-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, StJUzJ4YKGw4SOocsVHr6SsE2UrokEXKjeiT7hWW5B5PXwIhRWw7pv6N78Gkc26W cC5FdIJkLDgyXUu6rMH7XA== 0000883843-98-000006.txt : 19980430 0000883843-98-000006.hdr.sgml : 19980430 ACCESSION NUMBER: 0000883843-98-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980429 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DG INVESTOR SERIES CENTRAL INDEX KEY: 0000883843 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 251676752 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06607 FILM NUMBER: 98603670 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122881900 FORMER COMPANY: FORMER CONFORMED NAME: DG CITADEL FUNDS DATE OF NAME CHANGE: 19600201 N-30D 1 DG Investor Series Money Market Funds * DG Prime Money Market Fund * DG Treasury Money Market Fund (formerly DG U.S. Government Money Market Fund) ================================================ [LOGO] COMBINED DG ANNUAL REPORT INVESTOR SERIES Diversified Portfolios of DG Investor Series, an Open-End Management Investment Company ParkSouth Corporation Jackson, MS Investment Adviser An Affiliate of: [LOGO] Deposit Guaranty National Bank Jackson, MS The shares offered by this prospectus are not deposits or obligations of Deposit Guaranty National Bank, are not endorsed or guaranteed by Deposit Guaranty National Bank and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in these shares involves investment risks including the possible loss of principal. February 28, 1998 ================= [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. [LOGO] RECYCLED PAPER PRESIDENT'S MESSAGE - -------------------------------------------------------------------------------- Dear Shareholder: I'm pleased to present the Annual Report to Shareholders for the DG Investor Series money market funds, which covers the 12-month period from March 1, 1997 through February 28, 1998. In this Report, you will find a complete list of investments and financial statements for each fund. Each fund gives you a convenient way to earn daily income on your ready cash. In addition, each fund is managed to maintain the value of each share at a stable $1.00 and give you daily access to your money.* Fund by fund highlights over the 12-month period are as follows: - - DG PRIME MONEY MARKET FUND, which began operation on March 10, 1997, produced income totaling $0.05 per share from a portfolio of high quality money market securities. The fund's net assets reached $195 million. - - DG TREASURY MONEY MARKET FUND (formerly, DG U.S. Government Money Market Fund) produced income totaling $0.05 per share from a portfolio of U.S. Treasury money market securities. The fund's net assets reached $349 million. Thank you for choosing the DG Investor Series money market funds to keep your ready cash working--and earning--on a daily basis. We'll continue to provide the highest level of service as we keep you informed of your progress on a regular basis. Sincerely, LOGO Edward C. Gonzales President April 15, 1998 * Although money market funds seek to maintain a share value of $1.00, there is no guarantee that they will do so. An investment in the fund is neither insured nor guaranteed by the U.S. government. DG PRIME MONEY MARKET FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------- (A) COMMERCIAL PAPER--82.8% BANKING--3.0% $ 6,000,000 J.P. Morgan & Co., Inc., 5.481%, 5/15/1998 $ 5,932,500 ----------- BROKERAGE--6.1% 6,000,000 Goldman Sachs & Co., 5.504%, 5/13/1998 5,933,935 6,000,000 Merrill Lynch & Co., Inc., 5.513%, 4/15/1998 5,959,125 ----------- Total 11,893,060 ----------- FINANCE--AUTOMOTIVE--6.1% 6,000,000 Ford Motor Credit Corp., 5.606%, 4/3/1998 5,969,585 6,000,000 General Motors Acceptance Corp., 5.517%, 4/20/1998 5,954,583 ----------- Total 11,924,168 ----------- FINANCE--COMMERCIAL--12.5% 6,000,000 CIT Group Holdings, Inc., 5.523%, 5/1/1998 5,944,592 6,000,000 General Electric Capital Corp., 5.437%, 4/17/1998 5,958,013 6,000,000 IBM Credit Corp., 5.529%, 3/18/1998 5,984,502 6,500,000 MetLife Funding, Inc., 5.621%, 3/25/1998 6,475,950 ----------- Total 24,363,057 ----------- FINANCE--RETAIL--12.2% 6,000,000 American Express Credit Corp., 5.521%, 5/20/1998 5,927,333 6,000,000 American General Finance Corp., 5.504%, 4/13/1998 5,961,085 6,000,000 Commercial Credit Co., 5.511%, 5/4/1998 5,941,867 6,000,000 Household Finance Corp., 5.512%, 4/6/1998 5,967,360 ----------- Total 23,797,645 ----------- FINANCIAL SERVICES--3.6% 7,000,000 National Rural Utilities Cooperative Finance Corp., 5.508%-5.727%, 3/12/1998-4/22/1998 6,957,204 ----------- (See Notes to Portfolio of Investments)
- ---------------------------------------------------------- PRINCIPAL AMOUNT VALUE (A) COMMERCIAL PAPER (continued) FOOD & BEVERAGE--5.6% $ 6,000,000 Campbell Soup Co., 5.753%, 5/22/1998 $ 5,923,467 5,000,000 Hershey Foods Corp., 5.476%, 3/13/1998 4,990,950 ----------- Total 10,914,417 ----------- INDUSTRIAL PRODUCTS--6.1% 6,000,000 Archer-Daniels-Midland Co., 5.553%, 3/10/1998 5,991,750 6,000,000 Cargill, Inc., 5.492%, 4/27/1998 5,948,320 ----------- Total 11,940,070 ----------- INSURANCE--6.1% 6,000,000 General RE Corp., 5.831%, 3/20/1998 5,981,792 6,000,000 USAA Capital Corp., 5.495%, 3/16/1998 5,986,375 ----------- Total 11,968,167 ----------- MISCELLANEOUS--3.1% 6,000,000 Procter & Gamble Co., 5.463%, 3/31/1998 5,972,950 ----------- OIL & OIL FINANCE--6.1% 6,000,000 Amoco Corp., 5.476%, 5/11/1998 5,935,982 6,000,000 Atlantic Richfield Co., 5.468%, 4/8/1998 5,965,737 ----------- Total 11,901,719 ----------- PHARMACEUTICALS AND HEALTH CARE--3.1% 6,000,000 (e)Glaxo Wellcome PLC, 5.752%, 3/3/1998 5,998,110 ----------- TELECOMMUNICATIONS--9.2% 6,000,000 AT&T Corp., 5.768%, 3/6/1998 5,995,250 6,000,000 Ameritech Capital Funding Corp., 5.502%, 5/8/1998 5,938,460 6,000,000 BellSouth Telecommunications, Inc., 5.499%, 4/23/1998 5,951,946 ----------- Total 17,885,656 ----------- TOTAL COMMERCIAL PAPER 161,448,723 -----------
DG PRIME MONEY MARKET FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------- GOVERNMENT AGENCIES--9.2% $ 6,000,000 Federal Farm Credit System, 5.470%, 4/1/1998 $ 6,000,000 6,000,000 (b)Federal Home Loan Bank System, 11.08%, 3/23/1998 5,980,237 6,000,000 (b)Federal National Mortgage Association, 5.74%, 3/27/1998 5,975,863 ----------- TOTAL GOVERNMENT AGENCIES 17,956,100 -----------
- ---------------------------------------------------------- PRINCIPAL AMOUNT VALUE (C) REPURCHASE AGREEMENT--8.0% $15,566,100 Cantor Fitzgerald Securities, 5.580%, dated 2/27/1998, due 3/2/1998 (at amortized cost) $ 15,566,100 ----------- TOTAL INVESTMENTS (at amortized cost)(d) $194,970,923 ===========
(See Notes to Portfolios of Investments) DG TREASURY MONEY MARKET FUND (FORMERLY DG U.S. GOVERNMENT MONEY MARKET FUND) PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------- U.S. TREASURY OBLIGATIONS--59.9% U.S. TREASURY BILLS--32.7% $15,000,000 3/5/1998 $ 14,991,450 15,000,000 3/12/1998 14,976,510 15,000,000 3/19/1998 14,961,881 15,000,000 4/2/1998 14,931,600 15,000,000 4/9/1998 14,916,394 20,000,000 4/23/1998 19,845,858 20,000,000 7/23/1998 19,590,000 ----------- Total 114,213,693 ----------- U.S. TREASURY NOTES--27.2% 20,000,000 4.750%, 8/31/1998 19,937,496 10,000,000 5.125%, 3/31/1998 9,996,566 15,000,000 5.250%, 7/31/1998 14,997,751 15,000,000 5.875%, 4/30/1998 15,009,606 15,000,000 6.125%, 5/15/1998 15,021,415 20,000,000 7.875%, 4/15/1998 20,057,838 ----------- Total 95,020,672 ----------- TOTAL U.S. TREASURY OBLIGATIONS 209,234,365 -----------
- ---------------------------------------------------------- PRINCIPAL AMOUNT VALUE (C) REPURCHASE AGREEMENTS--39.8% $74,091,900 Cantor Fitzgerald Securities, 5.580%, dated 2/27/1998, due 3/2/1998 $ 74,091,900 65,000,000 State Street Bank and Trust Co., 5.580%, dated 2/27/1998, due 3/2/1998 65,000,000 ----------- TOTAL REPURCHASE AGREEMENTS 139,091,900 ----------- TOTAL INVESTMENTS (at amortized cost)(d) $348,326,265 ===========
(See Notes to Portfolios of Investments) NOTES TO PORTFOLIOS OF INVESTMENTS - -------------------------------------------------------------------------------- (a) Each issue shows the rate of discount at the time of purchase for discount issues, or the coupon for interest bearing issues. (b) Discount rate at time of purchase. (c) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on market prices at the date of the portfolio. (d) Also represents cost for federal tax purposes. (e) Denotes a restricted security which is subject to restrictions on resale under Federal Securities laws. At February 28, 1998, this security amounted to $5,998,110 which represents 3.08% of net assets. The following acronym is used throughout the Prime Money Market Fund: PLC -- Public Limited Company Note: The categories of investments are shown as a percentage of net assets at February 28, 1998. (See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG TREASURY MONEY MARKET FUND (FORMERLY, DG DG PRIME MONEY U.S. GOVERNMENT MARKET FUND MONEY MARKET FUND) ----------- ------------------ ASSETS: - ---------------------------------------------- Investments in repurchase agreements $ 15,566,100 $139,091,900 - ---------------------------------------------- Investments in other securities 179,404,823 209,234,365 - ---------------------------------------------- --------------- ------------------ Total investments in securities, at amortized cost and value 194,970,923 348,326,265 - ---------------------------------------------- Cash 81 -- - ---------------------------------------------- Income receivable 140,974 1,954,185 - ---------------------------------------------- Receivable for shares sold -- 6,470 - ---------------------------------------------- Deferred organizational costs 15,061 -- - ---------------------------------------------- --------------- ------------------ Total assets 195,127,039 350,286,920 - ---------------------------------------------- LIABILITIES: - ---------------------------------------------- Income distribution payable 1,451 1,173,029 - ---------------------------------------------- Accrued expenses 84,654 63,182 - ---------------------------------------------- --------------- ------------------ Total liabilities 86,105 1,236,211 - ---------------------------------------------- --------------- ------------------ Total Net Assets $195,040,934 $349,050,709 - ---------------------------------------------- --------------- ------------------ NET ASSET VALUE, OFFERING PRICE and Redemption Proceeds Per Share (net assets / shares outstanding) $ 1.00 $ 1.00 - ---------------------------------------------- --------------- ------------------ Shares Outstanding 195,040,934 349,050,709 - ---------------------------------------------- --------------- ------------------
(See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES MONEY MARKET FUNDS STATEMENTS OF OPERATIONS YEAR ENDED FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG TREASURY MONEY MARKET FUND (FORMERLY, DG DG PRIME MONEY U.S. GOVERNMENT MARKET FUND(A) MONEY MARKET FUND) -------------- ------------------ INVESTMENT INCOME: - ----------------------------------------- Interest $9,175,799 $15,090,078 - ----------------------------------------- EXPENSES: - ----------------------------------------- Investment advisory fee 810,951 1,407,882 - ----------------------------------------- Administrative personnel and services fee 160,588 278,821 - ----------------------------------------- Custodian fees 9,656 13,105 - ----------------------------------------- Transfer and dividend disbursing agent fees and expenses 21,624 39,769 - ----------------------------------------- Directors'/Trustees' fees 400 4,417 - ----------------------------------------- Auditing fees 400 12,688 - ----------------------------------------- Legal fees 700 2,658 - ----------------------------------------- Portfolio accounting fees 45,005 68,326 - ----------------------------------------- Distribution services fee 405,475 -- - ----------------------------------------- Shareholder services fee -- 275,682 - ----------------------------------------- Share registration costs 49,592 44,163 - ----------------------------------------- Printing and postage 8,000 6,500 - ----------------------------------------- Insurance premiums 4,001 4,000 - ----------------------------------------- Miscellaneous 1,768 4,464 - ----------------------------------------- --------------- ------------------ Total expenses 1,518,160 2,162,475 - ----------------------------------------- WAIVERS-- - ----------------------------------------- Waiver of investment advisory fees (324,380) (563,153) - ----------------------------------------- Waiver of administrative personnel and services fee (95,518) -- - ----------------------------------------- --------------- ------------------ Total waivers (419,898) (563,153) - ----------------------------------------- --------------- ------------------ Net expenses 1,098,262 1,599,322 - ----------------------------------------- --------------- ------------------ Net investment income $8,077,537 $13,490,756 - ----------------------------------------- --------------- ------------------
(a) For the period from March 10, 1997 (date of initial public investment) to February 28, 1998. (See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES MONEY MARKET FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
DG TREASURY MONEY MARKET FUND (FORMERLY, DG DG PRIME MONEY U.S. GOVERNMENT MARKET FUND MONEY MARKET FUND) --------------- ----------------------------- PERIOD YEAR YEAR ENDED ENDED ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998(A) 1998 1997 --------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS - -------------------------------------------- OPERATIONS-- - -------------------------------------------- Net investment income $ 8,077,537 $ 13,490,756 $ 10,783,399 - -------------------------------------------- -------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS-- - -------------------------------------------- Distributions from net investment income (8,077,537) (13,490,756) (10,783,399) - -------------------------------------------- -------------- ------------- ------------- SHARE TRANSACTIONS-- - -------------------------------------------- Proceeds from sale of shares 528,390,173 789,333,839 550,619,637 - -------------------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 8,066,557 457,722 167,230 - -------------------------------------------- Cost of shares redeemed (341,415,796) (714,193,778) (522,981,171) - -------------------------------------------- -------------- ------------- ------------- Change in net assets from share transactions 195,040,934 75,597,783 27,805,696 - -------------------------------------------- -------------- ------------- ------------- Change in net assets 195,040,934 75,597,783 27,805,696 - -------------------------------------------- NET ASSETS: - -------------------------------------------- Beginning of period -- 273,452,926 245,647,230 - -------------------------------------------- -------------- ------------- ------------- End of period $ 195,040,934 $ 349,050,709 $ 273,452,926 - -------------------------------------------- -------------- ------------- -------------
(a) For the period from March 10, 1997 (date of initial public investment) to February 28, 1998. (See Notes which are an integral part of the Financial Statements.) (This page intentionally left blank) DG INVESTOR SERIES MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET DISTRIBUTIONS VALUE, NET FROM NET BEGINNING INVESTMENT INVESTMENT YEAR ENDED FEBRUARY 28 OR 29, OF PERIOD INCOME INCOME ----------------------------- --------- ------ ------ DG PRIME MONEY MARKET FUND 1998(a) $1.00 0.05 (0.05) DG TREASURY MONEY MARKET FUND (FORMERLY, 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 $1.00 0.05 (0.05)
(a) For the period from March 10, 1997 (date of initial public investment), to February 28, 1998. (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) Based on net asset value, which does not reflect the sales load or contingent deferred sales charge, if applicable. (d) Computed on an annualized basis. (e) This voluntary expense decrease is reflected in both the expense and net investment income ratios. - --------------------------------------------------------------------------------
RETURN TO AVERAGE NET ASSETS --------------------------------- NET ASSETS, NET ASSET NET END OF VALUE, END TOTAL INVESTMENT EXPENSE PERIOD OF PERIOD RETURN(C) EXPENSES INCOME WAIVER(E) (000 OMITTED) - --------- --------- -------- ------ --------- ------------- $1.00 4.93% 0.68%(d) 4.98%(d) 0.26%(d) $195,041 $1.00 1.97% 0.41%(d) 2.88%(d) 0.38%(d) $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 4.90% 0.57% 4.81% 0.20% $349,051
