------------------------------------------------------------
Income receivable 686,520 5,869 1,168,344
- -------------------------------------------------------------
Receivable for investments sold -- 4,934,571 --
- -------------------------------------------------------------
Receivable for shares sold 1,041,907 9,717 --
- -------------------------------------------------------------
Deferred expenses -- 1,101 --
- ------------------------------------------------------------- ------------ ------------ -----------
Total assets 590,034,602 109,502,647 82,599,241
- ------------------------------------------------------------- ------------ ------------ -----------
LIABILITIES:
- -------------------------------------------------------------
Payable for investments purchased -- 2,785,250 2,000,000
- -------------------------------------------------------------
Payable for shares redeemed 5,905 -- --
- -------------------------------------------------------------
Income distribution payable 2,183 -- --
- -------------------------------------------------------------
Accrued expenses 86,516 23,549 23,479
- ------------------------------------------------------------- ------------ ------------ -----------
Total liabilities 94,604 2,808,799 2,023,479
- ------------------------------------------------------------- ------------ ------------ -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------
Paid in capital 329,241,989 74,321,504 83,764,158
- -------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 257,025,599 25,301,348 346,715
- -------------------------------------------------------------
Accumulated net realized gain (loss) on investments 3,104,714 7,219,352 (3,600,142)
- -------------------------------------------------------------
Undistributed net investment income (loss) 567,696 (148,356) 65,031
- ------------------------------------------------------------- ------------ ------------ -----------
Total Net Assets $589,939,998 $106,693,848 $80,575,762
- ------------------------------------------------------------- ------------ ------------ -----------
NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share:
(net assets / shares outstanding) $19.43 $17.20 $9.74
- ------------------------------------------------------------- ------------ ------------ -----------
Offering Price Per Share*** $20.13 * $17.82 * $9.94**
- ------------------------------------------------------------- ------------ ------------ -----------
Shares Outstanding 30,364,787 6,204,017 8,272,737
- ------------------------------------------------------------- ------------ ------------ -----------
Investments, at identified cost $331,280,544 $79,250,026 $81,084,155
- ------------------------------------------------------------- ------------ ------------ -----------
Investments, at tax cost $331,280,544 $79,250,026 $81,084,155
- ------------------------------------------------------------- ------------ ------------ -----------
</TABLE>
* Computation of offering price: 100/96.5 of net asset value.
** Computation of offering price: 100/98 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--STOCK AND BOND FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG DG
GOVERNMENT MUNICIPAL
INCOME FUND INCOME FUND
------------ -----------
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------
Investments in securities, at value $270,498,602 $48,424,888
- ---------------------------------------------------------------------------
Cash 52 --
- ---------------------------------------------------------------------------
Income receivable 2,871,620 699,463
- ---------------------------------------------------------------------------
Receivable for investments sold -- --
- ---------------------------------------------------------------------------
Receivable for shares sold -- --
- ---------------------------------------------------------------------------
Deferred expenses 89 --
- --------------------------------------------------------------------------- ------------ ---------
Total assets 273,370,363 49,124,351
- --------------------------------------------------------------------------- ------------ ---------
LIABILITIES:
- ---------------------------------------------------------------------------
Payable for investments purchased 4,000,000 --
- ---------------------------------------------------------------------------
Payable for shares redeemed -- --
- ---------------------------------------------------------------------------
Income distribution payable -- --
- ---------------------------------------------------------------------------
Accrued expenses 44,763 24,247
- --------------------------------------------------------------------------- ------------ ---------
Total liabilities 4,044,763 24,247
- --------------------------------------------------------------------------- ------------ ---------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------
Paid in capital 270,235,762 47,297,757
- ---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 1,140,024 1,701,077
- ---------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (2,135,944) (10,476)
- ---------------------------------------------------------------------------
Undistributed net investment income (loss) 85,758 111,746
- --------------------------------------------------------------------------- ------------ ---------
Total Net Assets $269,325,600 $49,100,104
- --------------------------------------------------------------------------- ------------ ---------
NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share: (net assets /
shares outstanding) $9.78 $10.67
- --------------------------------------------------------------------------- ------------ ---------
Offering Price Per Share*** $9.98 ** $10.89 **
- --------------------------------------------------------------------------- ------------ ---------
Shares Outstanding 27,540,048 4,601,094
- --------------------------------------------------------------------------- ------------ ---------
Investments, at identified cost $269,358,578 $46,723,811
- --------------------------------------------------------------------------- ------------ ---------
Investments, at tax cost $269,358,578 $46,723,811
- --------------------------------------------------------------------------- ------------ ---------
</TABLE>
** Computation of offering price: 100/98 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--STOCK AND BOND FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED
DG TERM
DG EQUITY OPPORTUNITY GOVERNMENT
FUND FUND INCOME FUND
----------- ----------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------
Dividends $3,402,264 $ 102,770 $ --
- -----------------------------------------------------------
Interest 1,022,271 268,106 2,485,392
- ----------------------------------------------------------- ----------- ----------- ----------
Total income 4,424,535 370,876 2,485,392
- ----------------------------------------------------------- ----------- ----------- ----------
EXPENSES:
- -----------------------------------------------------------
Investment advisory fee 2,059,859 432,400 249,630
- -----------------------------------------------------------
Administrative personnel and services fee 278,294 50,410 42,225
- -----------------------------------------------------------
Custodian fees 22,183 7,364 5,828
- -----------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 35,743 24,502 16,396
- -----------------------------------------------------------
Directors'/Trustees' fees 3,191 1,656 2,521
- -----------------------------------------------------------
Auditing fees 6,150 6,256 6,149
- -----------------------------------------------------------
Legal fees 1,634 920 1,018
- -----------------------------------------------------------
Portfolio accounting fees 48,889 22,328 23,972
- -----------------------------------------------------------
Shareholder services fee 77,728 13,179 10,293
- -----------------------------------------------------------
Share registration costs 9,258 7,639 7,408
- -----------------------------------------------------------
Printing and postage 2,998 3,312 2,420
- -----------------------------------------------------------
Insurance premiums 2,898 1,472 1,715
- -----------------------------------------------------------
Miscellaneous 2,435 3,680 1,814
- ----------------------------------------------------------- ----------- ---------- -----------
Total expenses 2,551,260 575,118 371,389
- -----------------------------------------------------------
WAIVER--
- -----------------------------------------------------------
Waiver of investment advisory fee -- (55,886) (72,895)
- ----------------------------------------------------------- ----------- ----------- ----------
Total waiver -- (55,886) (72,895)
- ----------------------------------------------------------- ----------- ----------- ----------
Net expenses 2,551,260 519,232 298,494
- ----------------------------------------------------------- ----------- ----------- ----------
Net investment income (loss) 1,873,275 (148,356) 2,186,898
- ----------------------------------------------------------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------
Net realized gain (loss) on investments 3,103,726 7,470,288 (70,452)
- -----------------------------------------------------------
Change in unrealized appreciation/depreciation of
investments 85,760,443 15,586,743 276,369
- ----------------------------------------------------------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on investments 88,864,169 23,057,031 205,917
- ----------------------------------------------------------- ----------- ----------- ----------
Change in net assets resulting from operations $90,737,444 $22,908,675 $ 2,392,815
- ----------------------------------------------------------- ----------- ----------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG DG
GOVERNMENT MUNICIPAL
INCOME FUND INCOME FUND
------------ -----------
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------
Dividends $ -- $ --
- ------------------------------------------------------------------------
Interest 8,558,683 1,246,487
- ------------------------------------------------------------------------ ----------- --------
Total income 8,558,683 1,246,487
- ------------------------------------------------------------------------ ----------- --------
EXPENSES:
- ------------------------------------------------------------------------
Investment advisory fee 789,947 144,215
- ------------------------------------------------------------------------
Administrative personnel and services fee 133,515 28,075
- ------------------------------------------------------------------------
Custodian fees 14,183 5,404
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 26,223 13,711
- ------------------------------------------------------------------------
Directors'/Trustees' fees 2,269 1,386
- ------------------------------------------------------------------------
Auditing fees 6,050 6,302
- ------------------------------------------------------------------------
Legal fees 1,008 1,008
- ------------------------------------------------------------------------
Portfolio accounting fees 33,868 25,031
- ------------------------------------------------------------------------
Shareholder services fee 34,859 6,264
- ------------------------------------------------------------------------
Share registration costs 11,190 6,563
- ------------------------------------------------------------------------
Printing and postage 3,025 2,521
