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Previous: MSD&T FUNDS INC, N-30D, 1997-02-04 |
Next: WINCANTON CORP, 10-Q/A, 1997-02-04 |
<PAGE>
[LETTERHEAD OF AFBA APPEARS HERE]
Semi-Annual Report
November 30, 1996
Dear Shareholder:
It is a pleasure to send you the semi-annual report for the AFBA Five Star
Shares of the M.S.D.&T. Funds, Inc. (the "Company") for the six months ended
November 30, 1996. The report includes financial information on the Value Equity
and Intermediate Fixed Income Funds.
During the past six months the stock and bond markets rewarded investors with
returns well above their long-term averages. The S&P 500 Index posted a total
return of 14.4%, while the Lehman Brothers Intermediate Government/Corporate
Index earned 6.1%. A favorable tailwind to the financial markets' performance
has been provided by large inflows of funds. The stock market has been the
beneficial recipient of unprecedented mutual fund inflows while foreign central
banks have purchased Treasury securities in record amounts. At the same time,
economic activity has expanded at a pace which has driven earnings higher
without inflationary consequences. Monetary policy makers have kept short-term
interest rates stable while fiscal policy has focused on balancing the federal
budget deficit.
The AFBA Five Star Shares of the M.S.D.&T. Value Equity Fund generated a 14.1%
total return for the six months ending November 30, 1996(1). Since its inception
in late 1995 through November 30, 1996, the Fund's AFBA Five Star Shares have
earned an average annual total return of 22.9%(1).
On balance, interest rates on term securities have trended downward during the
past six months, resulting in small capital appreciation complementing income
returns. The Federal Reserve Bank correctly anticipated a slowing growth rate in
the economy and chose to leave short-term interest rates unchanged. The status
quo in Fed policy had beneficial consequences for the bond markets where market
participants had already discounted a slightly more restrictive policy. For the
six months ended November 30, 1996 the AFBA Five Star Shares of the M.S.D.&T.
Intermediate Fixed Income Fund had a total return of 6.0%(1) while the Lehman
Brothers Intermediate Government/Corporate Index showed a 6.1% gain.
The investment adviser anticipates a benign economic environment where Real GDP
is not anticipated to drop to recessionary levels nor threaten to expand above
the Federal Reserve Bank's perceived target range of non-inflationary growth.
Indeed, the fundamentals of slow growth, subdued reported inflation, continued
inflows of funds and fiscal and monetary policies favorable toward the capital
markets is widely apparent. The major concern of the adviser is that much of the
good news may already be imbedded at current price levels. The adviser does not
anticipate any significant changes in monetary or fiscal policies which would
drastically effect the current equilibrium.
The pages that follow discuss the performance, structure and strategy of each of
the M.S.D.&T. Funds, as well as providing a detailed list of assets held(2). We
appreciate your investment in the AFBA Five Star Shares of the M.S.D.&T. Funds
and welcome any comments or questions regarding the Funds.
Sincerely,
/s/ Leslie B. Disharoon
Leslie B. Disharoon
<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 or AFBA Industrial Bank, its parent company or its affiliates, and
such shares are not federally insured by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
governmental agency. AFBA Industrial Bank is a wholly-owned subsidiary of Armed
Forces Benefit Services, Inc. and is not affiliated with AEGON USA, Mercantile-
Safe Deposit and Trust Company, BISYS Fund Services, The Fifth Third Bank or
State Street Bank and Trust Company. Investment in the Funds involves risk,
including the possible loss of principal.
For more complete information on the AFBA Five Star Shares of the M.S.D.&T.
Funds, Inc., please call (800) 782-4797 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 original
cost. Figures for the period indicated reflect fee waivers in effect,
reinvestment of dividends, distributions, and capital gains as well as changes
in share price. Fee waivers may result in higher total returns than would occur
if full fees were charged. Past performance is not a guarantee of future
results.
<TABLE>
<CAPTION>
Value Equity Fund Intermediate Fixed Income Fund
(AFBA Five Star (AFBA Five Star
Shares) Shares)
------------------- -----------------------------
<S> <C> <C>
Total Return for the one year ended
December 31, 1996 19.4% 2.8%
Inception Date 12/1/95 12/1/95
Total return since inception to December 31, 1996 19.7% 3.6%
</TABLE>
(2) The composition of the Funds' holdings is subject to change.
- ---------------------------
2
<PAGE>
The M.S.D.&T. Value Equity Fund
The equity market continued to advance during the six months ended November 30,
1996. The S&P 500 Index produced a total return of 14.4% for the six months, a
return well in excess of the long run average return for equity securities in
the U.S. market.
The market benefited from the benign outlook for inflation and interest rates,
from the continuation of the strong trend in corporate profits, and the ongoing
substantial inflow of funds for investment in the equity market. Although most
measures of valuation were at or near record highs, enthusiasm of common stocks
continued throughout the first half of the Fund's fiscal year.
