<PAGE>
M.S.D.&T. Funds, Inc.
.........................................................
Annual Report
May 31, 1997
<PAGE>
......................................................
Table of Contents
Chairman's Letter i
Funds Reviews iv
Statements of Net Assets
Prime Money Market Fund 1
Government Money Market Fund 5
Tax-Exempt Money Market Fund 8
Tax-Exempt Money Market Fund (Trust) 13
Value Equity Fund 17
International Equity Fund 21
Intermediate Fixed Income Fund 26
Maryland Tax-Exempt Bond Fund 30
Investment Abbreviations 32
Statements of Operations 33
Statements of Changes in Net Assets 35
Financial Highlights 39
Notes to Financial Statements 47
Important Tax Information 56
<PAGE>
Dear Shareholder,
It is a pleasure to present the annual report for M.S.D.&T. Funds, Inc. (the
"Company") for the fiscal year ended May 31, 1997. The report includes finan-
cial information and fund synopsis for the Value Equity, International Equity,
Intermediate Fixed Income and Maryland Tax-Exempt Bond Funds as well as the
Prime, Government, Tax-Exempt and Tax-Exempt (Trust) Money Market Funds.
Fiscal year 1997 proved to be rewarding for M.S.D.&T. Funds' shareholders as
stock prices rose and interest rates, on balance, fell. This favorable back-
drop served as the catalyst for investment returns that exceeded their long
term averages for another year. The Institutional Shares of the M.S.D.&T.
Value Equity Fund earned a total return of 31.26% for the twelve month period
ended May 31, 1997(1), outpacing the comparable 29.41% return on the Standard
& Poor's 500 Index. The M.S.D.&T. International Equity Fund(2) provided share-
holders with a 9.81% return for the fiscal year ended May 31, 1997(1), also
above its relative benchmark the MSCI EAFE (Europe, Australia, Far East) Index
which earned 7.54%. The Institutional Shares of the M.S.D.&T. Intermediate
Fixed Income Fund posted a total return of 7.12% for the fiscal year ended May
31, 1997(1), lagging somewhat its benchmark, the Lehman Brothers Intermediate
Government/Corporate Bond Index, which returned 7.38% for the fiscal year
ended May 31, 1997. Investors in the M.S.D.&T. Maryland Tax-Exempt Bond Fund
earned a 6.80% return for the period(1) while the Lehman Brothers Municipal
Bond Index earned 8.28%.
Importantly, the flagship M.S.D.&T. Value Equity Fund has been recognized by
Morningstar Inc. as having produced returns among the highest within its in-
vestment style category over the past twelve months. This has had the positive
result of increasing the risk-adjusted rating to four stars for the three and
five-year periods ended June 30, 1997, according to the Morningstar rating
system(3). This has largely been the result of a new investment management
team consisting of Brian Topping and Mani Govil. The managers will continue to
search for companies and industries with prospects for superior earnings and
dividends growth.
Money market rates have begun to rise as a result of the action initiated by
the Federal Reserve Bank to increase short-term interest rates. The M.S.D.&T.
Money Market Funds continue to generate competitive returns while providing
stability of principal. The seven-day current yields for each Money Market
Fund as of May 31, 1997 are detailed below:
<TABLE>
<CAPTION>
PRIME(4) GOVERNMENT(4) TAX-EXEMPT(4) TAX-EXEMPT (TRUST)(4)
-------- ------------- ------------- ---------------------
<S> <C> <C> <C>
5.19% 5.08% 3.39% 3.61%
3.45%(5) 3.67%(5)
</TABLE>
The investment adviser anticipates a more challenging environment for the up-
coming fiscal year. Domestic economic activity may experience growth above the
Federal Reserve Bank's comfort level, widely perceived to be real GDP growth
no greater than 2.5%. Although reported inflation remains well behaved, the
central bank may choose to act in a preemptive manner and increase borrowing
costs to inhibit potentially inflationary economic activity. Because tradi-
tional measures of stock market valuation such as the price/earnings,
price/book and dividend yield ratios are at or near record levels, any in-
crease in interest rates may threaten current multiples. This could put addi-
tional emphasis on
<PAGE>
earnings generation which should make stock selection critical. The adviser is
also anticipating better business conditions from developed economies which
should provide a favorable backdrop to most industrialized stock markets. How-
ever, a synchronized worldwide expansion may have a dampening effect on bond
markets.
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(6).
We appreciate your investment in the M.S.D.&T. Funds and welcome any comments
or questions regarding the Funds.
Best Regards,
LOGO
/s/ Leslie B. Disharoon
Leslie B. Disharoon
Chairman and President
- --------------------------------------------------------------------------------
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 1-800-551-2145
TO RECEIVE A PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING. BISYS
FUND 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, rein-
vestment 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 INTERMEDIATE FIXED
EQUITY FUND INCOME FUND 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,
1997................... 37.8% 13.3% 6.9% 7.1%
Annualized Total Return
for five years ended
June 30, 1997.......... 16.7% N/A 5.6% 5.7%
Inception Date.......... 2/28/91 7/2/93 3/14/91 6/2/92
Average annual total
return since inception
to June 30, 1997....... 15.6% 12.0% 6.3% 5.8%
</TABLE>
ii
<PAGE>
(2) International investing is subject to certain risks, 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) Morningstar proprietary rankings reflect historical risk-adjusted perfor-
mance as of June 30, 1997. The rankings are subject to change every month.
Funds with at least one year of performance history are assigned Morningstar
rankings from 1 star (lowest) to 5 stars (highest). Morningstar rankings are
calculated from the fund's performance relative to the monthly returns of
three-month U.S. Treasury bills. Returns are adjusted for fees and sales
loads. For the three-year and five-year periods ended June 30, 1997, Institu-
tional Shares of the Value Equity Fund received 4 star Morningstar rankings.
10% of the funds in an investment category receive 5 stars and 22.5% receive 4
stars. The Institutional Shares of the Value Equity Fund are included in
Morningstar's domestic equity category which is comprised of 1,997 funds for
the three-year period and 1,134 funds for the five-year period.
(4) Investments in the Money Market Funds are neither insured nor guaranteed
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 guarantee 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 Money Market Fund for the 7-day pe-
riod ended May 31, 1997 would have been:
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT (TRUST)
----- ---------- ---------- ------------------
<S> <C> <C> <C>
5.14% 5.02% 3.29% 3.54%
</TABLE>
(5) 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.
(6) 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, 1997, the Institutional Shares of the Value
Equity Fund produced a total return of 31.26%. For the same period, the S&P
500 Index returned 29.41%.
For the third consecutive year, the U.S. equity market produced returns well
in excess of the longer-term averages, reflecting an extremely positive eco-
nomic climate. The U.S. position in world trading and financial markets has
markedly improved. Many U.S. companies have become world suppliers while do-
mestic interest rate, inflation, productivity, employment and economic policy
factors have been supportive of superior financial market performance.
For the Value Equity Fund, the domestic market's performance for large capi-
talization issues and, in particular, those with export market exposure has
been beneficial. The Fund's concentration in companies and industries with
prospects for superior earnings and dividend growth has led to above average
results for the year.
The Fund has carried minimal cash reserves during the year and has remained
well diversified in a blend of issues having both growth and value character-
istics. The Fund's profile continues to show a higher dividend yield and a
lower ratio of price to earnings than is present in the general market.
iv
<PAGE>
THE M.S.D.&T. INTERNATIONAL EQUITY FUND
For the fiscal year ended May 31, 1997, the International Equity Fund produced
a total return of 9.81%. Over the same period, the MSCI EAFE Index gained
7.54%. In local currency terms, most international markets did extremely well
during the year, but a strengthening U.S. dollar dampened the overall returns
to U.S. investors.
The Japanese market had a very difficult year, falling 8% in local market
terms and over 15% in U.S. dollar terms. Although it rebounded in May, the yen
weakened throughout most of the year due to fiscal tightening and low interest
rates. The Japanese market was subdued by ongoing concerns such as government
debt, bad debts in the financial sector and questions regarding the aging pop-
ulation. Continued moves toward deregulation also negatively affected equities
because, in the short run, competition is likely to intensify. Hong Kong was
the Pacific region's best performer, enjoying stable interest rates, rising
property prices and a recovering economy. In addition, the imminent transfer
to China created high levels of speculative interest. Australian equities per-
formed well during the fiscal year just ended, led by the industrial sector.
European stock markets also performed well. Continental European markets bene-
fited from relatively stable economic environments, where low growth and low
inflation provided for interest rate reductions. Spain and Finland both expe-
rienced local currency returns in excess of 50%. Among the core markets, Swit-
zerland and the Netherlands each gained approximately 41% in local currency
terms and the German local currency return was 38%. Again, the stronger U.S.
dollar reduced returns to U.S. investors. The French and Italian markets were
less remarkable but still strongly positive. UK stocks rose just over 30% in
U.S. dollar terms, boosted by strength in the pound sterling. The Labour Party
won the May election, as expected, and this was well received by equity and
bond markets.
The Fund's exposure to emerging markets was increased throughout the period.
As of May 31, 1997, the Fund held investments in South Africa, the Philip-
pines, India, Indonesia, Mexico and Brazil. The Latin American markets were
laggards while the South African market did well during the second half of the
year following a relatively weak start.
v
<PAGE>
THE M.S.D.&T. INTERMEDIATE FIXED INCOME FUND
The past fiscal year saw several dramatic shifts in bond investor psychology
as the market grappled with such themes as 1) a booming economy, 2) an eco-
nomic soft landing, 3) an overstated inflation rate, 4) a resurgent economy
and 5) rising wage inflation--all within a twelve-month period. What became
apparent by the Spring of 1997 was that the U.S. economy was still expanding
above its trend rate and had just enjoyed its best combination of real growth
and low inflation in a dozen years. Additionally, the Federal Reserve openly
debated for most of the fiscal year whether or not to raise short-term inter-
est rates in a preemptory strike against a rise in the inflation rate. With
the unemployment rate below 5%, rising labor costs could start to squeeze cor-
porate earnings and start a cyclical rise in the inflation rate. By the end of
March, the Central Bank had raised the overnight bank lending rate by 0.25% in
the first of what we envision to be a series of tightening moves.
During the course of the fiscal year, ten-year term Treasuries swung between a
high yield of 7% and a low yield of 6%. However, by the end of the year, cou-
pon Treasury yields had barely moved from their past year's levels, having de-
clined 4 to 19 basis points. As such, total return was primarily affected by
income yield. Additionally, sectors within the bond market that benefited from
the strong economic growth, solid earnings and lowered volatility expectations
also enjoyed yield spread compression. Lower quality corporate, near-the-money
callable securities and mortgage backed securities performed best. In fact,
below investment grade bonds and emerging market debt enjoyed double digit re-
turns.
The Institutional Shares of the Intermediate Fixed Income Fund returned a
solid 7.12% for the fiscal year as income was supplemented with an increase in
the NAV from $10.19 to $10.31. This performance was slightly behind the bench-
mark Lehman G/C Intermediate Index which returned 7.38%. The Fund is actively
managed and the average maturity of the Fund had been extended during the
first half of the fiscal year to lock in attractive yield levels. This was ac-
complished through investments in the Treasury market and some high quality
corporate notes. However, during the second half of the fiscal year, the aver-
age maturity was reduced in order to mitigate the market value declines asso-
ciated with a renewed rise in interest rates. By year end, the average life of
the Fund stood at 3.7 years.
vi
<PAGE>
THE M.S.D.&T. MARYLAND TAX-EXEMPT BOND FUND
For the fiscal year ended May 31, 1997, the Maryland Tax-Exempt Bond Fund had
a total return of 6.80%, which represented the coupon income plus market ap-
preciation. This market appreciation in the price of municipal bonds reflected
a relatively flat new issue supply, good buying demand by retail investors and
insurance companies as well a narrowing of the relationship between the Trea-
sury market and municipal bonds as measured by the Bond Buyer Indices. Some of
the factors which helped the last fiscal year's performance could continue
into this fiscal year as new issuance volume should remain relatively flat and
retail investors still seek ways to shelter income through the purchase of
tax-free municipal bonds.
The economic and financial condition of the State of Maryland and its subdivi-
sions has for the most part improved as spending levels are more closely
matched to revenue estimates. In some cases "rainy day" funds have been able
to be built in the event the economy weakens; however, there is the risk that
if the economy stays relatively stable or grows, some of these funds could be
given back as tax reductions or used for special spending projects. Partly as
a result of the stronger economy, the State of Maryland passed an income tax
cut; however, it will be phased in over five years beginning January 1, 1998.
Even with this State income tax cut, combined Federal, State and local income
taxes remain relatively high, thus arguing well for demand by investors for
municipal bonds because of their relatively high, after-tax income. Interest-
ingly, during the first five months of this calendar year new issuance of
Maryland municipal bonds was down about 35% versus the national average of 5%.
This partly reflects the lower volume of refunding of older high cost issues
as well as the fiscal conservativeness being encouraged by voters. We would
expect new issuance volume to continue to be restrained unless there are
changes in the tax law relative to future refundings of outstanding issues or
new projects permitted to be financed on a tax-exempt basis.
