<PAGE>
[LOGO OF M.S.D.& T.
FUNDS, INC. APPEARS HERE]
ANNUAL REPORT
May 31, 1996
INVESTMENT ADVISER AND ADMINISTRATOR:
[LOGO OF MERCANTILE-SAFE DEPOSIT & TRUST COMPANY
APPEARS HERE]
Affiliate Mercantile Bankshares Corporation
Baltimore, MD
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Chairman's Letter................................................... i
Fund Reviews........................................................ iv
Statements of Net Assets
Prime Money Market Fund............................................ 1
Government Money Market Fund....................................... 6
Tax-Exempt Money Market Fund....................................... 10
Tax-Exempt Money Market Fund (Trust)............................... 17
Value Equity Fund.................................................. 24
International Equity Fund.......................................... 29
Intermediate Fixed Income Fund..................................... 34
Maryland Tax-Exempt Bond Fund...................................... 38
Investment Abbreviations........................................... 42
Statements of Operations............................................ 43
Statements of Changes in Net Assets................................. 45
Financial Highlights................................................ 49
Notes to Financial Statements....................................... 57
Important Tax Information........................................... 66
</TABLE>
<PAGE>
Dear Shareholder:
It is a pleasure to present the annual report for the M.S.D.&T. Funds, Inc.
(the "Company") for the fiscal year ended May 31, 1996. The report includes
financial information on the Value Equity, International Equity, Intermediate
Fixed Income and Maryland Tax-Exempt Bond Funds as well as the Prime, Govern-
ment, Tax-Exempt and Tax-Exempt (Trust) Money Market Funds.
During calendar 1995, both the stock and bond markets provided investors with
some of the best returns in recent financial market history. The equity market
experienced its largest returns since 1958 while the bond market's performance
for the year was its best in a decade. So far in 1996, a huge inflow of capi-
tal has kept the stock market moving to a series of new highs even as longer
term interest rates drift higher. The popularity of 401(k) investment vehicles
for retirement has led to record inflows of funds into investment companies.
To date, this enormous amount of liquidity has been largely directed into eq-
uity funds; however, as interest rates reach higher levels this trend may
level out. Adding to the attraction of stocks, economic growth has defied the
consensus estimates and accelerated during 1996, providing companies with con-
tinued earnings increases.
The Institutional Shares of the M.S.D.&T. Value Equity Fund earned a total re-
turn of 17.2% over the twelve months ended May 31, 1996(1). The Fund was aided
by its investments in cyclical and basic industry stocks. However, the cash
reserve position and interest rate sensitivity were, in retrospect, too large
as the Fund lagged the S&P 500's 28.4% return. During the fiscal year, the
portfolio management duties for the Fund were delegated to Brian Topping, the
adviser's Chief Investment Officer. Initially, Mr. Topping acted as co-portfo-
lio manager, although since April he has been serving as the sole investment
manager for the Fund. The adviser's strategy remains one of achieving good in-
herent value through stock selection based on sound fundamental analysis and
the application of a value discipline.
After adjusting for currency conversion, most international stock markets
lagged the returns of the S&P 500. The MSCI EAFE Index of international stocks
generated a 10.7% return for the 12 months ended May 31, 1996. The M.S.D.&T.
International Equity Fund(2) earned a total return of 14.3% for the same time
period(1). Currently, the Fund is slightly overweighted in its holdings in Ja-
pan versus the Index, while holding proportionately less than the Index in
Great Britain. During the fiscal year, CastleInternational Asset Management
Limited replaced Dunedin Fund Managers Ltd. as sub-adviser to the Fund. Impor-
tantly, the team that has been responsible for the Fund's management remained
essentially intact, as CastleInternational's staff consists of the former
Dunedin employees who were responsible for the investment management activi-
ties.
After enjoying a favorable environment throughout 1995, interest rates on term
debt securities have reversed their downward direction and are moving higher
during the current year. Concerns over the rapid pace of economic growth, a
lessened effort toward balancing the federal budget deficit and an increase in
basic commodities such as oil and grains have made bond investors nervous. In
this environment holders of Institutional Shares of the M.S.D.&T. Intermediate
Fixed Income Fund have experienced a total return of 3.4%(1) while sharehold-
ers of the M.S.D.&T. Maryland Tax-Exempt Fund have earned 2.8%(1).
During the fiscal year the Federal Reserve Bank lowered the Fed Funds rate
three times based on very favorable inflation readings. The M.S.D.&T. Money
Market Funds continued to generate competitive
<PAGE>
yields while providing stability of principal. The seven day yields for each
Fund as of May 31, 1996 are detailed below:
<TABLE>
<CAPTION>
PRIME(3) GOVERNMENT(3) TAX-EXEMPT(3) TAX-EXEMPT (TRUST)(3)
-------- ------------- ------------- ---------------------
<S> <C> <C> <C>
4.92% 4.94% 3.09% 3.35%
5.12%(4) 5.55%(4)
</TABLE>
The Company's adviser believes that this year's growth spurt in economic ac-
tivity will slow down in the second half of 1996. A real Gross Domestic Prod-
uct growth rate of 2% or less should characterize the upcoming fiscal year.
This level of economic activity should not threaten to raise inflation above
the current favorable rate of 3%. Longer-term interest rates should decline
from current levels as business conditions lose momentum. Toward the end of
the calendar year, the Federal Reserve Bank may again lower short-term inter-
est rates. This would provide a generally favorable backdrop for the equity
markets, with the caveat that earnings growth has most likely seen its maximum
increases. Stock selection should be a key factor in establishing favorable
relative investment performance in the current fiscal year.
The pages that follow discuss the performance, structure and strategy of each
Fund, as well as providing a detailed list of assets held(5). We appreciate
your investment in the M.S.D.&T. Funds.
Sincerely,
Leslie B. Disharoon
Chairman and President
ii
<PAGE>
SHARES OF THE M.S.D.&T. FUNDS, INC. ARE NOT BANK DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED, ENDORSED, OR OTHERWISE SUPPORTED BY MERCANTILE-SAFE DEPOSIT AND
TRUST COMPANY, ITS PARENT COMPANY OR ITS AFFILIATES, AND SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPO-
RATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT
IN THE FUNDS INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. FOR MORE
COMPLETE INFORMATION ON THE M.S.D.&T. FUNDS, INC., PLEASE CALL (800) 551-2145
TO RECEIVE A PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
BISYS FUNDS SERVICES SERVES AS THE FUNDS' DISTRIBUTOR.
(1) Total return and principal value of investments will fluctuate with market
changes and shares, when redeemed, may be worth more or less than their origi-
nal cost. Figures for the period indicated reflect fee waivers in effect, re-
investment of dividends, distributions, and capital gains as well as changes
in share price. Fee waivers may result in higher total returns than would oc-
cur if full fees were charged. Past performance is not a guarantee of future
results.
<TABLE>
<CAPTION>
VALUE INTERMEDIATE
EQUITY FUND FIXED INCOME MARYLAND
(INSTITUTIONAL INTERNATIONAL (INSTITUTIONAL TAX-EXEMPT
SHARES) EQUITY FUND SHARES) BOND FUND
-------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Total Return for the one
year ended
June 30, 1996.......... 16.3% 17.1% 3.9% 5.0%
Annualized Total Return
for five years ended
June 30, 1996.......... 12.1% N/A 6.3% N/A
Inception Date.......... 2/28/91 7/2/93 3/14/91 6/2/92
Average annual total
return since inception
to
June 30, 1996.......... 11.8% 11.5% 6.2% 5.5%
</TABLE>
(2) International investing is subject to certain factors such as currency ex-
change rate volatility, possible political, social or economic instability,
foreign taxation and/or differences in auditing and other financial standards.
(3) Investments in the money market portfolios are neither insured nor guaran-
teed by the U.S. Government and there is no assurance that a money market fund
will be able to maintain a stable net asset value of $1.00 per share. Yields
will fluctuate as market conditions change. Past performance is not a guaran-
tee of future results.
Figures for the period indicated reflect fee waivers in effect. Fee waivers
may result in higher yields than would occur if full fees were charged. Absent
fee waivers, the seven-day yields for each Fund for the 7-day period ended May
31, 1996 would have been:
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT (TRUST)
----- ---------- ---------- ------------------
<S> <C> <C> <C>
4.87% 4.89% 3.01% 3.30%
</TABLE>
(4) Taxable Equivalent Yield. Assumes 39.6% tax bracket. A portion of income
may be subject to some state and/or local taxes and for certain investors a
portion of income may be subject to the Federal alternative minimum tax.
(5) The composition of the Funds' holdings is subject to change.
- --------
iii
<PAGE>
THE M.S.D.&T. VALUE EQUITY FUND
For the fiscal year ended May 31,1996, the Institutional Shares of the Value
Equity Fund produced a total return of 17.2%. This return, while well above
historic average returns for the equity market, was disappointing when com-
pared to the 28.4% return of the S&P 500 Index. The Fund has been hampered by
a relatively high cash reserve position and by above average sensitivity to
changes in interest rates. The cash reserve position, which was 14.7% at the
start of the fiscal year, has gradually been reduced to the present level of
4.6%. Similarly, the interest rate sensitivity present in the Fund has been
reduced with many of the replacement issues providing greater potential for
long-term growth in earnings and dividends.
The 1995-1996 market for U.S. stocks has been among the most productive on
record. Equities have benefited from a material improvement in corporate earn-
ings, a generally declining level of interest rates, relatively low inflation,
and record inflows of funds into equity mutual funds. A significant shift in
the patterns of saving and investment appear to be underway as a greater share
of the retirement burden is shifted to the individual, primarily through par-
ticipation in rapidly growing 401(k) plans. In recent months, a notable shift
in investor preference toward maximum growth and small company funds has sig-
naled the onset of a more speculative phase for the market. With valuation
levels, as measured by price earnings multiples, the relationship of price-to-
book value and current yield, all exceeding or nearing record highs, we have
increased the Fund's focus on companies with strong financial characteristics
combined with good market liquidity, lower than market valuations, and higher
than market dividend yields. Recent emphasis has been placed on increasing the
Fund's exposure to technology and consumer non-durables, both of which are
groups with good earnings growth characteristics. Reductions have occurred in
the Fund's holdings of utilities and energy.
In order to achieve the Fund's objective, the investment adviser employs a
value-oriented strategy. Securities purchased generally possess a price-to-
earnings or price-to-book ratio lower than the stock market as a whole. The
equity securities in the Fund's portfolio normally generate a higher dividend
yield than the S&P 500 Index.
iv
<PAGE>
THE M.S.D.&T. INTERNATIONAL EQUITY FUND
For the fiscal year ended May 31, 1996, the International Equity Fund produced
a total return of 14.3%. Over the same period, the MSCI EAFE Index gained
10.7%. In local market terms, the international markets did extremely well
during the year, but a strengthening U.S. dollar dampened the overall returns
to U.S. investors after currency conversion.
The Japanese market entered a recovery phase when the Bank of Japan cut inter-
est rates in July. This led to a significantly weaker yen and an improvement
in GDP and corporate earnings forecast data. As a result, export-based compa-
nies such as machinery, automotive and precision instrument manufacturers, led
the market. The utilities, communications, and financial industries were the
laggards. In Australia, the strength in commodities resulted in solid gains in
mining stocks as well as appreciation in the Australian dollar. Assets were
shifted back into Hong Kong in the first part of the period and the Fund was
rewarded with healthy returns there. Returns in Singapore and Malaysia trailed
the larger markets.
European stocks also performed well. UK stocks benefited from a resurgence in
corporate activity and an improvement in interest rate expectations. The major
stimulus for the Continental European markets was the turnaround in the U.S.
dollar, allowing exporters to become more competitive. The best performing
markets, in U.S. dollar terms, were the Netherlands, Switzerland, Spain, and
Sweden. The two largest markets, Germany and France, underperformed, although
returns were still solid. Returns in Italy were also relatively disappointing,
although the recent election of a pro-business government should be a positive
in the future.
The Fund is now somewhat overweighted in Japan, where the combination of low
interest rates and a weakened yen should continue to boost equities going for-
ward. The European markets that stand to benefit from a stronger dollar are
also emphasized. Currency hedges are in place against the British pound, Ger-
man deutschmark, Swiss franc, French franc, and Dutch guilder.
v
<PAGE>
THE M.S.D.&T. INTERMEDIATE FIXED INCOME FUND
Fiscal year 1996 was the mirror image of fiscal year 1995 for the intermediate
bond market. Shareholders may recall that during fiscal 1995, interest rates
rose for the first six months and then fell for the balance of the year. Dur-
ing fiscal 1996, interest rates continued falling for the first seven months
of the year, before turning around and moving higher. A net rise of nearly
0.60% on the yield of ten-year treasury notes resulted over the year.
Driving the market has been the changing perception by investors of the
economy's weakness and subsequent strength. During most of 1995, the
manufacturing/wholesale/retail sectors of the economy were going through an
inventory correction. Having been overzealous in their forecast of sales in
1995, decision makers spent most of the year reducing production and/or liqui-
dating inventories. However, both the economy and investors' perceptions
changed in the Spring of 1996. The consumer sector of the economy bounced back
as evidenced by strengthening home and automobile sales. Businesses, which had
'downsizing' as their buzz word for four years, realized that it requires peo-
ple to keep an organization moving and profits rolling. Employment grew
smartly in the months following the poor winter weather and over a million new
jobs had been filled by May. The Federal Reserve, which had been lowering its
target rate on the Federal Funds rate, looks to be taking a "wait and see" at-
titude as to the magnitude and direction of its next policy change.
Crucial to the debate going on within the Federal Reserve is how fast the
economy can grow without igniting a rise in the inflation rate. Even in the
face of a sharp run up in commodity prices in the Spring and the unemployment
rate hovering around 5.6% for the past eighteen months, the annual inflation
as measured by PPI (2.2%) and CPI (3.0%) has been subdued. Additionally, both
energy and agricultural commodities have started to retreat from their peaks
reached in March and April.
In this environment, the Institutional Shares of the Fund had a modest posi-
tive total return during the year as interest income outpaced the decline in
market value caused by the rise in interest rates. The NAV for the Fund's In-
stitutional Shares, which does not include interest income, declined from
$10.43 per share to $10.19 per share. The Institutional Shares of the Fund had
a total return of 3.4%, trailing the benchmark Lehman G/C Intermediate Index
which returned 4.6% during the year. As interest rates rose, investments were
made in U.S. Treasuries and Government Agency mortgage backed securities. The
average maturity of the Fund has been lengthened from 4.0 to 5.0 years.
vi
<PAGE>
THE M.S.D.&T. MARYLAND TAX-EXEMPT BOND FUND
During the fiscal year ended May 31, 1996 municipal yields, as indicated by
the Bond Buyer 20 Bond General Obligation Index, experienced a "round trip. "
The Index started the fiscal year at a 5.8% yield and after a decline to a low
of 5.3% in February, 1996, the Index climbed to 5.9% at fiscal year end. The
resurgence in interest rates since February reflects investors' worries about
inflation and the possibility the Federal Reserve could possibly raise short-
term interest rates in reaction to the economy's surprising strength.
The economic and financial condition of the State of Maryland and its counties
and agencies has, for the most part, continued to be relatively stable as
spending levels are more closely matched to revenue estimates. In some coun-
ties the "rainy day" funds have been rebuilt to use in the event the economy
weakens significantly. Despite the relatively stable economic and financial
conditions, Maryland bond investors remain subject to relatively high Federal,
State and local taxes and should continue to find municipal bonds attractive
for high, after-tax income. On a positive note, both Baltimore County and How-
ard County had their debt ratings raised during the year. Municipal bond vol-
ume nationally and in Maryland continues to be restrained by the lack of major
building programs and refunding of existing issues. The former reflects the
pressure faced by most municipalities to hold the line on taxes, and where
possible, to reduce taxes even at the expense of reducing services. Municipal-
ities have and will institute or increase more service or user taxes to avoid
raising income and property taxes as a way to protect their credit quality.
The portfolio management strategy of the investment adviser has been to maxi-
mize the Fund's income exempt from Federal, Maryland State and local taxes
while maintaining high credit standards. This has resulted in a 12.3 year av-
erage life for the Fund's securities. The investment adviser closely monitors
the credit quality of all of the issuers of the securities held by the Fund
for signs of deterioration. While the Fund is permitted to hold securities
that have a minimum rating of Baa, the adviser has thus far chosen to invest
only in securities rated A or better.
vii
<PAGE>
Comparison of Change In Value of $10,000 Investment In
M.S. D. & T. Value Equity Fund and the S & P 500 Stock Index
[LINE GRAPH OF M. S. D. & T. VALUE EQUITY FUND VS.