The AFBA Five Star Shares of the M.S.D.&T. Value Equity Fund produced a total
return for the six-month period of 14.1%, nearly matching the return of the
general market. The Fund's holdings of larger consumer oriented companies,
whose earnings are not dependent on the business cycle, contributed to the
result, as did well represented positions in the bank and insurance groups,
where falling interest rates aided earnings growth.
The recent focus on earnings growth and sustainability has resulted in a
slightly higher price/earnings ratio for the Fund and a slightly lower dividend
yield. Despite these changes, the Fund's yield and the portfolio relationship
of price to earnings continues to be below the average of the general market.
During the past six months, the Fund's cash reserves have been kept at minimal
levels.
The M.S.D.&T. Intermediate Fixed Income Fund
After initially rising on fears of a tightening monetary policy, interest rates
reversed themselves and fell by 0.6% to 0.8% across the Treasury yield curve by
the end of the semi-annual period. Market participants were concerned by rising
commodity prices and a fear of rising wage pressure as the unemployment rate
fell to new cyclical lows. However, when the Federal Reserve did not act to
raise short-term rates in late September, the market broke out of its summer-
long trading range, bringing down the yield on ten-year Treasuries to about 6%.
During the past six months, investment quality within the Fund remained very
high. Combined Treasury, Government Agency and Government Mortgage exposure
totaled 82% of the Fund. During the first half of the semi-annual period,
investments were made in the ten year area of the Treasury curve as yields
approached 7%. Additionally, the corporate bond exposure was increased
incrementally in the five to ten year sector, as some yield spreads widened near
the end of the period. The average maturity of the Fund fell slightly by 0.1
years to 4.9 years.
As a result of the decline in interest rates, the Fund's AFBA Five Star Shares
enjoyed a strong rise in NAV over the period, increasing $0.33 to $10.53 per
share. Looking out over the next twelve to eighteen months, the investment
adviser is concerned by the increasing need for foreign investment to maintain
the current interest rate environment. Should yields around the world start to
rise due to increased economic activity, U.S. yields may be forced higher in a
sympathetic move. Outside of this need for foreign capital, the domestic
indicators continue to point to a benign interest rate environment.
3
<PAGE>
M.S.D.&T. Funds, Inc.
VALUE EQUITY FUND
Statement of Net Assets
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of Number of
Net Assets Shares Value
---------- ------ -----
<S> <C> <C> <C>
COMMON STOCK 97.8%
Airlines 1.6%
Southwest Airlines Co. 76,700 $ 1,898,325
-------------
Banks 7.9%
Barnett Banks, Inc. 32,000 1,408,000
CoreStates Financial Corp. 54,000 2,909,250
J.P. Morgan & Co. 27,000 2,548,125
Regions Financial Corp. 19,500 1,045,688
Sun Trust Banks Inc. 36,000 1,827,000
-------------
9,738,063
-------------
Beverages 2.3%
Pepsico Inc. 93,000 2,778,375
-------------
Chemicals 6.0%
Air Products & Chemicals Inc. 43,000 2,988,500
E.I. duPont deNemours & Co. 46,300 4,363,775
-------------
7,352,275
-------------
Computer Equipment 5.0%
Hewlett-Packard Co. 54,400 2,930,800
International Business Machine Corp. 20,000 3,187,500
-------------
6,118,300
-------------
Computer Software 1.7%
AutoDesk Inc. 24,000 672,000
Electronic Data Services Corp. 30,000 1,451,250
-------------
2,123,250
-------------
Consumer Goods 3.5%
Colgate Palmolive Co. 26,700 2,473,088
Proctor & Gamble Co. 17,000 1,848,750
-------------
4,321,838
-------------
Electrical Equipment 4.8%
ABB AB ADR 15,000 1,723,125
General Electric Co. 28,000 2,912,000
Hubbell, Inc. "B" 28,800 1,209,600
-------------
5,844,725
-------------
Electronics 2.5%
Intel Corp. 24,300 3,083,063
-------------
Foods 5.6%
Giant Food, Inc. "A" 73,500 2,480,625
McCormick & Co., Inc. 80,000 1,970,000
Nestle Registered ADR 43,900 2,384,903
-------------
6,835,528
-------------
Home Furnishings 0.3%
Maytag Corp. 21,000 401,625
-------------
Industrial Goods 4.0%
Corning Inc. 68,400 2,770,200
PPG Industries Inc. 36,000 2,205,000
-------------
4,975,200
-------------
Insurance 7.4%
Chubb Corp. 55,000 2,983,750
General RE Corp. 4,700 793,125
Jefferson Pilot Corp. 10,000 582,500
Lincoln National Corp. 42,100 2,268,138
Unum Corp. 34,500 2,453,812
-------------
9,081,325
-------------
Iron/Steel 1.5%
Worthington Industries Inc. 93,000 1,848,375
-------------
Machinery & Heavy Equipment 3.6%
Caterpillar, Inc. 16,000 1,266,000
Giddings & Lewis Inc. 68,000 799,000
Illinois Tool Works, Inc. 27,600 2,366,700
-------------
4,431,700
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. Funds, Inc.