- ------------------------------------------------------------------------
Insurance premiums 2,168 1,512
- ------------------------------------------------------------------------
Miscellaneous 1,915 3,065
- ------------------------------------------------------------------------ ----------- --------
Total expenses 1,060,220 245,057
- ------------------------------------------------------------------------
WAIVER--
- ------------------------------------------------------------------------
Waiver of investment advisory fee (97,667) (77,967)
- ------------------------------------------------------------------------ ----------- --------
Total waiver (97,667) (77,967)
- ------------------------------------------------------------------------ ----------- --------
Net expenses 962,553 167,090
- ------------------------------------------------------------------------ ----------- --------
Net investment income (loss) 7,596,130 1,079,397
- ------------------------------------------------------------------------ ----------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------
Net realized gain (loss) on investments (73,299) (10,668)
- ------------------------------------------------------------------------
Change in unrealized appreciation/depreciation of investments 2,483,093 514,351
- ------------------------------------------------------------------------ ----------- --------
Net realized and unrealized gain (loss) on investments 2,409,794 503,683
- ------------------------------------------------------------------------ ----------- --------
Change in net assets resulting from operations $10,005,924 $1,583,080
- ------------------------------------------------------------------------ ----------- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG EQUITY FUND DG OPPORTUNITY FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
(UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED
AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28,
1997 1997 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------
OPERATIONS--
- -------------------------------------------------
Net investment income/(operating loss) $ 1,873,275 $ 4,083,126 $ (148,356) $ (169,394)
- -------------------------------------------------
Net realized gain (loss) on investments
transactions 3,103,726 10,108,185 7,470,288 5,530,831
- -------------------------------------------------
Net change in unrealized
appreciation/depreciation of investments 85,760,443 63,747,215 15,586,743 1,007,879
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets resulting from
operations 90,737,444 77,938,526 22,908,675 6,369,316
- ------------------------------------------------- ----------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------
Distributions from net investment income (1,859,564) (3,964,723) -- --
- -------------------------------------------------
Distributions from net realized gain on
investments (14,896) (10,093,485) -- (4,554,267)
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets resulting from
distributions to shareholders (1,874,460) (14,058,208) -- (4,554,267)
- ------------------------------------------------- ----------- ------------ ----------- ------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------
Proceeds from sale of shares 81,763,483 102,599,959 13,421,175 35,538,237
- -------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 1,105,891 8,350,813 -- 3,267,077
- -------------------------------------------------
Cost of shares redeemed (72,184,261) (69,584,226) (10,163,150) (13,570,540)
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets from share transactions 10,685,113 41,366,546 3,258,025 25,234,774
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets 99,548,097 105,246,864 26,166,700 27,049,823
- -------------------------------------------------
NET ASSETS:
- -------------------------------------------------
Beginning of period 490,391,901 385,145,037 80,527,148 53,477,325
- ------------------------------------------------- ----------- ------------ ----------- ------------
End of period $589,939,998 $490,391,901 $106,693,848 $80,527,148
- ------------------------------------------------- ----------- ------------ ----------- ------------
Undistributed net investment income included in
net assets at end of period $ 567,696 $ 553,985 $ -- $ --
- ------------------------------------------------- ----------- ------------ ----------- ------------
Net realized gain (loss) as computed for federal
tax purposes $ 3,103,726 $10,108,185 $ 7,470,288 $ 4,663,970
- ------------------------------------------------- ----------- ------------ ----------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG LIMITED
TERM GOVERNMENT DG GOVERNMENT
INCOME FUND INCOME FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
(UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED
AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28,
1997 1997 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------
OPERATIONS--
- -------------------------------------------------
Net investment income/(operating loss) $ 2,186,898 $ 4,742,269 $ 7,596,130 $13,271,431
- -------------------------------------------------
Net realized gain (loss) on investments
transactions (70,452) (1,008,150) (73,299) (1,412,964)
- -------------------------------------------------
Net change in unrealized
appreciation/depreciation of investments 276,369 293,452 2,483,093 (2,801,515)
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets resulting from
operations 2,392,815 4,027,571 10,005,924 9,056,952
- ------------------------------------------------- ----------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------
Distributions from net investment income (2,157,420) (4,818,533) (7,556,166) (13,349,136)
- -------------------------------------------------
Distributions from net realized gain on
investments -- -- -- --
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets resulting from
distributions to shareholders (2,157,420) (4,818,533) (7,556,166) (13,349,136)
- ------------------------------------------------- ----------- ------------ ----------- ------------
CAPITAL STOCK TRANSACTION--
- -------------------------------------------------
Proceeds from sale of shares 5,761,313 28,760,569 52,913,206 113,591,135
- -------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 860,660 2,038,161 2,845,187 5,048,640
- -------------------------------------------------
Cost of shares redeemed (10,667,033) (38,897,952) (38,500,993) (48,955,255)
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets from share transactions (4,045,060) (8,099,222) 17,257,400 69,684,520
- ------------------------------------------------- ----------- ------------ ----------- ------------
Change in net assets (3,809,665) (8,890,184) 19,707,158 65,392,336
- -------------------------------------------------
NET ASSETS:
- -------------------------------------------------
Beginning of period 84,385,427 93,275,611 249,618,442 184,226,106
- ------------------------------------------------- ----------- ------------ ----------- ------------
End of period $ 80,575,762 $84,385,427 $269,325,600 $249,618,442
- ------------------------------------------------- ----------- ------------ ----------- ------------
Undistributed net investment income included in
net assets at end of period $ 65,031 $ 35,553 $ 85,758 $ 45,794
- ------------------------------------------------- ----------- ------------ ----------- ------------
Net realized gain (loss) as computed for federal
tax purposes $ (70,452) $ (758,580) $ (73,299) $ (498,409)
- ------------------------------------------------- ----------- ------------ ----------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG MUNICIPAL
INCOME FUND
---------------------------
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
AUGUST 31, FEBRUARY 28,
1997 1997
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income/(operating loss) $1,079,397 $ 2,183,126
- --------------------------------------------------------------------------
Net realized gain (loss) on investments transactions (10,668) 116,120
- --------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments 514,351 (430,649)
- -------------------------------------------------------------------------- ---------- -----------
Change in net assets resulting from operations 1,583,080 1,868,597
- -------------------------------------------------------------------------- ---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------
Distributions from net investment income (1,078,771) (2,140,424)
- --------------------------------------------------------------------------
Distributions from net realized gain on investments (104,785) (47,122)
- -------------------------------------------------------------------------- ---------- -----------
Change in net assets resulting from distributions to shareholders (1,183,556) (2,187,546)
- -------------------------------------------------------------------------- ---------- -----------
CAPITAL STOCK TRANSACTIONS--
- --------------------------------------------------------------------------
Proceeds from sale of shares 6,851,127 13,965,127
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 15,503 34,266
- --------------------------------------------------------------------------
Cost of shares redeemed (5,093,976) (11,330,842)
- -------------------------------------------------------------------------- ---------- -----------
Change in net assets from share transactions 1,772,654 2,668,551
- -------------------------------------------------------------------------- ---------- -----------
Change in net assets 2,172,178 2,349,602
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period 46,927,926 44,578,324
- -------------------------------------------------------------------------- ---------- -----------
End of period $49,100,104 $46,927,926
- -------------------------------------------------------------------------- ---------- -----------
Undistributed net investment income included in net assets at end of
period $ 111,746 $ 111,120
- -------------------------------------------------------------------------- ---------- -----------
Net realized gain (loss) as computed for federal tax purposes $ (10,668) $ 116,120
- -------------------------------------------------------------------------- ---------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET TO TO
REALIZED DISTRIBUTIONS SHAREHOLDERS SHAREHOLDERS
AND TO FROM NET IN EXCESS
NET ASSET NET UNREALIZED TOTAL SHAREHOLDERS REALIZED OF NET
VALUE, INVESTMENT GAIN/(LOSS) FROM FROM NET GAIN ON REALIZED
YEAR ENDED BEGINNING INCOME ON INVESTMENT INVESTMENT INVESTMENT GAIN ON
FEBRUARY 28 OR 29, OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME TRANSACTIONS INVESTMENTS
- ---------------------- --------- ---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DG 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) --
1998(d) $ 16.68 0.06 2.75 2.81 (0.06) -- --
DG 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 (0.03) 1.60 1.57 -- (0.83) --
1998(d) $ 13.53 (0.02) 3.69 3.67 -- -- --
DG 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) -- --
1998(d) $ 9.71 0.25 0.03 0.28 (0.25) -- --
DG 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) -- --
1998(d) $ 9.69 0.28 0.09 0.37 (0.28) -- --
DG 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) --
1998(d) $ 10.59 0.24 0.10 0.34 (0.24) (0.02) --
</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 six months ended August 31, 1997
(unaudited).