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 15 year aver-
age 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>
LOGO
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Value Equity Fund and the S&P 500 Stock Index
<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
Jun-96 18137 21490
Jul-96 17448 20540
Aug-96 17862 20973
Sep-96 18599 22154
Oct-96 19150 22765
Nov-96 20734 24486
Dec-96 20522 24000
Jan-97 21786 25500
Feb-97 21852 25700
Mar-97 21253 24644
Apr-97 22515 26115
May-97 23837 27350
</TABLE>
LOGO
Comparison of Change In Value of $10,000 Investment In
M.S.D.&.T. International Equity Fund and the EAFE Index
<TABLE>
<CAPTION>
INTL EQUITY EAFE
----------------------------------------------------
<S> <C> <C>
May-93
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
Jun-96 13893 13513
Jul-96 13477 13119
Aug-96 13521 13148
Sep-96 13910 13497
Oct-96 13721 13360
Nov-96 14211 13891
Dec-96 14123 13712
Jan-97 13842 13232
Feb-97 14151 13449
Mar-97 14196 13498
Apr-97 14264 13569
May-97 15052 14452
</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>
LOGO
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
<TABLE>
<CAPTION>
MSD&T INTMD
FIXED LBKL INTMD
- ---------------------------------------------------------------
<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
Jun-96 13790 14709
Jul-96 13818 14753
Aug-96 13818 14765
Sep-96 14019 14970
Oct-96 14279 15235
Nov-96 14497 15437
Dec-96 14374 15338
Jan-97 14416 15398
Feb-97 14437 15427
Mar-97 14353 15320
Apr-97 14520 15501
May-97 14587 15630
- ---------------------------------------------------------------
</TABLE>
LOGO
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
<TABLE>
<CAPTION>
MD TAX
EXEMPT SHEARSON
- ---------------------------------------------------------------
<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 13083
Mar-96 12283 12916
Apr-96 12224 12879
May-96 12213 12874
Jun-96 12320 13014
Jul-96 12419 13133
Aug-96 12384 13130
Sep-96 12543 13314
Oct-96 12681 13464
Nov-96 12914 13711
Dec-96 12844 13653
Jan-97 12860 13679
Feb-97 12956 13805
Mar-97 12774 13621
Apr-97 12876 13736
May-97 13186 13942
- ---------------------------------------------------------------
</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 return 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, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS................ 11.0%
FEDERAL HOME LOAN BANK............ 1.6%
Notes
5.71%............................ 01/21/98 $ 6,000 $ 6,000,000
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION...................... 6.0%
Discount Notes
5.52%............................ 07/18/97 7,760 7,704,076
Floating Rate Notes**
5.53%............................ 09/02/97 14,250 14,245,684
------------
21,949,760
------------
STUDENT LOAN MARKETING
ASSOCIATION...................... 3.4%
Floating Rate Notes**
5.33%............................ 06/07/97 12,560 12,551,980
------------
TOTAL AGENCY OBLIGATIONS
(Cost $40,501,740)............ 40,501,740
------------
BANKERS' ACCEPTANCES.............. 4.0%
CoreStates Bank N.A.
5.59%............................ 07/22/97 10,000 9,920,808
First Chicago NBD Bank Corp.
5.31%............................ 07/22/97 5,000 4,962,388
------------
TOTAL BANKERS' ACCEPTANCES
(Cost $14,883,196)............ 14,883,196
------------
CERTIFICATES OF DEPOSIT........... 8.9%
DOMESTIC.......................... 3.8%
Canadian Imperial Bank of Canada
5.56%............................ 07/01/97 7,000 7,000,000
CoreStates Bank N.A.
5.50%............................ 07/02/97 7,000 7,000,000
------------
14,000,000
------------
EURODOLLAR........................ 1.6%
Morgan Guaranty Trust Co.
5.71%............................ 01/06/98 6,000 5,998,620
------------
YANKEE............................ 3.5%
Credit Suisse First Boston
6.24%............................ 04/08/98 3,000 3,000,000
Swiss Bank Corp.
5.60%............................ 12/03/97 10,000 10,000,000
------------
13,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $32,998,620)............ 32,998,620
------------
</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, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER............. 53.2%
CHEMICALS.................... 2.7%
E.I. duPont de Nemours & Co.
5.54%....................... 06/25/97 $10,000 $9,963,067
----------
CONSUMER GOODS............... 7.3%
Procter & Gamble Co.
5.50%....................... 06/30/97 10,000 9,955,694
Unilever Capital Corp.
5.45%....................... 06/30/97 7,000 6,969,268
5.50%....................... 07/07/97 10,000 9,945,000
----------
26,869,962
----------
FINANCE...................... 16.5%
General Electric Capital
Corp.
5.50%....................... 06/06/97 7,000 6,994,653
5.50%....................... 06/17/97 10,000 9,975,556
KFW International Finance
Inc.
5.52%....................... 06/23/97 10,000 9,966,267
Norwest Financial, Inc.
5.52%....................... 07/02/97 7,000 6,966,727
5.55%....................... 07/07/97 10,000 9,944,500
UBS Financial Inc.
5.44%....................... 06/05/97 17,000 16,989,724
----------
60,837,427
----------
FOODS........................ 3.2%
Campbell Soup Co.
5.47%....................... 06/18/97 12,000 11,969,003
----------
INSURANCE.................... 4.1%
Marsh & McLennan Corp.
5.50%....................... 06/04/97 14,958 14,951,144
----------
PETROLEUM.................... 4.6%
Amoco Corp.
5.32%....................... 06/17/97 10,000 9,976,356
5.52%....................... 07/01/97 7,000 6,967,800
----------
16,944,156
----------
PHARMACEUTICALS.............. 3.4%
Abbott Laboratories
5.48%....................... 06/23/97 6,526 6,503,152
5.56%....................... 07/28/97 6,000 5,947,180
----------
12,450,332
----------
</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, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- CONTINUED
TECHNOLOGY......................... 2.4%
Motorola, Inc.
5.54%............................. 08/05/97 $ 9,000 $ 8,909,975
------------
TRANSPORTATION..................... 2.7%
Chevron Transport Corp.
5.52%............................. 07/11/97 10,000 9,938,667
------------
UTILITIES -- GAS................... 2.7%
Southern Cal Gas Co.
5.55%............................. 07/08/97 10,000 9,942,958
------------
UTILITIES -- TELEPHONE............. 3.6%
BellSouth Capital Funding Corp.
5.45%............................. 06/04/97 6,000 5,997,275
5.50%............................. 06/20/97 7,450 7,428,374
------------
13,425,649
------------
TOTAL COMMERCIAL PAPER
(Cost $196,202,340)............ 196,202,340
------------
CORPORATE BONDS.................... 4.8%
FINANCIAL SERVICES................. 3.0%
Associates Corp. N.A.
6.75%............................. 07/15/97 10,000 10,025,600
6.67%............................. 11/13/97 1,000 1,004,478
------------
11,030,078
------------
FOODS.............................. 0.3%
Campbell Soup Co.
9.00%............................. 11/01/97 1,000 1,013,335
------------
RETAIL DEPARTMENT STORES........... 0.4%
Wal-Mart Stores, Inc.
5.50%............................. 03/01/98 1,300 1,298,401
------------
UTILITIES -- ELECTRIC.............. 0.8%
Georgia Power Co.
5.50%............................. 04/01/98 3,000 2,983,473
------------
UTILITIES -- TELEPHONES............ 0.3%
GTE South Inc.
6.25%............................. 11/15/97 1,000 1,002,412
------------
TOTAL CORPORATE BONDS
(Cost $17,327,699)............. 17,327,699
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS............. 18.3%
GOLDMAN, SACHS & CO.
(Agreement dated 5/30/97 to be
repurchased at $10,020,803
collateralized by $8,005,000
(Value $10,291,877) U.S. Treasury
Notes, 10.75%, due 8/15/05)
5.38%........................... 06/02/97 $10,016 $ 10,016,312
J.P. MORGAN SECURITIES, INC.
(Agreement dated 5/30/97 to be
repurchased at $11,505,271
collateralized by $9,665,000
(Value $11,813,235) U.S. Treasury
Notes, 8.75%, due 8/15/20)
5.50%........................... 06/02/97 11,500 11,500,000
MERRILL LYNCH GOVERNMENT
SECURITIES, INC.
(Agreement dated 5/30/97 to be
repurchased at $11,505,175
collateralized by $9,310,000
(Value $11,742,213) U.S. Treasury
Notes, 9.25%, due 2/15/16)
5.40%........................... 06/02/97 11,500 11,500,000
MORGAN STANLEY & CO., INC.
(Agreement dated 5/30/97 to be
repurchased at $11,505,204
collateralized by $10,900,000
(Value $11,744,402) U.S. Treasury
Notes, 8.50%, due 2/15/00)
5.43%........................... 06/02/97 11,500 11,500,000
REPUBLIC NATIONAL BANK NEW YORK
(Agreement dated 5/30/97 to be
repurchased at $11,505,223
collateralized by $11,500,000
(Value $11,792,989) U.S. Treasury
Notes, 5.375%, due 11/30/97)
5.45%........................... 06/02/97 11,500 11,500,000
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
(Agreement dated 5/30/97 to be
repurchased at $11,505,242
collateralized by $11,375,000
(Value $11,752,106) U.S. Treasury
Notes, 9.00%, due 5/15/98)
5.47%........................... 06/02/97 11,500 11,500,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $67,516,312)............ 67,516,312
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $369,429,907*)............. 100.2% 369,429,907
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (0.2)% (576,967)
----- ------------
NET ASSETS (equivalent to $1.00
per share based on 368,932,216
shares outstanding).............. 100.0% $368,852,940
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($368,852,940 / 368,932,216)..... $1.00
=====
</TABLE>
- --------
*Aggregate cost for Federal income tax purposes.
**The rate shown is as of May 31, 1997 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.
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS................. 74.4%
FEDERAL FARM CREDIT BANK........... 11.5%
Discount Notes
5.39%............................. 06/17/97 $15,000 $14,964,067
5.29%............................. 07/21/97 10,000 9,926,528
5.52%............................. 08/12/97 9,500 9,395,120
Notes
5.60%............................. 06/03/97 5,000 5,000,042
-----------
39,285,757
-----------
FEDERAL HOME LOAN BANK............. 14.5%
Discount Notes
5.37%............................. 06/02/97 10,000 9,998,508
5.39%............................. 06/23/97 13,000 12,957,179
5.45%............................. 07/23/97 10,000 9,921,278
Floating Rate Notes**
5.58%............................. 06/16/97 7,000 6,998,107
Notes
5.51%............................. 11/21/97 5,000 5,000,000
5.73%............................. 01/27/98 4,500 4,499,704
-----------
49,374,776
-----------
FEDERAL HOME LOAN MORTGAGE CORP.... 15.2%
Discount Notes
5.27%............................. 06/06/97 15,000 14,989,021
5.47%............................. 06/30/97 10,000 9,955,936
5.39%............................. 07/08/97 15,000 14,916,904
5.48%............................. 07/18/97 12,000 11,914,147
-----------
51,776,008
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION....................... 13.6%
Discount Notes
5.34%............................. 06/06/97 6,400 6,395,253
5.36%............................. 06/16/97 15,865 15,829,568
5.39%............................. 06/23/97 12,000 11,960,473
5.47%............................. 07/09/97 6,000 5,965,357
Notes
5.35%............................. 08/14/97 6,000 6,000,000
-----------
46,150,651
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS -- CONTINUED
STUDENT LOAN MARKETING
ASSOCIATION....................... 12.0%
Discount Notes
5.46%............................. 06/30/97 $15,000 $ 14,934,025
Floating Rate Notes**
5.33%............................. 10/14/97 4,000 3,997,447
5.51%............................. 10/30/97 10,000 10,000,000
Notes
5.50%............................. 10/24/97 7,000 6,998,263
6.03%............................. 05/15/98 5,000 5,001,645
------------
40,931,380
------------
TENNESSEE VALLEY AUTHORITY......... 7.6%
Discount Notes
5.39%............................. 06/04/97 15,000 14,993,263
5.41%............................. 06/05/97 11,000 10,993,388
------------
25,986,651
------------
TOTAL AGENCY OBLIGATIONS
(Cost $253,505,223)............ 253,505,223
------------
U.S. TREASURY OBLIGATIONS.......... 2.3%
U.S. TREASURY NOTES................ 2.3%
5.875%............................ 04/30/98 8,000 7,982,832
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,982,832).............. 7,982,832
------------
REPURCHASE AGREEMENTS.............. 23.7%
GOLDMAN, SACHS & CO.
(Agreement dated 5/30/97 to be
repurchased at $10,638,317
collateralized by $7,630,000
(Value $10,927,597) U.S. Treasury
Notes, 12.00%, due 8/15/13)
5.38%............................ 06/02/97 10,634 10,633,550
J.P. MORGAN SECURITIES, INC.
(Agreement dated 5/30/97 to be
repurchased at $14,006,417
collateralized by $11,766,000
(Value $14,381,223) U.S. Treasury
Notes, 8.75%, due 8/15/20)
5.50%............................ 06/02/97 14,000 14,000,000
MERRILL LYNCH GOVERNMENT SECURI-
TIES, INC.
(Agreement dated 5/30/97 to be
repurchased at $14,006,300
collateralized by $14,105,000
(Value $14,288,972) U.S. Treasury
Notes, 6.125%, due 3/31/98)
5.40%............................ 06/02/97 14,000 14,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- CONTINUED
MORGAN STANLEY & CO., INC.