VALUE EQUITY FUND
Statement of Net Assets - Continued
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of Number of
Net Assets Shares Value
---------- ------ -----
<S> <C> <C> <C>
COMMON STOCK - Continued
Manufacturing 1.3%
Eastman Kodak Co. 20,000 $ 1,620,000
-------------
Medical Instruments & Supplies 2.4%
Johnson & Johnson 55,000 2,921,875
-------------
Natural Gas 1.4%
Questar Corp. 45,400 1,776,275
-------------
Oil Equipment & Services 4.2%
Halliburton Co. 22,922 1,381,050
Quaker State Corp. 80,000 1,370,000
Schlumberger Ltd. ADR 23,300 2,423,200
-------------
5,174,250
-------------
Paper & Forest Products 1.7%
Westvaco Corp. 72,300 2,042,475
-------------
Petroleum 6.2%
Amoco Corp. 29,725 2,307,403
Atlantic Richfield Co. 19,850 2,761,631
Exxon Corp. 27,500 2,602,187
-------------
7,671,221
-------------
Pharmaceuticals 8.4%
Bristol-Myers Squibb Co. 31,500 3,583,125
Pfizer Inc. 39,400 3,531,225
Warner Lambert Co. 45,000 3,217,500
-------------
10,331,850
-------------
Retail Department Stores 2.6%
May Department Stores Co. 41,300 2,013,375
Wal-Mart Stores, Inc. 48,000 1,224,000
-------------
3,237,375
-------------
Shoes 1.3%
Stride Rite Corp. 165,500 1,655,000
-------------
Technology 2.2%
Motorola, Inc. 50,000 2,768,750
-------------
Telecommunications 2.6%
Ericsson (LM) Tel - ADR 24,000 741,000
GTE Corp. 28,500 1,278,937
Lucent Technologies Inc. 24,059 1,233,024
-------------
3,252,961
-------------
Tobacco 2.5%
Philip Morris Inc. 30,000 3,093,750
-------------
Utilities-Telephone 3.3%
A T & T Corp. 48,000 1,884,000
MCI Communications Corp. 72,300 2,205,150
-------------
4,089,150
-------------
TOTAL COMMON STOCK
(Cost $90,236,969) 120,466,899
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. Funds, Inc.
VALUE EQUITY FUND
Statement of Net Assets - Concluded
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of Par
Net Assets Maturity (000) Value
---------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT 0.8%
Goldman Sachs & Co. (Agreement dated 11/29/96 to
be repurchased at $1,015,475, collateralized by
$760,000 (Value $1,049,000) U.S. Treasury Notes,
9.875%, due 11/15/15) 12/02/96 $ 1,015 $ 1,015,000
-------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,015,000) 1,015,000
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $91,251,969*) 98.6% 121,481,899
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.4% 1,697,164
------ --------------
NET ASSETS 100.0% $123,179,063
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
Institutional Shares
($121,775,670 / 7,379,366) $16.50
======
AFBA Five Star Shares
($1,403,393 / 85,186) $16.47
======
</TABLE>
- ----------------
* Cost for Federal income tax purposes is $91,323,127. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
Excess of value over tax cost............. $30,862,173
Excess of tax cost over value............. $ (703,401)
See Accompanying Notes to Financial Statments.
6
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE FIXED INCOME FUND
Statement of Net Assets
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of Par
Net Assets Maturity (000) Value
---------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS 19.7%
Federal Home Loan Bank 2.2%
Debentures
6.34% 06/13/05 $ 1,000 $ 1,004,530
-----------
Federal Home Loan Mortgage Corp. 2.6%
Debentures
8.14% 05/20/04 1,000 1,008,490
Mortgage Backed Securities
6.50% (Pool #E00201) 03/01/08 163 162,058
------------
1,170,548
Federal National Mortgage Association 6.5%
Medium Term Notes
6.08% 09/03/03 500 488,600
6.625% 03/21/06 1,000 1,023,190
Mortgage Backed Securities
6.00% (Pool #227994) 07/01/08 724 705,374
7.50% (Pool #282608) 05/01/09 742 758,545
------------
2,975,709
Government National Mortgage Association 8.4%
Mortgage Backed Securities
8.00% (Pool #308751) 11/15/06 256 265,178
8.00% (Pool #312726) 12/15/06 29 30,271
8.00% (Pool #319511) 12/15/06 79 82,089
6.50% (Pool #351994) 12/15/08 232 231,079
6.50% (Pool #359462) 01/15/09 244 242,914
6.00% (Pool #372668) 01/15/09 837 818,933
8.00% (Pool #389481) 04/15/09 263 273,084
8.00% (Pool #401484) 11/15/09 914 948,196
6.00% (Pool #410492) 01/15/11 166 162,160
6.00% (Pool #410497) 02/15/11 781 764,183
------------
3,818,087
------------
TOTAL AGENCY OBLIGATIONS
(Cost $8,910,483) 8,968,874
------------
CORPORATE BONDS 13.8%
Beverages 0.5%
Coca-Cola Co., Inc.