S&P STOCK INDEX FROM 11/90 TO 5/96 APPEARS HERE]
<TABLE>
<CAPTION>
VALUE EQUITY S&P 500
-----------------------------------------------
<S> <C> <C>
Nov-90
Dec-90
Jan-91
Feb-91 10000 10000
Mar-91 10103 10247
Apr-91 10151 10280
May-91 10686 10707
Jun-91 10270 10223
Jul-91 10652 10711
Aug-91 10853 10950
Sep-91 10710 10769
Oct-91 10903 10925
Nov-91 10426 10473
Dec-91 11274 11670
Jan-92 11287 11465
Feb-92 11481 11602
Mar-92 11325 11376
Apr-92 11661 11723
May-92 11709 11765
Jun-92 11546 11591
Jul-92 11917 12078
Aug-92 11689 11819
Sep-92 11890 11957
Oct-92 11847 12011
Nov-92 12160 12403
Dec-92 12194 12558
Jan-93 12300 12675
Feb-93 12462 12837
Mar-93 12820 13106
Apr-93 12871 12804
May-93 13204 13127
Jun-93 13045 13169
Jul-93 12958 13130
Aug-93 13365 13613
Sep-93 13216 13509
Oct-93 13528 13801
Nov-93 13292 13652
Dec-93 13444 13820
Jan-94 13843 14301
Feb-94 13559 13902
Mar-94 13189 13297
Apr-94 13298 13484
May-94 13320 13685
Jun-94 12980 13316
Jul-94 13371 13690
Aug-94 13769 14162
Sep-94 13669 13882
Oct-94 13979 14218
Nov-94 13568 13811
Dec-94 13766 14162
Jan-95 14027 14535
Feb-95 14543 15101
Mar-95 14818 15598
Apr-95 15134 16018
May-95 15480 16668
Jun-95 15596 17055
Jul-95 16082 17621
Aug-95 16059 17665
Sep-95 16593 18411
Oct-95 16278 18345
Nov-95 16792 19150
Dec-95 17090 19519
Jan-96 17269 20183
Feb-96 17430 20371
Mar-96 17542 20567
Apr-96 17851 20870
May-96 18150 21408
</TABLE>
Comparison of Change In Value of $10,000 Investment In
M.S.D.& T. International Equity Fund and the EAFE Index.
[LINE GRAPH OF CHANGE IN VALUE OF $10,000 INVESTED IN
M.S.D. & T. INTERNATIONAL EQUITY FUND AND EAFE INDEX
FROM 6/93 TO 5/96 APPEARS HERE]
<TABLE>
<CAPTION>
INTL EQUITY EAFE
-----------------------------------------------
<S> <C> <C>
Jun-93 10000 10000
Jul-93 10320 10350
Aug-93 10980 10909
Sep-93 10851 10663
Oct-93 10961 10992
Nov-93 10502 10031
Dec-93 11344 10755
Jan-94 11767 11664
Feb-94 11817 11632
Mar-94 11635 11130
Apr-94 11998 11602
May-94 11898 11536
Jun-94 11988 11699
Jul-94 12246 11811
Aug-94 12488 12091
Sep-94 12114 11710
Oct-94 12397 12100
Nov-94 11811 11518
Dec-94 11871 11591
Jan-95 11406 11146
Feb-95 11209 11113
Mar-95 11685 11807
Apr-95 11913 12251
May-95 11996 12105
Jun-95 11851 11896
Jul-95 12730 12640
Aug-95 12451 12161
Sep-95 12617 12401
Oct-95 12234 12071
Nov-95 12389 12410
Dec-95 12818 12913
Jan-96 13026 12969
Feb-96 13037 13017
Mar-96 13389 13296
Apr-96 13861 13686
May-96 13707 13438
</TABLE>
The S&P 500 Stock Index is an unmanaged index generally representative of the
performance of the U.S. Stock market.
The Morgan Stanley Europe, Australia and Far East (EAFE) Index is an unmanaged
index comprised of more than 900 securities issued by foreign companies and is
weighted according to the total market value of each security.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed
may be worth more or less than their original cost.
viii
<PAGE>
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Intermediate Fixed Income Fund and the
Lehman G/C Intermediate Bond Index
[LINE GRAPH OF M.S.D.&T. INTERMEDIATE FIXED INCOME FUND
AND THE LEHMAN G/C INTERMEDIATE BOND INDEX
FROM MAY 91 TO MAY 96 APPEARS HERE]
<TABLE>
<CAPTION>
MSD&T INTMD LBKL INTMD
FIXED
- -------------------------------------------------------
<S> <C> <C>
Nov-90
Dec-90
Jan-91
Feb-91
Mar-91 10000 10000
Apr-91 10074 10109
May-91 10125 10171
Jun-91 10154 10178
Jul-91 10239 10292
Aug-91 10387 10488
Sep-91 10526 10669
Oct-91 10638 10790
Nov-91 10748 10914
Dec-91 10946 11181
Jan-92 10883 11079
Feb-92 10907 11122
Mar-92 10881 11079
Apr-92 10972 11176
May-92 11104 11350
Jun-92 11231 11518
Jul-92 11415 11747
Aug-92 11506 11864
Sep-92 11638 12026
Oct-92 11522 11869
Nov-92 11483 11824
Dec-92 11609 11983
Jan-93 11769 12215
Feb-93 11891 12408
Mar-93 11929 12458
Apr-93 12003 12557
May-93 11983 12530
Jun-93 12112 12726
Jul-93 12127 12757
Aug-93 12280 12960
Sep-93 12328 13013
Oct-93 12354 13048
Nov-93 12293 12975
Dec-93 12341 13035
Jan-94 12436 13179
Feb-94 12305 12984
Mar-94 12152 12770
Apr-94 12080 12683
May-94 12094 12682
Jun-94 12096 12693
Jul-94 12232 12876
Aug-94 12275 12916
Sep-94 12171 12797
Oct-94 12179 12796
Nov-94 12137 12738
Dec-94 12185 12783
Jan-95 12381 12998
Feb-95 12623 13267
Mar-95 12698 13342
Apr-95 12833 13508
May-95 13198 13916
Jun-95 13272 14009
Jul-95 13259 14010
Aug-95 13387 14138
Sep-95 13488 14240
Oct-95 13630 14398
Nov-95 13797 14586
Dec-95 13940 14740
Jan-96 14032 14866
Feb-96 13844 14692
Mar-96 13752 14617
Apr-96 13670 14566
May-96 13644 14555
- -------------------------------------------------------
</TABLE>
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Maryland Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index
[LINE GRAPH OF M.S.D.&T. MARYLAND TAX-EXEMPT BOND FUND
AND THE LEHMAN MUNICIPAL BOND INDEX
FROM MAY 92 TO MAY 96 APPEARS HERE]
<TABLE>
<CAPTION>
MD TAX-EX SHEARSON
MUNI BOND
VALUE OF $10K1
- ----------------------------------------------
<S> <C> <C>
May-92
Jun-92 10000 10000
Jul-92 10337 10300
Aug-92 10174 10200
Sep-92 10230 10266
Oct-92 10022 10166
Nov-92 10281 10348
Dec-92 10395 10453
Jan-93 10530 10575
Feb-93 10923 10957
Mar-93 10787 10841
Apr-93 10885 10951
May-93 10939 11012
Jun-93 11156 11196
Jul-93 11160 11210
Aug-93 11424 11444
Sep-93 11562 11574
Oct-93 11576 11596
Nov-93 11462 11494
Dec-93 11698 11737
Jan-94 11839 11870
Feb-94 11516 11563
Mar-94 11036 11092
Apr-94 11078 11187
May-94 11154 11284
Jun-94 11067 11215
Jul-94 11254 11420
Aug-94 11278 11460
Sep-94 11091 11292
Oct-94 10926 11091
Nov-94 10681 10890
Dec-94 10872 11130
Jan-95 11141 11448
Feb-95 11408 11781
Mar-95 11533 11197
Apr-95 11545 11931
May-95 11877 12312
Jun-95 11740 12204
Jul-95 11845 12320
Aug-95 11974 12477
Sep-95 12055 12555
Oct-95 12197 12737
Nov-95 12372 12949
Dec-95 12456 13073
Jan-96 12542 13173
Feb-96 12458 13038
Mar-96 12283 12916
Apr-96 12224 12879
May-96 12213 12874
- ----------------------------------------------
</TABLE>
The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index generally representative of the performance of intermediate
term government and corporate bonds.
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total of outstanding municipal bonds.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
ix
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS............. 31.4%
FEDERAL FARM CREDIT BANK....... 3.4%
Floating Rate Notes**
5.22%......................... 06/03/96 $ 7,000,000 $ 6,994,407
5.33%......................... 08/12/96 4,000,000 4,000,000
------------
10,994,407
------------
FEDERAL HOME LOAN BANK......... 6.1%
Floating Rate Notes**
5.28%......................... 06/04/96 10,000,000 9,992,402
5.23%......................... 06/20/96 10,000,000 9,997,767
------------
19,990,169
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION................... 15.1%
Floating Rate Notes**
5.28%......................... 06/03/96 10,000,000 9,998,861
5.19%......................... 06/03/96 14,250,000 14,228,746
5.23%......................... 06/11/96 25,000,000 24,991,115
------------
49,218,722
------------
STUDENT LOAN MARKETING
ASSOCIATION................... 3.8%
Floating Rate Notes**
5.33%......................... 06/07/96 12,560,000 12,530,297
------------
TENNESSEE VALLEY AUTHORITY..... 3.0%
Discount Notes
4.19%......................... 09/09/96 10,000,000 9,959,066
------------
TOTAL AGENCY OBLIGATIONS
(Cost $102,692,661)........ 102,692,661
------------
BANKERS' ACCEPTANCES........... 3.0%
CoreStates Financial Corp. ....
4.88%......................... 08/20/96 5,000,000 4,945,778
5.30%......................... 10/07/96 5,000,000 4,905,778
------------
TOTAL BANKERS' ACCEPTANCES
(Cost $9,851,556).......... 9,851,556
------------
</TABLE>
See Accompanying Notes to Financial Statements.
1
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT......... 13.9%
DOMESTIC........................ 2.0%
National Bank of Detroit
5.85%.......................... 06/05/96 $ 6,500,000 $ 6,499,926
------------
EURODOLLAR...................... 11.9%
Morgan Guaranty Trust Co.
5.01%.......................... 08/20/96 8,000,000 8,000,173
4.93%.......................... 02/05/97 10,000,000 10,000,000
Swiss Bank Corp.
5.25%.......................... 06/25/96 10,000,000 10,000,000
Union Bank of Switzerland -- New
York Branch
5.10%.......................... 08/21/96 7,000,000 7,000,000
5.65%.......................... 04/24/97 4,000,000 4,000,000
------------
39,000,173
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $45,500,099).......... 45,500,099
------------
COMMERCIAL PAPER................ 19.2%
CHEMICALS....................... 3.9%
E.I. duPont de Nemours & Co.
5.27%.......................... 07/09/96 6,000,000 5,966,623
E.I. duPont de Nemours & Co.***
5.03%.......................... 08/06/96 7,000,000 6,935,448
------------
12,902,071
------------
FINANCE......................... 3.0%
Norwest Financial Corp.
5.30%.......................... 07/02/96 10,000,000 9,954,361
------------
FOODS........................... 1.2%
Campbell Soup Co.***
5.45%.......................... 10/04/96 4,000,000 3,924,306
------------
INSURANCE....................... 4.8%
Marsh & McLennan Corp.***
5.35%.......................... 06/10/96 10,000,000 9,986,625
5.15%.......................... 09/27/96 5,750,000 5,652,937
------------
15,639,562
------------
</TABLE>
See Accompanying Notes to Financial Statements.
2
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- CONTINUED
UTILITIES -- ELECTRIC........... 6.3%
Duke Power Co.
5.23%.......................... 06/12/96 $14,500,000 $ 14,476,607
Wisconsin Electric Co.
5.28%.......................... 06/04/96 5,960,000 5,957,378
------------
20,433,985
------------
TOTAL COMMERCIAL PAPER
(Cost $62,854,285).......... 62,854,285
------------
CORPORATE BONDS................. 9.8%
CONSUMER GOODS.................. 0.9%
Gillette Co.
4.75%.......................... 08/15/96 3,000,000 2,994,403
------------
FINANCE......................... 2.2%
General Electric Capital Corp.
5.50%.......................... 08/22/96 7,000,000 7,000,882
------------
FINANCIAL SERVICES.............. 4.1%
Associates Corp.
4.625%......................... 11/30/96 7,200,000 7,163,031
8.70%.......................... 01/01/97 6,200,000 6,300,603
------------
13,463,634
------------
UTILITIES -- GAS................ 2.6%
Wisconsin Gas Co.
6.625%......................... 01/15/97 8,440,000 8,490,127
------------
TOTAL CORPORATE BONDS
(Cost $31,949,046).......... 31,949,046
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS........... 22.5%
GOLDMAN, SACHS & CO.
(Agreement dated 5/31/96 to be
repurchased at $13,474,724
collateralized by $10,575,000
(Value $13,698,000) U.S.
Treasury Notes, 11.875%, due
11/15/03)
5.10%.......................... 06/03/96 $13,469,000 $ 13,469,000
J.P. MORGAN SECURITIES, INC.
(Agreement dated 5/31/96 to be
repurchased at $15,006,650
collateralized by $15,245,000
(Value $15,254,000) U.S.
Treasury Notes, 6.375%, due
5/15/99)
5.32%.......................... 06/03/96 15,000,000 15,000,000
MERRILL LYNCH GOVERNMENT
SECURITIES, INC.
(Agreement dated 5/31/96 to be
repurchased at $15,006,500
collateralized by $13,500,000
(Value $15,209,000) U.S.
Treasury Notes, 8.125%, due
8/15/19)
5.20%.......................... 06/03/96 15,000,000 15,000,000
REPUBLIC NATIONAL BANK NEW YORK
(Agreement dated 5/31/96 to be
repurchased at $15,006,563
collateralized by $15,300,000
(Value $15,286,000) U.S.
Treasury Notes, 5.125%, due
6/30/98)
5.25%.......................... 06/03/96 15,000,000 15,000,000
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
(Agreement dated 5/31/96 to be
repurchased at $15,006,625
collateralized by $14,950,000
(Value $15,310,000) U.S.
Treasury Notes, 6.75%, due
2/28/97)
5.30%.......................... 06/03/96 15,000,000 15,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $73,469,000).......... 73,469,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $326,316,647*)..... 99.8% $326,316,647
OTHER ASSETS IN EXCESS OF
LIABILITIES.................... 0.2% 561,500
----- ------------
NET ASSETS (equivalent to $1.00
per share based on 326,960,429
shares outstanding)............ 100.0% $326,878,147
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($326,878,147 / 326,960,429)... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1996 and the maturity date shown is the
longer of (i) the next interest readjustment date or (ii) the date on which
the principal amount can be recovered through demand.
*** Security was purchased pursuant to Section 4(2) of the Securities Act of
1933 and may not be resold subject to that rule except to qualified insti-
tutional buyers.