(Agreement dated 5/30/97 to be
repurchased at $14,006,335
collateralized by $14,400,000
(Value $14,301,880) U.S. Treasury
Notes, 5.875%, due 11/15/99)
5.43%........................... 06/02/97 $14,000 $ 14,000,000
REPUBLIC NATIONAL BANK NEW YORK
(Agreement dated 5/30/97 to be
repurchased at $14,006,358
collateralized by $14,000,000
(Value $14,356,682) U.S. Treasury
Notes, 5.375%, due 11/30/97)
5.45%........................... 06/02/97 14,000 14,000,000
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
(Agreement dated 5/30/97 to be
repurchased at $14,006,382
collateralized by $13,850,000
(Value $14,309,158) U.S. Treasury
Notes, 9.00%, due 5/15/98)
5.47%........................... 06/02/97 14,000 14,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $80,633,550)............ 80,633,550
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $342,121,605*)............. 100.4% 342,121,605
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (0.4)% (1,312,582)
----- ------------
NET ASSETS (equivalent to $1.00
per share based on 340,935,287
shares outstanding).............. 100.0% $340,809,023
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($340,809,023 / 340,935,287)..... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1997 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.
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
ARKANSAS............................ 1.0%
Pulaski County, VRDN, PCR (Minnesota
Mining & Manufacturing Co.)
3.90% (Aaa/NA, AAA/A-1+)**........ 06/06/97 $ 400 $ 400,000
3.90% (Aaa/NA, AAA/NA)**.......... 06/06/97 400 400,000
-----------
800,000
-----------
ARIZONA............................. 1.3%
Arizona State, RB, Waste Water
Treatment
5.60% (Aa1/NA, AA+/NA)............ 07/01/97 1,000 1,001,442
-----------
CALIFORNIA.......................... 0.6%
California Educational Facilities,
VRDN, (Stanford University)
3.65% (Aaa/VMIG1, AAA/A-1+)**..... 06/06/97 500 500,000
-----------
COLORADO............................ 4.8%
Colorado State TRAN
4.50% (NA/NA, NA/SP-1+)........... 06/27/97 3,800 3,802,929
-----------
CONNECTICUT......................... 3.5%
Connecticut Health & Educational
Facilities, TECP, (Yale University)
3.70% (Aaa/VMIG1, AAA/A-1+)....... 06/02/97 800 800,000
3.75% (Aaa/VMIG1, AAA/A-1+)....... 06/30/97 1,000 1,000,000
3.60% (Aaa/VMIG1, AAA/A-1+)....... 07/15/97 1,000 1,000,000
-----------
2,800,000
-----------
FLORIDA............................. 4.4%
Jacksonville Electric Authority,
TECP, LA: Morgan Guaranty Trust Co.
3.80% (Aa1/P-1, AA/A-1+).......... 06/09/97 1,000 1,000,000
3.80% (Aa1/P-1, AA/A-1+).......... 07/18/97 2,500 2,500,000
-----------
3,500,000
-----------
ILLINOIS............................ 5.6%
DuPage County, GO, Prerefunded @ 102
7.70% (NA/NA, AAA/NA)............. 11/01/97 1,000 1,035,543
Illinois Educational Facilities,
VRDN,
(Northwestern University), LIC:
Northern Trust Co.
3.95% (Aa1/VMIG1, AA/A-1+)**...... 06/06/97 3,226 3,226,000
Village of Bedford Park, VRDN,
(Minnesota Mining & Manufacturing
Co.)
3.90% (Aaa/NA, AAA/A-1+)**........ 06/06/97 200 200,000
-----------
4,461,543
-----------
INDIANA............................. 2.3%
City of Mount Vernon, TECP, PCR,
(General Electric Co.)
3.55% (Aaa/P-1, AAA/A-1+)......... 08/01/97 1,860 1,860,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
KANSAS.............................. 2.9%
Kansas State, VRDN, Department of
Transportation Highway
Revenue, LA: Kansas State Pooled
Money Investment Board
3.80% (Aa/VMIG1, AA/A-1+)**....... 06/06/97 $1,300 $ 1,300,000
Wyandotte County, COP, (Criminal
Justice Complex Project),
Prerefunded @ 102, INS: FGIC
7.875% (Aaa/NA, AAA/NA)........... 09/01/97 1,000 1,030,452
-----------
2,330,452
-----------
KENTUCKY............................ 5.9%
Jefferson County, TECP, PCR, (LG&E)
3.70% (Aa2/VMIG1, AA/A-1+)........ 07/08/97 2,000 2,000,000
Trimble County, TECP, PCR, (LG&E)
3.85% (Aa2/VMIG1, AA/A-1+)........ 07/09/97 2,650 2,650,000
-----------
4,650,000
-----------
LOUISIANA........................... 5.1%
East Baton Rouge Parish, VRDN, PCR,
(Exxon Project)
4.00% (Aaa/P-1, AAA/A-1+)......... 06/02/97 850 850,000
Plaquemine Parish Port & Harbor
Terminal District, TECP, (TECO
Energy, Inc.)
3.70% (A1/P-1, AA-/A-1+).......... 07/11/97 1,400 1,400,000
3.75% (A1/P-1, AA-/A-1+).......... 09/04/97 1,800 1,800,000
-----------
4,050,000
-----------
MARYLAND............................ 2.9%
Montgomery County, Parking
Authority,
(Bethesda Parking Lot), Prerefunded
@ 100
7.00% (Aaa/NA, AAA/NA)............ 06/01/98 500 514,493
Montgomery County, TECP, SPA: Union
Bank of Switzerland
3.65% (Aaa/P-1, AAA/A-1+)......... 08/04/97 1,800 1,800,000
-----------
2,314,493
-----------
MICHIGAN............................ 3.8%
University of Michigan, VRDN, Hospi-
tal Revenue
4.15% (Aa2/VMIG1, AA/NA)**........ 06/02/97 3,000 3,000,000
-----------
MINNESOTA........................... 4.2%
City of Rochester, TECP, (Mayo
Foundation/Mayo Clinic)
3.75% (NA/NA, AA+/A-1+)........... 06/03/97 800 800,000
3.60% (NA/NA, AA+/A-1+)........... 06/12/97 1,000 1,000,000
3.70% (NA/NA, AA+/A-1+)........... 07/11/97 1,500 1,500,000
-----------
3,300,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MISSISSIPPI......................... 1.0%
Jackson County, VRDN, Port
Facilities, (Chevron USA Inc.)
4.05% (Aa2/P-1, NA/NA)**.......... 06/02/97 $ 800 $ 800,000
-----------
MISSOURI............................ 0.6%
IDA of Boone County, VRDN, PCR,
(Minnesota Mining & Manufacturing
Co.)
3.90% (Aaa/P-1, NA/NA)**.......... 06/06/97 500 500,000
-----------
NORTH CAROLINA...................... 11.6%
City of Durham, VRDN, COP, SPA:
Wachovia Bank of North Carolina
3.75% (Aa1/VMIG1, AAA/A-1+)**..... 06/06/97 2,800 2,800,000
City of Winston-Salem, VRDN, COP,
SPA: Credit Suisse
4.00% (Aa1/VMIG1, AAA/A-1+)**..... 06/06/97 2,900 2,900,000
North Carolina Educational
Facilities, VRDN, (Duke University)
3.90% (Aa1/VMIG1, AA+/A-1+)**..... 06/06/97 3,500 3,500,000
-----------
9,200,000
-----------
OHIO................................ 4.4%
Cuyahoga County, VRDN, Hospital
Revenue, Cleveland Clinic
Foundation
3.85% (Aa3/VMIG1, AA-/A-1+)**..... 06/06/97 3,500 3,500,000
-----------
OREGON.............................. 3.0%
State of Oregon, GO, VRDN, Veterans
Welfare Board, LOC: Morgan Guaranty
Trust Co.
3.90% (Aa1/VMIG1, AAA/A-1+)**..... 06/06/97 2,400 2,400,000
-----------
PENNSYLVANIA........................ 1.6%
Montgomery County, VRDN, GO, SPA:
CoreStates Bank N.A.
3.90% (Aaa/VMIG1, NA/NA)**........ 06/06/97 150 150,000
Pennsylvania State TAN
4.50% (NA/MIG1, NA/SP-1+)......... 06/30/97 1,150 1,150,937
-----------
1,300,937
-----------
SOUTH CAROLINA...................... 0.3%
Berkeley County, VRDN, PCR, (Amoco
Chemical Co. Project)
4.05% (Aa1/VMIG1, AAA/A-1+)**..... 06/02/97 200 200,000
-----------
TENNESSEE........................... 5.7%
Shelby County, GO, School Board,
Prerefunded @ 102
6.50% (Aa/NA, AAA/NA)............. 08/01/97 1,000 1,024,099
Tennessee State, VRDN, BAN, SPA:
Tennsessee State Retirement System
3.90% (NA/ MIG1, NA/A-1+)**....... 06/06/97 3,500 3,500,000
-----------
4,524,099
-----------
</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, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
TEXAS............................... 7.8%
Harris County, Health Facilities
Development, VRDN, (Methodist
Hospital) SPA: Morgan Guaranty
Trust Co. 50%
4.05% (NA/NA, AA/A-1+)**.......... 06/02/97 $2,700 $ 2,700,000
Harris County, Health Facilities
Development, VRDN, (St. Luke's
Episcopal Hospital Project), SPA:
Morgan Guaranty Trust Co.
4.05% (NA/NA, AA/A-1+)**.......... 06/02/97 1,000 1,000,000
State of Texas, TRAN
4.75% (NA/MIG1, NA/SP-1+)......... 08/29/97 2,500 2,504,805
-----------
6,204,805
-----------
VIRGINIA............................ 3.7%
Commonwealth of Virginia, TECP, SPA:
State Street
3.85% (Aaa/P-1, AAA/A-1+)......... 06/17/97 1,100 1,100,000
Virginia State Transportation Board,
RB, Prerefunded @ 102
7.80% (Aaa/NA, AAA/NA)............ 03/01/98 1,750 1,834,484
-----------
2,934,484
-----------
WISCONSIN........................... 4.2%
Oak Creek, VRDN, PCR, (Wisconsin
Electric Power Co.)
4.00% (Aa3/P-1, AA/NA)**.......... 06/06/97 2,100 2,100,000
State of Wisconsin, GO
4.50% (NA/MIG1, NA/SP-1+)......... 06/16/97 1,250 1,250,337
-----------
3,350,337
-----------
WYOMING............................. 0.9%
Lincoln County, VRDN, PCR, (Exxon
Corp.)
4.05% (Aaa/NA, AAA/A-1+)**........ 06/02/97 200 200,000
Sublette County, VRDN, PCR, (Exxon
Corp.)
4.05% (Aaa/NA, AAA/A-1+)**........ 06/02/97 500 500,000
-----------
700,000
-----------
TOTAL MUNICIPAL BONDS***
(Cost $73,985,521).............. 73,985,521
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES................... 2.6%
Goldman Sachs Financial Square Tax-Free
Money Market Fund..................... 1,512,229 $ 1,512,229
Municipal Fund for Temporary
Investments-- MuniFund................ 584,448 584,448
-----------
TOTAL INVESTMENT COMPANIES
(Cost $2,096,677).................. 2,096,677
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $76,082,198*)................... 95.7% 76,082,198
OTHER ASSETS IN EXCESS OF LIABILITIES.. 4.3% 3,409,695
----- -----------
NET ASSETS (equivalent to $1.00 per
share based on 79,498,459 shares
outstanding).......................... 100.0% $79,491,893
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($79,491,893 / 79,498,459)............ $1.00
===========
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1997 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, 1997. These ratings are not cov-
ered by the Report of Independent Accountants.
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
ALABAMA............................. 4.0%
City of Montgomery, TECP, PCR,
(General Electric Co.)
3.55% (Aaa/P-1, AAA/A-1+)......... 08/01/97 $2,000 $ 2,000,000
-----------
ARKANSAS............................ 2.0%
Pulaski County, VRDN, PCR, (Minne-
sota Mining & Manufacturing Co.)
3.90% (Aaa/NA, AAA/A-1+)**........ 06/06/97 1,000 1,000,000
-----------
COLORADO............................ 5.3%
Colorado State TRAN
4.50% (NA/NA, NA/SP-1+)........... 06/27/97 2,600 2,601,799
-----------
CONNECTICUT......................... 4.5%
Connecticut Health & Educational Fa-
cilities, TECP, (Yale University)
3.70% (Aaa/VMIG1, AAA/A-1+)....... 06/02/97 200 200,000
3.75% (Aaa/VMIG1, AAA/A-1+)....... 06/30/97 1,000 1,000,000
3.60% (Aaa/VMIG1, AAA/A-1+)....... 07/15/97 1,000 1,000,000
-----------
2,200,000
-----------
FLORIDA............................. 3.6%
Jacksonville Electric Authority,
TECP, LA: Morgan Guaranty Trust Co.
3.80% (Aa1/P-1, AA/A-1+).......... 07/18/97 1,800 1,800,000
-----------
ILLINOIS............................ 5.4%
Illinois Educational Facilities,
VRDN, (Northwestern University),
LIC:
Northern Trust Co.
3.95% (Aa1/VMIG1, AA/A-1+)**...... 06/06/97 2,093 2,093,000
Village of Bedford Park, VRDN,
(Minnesota Mining & Manufacturing
Co.)
3.90% (Aaa/NA, AAA/A-1+)**........ 06/06/97 600 600,000
-----------
2,693,000
-----------
INDIANA............................. 5.3%
Allen County, VRDN, (Golden Years
Homestead Project), LOC: Norwest
Bank Minnesota
3.95% (NA/NA, AA/A-1+)**.......... 06/06/97 1,130 1,130,000
Indiana Health Facilities Financing
Authority, VRDN, (Pathfinder
Services Inc. Project), LOC:
Norwest Bank Minnesota
3.95% (NA/NA, AA/A-1+)**.......... 06/06/97 1,000 1,000,000
Princeton, VRDN, PCR, (PSI Energy
Inc. Project), LOC: Canadian
Imperial Bank
4.15% (Aa3/VMIG1, AA+/A-1+)**..... 06/02/97 500 500,000
-----------
2,630,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
KANSAS............................... 2.6%
Kansas State, VRDN, Department of
Transportation Highway Revenue, LA:
Kansas State Pooled Money Investment
Board
3.80% (Aa/VMIG1, AA/A-1+)**........ 06/06/97 $1,300 $1,300,000
----------
LOUISIANA............................ 2.0%
Plaquemine Parish Port & Harbor
Terminal District, TECP, (TECO
Energy, Inc.)