DG INVESTORS SERIES MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 - -------------------------------------------------------------------------------- (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:
- --------------------------------------------------------------------------------------------- PORTFOLIO NAME INVESTMENT OBJECTIVE - --------------------------------------------------------------------------------------------- DG Prime Money Market Fund ("Prime Money Current income consistent with stability of Market Fund") principal. - --------------------------------------------------------------------------------------------- DG Treasury Money Market Fund (formerly DG Current income consistent with stability of U.S. Government Money Market Fund) principal and liquidity. ("Treasury Money Market Fund") - ---------------------------------------------------------------------------------------------
Effective October 1, 1997, DG U.S. Government Money Market Fund was renamed DG Treasury Money Market Fund. 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, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Funds to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be 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 DG INVESTORS SERIES MONEY MARKET FUNDS - -------------------------------------------------------------------------------- "Trustees"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Funds could receive less than the repurchase price on the sale of collateral securities. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Dividend income and distributions to shareholders are recorded on the ex-dividend date. 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. DEFERRED EXPENSES--The costs incurred by Prime Money Market 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 its commencement date. Organizational expenses of $20,300 for Prime Money Market Fund were borne initially by the Adviser. The Fund has reimbursed the Adviser for these expenses. These expenses have been deferred and are being amortized over the five year period following the Fund's effective date. For the year ended February 28, 1998, the Fund expensed $1,171 of organizational expenses. 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 issuers' 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 Funds' 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 Funds' pricing committee. Additional information on each restricted security held by Prime Money Market Fund at February 28, 1998 is as follows:
Security Acquisition Date Acquisition Cost - -------------------------------------------------------------------------------------- Glaxo Wellcome 12/2/97 $5,914,950
DG INVESTORS SERIES MONEY MARKET FUNDS - -------------------------------------------------------------------------------- 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). At February 28, 1998, Prime Money Market Fund and Treasury Money Market Fund's capital paid-in aggregated $195,040,934, and $349,050,709, respectively. Transactions in shares were as follows:
PRIME MONEY MARKET FUND TREASURY MONEY MARKET FUND --------------------- ---------------------------------------- PERIOD ENDED YEAR ENDED YEAR ENDED FEBRUARY 28, 1998(A) FEBRUARY 28, 1998 FEBRUARY 28, 1997 - ------------------------------ --------------------- ------------------- ------------------ Shares sold 528,390,173 789,333,839 550,619,637 - ------------------------------ Shares issued to shareholders in payment of distributions declared 8,066,557 457,722 167,230 - ------------------------------ Shares redeemed (341,415,796) (714,193,778) (522,981,171) - ------------------------------ ------------------ ----------------- ---------------- Net change resulting from share transactions 195,040,934 75,597,783 27,805,696 - ------------------------------ ------------------ ----------------- ----------------
(a) For the period from March 10, 1997 (date of initial public investment), to February 28, 1998. (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 0.50% of each Fund's average daily net assets. ParkSouth Corporation became the Funds' investment adviser on March 1, 1997. Prior to March 1, 1997, Deposit Guaranty National Bank served as the Funds investment adviser. The advisory fees charged prior to March 1, 1997 were the same as the current fees listed above. DG INVESTORS SERIES MONEY MARKET FUNDS - -------------------------------------------------------------------------------- SUB-ADVISORY FEE--Prior to March 1,1997, under the terms of a 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 March 1, 1997, Commercial National Bank is no longer the sub-adviser to the Funds. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds with certain administrative personnel and services. The fee paid to FAS is based on the level of average aggregate net assets of the Trust for the period. FAS may voluntarily choose to waive a portion of its fee. 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 Fund for the period. The fee paid to FAS is used to finance certain services for shareholders and to maintain shareholder accounts. As of February 28, 1998, Prime Money Market Fund did not pay or accrue shareholder services fee. 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 February 28, 1998, Treasury 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. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders DG INVESTOR SERIES: We have audited the statements of assets and liabilities, including the portfolio of investments, of the DG Prime Money Market Fund and the DG Treasury Money Market Fund (two portfolios within DG Investor Series) as of February 28, 1998, and the related statements of operations for the year then ended, the statements of changes in net assets for the years ended February 28, 1998 and 1997, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to gain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 28, 1998 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights of the DG Investor Series portfolios referred to above present fairly, in all material respects, their financial position as of February 28, 1998, and the results of their operations for the year then ended, and the changes in their net assets and their financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania April 10, 1998 TRUSTEES OFFICERS - -------------------------------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales Nicholas P. Constantakis President and Treasurer William J. Copeland J. Christopher Donahue James E. Dowd Executive Vice President Lawrence D. Ellis, M.D. John W. McGonigle Edward L. Flaherty, Jr. Executive Vice President and Secretary Edward C. Gonzales Richard B. Fisher Peter E. Madden Vice President John E. Murray, Jr. Charles L. Davis, Jr. Wesley W. Posvar Vice President and Assistant Treasurer Marjorie P. Smuts Gail Cagney Assistant Secretary
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 the Funds objectives and policies, management fees, expenses and other information. DG Investor Series Stock and Bond Funds * DG Equity Fund * DG International Equity Fund * DG Opportunity Fund * DG Limited Term Government Income Fund * DG Government Income Fund * DG Municipal Income Fund ================================================ [LOGO] COMBINED DG ANNUAL REPORT INVESTOR SERIES Diversified Portfolios of DG Investor Series, an Open-End Management Investment Company ParkSouth Corporation Jackson, MS Investment Adviser Lazard Freres Asset Management New York, NY Sub-Advisor to DG International Equity Fund Womack Asset Management, Inc. Jackson, MS Sub-Advisor to DG Opportunity Fund An Affiliate of: [LOGO] Deposit Guaranty National Bank Jackson, MS The shares offered by this prospectus are not deposits or obligations of Deposit Guaranty National Bank, are not endorsed or guaranteed by Deposit Guaranty National Bank and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in these shares involves investment risks including the possible loss of principal. February 28, 1998 ================= [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 23321N301 Cusip 23321N202 [LOGO] Cusip 23321N400 Cusip 23321N608 RECYCLED Cusip 23321N103 G00498-11 (4/98) PAPER Cusip 23321N509 PRESIDENT'S MESSAGE - -------------------------------------------------------------------------------- Dear Shareholder: I'm pleased to present the Annual Report to Shareholders for the DG Investor Series stock and bond funds, which covers the 12-month period from March 1, 1997 through February 28, 1998. In this Report, you will find an interview with each fund's portfolio manager, as well as a complete list of investments and financial statements for each fund. Fund by fund highlights over the 12-month period are as follows: - - DG EQUITY FUND, in a highly favorable stock market environment, produced an extremely strong total return of 39.74%.* Contributing to the total return were dividends totaling $0.11 per share, capital gains of $0.15 per share, and a major $6.33 increase in net asset value. Net assets grew substantially from $490 million to $716 million. - - DG INTERNATIONAL EQUITY FUND, the newest member of the DG fund family, invests in international stocks. Since the fund began operation on August 15, 1997 through February 28, 1998, it produced a total return of 4.71% through dividends totaling $0.01 per share and a $0.46 increase in net asset value. The fund's net assets totaled $26.5 million. - - DG OPPORTUNITY FUND achieved a strong total return of 37.81%.* The fund paid capital gains totaling $2.54 per share, while its net asset value increased by $2.31. At the end of the report period, net assets reached $123 million. - - DG LIMITED TERM GOVERNMENT INCOME FUND, a portfolio of shorter-maturity government securities, paid dividends totaling $0.51 per share. The fund's total return was 6.16%.* The fund's net asset value increased by $0.07. The fund ended the period with $59 million in net assets. - - DG GOVERNMENT INCOME FUND, a portfolio of U.S. government securities, paid dividends totaling $0.55 per share, while producing a total return of 9.90%* in an improved bond market climate. The fund's net asset value increased by $0.38. Net assets totaled $270 million. - -------------------------------------------------------------------------------- - - DG MUNICIPAL INCOME FUND, a portfolio of high-quality municipal securities issued across the U.S., produced federally tax-free dividends totaling $0.47 per share and capital gains totaling $0.02 per share.** Dividends, capital gains and a $0.30 increase in net asset value produced a total return of 7.70%.* At the end of the report period, net assets stood at $49 million. Thank you for choosing the DG Investor Series stock and bond funds to pursue your financial goals. We hope you are pleased with the performance of your investment. We'll continue to provide the highest level of service as we keep you informed of your progress on a regular basis. Sincerely, LOGO Edward C. Gonzales President April 15, 1998 * Performance quoted represents past performance and is not indicative of future returns. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted above are based on net asset value and do not reflect the maximum sales charge. Total returns based on the maximum sales charge for the twelve-month period are as follows: DG Equity Fund, 34.89%; DG Opportunity Fund, 32.99%; DG Limited Term Government Income Fund, 4.02%; DG Government Income Fund, 7.67%; and DG Municipal Income Fund, 5.50%. ** Income may be subject to the federal alternative minimum tax. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG EQUITY FUND As unlikely as it may seem--particularly as it does to those of us who must be numbered among the "old hands"--we have, again, the pleasure of reporting, now, a fourth consecutive year of exceptional investment results for the DG Equity Fund. This latest fund fiscal year, ended February 28, 1998, saw our fund generate a total return based on net asset value of 39.74%.* This return bested--by some 4.7%--even the return posted by our heretofore seemingly unbeatable "bogey," the Standard & Poor's 500 Index ("S&P 500")**. When proper considerations are given to the return implications inherent in our fund's important goal of providing investors an even higher quality portfolio of equities than those comprising the venerable S&P 500, and the additional performance-dampening drags resulting from our modest but necessary operating cash position and from our investment management fees and expenses, we believe most would agree, fiscal 1997 was indeed special. To provide additional comparative perspective, as has been our custom, we note that our peers in the Growth Investment Objective category, as included in the broad-style Lipper Growth Fund Index, generated a not-at-all shabby 32.16% for the period. As was the case in reporting our own fund's returns, our Growth (mutual) Fund contemporaries' returns were also reduced by their cash position as well as by their management fees and by their other various expenses. At this juncture, we'll take a break in our "crowing" and offer an intentionally brief but obligatory overview of our near-term outlook--however unimportant the time frame for the long-term equity investor. In our view, the levels and directions of change in the ten-year (and longer) bond rates will influence and largely set the overall tone for our long duration growth stock portfolio. As additional unsettling effects of the Asian and Japanese economic problems work their way through our economy--short-term at least--the important longer-term interest rate influences are likely to continue to remain favorable. Conversely, however, corporate earnings over the next quarter or two are also likely to reflect the aforementioned foreign economic problems and the earnings-per-share comparisons for our large multi-national companies are almost certain to suffer. Therefore, we are probably faced with a kind-of "mixed bag" at least through mid-year or so in our equity markets. With earnings per share growth rate expectations contracting, on the one hand, and equity market price to earnings multiples, on the other hand, expanding--reflecting the currently low and possibly, later, even lower interest rate expectations--stock prices seem likely to advance, if at all, at an irregularly muted pace. * Performance quoted represents past performance and is not indicative of future returns. 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 for the period based on offering price was 34.89%. ** The S&P 500 is an unmanaged composite index of common stocks in industrial, transportation, and financial and public utility companies. Lipper Growth Fund Index is an unmanaged index and represents an average of the net asset-valuated total returns for the top 30 growth funds tracked by Lipper Analytical Services, Inc., an independent mutual fund rating service. Investments cannot be made in an index. - -------------------------------------------------------------------------------- Now, for the equity investor's investment horizon, none of our management views have changed regarding the long-term appeal of those economic sectors we have long held as those 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 greatest investment 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 ongoing major and largely unpredictable secular realignments occur in the economy. This relatively narrow strategic sector focus may preclude the fund from investing in numerous potentially rewarding opportunities, but our goal is to afford 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 contemporary investment arena. However, as one might imagine, this same relatively narrow strategic sector focus also lessens the occasionally significant benefits derived from a less selective broad-market or market-neutral diversification approach to investing. We believe that by virtue of the consistent application of our long-term focus and of our process of winnowing-down our universe to those issues we opine to be our "very best" investment choices, we can provide a most appropriate equity portfolio for a future of continued uncertainty. As always, rising interest rates, or the portent of much higher rates of inflation will continue to adversely impact our however-well chosen portfolio of growth stocks. The fund's portfolio is most certainly not immune to shocks. But, we believe the portfolio's very high quality focus, substantial company size, and typical economic sector emphasis will assure its resilience during periods of extended market distress and provide the spring-board for its success in the long run. DG EQUITY FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG EQUITY FUND The graph below illustrates the hypothetical investment of $10,000 in the DG Equity Fund (the "Fund") from August 1, 1992 (start of performance) to February 28, 1998, compared to the Standard & Poor's 500 Index ("S&P 500").