PRIME MONEY MARKET FUND
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY
PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
------------- ------------ ---------------------------------------
(CUM)
<S> <C> <C> <C>
1- 7 days $139,739,000 42.76% 42.76%
8- 14 days 49,500,000 15.15% 57.91%
15- 30 days 20,000,000 6.12% 64.03%
31- 60 days 16,000,000 4.90% 68.93%
61- 90 days 41,000,000 12.54% 81.47%
91-120 days 15,750,000 4.82% 86.29%
Over 120 days 44,840,000 13.71% 100.00%
------------ -------
$326,829,000 100.00%
------------ -------
</TABLE>
Average Weighted Maturity -- 50 days
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS............. 77.8%
FEDERAL FARM CREDIT BANK....... 11.2%
Floating Rate Notes**
5.25%......................... 06/03/96 $10,000,000 $ 9,973,760
5.22%......................... 06/03/96 10,700,000 10,691,451
5.33%......................... 08/12/96 6,000,000 6,000,000
Notes
5.30%......................... 08/01/96 3,000,000 3,000,000
------------
29,665,211
------------
FEDERAL HOME LOAN BANK......... 15.1%
Discount Notes
4.50%......................... 09/23/96 3,500,000 3,484,291
5.28%......................... 01/06/97 3,000,000 2,903,640
5.40%......................... 03/20/97 4,000,000 3,997,486
Floating Rate Notes**
5.83%......................... 06/03/96 7,000,000 7,021,074
5.23%......................... 06/20/96 15,000,000 14,996,650
Notes
4.80%......................... 07/12/96 5,000,000 5,000,000
6.05%......................... 01/27/97 2,500,000 2,507,224
------------
39,910,365
------------
FEDERAL HOME LOAN MORTGAGE
CORP. ........................ 14.2%
Discount Notes
5.20%......................... 06/12/96 8,210,000 8,196,955
5.20%......................... 06/13/96 12,000,000 11,979,000
5.20%......................... 06/18/96 12,570,000 12,539,134
Notes
5.68%......................... 09/11/96 5,000,000 5,002,221
------------
37,717,310
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION................... 15.1%
Discount Notes
5.60%......................... 11/01/96 10,000,000 9,994,390
Floating Rate Notes**
5.28%......................... 06/03/96 20,000,000 19,995,380
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION --
CONTINUED
Notes
7.90%.......................... 08/12/96 $ 5,000,000 $ 5,022,697
5.68%.......................... 10/07/96 5,000,000 5,002,821
------------
40,015,288
------------
STUDENT LOAN MARKETING ASSOCIA-
TION........................... 16.2%
Discount Notes
5.16%.......................... 06/04/96 7,900,000 7,896,596
5.20%.......................... 06/14/96 21,000,000 20,960,567
Floating Rate Notes**
5.33%.......................... 06/07/96 4,000,000 3,990,545
5.51%.......................... 06/07/96 10,000,000 10,000,000
------------
42,847,708
------------
TENNESSEE VALLEY AUTHORITY...... 6.0%
Discount Notes
5.01%.......................... 07/26/96 8,000,000 7,938,767
4.19%.......................... 09/09/96 8,000,000 7,966,616
------------
15,905,383
------------
TOTAL AGENCY OBLIGATIONS
(Cost $206,061,265)......... 206,061,265
------------
U.S. TREASURY OBLIGATIONS....... 5.7%
U.S. TREASURY BILLS............. 1.9%
4.87%.......................... 11/14/96 5,000,000 4,887,719
------------
U.S. TREASURY NOTES............. 3.8%
4.375%......................... 08/15/96 5,000,000 4,985,516
7.500%......................... 01/31/97 5,000,000 5,075,698
------------
10,061,214
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $14,948,933).......... 14,948,933
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS........... 16.6%
Goldman, Sachs & Co.
(Agreement dated 5/31/96 to be
repurchased at $3,893,654
collateralized by $3,185,000
(Value $3,956,000) U.S.
Treasury Notes, 10.75%, due
2/15/03)
5.10%......................... 06/03/96 $ 3,892,000 $ 3,892,000
J.P. Morgan Securities, Inc.
(Agreement dated 5/31/96 to be
repurchased at $10,004,433
collateralized by $8,465,000
(Value $10,167,000) U.S.
Treasury Notes, 8.75%, due
8/15/20)
5.32%......................... 06/03/96 10,000,000 10,000,000
Merrill Lynch Government
Securities, Inc.
(Agreement dated 5/31/96 to be
repurchased at $10,004,333
collateralized by $9,800,000
(Value $10,157,000) U.S.
Treasury Notes, 7.50%, due
11/15/16)
5.20%......................... 06/03/96 10,000,000 10,000,000
Republic National Bank New York
(Agreement dated 5/31/96 to be
repurchased at $10,004,375
collateralized by $10,200,000
(Value $10,190,000) U.S.
Treasury Notes, 5.125%, due
6/30/98)
5.25%......................... 06/03/96 10,000,000 10,000,000
Wachovia Bank of North Carolina,
N.A. (Agreement dated 5/31/96
to be repurchased at
$10,004,417 collateralized by
$10,000,000 (Value $10,201,000)
U.S. Treasury Notes, 6.875%,
due 3/31/97)
5.30%......................... 06/03/96 10,000,000 10,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $43,892,000).......... 43,892,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $264,902,198*)................ 100.1% $264,902,198
LIABILITIES IN EXCESS OF OTHER
ASSETS.............................. (0.1)% (177,109)
----- ------------
NET ASSETS (equivalent to $1.00 per
share based on 264,874,957 shares
outstanding)........................ 100.0% $264,725,089
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($264,725,089 / 264,874,957)........ $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1996 and the maturity date shown is the
longer of (i) the next interest readjustment date or (ii) the date on which
the principal amount can be recovered through demand.
GOVERNMENT MONEY MARKET FUND
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
--------------- ------------ -----------------------------------------
(CUM)
<S> <C> <C> <C>
1- 7 days $113,492,000 42.78% 42.78%
8- 14 days 41,210,000 15.53% 58.31%
15- 30 days 27,570,000 10.39% 68.70%
31- 60 days 13,000,000 4.90% 73.60%
61- 90 days 19,000,000 7.16% 80.76%
91-120 days 16,500,000 6.22% 86.98%
Over 120 days 34,500,000 13.02% 100.00%
------------ -----------
$265,272,000 100.00%
------------ -----------
</TABLE>
Average Weighted Maturity -- 44 days
See Accompanying Notes to Financial Statements.
9
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
ARKANSAS......................... 3.6%
City of Valdez, VRDN, (Exxon
Corp.)
(Aaa/P-1, AAA/A-1+)**
3.75%.......................... 06/03/96 $1,000,000 $ 1,000,000
Pulaski County, VRDN,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/A-1+)**
3.60%.......................... 06/07/96 400,000 400,000
Pulaski County, VRDN,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/NA)**
3.70%.......................... 06/07/96 400,000 400,000
-----------
1,800,000
-----------
CONNECTICUT...................... 4.0%
Connecticut Health & Educational
Facilities,
MPB, (Yale University)
(Aaa/VMIG1, AAA/A-1+)
3.35%.......................... 06/26/96 2,000,000 2,000,000
-----------
FLORIDA.......................... 6.2%
Broward County, GO, Prerefunded @
102
(Aaa/NA, AAA/NA)
7.30%.......................... 07/01/96 300,000 306,905
Jacksonville Electric Authority,
TECP,
LA: Morgan Guaranty Trust Co.
(Aa1/P-1, AAA/A-1+)
3.40%.......................... 06/06/96 2,800,000 2,800,000
-----------
3,106,905
-----------
ILLINOIS......................... 5.4%
Illinois Educational Facilities,
VRDN,
(Northwestern University), LIC:
Northern
Trust Co.
(Aa1/VMIG1, AA/A-1+)**
3.65%.......................... 06/07/96 2,626,000 2,626,000
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
ILLINOIS -- CONTINUED
Village of Bedford Park, VRDN,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/A-1+)**
3.70%.......................... 06/07/96 $ 100,000 $ 100,000
-----------
2,726,000
-----------
INDIANA.......................... 3.7%
City of Mount Vernon, MPB, PCR,
(General Electric Co.)
(Aa/VMIG1, AAA/A-1+)
3.55%.......................... 10/22/96 1,860,000 1,860,000
-----------
KENTUCKY......................... 6.0%
Jefferson County, MPB, PCR,
(LG&E)
(Aa2/VMIG1, AA/A-1+)
3.60%.......................... 08/15/96 1,000,000 1,000,000
Trimble County, MPB, PCR, (LG&E)
(Aa2/VMIG1, AA/A-1+)
3.30%.......................... 07/30/96 2,000,000 2,000,000
-----------
3,000,000
-----------
LOUISIANA........................ 5.7%
Plaquemine Parish Port & Harbor
Terminal District, MPB, (TECO
Energy, Inc.)
(A1/P-1, AA-/A-1+)
3.15%.......................... 06/13/96 1,450,000 1,450,000
3.25%.......................... 08/21/96 1,400,000 1,400,000
-----------
2,850,000
-----------
MARYLAND......................... 5.0%
Maryland State, GO
(Aaa/NA, AAA/NA)
5.70%.......................... 07/15/96 1,500,000 1,504,175
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
MARYLAND -- CONTINUED
Montgomery County, TECP, LOC:
Union Bank of Switzerland
(Aaa/NA, AAA/NA)
3.20%.......................... 06/05/96 $1,000,000 $ 1,000,000
-----------
2,504,175
-----------
MINNESOTA........................ 7.4%
City of Rochester, MPB, (Mayo
Foundation/
Mayo Clinic), SPA: Credit Suisse
(NA/NA, AA+/A-1+)
3.15%.......................... 06/12/96 2,700,000 2,700,000
Minnesota State, GO, Prerefunded
@ 100
(Aaa/NA, NA/NA)
7.00%.......................... 08/01/96 1,000,000 1,005,573
-----------
3,705,573
-----------
MISSOURI......................... 3.4%
Health & Educational Facilities
Authority, VRDN, (Washington
University Project),
LA: Morgan Guaranty Trust Co.
(Aa1/VMIG1, AA/A-1+)**
3.60%.......................... 06/05/96 400,000 400,000
3.60%.......................... 06/07/96 300,000 300,000
Industrial Development Authority
of Boone County, VRDN,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/P-1, NA/NA)**
3.60%.......................... 06/07/96 1,000,000 1,000,000
-----------
1,700,000
-----------
NORTH CAROLINA................... 15.0%
City of Durham, COP, VRDN, SPA:
Wachovia Bank of North Carolina
(Aa1/VMIG1, AAA/A-1+)**
3.50%.......................... 06/05/96 2,000,000 2,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
NORTH CAROLINA -- CONTINUED
City of Winston-Salem, COP, VRDN,
SPA:
Credit Suisse
(Aa1/VMIG1, AA+/A-1+)**
3.70%.......................... 06/07/96 $2,500,000 $ 2,500,000
North Carolina Educational
Facilities, VRDN,
(Duke University)
(Aa1/VMIG1, AA+/A-1+)**
3.65%.......................... 06/07/96 3,000,000 3,000,000
-----------
7,500,000
-----------
OHIO............................. 1.0%
Ohio State, GO, Prerefunded @ 102
(Aaa/NA, AA/NA)
6.95%.......................... 09/01/96 500,000 513,970
-----------
OREGON........................... 6.1%
Metropolitan Service District,
GO,
(Convention Center Project), ETM
(Aaa/NA, AAA/NA)
6.40%.......................... 12/01/96 650,000 660,087
State of Oregon, GO, VRDN,
Veterans Welfare Board, LOC:
Morgan Guaranty Trust Co.
(Aa1/VMIG1, AAA/A-1+)**
3.55%.......................... 06/05/96 2,400,000 2,400,000
-----------
3,060,087
-----------
SOUTH CAROLINA................... 2.8%
York County, MPB, PCR, (Duke
Power)
(Aa2/VMIG1, AA-/A-1+)
3.35%.......................... 07/30/96 400,000 400,000
3.55%.......................... 08/20/96 1,000,000 1,000,000
-----------
1,400,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
TEXAS............................ 8.0%
Harris County, Health Facilities
Development, VRDN, (Methodist
Hospital) SPA: Morgan Guaranty
Trust Co.
(NA/NA, AA/A-1+)**
3.65%.......................... 06/03/96 $1,000,000 $ 1,000,000
Harris County, Health Facilities
Development, VRDN,
(St. Luke's Episcopal Hospital
Project),
LA: Morgan Guaranty Trust Co.
(NA/NA, AA/A-1+)**
3.65%.......................... 06/03/96 1,000,000 1,000,000
State of Texas, TRAN
(NA/MIG1, NA/SP-1+)
4.75%.......................... 08/30/96 2,000,000 2,005,266
-----------
4,005,266
-----------
VIRGINIA......................... 2.0%
Virginia State, GO, Prerefunded @
102
(Aaa/NA, AAA/NA)
6.75%.......................... 07/01/96 1,000,000 1,022,300
-----------
WISCONSIN........................ 8.8%
Oak Creek, VRDN, PCR,
(Wisconsin Electric Power Co.)
(Aa3/P-1, AA/NA)**
3.85%.......................... 06/07/96 2,100,000 2,100,000
State of Wisconsin, GO
(NA/MIG1, NA/SP-1+)
4.50%.......................... 06/17/96 1,000,000 1,000,451
Wausau, VRDN, PCR,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AA/NA)**
4.05%.......................... 06/07/96 800,000 800,000
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
WISCONSIN -- CONTINUED
Wausau, VRDN, PCR,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/A-1+)**
4.05%.......................... 06/07/96 $ 500,000 $ 500,000
-----------
4,400,451
-----------
WYOMING.......................... 1.2%
Sublette County, VRDN, PCR,
(Exxon Corp.)
(Aaa/NA, AAA/A-1+)**
3.75%.......................... 06/03/96 600,000 600,000
-----------
TOTAL MUNICIPAL BONDS***
(Cost $47,754,727)........... 47,754,727
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES............. 4.2%
Goldman Sachs ITA Tax Exempt
Fund............................ 2,073,538 2,073,538
Municipal Fund for Temporary
Investments -- MuniFund......... 42,914 42,914
-----------
TOTAL INVESTMENT COMPANIES
(Cost $2,116,452)............ 2,116,452
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS VALUE
------------ -----
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $49,871,179*)................. 99.5% $49,871,179
OTHER ASSETS IN EXCESS OF LIABILITIES...... 0.5% 265,583
----- -----------
NET ASSETS (equivalent to $1.00 per share
based on 50,143,328 shares outstanding)... 100.0% $50,136,762
===== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
($50,136,762 / 50,143,328)................ $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1996 and the maturity date shown is the
longer of (i) the next interest readjustment date or (ii) the date on
which the principal amount can be recovered through demand.
*** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1996. These ratings are not cov-
ered by the Report of Independent Accountants.
TAX-EXEMPT MONEY MARKET FUND
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
--------------- ----------- -----------------------------------------
(CUM)
<S> <C> <C> <C>
1-- 7 days $28,042,452 56.31% 56.31%
8-- 14 days 4,150,000 8.33% 64.64%
15-- 30 days 4,000,000 8.03% 72.67%
31-- 60 days 4,200,000 8.43% 81.10%
61-- 90 days 4,400,000 8.83% 89.93%
91--120 days 2,500,000 5.02% 94.95%
Over120 days 2,510,000 5.05% 100.00%
----------- -----------
$49,802,452 100.00%
=========== ===========
</TABLE>
Average Weighted Maturity -- 30 days
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
ALABAMA.......................... 4.3%
City of Montgomery, MPB, PCR,
(General Electric Co.)
(Aaa/P-1, AAA/A-1+)
3.55%.......................... 06/18/96 $2,000,000 $ 2,000,000
-----------
ARKANSAS......................... 3.4%
City of Valdez, VRDN,
(Exxon Corp.)
(Aaa/P-1, AAA/A-1+)**
3.75%.......................... 06/03/96 500,000 500,000
Pulaski County, VRDN
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/A-1+)**
3.60%.......................... 06/07/96 100,000 100,000
Pulaski County, VRDN
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/NA)**
3.70%.......................... 06/07/96 1,000,000 1,000,000
-----------
1,600,000
-----------
CONNECTICUT...................... 6.7%
Connecticut Health & Educational
Facilities, MPB, (Yale
University)
(Aaa/VMIG1, AAA/A-1+)
3.35%.......................... 06/26/96 2,000,000 2,000,000
Connecticut State, GO
(Aa/NA, AA-/NA)
4.40%.......................... 12/01/96 1,100,000 1,104,759
-----------
3,104,759
-----------
FLORIDA.......................... 3.8%
Florida State Board of Education,
Capital Outlay, GO
(Aa/NA, AA/NA)
4.50%........................... 06/01/96 275,000 275,000
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
FLORIDA -- CONTINUED
Jacksonville Electric Authority,
TECP, LA: Morgan Guaranty Trust
Co.
(Aa/P-1, AA/A-1+)
3.40%.......................... 06/06/96 $1,500,000 $ 1,500,000
-----------
1,775,000
-----------
ILLINOIS......................... 9.1%
Chicago School Finance Authority,
GO,
Prerefunded @ 102
(Aaa/NA, AAA/NA)**
7.63%.......................... 06/01/96 1,500,000 1,530,000
Illinois Educational Facilities,
VRDN,
(Northwestern University), LIC:
Northern Trust Co.