7.875% (Aa3, AA) 09/15/98 200 207,000
------------
Chemicals 0.5%
E.I. duPont de Nemours & Co.
6.00% (Aa3, AA-) 12/01/01 250 248,125
------------
Finance 4.0%
General Electric Capital Corp. Medium Term Notes
6.125% (Aaa, AAA) 04/15/97 500 501,390
Norwest Financial, Inc.
6.125% (Aa3, AA-) 08/01/03 300 296,250
6.375% (Aa3, AA-) 11/15/03 1,000 1,003,750
------------
1,801,390
------------
Foods 0.6%
Kellogg Co.
5.90% (Aaa, AAA) 07/15/97 250 250,457
------------
Pharmaceuticals 1.1%
SmithKline Beacham, PLC, Medium Term Notes
6.625% (Aa3/A+) 10/01/01 500 511,875
------------
Retail Merchandising 0.6%
Wal-Mart Stores, Inc.
5.50% (Aa2, AA) 09/15/97 250 249,935
------------
Utilities - Electric 2.2%
Wisconsin Electic Power Co.
6.625% (Aa3/AA) 11/15/06 1,000 1,008,750
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE FIXED INCOME FUND
Statement of Net Assets - Continued
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of Par
Net Assets Maturity (000) Value
---------- -------- ----- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS - Continued
Utilities - Gas 2.7%
Consolidated Natural Gas Co.
5.75% (A1, AA-) 08/01/03 $ 475 $ 461,938
Northern Illinois Gas Co.
5.875% (Aa1, AA) 05/01/00 500 493,750
Wisconsin Natural Gas Co.
6.125% (Aa3, AA) 09/01/97 260 260,975
------------
1,216,663
------------
Utilities - Telephone 1.6%
New England Telephone & Telegraph Co.
5.05% (Aa2, AA-) 10/01/98 500 493,750
General Telephone Co. Illinois 1st Mortgage
7.50% (Aa3, AA) 02/01/02 250 253,438
------------
747,188
TOTAL CORPORATE BONDS** ------------
(Cost $6,236,220) 6,241,383
-----------
U.S. TREASURY OBLIGATIONS 62.7%
U.S. Treasury Notes
6.75% 05/31/97 300 302,073
7.375% 11/15/97 1,000 1,017,690
6.00% 11/30/97 1,000 1,005,520
5.875% 04/30/98 500 502,610
7.125% 10/15/98 1,000 1,027,860
5.50% 11/15/98 2,000 1,996,980
5.125% 12/31/98 1,000 991,120
5.00% 01/31/99 1,000 987,840
7.00% 04/15/99 1,000 1,029,890
6.50% 04/30/99 1,000 1,019,520
6.875% 07/31/99 1,000 1,029,290
6.00% 10/15/99 1,000 1,009,850
5.75% 10/31/00 1,500 1,498,860
5.50% 12/31/00 1,000 989,530
5.625% 02/28/01 600 596,262
6.25% 04/30/01 1,000 1,017,220
7.50% 11/15/01 450 481,905
6.25% 02/15/03 300 305,352
7.25% 05/15/04 3,000 3,228,150
7.25% 08/15/04 2,300 2,476,410
7.875% 11/15/04 1,000 1,116,480
7.50% 02/15/05 1,100 1,204,016
6.50% 05/15/05 1,500 1,546,065
7.000% 07/15/06 1,000 1,066,160
6.500% 10/15/06 1,000 1,032,970
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $27,648,033) 28,479,623
------------
REPURCHASE AGREEMENT 3.3%
Goldman, Sachs & Co.
(Agreement dated 11/29/96 to be repurchased at
$1,516,709 collateralized by $1,170,000 (Value
$1,563,000) U.S. Treasury Notes, 9.25%, due
2/15/16)
5.61% 12/02/96 1,516 1,516,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $1,516,000) 1,516,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE FIXED INCOME FUND
Statement of Net Assets - Concluded
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percentage of
Net Assets Value
---------- -----
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $44,310,736*) 99.5% $45,205,880
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5% 236,586
----- ------------
NET ASSETS 100.0% $45,442,466
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
Institutional Shares
($44,640,804 / 4,245,229) $10.52
AFBA Five Star Shares ======
($801,662 / 76,106) $10.53
======
</TABLE>
- ----------------
* Cost for Federal income tax purposes is $44,342,709. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
Excess of value over tax cost....... $ 1,013,604
Excess of tax cost over value....... $ (150,433)
- -------------------------------------------------------------------------------
INTERMEDIATE FIXED INCOME FUND
Maturity Schedule of Portfolio
November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Maturity Period Amount Par Percentage of Portfolio
-------------------- ------------- ------------------------
<S> <C> <C>
(cum)
1 - 6 months $3,566,000 8.06% 8.06%
7 - 12 months 2,760,000 6.24% 14.30%
13 - 18 months 500,000 1.13% 15.43%
19 - 24 months 3,700,000 8.37% 23.80%
25 - 36 months 6,000,000 13.57% 37.37%
37 - 48 months 2,364,004 5.34% 42.71%
49 - 60 months 4,950,300 11.19% 53.90%
Over 60 months 20,390,450 46.10% 100.00%
------------- ------------
$44,230,754 100.00%
------------- ------------
</TABLE>
Average Weighted Maturity - 4.9
years
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
9
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Six Months Ended November 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Intermediate
Value Equity Fixed Income
Fund Fund
-------------------- --------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $94,303 $1,407,146
Dividends 1,226,870 ---
-------------------- --------------------
TOTAL INVESTMENT INCOME 1,321,173 1,407,146
-------------------- --------------------
EXPENSES:
Investment advisory fees 330,469 77,690
Administration fees 68,848 27,746
Accounting agent fees 26,892 13,778
Custodian fees 9,206 5,118
Directors' fees 3,420 1,379
Transfer agent fees 23,471 16,907
Legal 11,399 4,597
Audit 7,990 3,671
Registration fees 3,785 3,710
Pricing service fees 978 3,535
Other 21,360 16,416
-------------------- --------------------