(e) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the financial statements)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------- NET
NET ASSETS,
NET ASSET INVESTMENT END OF
VALUE, INCOME/ PERIOD PORTFOLIO AVERAGE
TOTAL END OF TOTAL (OPERATING EXPENSE (000 TURNOVER COMMISSION
DISTRIBUTIONS PERIOD RETURN(E) EXPENSES LOSS) WAIVER(G) OMITTED) RATE PAID(I)
- ---------- --------- --------- -------- ------------- -------- ---------- ---------- ---------
<S> <C> <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% $0.0653
(0.49) $ 16.68 18.79% 0.92% 0.95% -- $490,392 7% $0.0761
(0.06) $ 19.43 16.90% 0.96%(f) 0.70%(f) -- $589,940 4% $0.0690
(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% $0.0098
(0.83) $ 13.53 12.08% 1.14% (0.24)% 0.16% $ 80,527 116% $0.0568
-- $ 17.20 27.12% 1.14%(f) (0.33)%(f) 0.12%(f) $106,694 74% $0.0628
(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% $ 92,216 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% --
(0.25) $ 9.74 2.97% 0.72% 5.26% 0.18% $ 80,576 24% --
(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% --
(0.28) $ 9.78 3.88% 0.73%(f) 5.77%(f) 0.07%(f) $269,326 6% --
(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% --
(0.26) $ 10.67 3.29% 0.70%(f) 4.49%(f) 0.32%(f) $ 49,100 1.15% --
</TABLE>
(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.
(See Notes which are an integral part of the financial statements)
DG INVESTOR SERIES--STOCK AND BOND FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of eight portfolios. The following diversified portfolios
(individually referred to as the "Fund", or collectively as the "Funds") are
presented herein:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
- ------------------------------------------------------------------------------------------------------
DG Equity Fund
("Equity Fund")
Provide long term
capital
appreciation with
current income as
a secondary
objective.
- ------------------------------------------------------------------------------------------------------
DG Opportunity Fund ("Opportunity Fund") Provide capital appreciation.
- ------------------------------------------------------------------------------------------------------
DG Limited Term Government Income Fund Provide current income.
("Limited Term Fund")
- ------------------------------------------------------------------------------------------------------
DG Government Income Fund ("Government Income Provide current income.
Fund")
- ------------------------------------------------------------------------------------------------------
DG Municipal Income Fund ("Municipal Income Provide dividend income
that is exempt from Fund") federal regular income tax.
- ------------------------------------------------------------------------------------------------------
</TABLE>
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, of issue, and
any other factors or market data the pricing service deems
relevant. U.S. government securities, listed 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. 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, to have
DG INVESTOR SERIES--STOCK AND BOND FUNDS
- --------------------------------------------------------------------------------
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 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 paid discount,
if applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Dividend income and distributions
to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the 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.
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
-------------------------------------- LOSS
FUND 2003 2004 2005 CARRYFORWARD
---------------------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Limited Term Fund $1,406,691 $1,040,337 $ 758,580 $ 3,205,608
Government Income Fund $ 181,520 $ 467,764 $ 498,409 $ 1,147,693
</TABLE>
DG INVESTOR SERIES--STOCK AND BOND FUNDS
- --------------------------------------------------------------------------------
Additionally, net capital losses, as noted below, attributable to
security transactions incurred after October 31, 1996, are
treated as arising the first day of the Funds' next taxable year.
<TABLE>
<CAPTION>
TOTAL TAX LOSS
FUND PUSHFORWARD
------------------------- ---------------
<S> <C>
Opportunity Fund $ 190,744
Limited Term Fund $ 324,507
Government Income Fund $ 914,555
</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 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).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
EQUITY FUND OPPORTUNITY FUND
---------------------------------------- ----------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
- ---------------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Shares sold 4,821,831 6,852,631 942,643 2,464,715
- ---------------------------
Shares issued to
shareholders in payment of
distributions declared 62,037 537,524 -- 234,535
- ---------------------------
Shares redeemed (3,913,394) (4,578,933) (690,235) (929,615)
- --------------------------- ------------- ------------- ----------- ------------
Net change resulting from
share transactions 970,474 2,811,222 252,408 1,769,635
- --------------------------- ------------- ------------- ----------- ------------
</TABLE>
DG INVESTOR SERIES--STOCK AND BOND FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED TERM FUND GOVERNMENT INCOME FUND
---------------------------------------- ----------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
- ---------------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Shares sold 592,760 2,953,124 5,442,591 11,623,519
- ---------------------------
Shares issued to
shareholders in payment of
distributions declared 88,756 209,814 293,703 521,253
- ---------------------------
Shares redeemed (1,098,227) (3,986,837) (3,957,480) (5,043,232)
- --------------------------- ------------- ------------- ------------- -------------
Net change resulting from
share transactions (416,711) (823,899) 1,778,814 7,101,540
- --------------------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997
- ------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Shares sold 648,833 1,331,086
- ------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 1,465 3,288
- ------------------------------------------------------------------------
Shares redeemed (482,549) (1,083,418
- ------------------------------------------------------------------------ ------------ -------------
Net change resulting from share transactions 167,749 250,956
- ------------------------------------------------------------------------ ------------ -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--ParkSouth Corporation, a subsidiary of
Deposit Guaranty National Bank, the Funds' investment adviser (the
"Adviser"), receives 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
FEE
FUND NAME 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%
- ------------------------------------------------------------------------------
</TABLE>
ParkSouth Corporation became the Fund's investment adviser on March 1,
1997. Prior to March 1, 1997, Deposit Guaranty National Bank served as
the Fund's investment adviser. The advisory fees charged prior to
March 1, 1997 were the same as the current fees listed above.
SUB-ADVISORY FEE--Effective March 1, 1997, Commercial National Bank is
no longer the sub-adviser to the Funds'.
DG INVESTOR SERIES--STOCK AND BOND FUNDS
- --------------------------------------------------------------------------------
Prior to March 1, 1997, under the terms of the sub-advisory agreement
between Deposit Guaranty National Bank and the Trust Division of
Commercial National Bank, (the "sub-adviser"), the sub-adviser
received an annual fee from the Deposit Guaranty National Bank equal
to 0.25% of each Fund's average daily net assets.
Effective July 21, 1997, Womack Asset Management, Inc. (the
"sub-adviser") became the sub-adviser to DG Opportunity Fund. For its
services under the Sub-Advisory Agreement, the sub-adviser receives a
monthly fee based on the average daily net assets of the DG
Opportunity Fund. The sub-advisory fee shall be the sum of: 0.32% of
the average daily net assets up to $50 million; 0.075% of the average
daily net assets in excess of $50 million and up to $70 million; and
0.25% of the average daily net assets in excess of $70 million.
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 Trust for the period. The administrative fee received during any
fiscal year shall aggregate at least $100,000 per Fund.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with FAS, the Funds will pay FAS up to 0.15% of average
daily net assets of the Funds for the period. The fees paid to FAS are
used to finance certain services for shareholders and to maintain
shareholder accounts.
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--STOCK AND BOND FUNDS
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended August 31, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Equity Fund $28,259,923 $21,945,907
- ----------------------------------------------------------------
Opportunity Fund $64,466,569 $59,835,229
- ----------------------------------------------------------------
Limited Term Fund $18,071,250 $19,291,720
- ----------------------------------------------------------------
Government Income Fund $39,754,038 $14,937,000
- ----------------------------------------------------------------
Municipal Income Fund $ 2,537,890 $ 528,124
- ----------------------------------------------------------------
</TABLE>
(6) SUBSEQUENT EVENT
Effective September 3, 1997, the Trust added DG Mid Cap Fund to the
Trust.
<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>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the Funds' prospectus which
contains facts concerning their objectives and policies, management
fees, expenses and other information.
DG
Investor Series
o DG International Equity
Fund
Semi-Annual Report
and Supplement to
the Combined
Prospectus dated
June 30, 1997
[DG INVESTOR SERIES LOGO]
A Diversified Portfolio of
DG Investor Series,
an Open-End Management
Investment Company
ParkSouth
Corporation
Jackson, MS
Investment Adviser
[LOGO] FEDERATED INVESTORS Lazard
Asset Management
FEDERATED INVESTORS TOWER New York, NY
PITTSBURGH, PA 15222-3779 Sub-Adviser
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS
AND IS A SUBSIDIARY OF FEDERATED INVESTORS.
Cusip 23321N806
G01258-17(10/97) [RECYCLED PAPER]
October 30, 1997
DG INTERNATIONAL EQUITY FUND
(A Portfolio of DG Investor Series)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE COMBINED PROSPECTUS DATED JUNE 30, 1997
A. Please insert the following "Financial Highlights" table for
International Equity Fund immediately following the section
entitled "Financial Highlights" which begins on page 6 of the
prospectus:
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
AUGUST 31, 1997(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------------
Net realized and unrealized (loss) on investments and foreign currency
transactions (0.33)
- ---------------------------------------------------------------------------- ------------
Total from investment operations (0.32)
- ---------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.68
- ---------------------------------------------------------------------------- ------------
TOTAL RETURN (B) (3.20)%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 1.77%*
- ----------------------------------------------------------------------------
Net investment income 2.96%*
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50%*
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,778
- ----------------------------------------------------------------------------
Average commission rate paid (d) $0.0205
- ----------------------------------------------------------------------------
Portfolio turnover 0%
- ----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 15, 1997 (date of
initial public investment) to August 31, 1997.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the fifth paragraph of the section entitled "Voting
rights" which begins on page 35 of the prospectus and replace it
with the following:
"As of October 1, 1997, Deposit Guaranty National Bank was the owner
of record of 1,124,587 shares (91.52%) of International Equity Fund,
and therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented
for vote of shareholders."