+ (Graphic representation A1 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * Represents a hypothetical investment of $10,000 in the Fund after deducting the original maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities in the index. ** Represents a hypothetical investment of $10,000 in the Fund after deducting the current maximum sales charge of 3.50% (effective 5/1/95) ($10,000 investment minus $350 sales charge = $9,650). The Fund's performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities in the index. *** Total return quoted reflects all applicable current maximum sales charges. + The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. This index is unmanaged. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG INTERNATIONAL EQUITY FUND The DG International Equity Fund kept pace with the rapidly rising Morgan Stanley Capital Europe, Australia, Far East Index ("EAFE")* as international equities raced to record levels during the first quarter of 1998. EAFE jumped nearly 15% in the first three months of the year led by a 20% appreciation in European bonuses. Investor hopes that the new year would mark the reverse of Japan's woes faded as the market retraced much of its January gains by the end of the quarter. The confluence of continued positive corporate change and signs of reinvigorated local economics drove strong European equity performance. European themes of restructuring, shareholder focus, and consolidation in the face of global competition and the impending Economic and Monetary Union ("EMU") are beginning to sound repetitive. However, they remain the underpinning of European stock performance and are likely to remain for some time. Recall that US companies began the same process years before their European counterparts, and continue to reap the benefits. General Electric has been at the forefront of US change and Fiat's (auto) appointment of GE's Vice-Chairman Paolo Fresco as its new Chairman illustrates European corporate desire to implement change. BTR (engineering) continued its aggressive restructuring by selling 4 significant disparate businesses. Alcatel Alsthom will intensify its telecom equipment focus by selling most of its engineering and systems activities to its GEC-Alsthom joint venture before publicly floating the entity in June. Companies also continue to unwind financial stakes in unrelated companies to free assets to fund core businesses or return to shareholders. UPM-Kymmene (paper) sold its stakes in Merita (banking), Sampo (insurance), and Aamuletti (media) and announced a share buy back plan; while British Aerospace sold its 16% stake in Orange (cellular) to build a cash hoard for a potential acquisition in the deregulating and consolidating defense industry. Others have moved to take advantage of telecommunication deregulation as European governments have privatized telecommunication companies and opened the sector to competition. In Germany, Mannesmann and Viag have shifted from industrial and utility businesses to compete with the former monopoly Deutsche Telekom. Mannesmann also moved outside of Germany by taking a stake in Olivetti's cellular business. Telefonica (Spain) and Telecom Italia (Italy) are also spreading their previously shackled wings. As a growing corporate renaissance has fueled equity performance in Europe, Japanese equities are mired in apathetic malaise. Japanese stocks leapt on the government's proclamation that it would use public pension money to ramp up the Nikkei 225 Index** and introduce a fiscal stimulus package to jump-start the economy. As nebulous proposals flowed from government officials, investors' hopes of decisive action faded. Banks were hardest hit as financial sector concerns were left unresolved despite * EAFE Index is a standard, unmanaged foreign securities index representing major non-U.S. stock markets, as monitored by Morgan Stanley Capital International. EAFE returns are in U.S. dollars. Investments can not be made in an index. ** The Nikkei 225 Index is calculated, published and disseminated by Nihon Keizai Shimbum, Inc. and measures the composite price performance of selected Japanese stocks. The Index is currently based on 225 highly capitalized stocks trading on the Tokyo Stock Exchange (TSE) representing a broad cross-section of Japanese industries. All 225 stocks are listed in the First Section of the TSE. This Index is unmanaged. Investments can not be made in an index. - -------------------------------------------------------------------------------- the impending "Big Bank" market reforms that began with foreign exchange deregulation on April 1st. Although the current situation seems dire, indications of change exist. Despite economic difficulties, the government is pushing ahead with deregulation. In addition to currency deregulation, the government is eliminating its minimum level holding requirement of Japanese bonds in pension funds. Nempuku, Japan's largest public pension fund, recently allocated $4 billion to foreign asset managers. The corporate world is also slowly showing signs of change. Matsushita Electric announced a package of management initiatives including share buybacks, stock options for executive and board members, incentive pay based on share price performance for management, and the creation of an outside advisory board to improve corporate governance. As corporate change drives stock performance on a global basis, indentifying and investing in companies that are proactively remaking themselves to generate higher returns will be paramount. The pace of change is likely to continue in Europe as the European Commission put 11 countries on track for the EMU commencing January 1, 1999. Current difficulties in Japan may deter some investors, but hopefully may force more companies and the government to finally take the stiff medicine necessary to address fundamental problems. Change provides exciting opportunity for companies to unleash value. Emerging markets (10% of portfolio) began to recover from oversold levels caused by Asia's financial crisis. In Brazil, BRAHMA (brewer) and TELEBRAS posted positive returns. In Greece, Hellenic Telecom contributed to portfolio performance as did Asia's Pulp and Paper in Indonesia. PANAMCO (Coke bottler) in Mexico and SAMSUNG (electronics) in South Korea also rebounded with significant gains. DG INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG INTERNATIONAL EQUITY FUND The graph below illustrates the hypothetical investment of $10,000 in the DG International Equity Fund (the "Fund") from August 18, 1997 (start of performance) to February 28, 1998, compared to the Morgan Stanley Capital Europe, Australia, Far East Index (EAFE).* (Graphic representation A2 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * The EAFE is not adjusted to reflect sales loads, expenses, or other fees that the SEC requires to be reflected in the Fund's performance. This index is unmanaged. Actual investments may not be made in an index. ** Represents a hypothetical investment of $10,000 in the Fund. The Fund's performance assumes the reinvestment of all dividends and distributions. The EAFE has been adjusted to reflect reinvestment of dividends on securities in the index. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG OPPORTUNITY FUND DG Opportunity Fund was established in July 1994, to provide investors with 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 12-month period ended February 28, 1998, the fund's 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 $122.9 million as of February 28, 1998. Total return based on net asset value for the twelve-month period ended February 28, 1998 was 37.81%.* * Performance quoted represents past performance and is not indicative of future returns. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. The fund's total return based on offering price for the period was 32.99%. The quoted performance data includes the performance of the collective trust fund for the period before the date on which the fund commenced operations (August 1, 1994), as adjusted to reflect the fund's then anticipated expenses as set forth in the "Expenses of the Fund" section of the fund's initial prospectus. The collective trust fund was not registered under the Investment Company Act of 1940 (the "1940 Act"), and therefore was not subject to certain investment restrictions that are imposed by the 1940 Act. If the collective trust fund had been registered under the 1940 Act, the performance may have been adversely affected. DG OPPORTUNITY FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG OPPORTUNITY FUND The graph below illustrates the hypothetical investment of $10,000 in the DG Opportunity Fund (the "Fund") from January 1, 1982+ (start of performance) to February 28, 1998, compared to the Russell 2000 Index.++ (Graphic representation A3 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * Represents a hypothetical investment of $10,000 in the Fund after deducting the original maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The Russell 2000 Index has been adjusted to reflect reinvestment of dividends on securities in the index. ** Represents a hypothetical investment of $10,000 in the Fund after deducting the current maximum sales charge of 3.50% (effective 5/1/95) ($10,000 investment minus $350 sales charge = $9,650). The Fund's performance assumes the reinvestment of all dividends and distributions. The Russell 2000 Index has been adjusted to reflect reinvestment of dividends on securities in the index. *** Total return quoted reflects all applicable current maximum sales charges. + The Fund is the successor to the portfolio of a collective trust fund ("CTF") formerly managed by the Adviser. On August 1, 1994, (the date of the Fund's commencement of operations), the assets of the CTF were transferred to the Fund in exchange for Fund shares. The quoted performance data includes the performance of the CTF for periods before the Fund's registration statement became effective. The CTF was not registered under the Investment Company Act of 1940 and therefore was not subject to certain investment restrictions that are imposed by the Act. If the CTF had been registered under the 1940 Act, the performance may have been adversely affected. ++ The Russell 2000 Index is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. This index is unmanaged. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG LIMITED TERM GOVERNMENT INCOME FUND Interest rates declined for the twelve-month period ended February 28, 1998. 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. But seeing no Fed Action since February 1997, yields on 3-, 5-, and 10-year Treasuries decreased by 63, 73, and 85 basis points, respectively. For the twelve-month period ended February 28, 1998, the fund's total return was 6.16%*, based on net asset value, compared to Merrill Lynch 1-3 Year Treasury Index** total return of 7.04%. The fund's duration of 1.61 years and average maturity of 1.8 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. * Performance quoted represents past performance and is not indicative of future returns. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. The fund's total return based on offering price for the period was 4.02%. ** Merrill Lynch 1-3 Year U.S. Treasury Index is an unmanaged index tracking short-term U.S. government securities with maturities between 1 and 2.99 years. The index is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc. Investments cannot be made in an index. SHAREHOLDER MEETING RESULTS - -------------------------------------------------------------------------------- A special meeting of DG Limited Term Government Income Fund's shareholders was held on January 12, 1998. On November 17, 1997, the record date for shareholders voting at the meeting, there were 8,131,725 shares of the fund outstanding and entitled to vote. The following item was considered by shareholders and the results were as follows: AGENDA ITEM: Approval or disapproval of a change to the investment objective of DG Limited Term Government Income Fund.
FOR AGAINST ABSTAINED - --------- ------- --------- 6,027,142 0 12,301
DG LIMITED TERM GOVERNMENT INCOME FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG LIMITED TERM GOVERNMENT INCOME FUND The graph below illustrates the hypothetical investment of $10,000 in DG Limited Term Government Income Fund (the "Fund") from August 1, 1992 (start of performance) to February 28, 1998, compared to the Merrill Lynch 1-3 Year Treasury Index ("ML1-3").+ (Graphic representation A4 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The ML1-3 has been adjusted to reflect reinvestment of dividends on securities in the index. ** Total return quoted reflects all applicable sales charges. + The ML1-3 is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. This index is unmanaged. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG GOVERNMENT INCOME FUND Interest rates declined for the twelve-month period ended February 28, 1998. 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. But seeing no Fed Action since February 1997, yields on 3-, 5-, and 10-year Treasuries decreased by 63, 73, and 85 basis points, respectively. For the twelve-month period ended February 28, 1998, the fund's total return was 9.90%*, based on net asset value, compared to the Lehman Brothers Government/Corporate Bond Index ("LBGCBI")** total return of 10.71%. The fund's duration of 4.62 years and average maturity of 7.8 years continues to be shorter than that of the LBGCBI. 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 increased from $249.6 million on February 28, 1997 to 270.4 million on February 28, 1998. * Performance quoted represents past performance and is not indicative of future returns. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. The fund's total return based on offering price for the period was 7.67%. ** The LBGCBI is comprised of approximately 5,000 issues which include: non-convertible bonds publicly issued by the U.S. government or its agencies; corporate bonds guaranteed by the U.S. government and quasi-federal corporations; and publicly issued, fixed rate, non-convertible domestic bonds of companies in industry, public utilities, and finance. This index is unmanaged. Investments cannot be made in an index. DG GOVERNMENT INCOME FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG GOVERNMENT INCOME FUND The graph below illustrates the hypothetical investment of $10,000 in the DG Government Income Fund (the "Fund") from August 1, 1992 (start of performance) to February 28, 1998, compared to the Lehman Brothers Government/ Corporate Total Index ("LBGCT").+ (Graphic representation A5 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The LBGCT has been adjusted to reflect reinvestment of dividends on securities in the index. ** Total return quoted reflects all applicable sales charges. + The LBGCT is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. This index is unmanaged. INVESTMENT REVIEW - -------------------------------------------------------------------------------- DG MUNICIPAL INCOME FUND DG Municipal Income Fund was established in December 1992 to provide investors with the ability to invest in a diversified portfolio of quality municipal issues. The investment objective of the fund is to provide dividend income that is exempt from federal regular income tax.* Massive supply in the municipal market in the latter part of the fund's fiscal year acted to keep yields at attractive levels relative to their treasury counterparts. While the twelve-month period ended February 28, 1998 produced strong returns, the municipal market did not experience the rally to the extent of other fixed income securities. The fund's investment adviser continued to focus on higher quality municipal issues consisting primarily of general obligations of states, counties, and cities. The fund's investment adviser intends to focus on lengthening the average maturity of 6.08 years in the first quarter of the upcoming fiscal year. The fund's total return (income plus capital appreciation) for the twelve-month period ended February 28, 1998, was 7.70%**, based on net asset value. As of February 28, 1998, the 30-day SEC yield was 3.59%, based on net asset value (3.52% taking into account the sales charge). The fund's 30-day distribution rate as of February 28, 1998, was 4.17% for shares, based on net asset value (4.09% taking into account the sales charge)***. The fund's net assets increased from $46.9 million on February 28, 1997 to $48.6 million on February 28, 1998. * 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 returns. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. The fund's total return based on offering price for the period was 5.50%. *** Distribution rate reflects actual distribution made to shareholders. It is calculated by dividing the monthly annualized dividend plus short-term capital gains, if any, by the average 30-day offering price. DG MUNICIPAL INCOME FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 INVESTED IN DG MUNICIPAL INCOME FUND The graph below illustrates the hypothetical investment of $10,000 in the DG Municipal Income Fund (the "Fund") from December 21, 1992 (start of performance) to February 28, 1998, compared to the Lehman Brothers Municipal Bond Index ("LBMBI").+ (Graphic representation A6 omitted. See Appendix.) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. * Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The LBMBI has been adjusted to reflect reinvestment of dividends on securities in the index. ** Total return quoted reflects all applicable sales charges. + The LBMBI is not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. This index is unmanaged. DG EQUITY FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------ COMMON STOCKS--95.3% BUSINESS EQUIPMENT & SERVICES--7.8% 280,000 Automatic Data Processing, Inc. $ 17,097,500 100,000 Cognizant Corp. 4,993,750 133,600 Donnelley (R.R.) & Sons Co. 5,293,900 74,600 Dun & Bradstreet Corp. 2,499,100 150,000 Electronic Data Systems Corp. 6,571,875 415,400 Pitney Bowes, Inc. 19,471,875 ------------ Total 55,928,000 ------------ CAPITAL GOODS--9.0% 520,000 Dover Corp. 20,085,000 311,000 General Electric Co. 24,180,250 127,500 PPG Industries, Inc. 8,263,594 240,000 Tyco International, Ltd. 12,180,000 ------------ Total 64,708,844 ------------ CONSUMER NON-DURABLES--18.7% 75,000 BestFoods 7,903,125 280,000 Coca-Cola Co. 19,232,500 60,000 Eastman Kodak Co. 3,937,500 130,000 Gillette Co. 14,023,750 129,450 Heinz (H.J.) Co. 7,289,653 250,000 International Flavors & Fragrances, Inc. 11,500,000 60,000 Nike, Inc., Class B 2,632,500 411,200 PepsiCo, Inc. 15,034,500 309,000 Philip Morris Cos., Inc. 13,422,188 230,000 Procter & Gamble Co. 19,535,625 209,800 Sara Lee Corp. 11,853,700 160,000 Sysco Corp. 7,530,000 ------------ Total 133,895,041 ------------ CONSUMER SERVICES--3.2% 204,500 Disney (Walt) Co. 22,891,219 ------------ HEALTHCARE--21.5% 187,300 Abbott Laboratories 14,012,381 110,000 American Home Products Corp. 10,312,500 100,000 Bristol-Myers Squibb Co. 10,018,750 100,000 Hillenbrand Industries, Inc. 5,618,750 250,000 Johnson & Johnson 18,875,000 320,000 Medtronic, Inc. 17,000,000 166,000 Merck & Co., Inc. 21,175,375 280,000 Pfizer, Inc. 24,780,000 340,000 Schering Plough Corp. 25,861,250 100,000 United Healthcare Corp. 6,068,750 ------------ Total 153,722,756 ------------
SHARES OR PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) RAW MATERIALS--1.5% 60,000 Avery Dennison Corp. $ 3,030,000 90,000 Lubrizol Corp. 3,470,625 120,000 Morton International, Inc. 3,967,500 ------------ Total 10,468,125 ------------ RETAIL--11.4% 200,000 Albertsons, Inc. 9,362,500 75,000 Gap (The), Inc. 3,351,562 225,000 Home Depot, Inc. 14,357,812 320,000 McDonald's Corp. 17,520,000 41,120 (b) Tricon Global Restaurants, Inc. 1,166,780 240,000 Wal-Mart Stores, Inc. 11,115,000 680,000 Walgreen Co. 24,947,500 ------------ Total 81,821,154 ------------ TECHNOLOGY--20.8% 150,000 AMP, Inc. 6,628,125 220,000 (b) Applied Materials, Inc. 8,098,750 177,200 Boeing Co. 9,613,100 700,000 Compaq Computer Corp. 22,443,750 130,000 (b) Digital Equipment Corp. 7,401,875 277,200 Hewlett-Packard Co. 18,572,400 200,000 Intel Corp. 17,937,500 200,000 International Business Machines Corp. 20,887,500 60,000 Lucent Technologies, Inc. 6,502,500 200,000 (b) Microsoft Corp. 16,950,000 100,000 Motorola, Inc. 5,575,000 150,000 (b) Oracle Corp. 3,693,750 100,000 (b) Sun Microsystems, Inc. 4,762,500 ------------ Total 149,066,750 ------------ UTILITIES--1.4% 103,800 AT&T Corp. 6,318,825 30,000 Central & SouthWest Corp. 804,375 40,000 SBC Communications, Inc. 3,025,000 ------------ Total 10,148,200 ------------ TOTAL COMMON STOCKS (identified cost $317,394,839) 682,650,089 ------------ (A) REPURCHASE AGREEMENT--4.5% $32,275,400 Cantor Fitzgerald Securities, 5.58%, dated 2/27/1998, due 3/2/1998 (at amortized cost) 32,275,400 ------------ TOTAL INVESTMENTS (identified cost $349,670,239) $714,925,489 ============
(See Notes to Portfolios of Investments) DG INTERNATIONAL EQUITY FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
SHARES VALUE - ----------------------------------------------------------- COMMON STOCKS--90.7% ARGENTINA--1.2% ENERGY SOURCES--1.2% 9,800 YPF Sociedad Anonima, ADR $ 309,925 ----------- AUSTRALIA--0.7% BANKING--0.7% 28,600 Westpac Banking Corp. Ltd., Sydney 197,646 ----------- BRAZIL--1.3% TELECOMMUNICATIONS--1.3% 2,740 Telecomunicacoes Brasileiras SA, ADR 335,479 ----------- DENMARK--0.9% BANKING--0.9% 3,250 Unidanmark, Class A 235,984 ----------- FINLAND--0.9% BANKING--0.5% 24,400 Merita Ltd, Class A 142,702 ----------- FOREST PRODUCTS & PAPER--0.4% 3,900 UPM--Kymmene OY 101,294 ----------- TOTAL FINLAND 243,996 ----------- FRANCE--12.5% AUTOMOBILE--0.4% 1,900 Michelin, Class B 119,189 ----------- BANKING--1.1% 5,000 Banque Nationale de Paris 302,557 ----------- CHEMICALS--1.9% 10,700 Rhone-Poulenc, Class A 493,697 ----------- COMMERCIAL SERVICES--1.9% 3,000 Compagnie Generale des Eaux 472,581 ----------- ELECTRICAL & ELECTRONICS--1.4% 2,880 Alcatel Alsthom 375,065 ----------- ENERGY SOURCES--2.1% 4,780 Elf Aquitaine SA 544,691 ----------- INSURANCE--1.6% 4,500 AXA 435,830 ----------- MISCELLANEOUS MATERIALS & COMMODITIES--1.3% 2,400 Compagnie de St. Gobain 336,627 ----------- MULTI-INDUSTRY--0.8% 1,700 Lyonnaise des Eaux SA 224,468 ----------- TOTAL FRANCE 3,304,705 -----------
SHARES VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) GERMANY--9.1% AUTOMOBILE--1.4% 4,500 Daimler Benz AG $ 368,643 ----------- BANKING--1.6% 2,700 Deutsche Bank, AG 185,537 5,100 Dresdner Bank AG, Frankfurt 231,390 ----------- Total 416,927 ----------- CHEMICALS--1.4% 9,400 Hoechst AG 364,299 ----------- FOOD & HOUSEHOLD PRODUCTS--0.7% 4,200 (b)Metro AG 191,020 ----------- MACHINERY & ENGINEERING--2.2% 550 Mannesmann SA 330,494 1,190 Thyssen AG 262,083 ----------- Total 592,577 ----------- UTILITIES--ELECTRICAL & GAS--1.8% 870 Viag AG 470,983 ----------- TOTAL GERMANY 2,404,449 ----------- GREECE--1.1% TELECOMMUNICATIONS--1.1% 15,000 Hellenic Telecommunications Organization 297,422 ----------- HONG KONG--2.1% BANKING--1.1% 10,400 HSBC Holdings PLC 300,885 ----------- DIVERSIFIED OPERATIONS--0.5% 59,000 Wharf Holdings Ltd. 123,067 ----------- MULTI-INDUSTRY--0.5% 20,500 Swire Pacific Ltd., Class A 123,384 ----------- TOTAL HONG KONG 547,336 ----------- ITALY--4.6% AUTOMOBILE--0.9% 64,200 Fiat SPA 225,918 ----------- BANKING--1.3% 88,000 Credito Italiano 338,225 ----------- ENERGY SOURCES--0.8% 35,700 Eni SPA 208,714 ----------- TELECOMMUNICATIONS--1.6% 89,400 Telecom Italia SpA 434,384 ----------- TOTAL ITALY 1,207,241 -----------
(See Notes to Portfolios of Investments) DG INTERNATIONAL EQUITY FUND - --------------------------------------------------------------------------------
SHARES VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) JAPAN--14.9% APPLIANCES & HOUSEHOLD DURABLES--1.3% 24,000 Matsushita Electric Industrial Co. $ 350,198 ----------- AUTOMOBILE--1.0% 8,000 Honda Motor Co. Ltd. 277,240 ----------- BANKING--1.3% 49,000 Sumitomo Trust & Banking 349,722 ----------- BUILDING MATERIALS & COMPONENTS--0.7% 28,000 Sekisui Chemical Co. 178,303 ----------- ELECTRICAL & ELECTRONICS--1.9% 9,000 Omron Corp. 145,599 4,200 Sony Corp. 379,699 ----------- Total 525,298 ----------- FINANCIAL SERVICES--2.6% 5,600 Orix Corp 408,565 4,940 Promise Co. Ltd. 276,577 ----------- Total 685,142 ----------- INSURANCE--0.1% 3,000 Mitsui Marine & Fire Insurance Co. 16,749 ----------- MERCHANDISING--1.4% 6,000 Ito-Yokado Co., Ltd. 328,311 180 Ito-Yokado Co., Ltd., ADR 39,060 ----------- Total 367,371 ----------- OFFICE EQUIPMENT--0.9% 23,000 Ricoh Co. Ltd. 246,233 ----------- RECREATION, OTHER CONSUMER GOODS--1.2% 3,400 Nintendo Corp. Ltd. 312,768 ----------- TELECOMMUNICATIONS--1.4% 39 Nippon Telegraph & Telephone Corp. 358,763 ----------- TOBACCO--1.1% 39 (d)Japan Tobacco, Inc. 287,320 ----------- TOTAL JAPAN 3,955,107 ----------- KOREA--1.2% APPLIANCES & HOUSEHOLD DURABLES--1.2% 10,000 (b)(d)Samsung Electronics Co., GDR 326,000 -----------
SHARES VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) MALAYSIA--0.2% LEISURE & TOURISM--0.2% 15,000 Genting Berhad $ 49,526 ----------- MEXICO--2.1% BANKING--0.9% 100,000 Grupo Financiero Banamex Accivel, Class B 251,524 ----------- BEVERAGE & TOBACCO--1.2% 8,500 Pan American Beverage, Class A 309,719 ----------- TOTAL MEXICO 561,243 ----------- NETHERLANDS--3.4% APPLIANCES & HOUSEHOLD DURABLES--1.2% 4,100 Philips Electronics N.V. 318,863 ----------- BEVERAGE & TOBACCO--0.9% 1,300 Heineken NV 241,503 ----------- ENERGY SOURCES--0.4% 2,100 Royal Dutch Petroleum Co., ADR 114,056 ----------- TELECOMMUNICATIONS--0.9% 4,900 Koninklijke PTT Nederland NV 246,863 ----------- TOTAL NETHERLANDS 921,285 ----------- PHILIPPINES--0.8% BANKING--0.8% 100,000 (b)Philippine National Bank 204,903 ----------- SINGAPORE--1.5% BANKING--0.3% 17,000 United Overseas Bank Ltd. 92,317 ----------- PAPER PRODUCTS--1.2% 26,000 Asia Pulp & Paper Co. Ltd., ADR 310,375 ----------- TOTAL SINGAPORE 402,692 ----------- SOUTH AFRICA--1.2% BUILDING MATERIALS & COMPONENTS--1.2% 33,159 Barlow Ltd. 310,014 ----------- SPAIN--2.6% BANKING--1.3% 4,600 Argentaria SA 342,891 ----------- TELECOMMUNICATIONS--1.3% 10,400 Telefonica de Espana 357,851 ----------- TOTAL SPAIN 700,742 -----------
(See Notes to Portfolios of Investments) DG INTERNATIONAL EQUITY FUND - --------------------------------------------------------------------------------
SHARES VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) SWEDEN--3.7% APPLIANCES & HOUSEHOLD DURABLES--0.9% 3,300 Electrolux AB, Class B $ 251,672 ----------- BANKING--1.9% 22,200 (b)Nordbanken Holding AB 140,164 8,100 Svenska Handelsbanken, Stockholm 346,846 ----------- Total 487,010 ----------- HEALTH & PERSONAL CARE--0.9% 12,600 Astra AB, Class B 246,534 ----------- TOTAL SWEDEN 985,216 ----------- SWITZERLAND--7.5% BANKING--1.2% 1,760 Credit Suisse Group 318,036 ----------- BUILDING MATERIALS & COMPONENTS--0.9% 245 Holderbank Financiere Glaris AG, Class B 238,902 ----------- BUSINESS & PUBLIC SERVICES--1.0% 143 SGS Societe Generale de Surveillance Holding SA 263,280 ----------- FOOD & HOUSEHOLD PRODUCTS--0.7% 112 Nestle SA 196,277 ----------- HEALTH & PERSONAL CARE--1.1% 165 Novartis AG 301,197 ----------- INSURANCE--1.9% 900 Zurich Versicherungsgesellschaft 490,965 ----------- RETAIL--0.7% 305 Societe Suisse pour la Microelectronique et l'Horlogerie 191,756 ----------- TOTAL SWITZERLAND 2,000,413 ----------- UNITED KINGDOM--17.2% AEROSPACE & MILITARY TECHNOLOGY--2.0% 16,400 British Aerospace 515,523 ----------- AUTOMOBILE--1.4% 97,700 (b)LucasVarity PLC 376,648 ----------- BANKING--1.5% 21,300 National Westminster Bank, PLC, London 393,379 -----------
SHARES OR PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) UNITED KINGDOM (continued) BEVERAGES--1.2% 31,968 Diageo PLC $ 327,327 ----------- BROADCASTING & PUBLISHING--0.4% 36,800 Mirror Group PLC 103,068 ----------- CHEMICALS--0.9% 13,100 Imperial Chemical Industries, PLC 239,239 ----------- ENERGY SOURCES--1.3% 24,700 British Petroleum Co. PLC 341,010 ----------- FOOD & HOUSEHOLD PRODUCTS--3.0% 25,600 Cadbury Schweppes PLC 325,810 20,200 Prudential Corp. PLC 303,176 19,000 Unilever PLC 172,164 ----------- Total 801,150 ----------- LEISURE & TOURISM--0.9% 15,800 Granada Group PLC 247,030 ----------- MULTI-INDUSTRY--1.3% 130,100 BTR PLC 345,623 ----------- RECREATION, OTHER CONSUMER GOODS--0.7% 21,400 EMI Group PLC 182,629 ----------- TOBACCO--1.3% 34,600 B.A.T. Industries PLC 345,441 ----------- UTILITIES--ELECTRICAL & GAS--1.3% 34,200 National Power Co. PLC 354,689 ----------- TOTAL UNITED KINGDOM 4,572,756 ----------- TOTAL COMMON STOCKS (identified cost $22,675,623) 24,074,080 ----------- PREFERRED STOCKS--1.1% BRAZIL--1.1% BEVERAGE & TOBACCO--1.1% 389,000 Cia Cervejaria Brahma, Preference (identified cost $268,422) 292,568 ----------- (A) REPURCHASE AGREEMENT--7.2% $1,919,000 State Street Bank and Trust Co., 5.56%, dated 2/27/1998, due 3/2/1998 (at amortized cost) 1,919,000 ----------- TOTAL INVESTMENTS (identified cost $24,863,045) $26,285,648 ===========
(See Notes to Portfolios of Investments) DG OPPORTUNITY FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------ COMMON STOCKS--90.5% BUSINESS EQUIPMENT & SERVICES--5.5% 250,000 (b) Comforce Corp. $ 2,140,625 122,000 (b) Dycom Industries, Inc. 3,111,000 295,000 (b) Employee Solutions, Inc. 1,548,750 ------------ Total 6,800,375 ------------ CAPITAL GOODS--6.3% 100,000 (b) Denali, Inc. 1,562,500 64,700 (b) Halter Marine Group, Inc. 1,269,738 152,000 (b) ITEQ, Inc. 1,805,000 129,700 (b) Terex Corp. 3,096,588 ------------ Total 7,733,826 ------------ CAPITAL GOODS/ELECTRONICS--2.0% 55,550 Kuhlman Corp. 2,451,144 ------------ COMPUTERS-PERIPHERALS & SOFTWARE--1.0% 30,700 (b) Insight Enterprises, Inc. 1,220,325 ------------ CONSUMER DURABLES--2.0% 93,000 (b) Speedway Motorsports, Inc. 2,499,375 ------------ CONSUMER NON-DURABLES--1.4% 160,000 (b) Hollywood Entertainment Corp. 1,760,000 ------------ CONSUMER SERVICES--3.6% 115,000 (b) Mobile Telecommunication Technologies Corp. 2,587,500 78,000 (b) SCP Pool Corp. 1,784,250 ------------ Total 4,371,750 ------------ ENERGY/OIL-DOMESTIC--1.6% 56,000 (b) Nuevo Energy Co. 2,009,000 ------------ ENERGY/OIL FIELD SERVICES--6.5% 67,000 (b) Friede Goldman International, Inc. 2,035,125 70,000 (b) Gulf Island Fabrication, Inc. 1,478,750 63,300 (b) J. Ray McDermott, S.A. 2,690,250 17,900 (b) Oceaneering International, Inc. 296,469 166,000 (b) Superior Energy Services, Inc. 1,473,250 ------------ Total 7,973,844 ------------
SHARES VALUE - ------------------------------------------------------------ COMMON STOCKS (continued) ENERGY/OIL SERVICES--3.7% 72,500 (b) Bellwether Exploration Co. $ 661,562 200,000 (b) EEX Corp. 1,712,500 45,500 Snyder Oil Corp. 847,438 97,000 (b) TransCoastal Marine Services, Inc. 1,297,375 ------------ Total 4,518,875 ------------ FINANCIAL SERVICES--5.8% 50,430 AmerUs Life Holdings, Inc., Class A 1,645,279 107,200 (b) IMC Mortgage Co. 1,259,600 63,000 T. Rowe Price Associates 4,181,625 ------------ Total 7,086,504 ------------ FOOD & RELATED--0.3% 30,400 Sanderson Farms, Inc. 330,600 ------------ HEALTHCARE--9.9% 34,000 (b) Arterial Vascular Engineering, Inc. 2,783,750 100,000 (b) Cyberonics, Inc. 2,412,500 86,000 (b) Imnet Systems Inc. 1,800,625 122,000 (b) Neotherapeutics, Inc. 1,159,000 150,000 (b) ProMedCo Management Co. 1,893,750 63,000 (b) Res-Care, Inc. 2,110,500 ------------ Total 12,160,125 ------------ LEISURE--2.0% 110,000 (b) Fairfield Communities, Inc. 2,461,250 ------------ RESTAURANTS--9.7% 120,000 Apple South, Inc. 1,635,000 60,000 (b) Casa Ole Restaurants, Inc. 255,000 170,000 (b) Foodmaker, Inc. 3,091,875 98,000 (b) Outback Steakhouse, Inc. 3,503,500 90,000 (b) ShowBiz Pizza Time, Inc. 2,610,000 29,000 (b) Sonic Corp. 848,250 ------------ Total 11,943,625 ------------ RETAIL/CONSUMER--1.7% 58,000 (b) I.C. Isaacs & Co., Inc. 648,875 139,000 (b) Ugly Duckling Corp. 1,390,000 ------------ Total 2,038,875 ------------
(See Notes to Portfolios of Investments) DG OPPORTUNITY FUND - --------------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------ COMMON STOCKS (continued) TECHNOLOGY/COMMUNICATION--4.9% 135,000 (b) Cerprobe Corp. $ 2,927,812 97,500 (b) Cree Research, Inc. 1,584,375 53,000 (b) Semtech Corp. 1,523,750 ------------ Total 6,035,937 ------------ TECHNOLOGY/COMPUTERS--14.4% 30,000 (b) ACT Networks, Inc. 296,250 192,500 (b) Compucom System, Inc. 1,696,406 230,000 (b) Datastream Systems, Inc. 4,341,250 80,000 (b) Data Dimensions, Inc. 1,090,000 96,000 (b) Datatec Systems, Inc. 432,000 120,000 (b) Harbinger Corp. 3,960,000 163,000 (b) Inso Corp. 2,282,000 100,000 (b) MetaCreations Corp. 853,125 138,000 (b) Microage, Inc. 1,776,750 87,500 (b) Micrografx, Inc. 984,375 ------------ Total 17,712,156 ------------ TECHNOLOGY/TELECOMMUNI- CATIONS--5.6% 30,000 (b) Boston Communications Group, Inc. 266,250 89,000 (b) Premiere Technologies, Inc. 2,792,375 70,000 (b) SmarTalk Teleservices, Inc. 2,353,750 64,500 (b) World Access, Inc. 1,451,250 ------------ Total 6,863,625 ------------