(Aa1/VMIG1, AA/A-1+)**
3.65%.......................... 06/07/96 2,093,000 2,093,000
Village of Bedford Park, VRDN,
(Minnesota Mining & Manufactur-
ing Co.)
(Aaa/NA, AAA/A-1+)**
3.70%.......................... 06/07/96 600,000 600,000
-----------
4,223,000
-----------
KENTUCKY......................... 6.3%
City of Cynthiana, VRDN, PCR,
(Minnesota Mining & Manufactur-
ing Co.)
(Aaa/NA, NA/NA)**
3.60%.......................... 06/07/96 100,000 100,000
Jefferson County, MPB, PCR,
(LG&E)
(Aa2/VMIG1, AA/A-1+)
3.60%.......................... 08/15/96 1,850,000 1,850,000
Trimble County, MPB, PCR, (LG&E)
(Aa2/VMIG1, AA/A-1+)
3.30%.......................... 07/30/96 1,000,000 1,000,000
-----------
2,950,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
LOUISIANA........................ 3.9%
East Baton Rouge Parish, VRDN,
PCR,
(Exxon Corp.)
(Aaa/P-1, AAA/A-1+)**
3.60%.......................... 06/03/96 $1,000,000 $ 1,000,000
Lake Charles, Harbor & Terminal
District, VRDN, (Conoco Inc.
Project), (E.I. duPont)
(Aa3/P-1, AA-/A-1+)**
3.85%.......................... 06/03/96 800,000 800,000
-----------
1,800,000
-----------
MARYLAND......................... 6.3%
Maryland State, GO
(Aaa/NA, AAA/NA)
5.70%.......................... 07/15/96 500,000 501,443
Montgomery County, GO,
Consolidated Public Improvement
(Aaa/NA, AAA/NA)
5.20%.......................... 10/01/96 1,400,000 1,408,662
Montgomery County, TECP, LOC:
Union Bank of Switzerland
(Aaa/P-1, AAA/A-1+)
3.20%.......................... 06/05/96 1,000,000 1,000,000
-----------
2,910,105
-----------
MINNESOTA........................ 5.4%
City of Rochester, MPB, (Mayo
Foundation/Mayo Clinic), SPA:
Credit Suisse
(NA/NA, AA+/A-1+)
3.15%.......................... 06/12/96 1,000,000 1,000,000
3.50%.......................... 08/12/96 1,000,000 1,000,000
Minnesota State, GO, Prerefunded
@ 100
(Aaa/NA, NA/NA)
7.00%.......................... 08/01/96 500,000 502,848
-----------
2,502,848
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
MISSOURI......................... 1.7%
Health & Educational Facilities
Authority, VRDN, (Washington
University Project), LA: Morgan
Guaranty Trust Co.
(Aa1/VMIG1, AA/A-1+)**
3.60%.......................... 06/07/96 $ 800,000 $ 800,000
-----------
NORTH CAROLINA................... 13.8%
City of Durham, COP, VRDN, SPA:
Wachovia Bank of North Carolina
(Aa1/VMIG1, AAA/A-1+)**
3.50%.......................... 06/05/96 2,000,000 2,000,000
City of Winston-Salem, COP, VRDN,
SPA:
Credit Suisse
(Aa1/VMIG1, AA+/A-1+)**
3.70%.......................... 06/07/96 2,000,000 2,000,000
City of Winston-Salem, GO, VRDN,
SPA:
Credit Suisse
(Aa1/VMIG1, AAA/A-1+)**
3.70%.......................... 06/07/96 500,000 500,000
North Carolina Educational
Facilities, VRDN, (Duke
University)
(Aa1/VMIG1, AAA/A-1+)**
3.65%.......................... 06/07/96 1,900,000 1,900,000
-----------
6,400,000
-----------
OREGON........................... 3.0%
Oregon State, GO, VRDN, Veterans
Welfare Board, LOC: Morgan
Guaranty Trust Co.
(Aa1/VMIG1, AAA/A-1+)**
3.55%.......................... 06/05/96 1,400,000 1,400,000
-----------
PENNSYLVANIA..................... 4.5%
Delaware County, VRDN, IDA,
Airport Facility RB, (United
Parcel Service)
(Aaa/P-1, AAA/A-1+)**
3.60%.......................... 06/03/96 500,000 500,000
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
PENNSYLVANIA -- CONTINUED
Pennsylvania State, TAN
(NA/MIG1, NA/SP-1+)
4.50%.......................... 06/28/96 $1,100,000 $ 1,101,019
Pittsburgh Water & Sewer
Authority, RB, INS: FGIC, ETM
(Aaa/NA, AAA/NA)
5.90%.......................... 09/01/96 500,000 502,619
-----------
2,103,638
-----------
SOUTH CAROLINA................... 4.3%
York County, MPB, PCR, (Duke
Power)
(Aa2/VMIG1, AA-/A-1+)
3.35%.......................... 07/30/96 1,000,000 1,000,000
3.55%.......................... 08/20/96 1,000,000 1,000,000
-----------
2,000,000
-----------
TEXAS............................ 11.0%
Austin Utility System, RB, ETM
(Aaa/NA, AAA/NA)
7.10%.......................... 11/15/96 360,000 365,668
Harris County, Health Facilities
Development, VRDN, (Methodist
Hospital), SPA: Morgan Guaranty
Trust Co.
(NA/NA, AA/A-1+)**
3.65%.......................... 06/03/96 1,000,000 1,000,000
Harris County, Health Facilities
Development, VRDN, (St. Luke's
Episcopal Hospital Project), LA:
Morgan Guaranty Trust Co.
(NA/NA, AA/A-1+)**
3.65%.......................... 06/03/96 1,250,000 1,250,000
State of Texas, TRAN
(NA/MIG1, NA/SP-1+)
4.75%.......................... 08/30/96 2,500,000 2,504,323
-----------
5,119,991
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
VIRGINIA......................... 0.5%
Lynchburg, GO, Prerefunded @
100.5
(Aaa/NA, NA/NA)
7.10%.......................... 07/01/96 $ 250,000 $ 251,964
-----------
WISCONSIN........................ 6.0%
Oak Creek, VRDN, PCR,
(Wisconsin Electric Power Co.)
(Aa3/P-1, AA/NA)**
3.85%.......................... 06/07/96 2,100,000 2,100,000
State of Wisconsin, GO
(NA/MIG1, NA/SP-1+)
4.50%.......................... 06/17/96 500,000 500,225
Wausau, VRDN, PCR,
(Minnesota Mining &
Manufacturing Co.)
(Aaa/NA, AAA/NA)**
4.05%.......................... 06/07/96 200,000 200,000
-----------
2,800,225
-----------
WYOMING.......................... 1.1%
Lincoln County, VRDN, PCR,
(Exxon Corp.)
(Aaa/NA, AAA/A-1+)**
3.60%.......................... 06/03/96 500,000 500,000
-----------
TOTAL MUNICIPAL BONDS***
(Cost $44,241,530)........... 44,241,530
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES............. 4.3%
Goldman Sachs ITA Tax Exempt
Fund............................ 1,384,022 1,384,022
Municipal Fund for Temporary
Investments -- MuniFund......... 652,914 652,914
-----------
TOTAL INVESTMENT COMPANIES
(Cost $2,036,936)............ 2,036,936
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS VALUE
------------ -----
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $46,278,466*)................. 99.4% $46,278,466
OTHER ASSETS IN EXCESS OF LIABILITIES...... 0.6% 262,815
----- -----------
NET ASSETS (equivalent to $1.00 per share
based on 46,539,458 shares outstanding)... 100.0% $46,541,281
===== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
($46,541,281 / 46,539,458)................ $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
* The rate shown is as of May 31, 1996 and the maturity date shown is the
longer of (i) the next interest readjustment date or (ii) the date on which
the principal amount can be recovered through demand.
*** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1996. These ratings are not cov-
ered by the Report of Independent Accountants.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
--------------- ----------- -----------------------------------------
(CUM)
<S> <C> <C> <C>
1-- 7 days $26,654,936 57.68% 57.68%
8-- 14 days 1,000,000 2.16% 59.84%
15-- 30 days 5,600,000 12.12% 71.96%
31-- 60 days 2,750,000 5.95% 77.91%
61-- 90 days 4,350,000 9.41% 87.32%
91--120 days 3,000,000 6.49% 93.81%
Over120 days 2,860,000 6.19% 100.00%
----------- -----------
$46,214,936 100.00%
=========== ===========
</TABLE>
Average Weighted Maturity -- 32 days
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK............................... 93.6%
AUTOMOTIVE................................. 1.7%
General Motors Corp. .................... 32,900 $ 1,813,613
------------
BANKS...................................... 5.1%
Barnett Banks, Inc. ..................... 23,100 1,443,750
CoreStates Financial Corp. .............. 44,000 1,732,500
J.P. Morgan.............................. 27,000 2,345,625
------------
5,521,875
------------
BEVERAGES.................................. 2.3%
Pepsico Inc. ............................ 75,000 2,493,750
------------
CHEMICALS.................................. 4.9%
Air Products............................. 43,000 2,558,500
E.I. duPont DeNemours & Co. ............. 34,200 2,727,450
------------
5,285,950
------------
COMPUTER EQUIPMENT......................... 2.7%
Hewlett-Packard Co. ..................... 17,000 1,814,750
International Business Machine Corp. .... 10,000 1,067,500
------------
2,882,250
------------
CONSUMER GOODS............................. 1.8%
Colgate Palmolive........................ 24,700 1,945,125
------------
COSMETICS.................................. 1.4%
Tambrands, Inc. ......................... 32,500 1,499,063
------------
DRUGS...................................... 7.7%
Bristol-Myers Squibb Co. ................ 31,500 2,689,313
Pfizer Inc. ............................. 39,400 2,787,550
Warner Lambert Co. ...................... 51,000 2,856,000
------------
8,332,863
------------
ELECTRICAL EQUIPMENT....................... 4.7%
ABB AB ADR............................... 15,000 1,533,750
General Electric Co. .................... 28,000 2,317,000
Hubbell, Inc. "B"........................ 17,900 1,250,763
------------
5,101,513
------------
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCKS -- CONTINUED
ELECTRONICS............................... 1.7%
Intel Corp. ............................ 24,300 $ 1,834,650
------------
FINANCIAL SERVICES........................ 1.4%
H.F. Amhanson........................... 57,000 1,467,750
------------
FOOD PROCESSING........................... 1.4%
Universal Foods......................... 42,800 1,508,700
------------
FOODS..................................... 6.2%
Giant Food, Inc. "A".................... 73,500 2,535,750
McCormick & Co., Inc. .................. 78,000 1,774,500
Nestle Registered ADR................... 41,900 2,358,957
------------
6,669,207
------------
HOME FURNISHINGS.......................... 1.5%
Maytag Corp............................. 73,000 1,569,500
------------
INDUSTRIAL GOODS.......................... 4.1%
Corning Inc. ........................... 68,400 2,616,300
PPG Industries Inc. .................... 34,000 1,759,500
------------
4,375,800
------------
INSURANCE................................. 6.7%
Chubb Corp. ............................ 55,000 2,564,375
Lincoln National Corp. ................. 42,100 1,978,700
Unum Corp. ............................. 46,000 2,714,000
------------
7,257,075
------------
IRON/STEEL................................ 1.6%
Worthington Industries.................. 85,000 1,710,625
------------
MACHINERY & HEAVY EQUIPMENT............... 2.9%
Giddings & Lewis Inc. .................. 78,000 1,296,750
Illinois Tool Works, Inc. .............. 27,600 1,849,200
------------
3,145,950
------------
MEDICAL INSTRUMENTS & SUPPLIES............ 2.5%
Johnson & Johnson....................... 27,500 2,677,813
------------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCKS -- CONTINUED
MULTI-INDUSTRY............................. 0.9%
Minnesota Mining & Manufacturing Co. .... 15,000 $ 1,023,750
------------
NATURAL GAS................................ 3.0%
Equitable Resources Inc.................. 57,825 1,720,294
Questar Corp............................. 45,400 1,486,850
------------
3,207,144
------------
OIL........................................ 6.4%
Amoco Corp. ............................. 29,725 2,155,062
Atlantic Richfield Co. .................. 19,850 2,374,556
Exxon Corp. ............................. 27,500 2,330,625
------------
6,860,243
------------
OIL EQUIPMENT & SERVICES................... 3.1%
Landmark Graphics Corp.* ................ 71,700 1,344,375
Schlumberger Ltd. ADR.................... 23,300 1,942,637
------------
3,287,012
------------
PAPER & FOREST PRODUCTS.................... 1.7%
Westvaco Corp. .......................... 58,000 1,856,000
------------
RETAIL DEPARTMENT STORES................... 1.8%
May Department Stores Co. ............... 41,300 1,956,587
------------
SHOES...................................... 1.4%
Stride Rite.............................. 165,500 1,489,500
------------
TECHNOLOGY................................. 3.0%
Motorola, Inc. .......................... 48,500 3,237,375
------------
TELECOMMUNICATIONS......................... 2.2%
GTE Corp. ............................... 55,750 2,383,312
------------
TOBACCO.................................... 1.6%
Philip Morris Inc. ...................... 17,000 1,689,375
------------
UTILITIES -- ELECTRIC...................... 1.7%
Northeast Utilities, Inc. ............... 22,575 327,338
Texas Utilities.......................... 35,500 1,451,063
------------
1,778,401
------------
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCKS -- CONTINUED
UTILITIES -- TELEPHONE..................... 4.5%
BellSouth Corp. ......................... 67,300 $ 2,734,062
MCI Communications....................... 72,300 2,105,737
------------
4,839,799
------------
TOTAL COMMON STOCK
(Cost $81,472,865)..................... 100,701,570
------------
PREFERRED STOCK............................ 1.5%
News Corp. Ltd. ......................... 82,500 1,598,437
------------
TOTAL PREFERRED STOCK
(Cost $1,651,076)...................... 1,598,437
------------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------- -------- --- -----
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS.......... 2.6%
U.S. Treasury Notes
7.25%............................. 11/30/96 $2,750,000 $ 2,773,100
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,746,661).............. 2,773,100
------------
REPURCHASE AGREEMENT............... 2.0%
Goldman Sachs & Co.
