<PAGE>
M.S.D.&T. Funds, Inc.
-----------------------------
Semi-Annual Report
NOVEMBER 30, 1997
<PAGE>
Table of Contents
Chairman's Letter i
Fund Reviews iii
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) 12
Growth & Income Fund 15
International Equity Fund 19
Diversified Real Estate Fund 24
Limited Maturity Bond Fund 27
Maryland Tax-Exempt Bond Fund 31
Investment Abbreviations 33
Statement of Operations 34
Statements of Changes in Net Assets 36
Financial Highlights 40
Notes to Financial Statements 49
<PAGE>
Dear Shareholder,
It is a pleasure to present the semi-annual report for M.S.D.&T. Funds, Inc.
(the "Company") for the six months ended November 30, 1997. During the first
half of fiscal 1998 the Company has added a new portfolio to the complex, the
Diversified Real Estate Fund, to provide shareholders with a broader product
offering which now includes real estate as an asset class. Additionally, the
names of two of the Funds have been changed to more accurately reflect their
investment strategy. The Value Equity Fund has been renamed the Growth & In-
come Fund while the Intermediate Fixed Income Fund is now known as the Limited
Maturity Bond Fund.
Domestic capital markets experienced favorable returns during the past six
months due to the combination of strong economic growth and little reported
inflation. However, foreign equity markets have become subject to increased
volatility, which may also become an increasing characteristic in the United
States. The so-called "Asian Flu" has emerged from the developing nations of
Southeast Asia to impact the capital markets of the industrialized world. The
economic effects caused by the financial market uncertainty will remain a key
element to stock and bond market activity.
For the six months ended November 30, 1997, the Growth & Income Fund earned a
total rate of return of 14.30%(1), outpacing the unmanaged S&P 500 which
posted a 13.62% return and the Lipper Analytical Growth & Income Fund Average
of 12.16%. Although shareholders experienced a negative total return as world
equity markets struggled, the International Equity Funds -3.27% total re-
turn(1) was above the MSCI EAFE (Europe, Asia, Far East) Index which regis-
tered -4.27%(2). The Diversified Real Estate Fund had a 6.39%(1) total return
for the period from August 1, 1997 to November 30, 1997. The Limited Maturity
Bond Fund had a 4.50%(1) total return, lagging somewhat the Lehman Brothers
Intermediate Government/Corporate Bond Index at 5.02%, but ahead of the Lipper
Analytical Short-Intermediate Fund Average's 4.15% return. The Maryland Tax-
Exempt Bond Fund experienced a total return of 5.32%(1) in line with the Leh-
man Brothers Municipal Bond Index at 5.40% for the six month period and ahead
of the Lipper Analytical Maryland Bond Fund Average of 5.17%.
Money market interest rates have remained within a narrow trading band during
the past six months. After raising the benchmark Federal Funds rate in March
1997 the central bank has elected an unchanged policy for the balance of the
year. The M.S.D.&T. Money Market Funds continue to generate competitive re-
turns while providing shareholders with stability of principal. The seven-day
current yields for each Money Market Fund as of November 30, 1997 is detailed
below:
<TABLE>
<CAPTION>
PRIME(3) GOVERNMENT(3) TAX-EXEMPT(3) TAX-EXEMPT (TRUST)(3)
-------- ------------- ------------- ---------------------
<S> <C> <C> <C>
5.27% 5.21% 3.36% 3.56%
5.56%(4) 5.89%(4)
</TABLE>
The investment adviser believes that domestic financial market conditions will
continue to be greatly influenced by the news out of Asia during the next sev-
eral months. Significant structural changes are being initiated in many of the
effected countries as a result of the capital markets discipline. Ultimately,
these changes should result in improved infrastructures and improving business
conditions. World economic growth, and the resulting inflationary pressures,
will probably be less than they otherwise would have been. The United States
domestic economy remains healthy and a moderate down tick in the rate of
growth may well prove to be a positive event, as it lends itself to an in-
crease in the life of
<PAGE>
the business expansion. Over time, the economy will likely "shake-off" the re-
cent international financial market volatility.
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. 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
ii
<PAGE>
SHARES OF 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, re-
investment of dividends, distributions, and capital gains as well as changes
in share price. Fee waivers may result in higher total returns than would oc-
cur if full fees were charged. Past performance is not a guarantee of future
results.
<TABLE>
<CAPTION>
DIVERSIFIED LIMITED MARYLAND
GROWTH & INTERNATIONAL REAL ESTATE MATURITY TAX-EXEMPT
INCOME FUND EQUITY FUND FUND BOND FUND BOND FUND
----------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total Return for the one
year ended December 31,
1997................... 34.15% 4.08% N/A 7.15% 8.57%
Annualized Total Return
for five years ended
December 31, 1997...... 17.71% N/A N/A 5.82% 6.06%
Inception Date.......... 2/28/91 7/2/93 8/1/97 3/14/91 6/2/92
Average annual total
return since inception
to December 31, 1997... 15.96% 8.94% 21.42% 6.52% 6.34%
</TABLE>
(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) 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 November 30, 1997 would have been:
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT (TRUST)
----- ---------- ---------- ------------------
<S> <C> <C> <C>
5.22% 5.16% 3.28% 3.50%
</TABLE>
(4) Taxable Equivalent Yield. Assumes 39.6% tax bracket. A portion of income
may be subject to some state and/or local taxes and for certain investors a
portion of income may be subject to the Federal alternative minimum tax.