SHARES OR PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- COMMON STOCKS (continued) TRANSPORTATION--2.6% 25,000 (b) AirTran Holdings, Inc. $ 145,312 76,000 Hunt (J.B.) Transportation Services, Inc. 2,033,000 38,000 (b)M.S. Carriers, Inc. 1,002,250 ------------ Total 3,180,562 ------------ TOTAL COMMON STOCKS (identified cost $93,085,284) 111,151,773 ------------ (A) REPURCHASE AGREEMENT--13.2% $16,223,500 Cantor Fitzgerald Securities, 5.58%, dated 2/27/1998, due 3/2/1998 (at net asset value) 16,223,500 ------------ TOTAL INVESTMENTS (identified cost $109,308,784) $127,375,273 ============
(See Notes to Portfolios of Investments) DG LIMITED TERM GOVERNMENT INCOME FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- CORPORATE BONDS--13.2% CHEMICALS--1.7% $1,000,000 Du Pont (E.I.) de Nemours & Co., 6.500%, 9/1/2002 $ 1,020,660 ----------- HEALTHCARE--2.1% 1,250,000 Upjohn Co., 5.875%, 4/15/2000 1,251,413 ----------- PHARMACEUTICALS--1.8% 1,000,000 American Home Products Corp., 7.700%, 2/15/2000 1,031,670 ----------- PRINTING & PUBLISHING--1.7% 1,000,000 Gannett Co., Inc., 5.250%, 3/1/1998 1,000,590 ----------- UTILITIES--5.9% 1,500,000 Northern States Power Co., 5.500%, 2/1/1999 1,498,455 1,000,000 Pacific Gas & Electric Co., 5.375%, 8/1/1998 999,800 1,000,000 Southern California Edison Co., 5.600%, 12/15/1998 999,820 ----------- Total 3,498,075 ----------- TOTAL CORPORATE BONDS (identified cost $7,625,682) 7,802,408 ----------- GOVERNMENT AGENCIES--18.6% FEDERAL FARM CREDIT BANK--6.8% 2,000,000 5.480%, 5/1/1998 2,000,640 2,000,000 5.550%, 3/2/1998 2,000,000 ----------- Total 4,000,640 ----------- FEDERAL HOME LOAN BANK--5.0% 2,000,000 5.760%, 7/28/2000 1,993,620 1,000,000 6.275%, 8/13/2001 1,003,980 ----------- Total 2,997,600 -----------
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- GOVERNMENT AGENCIES (continued) FEDERAL HOME LOAN MORTGAGE CORPORATION--5.1% $2,000,000 6.130%, 5/19/2000 $ 2,003,200 1,000,000 6.790%, 5/24/2001 1,011,080 ----------- Total 3,014,280 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.7% 1,000,000 6.050%, 10/20/2000 1,004,020 ----------- TOTAL GOVERNMENT AGENCIES (identified cost $10,992,344) 11,016,540 ----------- U.S. TREASURY NOTES--67.2% 6,000,000 5.125%, 3/31/1998 6,000,420 5,000,000 5.625%, 11/30/2000 5,008,550 2,000,000 6.125%, 7/31/2000 2,025,280 3,000,000 6.250%, 10/31/2001 3,063,690 5,000,000 6.250%, 8/31/2000 5,079,450 4,000,000 6.625%, 7/31/2001 4,127,480 4,000,000 6.750%, 6/30/1999 4,062,320 4,000,000 7.125%, 10/15/1998 4,039,880 2,000,000 7.500%, 10/31/1999 2,060,420 4,000,000 7.500%, 11/15/2001 4,250,920 ----------- TOTAL U.S. TREASURY NOTES (identified cost $39,229,453) 39,718,410 ----------- (A) REPURCHASE AGREEMENT--1.1% 649,700 Cantor Fitzgerald Securities, 5.580%, dated 2/27/1998, due 3/2/1998 (at amortized cost) 649,700 ----------- TOTAL INVESTMENTS (identified cost $58,497,179) $59,187,058 ===========
(See Notes to Portfolios of Investments) DG GOVERNMENT INCOME FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- CORPORATE BONDS--6.4% BANKING--0.4% $ 1,000,000 NationsBank Corp., 5.375%, 4/15/2000 $ 988,100 ------------ CONSUMER NON-DURABLES--0.7% 889,000 Anheuser-Busch Cos., Inc., 6.900%, 10/1/2002 895,854 1,000,000 Heinz (H.J.) Co., 6.750%, 10/15/1999 1,014,530 ------------ Total 1,910,384 ------------ FINANCIAL SERVICES--1.5% 2,000,000 Private Export Funding Corp., 6.310%, 9/30/2004 2,047,242 2,000,000 Private Export Funding Corp., 6.490%, 7/15/2007 2,085,242 ------------ Total 4,132,484 ------------ HEALTHCARE--0.4% 1,000,000 Upjohn Co., 5.875%, 4/15/2000 1,001,130 ------------ PHARMACEUTICALS-HEALTHCARE--0.5% 1,400,000 American Home Products Corp., 7.700%, 2/15/2000 1,444,338 ------------ PRINTING & PUBLISHING--0.5% 1,500,000 Gannett Co., Inc., 5.250%, 3/1/1998 1,500,885 ------------ RAW MATERIALS--0.5% 889,000 Du Pont (E.I.) de Nemours & Co., 6.750%, 10/15/2002 916,408 437,000 Du Pont (E.I.) de Nemours & Co., 9.150%, 4/15/2000 464,837 ------------ Total 1,381,245 ------------ TECHNOLOGY SERVICES--0.2% 437,000 Texas Instruments, Inc., 9.250%, 6/15/2003 496,161 ------------ UTILITIES--1.7% 1,000,000 Alabama Power Co., 6.750%, 2/1/2003 1,013,880 1,500,000 Northern States Power Co., 5.500%, 2/1/1999 1,498,455 1,000,000 Pacific Gas & Electric Co., 6.250%, 3/1/2004 1,009,760 (See Notes to Portfolios of Investments)
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- CORPORATE BONDS (continued) UTILITIES (continued) $ 1,000,000 Southern California Edison Co., 5.625%, 10/1/2002 $ 984,680 ------------ Total 4,506,775 ------------ TOTAL CORPORATE BONDS (identified cost $16,917,984) 17,361,502 ------------ GOVERNMENT AGENCIES--7.0% FEDERAL FARM CREDIT BANK--3.0% 4,000,000 5.430%, 9/1/1998 4,000,520 4,000,000 5.600%, 6/1/1998 3,999,068 ------------ Total 7,999,588 ------------ FEDERAL HOME LOAN BANK--2.5% 2,000,000 5.760%, 7/28/2000 1,993,620 3,000,000 5.790%, 2/18/2000 2,991,360 2,000,000 6.275%, 8/13/2001 2,007,960 ------------ Total 6,992,940 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--0.4% 1,000,000 6.820%, 12/13/2006 1,014,440 ------------ STUDENT LOAN MARKETING ASSOCIATION--1.1% 3,000,000 5.810%, 1/27/2000 2,994,390 ------------ TOTAL GOVERNMENT AGENCIES (identified cost $18,995,625) 19,001,358 ------------ U.S. TREASURY OBLIGATIONS--73.1% TREASURY BONDS--21.2% 10,000,000 6.750%, 8/15/2026 11,044,700 10,000,000 6.875%, 8/15/2025 11,186,000 9,000,000 7.125%, 2/15/2023 10,305,720 7,000,000 7.250%, 8/15/2022 8,113,980 7,000,000 7.500%, 11/15/2016 8,190,420 7,000,000 7.625%, 11/15/2022 8,455,090 ------------ Total 57,295,910 ------------ TREASURY NOTES--51.9% 8,000,000 5.750%, 10/31/2000 8,037,600 10,000,000 5.750%, 8/15/2003 10,062,100 10,000,000 5.875%, 11/15/2005 10,120,000 9,000,000 6.125%, 5/15/1998 9,014,670 10,000,000 6.125%, 7/31/2000 10,126,400 9,000,000 6.500%, 8/15/2005 9,448,920 15,000,000 7.000%, 7/15/2006 16,276,950
DG GOVERNMENT INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (continued) TREASURY NOTES (continued) $ 9,000,000 7.125%, 10/15/1998 $ 9,089,730 10,000,000 7.500%, 10/31/1999 10,302,100 10,000,000 7.500%, 5/15/2002 10,698,200 10,000,000 7.750%, 1/31/2000 10,393,300 9,000,000 7.750%, 2/15/2001 9,527,310 7,000,000 7.875%, 8/15/2001 7,494,830 9,000,000 8.000%, 5/15/2001 9,627,660 ------------ Total $140,219,770 ------------ TOTAL U.S. TREASURY OBLIGATIONS (identified cost $189,383,825) 197,515,680 ------------
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------- (A)REPURCHASE AGREEMENT--14.0% $37,774,400 Cantor Fitzgerald Securities, 5.580%, dated 2/27/1998, due 3/2/1998 (at amortized cost) $ 37,774,400 ------------ TOTAL INVESTMENTS (identified cost $263,071,834) $271,652,940 ============
(See Notes to Portfolios of Investments) DG MUNICIPAL INCOME FUND PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES--95.1% ALABAMA--3.4% $ 500,000 Huntsville, AL, GO LT Warrants (Series A), 6.00% (Original Issue Yield: 6.325%), 11/1/2012 AA $ 540,950 1,000,000 Jefferson County, AL, Sewer Revenue Bonds, 6.00% (Original Issue Yield: 6.30%), 9/1/2013 NR 1,096,460 ----------- Total 1,637,410 ----------- ARIZONA--2.1% 1,000,000 Phoenix, AZ, GO UT Refunding Bonds (Series C), 4.90% (Original Issue Yield: 5.00%), 7/1/2008 AA+ 1,031,030 ----------- CALIFORNIA--2.2% 1,000,000 California State, GO UT Public Improvement Bonds, 5.75%, 5/1/2007 A+ 1,086,410 ----------- CONNECTICUT--2.2% 1,000,000 Connecticut State, GO UT Public Improvement Bonds (Series C), 5.80%, 8/15/2008 AA- 1,083,820 ----------- FLORIDA--8.6% 1,000,000 Broward County, FL School District, GO UT Refunding Bonds, 5.60% (Original Issue Yield: 5.80%), 2/15/2007 AA- 1,071,900 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+ 1,003,280
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) FLORIDA (continued) $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 $ 1,035,430 1,000,000 St. Petersburg, FL Public Utility, Water & Sewer Revenue Bonds, 5.50%, 10/1/2009 AA- 1,060,380 ----------- Total 4,170,990 ----------- GEORGIA--2.1% 1,000,000 Fulton County, GA, GO UT Refunding Bonds, 4.60%, 1/1/2001 AA 1,019,170 ----------- HAWAII--3.3% 500,000 Hawaii State, GO UT Bonds (Series CB), 5.75% (Original Issue Yield: 5.95%), 1/1/2008 A+ 549,445 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 1,074,440 ----------- Total 1,623,885 ----------- ILLINOIS--3.3% 1,000,000 Illinois State, GO UT Bonds, 5.60% (Original Issue Yield: 5.65%), 4/1/2008 AA 1,073,270 500,000 Illinois State, GO UT Refunding Bonds, 5.875% (Original Issue Yield: 6.05%), 6/1/2011 AA 537,550 ----------- Total 1,610,820 -----------
(See Notes to Portfolios of Investments) DG MUNICIPAL INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) INDIANA--1.1% $ 500,000 Indianapolis, IN, Local Public Improvement Revenue Bonds, 6.00% (Original Issue Yield: 6.40%), 7/1/2010 AA- $ 537,185 ----------- 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 533,165 ----------- MARYLAND--2.2% 1,000,000 Maryland State, GO UT Bonds (Series BB), 5.50%, 6/1/2009 AAA 1,072,510 ----------- MASSACHUSETTS--3.3% 450,000 Commonwealth of Massachusetts, GO UT Bonds (Series A), 6.00% (FSA INS)/ (Original Issue Yield: 7.618%), 6/1/2011 AAA 477,158 1,000,000 Commonwealth of Massachusetts, GO UT Refunding Revenue Bonds (Series A), 6.25%, 7/1/2003 1,099,670 ----------- Total 1,576,828 ----------- MINNESOTA--2.2% 1,000,000 Minnesota State, GO UT, 5.00% (Original Issue Yield: 5.15%), 11/1/2008 AAA 1,041,370 -----------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) MISSISSIPPI--13.2% $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 $ 1,083,660 1,125,000 Jackson, MS, GO UT Refunding Bonds (Series A), 5.85% (MBIA Insurance Corporation INS), 5/1/2006 AAA 1,190,070 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 1,033,900 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 1,052,160 1,000,000 Mississippi State, GO UT Bonds, 5.125% (Original Issue Yield: 5.30%), 12/1/2011 AA 1,027,340 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 1,033,560 ----------- Total 6,420,690 ----------- MISSOURI--2.1% 1,000,000 Missouri State, Water Pollution Control Refunding Bonds (Series B), 5.00% (Original Issue Yield: 5.60%), 8/1/2010 AAA 1,018,230 -----------
(See Notes to Portfolios of Investments) DG MUNICIPAL INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) MONTANA--2.1% $1,000,000 Montana State, GO UT Bonds (Series A), 4.875% (Long Range Building Program)/ (Original Issue Yield: 4.95%), 8/1/2009 AA- $ 1,021,380 ----------- NEVADA--3.2% 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 529,860 1,000,000 Nevada State, (Project R-5) GO LT Bonds (Series A), 4.90% (Original Issue Yield: 5.00%), 11/1/2007 AA 1,033,540 ----------- Total 1,563,400 ----------- 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+ 540,950 ----------- NORTH CAROLINA--3.3% 1,000,000 North Carolina State, GO UT Bonds, 5.10%, 3/1/2003 AAA 1,051,350 500,000 Wake County, NC, GO UT Bonds, 4.90%, 3/1/2005 AAA 522,920 ----------- Total 1,574,270 ----------- 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 540,900 -----------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) OREGON--2.1% $1,000,000 Portland, OR, GO UT Refunding Revenue Bonds, 4.90% (Original Issue Yield: 5.00%), 10/1/2007 NR $ 1,026,690 ----------- RHODE ISLAND--1.1% 500,000 Providence, RI, GO UT Bonds, 5.90% (MBIA Insurance Corporation INS)/ (Original Issue Yield: 6.05%), 1/15/2009 AAA 536,445 ----------- TENNESSEE--2.1% 1,000,000 Memphis, TN, GO UT Refunding Bonds, 4.90% (Original Issue Yield: 5.05%), 8/1/2006 AA 1,032,620 ----------- TEXAS--8.8% 500,000 Corpus Christi, TX, GO UT Refunding Bonds, 6.00% (FGIC INS)/(Original Issue Yield: 6.15%), 3/1/2010 AAA 535,390 500,000 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 527,610 500,000 Harris County, TX Flood Control District, GO LT Bonds (Series B), 6.20% (Original Issue Yield: 6.25%), 10/1/2002 (@100) AA 543,435 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 1,049,940
(See Notes to Portfolios of Investments) DG MUNICIPAL INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING(C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) TEXAS (continued) $ 500,000 Texas State Public Finance Authority, GO UT Refunding Bonds (Series A), 5.90% (Original Issue Yield: 6.00%), 10/1/2011 AA $ 548,285 1,000,000 Texas State, GO UT Water Development Bonds, 5.20% (Original Issue Yield: 5.25%), 8/1/2010 AA 1,040,500 ----------- Total 4,245,160 ----------- VIRGINIA--4.3% 1,000,000 Fairfax County, VA, GO UT Bonds (Series A), 5.50% (Original Issue Yield: 5.70%), 6/1/2008 AAA 1,058,860 500,000 Virginia Commonwealth Transportation Board, Refunding Revenue Bonds, 5.125% (Northern Virginia Transportation District)/(Original Issue Yield: 5.25%), 5/15/2017 AA 501,060 500,000 Virginia State Transportation Board, Refunding Revenue Bonds, 6.00% (Original Issue Yield: 6.45%), 4/1/2010 AA 539,195 ----------- Total 2,099,115 ----------- WASHINGTON--9.1% 1,000,000 King County, WA Library System, UT GO Bonds, 6.15%, 12/1/2010 AA- 1,106,090 500,000 King County, WA, GO UT Refunding Bonds (Series A), 6.00%, 12/1/2010 AA+ 541,340 500,000 Port of Seattle, WA, Revenue Bonds, 6.25% (Original Issue Yield: 6.566%), 11/1/2010 AA- 535,195
PRINCIPAL CREDIT AMOUNT RATING OR SHARES (C) VALUE - ---------------------------------------------------------------- LONG-TERM MUNICIPAL SECURITIES (continued) WASHINGTON (continued) $ 650,000 Tacoma, WA Electric System, Refunding Revenue Bonds, 6.25% (AMBAC INS)/ (Original Issue Yield: 6.60%), 1/1/2011 AAA $ 704,743 500,000 Washington State, GO LT Refunding Revenue Bonds (Series R92-B), 6.25% (Original Issue Yield: 6.80%), 9/1/2009 AA+ 532,295 1,000,000 Washington State, GO UT Refunding Bonds (Series R-96B), 5.00% (Original Issue Yield: 5.45%), 7/1/2010 AA+ 1,022,530 ----------- Total 4,442,193 ----------- WISCONSIN--4.3% 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 528,290 500,000 Wisconsin State, GO UT Bonds (Series A), 6.30% (Original Issue Yield: 6.60%), 5/1/2012 AA 542,505 1,000,000 Wisconsin State, GO UT Bonds (Series C), 5.25% (Original Issue Yield: 5.45%), 5/1/2011 AA 1,034,170 ----------- Total 2,104,965 ----------- TOTAL LONG-TERM MUNICIPALS (identified cost $43,592,302) 46,191,601 ----------- MUTUAL FUND SHARES--3.2% 1,523,612 Dreyfus Tax Exempt Cash Management (at net asset value) 1,523,612 ----------- TOTAL INVESTMENTS (identified cost $45,115,914) $47,715,213 ===========
(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. Current ratings are unaudited. (d) Denotes a restricted security which is subject to restrictions on resale under Federal Securities laws. At February 28, 1998, these securities amounted to $613,320 which represents 2.3% of net assets. The following acronyms are used throughout the portfolios: ADR -- American Depository Receipt AMBAC -- American Municipal Bond Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance GDR -- Global Depository Receipt GO -- General Obligation INS - -- Insured LT -- Limited Tax MBIA -- Municipal Bond Investors Assurance PFA -- Public Facility Authority PLC -- Public Limited Company PSFG -- Permanent School Fund Guarantee SA -- Support Agreement SPA -- Standby Purchase Agreement UT -- Unlimited Tax