C. Please insert the following "Financial Statements" for
International Equity Fund immediately following the section
entitled "Performance Information" on page 38 of the prospectus.
DG INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--94.4%
- -----------------------------------------------------------------------------------
ARGENTINA--1.6%
- -----------------------------------------------------------------------------------
ENERGY SOURCES--1.6%
----------------------------------------------------------------
5,200 YPF Sociedad Anonima, ADR $ 169,325
---------------------------------------------------------------- ------------
AUSTRALIA--0.9%
- -----------------------------------------------------------------------------------
BANKING--0.9%
----------------------------------------------------------------
16,300 Westpac Banking Corp. Ltd. 94,365
---------------------------------------------------------------- ------------
BRAZIL--1.5%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.5%
----------------------------------------------------------------
1,400 Telecomunicacoes Brasileiras SA, ADR 165,200
---------------------------------------------------------------- ------------
DENMARK--0.9%
- -----------------------------------------------------------------------------------
BANKING--0.9%
----------------------------------------------------------------
1,600 Unidanmark, Class A 93,607
---------------------------------------------------------------- ------------
FINLAND--0.4%
- -----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER--0.4%
----------------------------------------------------------------
2,000 UPM--Kymmene OY 47,437
---------------------------------------------------------------- ------------
FRANCE--11.4%
- -----------------------------------------------------------------------------------
BANKING--1.7%
----------------------------------------------------------------
4,400 Banque Nationale de Paris 187,610
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
FRANCE--CONTINUED
- -----------------------------------------------------------------------------------
BROADCASTING & PUBLISHING--0.5%
----------------------------------------------------------------
800 Havas SA $ 48,849
---------------------------------------------------------------- ------------
CHEMICALS--2.0%
----------------------------------------------------------------
6,000 Rhone-Poulenc, Class A 220,075
---------------------------------------------------------------- ------------
COMMERCIAL SERVICES--1.7%
----------------------------------------------------------------
1,650 Compagnie Generale des Eaux 184,170
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--1.5%
----------------------------------------------------------------
1,300 Alcatel Alsthom 159,228
---------------------------------------------------------------- ------------
ENERGY SOURCES--2.0%
----------------------------------------------------------------
1,900 Elf Aquitaine SA 211,136
---------------------------------------------------------------- ------------
INSURANCE--0.9%
----------------------------------------------------------------
1,500 AXA 95,567
---------------------------------------------------------------- ------------
MISCELLANEOUS MATERIALS & COMMODITIES--1.1%
----------------------------------------------------------------
850 Compagnie de St. Gobain 116,705
---------------------------------------------------------------- ------------
Total France 1,223,340
---------------------------------------------------------------- ------------
GERMANY--10.9%
- -----------------------------------------------------------------------------------
AUTOMOBILE--1.5%
----------------------------------------------------------------
2,200 (a) Daimler Benz AG 164,552
---------------------------------------------------------------- ------------
BANKING--1.9%
----------------------------------------------------------------
1,600 Deutsche Bank, AG 93,523
----------------------------------------------------------------
2,700 Dresdner Bank AG, Frankfurt 107,258
---------------------------------------------------------------- ------------
Total 200,781
---------------------------------------------------------------- ------------
CHEMICALS--1.7%
----------------------------------------------------------------
4,700 Hoechst AG 186,057
---------------------------------------------------------------- ------------
DIVERSIFIED OPERATIONS--0.7%
----------------------------------------------------------------
3,500 (a) Metallgesellschaft 78,536
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--1.0%
----------------------------------------------------------------
2,300 (a) Metro AG 105,130
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
GERMANY--CONTINUED
- -----------------------------------------------------------------------------------
MACHINERY & ENGINEERING--2.4%
----------------------------------------------------------------
320 Mannesmann SA $ 148,219
----------------------------------------------------------------
450 Thyssen AG 103,468
---------------------------------------------------------------- ------------
Total 251,687
---------------------------------------------------------------- ------------
UTILITIES--ELECTRICAL & GAS--1.7%
----------------------------------------------------------------
450 Viag AG 186,866
---------------------------------------------------------------- ------------
Total Germany 1,173,609
---------------------------------------------------------------- ------------
GREECE--3.1%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.1%
----------------------------------------------------------------
15,000 (b) Hellenic Telecommunications Organization 333,797
---------------------------------------------------------------- ------------
HONG KONG--2.3%
- -----------------------------------------------------------------------------------
BANKING--1.3%
----------------------------------------------------------------
4,800 HSBC Holdings PLC 146,177
---------------------------------------------------------------- ------------
MULTI-INDUSTRY--1.0%
----------------------------------------------------------------
14,000 Swire Pacific Ltd., Class A 107,039
---------------------------------------------------------------- ------------
Total Hong Kong 253,216
---------------------------------------------------------------- ------------
ITALY--5.1%
- -----------------------------------------------------------------------------------
AUTOMOBILE--1.5%
----------------------------------------------------------------
52,900 Fiat SPA 162,387
---------------------------------------------------------------- ------------
BANKING--0.9%
----------------------------------------------------------------
48,700 Credito Italiano 100,674
---------------------------------------------------------------- ------------
ENERGY--OIL & GAS--1.3%
----------------------------------------------------------------
25,500 Eni SPA 142,257
---------------------------------------------------------------- ------------
TELECOMMUNICATIONS--1.4%
----------------------------------------------------------------
41,600 Telecom Italia SPA 146,783
---------------------------------------------------------------- ------------
Total Italy 552,101
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
JAPAN--19.9%
- -----------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--2.0%
----------------------------------------------------------------
12,000 Matsushita Electric Industrial Co. $ 220,566
---------------------------------------------------------------- ------------
AUTOMOBILE--1.4%
----------------------------------------------------------------
5,000 Honda Motor Co. Ltd. 153,999
---------------------------------------------------------------- ------------
BANKING--1.8%
----------------------------------------------------------------
20,000 (a) Sumitomo Trust & Banking 193,741
---------------------------------------------------------------- ------------
BUILDING MATERIALS & COMPONENTS--1.0%
----------------------------------------------------------------
13,000 Sekisui Chemical Co. 109,786
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--2.5%
----------------------------------------------------------------
3,000 Omron Corp. 55,638
----------------------------------------------------------------
2,400 Sony Corp. 208,644
---------------------------------------------------------------- ------------
Total 264,282
---------------------------------------------------------------- ------------
FINANCE-LEASING--1.7%
----------------------------------------------------------------
2,400 Orix Corp 177,844
---------------------------------------------------------------- ------------
FINANCIAL SERVICES--0.7%
----------------------------------------------------------------
1,400 Promise Co. Ltd. 70,475
---------------------------------------------------------------- ------------
INSURANCE--0.3%
----------------------------------------------------------------
6,000 (a) Mitsui Marine & Fire Insurance Co. 34,824
---------------------------------------------------------------- ------------
MACHINERY & ENGINEERING--1.3%
----------------------------------------------------------------
21,000 Mitsubishi Heavy Industries Ltd. 138,922
---------------------------------------------------------------- ------------
MERCHANDISING--1.0%
----------------------------------------------------------------
2,000 Ito-Yokado Co., Ltd. 107,634
---------------------------------------------------------------- ------------
OFFICE EQUIPMENT--2.0%
----------------------------------------------------------------
16,000 (a) Ricoh Co. Ltd. 215,930
---------------------------------------------------------------- ------------
RECREATION, OTHER CONSUMER GOODS--1.5%
----------------------------------------------------------------
2,000 Nintendo Corp. Ltd. 164,597
---------------------------------------------------------------- ------------
TELECOMMUNICATIONS--1.8%
----------------------------------------------------------------
21 Nippon Telegraph & Telephone Corp. 196,473
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
JAPAN--CONTINUED
- -----------------------------------------------------------------------------------
TOBACCO--0.9%
----------------------------------------------------------------
12 (b) Japan Tobacco, Inc. $ 96,274
---------------------------------------------------------------- ------------
Total Japan 2,145,347
---------------------------------------------------------------- ------------
KOREA, REPUBLIC OF--1.4%
- -----------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS--1.4%
----------------------------------------------------------------
9,300 Korea Electric Power Corp., ADR 151,706
---------------------------------------------------------------- ------------
MALAYSIA--0.2%
- -----------------------------------------------------------------------------------
LEISURE & TOURISM--0.2%
----------------------------------------------------------------
7,000 Genting Berhad 23,942
---------------------------------------------------------------- ------------
MEXICO--1.3%
- -----------------------------------------------------------------------------------
BANKING--1.3%
----------------------------------------------------------------
52,000 (a) Grupo Financiero Banamex Accivel, Class B 139,295
---------------------------------------------------------------- ------------
NETHERLANDS--1.6%
- -----------------------------------------------------------------------------------
BEVERAGE & TOBACCO--0.7%
----------------------------------------------------------------
500 Heineken NV 78,844
---------------------------------------------------------------- ------------
ENERGY SOURCES--0.9%
----------------------------------------------------------------
1,800 Royal Dutch Petroleum Co., ADR 91,350
---------------------------------------------------------------- ------------
Total Netherlands 170,194
---------------------------------------------------------------- ------------
NEW ZEALAND--0.4%
- -----------------------------------------------------------------------------------
BREWERY--0.4%
----------------------------------------------------------------
19,200 Lion Nathan Ltd. 48,450
---------------------------------------------------------------- ------------
PHILIPPINES--1.2%
- -----------------------------------------------------------------------------------
BANKING--1.2%
----------------------------------------------------------------
30,000 (a) Philippine National Bank 129,412