3.75% (A1/P-1, AA-/A-1+)........... 09/04/97 1,000 1,000,000
----------
MARYLAND............................. 2.9%
Montgomery County, Parking Authority,
(Bethesda Parking Lot), Prerefunded
@ 100
7.00% (Aaa/NA, AAA/NA)............. 06/01/98 500 514,493
Montgomery County, TECP, SPA: Union
Bank of Switzerland
3.65% (Aaa/P-1, AAA/A-1+).......... 08/04/97 900 900,000
----------
1,414,493
----------
MICHIGAN............................. 2.3%
University of Michigan, VRDN,
Hospital Revenue
4.15% (Aa2/VMIG1, NA/NA)**......... 06/02/97 1,120 1,120,000
----------
MINNESOTA............................ 5.1%
City of Rochester, TECP, (Mayo
Foundation/Mayo Clinic)
3.75% (NA/NA, AA+/A-1+)............ 06/03/97 700 700,000
3.60% (NA/NA, AA+/A-1+)............ 06/12/97 800 800,000
3.75% (NA/NA, AA+/A-1+)............ 09/13/97 1,000 1,000,000
----------
2,500,000
----------
MISSISSIPPI.......................... 1.8%
Jackson County, VRDN, Port
Facilities, (Chevron USA Inc.)
4.00% (Aa2/P-1, NA/NA)**........... 06/02/97 900 900,000
----------
MISSOURI............................. 4.9%
IDA of Boone County, VRDN, PCR,
(Minnesota Mining & Manufacturing
Co.)
3.90% (Aaa/P-1, NA/NA)**........... 06/06/97 500 500,000
Missouri State Health & Educational
Facilities, VRDN, (Washington
University Project), SPA: Morgan
Guaranty Trust
3.90% (Aa1/VMIG1, AA/A-1+)**....... 06/06/97 1,900 1,900,000
----------
2,400,000
----------
NORTH CAROLINA....................... 10.1%
City of Durham, VRDN, COP, SPA:
Wachovia Bank of North Carolina
3.75% (Aa1/VMIG1, AAA/A-1+)**...... 06/06/97 2,200 2,200,000
North Carolina Educational
Facilities, VRDN, (Duke University)
3.90% (Aa1/VMIG1, AAA/A-1+)**...... 06/06/97 1,900 1,900,000
North Carolina Educational
Facilities, VRDN, (Wake Forest
University Project), SPA: Wachovia
Bank
3.40% (Aa3/VMIG1, NA/NA)**......... 06/06/97 875 875,000
----------
4,975,000
----------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
OHIO................................ 3.0%
Cuyahoga County, VRDN, Hospital
Revenue, Cleveland Clinic
Foundation
3.85% (Aa3/VMIG1, AA-/A-1+)**..... 06/06/97 $1,500 $ 1,500,000
-----------
OREGON.............................. 4.0%
Oregon State, GO, VRDN, Veterans
Welfare Board, LOC: Morgan Guaranty
Trust Co.
3.45% (Aa1/VMIG1, AAA/A-1+)**..... 06/06/97 2,000 2,000,000
-----------
PENNSYLVANIA........................ 7.2%
Delaware County, VRDN, IDA, Airport
Facility RB, (United Parcel
Project)
3.95% (Aaa/P-1, AAA/NA)**......... 06/02/97 1,000 1,000,000
Delaware County, VRDN, PCR, (BP Oil
Inc. Project)
4.05% (Aa2/P-1, AA/A-1+)**........ 06/02/97 900 900,000
Montgomery County, Higher Education
& Health Authority, RB, (Bryn Mawr
Hospital Project), Prerefunded @
102
9.38% (Aaa/NA, AAA/NA)............ 12/01/97 500 524,099
Montgomery County, VRDN, GO, SPA:
CoreStates Bank N.A.
3.90% (Aaa/VMIG1, NA/NA)**........ 06/06/97 150 150,000
Pennsylvania State TAN
4.50% (NA/MIG1, NA/SP-1+)......... 06/30/97 1,000 1,000,814
-----------
3,574,913
-----------
TENNESSEE........................... 4.0%
Tennessee State, VRDN, BAN, SPA:
Tennsessee State Retirement System
3.90% (NA/MIG1, NA/A-1+)**........ 06/06/97 2,000 2,000,000
-----------
TEXAS............................... 4.9%
Gulf Coast Waste Disposal Authority,
VRDN, PCR, (Amoco Oil Project)
4.10% (Aa1/VMIG1, AAA/A-1+)**..... 06/02/97 500 500,000
Harris County, Health Facilities
Development, VRDN, (St. Luke's
Episcopal Hospital Project), SPA:
Morgan Guaranty Trust Co.
4.05% (NA/NA, AA/A-1+)**.......... 06/02/97 400 400,000
State of Texas, TRAN
4.75% (NA/MIG1, NA/SP-1+)......... 08/29/97 1,500 1,502,883
-----------
2,402,883
-----------
VIRGINIA............................ 5.5%
Commonwealth of Virginia, TECP, SPA:
State Street
3.85% (Aaa/P-1, AAA/A-1+)......... 06/17/97 1,100 1,100,000
Peninsula Ports Authority, VRDN,
(Shell Co.)
4.00% (Aa1/NA, AAA/NA)**.......... 06/02/97 1,100 1,100,000
Virginia State Transportation Board,
RB, Prerefunded @ 102
7.80% (Aaa/NA, AAA/NA)............ 03/01/98 500 524,138
-----------
2,724,138
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
WISCONSIN......................... 3.5%
State of Wisconsin, GO
4.50% (NA/MIG1, NA/SP-1+)....... 06/16/97 $1,750 $ 1,750,472
-----------
WYOMING........................... 3.0%
Lincoln County, VRDN, PCR, (Exxon
Corp.)
4.00% (Aaa/NA, AAA/A-1+)**...... 06/02/97 500 500,000
Sublette County, VRDN, PCR, (Exxon
Corp.)
4.05% (Aaa/NA, AAA/A-1+)**...... 06/02/97 500 500,000
Uinta County, VRDN, PCR, (Chevron
USA Inc. Project)
4.00% (Aa2/P-1, NA/NA)**........ 06/02/97 500 500,000
-----------
1,500,000
-----------
TOTAL MUNICIPAL BONDS***
(Cost $47,986,698)............ 47,986,698
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES.............. 2.5%
Goldman Sachs Financial Square
Tax-Free Money Market Fund....... 688,400 688,400
Municipal Fund for Temporary
Investments--MuniFund............ 563,473 563,473
-----------
TOTAL INVESTMENT COMPANIES
(Cost $1,251,873)............. 1,251,873
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $49,238,571*).............. 99.4% 49,238,571
OTHER ASSETS IN EXCESS OF
LIABILITIES...................... 0.6% 305,179
----- -----------
NET ASSETS (equivalent to $1.00
per share based on 49,544,228
shares outstanding).............. 100.0% $49,543,750
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($49,543,750 / 49,544,228).......... $1.00
===========
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1997 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, 1997. These ratings are not cov-
ered by the Report of Independent Accountants.
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK............................... 97.4%
AIRLINES................................... 1.4%
Southwest Airlines Co.................... 76,700 $ 1,975,025
------------
BANKS...................................... 7.6%
Barnett Banks, Inc....................... 32,000 1,684,000
CoreStates Financial Corp................ 54,000 2,855,250
J.P. Morgan & Co......................... 27,000 2,902,500
Regions Financial Corp................... 27,000 1,613,250
SunTrust Banks Inc....................... 36,000 1,921,500
------------
10,976,500
------------
BEVERAGES.................................. 2.4%
Pepsico Inc.............................. 93,000 3,417,750
------------
CHEMICALS.................................. 5.8%
Air Products & Chemicals Inc............. 43,000 3,343,250
E.I. duPont deNemours & Co............... 46,300 5,040,913
------------
8,384,163
------------
COMPUTER EQUIPMENT......................... 4.5%
Hewlett-Packard Co....................... 59,400 3,059,100
International Business Machine Corp...... 40,000 3,460,000
------------
6,519,100
------------
COMPUTER SOFTWARE.......................... 2.9%
AutoDesk Inc............................. 24,000 933,000
Cicso Systems Inc.**..................... 24,000 1,626,000
Electronic Data Services Corp............ 45,000 1,681,875
------------
4,240,875
------------
CONSUMER GOODS............................. 4.2%
Colgate Palmolive Co..................... 53,400 3,310,800
Procter & Gamble Co...................... 17,000 2,343,875
Rubbermaid, Inc.......................... 15,600 434,850
------------
6,089,525
------------
ELECTRICAL EQUIPMENT....................... 4.8%
ABB AB ADR............................... 15,000 2,042,813
General Electric Co...................... 56,000 3,381,000
Hubbell, Inc. "B"........................ 33,800 1,537,900
------------
6,961,713
------------
ELECTRONICS................................ 2.7%
Intel Corp............................... 25,300 3,832,950
------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK -- CONTINUED
FOODS..................................... 6.3%
CPC International, Inc.................. 22,000 $ 1,892,000
Giant Food, Inc. "A".................... 73,500 2,420,906
McCormick & Co., Inc.................... 80,000 2,090,000
Nestle Registered ADR................... 43,900 2,730,813
------------
9,133,719
------------
INDUSTRIAL GOODS.......................... 4.1%
Corning Inc............................. 71,000 3,576,625
PPG Industries Inc...................... 40,500 2,354,063
------------
5,930,688
------------
INSURANCE................................. 7.9%
Chubb Corp.............................. 55,000 3,355,000
General RE Corp......................... 10,000 1,752,500
Jefferson Pilot Corp.................... 25,000 1,590,625
Lincoln National Corp................... 32,100 1,954,088
Unum Corp............................... 34,500 2,729,813
------------
11,382,026
------------
IRON/STEEL................................ 1.2%
Worthington Industries Inc.............. 93,000 1,720,500
------------
MACHINERY & HEAVY EQUIPMENT............... 3.9%
Caterpillar, Inc........................ 27,000 2,635,875
Illinois Tool Works, Inc................ 60,000 2,977,500
------------
5,613,375
------------
MANUFACTURING............................. 1.6%
Eastman Kodak Co........................ 27,000 2,237,625
------------
MEDICAL INSTRUMENTS & SUPPLIES............ 3.0%
Johnson & Johnson....................... 73,000 4,370,875
------------
NATURAL GAS............................... 1.2%
Questar Corp............................ 45,400 1,781,950
------------
OIL EQUIPMENT & SERVICES.................. 3.6%
Halliburton Co.......................... 22,922 1,773,590
Quaker State Corp....................... 40,000 605,000
Schlumberger Ltd. ADR................... 23,300 2,775,613
------------
5,154,203
------------
PAPER & FOREST PRODUCTS................... 1.6%
Westvaco Corp........................... 72,300 2,259,375
------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK -- CONTINUED
PETROLEUM................................. 6.1%
Amoco Corp.............................. 29,725 $ 2,656,672
Atlantic Richfield Co. ................. 19,850 2,888,175
Exxon Corp.............................. 55,000 3,258,750
------------
8,803,597
------------
PHARMACEUTICALS........................... 8.0%
Bristol-Myers Squibb Co................. 63,000 4,622,625
Covance, Inc............................ 17,100 318,487
Pfizer Inc.............................. 39,400 4,053,275
Warner Lambert Co. ..................... 25,000 2,518,750
------------
11,513,137
------------
RETAIL DEPARTMENT STORES.................. 2.7%
May Department Stores Co. .............. 41,300 1,946,262
Wal-Mart Stores, Inc.................... 65,000 1,933,750
------------
3,880,012
------------
TECHNOLOGY................................ 2.3%
Motorola, Inc. ......................... 50,000 3,318,750
------------
TELECOMMUNICATIONS........................ 3.0%
Ericsson (LM) Tel -- ADR................ 24,000 855,000
GTE Corp................................ 28,500 1,257,562
Lucent Technologies Inc. ............... 34,059 2,167,003
------------
4,279,565
------------
TOBACCO................................... 2.7%
Philip Morris Inc....................... 90,000 3,960,000
------------
UTILITIES -- TELEPHONE.................... 1.9%
MCI Communications Corp................. 72,300 2,774,512
------------
TOTAL COMMON STOCK
(Cost $94,143,657).................... 140,511,510
------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. FUNDS, INC.
VALUE EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT............... 3.7%
GOLDMAN SACHS & CO.