- --------------------------------------------------------------------------------------------------------------------- COST OF NET INVESTMENTS FOR UNREALIZED GROSS GROSS FEDERAL TAX APPRECIATION UNREALIZED UNREALIZED DG INVESTOR SERIES PURPOSES (DEPRECIATION) APPRECIATION DEPRECIATION TOTAL NET ASSETS - --------------------------------------------------------------------------------------------------------------------- DG Equity Fund $349,670,239 $365,255,250 $367,411,612 $2,156,362 $715,630,667 DG International Equity Fund 24,927,629 1,358,019 2,248,376 890,357 26,533,211 DG Opportunity Fund 109,308,784 18,066,489 25,490,965 7,424,476 122,871,510 DG Limited Term Government Income Fund 58,497,179 689,879 764,812 74,933 59,136,926 DG Government Income Fund 263,071,834 8,581,106 9,959,695 1,378,589 270,403,564 DG Municipal Income Fund 45,115,914 2,599,299 2,603,524 4,225 48,578,607 - ---------------------------------------------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets at February 28, 1998. (See Notes which are an integral part of the Financial Statements) f DG INVESTOR SERIES STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG DG DG EQUITY INTERNATIONAL OPPORTUNITY FUND EQUITY FUND FUND ------------ ------------- ------------ ASSETS: - ------------------------------------------------------------ Investments in repurchase agreements $ 32,275,400 $ 1,919,000 $ 16,223,500 - ------------------------------------------------------------ Investments in securities 682,650,089 24,366,648 111,151,773 - ------------------------------------------------------------ ----------- ------------ ----------- Total investments in securities, at value 714,925,489 26,285,648 127,375,273 - ------------------------------------------------------------ Income receivable 745,192 10,382 5,041 - ------------------------------------------------------------ Receivable for investments sold -- 525,978 2,045,078 - ------------------------------------------------------------ Receivable for shares sold 282,522 29,865 17,773 - ------------------------------------------------------------ Deferred organizational costs -- -- 6,420 - ------------------------------------------------------------ Deferred expenses -- -- 1,102 - ------------------------------------------------------------ ----------- ----------- ------------ Total assets 715,953,203 26,851,873 129,450,687 - ------------------------------------------------------------ ----------- ----------- ------------ LIABILITIES: - ------------------------------------------------------------ Payable for investments purchased -- 243,665 6,514,035 - ------------------------------------------------------------ Payable for shares redeemed 197,260 -- 25,939 - ------------------------------------------------------------ Payable to bank -- 26,989 -- - ------------------------------------------------------------ Net payable for foreign exchange contracts purchased -- 1,399 -- - ------------------------------------------------------------ Payable for taxes withheld -- 2,096 -- - ------------------------------------------------------------ Accrued expenses 125,276 44,513 39,203 - ------------------------------------------------------------ ----------- ----------- ------------ Total liabilities 322,536 318,662 6,579,177 - ------------------------------------------------------------ ----------- ----------- ------------ NET ASSETS CONSIST OF: - ------------------------------------------------------------ Paid in capital 344,394,053 25,371,801 97,575,114 - ------------------------------------------------------------ Net unrealized appreciation (depreciation) of investments, forward contracts and foreign currency translation 365,255,250 1,421,852 18,066,489 - ------------------------------------------------------------ Accumulated net realized gain (loss) on investments, foreign currency transactions and forward contracts 5,543,250 (237,273) 7,229,907 - ------------------------------------------------------------ Undistributed net investment income (distribution in excess of net investment loss) 438,114 (23,169) -- - ------------------------------------------------------------ ----------- ----------- ------------ Total Net Assets $715,630,667 $26,533,211 $122,871,510 - ------------------------------------------------------------ ----------- ----------- ------------ NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share (net assets / shares outstanding) $ 23.01 $ 10.46 $ 15.84 - ------------------------------------------------------------ ----------- ----------- ------------ Offering Price Per Share** $ 23.84* $ 10.46 $ 16.41* - ------------------------------------------------------------ ----------- ----------- ------------ Shares Outstanding 31,104,390 2,537,448 7,758,133 - ------------------------------------------------------------ ----------- ----------- ------------ Investments, at identified cost $349,670,239 $24,863,045 $109,308,784 - ------------------------------------------------------------ ----------- ----------- ------------ Investments, at tax cost $349,670,239 $24,927,629 $109,308,784 - ------------------------------------------------------------ ----------- ----------- ------------
* Computation of offering price: 100/96.5 of net asset value. ** See "What Shares Cost" in the Prospectus. (See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG LIMITED TERM DG GOVERNMENT GOVERNMENT DG MUNICIPAL INCOME FUND INCOME FUND INCOME FUND ----------- ------------ ------------- ASSETS: - ------------------------------------------------------------ Investments in repurchase agreements $ 649,700 $37,774,400 $ -- - ------------------------------------------------------------ Investments in securities 58,537,358 233,878,540 47,715,213 - ------------------------------------------------------------ ----------- ------------ ----------- Total investments in securities, at value 59,187,058 271,652,940 47,715,213 - ------------------------------------------------------------ Income receivable 1,013,104 2,574,933 672,284 - ------------------------------------------------------------ Receivable for investments sold -- -- -- - ------------------------------------------------------------ Receivable for shares sold -- 254,234 294,800 - ------------------------------------------------------------ ----------- ------------ ----------- Total assets 60,200,162 274,482,107 48,682,297 - ------------------------------------------------------------ ----------- ------------ ----------- LIABILITIES: - ------------------------------------------------------------ Payable for investments purchased -- 4,000,000 -- - ------------------------------------------------------------ Payable for shares redeemed 1,041,793 22,478 81,400 - ------------------------------------------------------------ Payable to bank -- -- -- - ------------------------------------------------------------ Accrued expenses 21,443 56,065 22,290 - ------------------------------------------------------------ ----------- ------------ ----------- Total liabilities 1,063,236 4,078,543 103,690 - ------------------------------------------------------------ ----------- ------------ ----------- NET ASSETS CONSIST OF: - ------------------------------------------------------------ Paid in capital 61,986,667 263,639,496 45,793,969 - ------------------------------------------------------------ Net unrealized appreciation (depreciation) of investments 689,879 8,581,106 2,599,299 - ------------------------------------------------------------ Accumulated net realized gain (loss) on investments (3,551,095) (1,911,369) 72,524 - ------------------------------------------------------------ Undistributed net investment income 11,475 94,331 112,815 - ------------------------------------------------------------ ----------- ------------ ----------- Total Net Assets $59,136,926 $270,403,564 $48,578,607 - ------------------------------------------------------------ ----------- ------------ ----------- NET ASSET VALUE PER SHARE, and Redemption Proceeds Per Share (net assets / shares outstanding) $ 9.78 $ 10.07 $ 10.89 - ------------------------------------------------------------ ----------- ------------ ----------- Offering Price Per Share** $ 9.98* $ 10.28* $ 11.11* - ------------------------------------------------------------ ----------- ------------ ----------- Shares Outstanding 6,048,049 26,865,406 4,461,934 - ------------------------------------------------------------ ----------- ------------ ----------- Investments, at identified cost $58,497,179 $263,071,834 $45,115,914 - ------------------------------------------------------------ ----------- ------------ ----------- Investments, at tax cost $58,497,179 $263,071,834 $45,115,914 - ------------------------------------------------------------ ----------- ------------ -----------
* 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 STATEMENTS OF OPERATIONS YEAR ENDED FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG DG EQUITY DG INTERNATIONAL OPPORTUNITY FUND EQUITY FUND(A) FUND ------------ ---------------- ----------- INVESTMENT INCOME: - ------------------------------------------------------------ Dividends $ 7,026,887 $ 51,524 $ 180,173 - ------------------------------------------------------------ Interest 2,036,113 71,091 638,380 - ------------------------------------------------------------ ----------- ------------ ----------- Total income 9,063,000 122,615 818,553 - ------------------------------------------------------------ ----------- ------------ ----------- EXPENSES: - ------------------------------------------------------------ Investment advisory fee 4,445,559 95,011 966,775 - ------------------------------------------------------------ Administrative personnel and services fee 587,750 9,237 105,468 - ------------------------------------------------------------ Custodian fees 28,282 27,192 8,039 - ------------------------------------------------------------ Transfer and dividend disbursing agent fees and expenses 86,439 11,533 52,313 - ------------------------------------------------------------ Directors'/Trustees' fees 6,241 509 3,344 - ------------------------------------------------------------ Auditing fees 12,500 -- 12,529 - ------------------------------------------------------------ Legal fees 2,561 747 2,976 - ------------------------------------------------------------ Portfolio accounting fees 106,076 31,787 39,084 - ------------------------------------------------------------ Shareholder services fee 554,868 14,252 97,554 - ------------------------------------------------------------ Share registration costs 33,907 16,265 23,900 - ------------------------------------------------------------ Printing and postage 6,044 6,852 8,047 - ------------------------------------------------------------ Insurance premiums 4,599 1,891 2,866 - ------------------------------------------------------------ Miscellaneous 8,561 563 6,728 - ------------------------------------------------------------ ----------- ------------ ----------- Total expenses 5,883,387 215,839 1,329,623 - ------------------------------------------------------------ WAIVERS-- - ------------------------------------------------------------ Waiver of investment advisory fees -- (47,505) (112,136) - ------------------------------------------------------------ Waiver of administrative personnel and services fee -- -- -- - ------------------------------------------------------------ ----------- ------------ ----------- Total waivers -- (47,505) (112,136) - ------------------------------------------------------------ ----------- ------------ ----------- Net expenses 5,883,387 168,334 1,217,487 - ------------------------------------------------------------ ----------- ------------ ----------- Net investment income (loss) 3,179,613 (45,719) (398,934) - ------------------------------------------------------------ ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY TRANSACTIONS AND FORWARD CONTRACTS: - ------------------------------------------------------------ Net realized gain (loss) on investment transactions, forward contracts and foreign currency 9,991,335 (240,297) 24,232,586 - ------------------------------------------------------------ Change in unrealized appreciation (depreciation) of investments forward contracts and foreign currency translation 193,990,094 1,421,852 8,351,884 - ------------------------------------------------------------ ----------- ------------ ----------- Net realized and unrealized gain (loss) on investments, foreign currency transactions and forward contracts 203,981,429 1,181,555 32,584,470 - ------------------------------------------------------------ ----------- ------------ ----------- Change in net assets resulting from operations $207,161,042 $1,135,836 $32,185,536 - ------------------------------------------------------------ ----------- ------------ -----------
(a) Reflects operations for the period from August 15, 1997 (date of initial public investment) to February 28, 1998. (See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES STATEMENTS OF OPERATIONS YEAR ENDED FEBRUARY 28, 1998 - --------------------------------------------------------------------------------
DG LIMITED TERM GOVERNMENT INCOME DG GOVERNMENT DG MUNICIPAL FUND INCOME FUND INCOME FUND ---------- ------------- ------------ INVESTMENT INCOME: - ------------------------------------------------------------ Dividends $ -- $ -- $ -- - ------------------------------------------------------------ Interest 4,832,371 16,893,631 2,492,223 - ------------------------------------------------------------ ---------- ----------- ---------- Total income 4,832,371 16,893,631 2,492,223 - ------------------------------------------------------------ ---------- ----------- ---------- EXPENSES: - ------------------------------------------------------------ Investment advisory fee 482,331 1,580,350 289,417 - ------------------------------------------------------------ Administrative personnel and services fee 100,000 261,726 100,000 - ------------------------------------------------------------ Custodian fees 2,729 16,378 1,438 - ------------------------------------------------------------ Transfer and dividend disbursing agent fees and expenses 31,022 52,296 26,461 - ------------------------------------------------------------ Directors'/Trustees' fees 2,968 3,875 2,500 - ------------------------------------------------------------ Auditing fees 12,688 12,689 12,501 - ------------------------------------------------------------ Legal fees 2,458 2,458 2,100 - ------------------------------------------------------------ Portfolio accounting fees 42,532 68,285 48,359 - ------------------------------------------------------------ Shareholder services fee 68,469 232,460 42,564 - ------------------------------------------------------------ Share registration costs 14,088 22,335 14,013 - ------------------------------------------------------------ Printing and postage 5,137 5,000 5,001 - ------------------------------------------------------------ Insurance premiums 3,001 3,999 3,000 - ------------------------------------------------------------ Miscellaneous 3,779 4,199 5,800 - ------------------------------------------------------------ ---------- ----------- ---------- Total expenses 771,202 2,266,050 553,154 - ------------------------------------------------------------ WAIVERS-- - ------------------------------------------------------------ Waiver of investment advisory fees (131,070) (163,534) (150,568) - ------------------------------------------------------------ Waiver of administrative personnel and services fee -- -- (34,479) - ------------------------------------------------------------ ---------- ----------- ---------- Total waivers (131,070) (163,534) (185,047) - ------------------------------------------------------------ ---------- ----------- ---------- Net expenses 640,132 2,102,516 368,107 - ------------------------------------------------------------ ---------- ----------- ---------- Net investment income (loss) 4,192,239 14,791,115 2,124,116 - ------------------------------------------------------------ ---------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: - ------------------------------------------------------------ Net realized gain (loss) on investment transactions (21,405) 151,276 72,332 - ------------------------------------------------------------ Change in unrealized appreciation (depreciation) of investments 619,533 9,924,175 1,412,573 - ------------------------------------------------------------ ---------- ----------- ---------- Net realized and unrealized gain (loss) on investments 598,128 10,075,451 1,484,905 - ------------------------------------------------------------ ---------- ----------- ---------- Change in net assets resulting from operations $4,790,367 $24,866,566 $3,609,021 - ------------------------------------------------------------ ---------- ----------- ----------
(See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