---------------------------------------------------------------- ------------
SOUTH AFRICA--1.6%
- -----------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS--1.6%
----------------------------------------------------------------
14,200 (a) Barlow Ltd. 167,228
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
SPAIN--1.3%
- -----------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.3%
----------------------------------------------------------------
5,600 Telefonica de Espana $ 145,168
---------------------------------------------------------------- ------------
SWEDEN--2.8%
- -----------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--1.1%
----------------------------------------------------------------
1,600 Electrolux AB, Class B 113,781
---------------------------------------------------------------- ------------
BANKING--1.1%
----------------------------------------------------------------
4,000 Svenska Handelsbanken, Stockholm 122,924
---------------------------------------------------------------- ------------
HEALTH & PERSONAL CARE--0.6%
----------------------------------------------------------------
4,300 Astra AB, Class B 64,979
---------------------------------------------------------------- ------------
Total Sweden 301,684
---------------------------------------------------------------- ------------
SWITZERLAND--5.8%
- -----------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS--0.9%
----------------------------------------------------------------
115 Holderbank Financiere Glaris AG, Class B 96,200
---------------------------------------------------------------- ------------
BUSINESS & PUBLIC SERVICES--0.8%
----------------------------------------------------------------
50 SGS Societe Generale de Surveillance Holding SA 90,372
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--0.9%
----------------------------------------------------------------
80 Nestle SA 92,992
---------------------------------------------------------------- ------------
HEALTH & PERSONAL CARE--1.4%
----------------------------------------------------------------
105 Novartis AG 148,720
---------------------------------------------------------------- ------------
INSURANCE--1.4%
----------------------------------------------------------------
415 Zurich Versicherungsgesellschaft 150,574
---------------------------------------------------------------- ------------
UNASSIGNED--0.4%
----------------------------------------------------------------
80 Societe Suisse pour la Microelectronique et l'Horlogerie 44,668
---------------------------------------------------------------- ------------
Total Switzerland 623,526
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
UNITED KINGDOM--18.8%
- -----------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNOLOGY--2.9%
----------------------------------------------------------------
13,100 British Aerospace $ 306,654
---------------------------------------------------------------- ------------
AUTOMOBILE--1.2%
----------------------------------------------------------------
40,500 (a) LucasVarity PLC 128,420
---------------------------------------------------------------- ------------
BANKING--1.4%
----------------------------------------------------------------
11,700 National Westminster Bank, PLC, London 149,649
---------------------------------------------------------------- ------------
BROADCASTING & PUBLISHING--0.4%
----------------------------------------------------------------
14,700 Mirror Group PLC 48,471
---------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--0.8%
----------------------------------------------------------------
14,600 General Electric Co. PLC 90,412
---------------------------------------------------------------- ------------
ENERGY SOURCES--0.9%
----------------------------------------------------------------
7,000 British Petroleum Co. PLC 97,817
---------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--3.4%
----------------------------------------------------------------
20,700 Cadbury Schweppes PLC 192,281
----------------------------------------------------------------
18,900 (a) Grand Metropolitan PLC 173,569
---------------------------------------------------------------- ------------
Total 365,850
---------------------------------------------------------------- ------------
INSURANCE--0.9%
----------------------------------------------------------------
10,300 Prudential Corp. PLC 101,353
---------------------------------------------------------------- ------------
LEISURE & TOURISM--1.9%
----------------------------------------------------------------
7,600 Granada Group PLC 100,411
----------------------------------------------------------------
18,000 Rank Group PLC 103,296
---------------------------------------------------------------- ------------
Total 203,707
---------------------------------------------------------------- ------------
MULTI-INDUSTRY--1.1%
----------------------------------------------------------------
34,000 BTR PLC 120,156
---------------------------------------------------------------- ------------
RECREATION, OTHER CONSUMER GOODS--0.8%
----------------------------------------------------------------
9,000 EMI Group PLC 81,120
---------------------------------------------------------------- ------------
TOBACCO--1.4%
----------------------------------------------------------------
18,200 B.A.T. Industries PLC 152,388
---------------------------------------------------------------- ------------
</TABLE>
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS--1.7%
----------------------------------------------------------------
19,400 National Power Co. PLC $ 177,311
---------------------------------------------------------------- ------------
Total United Kingdom 2,023,308
---------------------------------------------------------------- ------------
Total Common Stocks (IDENTIFIED COST $10,586,666) 10,175,257
---------------------------------------------------------------- ------------
PREFERRED STOCKS--1.4%
- -----------------------------------------------------------------------------------
BRAZIL--1.4%
- -----------------------------------------------------------------------------------
BEVERAGE & TOBACCO--1.4%
----------------------------------------------------------------
223,000 Cia Cervejaria Brahma, Preference (IDENTIFIED COST $149,910) 149,579
---------------------------------------------------------------- ------------
(C) REPURCHASE AGREEMENT--4.1%
- -----------------------------------------------------------------------------------
$ 441,000 State Street Bank and Trust Co., 5.45%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 441,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $11,177,576)(D) $ 10,765,836
---------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At August 31, 1997, these
securities amounted to $430,071 which represents 4.0% of net
assets.
(c) The repurchase agreement is fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio.
(d) The cost of investments for federal tax purposes amounts to
$11,177,576. The net unrealized depreciation of investments on a
federal tax basis amounts to $411,740 which is comprised of
$19,293 appreciation and $431,033 depreciation at August 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($10,777,646) at August 31, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $11,177,576) $10,765,836
- --------------------------------------------------------------------------------
Cash 911,596
- --------------------------------------------------------------------------------
Receivable for shares sold 34,571
- -------------------------------------------------------------------------------- -----------
Total assets 11,712,003
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $926,759
- ---------------------------------------------------------------------
Payable for taxes withheld 41
- ---------------------------------------------------------------------
Accrued expenses 7,557
- --------------------------------------------------------------------- --------
Total liabilities 934,357
- -------------------------------------------------------------------------------- -----------
Net Assets for 1,113,491 shares outstanding $10,777,646
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $11,134,671
- --------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets
and
liabilities in foreign currency (413,176)
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 43,545
- --------------------------------------------------------------------------------
Undistributed net investment income 12,606
- -------------------------------------------------------------------------------- -----------
Total net assets $10,777,646
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$10,777,646 / 1,113,491 shares outstanding $9.68
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1997 (UNAUDITED)*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $41) $ 1,373
- ----------------------------------------------------------------------------------
Interest 18,790
- ---------------------------------------------------------------------------------- ---------
Total income 20,163
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $ 4,262
- ------------------------------------------------------------------------
Administrative personnel and services fee 421
- ------------------------------------------------------------------------
Custodian fees 2,057
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 460
- ------------------------------------------------------------------------
Directors'/Trustees' fees 38
- ------------------------------------------------------------------------
Legal fees 47
- ------------------------------------------------------------------------
Portfolio accounting fees 1,129
- ------------------------------------------------------------------------
Shareholder services fee 639
- ------------------------------------------------------------------------
Share registration costs 311
- ------------------------------------------------------------------------
Printing and postage 107
- ------------------------------------------------------------------------
Insurance premiums 55
- ------------------------------------------------------------------------
Miscellaneous 162
- ------------------------------------------------------------------------ -------
Total expenses 9,688
- ------------------------------------------------------------------------
Waiver of investment advisory fee (2,131)
- ------------------------------------------------------------------------ -------
Net expenses 7,557
- ---------------------------------------------------------------------------------- ---------
Net investment income 12,606
- ---------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ----------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 43,545
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (413,176)
- ---------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments and foreign currency (369,631)
- ---------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $(357,025)
- ---------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
AUGUST 31, 1997*
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------
Net investment income $ 12,606
- ----------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
($43,545, as computed for federal tax purposes) 43,545
- ----------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation
of
assets and liabilities in foreign currency (413,176)
- ---------------------------------------------------------------------- ----------------
Change in net assets resulting from operations (357,025)
- ---------------------------------------------------------------------- ----------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------
Proceeds from sale of shares 11,134,671
- ---------------------------------------------------------------------- ----------------
Change in net assets resulting from share transactions 11,134,671
- ---------------------------------------------------------------------- ----------------
Change in net assets 10,777,646
- ----------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------- ----------------
End of period (including undistributed net investment income of
$12,606) $10,777,646
- ---------------------------------------------------------------------- ----------------
</TABLE>
* For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The
financial statements included herein are only those of DG
International Equity Fund (the "Fund"), a non-diversified portfolio.