(Agreement dated 5/30/97 to be
repurchased at $5,274,475,
collateralized by $4,835,000
(Value $5,418,201) U.S. Treasury
Notes, 7.875%, due 2/15/21)
5.38%............................ 06/02/97 $5,272 $ 5,272,111
------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,272,111).............. 5,272,111
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $99,415,768*)............... 101.1% 145,783,621
LIABILITIES IN EXCESS OF OTHER AS-
SETS.............................. (1.1)% (1,538,427)
----- ------------
NET ASSETS......................... 100.0% $144,245,194
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
INSTITUTIONAL SHARES
($142,452,042 / 7,805,540)....... $18.25
============
AFBA FIVE STAR SHARES
($1,793,152 / 98,400)............ $18.22
============
</TABLE>
- --------
* Cost for Federal income tax purposes is $99,486,926. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost........ $46,755,295
Excess of tax cost over value........ $ (458,600)
</TABLE>
** Non-income producing securities.
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS................................... 97.8%
AUSTRALIA................................. 3.8%
AAPC...................................... 700,000 $ 442,286
MIM....................................... 520,000 775,865
National Mutual........................... 380,000 564,086
News Corp................................. 140,000 621,332
QNI....................................... 370,000 757,672
-----------
3,161,241
-----------
BRAZIL.................................... 2.3%
Celesc GDR*............................... 9,000 1,096,853
Unibanco GDR*............................. 24,324 839,178
-----------
1,936,031
-----------
FINLAND................................... 2.2%
UPM -- Kymmene OY......................... 40,000 919,904
Valmet.................................... 50,000 904,728
-----------
1,824,632
-----------
FRANCE.................................... 7.4%
AXA -- UAP................................ 16,500 989,457
Bouygues.................................. 4,000 346,994
Christian Dior............................ 3,500 549,771
Compagne Generale Des Eaux................ 9,500 1,170,704
Compagne Generale Des Eaux Warrants*...... 9,500 6,513
Dexia France.............................. 10,000 935,522
Michelin.................................. 10,000 547,254
Pinault Printemps La Redoute.............. 1,500 630,045
SGS Thomson Microelectronics*............. 5,200 423,474
Total 'B'................................. 6,000 549,858
-----------
6,149,592
-----------
GERMANY................................... 8.7%
Commerzbank............................... 42,000 1,228,803
GEA Preferred............................. 2,950 1,219,393
Man....................................... 4,450 1,281,073
Mannesman................................. 3,120 1,277,772
Metro..................................... 4,860 530,007
RWE....................................... 13,000 560,226
Veba...................................... 21,000 1,196,175
-----------
7,293,449
-----------
HONG KONG................................. 4.1%
Cheung Kong............................... 78,000 797,764
Hong Kong Electric........................ 200,000 720,136
HSBC...................................... 24,800 752,142
Jardine Matheson.......................... 77,800 529,040
New World Development..................... 95,000 603,211
-----------
3,402,293
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS -- CONTINUED
INDIA..................................... 1.0%
State Bank of India GDR*.................. 35,000 $ 879,375
-----------
INDONESIA................................. 0.8%
Bank Dagang Nasional...................... 600,000 647,482
-----------
ITALY..................................... 3.6%
Fiat Preferred............................ 170,000 287,889
Istituto Nazionale delle Assicurazioni
(INA).................................... 380,000 525,594
Stet...................................... 120,000 606,454
Telecom Italia Mobile..................... 340,000 998,818
Unicem.................................... 90,000 608,316
-----------
3,027,071
-----------
JAPAN..................................... 24.7%
18th Bank................................. 87,000 567,407
Amada..................................... 100,000 845,276
Bridgestone............................... 40,000 902,772
Daiwa Securities.......................... 70,000 514,803
Dowa Fire & Marine........................ 148,000 715,043
Fuji Photo Film........................... 20,000 774,049
Hitachi................................... 110,000 1,170,514
Ito Yokado................................ 15,000 854,715
Mabuchi Motors............................ 14,000 795,332
Matsushita Electric Industrial............ 57,000 1,071,226
Mitsubishi Heavy Industries............... 111,000 798,232
Mitsubishi Motors......................... 70,000 517,807
Mitsui Fudosan............................ 29,000 365,829
Mitsui Petrochemical...................... 177,000 829,331
NKK....................................... 485,000 953,102
Ricoh..................................... 75,000 984,725
Sanwa Bank................................ 70,000 895,048
Sanyo Shinpan Finance..................... 200 10,778
Shimachu.................................. 22,000 643,783
Shin-Etsu Chemical........................ 47,000 1,177,722
Shiseido.................................. 52,000 758,603
Sony...................................... 8,000 673,475
Sumitomo Electric Industries.............. 45,000 706,685
Sumitomo Trust & Banking.................. 75,000 662,919
Suzuki Motor.............................. 69,000 864,498
Tokyo Electron............................ 22,000 1,108,212
Tsubaki Nakashima......................... 52,000 446,237
-----------
20,608,123
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS -- CONTINUED
KOREA..................................... 0.0%
Hana Bank GDR............................. 138 $ 1,897
-----------
MEXICO 1.6%
Altos Hornos de Mexico*................... 280,000 643,051
Cemex CPO................................. 180,000 667,381
-----------
1,310,432
-----------
NETHERLANDS............................... 4.9%
Hagemeyer................................. 26,000 1,277,801
ING....................................... 7,800 345,128
Philips Electronics....................... 9,000 492,973
Vendex Intl............................... 17,000 955,094
Ver Ned Uitgev Ver Bezit.................. 43,500 983,914
-----------
4,054,910
-----------
PHILIPPINES............................... 1.2%
Far East Bank & Trust Rights*............. 2,268 3,319
Manila Electric 'B'....................... 80,000 448,910
Philippine National Bank*................. 77,875 513,754
-----------
965,983
-----------
SINGAPORE................................. 4.8%
DBS Land.................................. 240,000 839,441
Development Bank of Singapore (Foreign)... 70,000 876,516
GP Batteries International................ 200,000 663,158
Singapore Press (Foreign)................. 36,000 717,722
United Overseas Bank (Foreign)............ 87,244 897,143
-----------
3,993,980
-----------
SOUTH AFRICA.............................. 1.6%
AECI...................................... 140,000 761,243
Murray & Roberts.......................... 220,000 541,507
-----------
1,302,750
-----------
SPAIN..................................... 2.8%
Adolgo Dominguez*......................... 15,000 528,085
Banco Santander........................... 10,000 854,499
Iberdrola................................. 34,000 418,240
Telefonica de Espana...................... 20,000 577,982
-----------
2,378,806
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS -- CONTINUED
SWEDEN.................................... 2.1%
Electrolux "B"............................ 10,000 $ 597,812
Ericsson "B".............................. 30,200 1,062,915
Granges AB*............................... 5,000 62,434
-----------
1,723,161
-----------
SWITZERLAND............................... 6.3%
CS Holdings Registered.................... 8,800 1,105,700
Nestle Registered......................... 1,100 1,368,518
Novartis Registered....................... 1,066 1,446,784
Roche Holdings 1/10 PC Non-Voting......... 145 1,289,418
-----------
5,210,420
-----------
UNITED KINGDOM............................ 13.9%
Allied Carpets............................ 50,000 175,870
Asda...................................... 200,000 391,823
Barclays.................................. 30,000 582,581
BBA....................................... 75,000 410,432
Blue Circle Industries.................... 50,000 344,788
Bryant Group.............................. 140,000 290,881
British Petroleum......................... 55,760 660,914
British Telecom........................... 80,000 579,145
Burton.................................... 185,000 406,322
Dairy Crest............................... 100,000 348,469
Glaxo Wellcome............................ 40,000 799,351
Grand Metropolitan........................ 50,000 464,625
Guardian Royal Exchange................... 90,000 410,064
IMS Group*................................ 190,000 542,417
Jarvis Hotels............................. 175,000 428,019
Limelight Group........................... 150,000 153,375
Lloyds TSB Group.......................... 65,000 652,929
Medeva.................................... 82,500 369,818
National Grid Group....................... 60,000 222,333
National Westminster Bank................. 40,000 487,202
NFC....................................... 150,000 315,339
Rubicon................................... 210,000 405,401
Senior Engineering........................ 150,000 315,339
Shell Transport & Trading................. 40,000 788,226
SOCO International*....................... 61,000 236,018
Sun Life & Provincial..................... 75,000 366,260
United Utilities.......................... 40,000 457,754
-----------
11,605,695
-----------
TOTAL COMMON STOCK, PREFERRED STOCK,
WARRANTS & RIGHTS
(Cost $69,471,264).................... 81,477,323
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS................ 2.1%
Eurodollar Time Deposit State Street
Bank & Trust Co.
4.50%................................ 6/02/97 $1,720 $ 1,720,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,720,000)................. 1,720,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $71,191,264**)................. 99.9% 83,197,323
OTHER ASSETS IN EXCESS OF
LIABILITIES.......................... 0.1% 116,020
----- -----------
NET ASSETS (equivalent to $13.18 per
share based on 6,320,438 shares
outstanding)......................... 100.0% $83,313,343
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($83,313,343 / 6,320,438)........... $13.18
======
</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........ $14,847,367
Excess of tax cost over value........ $(2,841,308)
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS.................. 14.9%
FEDERAL HOME LOAN BANK.............. 2.2%
Debentures
6.34%.............................. 06/13/05 $1,000 $ 965,280
-----------
FEDERAL HOME LOAN MORTGAGE CORP..... 0.3%
Mortgage Backed Securities
6.50% (Pool #E00201)............... 03/01/08 152 148,460
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIA-
TION............................... 4.3%
Medium Term Notes
6.08%.............................. 09/03/03 500 482,090
Mortgage Backed Securities
6.00% (Pool #227994)............... 07/01/08 690 660,020
7.50% (Pool #282608)............... 05/01/09 722 729,780
-----------
1,871,890
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCI-
ATION.............................. 8.1%
Mortgage Backed Securities
8.00% (Pool #308751)............... 11/15/06 232 238,616
8.00% (Pool #312726)............... 12/15/06 28 28,356
8.00% (Pool #319511)............... 12/15/06 76 78,233
6.50% (Pool #351994)............... 12/15/08 209 205,254
6.50% (Pool #359462)............... 01/15/09 237 231,856
6.00% (Pool #372668)............... 01/15/09 813 779,144
8.00% (Pool #389481)............... 04/15/09 254 261,636
8.00% (Pool #401484)............... 11/15/09 816 839,172
6.00% (Pool #410492)............... 01/15/11 156 149,167
6.00% (Pool #410497)............... 02/15/11 763 731,716
-----------
3,543,150
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $6,630,163)............... 6,528,780
-----------
CORPORATE BONDS..................... 12.2%
BEVERAGES........................... 0.5%
Coca-Cola Co., Inc.
7.875% (Aa3, AA)................... 09/15/98 200 204,526
-----------
CHEMICALS........................... 0.5%
E.I. duPont de Nemours & Co.
6.00% (Aa3, AA-)................... 12/01/01 250 242,187
-----------
FINANCE............................. 2.9%
Norwest Financial, Inc.
6.125% (Aa3, AA-).................. 08/01/03 300 287,625
6.375% (Aa3, AA-).................. 11/15/03 1,000 972,500
-----------
1,260,125
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS -- CONTINUED
FOODS................................ 0.6%
Kellogg Co.
5.90% (Aa1, AA)..................... 07/15/97 $ 250 $ 250,041
----------
PHARMACEUTICALS...................... 1.1%
SmithKline Beecham, PLC, Medium Term
Notes
6.625% (Aa3/A+)..................... 10/01/01 500 496,875
----------
RETAIL DEPARTMENT STORES............. 0.6%
Wal-Mart Stores, Inc.
5.50% (Aa2, AA)..................... 09/15/97 250 249,880
----------
UTILITIES -- ELECTRIC................ 2.2%
Wisconsin Electic Power Co.
6.625% (Aa3/AA)..................... 11/15/06 1,000 967,500
----------
UTILITIES -- GAS..................... 2.7%
Consolidated Natural Gas Co.
5.75% (A1, AA-)..................... 08/01/03 475 448,281
Northern Illinois Gas Co.
5.875% (Aa1, AA).................... 05/01/00 500 486,875
Wisconsin Natural Gas Co.
6.125% (Aa3, AA).................... 09/01/97 260 260,000
----------
1,195,156
----------
UTILITIES -- TELEPHONE............... 1.1%
New England Telephone & Telegraph Co.
5.05% (Aa2, AA)..................... 10/01/98 500 493,125
----------
TOTAL CORPORATE BONDS**
(Cost $5,484,737)................ 5,359,415
----------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES............... 2.3%
Ford Credit Auto Owner Trust
6.750% (Aaa, AAA-)................... 09/15/00 $1,000 $ 1,005,480
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $1,010,546)................. 1,005,480
-----------
U.S. TREASURY OBLIGATIONS............. 51.6%
U.S. Treasury Notes
7.375%............................... 11/15/97 1,000 1,007,740
5.875%............................... 04/30/98 500 500,160
7.125%............................... 10/15/98 1,000 1,013,940
5.50%................................ 11/15/98 2,000 1,984,820
5.125%............................... 12/31/98 1,000 986,330
5.00%................................ 01/31/99 1,000 982,900
7.00%................................ 04/15/99 1,000 1,014,500
6.50%................................ 04/30/99 1,000 1,005,780
6.875%............................... 07/31/99 1,000 1,012,740
5.75%................................ 10/31/00 1,500 1,470,870
5.50%................................ 12/31/00 1,000 970,600
5.625%............................... 02/28/01 600 584,094
6.25%................................ 04/30/01 1,000 992,760
7.50%................................ 11/15/01 450 467,307
6.25%................................ 02/15/03 300 296,016
7.25%................................ 05/15/04 2,600 2,695,810
7.25%................................ 08/15/04 2,300 2,382,915
7.875%............................... 11/15/04 1,000 1,072,840
7.50%................................ 02/15/05 1,100 1,156,155
7.00%................................ 07/15/06 1,000 1,021,470
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $22,445,450)................ 22,619,747
-----------
COMMERCIAL PAPER...................... 6.8%
CHEMICALS............................. 2.3%
E.I. duPont de Nemours & Co.