507,818 174,547
Fees waived by Investment Adviser (94,326) (30,632)
Fees waived by Administrator (10,465) (9,870)
-------------------- --------------------
TOTAL EXPENSES 403,027 134,045
-------------------- --------------------
NET INVESTMENT INCOME 918,146 1,273,101
-------------------- --------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from investments 3,424,251 26,502
Net unrealized appreciation
(deperciation) on investments 11,027,424 1,370,650
-------------------- --------------------
Net gain (loss) on investments 14,451,675 1,397,152
-------------------- --------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $15,369,821 $2,670,253
==================== ====================
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate
Value Fixed Intermediate
Equity Fund Value Income Fund Fixed
For the Equity Fund For the Income Fund
Six Months Ended For the Year Six Months Ended For the Year
November 30, 1996 Ended May 31, 1996 November 30, 1996 Ended May 31, 1996
------------------ -------------------- ------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income $918,146 $2,385,328 $1,273,101 $2,448,392
Net gain (loss) on investments $14,451,675 $13,463,650 $1,397,152 ($1,092,759)
------------------ -------------------- ------------------- ---------------------
Net increase (decrease) in net assets
resulting from operations 15,369,821 15,848,978 2,670,253 1,355,633
------------------ -------------------- ------------------- ---------------------
Distributions to shareholders from:
Net investment income
Institutional Class
($.14, $.35, $.30, and $.59 per
share, respectively) (1,031,160) (2,496,063) (1,257,406) (2,444,640)
AFBA Five Star Class
($.13, $.10, $.28 and $.28 per
share, respectively) (6,156) (375) (15,695) (3,752)
Net realized capital gains
Institutional Class
($.00, $.71, $.00, and $.00 per
share, respectively) --- (4,969,957) --- ---
------------------ -------------------- ------------------- ---------------------
Total distributions to
shareholders (1,037,316) (7,466,395) (1,273,101) (2,448,392)
------------------ -------------------- ------------------- ---------------------
Capital Share Transactions:
Proceeds of shares sold
Institutional Class 7,860,835 23,438,948 3,660,910 12,256,511
AFBA Five Star Class 926,098 316,761 424,439 354,044
Cost of shares redeemed
Institutional Class (8,133,302) (20,452,056) (5,118,976) (12,858,524)
AFBA Five Star Class (16,417) (100) (3,107) (2,093)
Value of shares issued in
reinvestment of dividends
Institutional Class 639,863 4,599,394 622,867 1,138,177
AFBA Five Star Class 6,193 369 11,115 949
------------------ -------------------- ------------------- ---------------------
Increase (decrease) in net assets
derived from capital share
transactions 1,283,270 7,903,316 (402,752) 889,064
------------------ -------------------- ------------------- ---------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 15,615,775 16,285,899 994,400 (203,695)
NET ASSETS:
Beginning of period 107,563,288 91,277,389 44,448,066 44,651,761
------------------ -------------------- ------------------- ---------------------
End of period $123,179,063 $107,563,288 $45,442,466 $44,448,066
================== ==================== =================== =====================
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
VALUE EQUITY FUND
---------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
---------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
NOVEMBER 30, FOR THE YEARS ENDED
1996 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1992
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 11.36 $ 10.69
-------- -------- ------- ------- ------- -------
Income From
Investment
Operations:
Net Investment
Income.......... 0.13 0.33 0.35 0.29 0.29 0.33
Net Realized and
Unrealized Gain
(Loss) on
Investments..... 1.93 1.89 1.55 (0.18) 1.13 0.66
-------- -------- ------- ------- ------- -------
Total From
Investment
Operations.. 2.06 2.22 1.90 0.11 1.42 0.99
-------- -------- ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders
from Net
Investment
Income.......... (0.14) (0.35) (0.34) (0.28) (0.30) (0.32)
Distributions to
Shareholders
from Net Capital
Gains........... 0.00 (0.71) (0.28) (0.08) (0.09) --
-------- -------- ------- ------- ------- -------
Total
Distributions (0.14) (1.06) (0.62) (0.36) (0.39) (0.32)
-------- -------- ------- ------- ------- -------
Net Asset Value,
End of Period.... $ 16.50 $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 11.36
======== ======== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------
Total Return...... 14.24% 17.24% 16.22% 0.87% 12.87% 9.51%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data Net Assets,
End of Period
(000)........... $121,776 $107,233 $91,277 $53,240 $46,754 $17,463
Ratio of Expenses
to Average Net
Assets.......... 0.73%(1)(3) 0.73%(1) 0.73%(1) 0.68%(1) 0.68%(1) 0.68%(1)
Ratio of Net
Income to
Average Net
Assets.......... 1.67%(3) 2.38% 2.99% 2.41% 2.68% 3.05%
Portfolio turnover
rate............. 21.44% 45.15% 33.26% 61.16% 11.99% 9.57%
Average commission
rate(5).......... $ 0.0637 N/A N/A N/A N/A N/A
<CAPTION>
--------------------------------
AFBA FIVE
STAR SHARES
--------------------------------