(Agreement dated 5/31/96 to be
repurchased at $2,212,940,
collateralized by $1,505,000
(Value $2,246,000) U.S. Treasury
Notes, 13.875%, due 5/15/11)
5.10%............................ 06/03/96 2,212,000 2,212,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,212,000).............. 2,212,000
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $88,082,602**)........... 99.7% 107,285,107
OTHER ASSETS IN EXCESS OF
LIABILITIES....................... 0.3% 278,181
----- ------------
NET ASSETS......................... 100.0% $107,563,288
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
INSTITUTIONAL SHARES
($107,233,079 / 7,356,638)....... $14.58
======
AFBA FIVE STAR SHARES
($330,209 / 22,681).............. $14.56
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $88,153,760. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost........ $19,950,483
Excess of tax cost over value........ $ (819,136)
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON & PREFERRED STOCK................... 97.6%
AUSTRALIA.................................. 2.7%
AAPC Ltd................................... 600,000 $ 392,839
Australian Gas and Light................... 90,000 371,521
Australian National Industries............. 583,000 507,394
Broken Hill Proprietary.................... 25,000 377,270
QNI Ltd.................................... 169,000 411,563
-----------
2,060,587
-----------
FRANCE..................................... 6.9%
Alcatel Alsthom............................ 2,400 218,371
Bouygues................................... 4,000 434,268
Christian Dior............................. 5,500 775,618
Cie de Suez................................ 9,470 364,968
Compagnie Generale Des Eaux................ 9,500 1,014,871
Danone..................................... 2,800 408,925
Lafarge Coppee S.A. Bearer................. 10,040 660,215
Pinault Printemps La Redoute............... 2,500 772,720
Societe Generale........................... 5,200 552,495
-----------
5,202,451
-----------
GERMANY.................................... 5.3%
Asko Deutsche Kaufhaus..................... 600 408,922
Bilfinger & Berger......................... 1,000 413,767
Commerzbank................................ 2,200 460,617
Linde AG................................... 700 447,287
Mannesman AG............................... 2,020 702,239
RWE Aktiengesellscha....................... 13,000 514,917
Veba....................................... 21,000 1,099,062
-----------
4,046,811
-----------
HONG KONG.................................. 4.5%
Cheung Kong................................ 70,000 517,931
Guangshen Railway.......................... 1,250,000 496,768
Hong Kong Electric......................... 149,000 477,570
HSBC Holdings.............................. 46,000 695,573
Sun Hung Kai Properties.................... 56,000 571,760
Swire Pacific "A".......................... 72,000 639,741
-----------
3,399,343
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
29
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON & PREFERRED STOCK -- CONTINUED
ITALY..................................... 4.0%
Ente Nazionale Idrocarburi................ 150,000 $ 710,294
Fiat Preferred*........................... 170,000 317,387
Istituto Nazionale delle Assicurazioni
(INA)*................................... 380,000 568,300
Telecom Italia Mobile..................... 340,000 724,830
Unicem.................................... 90,000 696,534
-----------
3,017,345
-----------
JAPAN..................................... 43.3%
18th Bank................................. 87,000 788,714
Amada Co. Ltd............................. 75,000 777,058
Canon Inc................................. 48,000 941,350
Dowa Fire & Marine........................ 68,000 374,283
Eisai Co.................................. 33,300 609,935
Fuji Photo Film........................... 38,000 1,181,128
Hirose Electric........................... 13,600 795,115
Hitachi Limited........................... 100,000 925,069
Honda Motor............................... 25,000 601,295
Ichiyoshi Securities...................... 100,000 667,900
Ito Yokado Co............................. 15,000 850,601
Kamigumi Co............................... 70,000 641,073
Kurimoto Iron............................. 46,000 506,383
Mabuchi Motors............................ 11,000 681,776
Matsushita Electric Industrial Co......... 65,000 1,118,408
Mitsubishi Bank........................... 42,000 994,635
Mitsubishi Electric Corp.................. 140,000 958,372
Mitsubishi Heavy Industries............... 135,000 1,160,175
Mitsui Fudosan............................ 72,000 912,488
Mitsui Petrochemical Industries........... 68,000 559,223
NGK Spark Plug Co......................... 67,000 774,745
Nippon Comsys Corp........................ 57,000 727,659
NKK Corp.*................................ 350,000 1,023,126
NTN Corp.................................. 105,000 745,976
Ryobi..................................... 110,000 569,842
Sanwa Bank................................ 46,000 885,106
Seino Transportation...................... 50,000 841,813
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON & PREFERRED STOCK -- CONTINUED
JAPAN -- CONTINUED
Shikoku Electric Power.................... 26,500 $ 605,504
Shimachu.................................. 37,000 1,095,282
Shimano Industries........................ 48,000 910,268
Shin-Etsu Chemical........................ 39,900 797,262
Shizuoka Bank............................. 44,000 569,843
Sony Corp................................. 17,000 1,080,388
Sumitomo Bank............................. 48,000 945,791
Sumitomo Electric Industries.............. 70,000 951,896
Sumitomo Forestry......................... 32,000 497,317
Suzuki Motor.............................. 80,000 1,013,876
TDK Corp.................................. 9,000 512,026
Tokyo Ohka Kogyo.......................... 12,000 327,474
Toppan Printing Co........................ 55,000 783,533
Toyota Motor Co........................... 48,000 1,096,762
-----------
32,800,470
-----------
MALAYSIA.................................. 1.4%
Aluminium Co. of Malaysia................. 104,000 160,671
Malaysia International Shipping Corp.
(Foreign)................................ 119,666 368,790
Malaysian Airline Systems................. 55,000 172,803
Sime Darby Berhad......................... 132,000 353,970
-----------
1,056,234
-----------
NETHERLANDS............................... 4.7%
Hagemeyer................................. 13,000 892,357
ING....................................... 8,720 716,241
Konin Emballage Ind Van Leer.............. 35,000 664,521
Vendex Intl............................... 17,000 543,242
Ver Ned Uitgev Ver Bezit.................. 43,500 711,549
-----------
3,527,910
-----------
PHILIPPINES............................... 0.1%
Far East Bank & Trust..................... 1,500 50,973
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
31
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON & PREFERRED STOCK -- CONTINUED
SINGAPORE.................................. 1.4%
Development Bank of Singapore (Foreign).... 25,000 $ 296,161
Singapore Airlines (Foreign)............... 35,000 360,004
United Overseas Bank (Foreign)............. 43,244 392,651
-----------
1,048,816
-----------
SPAIN...................................... 2.3%
Acerinox................................... 4,000 440,566
Argentaria................................. 14,250 595,753
Iberdrola SA............................... 68,000 688,307
-----------
1,724,626
-----------
SWEDEN..................................... 3.3%
Dahl International......................... 40,000 546,819
Electrolux AB "B".......................... 10,000 509,671
Ericsson "B"............................... 30,200 675,366
Stora Kopparbergs.......................... 60,000 797,940
-----------
2,529,796
-----------
SWITZERLAND................................ 3.8%
Ciba Geigy A.G. Registered................. 1,000 1,099,641
Nestle SA Registered....................... 500 562,997
Roche Holdings 1/10 PC Non-Voting.......... 90 689,971
Swiss Bank Corp. Bearer.................... 3,150 559,703
-----------
2,912,312
-----------
UNITED KINGDOM............................. 13.9%
Asda Group................................. 200,000 366,433
BAT Industries............................. 35,000 281,449
Barclays................................... 30,000 349,080
British Gas................................ 52,400 154,664
British Petroleum.......................... 40,760 350,818
Burton Group............................... 150,000 345,710
Glaxo Wellcome............................. 30,000 390,914
Grand Metropolitan......................... 45,000 303,295
Greenalls Group............................ 40,000 357,602
Guardian Royal Exchange.................... 90,000 373,018
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON & PREFERRED STOCK -- CONTINUED
UNITED KINGDOM -- CONTINUED
Hanson....................................... 95,000 $ 275,251
Ladbroke Group............................... 117,000 343,525
Lex Service.................................. 55,666 314,808
Lloyds Abbey Life............................ 40,000 322,275
MEPC......................................... 50,000 323,825
Millenium & Copthorne........................ 90,000 479,694
National Westminster Bank.................... 50,000 483,025
NFC.......................................... 140,000 334,051
P & P........................................ 100,000 258,750
Peninsular & Oriental Steam Navigation....... 31,000 251,444
Powergen..................................... 38,000 220,201
Railtrack Group.............................. 150,000 506,654
Rubicon Group................................ 100,000 292,837
Shell Transport & Trading.................... 30,000 426,705
Siebe........................................ 27,000 361,862
Tomkins...................................... 90,000 356,285
Unigate...................................... 45,000 280,984
United Utilities............................. 40,000 361,320
Vanguard Medica*............................. 70,000 664,848
Wolseley..................................... 50,000 356,362
-----------
10,487,689
-----------
TOTAL COMMON & PREFERRED STOCK
(Cost $67,615,737)....................... 73,865,363
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $67,615,737**)........................ 97.6% 73,865,363
OTHER ASSETS IN EXCESS OF LIABILITIES........ 2.4% 1,810,983
----- -----------
NET ASSETS (equivalent to $12.47 per share
based on 6,066,282 shares outstanding)...... 100.0% $75,676,346
===== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
($75,676,346 / 6,066,282).................. $12.47
======
</TABLE>
- --------
* Non-income producing securities.
** Aggregate cost for Federal income tax purposes. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost........ $ 8,603,412
Excess of tax cost over value........ $(2,353,786)
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------- -------- --- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS............... 22.5%
FEDERAL HOME LOAN BANK........... 2.1%
Medium Term Notes
6.34%.......................... 06/13/05 $1,000,000 $ 948,020
----------
FEDERAL HOME LOAN MORTGAGE
CORP............................ 4.9%
Medium Term Notes
7.31%.......................... 09/03/99 1,000,000 1,000,490
8.14%.......................... 05/20/04 1,000,000 1,009,110
Mortgage Backed Securities
6.50% (Pool #E00201)........... 03/01/08 175,659 168,907
----------
2,178,507
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 6.6%
Medium Term Notes
6.08%.......................... 09/03/03 500,000 469,255
6.625%......................... 03/21/06 1,000,000 962,620
Mortgage Backed Securities
6.00% (Pool #227994)........... 07/01/08 779,534 732,271
7.50% (Pool #282608)........... 05/01/09 762,781 764,688
----------
2,928,834
----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION..................... 8.9%
Mortgage Backed Securities
8.00% (Pool #308751)........... 11/15/06 265,122 271,418
8.00% (Pool #312726)........... 12/15/06 33,636 34,435
8.00% (Pool #319511)........... 12/15/06 87,085 89,153
6.50% (Pool #351994)........... 12/15/08 253,524 244,412
6.50% (Pool #359462)........... 01/15/09 272,281 262,495
6.00% (Pool #372668)........... 01/15/09 895,273 847,429
8.00% (Pool #389481)........... 04/15/09 291,313 298,231
8.00% (Pool #401484)........... 11/15/09 950,089 972,654
6.00% (Pool #410492)........... 01/15/11 169,844 160,768
6.00% (Pool #410497)........... 02/15/11 798,592 755,916
----------
3,936,911
----------
TOTAL AGENCY OBLIGATIONS
(Cost $10,214,035)........... 9,992,272
----------
</TABLE>
See Accompanying Notes to Financial Statements.
34
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS.................. 8.2%
BEVERAGES........................ 0.5%
Coca-Cola Co., Inc. (Aa3, AA)
7.875%.......................... 09/15/98 $ 200,000 $ 205,500
-----------
CHEMICALS........................ 0.5%
E.I. duPont de Nemours & Co.
(Aa3, AA-)
6.00%........................... 12/01/01 250,000 238,750
-----------
FINANCE.......................... 1.8%
General Electric Capital Corp.
(Aaa, AAA)
6.125%.......................... 04/15/97 500,000 501,585
Norwest Financial Inc. (Aa3, AA-)
6.125%.......................... 08/01/03 300,000 282,750
-----------
784,335
-----------
FOODS............................ 0.6%
Kellogg Corp. (Aaa, AAA)
5.90%........................... 07/15/97 250,000 249,375
-----------
RETAIL MERCHANDISING............. 0.6%
Wal-Mart Stores, Inc. (Aa2, AA)
5.50%........................... 09/15/97 250,000 247,812
-----------
UTILITIES -- GAS................. 2.6%
Consolidated Natural Gas Co. (A1,
AA-)
5.75%........................... 08/01/03 475,000 437,000
Northern Illinois Gas Co. (Aa1,
AA)
5.875%.......................... 05/01/00 500,000 480,000
Wisconsin Natural Gas Co. (Aa3,
AA)
6.125%.......................... 09/01/97 260,000 259,675
-----------
1,176,675
-----------
UTILITIES -- TELEPHONE........... 1.6%
General Telephone Co. Illinois
1st Mortgage
(Aa3, AA)
7.50%.......................... 02/01/02 250,000 $248,750
New England Telephone & Telegraph
Co.
(Aa2, AA-)
5.05%.......................... 10/01/98 500,000 482,500
-----------
731,250
-----------
TOTAL CORPORATE BONDS**
(Cost $3,742,716)............ 3,633,697
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
35
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------ -------- --- -----
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS.......... 67.3%
U.S. Treasury Notes
7.00%............................. 09/30/96 $ 835,000 $ 839,484
4.375%............................ 11/15/96 600,000 597,312
6.50%............................. 05/15/97 1,000,000 1,006,140
6.75%............................. 05/31/97 300,000 302,565
7.375%............................ 11/15/97 1,000,000 1,017,650
6.00%............................. 11/30/97 1,000,000 998,850
5.875%............................ 04/30/98 500,000 496,810
7.125%............................ 10/15/98 1,000,000 1,017,760
5.50%............................. 11/15/98 2,000,000 1,961,880
5.125%............................ 12/31/98 1,000,000 971,220
5.00%............................. 01/31/99 1,000,000 966,610
7.00%............................. 04/15/99 1,000,000 1,015,110
6.50%............................. 04/30/99 1,000,000 1,002,260
6.875%............................ 07/31/99 1,000,000 1,010,430
6.00%............................. 10/15/99 1,000,000 986,180
5.75%............................. 10/31/00 1,500,000 1,450,665
5.50%............................. 12/31/00 1,000,000 955,930
5.625%............................ 02/28/01 600,000 575,520
6.25%............................. 04/30/01 1,000,000 983,810
7.50%............................. 11/15/01 450,000 466,389
6.25%............................. 02/15/03 1,300,000 1,265,251
7.25%............................. 05/15/04 3,000,000 3,076,110
7.25%............................. 08/15/04 2,300,000 2,358,075
7.875%............................ 11/15/04 1,000,000 1,064,220
7.50%............................. 02/15/05 1,100,000 1,145,375
6.50%............................. 05/15/05 1,500,000 1,464,240
5.875%............................ 11/15/05 1,000,000 932,260
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $30,072,830).............. 29,928,106
-----------
REPURCHASE AGREEMENT............... 1.6%
Goldman, Sachs & Co.
(Agreement dated 5/31/96 to be re-
purchased at $714,303 collateral-
ized by $615,000 (Value $726,000)
U.S. Treasury Notes, 8.75%, due
5/15/20)
5.10%............................ 06/03/96 714,000 714,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $714,000)................ 714,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PECENTAGE OF
NET ASSETS VALUE
------------ -----
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $44,743,581*)................. 99.6% $44,268,075
OTHER ASSETS IN EXCESS OF LIABILI-
TIES................................ 0.4% 179,991
----- -----------
NET ASSETS........................... 100.0% $44,448,066
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
INSTITUTIONAL SHARES
($44,101,736 / 4,327,461).......... $10.19
======
AFBA FIVE STAR SHARES
($346,330 / 33,943)................ $10.20
======
</TABLE>
- --------
* Cost for Federal income tax purposes is $44,775,554. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.......... $ 309,358
Excess of tax cost over value.......... $(816,837)
</TABLE>
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1996. These ratings are not cov-
ered by the Report of Independent Accountants.
INTERMEDIATE FIXED INCOME FUND
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY
PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
-------------- ----------- -------------------------
(CUM)
<S> <C> <C> <C>
1- 6 months $ 2,149,000 4.81% 4.81%
7-12 months 1,800,000 4.03% 8.84%
13-18 months 2,760,000 6.18% 15.02%
19-24 months 500,000 1.12% 16.14%
25-36 months 7,700,000 17.24% 33.38%
37-48 months 3,765,000 8.43% 41.81%
49-60 months 4,512,000 10.10% 51.91%
Over 60 months 21,482,732 48.09% 100.00%
----------- -----------
$44,668,732 100.00%
=========== ===========
</TABLE>
Average Weighted Maturity -- 5.0 years
See Accompanying Notes to Financial Statements.
37
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------- -------- --- -----
<S> <C> <C> <C> <C>
MARYLAND...................... 92.8%
Annapolis, GO, Public
Improvement RB (Aa, AA-)
6.20%....................... 11/01/02 $200,000 $207,000
Anne Arundel County, GO,
Consolidated General
Improvement Water & Sewer
(Aa1, AA+)
5.30%....................... 07/15/12 500,000 476,250
Baltimore County, GO,
Metropolitan District
(Aaa, AAA)
6.125%...................... 07/01/07 175,000 184,406
Baltimore County, GO,
Refunding -- Consolidated
Public Improvement Unlimited
Tax (Aaa, AAA)
5.20%....................... 04/01/09 500,000 491,875
Baltimore, Port Facilities,
RB, GTD: E.I. duPont (Aa2,
AA)
6.50%....................... 10/01/11 300,000 319,500
Calvert County, PCRB, (BGE)
(A2, A)
5.55%....................... 07/15/14 300,000 286,500
Charles County, GO,
Consolidated Public
Improvement, Unlimited Tax,
INS: FGIC (Aaa, AAA)
5.50%....................... 01/01/06 230,000 232,875
Dorchester County, GO, Public
Facilities, INS: MBIA (Aaa,
AAA)
5.875%...................... 02/01/10 215,000 219,569
Harford County, GO, Public
Improvement Unlimited Tax
(Aa, AA-)
5.60%....................... 09/01/06 325,000 329,469
Howard County, GO,
Consolidated Public
Improvement (Aaa, AA+)
5.25%....................... 08/15/09 500,000 490,000
5.25%....................... 08/15/12 250,000 237,813
Laurel, GO, INS: MBIA (Aaa,
AAA)
6.40%....................... 07/01/01 200,000 214,500
Maryland Community Development
Administration, RB, Multi
Family Mortgage (Aa, NA)
6.60%....................... 05/15/12 145,000 150,075
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------- -------- --- -----
<S> <C> <C> <C> <C>
MARYLAND -- CONTINUED
Maryland Community Development
Administration, RB, Single
Family Mortgage (Aa, NA)
5.80%....................... 04/01/07 $170,000 $175,737
6.55%....................... 04/01/17 185,000 189,625
Maryland National Capital Park
& Planning Commission --
Montgomery County, GO
(Aaa, AAA)
6.00%....................... 07/01/06 150,000 158,063
Maryland National Capital Park
& Planning Commission --
Prince George's County, GO
(Aa, AA)
5.15%....................... 07/01/11 300,000 282,750
Maryland State Health & Higher
Educational Facilities
Authority, RB, Johns Hopkins
Hospital, ETM (Aaa, AAA)
6.625%...................... 07/01/08 430,000 472,462
Maryland State Health & Higher
Educational Facilities
Authority, RB, Johns Hopkins
University (Aa1, AA-)
7.50%....................... 07/01/20 150,000 160,500
Maryland State Health & Higher
Educational Facilities
Authority, RB, University of
Maryland Medical System, INS:
FGIC (Aaa, AAA)
5.40%....................... 07/01/07 300,000 298,500
Maryland State Stadium
Authority, RB, (Ocean City
Convention Center) (Aa, AA)
5.38%....................... 12/15/15 500,000 462,500
Maryland State Transportation
Authority, RB (A1, A+)
5.75%....................... 07/01/15 350,000 341,250
Maryland State, GO (Aaa, AAA)
6.60%....................... 03/01/01 500,000 531,875
5.90%....................... 10/15/04 260,000 272,675
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR VALUE
------------- -------- --- -----
<S> <C> <C> <C> <C>
MARYLAND -- CONTINUED
Maryland State, RB, COP, St.