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to seek capital
appreciation.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the
last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair
market value. With respect to valuation of foreign securities,
trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore,
foreign securities are valued at the latest closing price on the
exchange on which they are traded prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. Dollars at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Trustees (the "Trustees"). Risks
may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Fund
could receive less than the repurchase price on the sale of
collateral securities.
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Dividend income and distributions
to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.
Withholding taxes on foreign interest and dividends have been
provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign
currency commitments for the delayed delivery of securities or
foreign currency exchange transactions. Purchased contracts are
used to acquire exposure to foreign currencies; whereas,
contracts to sell are used to hedge the Fund's securities against
currency fluctuations. Risks may arise upon entering these
transactions from the potential inability of counter-parts to
meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The
foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are
recorded for financial statement purpose as unrealized until the
settlement date. At August 31, 1997, the Fund had outstanding
foreign currency commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN CURRENCY UNITS IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE TO DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
--------------- --------------------------- ----------- --------- --------------
<C> <S> <C> <C> <C>
8/29/97 472,743 Sterling Pound $ 761,116 $766,364 $5,248
8/29/97 4,950,048 Philippine Peso $ 166,109 $161,766 (4,343)
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund
are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies ("FC") are translated into U.S.
dollars based on the rate of exchange of such currencies against
U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded
and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from
sales of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized
between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on theFund's
books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that
may only be resold upon registration under federal securities
laws or in transactions exempt from such registration. In some
cases, the issuer of restricted securities has agreed to register
such securities for resale, at the issuer's expense either upon
demand by the Fund or in connection with another registered
offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The
Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at August
31, 1997 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
---------------------------------------------- ----------------- -----------------
<S> <C> <C>
Hellenic Telecommunications Organization 8/22/97--8/26/97 $ 339,752
Japan Tobacco, Inc. 8/18/97--8/22/97 $ 97,306
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade
date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares sold 1,113,491
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 0
- -------------------------------------------------------------------------
Shares redeemed 0
- ------------------------------------------------------------------------- --------------
Net change resulting from Institutional Shares transactions 1,113,491
- ------------------------------------------------------------------------- --------------
</TABLE>
*For the period from August 15, 1997 (date of initial public
investment) to August 31, 1997.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--ParkSouth Corporation, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net
assets. For the period ended August 31, 1997, ParkSouth Corporation
earned an advisory fee of $2,131, all of which was voluntarily waived.
Under the terms of a sub-advisory agreement between the Adviser and
Lazard Asset Management, Lazard Asset Management receives an annual
fee from the Adviser equal to 0.50% of the Fund's average daily net
assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Fund with certain administrative personnel and services. The fee
paid to FAS is based on the level of average aggregate net assets of
the Trust for the period. The administrative fee received during any
fiscal year shall be at least $100,000.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with FAS, the Fund will pay FAS up to 0.15% of average daily
net assets of the Fund for the period. The fee paid to FAS is used to
finance certain services for shareholders and to maintain shareholder
accounts.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp., the
principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Fund shares.
The Plan provides that the Fund may incur distribution expenses up to
0.25% of the average daily net assets of the Fund shares, annually, to
compensate Federated Securities Corp.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and
transactions made by shareholders.
DG INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--Federated Services Company maintains the
Trust's accounting records for which it receives a fee. The fee is
based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities
(and in-kind contributions), for the period ended August 31, 1997,
were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $10,736,576
- ------------------------------------------------------------------------------- -----------
SALES $ 0
- ------------------------------------------------------------------------------- -----------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. The political or
economic developments within a particular country or region may have
an adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
DG
Investor Series
Money Market Funds
o DG Prime Money
Market Fund
o DG U.S. Government
Money Market Fund
Combined
Semi-Annual Report
[DG INVESTOR SERIES LOGO]
Portfolios of
DG Investor Series,
an Open-End Management
Investment Company
ParkSouth
Corporation
Jackson, MS
Investment Adviser
[LOGO] FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS
AND IS A SUBSIDIARY OF FEDERATED INVESTORS.
Cusip 23321N707
Cusip 23321N103
G00498-10(10/97) [RECYCLED PAPER]
August 31, 1997
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report of the DG Investor
Series--Money Market Funds for the six-month period from March 1, 1997
through August 31, 1997. It provides you with complete financial
information for the funds, including a complete list of investments
and the financial statements.
Each fund puts your cash to work pursuing daily income by investing in
a diversified portfolio of high-quality money market securities. Of
course, the funds are also managed to give you easy access to your
money, and maintain a stable price of $1.00.*
DG PRIME MONEY MARKET FUND, a portfolio of all-government securities,
began operation on May 10, 1997. From that date through August 31,
1997, the fund paid dividends totaling $0.02 per share, for a total
return of 2.37%.** By the end of the period, the fund had attracted
$168.5 million in assets.
DG U.S. GOVERNMENT MONEY MARKET FUND, a portfolio of all-government
securities, paid dividends totaling $0.02 per share, for a total
return of 2.46% for the six-month period.** Net assets had climbed to
more than $242.3 million at the end of the report period.
Thank you for keeping your ready cash working every day through the convenience
and professional management of the DG Investor Series Money Market Funds. As
always, we welcome your questions or comments.
Sincerely,
LOGO
Edward C. Gonzales
President
October 15, 1997
* Although money market funds seek to maintain a stable net asset
value of $1.00 per share, there can be no assurance that they will
be able to do so. Investments in the funds are neither insured nor
guaranteed by the U.S.
government.
** Performance quoted represents past performance and is not indicative of
future results.