FOR THE PERIOD
FOR THE SIX DECEMBER 1,
MONTHS ENDED 1995(4)
NOVEMBER 30, TO MAY 31,
1996 1996
------------- ---------------
(UNAUDITED)
<S> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 14.56 $13.61
------- ------
Income From
Investment
Operations:
Net Investment
Income.......... 0.11 0.14
Net Realized and
Unrealized Gain
(Loss) on
Investments..... 1.93 0.91
------- ------
Total From
Investment
Operations.. 2.04 1.05
------- ------
Less Distributions
Dividends to
Shareholders
from Net
Investment
Income.......... (0.13) (0.10)
Distributions to
Shareholders
from Net Capital
Gains........... 0.00 0.00
------- ------
Total
Distribution (0.13) (0.10)
------- ------
Net Asset Value,
End of Period.... $ 16.47 $14.56
======= ======
- ----------------------------------------------------
Total Return...... 14.09% 7.72%
- ----------------------------------------------------
Ratios/Supplemental
Data Net Assets,
End of Period
(000)........... $ 1,403 $ 330
Ratio of Expenses
to Average Net
Assets.......... 0.98%(2)(3) 0.98%(2)(3)
Ratio of Net
Income to
Average Net
Assets.......... 1.34%(3) 2.36%(3)
Portfolio turnover
rate............. 21.44% 45.15%
Average commission
rate(5).......... $0.0637 N/A
</TABLE>
- -------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the six months ended November 30, 1996
and the years ended May 31, 1996, May 31, 1995, May 31, 1994, May 31,
1993, and May 31, 1992, would have been .92%, .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 six months ended November 30, 1996
and the period ended May 31, 1996 would have been 1.17% and 1.15%,
(annualized), respectively.
(3) Annualized.
(4) Commencement of Operations.
(5) Computed by dividing the total amount of commission paid by the total num-
ber of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. beginning 1996.
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
-------------------------------------------------------------------------------
INSTITUTIONAL SHARES
-------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
NOVEMBER 30, 1996 1996 1995 1994 1993 1992
----------------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 10.19 $ 10.43 $ 10.10 $ 10.55 $ 10.31 $ 9.97
------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income..... 0.30 0.59 0.56 0.50 0.56 0.60
Net Realized and
Unrealized Gain (Loss) on
Investments.............. 0.33 (0.24) 0.33 (0.39) 0.24 0.34
------- ------- ------- ------- ------- -------
Total From Investment
Operations.............. 0.63 0.35 0.89 0.11 0.80 0.94
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
from Net Investment
Income................... (0.30) (0.59) (0.56) (0.50) (0.56) (0.60)
Distributions to
Shareholders from Net
Capital Gains............ -- -- -- (0.06) -- --
------- ------- ------- ------- ------- -------
Total Distributions..... (0.30) (0.59) (0.56) (0.56) (0.56) (0.60)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period.................... $ 10.52 $ 10.19 $ 10.43 $ 10.10 $ 10.55 $ 10.31
======= ======= ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------
Total Return............... 6.24% 3.38% 9.13% 0.94% 7.94% 9.68%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period
(000).................... $44,641 $44,102 $44,652 $35,008 $28,078 $17,549
Ratio of Expenses to
Average Net Assets....... 0.60%(1)(3) 0.60%(1) 0.60%(1) 0.55%(1) 0.55%(1) 0.55%(1)
Ratio of Net Income to
Average.................. 5.74%(3) 5.66% 5.56% 4.75% 5.32% 5.76%
Portfolio turnover rate... 10.41% 52.79% 22.01% 48.58% 12.29% 13.76%
<CAPTION>
-------------------------------
AFBA FIVE
STAR SHARES
-------------------------------
FOR THE
FOR THE SIX PERIOD
MONTHS ENDED DECEMBER 1,
NOVEMBER 30, 1995(4)
1996 TO MAY 31, 1996
------------ ---------------
(UNAUDITED)
<S> <C> <C>
Net Asset Value, Beginning
of Period................. $10.20 $10.61
------ ------
Income From Investment
Operations:
Net Investment Income..... 0.28 0.28
Net Realized and
Unrealized Gain (Loss) on
Investments.............. 0.33 (0.41)
------ ------
Total From Investment
Operations.............. 0.61 (0.13)
------ ------
Less Distributions:
Dividends to Shareholders
from Net Investment
Income................... (0.28) (0.28)
Distributions to
Shareholders from Net
Capital Gains............ 0.00 --
------ ------
Total Distributions..... (0.28) (0.28)
------ ------
Net Asset Value, End of
Period.................... $10.53 $10.20
====== ======
- ------------------------------------------------------------
Total Return............... 6.04% (1.23)%
- ------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period
(000).................... $ 802 $ 346
Ratio of Expenses to
Average Net Assets....... 0.90%(2)(3) 0.90%(2)(3)
Ratio of Net Income to
Average.................. 5.46%(3) 5.50%(3)
Portfolio turnover rate... 10.41% 52.79%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the six months ended November 30, 1996
and the years ended May 31, 1996, May 31, 1995, May 31, 1994, May 31,
1993, and May 31, 1992, would have been .78%, .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 the six months ended November 30,
1996 and the period ended May 31, 1996 would have been 1.08% and 1.06%,
(annualized), respectively.