Mary's Multi Service Center
(Aa, AA)
5.70%...................... 06/01/13 $200,000 $ 200,500
Maryland Water Quality
Financing Administration,
RB, Revolving Loan Fund (Aa,
AA)
5.50%...................... 09/01/11 200,000 195,000
5.40%...................... 09/01/12 300,000 287,625
Montgomery County Revenue
Authority, RB, Olney Indoor
Swim Project (NA, AA-)
5.25%...................... 10/01/12 250,000 237,500
Montgomery County, GO,
Refunding --Consolidated
Public Improvement Unlimited
Tax (Aaa, AAA)
5.80%...................... 07/01/07 250,000 259,375
Montgomery County, RB, Silver
Spring Parking Lot, INS:
FGIC (Aaa, AAA)
5.80%...................... 06/01/01 135,000 140,737
Prince George's County, GO,
Consolidated Public
Improvement Limited Tax,
INS: AMBAC (Aaa, AAA)
5.75%...................... 03/15/10 175,000 176,969
Prince George's County, GO,
Refunding --Consolidated
Public Improvement Limited
Tax (A1, AA-)
4.90%...................... 10/01/02 300,000 300,000
Washington County, GO,
Refunding --
Consolidated Public
Improvement Unlimited Tax,
INS: FGIC (Aaa, AAA)
5.25%...................... 01/01/06 200,000 201,000
Washington Suburban
Sanitation District, GO
(Aa1, AA)
5.50%...................... 06/01/12 280,000 274,050
---------
TOTAL MUNICIPAL BONDS**
(Cost $9,404,948)........ 9,458,525
---------
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER
NET ASSETS MATURITY OF SHARES VALUE
------------- -------- --------- -----
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES....... 5.9%
Goldman Sachs ITA Tax
Exempt Fund............... 488,289 $ 488,289
Municipal Fund for
Temporary Investments --
MuniFund.................. 110,325 110,325
-----------
TOTAL INVESTMENT
COMPANIES
(Cost $598,614)........ 598,614
-----------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $10,003,562*)....... 98.7% 10,057,139
OTHER ASSETS IN EXCESS OF
LIABILITIES............... 1.3% 128,678
---- -----------
NET ASSETS (equivalent to
$10.20 per share based on
998,454 shares
outstanding).............. 100.0% $10,185,817
====== ===========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE
($10,185,817 / 998,454).. $10.20
======
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.......... $ 158,192
Excess of tax cost over value.......... $(104,615)
</TABLE>
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1996. These ratings are not cov-
ered by the Report of Independent Accountants.
MARYLAND TAX-EXEMPT BOND FUND
MATURITY SCHEDULE OF PORTFOLIO
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT PAR PERCENTAGE OF PORTFOLIO
--------------- ----------- -----------------------------------------
(CUM)
<S> <C> <C> <C>
1 -- 6 months $ 598,614 5.97% 5.97%
49 -- 60 months 500,000 4.99% 10.96%
Over 60 months 8,925,000 89.04% 100.00%
----------- -----------
$10,023,614 100.00%
----------- -----------
</TABLE>
Average Weighted Maturity -- 12.3 years
See Accompanying Notes to Financial Statements.
41
<PAGE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR American Depository Receipt
BAN Bond Anticipation Notes
COP Certificates of Participation
ETM Escrowed to Maturity in U.S. Government Obligations
FRN Floating Rate Notes
GO General Obligation
GTD Guaranteed
IDA Industrial Development Authority
INS Insured
LA Liquidity Agreement
LIC Line of Credit
LOC Letter of Credit
MB Municipal Bonds
MPB Municipal Put Bonds
PCR Pollution Control Revenue
PCRB Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RB Revenue Bonds
SPA Standby Purchase Agreement
TAN Tax Anticipation Notes
TECP Tax-Exempt Commercial Paper
TRAN Tax and Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
</TABLE>
See Accompanying Notes to Financial Statements.
42
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND (TRUST)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $20,682,276 $16,980,323 $2,473,694 $1,885,832
EXPENSES:
Investment advisory
fees.................. 897,812 745,334 169,470 --
Administration fees.... 448,906 372,667 84,735 65,080
Accounting agent fees.. 107,737 89,440 27,115 20,826
Custodian fees......... 35,027 36,262 14,947 12,958
Directors' fees........ 19,083 16,832 4,026 2,984
Transfer agent fees.... 82,434 70,885 18,614 18,040
Legal.................. 59,115 49,437 11,313 8,568
Audit.................. 42,987 35,787 6,977 6,274
Other.................. 33,354 28,249 8,978 7,521
----------- ----------- ---------- ----------
1,726,455 1,444,893 346,175 142,251
Fees waived by Invest-
ment Adviser.......... (35,912) (59,626) (13,558) --
Fees waived by Adminis-
trator................ (146,306) (103,292) (41,129) (27,710)
----------- ----------- ---------- ----------
TOTAL EXPENSES....... 1,544,237 1,281,975 291,488 114,541
----------- ----------- ---------- ----------
NET INVESTMENT INCOME... 19,138,039 15,698,348 2,182,206 1,771,291
----------- ----------- ---------- ----------
REALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss) on investments
sold.................. (21,657) (13,041) (3,901) 3,228
----------- ----------- ---------- ----------
Net gain (loss) on in-
vestments............. (21,657) (13,041) (3,901) 3,228
----------- ----------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $19,116,382 $15,685,307 $2,178,305 $1,774,519
=========== =========== ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
43
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE MARYLAND
VALUE EQUITY INTERNATIONAL FIXED INCOME TAX-EXEMPT
FUND EQUITY FUND FUND BOND FUND
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $ 562,817 $ 169,667 $ 2,708,086 $ 615,332
Dividends.............. 2,553,134 1,170,049(1) -- --
----------- ---------- ----------- ---------
TOTAL INVESTMENT IN-
COME................ 3,115,951 1,339,716 2,708,086 615,332
----------- ---------- ----------- ---------
EXPENSES:
Investment advisory
fees.................. 600,399 584,984 151,371 57,370
Administration fees.... 125,083 91,404 54,061 14,342
Accounting agent fees.. 45,002 36,562 22,265 5,737
Custodian fees......... 14,882 54,845 10,108 4,267
Directors' fees........ 5,130 3,877 2,308 641
Transfer agent fees.... 44,806 35,619 31,596 18,830
Legal.................. 16,095 11,836 6,973 1,903
Audit.................. 11,787 8,664 5,139 1,388
Registration fees...... 2,252 1,893 2,181 1,815
Amortization of organi-
zational costs........ 6,636 4,857 6,636 6,771
Pricing service fees... 1,775 2,230 6,590 5,285
Other.................. 15,812 16,675 11,288 827
----------- ---------- ----------- ---------
889,659 853,446 310,516 119,176
Fees waived by Invest-
ment Advisers......... (159,036) (49,092) (43,249) (40,159)
Fees waived by Adminis-
trator................ -- (36,562) (7,573) (7,878)
----------- ---------- ----------- ---------
TOTAL EXPENSES....... 730,623 767,792 259,694 71,139
----------- ---------- ----------- ---------
NET INVESTMENT INCOME... 2,385,328 571,924 2,448,392 544,193
----------- ---------- ----------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments........... 3,132,449 2,866,975 (58,107) 163,201
Foreign currency
transactions......... -- (9,417) -- --
Forward foreign
currency contracts... -- 989,951 -- --
----------- ---------- ----------- ---------
3,132,449 3,847,509 (58,107) 163,201
----------- ---------- ----------- ---------
Net unrealized appreci-
ation (depreciation):
Investments........... 10,331,201 3,782,260 (1,034,652) (330,070)
Translation of assets
and liabilities in
foreign currencies... -- 29,896 -- --
Forward foreign
currency contracts... -- 1,359,256 -- --
----------- ---------- ----------- ---------
10,331,201 5,171,412 (1,034,652) (330,070)
----------- ---------- ----------- ---------
Net gain (loss) on in-
vestments and foreign
currency transac-
tions................. 13,463,650 9,018,921 (1,092,759) (166,869)
----------- ---------- ----------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $15,848,978 $9,590,845 $ 1,355,633 $ 377,324
=========== ========== =========== =========
</TABLE>
- --------
(1) Net of withholding taxes of $234,457
See Accompanying Notes to Financial Statements.
44
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIME PRIME GOVERNMENT GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FOR THE FUND FOR THE FUND FOR THE FUND FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 19,138,039 $ 17,151,984 $ 15,698,348 $ 13,495,684
Net gain (loss) on
investments........... (21,657) (60,625) (13,041) (131,318)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 19,116,382 17,091,359 15,685,307 13,364,366
------------ ------------ ------------ ------------
Distributions to
shareholders from:
Net investment income
($.05, $.05, $.05, and
$.05 per share,
respectively)......... (19,138,039) (17,151,984) (15,698,348) (13,495,684)
Net realized capital
gains................. -- (1,797) -- --
------------ ------------ ------------ ------------
Total distributions
to shareholders..... (19,138,039) (17,153,781) (15,698,348) (13,495,684)
------------ ------------ ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... (55,159,078) 35,427,702 985,792 (9,906,280)
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (55,180,735) 35,365,280 972,751 (10,037,598)
NET ASSETS:
Beginning of period.... 382,058,882 346,693,602 263,752,338 273,789,936
------------ ------------ ------------ ------------
End of period.......... $326,878,147 $382,058,882 $264,725,089 $263,752,338
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
45
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET FUND MONEY MARKET FUND
FUND FOR THE FUND FOR THE (TRUST) FOR THE (TRUST) FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 2,182,206 $ 2,310,790 $ 1,771,291 $ 1,824,586
Net gain (loss) on
investments........... (3,901) (1,165) 3,228 (255)
------------ ------------ ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,178,305 2,309,625 1,774,519 1,824,331
------------ ------------ ----------- ------------
Distributions to
shareholders from net
investment income
($.03, $.03, $.03, and
$.03 per share,
respectively).......... (2,182,206) (2,310,790) (1,771,291) (1,824,586)
Decrease in net assets
derived from capital
share transactions..... (18,959,016) (13,121,407) (8,505,165) (18,186,250)
------------ ------------ ----------- ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (18,962,917) (13,122,572) (8,501,937) (18,186,505)
NET ASSETS:
Beginning of period.... 69,099,679 82,222,251 55,043,218 73,229,723
------------ ------------ ----------- ------------
End of period.......... $ 50,136,762 $ 69,099,679 $46,541,281 $ 55,043,218
============ ============ =========== ============
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE VALUE INTERNATIONAL INTERNATIONAL
EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 2,385,328 $ 2,324,502 $ 571,924 $ 739,139
Net realized gain
(loss) on investments
and foreign currency.. 3,132,449 2,649,128 3,847,509 1,653,228
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilities in
foreign currency...... 10,331,201 7,369,860 5,171,412 (2,312,652)
------------ ------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 15,848,978 12,343,490 9,590,845 79,715
------------ ------------ ------------ -----------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.35, $.34, $.07,
and $.04 per share,
respectively)........ (2,496,063) (2,063,461) (430,777) (145,995)
AFBA Five Star Class
($.10 and $.00 per
share,
respectively)........ (375) --
Net realized capital
gains
Institutional Class
($.71, $.28, $.66,
and $.28 per share,
respectively)........ (4,969,957) (1,856,680) (3,866,820) (1,505,558)
------------ ------------ ------------ -----------
Total distributions
to shareholders..... (7,466,395) (3,920,141) (4,297,597) (1,651,553)
------------ ------------ ------------ -----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 23,438,948 43,358,779 12,630,589 29,008,624
AFBA Five Star Class.. 316,761 --
Cost of shares redeemed
Institutional Class... (20,452,056) (15,427,649) (12,076,799) (5,966,953)
AFBA Five Star Class.. (100) --
Value of shares issued
in reinvestment of
dividends
Institutional Class... 4,599,394 1,682,665 656,985 230,530
AFBA Five Star Class.. 369 --
------------ ------------ ------------ -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 7,903,316 29,613,795 1,210,775 23,272,201
------------ ------------ ------------ -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 16,285,899 38,037,144 6,504,023 21,700,363
NET ASSETS:
Beginning of period.... 91,277,389 53,240,245 69,172,323 47,471,960
------------ ------------ ------------ -----------
End of period.......... $107,563,288 $ 91,277,389 $ 75,676,346 $69,172,323
============ ============ ============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
47
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE INTERMEDIATE MARYLAND MARYLAND
FIXED FIXED TAX-EXEMPT TAX-EXEMPT
INCOME FUND INCOME FUND BOND FUND BOND FUND
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income... $ 2,448,392 $ 2,274,051 $ 544,193 $ 802,877
Net realized gain (loss)
on investments and
foreign currency....... (1,092,759) 1,327,498 (166,869) (129,142)
------------ ------------ ----------- -----------
Net increase in net
assets resulting from
operations............. 1,355,633 3,601,549 377,324 673,735
------------ ------------ ----------- -----------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.59, $.56, $.49, and
$.49 per share,
respectively)......... (2,444,640) (2,274,051) (544,193) (802,877)
AFBA Five Star Class
($.28 and $.00 per
share, respectively).. (3,752) --
------------ ------------ ----------- -----------
Total distributions to
shareholders......... (2,448,392) (2,274,051) (544,193) (802,877)
------------ ------------ ----------- -----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class.... 12,256,511 19,879,026 1,203,881 1,287,287
AFBA Five Star Class... 354,044 --
Cost of shares redeemed
Institutional Class.... (12,858,524) (12,149,096) (3,368,450) (9,025,879)
AFBA Five Star Class... (2,093) --
Value of shares issued
in reinvestment of
dividends
Institutional Class.... 1,138,177 586,531 157,194 139,793
AFBA Five Star Class... 949 --
------------ ------------ ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions............ 889,064 8,316,461 (2,007,375) (7,598,799)
------------ ------------ ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS........... (203,695) 9,643,959 (2,174,244) (7,727,941)
NET ASSETS:
Beginning of period..... 44,651,761 35,007,802 12,360,061 20,088,002
------------ ------------ ----------- -----------
End of period........... $ 44,448,066 $ 44,651,761 $10,185,817 $12,360,061
============ ============ =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
48
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
------------------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.0532 0.0491 0.0296 0.0297 0.0467
-------- -------- -------- -------- --------
Total From
Investment
Operations......... 0.0532 0.0491 0.0296 0.0297 0.0467
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0532) (0.0491) (0.0296) (0.0297) (0.0467)
-------- -------- -------- -------- --------
Total
Distributions...... (0.0532) (0.0491) (0.0296) (0.0297) (0.0467)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 5.45% 5.02% 3.00% 3.01% 4.77%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $326,878 $382,059 $346,694 $432,415 $402,745
Ratio of Expenses to
Average Net Assets.... 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1) 0.35%(1)
Ratio of Net Income to
Average Net Assets.... 5.33% 4.92% 2.95% 2.96% 4.55%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995, May 31, 1994, May 31, 1993, and May 31, 1992 would have been .48%,
.48%, .47%, .43%, and .42%, respectively.