DG PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--84.2%
- -----------------------------------------------------------------------------------
BANKING--3.5%
----------------------------------------------------------------
$ 6,000,000 J.P. Morgan & Co., Inc., 5.560%, 11/17/1997 $ 5,929,673
---------------------------------------------------------------- ------------
BROKERAGE--3.5%
----------------------------------------------------------------
6,000,000 Merrill Lynch & Co., Inc., 5.671%, 10/6/1997 5,967,450
---------------------------------------------------------------- ------------
CONSUMER PRODUCTS--3.0%
----------------------------------------------------------------
5,000,000 Gillette Co., 5.495%, 9/17/1997 4,987,889
---------------------------------------------------------------- ------------
FINANCE--COMMERCIAL--13.5%
----------------------------------------------------------------
5,000,000 CIT Group Holdings, Inc., 5.556%, 11/5/1997 4,950,528
----------------------------------------------------------------
6,000,000 General Electric Capital Corp., 5.604%, 10/14/1997 5,960,440
----------------------------------------------------------------
6,000,000 IBM Credit Corp., 5.567%, 12/15/1997 5,904,275
----------------------------------------------------------------
6,000,000 MetLife Funding, Inc., 5.519%, 10/10/1997 5,964,380
---------------------------------------------------------------- ------------
Total 22,779,623
---------------------------------------------------------------- ------------
FINANCE--RETAIL--9.4%
----------------------------------------------------------------
5,000,000 Associates Corp. of North America, 5.621%, 10/3/1997 4,975,378
----------------------------------------------------------------
6,000,000 Commercial Credit Co., 5.596%, 11/10/1997 5,935,600
----------------------------------------------------------------
5,000,000 Household Finance Corp., 5.609%, 10/8/1997 4,971,582
---------------------------------------------------------------- ------------
Total 15,882,560
---------------------------------------------------------------- ------------
FINANCIAL SERVICES--6.5%
----------------------------------------------------------------
6,000,000 Caterpillar Financial Services Corp., 5.566%, 11/12/1997 5,934,000
----------------------------------------------------------------
5,000,000 National Rural Utilities Cooperative Finance Corp., 5.546%,
10/23/1997 4,960,494
---------------------------------------------------------------- ------------
Total 10,894,494
---------------------------------------------------------------- ------------
</TABLE>
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
- -----------------------------------------------------------------------------------
FOOD & BEVERAGE--3.0%
----------------------------------------------------------------
$ 5,000,000 PepsiCo, Inc., 5.491%, 9/10/1997 $ 4,993,187
---------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS--11.8%
----------------------------------------------------------------
5,000,000 Cargill, Inc., 5.665%, 9/30/1997 4,977,606
----------------------------------------------------------------
5,000,000 Hasbro, Inc., 5.578%, 12/10/1997 4,923,194
----------------------------------------------------------------
5,000,000 McGraw-Hill Cos., Inc., 5.590%, 11/14/1997 4,943,369
----------------------------------------------------------------
5,000,000 (b) Sherwin-Williams Co., 5.574%, 9/8/1997 4,994,633
---------------------------------------------------------------- ------------
Total 19,838,802
---------------------------------------------------------------- ------------
INSURANCE--9.4%
----------------------------------------------------------------
5,000,000 AIG Funding, Inc., 5.686%, 10/1/1997 4,976,750
----------------------------------------------------------------
6,000,000 General RE Corp., 5.605%, 12/18/1997 5,900,820
----------------------------------------------------------------
5,000,000 USAA Capital Corp., 5.553%, 10/30/1997 4,955,176
---------------------------------------------------------------- ------------
Total 15,832,746
---------------------------------------------------------------- ------------
PHARMACEUTICALS AND HEALTH CARE--8.8%
----------------------------------------------------------------
5,000,000 American Home Products Corp., 5.550%, 10/16/1997 4,965,625
----------------------------------------------------------------
5,000,000 Glaxo Wellcome PLC, 5.638%, 9/23/1997 4,983,011
----------------------------------------------------------------
5,000,000 Schering Plough Corp., 5.630%, 10/28/1997 4,956,300
---------------------------------------------------------------- ------------
Total 14,904,936
---------------------------------------------------------------- ------------
TELECOMMUNICATIONS--5.9%
----------------------------------------------------------------
5,000,000 AT&T Corp., 5.557%, 12/17/1997 4,919,156
----------------------------------------------------------------
5,000,000 NYNEX Corp., 5.500%, 9/12/1997 4,991,643
---------------------------------------------------------------- ------------
Total 9,910,799
---------------------------------------------------------------- ------------
</TABLE>
DG PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES-ELECTRIC--5.9%
----------------------------------------------------------------
$ 5,000,000 Carolina Power & Light Co., 5.604%, 9/2/1997 $ 4,999,229
----------------------------------------------------------------
5,000,000 Southern California Edison Co., 5.623%, 9/19/1997 4,986,125
---------------------------------------------------------------- ------------
Total 9,985,354
---------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 141,907,513
---------------------------------------------------------------- ------------
GOVERNMENT AGENCIES--9.4%
- -----------------------------------------------------------------------------------
5,000,000 (c) Federal Farm Credit Bank, 5.485%, 9/4/1997 4,997,804
----------------------------------------------------------------
5,000,000 (c) Federal Home Loan Bank System, 5.729%, 9/25/1997 4,981,667
----------------------------------------------------------------
6,000,000 (c) Federal National Mortgage Association, 5.550%, 12/12/1997 5,908,712
---------------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES 15,888,183
---------------------------------------------------------------- ------------
(D) REPURCHASE AGREEMENTS--6.8%
- -----------------------------------------------------------------------------------
$11,484,800 Cantor Fitzgerald Securities, 5.490%, dated 8/29/1997, due
9/2/1997 11,484,800
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $169,280,496
---------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for
discount issues, or the coupon for interest bearing issues.
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At August 31, 1997, these
securities amounted to $4,994,633 which represents 3.0% of net
assets.
(c) Discount rate at time of purchase.
(d) The repurchase agreement is fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($168,498,305) at August 31, 1997.
The following acronym is used throughout this portfolio:
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
DG U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--84.0%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS--63.4%
----------------------------------------------------------------
$15,000,000 9/4/1997 $ 14,993,462
----------------------------------------------------------------
10,000,000 9/11/1997 9,986,097
----------------------------------------------------------------
10,000,000 9/18/1997 9,975,043
----------------------------------------------------------------
10,000,000 10/2/1997 9,956,255
----------------------------------------------------------------
10,000,000 10/9/1997 9,946,694
----------------------------------------------------------------
10,000,000 10/23/1997 9,928,789
----------------------------------------------------------------
10,000,000 11/6/1997 9,905,492
----------------------------------------------------------------
10,000,000 11/13/1997 9,896,381
----------------------------------------------------------------
10,000,000 11/20/1997 9,888,667
----------------------------------------------------------------
15,000,000 11/28/1997 14,811,900
----------------------------------------------------------------
10,000,000 12/4/1997 9,866,833
----------------------------------------------------------------
10,000,000 12/11/1997 9,856,356
----------------------------------------------------------------
10,000,000 1/2/1998 9,824,554
----------------------------------------------------------------
15,000,000 1/8/1998 14,722,650
---------------------------------------------------------------- ------------
Total 153,559,173
---------------------------------------------------------------- ------------
U.S TREASURY NOTES--20.6%
----------------------------------------------------------------
10,000,000 5.125%, 3/31/1998 9,975,848
----------------------------------------------------------------
10,000,000 5.625%, 10/31/1997 9,997,791
----------------------------------------------------------------
10,000,000 5.750%, 9/30/1997 10,000,205
----------------------------------------------------------------
10,000,000 6.000%, 12/31/1997 10,017,660
----------------------------------------------------------------
10,000,000 8.750%, 10/15/1997 10,036,976
---------------------------------------------------------------- ------------
Total 50,028,480
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 203,587,653
---------------------------------------------------------------- ------------
</TABLE>
DG U.S. GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)REPURCHASE AGREEMENTS--16.0%
- -----------------------------------------------------------------------------------
$25,000,000 Cantor Fitzgerald Securities, 5.490%, dated 8/29/1997, due
9/2/1997 $ 25,000,000
----------------------------------------------------------------
13,683,800 Eastbridge Capital, Inc., 5.480%, dated 8/29/1997, due 9/2/1997 13,683,800
---------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 38,683,800
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS AT AMORTIZED COST(B) $242,271,453
---------------------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($242,337,718) at August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG U.S.
DG PRIME GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------
Investments in repurchase agreements $11,484,800 $38,683,800
- --------------------------------------------------------------------------
Investments in other securities 157,795,696 203,587,653
- -------------------------------------------------------------------------- ----------- -----------
Total investments in securities, at amortized cost and value 169,280,496 242,271,453
- --------------------------------------------------------------------------
Cash -- 56
- --------------------------------------------------------------------------
Income receivable 5,254 1,099,833
- -------------------------------------------------------------------------- ----------- -----------
Total assets 169,285,750 243,371,342
- -------------------------------------------------------------------------- ----------- -----------
LIABILITIES:
- --------------------------------------------------------------------------
Income distribution payable 714,531 995,966
- --------------------------------------------------------------------------
Payable for Bank 6,042 --
- --------------------------------------------------------------------------
Accrued expenses 66,872 37,658
- -------------------------------------------------------------------------- ----------- -----------
Total liabilities 787,445 1,033,624
- -------------------------------------------------------------------------- ----------- -----------
Total Net Assets $168,498,305 $242,337,718
- -------------------------------------------------------------------------- ----------- -----------
NET ASSET VALUE, OFFERING PRICE and Redemption Proceeds Per Share:
(net assets / shares outstanding) $1.00 $1.00
- -------------------------------------------------------------------------- ----------- -----------
Shares Outstanding 168,498,305 242,337,718
- -------------------------------------------------------------------------- ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1997(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG U.S.