(3) Annualized.
(4) Commencement of Operations.
See Accompanying Notes to Financial Statements
13
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements
(Unaudited)
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
Incorporation 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 of 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 Intermediate
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). 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 each pro rata interest in the
respective Fund and bear the same fees and expenses, 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 Directors and each class bears certain
class specific expenses, such as transfer agent fees, printing fees and shares
registration fees. The financial statements herein relate to the Value Equity
and the Intermediated Fixed Income Fund (the "Funds").
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting 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: Investments held by the Value Equity Fund and
Intermediate Fixed Income Fund are valued at market value or, in the absence of
a market value with respect 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. Over-the-counter securities are valued at the mean of the
most recent available quoted bid and asked prices in the over-the-counter
market. 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, electronic 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 each Fund will fluctuate as the values of investment portfolios change.
B) Security Transactions and Investment Income: Security transactions are
accounted for on the trade date. The cost of investments sold is determined 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 (other than the expenses incurred under the Service Plan and class
specific expenses) and realized and unrealized gains and losses on the
investments are allocated to the separate classes of shares of each 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 investment
income are declared daily and paid monthly to shareholders of the Intermediate
Fixed Income Fund and are declared and paid quarterly to shareholders of the
Value 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
14
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements - Continued
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES - Continued
D) Federal Income Taxes: Each of the Funds is a separate taxable entity and
intends to qualify for the tax treatment applicable to regulated investment
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.
Under current tax law, capital losses and foreign currency losses realized 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.
Capital Losses
Deferred
---------------
Intermediate Fixed Income Fund 73,725
F) Repurchase Agreements: The Value Equity Fund and Intermediate Fixed Income
Fund may agree to purchase 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. The seller will be required
on a daily basis to maintain the value of the securities subject to the
repurchase agreement at not less than the repurchase price (including accrued
interest), plus the transaction costs the Funds could expect to incur if the
seller defaults, marked-to-market daily.
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 Advisory 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 .60% of the average daily net assets of the Value
Equity Fund and .35% of the average daily net assets of the Intermediate Fixed
Income Fund. For its services as Administrator, Mercantile receives an
administration fee computed daily and payable monthly at an annual rate of .125%
of the average daily net assets of each Fund. Mercantile may, at its discretion,
voluntarily waive any portion of its advisory fee or its administration fee for
any Fund.
Under the Service Plan with respect to AFBA Five Star Shares institutions
("Service Organizations") agree to provide support services 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 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
Distributor 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
officers. No person who is a director, officer or employee of the Adviser serves
as a director, officer or employee of the Company. During the six months ended
November 30, 1996, the Funds paid legal fees to a law firm, a partner of which
serves as Secretary of the Company.