See Accompanying Notes to Financial Statements.
49
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
GOVERNMENT MONEY MARKET FUND
------------------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.0526 0.0485 0.0294 0.0293 0.0465
-------- -------- -------- -------- --------
Total From
Investment
Operations......... 0.0526 0.0485 0.0294 0.0293 0.0465
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0526) (0.0485) (0.0294) (0.0293) (0.0465)
-------- -------- -------- -------- --------
Total
Distributions...... (0.0526) (0.0485) (0.0294) (0.0293) (0.0465)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 5.39% 4.95% 2.98% 2.97% 4.75%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $264,725 $263,752 $273,790 $255,637 $293,450
Ratio of Expenses to
Average Net Assets.... 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1) 0.34%(1)
Ratio of Net Income to
Average Net Assets.... 5.27% 4.85% 2.94% 2.93% 4.64%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995, May 31, 1994, May 31, 1993, and May 31, 1992 would have been .48%,
.48%, .47%, .44%, and .41%, respectively.
See Accompanying Notes to Financial Statements.
50
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY MARKET FUND
------------------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.0321 0.0303 0.0202 0.0217 0.0346
Net Realized Gain on
Investments........... -- -- 0.0004 -- --
------- ------- ------- ------- -------
Total From
Investment
Operations......... 0.0321 0.0303 0.0206 0.0217 0.0346
------- ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0321) (0.0303) (0.0202) (0.0217) (0.0346)
Distributions to
Shareholders from Net
Capital Gains......... -- -- (0.0004) -- --
------- ------- ------- ------- -------
Total
Distributions...... (0.0321) (0.0303) (0.0206) (0.0217) (0.0346)
------- ------- ------- ------- -------
Net Asset Value,
End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
Total Return............ 3.26% 3.08% 2.08% 2.19% 3.51%
- ---------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $50,137 $69,100 $82,222 $81,838 $72,687
Ratio of Expenses to
Average Net Assets.... 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1) 0.38%(1)
Ratio of Net Income to
Average Net Assets.... 3.22% 3.01% 2.02% 2.16% 3.42%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995, May 31, 1994, May 31, 1993, and May 31, 1992 would have been .51%,
.52%, .50%, .44%, and .46%, respectively.
See Accompanying Notes to Financial Statements.
51
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
(UNAUDITED)
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY MARKET FUND (TRUST)
------------------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.0340 0.0320 0.0219 0.0238 0.0362
Net Realized Gain on
Investments........... -- -- 0.0003 -- --
------- ------- ------- ------- -------
Total From
Investment
Operations......... 0.0340 0.0320 0.0222 0.0238 0.0362
------- ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0340) (0.0320) (0.0219) (0.0238) (0.0362)
Distributions to
Shareholders from Net
Capital Gains......... -- -- (0.0003) -- --
------- ------- ------- ------- -------
Total
Distributions...... (0.0340) (0.0320) (0.0222) (0.0238) (0.0362)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
Total Return............ 3.45% 3.25% 2.24% 2.40% 3.68%
- ---------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $46,541 $55,043 $73,230 $55,975 $62,502
Ratio of Expenses to
Average Net Assets.... 0.22%(1) 0.22%(1) 0.20%(1) 0.20%(1) 0.20%(1)
Ratio of Net Income to
Average Net Assets.... 3.40% 3.14% 2.19% 2.38% 3.63%
</TABLE>
- --------
(1) Without the waiver of administration fees, the ratio of expenses to average
net assets for the years ended May 31, 1996, May 31, 1995, May 31, 1994,
May 31, 1993, and May 31, 1992 would have been .27%, .28%, .26%, .21%, and
.21%, respectively.
See Accompanying Notes to Financial Statements.
52
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
VALUE EQUITY FUND
----------------------------------------------------------------------------------------------
AFBA FIVE
INSTITUTIONAL SHARES STAR SHARES
------------------------------------------------------------------------ -------------------
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 1, 1995(4)
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992 TO MAY 31, 1996
------------ ------------ ------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.42 $ 12.14 $ 12.39 $ 11.36 $ 10.69 $13.61
-------- ------- ------- ------- ------- ------
Income From Investment
Operations:
Net Investment Income.. 0.33 0.35 0.29 0.29 0.33 0.14
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.89 1.55 (0.18) 1.13 0.66 0.91
-------- ------- ------- ------- ------- ------
Total From
Investment
Operations......... 2.22 1.90 0.11 1.42 0.99 1.05
-------- ------- ------- ------- ------- ------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.35) (0.34) (0.28) (0.30) (0.32) (0.10)
Distributions to
Shareholders from Net
Capital Gains......... (0.71) (0.28) (0.08) (0.09) -- 0.00
-------- ------- ------- ------- ------- ------
Total Distribu-
tions.............. (1.06) (0.62) (0.36) (0.39) (0.32) (0.10)
-------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 11.36 $14.56
======== ======= ======= ======= ======= ======
- ------------------------------------------------------------------------------------------------------------------------
Total Return............ 17.24% 16.22% 0.87% 12.87% 9.51% 7.72%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $107,233 $91,277 $53,240 $46,754 $17,463 $ 330
Ratio of Expenses to
Average Net Assets.... 0.73%(1) 0.73%(1) 0.68%(1) 0.68%(1) 0.68%(1) 0.98%(2)(3)
Ratio of Net Income to
Average Net Assets.... 2.38% 2.99% 2.41% 2.68% 3.05% 2.36%(3)
Portfolio turnover
rate................... 45.15% 33.26% 61.16% 11.99% 9.57% 45.15%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995, May 31, 1994, May 31, 1993, and May 31, 1992 would have been .89%,
.89%, .87%, .88%, and .96%. (annualized), respectively.
(2) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the period ended May 31, 1996 would
have been 1.15% (annualized).
(3) Annualized.
(4) Commencement of Operations.
See Accompanying Notes to Financial Statements.
53
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED JULY 2, 1993 (3)
MAY 31, 1996 MAY 31, 1995 TO MAY 31, 1994
------------ ------------ ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $11.60 $11.81 $10.00
------- ------- -------
Income From Investment
Operations:
Net Investment Income.......... 0.09 0.03 0.08
Net Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency.............. 1.51 0.08 1.81
------- ------- -------
Total From Investment
Operations................. 1.60 0.11 1.89
------- ------- -------
Less Distributions:
Dividends to Shareholders from
Net Investment Income......... (0.07) (0.04) (0.07)
Distributions to Shareholders
from Net Capital Gains........ (0.66) (0.28) (0.01)
------- ------- -------
Total Distributions......... (0.73) (0.32) (0.08)
------- ------- -------
Net Asset Value, End of Period.. $12.47 $11.60 $11.81
======= ======= =======
- ----------------------------------------------------------------------------------
Total Return.................... 14.27% 0.82% 18.98%
- ----------------------------------------------------------------------------------
Ratios/Supplemental Data........
Net Assets, End of Period
(000)......................... $75,676 $69,172 $47,472
Ratio of Expenses to Average
Net Assets.................... 1.05%(1) 1.05%(1) 1.00%(1)(2)
Ratio of Net Income to Average
Net Assets.................... 0.78% 0.06% 0.82%(2)
Portfolio turnover rate......... 53.58% 42.15% 39.49%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the
annualized ratio of expenses to average net assets for the years ended May
31, 1996 and May 31, 1995 and the period ended May 31, 1994 would have
been 1.17%, 1.16% and 1.20%, respectively.
(2) Annualized.
(3) Commencement of operations.
See Accompanying Notes to Financial Statements.
54
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
----------------------------------------------------------------------------------------------
AFBA FIVE
INSTITUTIONAL SHARES STAR SHARES
------------------------------------------------------------------------ -------------------
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 1, 1995(4)
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992 TO MAY 31, 1996
------------ ------------ ------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.43 $10.10 $10.55 $10.31 $9.97 $10.61
------- ------- ------- ------- ------- ------
Income From Investment
Operations:
Net Investment Income.. 0.59 0.56 0.50 0.56 0.60 0.28
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.24) 0.33 (0.39) 0.24 0.34 (0.41)
------- ------- ------- ------- ------- ------
Total From
Investment
Operations......... 0.35 0.89 0.11 0.80 0.94 (0.13)
------- ------- ------- ------- ------- ------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.59) (0.56) (0.50) (0.56) (0.60) (0.28)
Distributions to
Shareholders from Net
Capital Gains......... -- -- (0.06) -- -- --
------- ------- ------- ------- ------- ------
Total Distribu-
tions.............. (0.59) (0.56) (0.56) (0.56) (0.60) (0.28)
------- ------- ------- ------- ------- ------
Net Asset Value,
End of Period.......... $10.19 $10.43 $10.10 $10.55 $10.31 $10.20
======= ======= ======= ======= ======= ======
- ------------------------------------------------------------------------------------------------------------------------
Total Return............ 3.38% 9.13% 0.94% 7.94% 9.68% (1.23)%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $44,102 $44,652 $35,008 $28,078 $17,549 $346
Ratio of Expenses to
Average Net Assets.... 0.60%(1) 0.60%(1) 0.55%(1) 0.55%(1) 0.55%(1) 0.90%(2)(3)
Ratio of Net Income to
Average Net Assets.... 5.66% 5.56% 4.75% 5.32% 5.76% 5.50%(3)
Portfolio turnover
rate................... 52.79% 22.01% 48.58% 12.29% 13.76% 52.79%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995, May 31, 1994, May 31, 1993, and May 31, 1992 would have been .72%,
.70%, .66%, .64%, and .72%, (annualized), respectively.
(2) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the period ended May 31, 1996 would
have been 1.06% (annualized).
(3) Annualized.
(4) Commencement of Operations.
See Accompanying Notes to Financial Statements.
55
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MARYLAND TAX-EXEMPT BOND FUND
------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED JUNE 2, 1992(1)
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 TO MAY 31, 1993
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.40 $ 10.25 $ 10.55 $ 10.00
------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.49 0.49 0.50 0.48
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.20) 0.15 (0.28) 0.55
------- ------- ------- -------
Total From
Investment
Operations......... 0.29 0.64 0.22 1.03
------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.49) (0.49) (0.50) (0.48)
Distributions to
Shareholders from Net
Capital Gains......... -- -- (0.02) --
------- ------- ------- -------
Total
Distributions...... (0.49) (0.49) (0.52) (0.48)
------- ------- ------- -------
Net Asset Value, End of
Period................. $ 10.20 $ 10.40 $ 10.25 $ 10.55
======= ======= ======= =======
- -----------------------------------------------------------------------------------------
Total Return............ 2.84% 6.48% 1.99% 10.59%(3)
- -----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $10,186 $12,360 $20,008 $15,707
Ratio of Expenses to
Average Net Assets.... 0.62%(2) 0.62%(2) 0.55%(2) 0.55%(2)(3)
Ratio of Net Income to
Average Net Assets.... 4.74% 4.83% 4.66% 4.78%(3)
Portfolio turnover
rate................... 20.58% 36.80% 33.89% 17.59%
</TABLE>
- --------
(1) Commencement of operations.
(2) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1996, May 31,
1995 and May 31, 1994 and the period ended May 31, 1993 would have been
1.04%, .97%, .86%, and .94% (annualized), respectively.
(3) Annualized.
See Accompanying Notes to Financial Statements.
56
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES
M.S.D.&T. Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on March 7, 1989. The Articles of In-
corporation of the Company authorize the Board of Directors to issue up to ten
billion shares, having a par value of $.001 per share. The Company is a series
fund which is currently authorized to issue ten classes of common stock, which
represent interests in eight investment portfolios: the Prime Money Market
Fund (Class A), the Government Money Market Fund (Class B), the Tax-Exempt
Money Market Fund (Class C), the Tax-Exempt Money Market Fund (Trust) (Class
D), the Value Equity Fund (Class E and Class E -- Special Series 1), the In-
termediate Fixed Income Fund (Class F and Class F -- Special Series 1), the
Maryland Tax-Exempt Bond Fund (Class G) and the International Equity Fund
(Class H) -- (the "Funds"). Class E shares (Institutional Shares) and Class
E -- Special Series 1 shares (AFBA Five Star Shares) of the Value Equity Fund
and Class F shares (Institutional Shares) and Class F -- Special Series 1
shares (AFBA Five Star Shares) of the Intermediate Fixed Income Fund represent
equal pro rata interests in the respective Fund and bear the same fees and ex-
penses, except that AFBA Five Star Shares of a Fund bear the fees that are
payable under a Service Plan (the "Service Plan") adopted by the Board of Di-
rectors and each class bears certain class specific expenses.
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the re-
porting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
A) Security Valuation: Investment securities held by the Prime Money Market
Fund, Government Money Market Fund, Tax-Exempt Money Market Fund and Tax-
Exempt Money Market Fund (Trust) (the "Money Market Funds") are val-ued
under the amortized cost method, which approximates current market value.
Under this method, securities are valued at cost when purchased and,
thereafter, a constant proportionate amortization of any discount or
premium is recorded until maturity of the security. Regular review and
monitoring of the valuation is performed pursuant to procedures adopted by
the Company's Board of Directors in an attempt to avoid dilu-tion or other
unfair results to shareholders. The Money Market Funds each seek to
maintain a stable net asset value of $1.00 per share, but there can be no
assurance that they will be able to do so.
Investments held by the Value Equity Fund, International Equity Fund,
Intermediate Fixed Income Fund and Maryland Tax-Exempt Bond Fund are
valued at market value or, in the absence of a market value with re-
spect to any portfolio securities, at fair value. A security that is
primarily traded on a domestic security exchange (including securities
traded through the National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at
the current quoted bid price. Portfolio securities that are primarily
57
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1.SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
traded on foreign exchanges are generally valued at the closing values
of such securities on their respective exchanges, provided that if such
securities are not traded on the valuation date, they will be valued at
the preceding closing values and provided further, that when an occur-
rence subsequent to the time of valuation is likely to have changed the
value, then the fair value of those securities will be determined
through consideration of other factors by or under the direction of the
Company's Board of Directors. Over-the-counter securities and securi-
ties listed or traded on foreign exchanges with operations similar to
the U.S. over-the-counter market are valued at the mean of the most re-
cent available quoted bid and asked prices in the over-the-counter mar-
ket. Market or fair value may be determined on the basis of valuations
provided by one or more recognized pricing services approved by the
Board of Directors, which may rely on matrix pricing systems, elec-
tronic data processing techniques and/or quoted bid and asked prices
provided by investment dealers. Short-term investments with maturities
of 60 days or less are valued at amortized cost which approximates fair
value. The net asset value per share of the Value Equity Fund, Interna-
tional Equity Fund, Intermediate Fixed Income Fund and Maryland Tax-Ex-
empt Bond Fund will fluctuate as the values of their respective invest-
ment portfolios change.
B) Security Transactions and Investment Income: Security transactions are
accounted for on the trade date. The cost of investments sold is deter-
mined by use of the specific identification method for both financial
reporting and income tax purposes. Interest income is recorded on the
accrual basis; dividend income is recorded on the ex-dividend date. The
Company accounts separately for the assets, liabilities and operations
of each Fund. Direct expenses of a Fund are charged to that Fund while
general expenses of the Company are allocated among the Funds based on
relative net assets. The investment income and expenses of the Value Eq-
uity Fund and Intermediate Fixed Income Fund (other than the expenses
incurred under the Service Plan and class specific expenses) and real-
ized and unrealized gains and losses on the investments of each such
Fund are allocated to the separate classes of shares of each such Fund
based upon their relative net asset value on the date income is earned
or expenses and realized and unrealized gains and losses are incurred.
C) Dividends and Distributions to Shareholders: Dividends from net invest-
ment income are declared daily and paid monthly to shareholders of the
Money Market Funds, Intermediate Fixed Income Fund and the Maryland Tax-
Exempt Bond Fund; are declared and paid quarterly to shareholders of the
Value Equity Fund; and are declared and paid semiannually to sharehold-
ers of the International Equity Fund. Any net realized capital gains are
distributed annually.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principals. These differences are primarily due to
differing treatments for foreign currency transactions.