- --------
iii
<PAGE>
THE M.S.D.&T. GROWTH & INCOME FUND
For the six-month period ended November 30, 1997, the Growth & Income Fund re-
turned 14.3% versus 13.6% for S&P 500 Index. Over the last twelve months, the
Fund returned 31.3% versus 28.5% for the Index.
The Fund's above market return was due to its focus on larger capitalization
stocks in industries which have provided consistent earnings growth. These in-
cluded selected technology companies which benefited from good domestic and
foreign demand; financial companies, in particular banks and insurance compa-
nies, which benefited from lower interest rates; and consumer non-durable com-
panies, which had good unit growth and benefited from lower inflation.(1)
The most notable events of the past six months surrounded the distress of var-
ious Asian economies resulting from a combination of imprudent lending, unwise
infrastructure development and economic systems based on favoritism and exces-
sive leverage. The resulting collapse encompassed both local equity markets
and foreign exchange rates providing significant losses for many emerging mar-
kets. It remains to be seen if this damage can be contained and if so what im-
pact it will have on U.S. exports. On the favorable side, U.S. import prices
and the cost of Asian produced components should fall, further reducing infla-
tionary pressures domestically.
Looking forward, the U.S. economy continues to grow at a robust pace while
showing minimal inflation (under 2%). The unknown variable is the effect of
deterioration in foreign economies. The equity market continues to be fully
valued by most historical measures. The Fund is broadly diversified in high
quality issues offering, in our opinion, good prospects for above average re-
turns at acceptable risk levels in the long run. The Fund continues to focus
on companies with consistent and superior earnings and dividend growth.
- --------
(1) Portfolio composition is subject to change.
iv
<PAGE>
THE M.S.D.&T. INTERNATIONAL EQUITY FUND
For the six months ended November 30, 1997, the International Equity Fund pro-
duced a total return of -3.27%. Over the same period, the Fund's benchmark,
the MSCI All Country World ex-U.S. Index, fell 5.60%. The period was notable
for unusually high volatility in the equity and currency markets in Asia and,
to a lesser extent, in Latin America.
Continental European markets performed well during the period as the MSCI Eu-
rope ex-UK Index gained over 9%. Italy was the strongest market, posting a
23.5% gain in U.S. dollar terms. Switzerland, Sweden and Finland also
outperformed the regional index, while Spain, the Netherlands, France and Ger-
many lagged somewhat behind. Profits were taken within the European markets
early in the period but holdings were built up again following a shift of as-
sets out of the Pacific markets. The banking and insurance sectors have been
particularly strong, taking advantage of a wave of restructuring and consoli-
dation. Cyclical and technology stocks underperformed. The allocation to the
United Kingdom was boosted during the period under review. The Fund has a sig-
nificant exposure to financial stocks, which have posted solid gains and
should continue to do well on the strength of a stable economy, strong earn-
ings growth and the demutualization of building societies.(1)
The Japanese market continued to struggle, falling 12% in local market terms
and over 20% in U.S. dollar terms. The yen weakened throughout the period but
the Fund had a partial hedge in place to protect the value of the underlying
assets. Weaknesses in the financial sector have led to the failure of major
institutions such as Yamaichi Securities and Hokkaido Takusho Bank, with other
bankruptcies likely. On a positive note, the export sector has benefited from
a weaker yen and the strength of the U.S. and European economies. The Fund's
exposure to Japan was reduced significantly throughout the period, with some
sales generated by declining profit outlooks and some partial sales aimed at
locking in gains. Hong Kong was particularly hard hit during the currency tur-
moil although the peg to the U.S. dollar remains in place. Again, the Fund's
allocation to this market has been reduced and the remaining safe holdings are
concentrated in defensive stocks such as utilities. The Singapore market was a
relatively safe haven during the period although its reliance on trade with
neighboring nations will likely lead to slower growth going forward. Australia
also will likely feel the impact on its trading partners.
The Fund's exposure to the Asian emerging markets was fairly small during the
period and included holdings in India, the Philippines and Indonesia. The lat-
ter two markets were hard hit during the regional turmoil while India has suf-
fered due to political problems and foreign selling. While Latin American mar-
kets were impacted by the Asian situation, their decline was not nearly as se-
vere. Brazil posted the largest decline due to its strong gains in the first
part of the year and its partial peg to the U.S. dollar. Prospects remain fa-
vorable, however; Telebras, Copel and Celesc, three of the Fund's holdings,
are early candidates for privation and Unibanco should benefit from lower in-
terest rates as the market stabilizes. The South African market declined,
spurred by lower gold prices.