15
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements - Continued
(Unaudited)
3. NET ASSETS
At November 30, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
Value Intermediate
Equity Fixed Income
Fund Fund
-------------- ---------------
<S> <C> <C>
Capital Paid-In
Institutional Class $ 87,228,704 $43,903,593
AFBA Five Star Class 1,232,904 785,347
Accumulated Realized Gain (Loss) on Investments 4,163,964 (134,922)
Net Unrealized Appreciation (Depreciation)
on Investments 30,229,930 895,144
Undistributed Net Investment Income
(Distribution in Excess of Net
Investment Income) 323,561 (6,696)
-------------- ---------------
$123,179,063 $45,442,466
============== ===============
</TABLE>
4. CAPITAL STOCK
Transactions in shares of the Company are summarized as follows:
<TABLE>
<CAPTION>
Value Equity Fund
-------------------------------------------------------------------------------------------------
Institutional Shares AFBA Five Star Shares
--------------------------------------------- ------------------------------------------------
For the Six Months For the Year For the Six Months For the Period
Ended Ended Ended Ended
November 30, 1996 May 31, 1996 November 30, 1996 May 31, 1996
--------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold 531,809 1,678,924 63,086 22,663
Shares Redeemed (552,450) (1,459,804) (1,071) (7)
Shares Reinvested 43,369 335,598 490 25
------------------- ------------------ ------------------- ------------------
Net Increase (Decrease) in
Shares. 22,728 554,718 62,505 22,681
Shares Outstanding:
Beginning of Period 7,356,638 6,801,920 22,681 0
------------------- ------------------ ------------------- ------------------
End of Period 7,379,366 7,356,638 85,186 22,681
=================== ================== =================== ==================
<CAPTION>
Intermediate Fixed Income Fund
-------------------------------------------------------------------------------------------------
Institutional Shares AFBA Five Star Shares
-------------------------------------------- -----------------------------------------------
For the Six Months For the Year For the Six Months For the Period
Ended Ended Ended Ended
November 30, 1996 May 31, 1996 November 30, 1996 May 31, 1996
-------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold 355,707 1,170,604 41,383 34,055
Shares Redeemed (498,695) (1,232,150) (299) (204)
Shares Reinvested 60,756 108,696 1,079 92
------------------- ------------------ ------------------- ------------------
Net Increase (Decrease) in
Shares. (82,232) 47,150 42,163 33,943
Shares Outstanding:
Beginning of Period 4,327,461 4,280,311 33,943 0
------------------- ------------------ ------------------- ------------------
End of Period 4,245,229 4,327,461 76,106 33,943
------------------- ------------------ ------------------- ------------------
</TABLE>
16
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements - Concluded
(Unaudited)
5. PURCHASES & SALES OF SECURITIES
For the six months ended November 30, 1996, total aggregate purchases and
proceeds from sales of investment securities (excluding short-term securities)
were as follows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Purchases * Sales * Purchases Sales
----------- --------- --------- -----
<S> <C> <C> <C> <C>
Value Equity Fund $24,192,501 $20,489,091 $0 $2,761,484
Intermediate Fixed Income Fund 2,493,860 0 1,994,688 5,737,306
</TABLE>
* (excluding short-term and U.S. Government securities)
6. CAPITAL LOSS CARRYOVERS
At May 31, 1996, the following Funds had capital loss carryovers:.
<TABLE>
<CAPTION>
Capital Loss Expiration
Carryover Year
--------- ----
<S> <C> <C>
Intermediate Fixed Income Fund 65,316 2003
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the Fund.
17
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
During the calendar year ended December 31, 1996:
35.9% 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 64.1% were derived from long term capital gains and are
taxable at the long term capital gain rate. Of such distributions derived
from net investment income and short-term capital gains, 100% qualify for
the dividends received deduction available to corporate shareholders.
100.0% of the distributions paid by the Intermediate Fixed Income Fund were
derived from net investment income and short-term capital gains and are
taxable as ordinary income.
- --------------------------------------------------------------------------------
CAPITAL GAIN DISTRIBUTIONS
During the calendar year of 1996, the M.S.D.&T. Funds distributed capital gains
to shareholders of the Value Equity Fund on 12/23/96. The Securities and
Exchange Commission requires mutual funds to disclose to shareholders the
composition of the capital gain distribution. Pursuant to this requirement,
these percentages are listed below:
<TABLE>
Short-Term Long-Term
---------- ---------
<S> <C> <C>
Value Equity Fund 0% 100.0%
</TABLE>
Short-term capital gain distributions are taxable to you as ordinary income.
Long-term capital gain distributions are taxable to you as long term capital
gains.
- --------------------------------------------------------------------------------
Investment Adviser and Administrator:
[LETTERHEAD OF MERCANTILE-SAFE DEPOSIT & TRUST COMPANY APPEARS HERE]
MERCANTILE-SAFE DEPOSIT & TRUST COMPANY
Affiliate Merchantile Bankshares Corporation
Baltimore, Maryland
Custodian:
Fifth Third Bank
Cincinnati, Ohio
Transfer Agent:
BISYS Fund Services Ohio, Inc.
Columbus, Ohio
Distributor:
BISYS Fund Services
Columbus, Ohio
AFBA Industrial Bank is a wholly-owned subsidiary of Armed Forces Benefit
Services, Inc. AFBA Industrial Bank is not affiliated with AEGON USA,
Mercantile-Safe Deposit and Trust,BISYS Fund Services Ohio, Inc., BISYS Fund
Services or Fifth Third Bank.
This report is submitted for the general information of the shareholders of the
AFBA Five Star Shares of the M.S.D.&T. Funds, Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by the
current Prospectus.
Shares of the Funds are not bank deposits or obligations of, or guaranteed,
endorsed or otherwise supported by Mercantile-Safe Deposit and Trust Co. or AFBA
Industrial Bank, their parent companies or affiliates and are not federally
insured or guaranteed by the U.S. Government, the Federal Deposit Insurance
Corp., the Federal Reserve Board or any other governmental agency. Investment in
the Funds involves investment risks, including possible loss of principal.
18
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