GOVERNMENT
MONEY
DG PRIME MONEY MARKET
MARKET FUND(A) FUND
-------------- ----------
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------
Interest $ 4,107,657 $6,355,679
- ----------------------------------------------------------------------- ----------- ---------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee 364,088 595,570
- -----------------------------------------------------------------------
Administrative personnel and services fee 73,645 120,836
- -----------------------------------------------------------------------
Custodian fees 7,343 14,062
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 7,004 23,469
- -----------------------------------------------------------------------
Directors'/Trustees' fees 1,176 2,168
- -----------------------------------------------------------------------
Auditing fees 1,951 6,302
- -----------------------------------------------------------------------
Legal fees 1,461 1,110
- -----------------------------------------------------------------------
Portfolio accounting fees 20,292 27,223
- -----------------------------------------------------------------------
Distribution services fee 182,044 --
- -----------------------------------------------------------------------
Shareholder services fee -- 31,989
- -----------------------------------------------------------------------
Share registration costs 15,416 7,794
- -----------------------------------------------------------------------
Printing and postage 2,354 2,521
- -----------------------------------------------------------------------
Insurance premiums 1,961 2,217
- -----------------------------------------------------------------------
Miscellaneous 1,641 1,915
- ----------------------------------------------------------------------- ------------ ---------
Total expenses 680,376 837,176
- -----------------------------------------------------------------------
WAIVERS--
- -----------------------------------------------------------------------
Waiver of investment advisory fee (145,635) (238,228)
- -----------------------------------------------------------------------
Waiver of administrative personnel and services fee (41,894) --
- ----------------------------------------------------------------------- ------------ ---------
Total waivers (187,529) (238,228)
- ----------------------------------------------------------------------- ------------ ---------
Net expenses 492,847 598,948
- ----------------------------------------------------------------------- ------------ ---------
Net investment income $ 3,614,810 $5,756,731
- ----------------------------------------------------------------------- ------------ ---------
</TABLE>
(a) For the period from March 10, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DG PRIME DG U.S. GOVERNMENT MONEY
MONEY MARKET MARKET FUND
FUND ------------------------------
------------- SIX MONTHS
PERIOD ENDED ENDED
(UNAUDITED) (UNAUDITED) YEAR ENDED
AUGUST 31, AUGUST 31, FEBRUARY 28,
1997(A) 1997 1997
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------
OPERATIONS--
- ----------------------------------------------
Net investment income $ 3,614,810 $ 5,756,731 $ 10,783,399
- ---------------------------------------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------
Distributions from net investment income (3,614,810) (5,756,731) (10,783,399)
- ---------------------------------------------- ------------- ------------- -------------
SHARE TRANSACTIONS--
- ----------------------------------------------
Proceeds from sale of shares 310,014,605 281,336,338 550,619,637
- ----------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,900,277 94,342 167,230
- ----------------------------------------------
Cost of shares redeemed (144,416,577) (312,545,888) (522,981,171)
- ---------------------------------------------- ------------- ------------- -------------
Change in net assets from share
transactions 168,498,305 (31,115,208) 27,805,696
- ---------------------------------------------- ------------- ------------- -------------
Change in net assets 168,498,305 (31,115,208) 27,805,696
- ----------------------------------------------
NET ASSETS:
- ----------------------------------------------
Beginning of period -- 273,452,926 245,647,230
- ---------------------------------------------- ------------- ------------- -------------
End of period $ 168,498,305 $ 242,337,718 $ 273,452,926
- ---------------------------------------------- ------------- ------------- -------------
</TABLE>
(a) For the period from March 10, 1997 (date of initial public
investment) to August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
DG INVESTOR SERIES--MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS
VALUE, NET FROM NET
BEGINNING INVESTMENT INVESTMENT
YEAR ENDED FEBRUARY 28 OR 29, OF PERIOD INCOME INCOME
- ------------------------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C>
DG PRIME MONEY MARKET FUND
1998(a) $ 1.00 0.02 (0.02)
DG U.S. GOVERNMENT MONEY MARKET FUND
1993(b) $ 1.00 0.02 (0.02)
1994 $ 1.00 0.03 (0.03)
1995 $ 1.00 0.04 (0.04)
1996 $ 1.00 0.05 (0.05)
1997 $ 1.00 0.05 (0.05)
1998(c) $ 1.00 0.02 (0.02)
</TABLE>
(a) For the period from March 10, 1997 (date of initial public
investment), to August 31, 1997 (unaudited).
(b) 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.
(c) Reflects operations for the six months ended August 31, 1997
(unaudited).
(d) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(e) Computed on an annualized basis.
(f) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------
NET ASSETS,
NET ASSET NET END OF
VALUE, END TOTAL INVESTMENT EXPENSE PERIOD (000
OF PERIOD RETURN(D) EXPENSES INCOME WAIVER(F) OMITTED)
- ------------ ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
$ 1.00 2.37% 0.68%(e) 4.96%(e) 0.26%(e) $ 168,498
$ 1.00 1.97% 0.41%(e) 2.88%(e) 0.38%(e) $ 189,024
$ 1.00 2.74% 0.54% 2.70% 0.20% $ 189,315
$ 1.00 4.06% 0.53% 3.96% 0.20% $ 162,515
$ 1.00 5.48% 0.51% 5.33% 0.20% $ 245,647
$ 1.00 4.83% 0.50% 4.74% 0.20% $ 273,453
$ 1.00 2.46% 0.51%(e) 4.94%(e) 0.20%(e) $ 242,338
</TABLE>
DG INVESTORS SERIES--MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
DG Investor Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of eight portfolios. The
following portfolios (individually referred to as the "Fund", or
collectively as the "Funds") are presented herein:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
- ------------------------------------------------------------------------------------------------------
DG Prime Money Market Fund ("Prime Money Market Current income
consistent with stability of Fund") principal.
- ------------------------------------------------------------------------------------------------------
DG U.S. Government Money Market Fund ("U.S. Current income consistent with stability of
Government Money Market Fund") principal and liquidity.
- ------------------------------------------------------------------------------------------------------
</TABLE>
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--The Funds' use of the amortized cost
method to value portfolio securities is in accordance with Rule
2a-7 under the Act.
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, 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 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 paid discount,
if applicable, are amortized as required by the Internal
DG INVESTORS SERIES--MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Dividend income and
distributions to shareholders are recorded on the ex-dividend
date.
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.
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.
RESTRICTED SECURITIES--Restricted securities are securities that
may only be resold upon registration under federal securities
laws or in transactions exempt from such registration. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. In some cases, the
restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the
Trustees. The Funds will not incur any registration costs upon
such resales. Restricted securities are valued at amortized cost
in accordance with Rule 2a-7 under Act.
At August 31, 1997, Prime Money Market Fund held restricted
securities as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Sherwin-Williams Co. 07/07/1997 $4,951,700
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade
date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At August
31, 1997, Prime Money Market and U.S.
DG INVESTORS SERIES--MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Market Funds' capital paid-in aggregated
$168,498,305, and $242,337,718, respectively. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
PRIME MONEY
MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND
------------------ ----------------------------------------
PERIOD ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997(A) AUGUST 31, 1997 FEBRUARY 28, 1997
- ------------------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
Shares sold 310,014,605 281,336,338 550,619,637
- -----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 2,900,277 94,342 167,230
- -----------------------------------------------
Shares redeemed (144,416,577) (312,545,888) (522,981,171)
- ----------------------------------------------- -------------- -------------- ------------
Net change resulting from share transactions 168,498,305 (31,115,208) 27,805,696
- ----------------------------------------------- -------------- -------------- --------------
</TABLE>
(a) For the period from March 10, 1997 (date of initial public
investment), to August 31, 1997.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--ParkSouth Corporation, a subsidiary of
Deposit Guaranty National Bank, the Funds' investment adviser (the
"Adviser"), receives 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>
Prime Money Market Fund 0.50%
U.S. Government Money Market Fund 0.50%
</TABLE>
ParkSouth Corporation became the Fund's investment adviser on March 1,
1997. Prior to March 1, 1997, Deposit Guaranty National Bank served as
the Fund's investment adviser. The advisory fees charged prior to
March 1, 1997 were the same as the current fees listed above.
SUB-ADVISORY FEE--Effective March 1, 1997, Commercial National Bank is
no longer the sub-adviser to the Funds.
Prior to March 1, 1997, under the terms of the sub-advisory agreement
between Deposit Guaranty National Bank and the Trust Division of
Commercial National Bank, (the "sub-adviser"), the sub-adviser
received an annual fee from the Deposit Guaranty National Bank equal
to 0.25% of each Fund's average daily net assets.
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 Trust for the period. The administrative fee received during any
fiscal year shall aggregate at least $100,000 per fund.
DG INVESTORS SERIES--MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with FAS, the U.S. Government Money Market Fund will pay FAS
up to 0.15% of average daily net assets of the Fund for the period.
The fee paid to FAS is used to finance certain services for
shareholders and to maintain shareholder accounts.
DISTRIBUTION SERVICES FEE--The Funds have adopted a Distribution Plan
("the Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Funds will compensate Federated Securities Corporation
("FSC"), the principal distributor, from the net assets of the Funds
to finance activities intended to result in the sale of the Funds'
shares. The Plan provides that the Funds may incur distribution
expenses up to 0.25% of the average daily net assets of the Funds,
annually, to compensate FSC.
As of August 31, 1997, U.S. Government Money Market Fund did not pay
or accrue 12b-1 fees.
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.
ORGANIZATIONAL EXPENSES--Organizational and start-up administrative
service expenses of $20,300 for Prime Money Market Fund were borne
initially by FAS. Prime Money Market Fund has agreed to reimburse FAS
for the organizational and start-up administrative expenses during the
five year period following effective date. For the period ended August
31, 1997, the Fund paid $0 pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
(5) SUBSEQUENT EVENT
Effective October 1, 1997, DG U.S. Government Money Market Fund was
renamed DG Treasury Money Market Fund.
<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>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal. Although money
market funds seek to maintain a stable net asset value of $1.00 per
share, there is no assurance that they will be able to do so.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the Funds' prospectus which
contains facts concerning their objectives and policies, management
fees, expenses and other information.