5.50%................................ 06/17/97 1,000 997,555
-----------
CONSUMER GOODS........................ 2.2%
Procter & Gamble Co.
5.50%................................ 06/18/97 1,000 997,403
-----------
FINANCE............................... 2.3%
Nestle Capital Corp.
5.47%................................ 06/18/97 1,000 997,417
-----------
TOTAL COMMERCIAL PAPER
(Cost $2,992,375)................. 2,992,375
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE FIXED INCOME FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS............ 8.9%
GOLDMAN, SACHS & CO.
(Agreement dated 5/30/97 to be
repurchased at $1,959,814 col-
lateralized by $1,595,000 (Value
$2,011,807) U.S. Treasury Notes,
11.125%, due 8/15/03)
5.38%.......................... 06/02/97 $ 1,959 $ 1,958,936
MERRILL LYNCH GOVERNMENT SECURI-
TIES, INC.
(Agreement dated 5/30/97 to be
repurchased at $1,959,819 col-
lateralized by $1,975,000 (Value
$2,000,760) U.S. Treasury Notes,
6.125%, due 3/31/98)
5.40%.......................... 06/02/97 1,959 1,958,937
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $3,917,873)............ 3,917,873
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANY............... 2.3%
Goldman Sachs Financial Square
Prime Obligations Fund.......... 1,000,000 1,000,000
-----------
TOTAL INVESTMENT COMPANY
(Cost $1,000,000)............ 1,000,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $43,481,144*)............. 99.0% 43,423,670
OTHER ASSETS IN EXCESS OF
LIABILITIES..................... 1.0% 424,985
----- -----------
NET ASSETS....................... 100.0% $43,848,655
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE:
INSTITUTIONAL SHARES
($43,009,448 / 4,171,415)...... $10.31
======
AFBA FIVE STAR SHARES
($839,207 / 81,256)............ $10.33
======
</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.......... $ 372,639
Excess of tax cost over value.......... $(430,113)
</TABLE>
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1997. These ratings are not cov-
ered by the Report of Independent Accountants.
See Accompanying Notes to Financial Statements.
29
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MARYLAND.............................. 95.0%
Anne Arundel County, GO, Consolidated
General Improvement
5.30% (Aa1, AA+).................... 07/15/12 $400 $ 392,500
Baltimore City, RB, (Waste Water
Project), INS: FGIC
5.50% (Aaa, AAA).................... 07/01/26 300 292,500
Baltimore County, GO, Metropolitan
District
6.125% (Aaa, AAA)................... 07/01/07 175 186,594
Baltimore County, GO, Refunding --
Consolidated Public Improvement
5.20% (Aaa, AAA).................... 04/01/09 400 401,500
5.40% (Aaa, AAA).................... 10/15/12 250 250,000
Calvert County, PCRB, GTD: BGE
5.55% (A2, A)....................... 07/15/14 300 298,875
Charles County, GO, Consolidated
Public Improvement, UT, INS: FGIC
5.50% (Aaa, AAA).................... 01/01/06 230 238,050
Dorchester County, GO, Public
Facilities, INS: MBIA
5.875% (Aaa, AAA)................... 02/01/10 215 224,406
Harford County, GO, Public
Improvement, UT
5.60% (Aa, AA-)..................... 09/01/06 325 337,187
Howard County, GO, Consolidated Public
Improvement
5.25% (Aaa, AA+).................... 08/15/09 400 405,000
5.25% (Aaa, AA+).................... 08/15/12 250 249,688
Maryland Community Development
Administration, RB, Multi Family
Mortgage
6.60% (Aa, NA)...................... 05/15/12 145 151,344
Maryland Community Development
Administration, RB, Single Family
Mortgage
6.55% (Aa, NA)...................... 04/01/17 180 186,525
Maryland National Capital Park &
Planning Commission-- Montgomery
County, GO
6.00% (Aaa, AAA).................... 07/01/06 150 159,938
Maryland National Capital Park &
Planning Commission -- Prince
George's County, GO
5.15% (Aa, AA)...................... 07/01/11 300 294,000
Maryland State Health & Higher
Educational Facilities Authority, RB,
Johns Hopkins Hospital
5.00% (Aa3, AA-).................... 07/01/23 300 275,250
Maryland State Health & Higher
Educational Facilities Authority, RB,
Loyola College, INS: MBIA
5.375% (Aaa, AAA)................... 10/01/26 500 486,875
Maryland State Health & Higher
Educational Facilities Authority, RB,
University of Maryland Medical
System, INS: FGIC
5.40% (Aaa, AAA).................... 07/01/07 300 306,000
Maryland State Stadium Authority, RB,
(Ocean City Convention Center)
5.375% (Aa, AA)..................... 12/15/15 400 385,500
Maryland State Transportation
Authority, RB
5.75% (A1, A+)...................... 07/01/15 350 350,875
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MARYLAND -- CONTINUED
Maryland Water Quality Financing
Administration, RB, Revolving
Loan Fund
5.50% (Aa, AA)................. 09/01/11 $ 200 $ 201,500
5.40% (Aa, AA)................. 09/01/12 300 297,375
Montgomery County Revenue
Authority, RB, Olney Indoor Swim
Project
5.25% (NA, AA-)................ 10/01/12 250 245,625
Montgomery County, GO, Refunding
-- Consolidated Public
Improvement, UT
5.80% (Aaa, AAA)............... 07/01/07 250 265,000
Montgomery County, RB, Housing
Opportunity Community Housing
Multi-Family (Avalon Knoll)
5.70% (NA, AAA)................ 07/01/10 150 151,500
Prince George's County, GO,
Consolidated Public Improvement,
INS: MBIA
5.25% (Aaa, AAA)............... 03/15/15 400 394,000
Washington County, GO, Refunding
-- Consolidated Public
Improvement UT, INS: FGIC
5.25% (Aaa, AAA)............... 01/01/06 200 205,750
Washington Suburban Sanitation
District, GO, General
Construction
5.25% (Aa1, AA)................ 06/01/16 250 246,562
----------
TOTAL MUNICIPAL BONDS**
(Cost $7,736,789)............ 7,879,919
----------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES............. 8.6%
Goldman Sachs Financial Square
Tax-Free Money Market Fund...... 282,925 282,925
Municipal Fund for Temporary
Investments -- MuniFund......... 434,263 434,263
----------
TOTAL INVESTMENT COMPANIES
(Cost $717,188).............. 717,188
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $8,453,977*).............. 103.6% 8,597,107
LIABILITIES IN EXCESS OF OTHER
ASSETS.......................... (3.6)% (299,298)
----- ----------
NET ASSETS (equivalent to $10.38
per share based on 799,072
shares outstanding)............. 100.0% $8,297,809
===== ==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($8,297,809 / 799,072)......... $10.38
==========
</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........... $174,322
Excess of tax cost over value........... $(31,192)
</TABLE>
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1997. These ratings are not cov-
ered by the Report of Independent Accountants.
See Accompanying Notes to Financial Statements.
31
<PAGE>
M.S.D.&T. FUNDS, INC.
INVESTMENT ABBREVIATIONS
<TABLE>
<C> <S>
ADR American Depository Receipt
BAN Bond Anticipation Notes
COP Certificates of Participation
ETM Escrowed to Maturity in U.S. Government Obligations
FGIC Financial Guaranty Insurance Co.
FRN Floating Rate Notes
GO General Obligation
GDR Global Depository Receipt
GTD Guaranteed
IDA Industrial Development Authority
INS Insured
LA Liquidity Agreement
LIC Line of Credit
LOC Letter of Credit
MB Municipal Bonds
MBIA Municipal Bond Investor Association
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
UT Unlimited Tax
VRDN Variable Rate Demand Notes
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1997
<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............... $19,364,645 $16,325,192 $2,167,656 $1,710,288
----------- ----------- ---------- ----------
EXPENSES:
Investment advisory
fees.................. 894,393 758,420 155,526 --
Administration fees.... 447,197 379,210 77,763 61,732
Accounting agent fees.. 107,327 91,010 24,884 19,754
Custodian fees......... 43,689 39,041 14,725 13,260
Directors' fees........ 17,274 14,188 3,031 2,493
Transfer agent fees.... 60,945 49,469 18,741 18,013
Legal.................. 68,544 57,019 11,451 9,498
Audit.................. 46,810 38,873 9,202 6,618
Other.................. 47,518 59,995 13,219 9,279
----------- ----------- ---------- ----------
1,733,697 1,487,225 328,542 140,647
Fees waived by
Investment Adviser.... (35,776) (60,674) (12,442) --
Fees waived by
Administrator......... (159,565) (122,069) (48,595) (31,999)
----------- ----------- ---------- ----------
TOTAL EXPENSES....... 1,538,356 1,304,482 267,505 108,648
----------- ----------- ---------- ----------
NET INVESTMENT INCOME... 17,826,289 15,020,710 1,900,151 1,601,640
----------- ----------- ---------- ----------
REALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss) on investments
sold.................. 3,006 23,604 -- (478)
----------- ----------- ---------- ----------
Net gain (loss) on
investments........... 3,006 23,604 -- (478)
----------- ----------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $17,829,295 $15,044,314 $1,900,151 $1,601,162
=========== =========== ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1997
<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............... $ 195,217 $ 380,697 $2,794,747 $482,927
Dividends.............. 2,496,932 1,171,673(1) -- --
----------- ---------- ---------- --------
TOTAL INVESTMENT
INCOME.............. 2,692,149 1,552,370 2,794,747 482,927
----------- ---------- ---------- --------
EXPENSES:
Investment advisory
fees.................. 717,042 615,841 154,692 44,777
Administration fees.... 149,384 96,225 55,247 11,194
Accounting agent fees.. 57,338 38,490 27,402 4,478
Custodian fees......... 14,911 57,732 10,352 4,353
Directors' fees........ 5,119 3,622 2,128 513
Transfer agent fees.... 40,046 30,823 29,388 19,041
Legal.................. 22,935 15,080 8,707 1,731
Audit.................. 15,044 10,036 5,820 1,242
Registration fees...... 11,682 3,196 7,196 1,175
Amortization of
organizational costs.. -- 4,844 -- 6,799
Pricing service fees... 2,008 5,956 6,612 4,388
Other.................. 35,418 8,280 25,588 1,162
----------- ---------- ---------- --------
1,070,927 890,125 333,132 100,853
Fees waived by
Investment Advisers... (175,151) (44,785) (60,993) (41,084)
Fees waived by
Administrator......... (20,468) (37,049) (4,871) (10,592)
----------- ---------- ---------- --------
TOTAL EXPENSES....... 875,308 808,291 267,268 49,177
----------- ---------- ---------- --------
NET INVESTMENT INCOME... 1,816,841 744,079 2,527,479 433,750
----------- ---------- ---------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments........... 4,813,430 1,033,246 93,259 66,313
Foreign currency
transactions......... -- (179,212) -- --
----------- ---------- ---------- --------
4,813,430 854,034 93,259 66,313
----------- ---------- ---------- --------
Net unrealized
appreciation
(depreciation):
Investments........... 27,165,348 5,756,432 418,032 89,553
Translation of assets
and liabilities in
foreign currencies... -- 53,344 -- --
----------- ---------- ---------- --------
27,165,348 5,809,776 418,032 89,553
----------- ---------- ---------- --------
Net gain (loss) on
investments and
foreign currency
transactions.......... 31,978,778 6,663,810 511,291 155,866
----------- ---------- ---------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $33,795,619 $7,407,889 $3,038,770 $589,616
=========== ========== ========== ========
</TABLE>
- --------
(1)Net of withholding taxes of $200,432
See Accompanying Notes to Financial Statements.
34
<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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 17,826,289 $ 19,138,039 $ 15,020,710 $ 15,698,348
Net gain (loss) on
investments........... 3,006 (21,657) 23,604 (13,041)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 17,829,295 19,116,382 15,044,314 15,685,307
------------ ------------ ------------ ------------
Distributions to
shareholders from net
investment income
($.05, $.05, $.05, and
$.05 per share,
respectively).......... (17,826,289) (19,138,039) (15,020,710) (15,698,348)
Increase (decrease) in
net assets derived from
capital share
transactions........... 41,971,787 (55,159,078) 76,060,330 985,792
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 41,974,793 (55,180,735) 76,083,934 972,751
NET ASSETS:
Beginning of period.... 326,878,147 382,058,882 264,725,089 263,752,338
------------ ------------ ------------ ------------
End of period.......... $368,852,940 $326,878,147 $340,809,023 $264,725,089
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
35
<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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 1,900,151 $ 2,182,206 $ 1,601,640 $ 1,771,291
Net gain (loss) on
investments........... -- (3,901) (478) 3,228
----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,900,151 2,178,305 1,601,162 1,774,519
----------- ----------- ----------- -----------
Distributions to
shareholders from:
Net investment income
($.03, $.03, $.03, and
$.03 per share,
respectively)......... (1,900,151) (2,182,206) (1,601,640) (1,771,291)
Net realized capital
gains................. -- -- (1,823) --
----------- ----------- ----------- -----------
Total distributions to
shareholders......... (1,900,151) (2,182,206) (1,603,463) (1,771,291)
----------- ----------- ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 29,355,131 (18,959,016) 3,004,770 (8,505,165)
----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 29,355,131 (18,962,917) 3,002,469 (8,501,937)
NET ASSETS:
Beginning of period.... 50,136,762 69,099,679 46,541,281 55,043,218
----------- ----------- ----------- -----------
End of period.......... $79,491,893 $50,136,762 $49,543,750 $46,541,281
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
36
<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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 1,816,841 $ 2,385,328 $ 744,079 $ 571,924
Net realized gain
(loss) on investments
and foreign currency.. 4,813,430 3,132,449 854,034 3,847,509
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilites in
foreign currency...... 27,165,348 10,331,201 5,809,776 5,171,412
------------ ------------ ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 33,795,619 15,848,978 7,407,889 9,590,845
------------ ------------ ----------- ------------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.25, $.35, $.24,
and $.07 per share,
respectively)........ (1,864,057) (2,496,063) (1,565,408) (430,777)
AFBA Five Star Class
($.21 and $.10 per
share,
respectively)........ (14,126) (375)
Net realized capital
gains
Institutional Class
($.50, $.71, $.24,
and $.66 per share,
respectively)........ (3,679,018) (4,969,957) (1,379,819) (3,866,820)
AFBA Five Star Class
($.50 and $.00 per
share,
respectively)........ (43,603) --
------------ ------------ ----------- ------------
Total distributions
to shareholders..... (5,600,804) (7,466,395) (2,945,227) (4,297,597)
------------ ------------ ----------- ------------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 25,654,867 23,438,948 11,703,559 12,630,589
AFBA Five Star Class.. 1,121,207 316,761
Cost of shares redeemed
Institutional Class... (21,862,834) (20,452,056) (9,029,741) (12,076,799)
AFBA Five Star Class.. (43,474) (100)
Value of shares issued
in reinvestment
of dividends
Institutional Class... 3,559,863 4,599,394 500,517 656,985
AFBA Five Star Class.. 57,462 369
------------ ------------ ----------- ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... 8,487,091 7,903,316 3,174,335 1,210,775
------------ ------------ ----------- ------------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS............. 36,681,906 16,285,899 7,636,997 6,504,023
NET ASSETS:
Beginning of period.... 107,563,288 91,277,389 75,676,346 69,172,323
------------ ------------ ----------- ------------
End of period.......... $144,245,194 $107,563,288 $83,313,343 $ 75,676,346
============ ============ =========== ============
</TABLE>
See Accompanying Notes to Financial Statements.