DG INTERNATIONAL DG EQUITY FUND EQUITY FUND ---------------------------- ---------------- YEAR YEAR PERIOD ENDED ENDED ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998(A) ------------- ------------ ---------------- INCREASE (DECREASE) IN NET ASSETS - ------------------------------------------------------ OPERATIONS-- - ------------------------------------------------------ Net investment income/operating loss $ 3,179,613 $ 4,083,126 $ (45,719) - ------------------------------------------------------ Net realized gain (loss) on investment transactions and foreign currency 9,991,335 10,108,185 (240,297) - ------------------------------------------------------ Net change in unrealized appreciation (depreciation) of investments and foreign currency 193,990,094 63,747,215 1,421,852 - ------------------------------------------------------ ------------- ----------- ------------- Change in net assets resulting from operations 207,161,042 77,938,526 1,135,836 - ------------------------------------------------------ ------------- ----------- ------------- DISTRIBUTIONS TO SHAREHOLDERS-- - ------------------------------------------------------ Distributions from net investment income (3,295,484) (3,964,723) -- - ------------------------------------------------------ Distributions in excess of net investment income -- -- (20,145) - ------------------------------------------------------ Distributions from net realized gain on investments (4,463,969) (10,093,485) -- - ------------------------------------------------------ ------------- ----------- ------------- Change in net assets resulting from distributions to shareholders (7,759,453) (14,058,208) (20,145) - ------------------------------------------------------ ------------- ----------- ------------- CAPITAL STOCK TRANSACTIONS-- - ------------------------------------------------------ Proceeds from sale of shares 146,010,215 102,599,959 26,266,042 - ------------------------------------------------------ Net asset value of shares issued to shareholders in payment of distributions declared 4,620,893 8,350,813 17,816 - ------------------------------------------------------ Cost of shares redeemed (124,793,931) (69,584,226) (866,338) - ------------------------------------------------------ ------------- ----------- ------------- Change in net assets from share transactions 25,837,177 41,366,546 25,417,520 - ------------------------------------------------------ ------------- ----------- ------------- Change in net assets 225,238,766 105,246,864 26,533,211 - ------------------------------------------------------ NET ASSETS: - ------------------------------------------------------ Beginning of period 490,391,901 385,145,037 -- - ------------------------------------------------------ ------------- ----------- ------------- End of period $ 715,630,667 $490,391,901 $ 26,533,211 - ------------------------------------------------------ ------------- ----------- ------------- Undistributed net investment income (distribution in excess of net investment loss) included in net assets at end of period $ 438,114 $ 553,985 $ (23,169) - ------------------------------------------------------ ------------- ----------- ------------- Net realized gain (loss) as computed for federal tax purposes $ 9,991,335 $10,108,185 $ 364 - ------------------------------------------------------ ------------- ----------- -------------
(a) Reflects operations for the period from August 15, 1997 (date of initial public investment) to February 28, 1998. (See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
DG LIMITED TERM DG OPPORTUNITY FUND GOVERNMENT INCOME FUND --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS - ----------------------------------------------- OPERATIONS-- - ----------------------------------------------- Net investment income/operating loss $ (398,934) $ (169,394) $ 4,192,239 $ 4,742,269 - ----------------------------------------------- Net realized gain (loss) on investment transactions and foreign currency 24,232,586 5,530,831 (21,405) (1,008,150) - ----------------------------------------------- Net change in unrealized appreciation (depreciation) of investments and foreign currency 8,351,884 1,007,879 619,533 293,452 - ----------------------------------------------- ------------ ------------ ------------ ------------ Change in net assets resulting from operations 32,185,536 6,369,316 4,790,367 4,027,571 - ----------------------------------------------- ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS-- - ----------------------------------------------- Distributions from net investment income -- -- (4,216,317) (4,818,533) - ----------------------------------------------- Distributions in excess of net investment income -- -- -- -- - ----------------------------------------------- Distributions from net realized gain on investments (16,352,806) (4,554,267) -- -- - ----------------------------------------------- ------------ ------------ ------------ ------------ Change in net assets resulting from distributions to shareholders (16,352,806) (4,554,267) (4,216,317) (4,818,533) - ----------------------------------------------- ------------ ------------ ------------ ------------ CAPITAL STOCK TRANSACTIONS-- - ----------------------------------------------- Proceeds from sale of shares 47,226,667 35,538,237 9,959,722 28,760,569 - ----------------------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 10,900,651 3,267,077 1,715,788 2,038,161 - ----------------------------------------------- Cost of shares redeemed (31,615,686) (13,570,540) (37,498,061) (38,897,952) - ----------------------------------------------- ------------ ------------ ------------ ------------ Change in net assets from share transactions 26,511,632 25,234,774 (25,822,551) (8,099,222) - ----------------------------------------------- ------------ ------------ ------------ ------------ Change in net assets 42,344,362 27,049,823 (25,248,501) (8,890,184) - ----------------------------------------------- NET ASSETS: - ----------------------------------------------- Beginning of period 80,527,148 53,477,325 84,385,427 93,275,611 - ----------------------------------------------- ------------ ------------ ------------ ------------ End of period $122,871,510 $ 80,527,148 $ 59,136,926 $ 84,385,427 - ----------------------------------------------- ------------ ------------ ------------ ------------ Undistributed net investment income included in net assets at end of period $ -- $ -- $ 11,475 $ 35,553 - ----------------------------------------------- ------------ ------------ ------------ ------------ Net realized gain (loss) as computed for federal tax purposes $ 24,041,342 $ 4,663,970 $ (378,938) $ (758,580) - ----------------------------------------------- ------------ ------------ ------------ ------------
(See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
DG GOVERNMENT DG MUNICIPAL INCOME FUND INCOME FUND --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS - ------------------------------------------ OPERATIONS-- - ------------------------------------------ Net investment income/operating loss $14,791,115 $13,271,431 $ 2,124,116 $ 2,183,126 - ------------------------------------------ Net realized gain (loss) on investment transactions 151,276 (1,412,964) 72,332 116,120 - ------------------------------------------ Net change in unrealized appreciation (depreciation) of investments 9,924,175 (92,801,515) 1,412,573 (430,649) - ------------------------------------------ ----------- ----------- ----------- ----------- Change in net assets resulting from operations 24,866,566 9,056,952 3,609,021 1,868,597 - ------------------------------------------ ----------- ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS-- - ------------------------------------------ Distributions from net investment income (14,742,578) (13,349,136) (2,122,421) (2,140,424) - ------------------------------------------ Distributions in excess of net investment income -- -- -- -- - ------------------------------------------ Distributions from net realized gain on investments -- -- (104,785) (47,122) - ------------------------------------------ ----------- ----------- ----------- ----------- Change in net assets resulting from distributions to shareholders (14,742,578) (13,349,136) (2,227,206) (2,187,546) - ------------------------------------------ ----------- ----------- ----------- ----------- CAPITAL STOCK TRANSACTIONS-- - ------------------------------------------ Proceeds from sale of shares 97,746,058 113,591,135 12,400,013 13,965,127 - ------------------------------------------ Net asset value of shares issued to shareholders in payment of distributions declared 5,515,899 5,048,640 26,535 34,266 - ------------------------------------------ Cost of shares redeemed (92,600,823) (48,955,255) (12,157,682) (11,330,842) - ------------------------------------------ ----------- ----------- ----------- ----------- Change in net assets from share transactions 10,661,134 69,684,520 268,866 2,668,551 - ------------------------------------------ ----------- ----------- ----------- ----------- Change in net assets 20,785,122 65,392,336 1,650,681 2,349,602 - ------------------------------------------ NET ASSETS: - ------------------------------------------ Beginning of period 249,618,442 184,226,106 46,927,926 44,578,324 - ------------------------------------------ ----------- ----------- ----------- ----------- End of period $270,403,564 $249,618,442 $48,578,607 $ 46,927,926 - ------------------------------------------ ----------- ----------- ----------- ----------- Undistributed net investment income included in net assets at end of period $ 94,331 $ 45,794 $ 112,815 $ 111,120 - ------------------------------------------ ----------- ----------- ----------- ----------- Net realized gain (loss) as computed for federal tax purposes $ (763,279) $ (498,409) $ 72,332 $ 116,120 - ------------------------------------------ ----------- ----------- ----------- -----------
(See Notes which are an integral part of the Financial Statements) DG INVESTOR SERIES FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
NET REALIZED AND UNREALIZED DISTRIBUTIONS NET ASSET NET GAIN/(LOSS) TOTAL TO SHAREHOLDERS DISTRIBUTIONS VALUE, INVESTMENT ON INVESTMENTS FROM FROM NET TO SHAREHOLDERS YEAR ENDED BEGINNING INCOME AND FOREIGN INVESTMENT INVESTMENT IN EXCESS OF NET FEBRUARY 28 OR 29, OF PERIOD (LOSS) CURRENCIES OPERATIONS INCOME INVESTMENT LOSS ------------------ --------- ------ ---------- ---------- ------ --------------- 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) -- 1995 $10.87 0.16 0.71 0.87 (0.16) -- 1996 $11.41 0.16 3.63 3.79 (0.17) -- 1997 $14.49 0.14 2.54 2.68 (0.14) -- 1998 $16.68 0.11 6.48 6.59 (0.11) -- DG INTERNATIONAL EQUITY FUND 1998(c) $10.00 (0.02)* 0.49 0.47 -- (0.01) DG OPPORTUNITY FUND 1995(b) $10.00 0.02 1.17 1.19 (0.02) -- 1996 $11.15 -- 3.30 3.30 -- -- 1997 $12.79 (0.03) 1.60 1.57 -- -- 1998 $13.53 (0.05) 4.90 4.85 -- -- 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) -- 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 $ 9.71 0.51 0.07 0.58 (0.51) -- 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) -- 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 $ 9.69 0.55 0.38 0.93 (0.55) -- DG MUNICIPAL INCOME FUND 1993(d) $10.00 0.07 0.49 0.56 (0.05) -- 1994 $10.51 0.48 0.08 0.56 (0.49) -- 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) -- 1998 $10.59 0.47 0.32 0.79 (0.47) -- DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN ON INVESTMENT TRANSACTIONS YEAR ENDED AND FOREIGN FEBRUARY 28 OR 29, CURRENCIES ------------------ ---------- DG EQUITY FUND 1993(a) -- 1994 (0.05) 1995 (0.17) 1996 (0.54) 1997 (0.35) 1998 (0.15) DG INTERNATIONAL EQUITY FU 1998(c) -- DG OPPORTUNITY FUND 1995(b) (0.02) 1996 (1.66) 1997 (0.83) 1998 (2.54) DG LIMITED TERM GOVERNMENT INCOME FUND 1993(a) -- 1994 (0.03) 1995 -- 1996 -- 1997 -- 1998 -- DG GOVERNMENT INCOME FUND 1993(a) -- 1994 (0.25) 1995 -- 1996 -- 1997 -- 1998 -- DG MUNICIPAL INCOME FUND 1993(d) -- 1994 (0.01) 1995 -- 1996 -- 1997 (0.01) 1998 (0.02)
* Per share information presented is based upon the monthly average number of shares outstanding. (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 August 15, 1997 (date of initial public investment) to February 28, 1998. (d) Reflects operations for the period from December 29, 1992 (date of initial public investment) to February 28, 1993. (See Notes which are an integral part of the Financial Statements.) - --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS RATIOS TO AVERAGE NET ASSETS IN EXCESS ----------------------------------------------------- OF NET NET ASSET NET NET ASSETS, PORTFOLIO REALIZED GAIN TOTAL VALUE, END TOTAL INVESTMENT EXPENSE END OF PERIOD TURNOVER ON INVESTMENTS DISTRIBUTIONS OF PERIOD RETURN(E) EXPENSES INCOME/(LOSS) WAIVER(G) (000 OMITTED) RATE -------------- ------------- --------- --------- -------- ------------- --------- ------------- ---- -- (0.10) $10.54 6.40% 0.51%(f) 2.15%(f) 0.53%(f) $181,239 28% -- (0.19) $10.87 4.99% 0.96% 1.38% 0.01% $284,203 7% -- (0.33) $11.41 8.23% 0.95% 1.54% -- $259,998 1% -- (0.71) $14.49 33.73% 0.94% 1.24% -- $385,145 15% -- (0.49) $16.68 18.79% 0.92% 0.95% -- $490,392 7% -- (0.26) $23.01 39.74% 0.99% 0.54% -- $715,631 6% -- (0.01) $10.46 4.71% 1.77%(f) (0.48)%(f) 0.50%(f) $ 26,533 21% -- (0.04) $11.15 11.84% 0.79%(f) 0.06%(f) 1.34%(f) $ 36,664 45% -- (1.66) $12.79 31.42% 1.17% -- 0.35% $ 53,477 154% -- (0.83) $13.53 12.08% 1.14% (0.24)% 0.16% $ 80,527 116% -- (2.54) $15.84 37.81% 1.20% (0.39)% 0.11% $122,872 180% -- (0.36) $10.07 4.43% 0.50%(f) 6.25%(f) 0.42%(f) $ 99,921 18% -- (0.55) $ 9.87 3.52% 0.59% 5.21% 0.29% $116,600 76% -- (0.48) $ 9.65 2.72% 0.63% 5.00% 0.25% $ 96,216 14% -- (0.54) $ 9.80 7.34% 0.69% 5.49% 0.20% $ 93,276 56% -- (0.53) $ 9.71 4.66% 0.68% 5.39% 0.20% $ 84,385 28% -- (0.51) $ 9.78 6.16% 0.80% 5.21% 0.16% $ 59,137 42% -- (0.37) $10.25 6.40% 0.50%(f) 6.45%(f) 0.41%(f) $111,435 78% (0.01)(h) (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% -- (0.55) $10.07 9.90% 0.80% 5.62% 0.06% $270,404 25% -- (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% -- (0.49) $10.89 7.70% 0.76% 4.40% 0.31% $ 48,579 6% DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET AVERAGE REALIZED GAIN COMMISSION ON INVESTMENTS PAID(I) -------------- ------- == == -- -- -- $0.0653 -- $0.0761 -- $0.0627 -- $0.0273 -- -- -- $0.0098 -- $0.0568 -- $0.0630 == == == == == == -- -- (0.01)(h) -- == == == == == == == == == ==
(e) Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. (f) Computed on an annualized basis. (g) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (h) This distribution does not represent a return of capital for federal tax purposes. (i) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which commissions were charged. This disclosure is required for fiscal years beginning on or after September 1, 1995. (See Notes which are an integral part of the Financial Statements.) DG INVESTOR SERIES NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 - -------------------------------------------------------------------------------- (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:
- --------------------------------------------------------------------------------------------- PORTFOLIO NAME INVESTMENT OBJECTIVE - --------------------------------------------------------------------------------------------- DG Equity Fund Provide long term capital appreciation with ("Equity Fund") current income as a secondary objective. - --------------------------------------------------------------------------------------------- DG International Equity Fund Seek capital appreciation ("International Equity Fund") - --------------------------------------------------------------------------------------------- DG Opportunity Fund ("Opportunity Fund") Provide capital appreciation. - --------------------------------------------------------------------------------------------- DG Limited Term Government Income Fund Provide current income. ("Limited Term Fund") - --------------------------------------------------------------------------------------------- DG Government Income Fund Provide current income. ("Government Income Fund") - --------------------------------------------------------------------------------------------- DG Municipal Income Fund Provide dividend income that is exempt from ("Municipal Income Fund") federal regular income tax. - ---------------------------------------------------------------------------------------------
The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. U.S. government securities, listed 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, DG INVESTOR SERIES - -------------------------------------------------------------------------------- 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. Investments in other open-end regulated investment companies are valued at net asset 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 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 Revenue Code, as amended (the "Code"). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions and book/tax treatments of net operating loss. The following reclassifications have been made to the financial statements.