D) Federal Income Taxes: Each of the Funds is a separate taxable entity and
intends to qualify for the tax treatment applicable to regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended, and,
among other things, is required to make the requisite distributions to
its shareholders which will relieve it from Federal income or excise
taxes. Therefore, no provision has been recorded for Federal income or
excise taxes.
58
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1.SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Under current tax law, capital losses and foreign currency losses real-
ized after October 31 may be deferred and treated as occurring on the
first day of the following fiscal year. The following losses will be
treated as arising on the first day of fiscal year ended May 31, 1997.
<TABLE>
<CAPTION>
CAPITAL LOSSES
DEFERRED
--------------
<S> <C>
Government Money Market Fund............................... 9,099
Intermediate Fixed Income Fund............................. 73,725
</TABLE>
E) Organizational Costs: Costs incurred in connection with the registration
and initial public offering of shares of the Funds have been deferred
and are being amortized on a straight-line basis for a five-year period.
F) Repurchase Agreements: The Prime Money Market Fund, Government Money
Market Fund, Value Equity Fund, International Equity Fund, Intermediate
Fixed Income Fund and Maryland Tax-Exempt Bond Fund may agree to pur-
chase portfolio securities from financial institutions, such as banks
and broker-dealers, subject to the seller's agreement to repurchase them
at an agreed upon date and price. In the case of the Prime Money Market
Fund and Government Money Market Fund, collateral for repurchase agree-
ments may have longer maturities than the maximum permissible remaining
maturity of portfolio investments. The seller will be required on a
daily basis to maintain the value of the securities subject to the re-
purchase agreement at not less than the repurchase price (including ac-
crued interest), plus the transaction costs the Funds could expect to
incur if the seller defaults, marked-to-market daily.
G) Foreign Currency Translation: Foreign currency amounts are translated
into U.S. dollars at prevailing exchange rates as follows: assets and
liabilities at the rate of exchange prevailing at the end of the respec-
tive period, purchases and sales of securities and income and expenses
at the rate of exchange prevailing on the dates of such transactions.
The International Equity Fund does not isolate that portion of the re-
sults of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
H) Forward Foreign Currency Contracts: The International Equity Fund enters
into forward foreign currency contracts in order to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio
holdings. All commitments are marked-to-market daily at the applicable
foreign exchange rate and any resulting unrealized gains or losses are
recorded currently. The gain or loss arising from the difference between
the original contracts and the closing of such contracts is included in
income as a component of realized gain or loss on foreign currency. Such
contracts, which protect the value of a Fund's investment securities
against a decline in the value of currency, do not eliminate fluctua-
tions in the underlying prices of the securities, but merely establish
an exchange rate at a future date. Also, although such contracts tend to
minimize the risk of loss due to a decline in the value of a hedged cur-
rency, at the same time they tend to limit any potential gain that might
be realized should the value of such foreign currency increase.
59
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
2. INVESTMENT ADVISER, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS
Mercantile-Safe Deposit and Trust Company ("Mercantile") provides investment
advisory and administration services to each Fund pursuant to Investment Advi-
sory Agreements and an Administration Agreement. For its services as Adviser,
Mercantile receives an advisory fee computed daily and payable monthly at an
annual rate of .25% of the average daily net assets of each of the Prime Money
Market Fund, Government Money Market Fund, and Tax-Exempt Money Market Fund;
.60% of the average daily net assets of the Value Equity Fund; .80% of the av-
erage daily net assets of the International Equity Fund (.45% of which fee
Mercantile pays to CastleInternational Asset Management Limited., as sub-ad-
viser); .35% of the average daily net assets of the Intermediate Fixed Income
Fund; and .50% of the average daily net assets of the Maryland Tax-Exempt Bond
Fund. For its services as Administrator, Mercantile receives an administration
fee computed daily and payable monthly at an annual rate of .125% of the aver-
age daily net assets of each Fund. Mercantile may, at its discretion, volun-
tarily waive any portion of its advisory fee or its administration fee for any
Fund. Mercantile does not receive a fee for advisory services provided to the
Tax-Exempt Money Market Fund (Trust).
Under the Service Plan with respect to AFBA Five Star Shares, institutions
("Service Organizations") agree to provide support service to their clients
who are the beneficial owners of AFBA Five Star Shares of the Value Equity and
Intermediate Fixed Income Funds. For these services, the Funds agree to pay
the Service Organizations a fee at the an annual rate of .25% of the average
daily net assets of each Fund's outstanding AFBA Five Star Shares.
Shares in each Fund are sold on a continuous basis without a sales load by
the Company's distributor, BISYS Fund Services ("the Distributor"). The Dis-
tributor receives no fee for these services.
Directors of the Company each receive from the Company an annual fee of
$3,500 and a fee of $1,625 for each Board meeting attended and are reimbursed
for all out-of-pocket expenses relating to attendance at meetings. Officers of
the Company do not receive compensation from the Company for serving as offi-
cers. No person who is a director, officer or employee of the Adviser serves
as a director, officer or employee of the Company. During the year ended May
31, 1996, the Funds paid legal fees to a law firm, a partner of which serves
as Secretary of the Company.
3. NET ASSETS
At May 31, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND (TRUST)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Capital Paid-In......... $326,960,429 $264,874,957 $50,143,328 $46,539,458
Accumulated Realized
Gain (Loss) on
Investments............ (82,282) (149,868) (6,566) 1,823
------------ ------------ ----------- -----------
$326,878,147 $264,725,089 $50,136,762 $46,541,281
============ ============ =========== ===========
</TABLE>
60
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. NET ASSETS -- CONTINUED
<TABLE>
<CAPTION>
VALUE INTERNATIONAL INTERMEDIATE MARYLAND
EQUITY EQUITY FIXED INCOME TAX-EXEMPT
FUND FUND FUND BOND FUND
------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
Capital Paid-In
Institutional Class..... $ 86,861,309 $67,729,337 $44,738,792 $10,763,521
AFBA Five Star Class.... 317,030 -- 352,900 --
Accumulated Realized Gain
(Loss) on Investments.... 798,638 738,387 (171,015) (631,281)
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency................. 19,202,505 6,193,604 (475,506) 53,577
Undistributed Net
Investment Income........ 383,806 1,015,018 2,895 --
------------ ----------- ----------- -----------
$107,563,288 $75,676,346 $44,448,066 $10,185,817
============ =========== =========== ===========
</TABLE>
4. CAPITAL STOCK
Transactions in shares of the Company are summarized as follows:
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND
-------------------------- ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 434,185,717 492,510,690 546,351,190 467,743,955
Shares Redeemed......... (490,322,690) (457,766,048) (545,573,787) (477,734,723)
Shares Reinvested....... 977,895 683,060 208,389 84,488
------------ ------------ -------------- --------------
Net Increase (Decrease)
in Shares.............. (55,159,078) 35,427,702 985,792 (9,906,280)
Shares Outstanding:
Beginning of Period.... 382,119,507 346,691,805 263,889,165 273,795,445
------------ ------------ -------------- --------------
End of Period.......... 326,960,429 382,119,507 264,874,957 263,889,165
============ ============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND (TRUST)
-------------------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 98,464,935 93,743,923 43,529,526 46,932,392
Shares Redeemed......... (117,428,168) (106,897,393) (52,034,691) (65,118,642)
Shares Reinvested....... 4,217 32,063 0 0
------------ ------------ ----------- -----------
Net Increase (Decrease)
in Shares.............. (18,959,016) (13,121,407) (8,505,165) (18,186,250)
Shares Outstanding:
Beginning of Period.... 69,102,344 82,223,751 55,044,623 73,230,873
------------ ------------ ----------- -----------
End of Period.......... 50,143,328 69,102,344 46,539,458 55,044,623
============ ============ =========== ===========
</TABLE>
61
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
VALUE EQUITY FUND
---------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------- ---------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ------------ --------------
<S> <C> <C> <C>
Shares Sold............... 1,678,924 3,524,889 22,663
Shares Redeemed........... (1,459,804) (1,245,712) (7)
Shares Reinvested......... 335,598 137,627 25
---------- ---------- ------
Net Increase (Decrease) in
Shares................... 554,718 2,416,804 22,681
Shares Outstanding:
Beginning of Period...... 6,801,920 4,385,116 0
---------- ---------- ------
End of Period............ 7,356,638 6,801,920 22,681
========== ========== ======
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1996 MAY 31, 1995
------------ ------------
<S> <C> <C> <C>
Shares Sold............... 1,059,437 2,447,856
Shares Redeemed........... (1,009,713) (527,850)
Shares Reinvested......... 55,904 20,340
---------- ----------
Net Increase (Decrease) in
Shares................... 105,628 1,940,346
Shares Outstanding:
Beginning of Period...... 5,960,654 4,020,308
---------- ----------
End of Period............ 6,066,282 5,960,654
========== ==========
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
-----------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------- ---------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ------------ --------------
<S> <C> <C> <C>
Shares Sold............... 1,170,604 1,968,576 34,055
Shares Redeemed........... (1,232,150) (1,215,322) (204)
Shares Reinvested......... 108,696 60,963 92
---------- ---------- ------
Net Increase (Decrease) in
Shares................... 47,150 814,217 33,943
Shares Outstanding:
Beginning of Period...... 4,280,311 3,466,094 0
---------- ---------- ------
End of Period............ 4,327,461 4,280,311 33,943
========== ========== ======
</TABLE>
62
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
MARYLAND TAX-EXEMPT BOND FUND
-----------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1996 MAY 31, 1995
------------ ------------
<S> <C> <C>
Shares Sold................................. 115,810 127,758
Shares Redeemed............................. (321,232) (912,593)
Shares Reinvested........................... 15,078 14,372
-------------- --------------
Net Increase (Decrease) in Shares........... (190,344) (770,463)
Shares Outstanding:
Beginning of Period........................ 1,188,798 1,959,261
-------------- --------------
End of Period.............................. 998,454 1,188,798
============== ==============
</TABLE>
5. FORWARD FOREIGN CURRENCY CONTRACTS
A summary of forward foreign currency contracts which were outstanding at May
31, 1996 is as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS TO APPRECIATION/
SETTLEMENT DATES DELIVER/RECEIVE IN EXCHANGE FOR (DEPRECIATION)
---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Foreign Currency Sales.. 6/4/96 BP 242,713 $ 367,832 $ (8,247)
6/4/96 BP 209,530 317,542 (7,119)
7/31/96 BP 2,500,000 3,771,200 (101,803)
7/31/96 DM 3,000,000 1,973,684 (3,382)
7/31/96 DG 2,300,000 1,353,499 (3,274)
7/31/96 FF 13,200,000 2,569,243 3,047
7/31/96 SF 1,900,000 1,550,135 20,344
----------- ---------
$11,903,135 (100,434)
----------- ---------
Foreign Currency Pur-
chases................. 6/4/96 BP 111,834 $ 169,484 $ 3,800
---------
$ (96,634)
=========
</TABLE>
Currency Legend
BP British Pound
DM German Mark
DG Dutch Guilder
FF French Franc
SF Swiss Franc
63
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
6. PURCHASES & SALES OF SECURITIES
For the year ended May 31, 1996, total aggregate purchases and proceeds from
sales of investment securities (excluding short-term securities) were as fol-
lows:
<TABLE>
<CAPTION>
U.S. U.S.
GOVERNMENT GOVERNMENT
PURCHASES * SALES * PURCHASES SALES
----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Value Equity Fund............. $48,513,480 $38,715,567 $ 0 $ 4,011,250
International Equity Fund..... 41,583,354 37,387,278 0 0
Intermediate Fixed Income
Fund......................... 0 1,988,815 22,902,846 20,203,410
Maryland Tax-Exempt Bond
Fund......................... 2,250,698 4,715,666 0 0
</TABLE>
*(excluding short-term and U.S. Government securities)
7. CAPITAL LOSS CARRYOVERS
At May 31, 1996, the following Funds had capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER YEAR
------------ ----------
<S> <C> <C>
Prime Money Market Fund.................... $ 73,906 2003 through 2004
Government Money Market Fund............... 140,768 2003 through 2004
Tax-Exempt Money Market Fund............... 5,946 2003 through 2004
Intermediate Fixed Income Fund............. 65,316 2003
Maryland Tax-Exempt Bond Fund.............. 631,281 2003 through 2004
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the respective Funds.
64
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Directors of the M.S.D.&T. Funds,
Inc.
We have audited the accompanying statements of net assets of M.S.D.&T. Funds,
Inc. (Prime Money Market Fund, Government Money Market Fund, Tax-Exempt Money
Market Fund, Tax-Exempt Money Market Fund (Trust), Value Equity Fund, Interna-
tional Equity Fund, Intermediate Fixed Income Fund and Maryland Tax-Exempt
Bond Fund) as of May 31, 1996, and the related statements of operations for
the year then ended, and the statements of changes in net assets and the fi-
nancial highlights for each of the periods presented. These financial state-
ments and financial highlights are the responsibility of the Fund's manage-
ment. 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 stan-
dards. Those standards require that we plan and perform the audit to obtain
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 May
31, 1996, by correspondence with the custodian and brokers. An audit also in-
cludes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
the M.S.D.&T. Funds, Inc. (Prime Money Market Fund, Government Money Market
Fund, Tax-Exempt Money Market Fund, Tax-Exempt Money Market Fund (Trust),
Value Equity Fund, International Equity Fund, Intermediate Fixed Income Fund
and Maryland Tax-Exempt Bond Fund) as of May 31, 1996, the results of its op-
erations for the year then ended, and the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 18, 1996
65
<PAGE>
IMPORTANT TAX INFORMATION (UNAUDITED)
During the fiscal year ended May 31, 1996:
100.0% of the distributions paid by the Prime Money Market Fund, the
Government Money Market Fund and the Intermediate Fixed Income Fund
were derived from net investment income and are taxable as ordinary in-
come.
100.0% of the distributions paid by the Tax-Exempt Money Market Fund,
the Tax-Exempt Money Market Fund (Trust) and the Maryland Tax-Exempt
Bond Fund were exempt-interest dividends, excludable from gross income
for Federal income tax purposes.
33.4% of the distributions paid by the Value Equity Fund were derived
from net investment income and short-term capital gains and are taxable
as ordinary income and 66.6% were derived from long term capital gains
and are taxable at the long term capital gain rate. Of such distribu-
tions derived from net investment income and short-term capital gains,
100% qualify for the dividends received deduction available to corpo-
rate shareholders.
10.0% of the distributions paid by the International Equity Fund were
derived from net investment income and short-term capital gains and are
taxable as ordinary income and 90.0% were derived from long term capi-
tal gains and are taxable at the long term capital gain rate.
SHAREHOLDER MEETING OF THE INTERNATIONAL EQUITY FUND
At a Special Meeting of Shareholders (the "Meeting") of the International
Equity Fund (the "Fund") held on May 17, 1996, shareholders of the Fund ap-
proved a new Sub-Advisory Agreement between Mercantile-Safe Deposit & Trust
Company, as adviser, and CastleInternational Asset Management Limited, as sub-
adviser, with respect to the Fund. Of the 6,025,063.053 shares of the Fund
outstanding on April 3, 1996, the record date for the Meeting, and the
5,121,544.620 shares of the Fund represented at the Meeting in person or by
proxy, 5,038,795.393 shares were voted in favor of the resolution approving
the new Sub-Advisory Agreement, 7,174.044 were voted against such resolution,
and 75,575.183 shares abstained.
66
<PAGE>
CUSTODIAN (EXCEPT FOR THE INTERNATIONAL EQUITY FUND)
Fifth Third Bank
Cincinnati, OH
DISTRIBUTOR
BISYS Fund Services
Columbus, Ohio
CUSTODIAN FOR THE INTERNATIONAL EQUITY FUND AND TRANSFER AGENT:
State Street Bank and Trust Company
Boston, MA
This report is submitted for the general information of the shareholders of
M.S.D.& T. Funds, Inc. It is not authorized for distribution to prospective
investors unless accompanied or preceded by current Prospectuses for the Funds
which contain information concerning the Funds' investment policies and ex-
penses as well as other pertinent information.
Shares of the Funds are not bank deposits or obligations of, or guaranteed,
endorsed or otherwise supported by Mercantile Safe Deposit and Trust Company,
its parent company or its affiliates and are not federally insured or guaran-
teed by the U.S. Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other governmental agency. Investment in the
Funds involves investment risks, including possible loss of principal.