37
<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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income... $ 2,527,479 $ 2,448,392 $ 433,750 $ 544,193
Net realized gain (loss)
on investments......... 93,259 (58,107) 66,313 163,201
Net unrealized gain
(loss) on investments.. 418,032 (1,034,652) 89,553 (330,070)
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ 3,038,770 1,355,633 589,616 377,324
------------ ------------ ----------- -----------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.59, $.59, $.50, and
$.49 per share,
respectively)......... (2,489,799) (2,444,640) (433,750) (544,193)
AFBA Five Star Class
($.55 and $.28 per
share, respectively).. (37,680) (3,752)
------------ ------------ ----------- -----------
Total distributions to
shareholders......... (2,527,479) (2,448,392) (433,750) (544,193)
------------ ------------ ----------- -----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class.... 8,581,841 12,256,511 946,151 1,203,881
AFBA Five Star Class... 469,598 354,044
Cost of shares redeemed
Institutional Class.... (11,437,189) (12,858,524) (3,115,604) (3,368,450)
AFBA Five Star Class... (13,985) (2,093)
Value of shares issued
in reinvestment
of dividends
Institutional Class.... 1,258,860 1,138,177 125,579 157,194
AFBA Five Star Class... 30,173 949
------------ ------------ ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions............ (1,110,702) 889,064 (2,043,874) (2,007,375)
------------ ------------ ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS........... (599,411) (203,695) (1,888,008) (2,174,244)
NET ASSETS:
Beginning of period..... 44,448,066 44,651,761 10,185,817 12,360,061
------------ ------------ ----------- -----------
End of period........... $ 43,848,655 $ 44,448,066 $ 8,297,809 $10,185,817
============ ============ =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
38
<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, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------ ------------ ------------ ------------ ------------
<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.. 0.0498 0.0532 0.0491 0.0296 0.0297
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0498 0.0532 0.0491 0.0296 0.0297
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0498) (0.0532) (0.0491) (0.0296) (0.0297)
-------- -------- -------- -------- --------
Total Distributions.. (0.0498) (0.0532) (0.0491) (0.0296) (0.0297)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 5.10% 5.45% 5.02% 3.00% 3.01%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $368,853 $326,878 $382,059 $346,694 $432,415
Ratio of Expenses to
Average Net Assets.... 0.43%(1) 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1)
Ratio of Net Income to
Average Net Assets.... 4.98% 5.33% 4.92% 2.95% 2.96%
</TABLE>
- --------
(1) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31,1997, May 31,
1996, May 31, 1995, May 31, 1994, and May 31, 1993 would have been 0.48%,
0.48%, 0.48%, 0.47%, and 0.43%, respectively.
See Accompanying Notes to Financial Statements.
39
<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, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------ ------------ ------------ ------------ ------------
<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.. 0.0495 0.0526 0.0485 0.0294 0.0293
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0495 0.0526 0.0485 0.0294 0.0293
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0495) (0.0526) (0.0485) (0.0294) (0.0293)
-------- -------- -------- -------- --------
Total Distributions.. (0.0495) (0.0526) (0.0485) (0.0294) (0.0293)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 5.06% 5.39% 4.95% 2.98% 2.97%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $340,809 $264,725 $263,752 $273,790 $255,637
Ratio of Expenses to
Average
Net Assets............ 0.43%(1) 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1)
Ratio of Net Income to
Average Net Assets.... 4.95% 5.27% 4.85% 2.94% 2.93%
</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, 1997, May 31,
1996, May 31, 1995, May 31, 1994, and May 31, 1993, would have been 0.49%,
0.48%, 0.48%, 0.47%, and 0.44%, respectively.
See Accompanying Notes to Financial Statements.
40
<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, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------ ------------ ------------ ------------ ------------
<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.. 0.0304 0.0321 0.0303 0.0202 0.0217
Net Realized Gain on
Investments........... -- -- -- 0.0004 --
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0304 0.0321 0.0303 0.0206 0.0217
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0304) (0.0321) (0.0303) (0.0202) (0.0217)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- (0.0004) --
-------- -------- -------- -------- --------
Total Distributions.. (0.0304) (0.0321) (0.0303) (0.0206) (0.0217)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 3.09% 3.26% 3.08% 2.08% 2.19%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $ 79,492 $ 50,137 $ 69,100 $ 82,222 $ 81,838
Ratio of Expenses to
Average Net Assets.... 0.43%(1) 0.43%(1) 0.43%(1) 0.38%(1) 0.37%(1)
Ratio of Net Income to
Average Net Assets.... 3.05% 3.22% 3.01% 2.02% 2.16%
</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, 1997, May 31,
1996, May 31, 1995, May 31, 1994, and May 31, 1993 would have been 0.53%,
0.51%, 0.52%, 0.50%, and 0.44%, respectively.
See Accompanying Notes to Financial Statements.
41
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY MARKET FUND (TRUST)
------------------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------ ------------ ------------ ------------ ------------
<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.. 0.0325 0.0340 0.0320 0.0219 0.0238
Net Realized Gain on
Investments........... -- -- -- 0.0003 --
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0325 0.0340 0.0320 0.0222 0.0238
-------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0325) (0.0340) (0.0320) (0.0219) (0.0238)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- (0.0003) --
-------- -------- -------- -------- --------
Total Distributions.. (0.0325) (0.0340) (0.0320) (0.0222) (0.0238)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------
Total Return............ 3.30% 3.45% 3.25% 2.24% 2.40%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $ 49,544 $ 46,541 $ 55,043 $ 73,230 $ 55,975
Ratio of Expenses to
Average Net Assets.... 0.22%(1) 0.22%(1) 0.22%(1) 0.20%(1) 0.20%(1)
Ratio of Net Income to
Average Net Assets.... 3.24% 3.40% 3.14% 2.19% 2.38%
</TABLE>
- --------
(1) Without the waiver of administration fees, the ratio of expenses to aver-
age net assets for the years ended May 31, 1997, May 31, 1996, May 31,
1995, May 31, 1994, and May 31, 1993 would have been 0.28%, 0.27%, 0.28%,
0.26%, and 0.21%, respectively.
See Accompanying Notes to Financial Statements.
42
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
VALUE EQUITY FUND
-------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
----------------------------------------------------------------------- -----------------------------------
FOR THE FOR THE PERIOD
FOR THE YEARS ENDED YEAR ENDED DECEMBER 31, 1995(1)
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1997 TO MAY 31, 1996
------------ ------------ ------------ ------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 11.36 $ 14.56 $13.61
-------- -------- ------- ------- ------- ------- ------
Income From Investment
Operations:
Net Investment
Income............... 0.74 0.33 0.35 0.29 0.29 0.62 0.14
Net Realized and
Unrealized Gain
(Loss) on
Investments.......... 3.68 1.89 1.55 (0.18) 1.13 3.75 0.91
-------- -------- ------- ------- ------- ------- ------
Total From
Investment
Operations......... 4.42 2.22 1.90 0.11 1.42 4.37 1.05
-------- -------- ------- ------- ------- ------- ------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income.... (0.25) (0.35) (0.34) (0.28) (0.30) (0.21) (0.10)
Distributions to
Shareholders from Net
Capital Gains........ (0.50) (0.71) (0.28) (0.08) (0.09) (0.50) 0.00
-------- -------- ------- ------- ------- ------- ------
Total
Distributions...... (0.75) (1.06) (0.62) (0.36) (0.39) (0.71) (0.10)
-------- -------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................ $ 18.25 $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 18.22 $14.56
======== ======== ======= ======= ======= ======= ======
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return........... 31.26% 17.24% 16.22% 0.87% 12.87% 30.92% 7.72%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)......... $142,452 $107,233 $91,277 $53,240 $46,754 $ 1,793 $ 330
Ratio of Expenses to
Average Net Assets... 0.73%(2) 0.73%(2) 0.73%(2) 0.68%(2) 0.68%(2) 0.98%(3) 0.98%(3)(4)
Ratio of Net Income to
Average Net Assets... 1.52% 2.38% 2.99% 2.41% 2.68% 1.74% 2.36%(4)
Portfolio turnover
rate.................. 27.10% 45.15% 33.26% 61.16% 11.99% 27.10% 45.15%
Average commission rate
paid(5)............... $0.0625 $0.0625
</TABLE>
- --------
(1)Commencement of public offering.
(2) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1997. May 31,
1996, May 31, 1995, May 31, 1994, and May 31, 1993, would have been 0.89%,
0.89%, 0.89%, 0.87%, and 0.88%, respectively.
(3) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the year ended May 31, 1997 and the pe-
riod ended May 31, 1996 would have been 1.15% and 1.15%, (annualized), re-
spectively.
(4) Annualized.
(5) Average commission rate paid on securities purchased and sold. Disclosure
is required for fiscal years beginning on or after September 1, 1995.
See Accompanying Notes to Financial Statements.
43
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
------------------------------------------------------------
FOR THE PERIOD
FOR THE YEARS ENDED JULY 2, 1993(1)
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 TO MAY 31, 1994
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 12.47 $ 11.60 $ 11.81 $ 10.00
------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.31 0.09 0.03 0.08
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency...... 0.88 1.51 0.08 1.81
------- ------- ------- -------
Total From
Investment
Operations......... 1.19 1.60 0.11 1.89
------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.24) (0.07) (0.04) (0.07)
Distributions to
Shareholders from Net
Capital Gains......... (0.24) (0.66) (0.28) (0.01)
------- ------- ------- -------
Total
Distributions...... (0.48) (0.73) (0.32) (0.08)
------- ------- ------- -------
Net Asset Value, End of
Period................. $ 13.18 $ 12.47 $ 11.60 $ 11.81
======= ======= ======= =======
- -----------------------------------------------------------------------------------------
Total Return............ 9.81% 14.27% 0.82% 18.98%
- -----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $83,313 $75,676 $69,172 $47,472
Ratio of Expenses to
Average Net Assets.... 1.05%(2) 1.05%(2) 1.05%(2) 1.00%(2)(3)
Ratio of Net Income to
Average Net Assets.... 0.97% 0.78% 0.06% 0.82%(3)
Portfolio turnover
rate................... 74.15% 53.58% 42.15% 39.49%
Average commission rate
paid(4)................ $0.0164
</TABLE>
- --------
(1)Commencement of operations.
(2) Without the waiver of advisory fees and administration fees, the
annualized ratio of expenses to average net assets for the years ended May
31, 1997, May 31, 1996, and May 31, 1995 and the period ended May 31, 1994
would have been 1.16%, 1.17%, 1.16%, and 1.20%, respectively.
(3) Annualized.
(4) Average commission rate paid on securities purchased and sold. Disclosure
is required for fiscal years beginning on or after September 1, 1995.
See Accompanying Notes to Financial Statements.