INCREASE (DECREASE) ------------------------------------------------ ACCUMULATED UNDISTRIBUTED PAID IN NET REALIZED NET INVESTMENT FUND NAME CAPITAL GAIN/(LOSS) INCOME ------------------------- -------- ------------ -------------- International Equity Fund $(45,719) 3,024 $ 42,695 Opportunity Fund -- $(398,936) $398,936
Net investment income, net realized gains, and net assets were not affected by this reclassification. DG INVESTOR SERIES - -------------------------------------------------------------------------------- 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, 1998, 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:
EXPIRATION YEAR --------------------------------------------- LOSS FUND 2003 2004 2005 2006 CARRYFORWARD ---- ---- ---- ---- ---- ------------- Limited Term Fund $1,406,691 $1,040,337 $758,580 $378,938 $3,584,546 Government Income Fund $ 181,520 $ 467,764 $498,409 $763,279 $1,910,972
Net realized losses on International Equity Fund of $204,664, attributable to security, forward contracts and foreign currency transactions incurred after October 31, 1997, were treated as arising on the first day of International Equity Funds' next taxable year (March 1, 1998). Net realized losses on Limited Term Fund of $6,643, attributable to security transactions incurred after October 31, 1997, were treated as arising on the first day of the Fund's next taxable year (March 1, 1998). 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 the Opportunity Fund with respect to registration of their shares in its first fiscal year, excluding the initial expense of registering their shares, have been deferred and are being amortized over a period not to exceed five years from each Fund's commencement date. Organizational expenses of $22,108 for Opportunity Fund were borne initially by the Adviser. The Fund has reimbursed the Adviser for these expenses. These expenses have been deferred and are being amortized over the five year period following the Fund's effective date. For the year ended February 28, 1998, the Fund expensed $1,742 of organizational expenses. FOREIGN FORWARD EXCHANGE CONTRACTS--International Equity Fund may enter into foreign forward currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price DG INVESTOR SERIES - -------------------------------------------------------------------------------- on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. The objective of the Fund's foreign currency hedging transactions is to reduce the risk that the U.S. dollar value of the Fund's foreign-currency-denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are "marked-to-market" daily at the applicable translation rates resulting in unrealized gains or losses. Realized gains or losses are recorded at the time the foreign currency exchange contract is offset by entering into a closing transaction or by delivery or receipt of the currency. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At February 28, 1998, International Equity Fund had outstanding foreign exchange contracts as set forth below:
UNREALIZED CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION) --------------- ----------------------------- ----------- --------- -------------- Contracts Purchased: 3/4/98-3/5/98 69,524 Pound Sterling $114,594 $114,540 $ (54) 3/5/98 17,008 Singapore Dollar $ 10,561 $ 10,495 $ (66) Contracts Sold: 3/4/98 132,344 Pound Sterling $217,242 $218,036 $ (794) 3/4/98 103,541,690 Italian Lira $ 57,658 $ 57,927 $ (269) 3/2/98-3/3/98 6,282,966 Japanese Yen $ 49,609 $ 49,825 $ (216) ------- Net Unrealized Depreciation on Foreign Exchange Contracts $(1,399) =======
FOREIGN CURRENCY TRANSLATION--The accounting records of International Equity 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 the 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 DG INVESTOR SERIES - -------------------------------------------------------------------------------- trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund'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 issuers' 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 Funds' pricing committee. Additional information on each restricted security held by International Equity Fund at February 28, 1998 is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST -------- ---------------- ---------------- Japan Tobacco 8/18/97-2/12/98 $297,751 Samsung Electronics Co. 11/11/97-12/1/97 $228,600
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. DG INVESTOR SERIES - -------------------------------------------------------------------------------- (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:
INTERNATIONAL EQUITY FUND* EQUITY FUND --------------------------- ------------- YEAR ENDED YEAR ENDED PERIOD ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998(A) - ------------------------------------------------ ------------ ------------ ------------- Shares sold 7,924,532 6,852,631 2,623,705 - ------------------------------------------------ Shares issued to shareholders in payment of distributions declared 234,089 537,524 1,867 - ------------------------------------------------ Shares redeemed (6,448,544) (4,578,933) (88,124) - ------------------------------------------------ ------------ ------------ ------------ Net change resulting from share transactions 1,710,077 2,811,222 2,537,448 - ------------------------------------------------ ------------ ------------ ------------
* On March 31, 1997, the Equity Fund acquired a common trust fund managed by an affiliate, Commercial National Bank. The acquisition was a tax-free exchange of 610,052 shares of the Equity Fund valued at $9,998,744. (a) For the period from August 15, 1997 (date of initial public investment) to February 28, 1998.
OPPORTUNITY FUND LIMITED TERM FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998 1997 - ------------------------------------ ------------ ------------ ------------ ------------ Shares sold 3,050,510 2,464,715 1,021,729 2,953,124 - ------------------------------------ Shares issued to shareholders in payment of distributions declared 759,627 234,535 176,304 209,814 - ------------------------------------ Shares redeemed (2,003,613) (929,615) (3,839,432) (3,986,837) - ------------------------------------ ------------ ----------- ------------ ------------ Net change resulting from share transactions 1,806,524 1,769,635 (2,641,399) (823,899) - ------------------------------------ ------------ ----------- ------------ ------------
DG INVESTOR SERIES - --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND MUNICIPAL INCOME FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 1998 1997 1998 1997 - -------------------------- ------------ ------------ ------------ ------------ Shares sold 9,911,035 11,623,519 1,162,205 1,331,086 - -------------------------- Shares issued to shareholders in payment of distributions declared 561,104 521,253 2,485 3,288 - -------------------------- Shares redeemed (9,367,967) (5,043,232) (1,136,101) (1,083,418) - -------------------------- ------------ ------------ ------------ ------------ Net change resulting from share transactions 1,104,172 7,101,540 28,589 250,956 - -------------------------- ------------ ------------ ------------ ------------
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:
INVESTMENT ADVISORY FUND NAME FEE PERCENTAGE --------- --------------- Equity Fund 0.75% International Equity Fund 1.00% Opportunity Fund 0.95% Limited Term Fund 0.60% Government Income Fund 0.60% Municipal Income Fund 0.60%
ParkSouth Corporation became the Funds' investment adviser on March 1, 1997. Prior to March 1, 1997, Deposit Guaranty National Bank served as the Funds' investment adviser. The advisory fees charged prior to March 1, 1997 were the same as the current fees listed above. SUB-ADVISORY FEE--Prior to March 1, 1997, under the terms of a 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 March 1, 1997, Commercial National Bank is no longer the sub-adviser to the Funds. Lazard Freres Asset Management is a sub-adviser for International Equity Fund. Under the terms of a Sub-Advisory Agreement between ParkSouth Corporation and Lazard Freres Asset Management, the DG INVESTOR SERIES - -------------------------------------------------------------------------------- sub-adviser receives an annual fee from the adviser equal to 0.50% of the average daily net assets of the Fund. Effective July 21, 1997, Womack Asset Management, Inc. (the "WAMI") became the sub-adviser to Opportunity Fund. For its services under the Sub-Advisory Agreement, WAMI receives a monthly fee based on the average daily net assets of Opportunity Fund under management by WAMI during the preceding month, as described below. The sub-advisory fee shall be the sum of: 0.32% of the average daily net assets up to $50 million; 0.075% of the average daily net assets in excess of $50 million and up to $70 million; and 0.25% of the average daily net assets in excess of $70 million. 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. FAS may voluntarily choose to waive a portion of its fee. 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 Fund for the period. The fee paid to FAS is 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. 17A-7 TRANSACTIONS--During the period ended February 28, 1998, the Equity Fund engaged in a purchase transaction with a common trust fund that has a common investment adviser. This purchase transaction was made at current market value pursuant to Rule 17a-7 under the Act amounting to $9,345,984. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. DG INVESTOR SERIES - -------------------------------------------------------------------------------- 5. INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term and converted securities, for the period ended February 28, 1998, were as follows:
FUND PURCHASES SALES - ------------------------------------------------------------ ------------ ------------ Equity Fund $ 59,008,225 $ 34,548,018 - ------------------------------------------------------------ International Equity Fund $ 26,424,806 $ 3,240,464 - ------------------------------------------------------------ Opportunity Fund $168,954,497 $163,774,732 - ------------------------------------------------------------ Limited Term Fund $ 30,065,321 $ 48,375,914 - ------------------------------------------------------------ Government Income Fund $ 65,754,038 $ 59,788,619 - ------------------------------------------------------------ Municipal Income Fund $ 3,043,175 $ 2,593,755 - ------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders DG INVESTOR SERIES: We have audited the statements of assets and liabilities, including the portfolio of investments, of the DG Equity Fund, DG International Equity Fund, DG Opportunity Fund, DG Limited Term Government Income Fund, DG Government Income Fund, and DG Municipal Income Fund (six portfolios within DG Investor Series) as of February 28, 1998, and the related statements of operations for the year then ended, the statements of changes in net assets for the years ended February 28, 1998 and 1997, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to gain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 28, 1998 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights of the DG Investor Series portfolios referred to above present fairly, in all material respects, their financial position as of February 28, 1998, and the results of their operations for the year then ended, and the changes in their net assets and their financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania April 10, 1998 TRUSTEES OFFICERS - -------------------------------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales Nicholas P. Constantakis President and Treasurer William J. Copeland J. Christopher Donahue James E. Dowd Executive Vice President Lawrence D. Ellis, M.D. John W. McGonigle Edward L. Flaherty, Jr. Executive Vice President and Secretary Edward C. Gonzales Richard B. Fisher Peter E. Madden Vice President John E. Murray, Jr. Charles L. Davis, Jr. Wesley W. Posvar Vice President and Assistant Treasurer Marjorie P. Smuts Gail Cagney Assistant Secretary
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. APPENDIX A1. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG Equity Fund (the "Fund"), taking into account the original maximum sales charge of 2.00%, is represented by a solid line, and the Fund taking into account the current maximum sales charge of 3.50%, is represented by a dotted line. The Standard & Poor's 500 Index (the "S&P 500") is represented by a broken line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the S&P 500. The "x" axis reflects computation periods from 8/1/92 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund, taking into account the 2.00% and 3.50% sales charges, as compared to the S&P 500; the ending values were $26,302, $25,899, and $28,359, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's Average Annual Total Return for the one-year, five-year, and the since inception (8/1/92) periods ended 2/28/98, which were 34.89%, 19.48%, and 18.60%, respectively. A2. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG International Equity Fund (the "Fund") is represented by a solid line. The Morgan Stanley Capital Europe, Austrailia, Far East Index ("EAFE") is represented by a dotted line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the EAFE. The "x" axis reflects computation periods from 8/18/97 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund as compared to the EAFE; the ending values were $10,472 and $9,935, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's cumulative Total Return for the six-month and the since inception (8/18/97) periods ended 2/28/98, which were 8.17% and 4.71%, respectively. A3. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG Opportunity Fund (the "Fund"), taking into account the original maximum sales charge of 2.00%, is represented by a solid line, and the Fund taking into account the current maximum sales charge of 3.50%, is represented by a dotted line. The Russell 2000 Index is represented by a broken line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the Russell 2000 Index. The "x" axis reflects computation periods from 1/1/82 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund, taking into account the 2.00% and 3.50% sales charges, as compared to the Russell 2000 Index; the ending values were $99,160, $97,643, and $86,293, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's Average Annual Total Return for the one-year, five-year, ten-year, and the since inception (1/1/82) periods ended 2/28/98, which were 32.99%, 19.87%, 19.76%, and 15.13%, respectively. A4. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG Limited Term Government Income Fund (the "Fund") is represented by a solid line. The Merrill Lynch 1-3 Year Treasury Index (the "ML1-3") is represented by a broken line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the ML1-3. The "x" axis reflects computation periods from 8/1/92 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund, based on a 2.00% sales charge, as compared to the ML1-3; the ending values were $12,979 and $13,584, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's Average Annual Total Return for the one-year, five-year, and the since inception (8/1/92) periods ended 2/28/98, which were 4.02%, 4.43%, and 4.79%, respectively. A5. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG Government Income Fund (the "Fund") is represented by a solid line. The Lehman Brothers Government/Corporate Total Index (the "LBGCT") is represented by a dotted line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the LBGCT. The "x" axis reflects computation periods from 8/1/92 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund, based on a 2.00% sales charge, as compared to the LBGCT; the ending values were $13,968 and $14,947, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's Average Annual Total Return for the one-year, five-year, and the since inception (8/1/92) periods ended 2/28/98, which were 7.67%, 5.59%, and 6.18%, respectively. A6. The graphic presentation here displayed consists of a line graph. The corresponding components of the line graph are listed underneath. DG Municipal Income Fund (the "Fund") is represented by a solid line. The Lehman Brothers Municipal Bond Index (the "LBMBI") is represented by a dotted line. The line graph is a visual representation of a comparison of change in value of a $10,000 hypothetical investment in the Fund and the LBMBI. The "x" axis reflects computation periods from 12/21/92 to 2/28/98. The "y" axis reflects the cost of the investment. The right margin reflects the ending value of the hypothetical investment in the Fund, based on a 2.00% sales charge, as compared to the LBMBI; the ending values were $13,557 and $14,413, respectively. The legend in the lower middle quadrant of the graphic presentation indicates the Fund's Average Annual Total Return for the one-year, five-year, and the since inception (12/21/92) periods ended 2/28/98, which were 5.50%, 5.12%, and 6.04%, respectively. -----END PRIVACY-ENHANCED MESSAGE-----