44
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------------------------------------------------------ ---------------------------------
FOR THE FOR THE PERIOD
FOR THE YEARS ENDED YEAR ENDED DECEMBER 1, 1995(1)
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993 MAY 31, 1997 TO MAY 31, 1996
------------ ------------ ------------ ------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.19 $ 10.43 $ 10.10 $ 10.55 $ 10.31 $10.20 $10.61
------- ------- ------- ------- ------- ------ ------
Income From Investment
Operations:
Net Investment Income.. 0.59 0.59 0.56 0.50 0.56 0.55 0.28
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.12 (0.24) 0.33 (0.39) 0.24 0.13 (0.41)
------- ------- ------- ------- ------- ------ ------
Total From Investment
Operations.......... 0.71 0.35 0.89 0.11 0.80 0.68 (0.13)
------- ------- ------- ------- ------- ------ ------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.59) (0.59) (0.56) (0.50) (0.56) (0.55) (0.28)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- (0.06) -- -- --
------- ------- ------- ------- ------- ------ ------
Total Distributions.. (0.59) (0.59) (0.56) (0.56) (0.56) (0.55) (0.28)
------- ------- ------- ------- ------- ------ ------
Net Asset Value, End of
Period................. $ 10.31 $ 10.19 $ 10.43 $ 10.10 $ 10.55 $10.33 $10.20
======= ======= ======= ======= ======= ====== ======
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return............ 7.12% 3.38% 9.13% 0.94% 7.94% 6.80% (1.23)%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $43,010 $44,102 $44,652 $35,008 $28,078 $ 839 $ 346
Ratio of Expenses to
Average Net Assets.... 0.60%(2) 0.60%(2) 0.60%(2) 0.55%(2) 0.55%(2) 0.90%(3) 0.90%(3)(4)
Ratio of Net Income to
Average Net Assets.... 5.72% 5.66% 5.56% 4.75% 5.32% 5.43% 5.50%(4)
Portfolio turnover
rate................... 20.92% 52.79% 22.01% 48.58% 12.29% 20.92% 52.79%
</TABLE>
- --------
(1) Commencement of public offering.
(2) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the years ended May 31, 1997, May 31,
1996, May 31, 1995, May 31, 1994, and May 31, 1993 would have been 0.75%,
0.72%, 0.70%, 0.66%, and 0.64%, respectively.
(3) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the year ended May 31, 1997 and the pe-
riod ended May 31, 1996 would have been 1.05% and 1.06%, (annualized), re-
spectively.
(4) Annualized.
See Accompanying Notes to Financial Statements.
45
<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 YEARS ENDED JUNE 2, 1992(1)
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 TO MAY 31, 1993
------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.20 $ 10.40 $ 10.25 $ 10.55 $ 10.00
------ ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.50 0.49 0.49 0.50 0.48
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.18 (0.20) 0.15 (0.28) 0.55
------ ------- ------- ------- -------
Total From Investment
Operations.......... 0.68 0.29 0.64 0.22 1.03
------ ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.50) (0.49) (0.49) (0.50) (0.48)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- (0.02) --
------ ------- ------- ------- -------
Total Distributions.. (0.50) (0.49) (0.49) (0.52) (0.48)
------ ------- ------- ------- -------
Net Asset Value, End of
Period................. $10.38 $ 10.20 $ 10.40 $ 10.25 $ 10.55
====== ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------
Total Return............ 6.80% 2.84% 6.48% 1.99% 10.59%(3)
- -------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $8,298 $10,186 $12,360 $20,008 $15,707
Ratio of Expenses to
Average Net Assets.... 0.55%(2) 0.62%(2) 0.62%(2) 0.55%(2) 0.55%(2)(3)
Ratio of Net Income to
Average Net Assets.... 4.84% 4.74% 4.83% 4.66% 4.78%(3)
Portfolio turnover
rate................... 28.11% 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, 1997, May 31,
1996, May 31, 1995 and May 31, 1994 and the period ended May 31, 1993
would have been 1.13%, 1.04%, 0.97%, 0.86%, and 0.94%, (annualized), re-
spectively.
(3) Annualized.
See Accompanying Notes to Financial Statements.
46
<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 issues 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 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)-(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 (Institu-
tional 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 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.
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 state-
ments 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: 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. Each Money Market Fund
seeks to maintain a stable net asset value of $1.00 per share, but there
can be no assurance that it 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
47
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1.SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
no sales during the day, at the current quoted bid price. Portfolio se-
curities that are primarily traded on foreign exchanges are generally
valued at the closing values of such securities on their respective ex-
changes, provided that if such securities are not traded on the valua-
tion date, they will be valued at the preceding closing values and pro-
vided further, that when an occurrence subsequent to the time of valua-
tion 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 securities 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 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 invest-
ments 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, International Equity Fund, Intermediate Fixed Income
Fund and Maryland Tax-Exempt Bond Fund will fluctuate as the values of
their respective investment 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 each of the
Value Equity Fund and Intermediate Fixed Income Fund (other than the ex-
penses incurred under the Service Plan and class specific expenses) and
realized 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 and real-
ized gains and losses are earned or expenses 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 Maryland Tax-Ex-
empt Bond Fund; are declared and paid quarterly to shareholders of the
Value Equity Fund; and are declared and paid semi-annually 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 principles. 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 continue to qualify for the tax treatment applicable to regu-
lated investment companies under the
48
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1.SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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 pro-
vision has been recorded for Federal income or excise taxes.
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 FOREIGN CURRENCY
DEFERRED LOSSES DEFERRED
-------------- ----------------
<S> <C> <C>
Tax-Exempt Money Market Fund (Trust).... $478 --
International Equity Fund............... -- $69,977
</TABLE>
E) 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.
F) 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.
G) 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.
49
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1.SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Also, although such contracts tend to minimize the risk of loss due to a
decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such
foreign currency increase.
H) International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic insta-
bility, foreign taxation and/or differences in auditing and other finan-
cial standards.
2. INVESTMENT ADVISER, ADMINISTRATOR, 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-advis-
er); .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 an annual rate of .25% of the average daily net as-
sets 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.
Each director of the Company receives from the Company an annual fee of
$3,500 and a fee of $1,625 for each Board meeting attended and is 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, 1997, the Funds paid legal fees to a law firm, a partner of which serves
as Secretary of the Company.
50
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3.NET ASSETS
At May 31, 1997, 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.......... $368,932,216 $340,935,287 $79,498,459 $49,544,228
Accumulated Realized Gain
(Loss) on Investments... (79,276) (126,264) (6,566) (478)
------------ ------------ ----------- -----------
$368,852,940 $340,809,023 $79,491,893 $49,543,750
============ ============ =========== ===========
<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..... $ 94,213,205 $ 70,903,672 $43,142,304 $ 8,719,647
AFBA Five Star Class.... 1,452,225 -- 838,686 --
Accumulated Realized Gain
(Loss) on Investments... 1,889,447 391,814 (79,690) (564,968)
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency................ 46,367,853 12,003,380 (57,474) 143,130
Undistributed Net
Investment Income....... 322,464 14,477 4,829 --
------------ ------------ ----------- -----------
$144,245,194 $ 83,313,343 $43,848,655 $ 8,297,809
============ ============ =========== ===========
</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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 1,174,068,226 434,185,717 1,219,474,458 546,351,190
Shares Redeemed......... (1,132,965,297) (490,322,690) (1,143,857,569) (545,573,787)
Shares Reinvested....... 868,858 977,895 443,441 208,389
-------------- ------------ --------------- -------------
Net Increase (Decrease)
in Shares.............. 41,971,787 (55,159,078) 76,060,330 985,792
Shares Outstanding:
Beginning of Period.... 326,960,429 382,119,507 264,874,957 263,889,165
-------------- ------------ --------------- -------------
End of Period.......... 368,932,216 326,960,429 340,935,287 264,874,957
============== ============ =============== =============
</TABLE>
51
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4.CAPITAL STOCK -- CONTINUED
<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, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 290,334,386 98,464,935 174,863,800 43,529,526
Shares Redeemed......... (260,981,502) (117,428,168) (171,859,030) (52,034,691)
Shares Reinvested....... 2,247 4,217 -- --
------------ ------------ ------------ -----------
Net Increase (Decrease)
in Shares.............. 29,355,131 (18,959,016) 3,004,770 (8,505,165)
Shares Outstanding:
Beginning of Period.... 50,143,328 69,102,344 46,539,458 55,044,623
------------ ------------ ------------ -----------
End of Period.......... 79,498,459 50,143,328 49,544,228 46,539,458
============ ============ ============ ===========
<CAPTION>
VALUE EQUITY FUND
--------------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
-------------------------- ----------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold............. 1,687,124 1,678,924 74,788 22,663
Shares Redeemed......... (1,464,735) (1,459,804) (2,711) (7)
Shares Reinvested....... 226,513 335,598 3,642 25
------------ ------------ ------------ -----------
Net Increase (Decrease)
in Shares.............. 448,902 554,718 75,719 22,681
Shares Outstanding:
Beginning of Period.... 7,356,638 6,801,920 22,681 --
------------ ------------ ------------ -----------
End of Period.......... 7,805,540 7,356,638 98,400 22,681
============ ============ ============ ===========
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1997 MAY 31, 1996
------------ ------------
<S> <C> <C>
Shares Sold............. 840,256 1,059,437
Shares Redeemed......... (626,614) (1,009,713)
Shares Reinvested....... 40,514 55,904
------------ ------------
Net Increase (Decrease)
in Shares.............. 254,156 105,628
Shares Outstanding:
Beginning of Period.... 6,066,282 5,960,654
------------ ------------
End of Period.......... 6,320,438 6,066,282
============ ============
</TABLE>
52
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4.CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
-----------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------- ---------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold............. 843,216 1,170,604 45,744 34,055
Shares Redeemed......... (1,121,470) (1,232,150) (1,349) (204)
Shares Reinvested....... 122,208 108,696 2,918 92
---------- ---------- ------ ------
Net Increase (Decrease)
in Shares.............. (156,046) 47,150 47,313 33,943
Shares Outstanding:
Beginning of Period.... 4,327,461 4,280,311 33,943 --
---------- ---------- ------ ------
End of Period.......... 4,171,415 4,327,461 81,256 33,943
========== ========== ====== ======
<CAPTION>
MARYLAND TAX-
EXEMPT BOND FUND
-------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1997 MAY 31, 1996
------------ ------------
<S> <C> <C>
Shares Sold............. 91,722 115,810
Shares Redeemed......... (303,265) (321,232)
Shares Reinvested....... 12,161 15,078
---------- ----------
Net Increase (Decrease)
in Shares.............. (199,382) (190,344)
Shares Outstanding:
Beginning of Period.... 998,454 1,188,798
---------- ----------
End of Period.......... 799,072 998,454
========== ==========
</TABLE>
5.FOREIGN CURRENCY CONTRACTS
A summary of foreign currency contracts which were outstanding at May 31,
1997 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.. 6/2/97 BP 58,882 $ 95,860 $ (471)
6/2/97 SEK 2,731,345 353,115 (312)
6/3/97 BP 180,089 293,995 (631)
-------- -------
$742,970 $(1,414)
======== =======
Foreign Currency
Purchases.............. 6/2/97 IDR 591,964,263 $242,907 $ 449
-------
$ (965)
=======
</TABLE>
Currency Legend
BP British Pound
IDR Indonesian Rupian
SEK Swedish Krone
53
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
6.PURCHASES & SALES OF SECURITIES
For the year ended May 31, 1997, 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.............. $35,139,214 $28,919,627 $ 0 $ 2,761,550
International Equity Fund...... 56,238,122 55,423,530 0 0
Intermediate Fixed Income
Fund.......................... 3,515,501 763,795 5,004,063 16,295,867
Maryland Tax-Exempt Bond Fund.. 2,399,488 4,134,315 0 0
</TABLE>
* (excluding short-term and U.S. Government securities)
7.CAPITAL LOSS CARRYOVERS
At May 31, 1997, the following Funds had capital loss carryovers:.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER YEAR
------------ ----------
<S> <C> <C>
Prime Money Market Fund.................... $ 79,276 2003 through 2005
Government Money Market Fund............... 126,264 2003 through 2005
Tax-Exempt Money Market Fund............... 5,946 2003 through 2005
Intermediate Fixed Income Fund............. 79,690 2003 through 2005
Maryland Tax-Exempt Bond Fund.............. 564,968 2003 through 2005
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the respective Funds.
8.SUBSEQUENT EVENT--TERMINATION OF AFBA FIVE STAR SHARES
On June 5, 1997, the Board of Directors of the Company approved the termina-
tion of the offering of AFBA Five Star Shares of the Value Equity and Interme-
diate Fixed Income Funds. Specifically, the Board approved that (i) as of the
close of business on June 6, 1997, AFBA Five Star Shares of the Funds would no
longer be offered to new investors, provided, however, that existing holders
of AFBA Five Star Shares may continue to purchase and redeem such Shares, and
will continue to receive dividends and distributions in additional AFBA Five
Star Shares if they have so elected, until August 8, 1997; and (ii) as of the
close of business on August 8, 1997, all outstanding AFBA Five Star Shares of
a Fund will be automatically exchanged for Institutional Shares of the same
Fund at net asset value without payment of any exchange fee.
54
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Di-
rectors of 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, 1997, 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 Funds management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing 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, 1997, 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
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 Eq-
uity Fund, International Equity Fund, Intermediate Fixed Income Fund and Mary-
land Tax-Exempt Bond Fund) as of May 31, 1997, the results of its operations
for the year then ended, and the changes in its net assets and its financial
highlights for each of the periods presented, in conformity with generally ac-
cepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 18, 1997
55
<PAGE>
IMPORTANT TAX INFORMATION
(UNAUDITED)
During the fiscal year ended May 31, 1997:
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.
33.6% 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 66.4% 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.
93.4% 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 6.6% were derived from long term capital
gains and are taxable at the long term capital gain rate.
56
<PAGE>
Investment Adviser and Administrator:
[Mercantile LOGO]
MERCANTILE
Mercantile-Safe Deposit and Trust Company
Baltimore, Maryland
Custodian (except for the International Equity Fund)
The Fifth Third Bank
Cincinnati, Ohio
Distributor:
BISYS Fund Services
Columbus, Ohio
Custodian for the International Equity Fund and Transfer Agent:
State Street Bank and Trust Company
Boston, Massachusetts
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
Fund's investment policies and expenses as well as other pertinent
information.
Shares of the Funds are nor 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 guaranteed 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.