- --------
(1) Portfolio composition is subject to change.
v
<PAGE>
THE M.S.D.&T. DIVERSIFIED REAL ESTATE FUND
The Diversified Real Estate Fund began operations on August 1, 1997. Total re-
turn for the three months ended November 30, 1997 was 6.71%. For the same pe-
riod, the Wilshire Real Estate Index returned 4.5%.
Fueled by a strong national economy and low interest rates, the U.S. real es-
tate markets followed last year's record performance with another good year.
In good markets, market conditions became better; in strong markets, they pro-
gressed toward record levels. Once again, the magnitude of available capital
spurred acquisitions of various kinds, both private and public. The move to-
wards size was clearly evident during 1997 as more and more REITs strived for
the "magic" $1 billion market capitalization point. This attitude created in-
creased competition, higher prices for all real estate property types, and
further accelerated the progress toward consolidation of both the REIT and
real estate industry.
During the first 10 months of 1997, the REIT industry expanded by 47.9%. The
total REIT industry market capitalization as of December 31, 1996 was $88.78
billion; as of October 31, 1997, it was $131.29 billion.
In keeping with our strategic plan, the Diversified Real Estate Fund focused
on core property types during the last four months. As of November 30, 1997,
the Fund, excluding cash, was 93.7% invested in core property types with the
largest sector being Office (24.3%), closely followed by Apartments (22.6%).
Other sector weightings were Diversified (12.4%), Retail (11.9%), Hotels
(9.3%), Industrial (7%), Health Care (4.5%) and Cash (6.3%).
The investment adviser believes the movement towards public ownership and the
consolidation of real estate companies will continue in 1998. Real estate is a
capital intensive industry; accordingly, ease of access to capital and the
cost of capital is the engine which drives it. This will become a more impor-
tant consideration as we evaluate value and growth characteristics in the
portfolio.
- --------
(1) Portfolio composition is subject to change.
vi
<PAGE>
THE M.S.D.&T. LIMITED MATURITY BOND FUND
The Limited Maturity Bond Fund enjoyed a solid 4.50% total return as a rising
NAV supplemented income return over the six month period. The somewhat longer
maturity Lehman G/C Intermediate Index returned 5.02% over the same time
frame. In comparison, the Fund's peer group, the Lipper Short-Intermediate In-
vestment Grade Funds' Averages returned 4.15%.
Two forces shaped the trend in the fixed income market over the past six
months: the continued dampening of the inflation rate and the financial crisis
that has enveloped Southeast Asia. On the inflation side of the equation, most
measures of price appreciation have continued to register subdued increases.
Indeed, this has been especially true in the goods sectors of the economy as
many industrial corporations seem to lack significant pricing power, even in
an environment of strong domestic economic growth. Coupled with several meth-
odology changes in the CPI sampling over the past two years, the result has
been virtual price stability in traded goods. While service sector inflation
has been running steady around 3%, the overall CPI is currently running around
the 2% annual rate.
Secondly, the so-called Southeast Asian Tiger economies, Indonesia, Thailand,
Hong Kong, Taiwan, and Korea, have all undergone a series of financial crises
that are affecting world financial asset prices. As these countries have ei-
ther devalued their currencies and/or experienced dramatic declines in their
equity markets. European and North American stock and bond markets have moved
in sympathetic fashion. Most notable has been the beneficial "flight to quali-
ty" in the U.S. Treasury bond market.
These forces have combined to make the past six months very favorable for
fixed income securities as interest rates in the U.S. declined along the cou-
pon curve. Interest rates fell approximately 45 basis points on two year Trea-
suries while falling 85 basis points on thirty year maturities. As would be
expected in this environment, the further along the curve an investor was po-
sitioned, the higher the total return in the period. Additionally, U.S. Trea-
suries have generally outperformed higher-yielding, comparable maturity secu-
rities in the recent financial market volatility.
The Fund has taken advantage of selected corporate spread widening to invest
in some high quality "AA" and "A" rated credits during the turbulence of the
past six weeks. This has been the first time in several years that corporate
yield spreads have come under pressure and we continue to look for opportuni-
ties to increase the Fund's yield in selected high quality issuers. At Novem-
ber 30, 1997, the Fund's average life stood at 3.7 years and had a 30-day SEC
yield of 5.61%.
vii
<PAGE>
THE M.S.D.&T. MARYLAND TAX-EXEMPT BOND FUND
For the six months ended November 30, 1997, the Maryland Tax-Exempt Bond Fund
generated a total return of 5.32%. For the same period, the unmanaged Lehman
Brothers Municipal Bond Index posted a 5.40% return while the Lipper Average
for Maryland Tax- Exempt Bond Funds was 5.17%.
During the first half of fiscal 1998, interest rates fell as investor fears of
accelerating inflation abated. Reported inflation, as measured by both the
consumer price and producer price indices, showed a steady deceleration in the
rate of price increases to the lowest levels in 30 years. Meanwhile, the do-
mestic economy displayed consistent growth at above long-trend rates, a highly
unusual combination.
The drop in municipal bond yields, however, has not kept pace with that of the
U. S. Treasury market. Long maturity dated General Obligation municipal
yields, as measured by the Bond Buyer Indices, are currently toward the wide
end of the trading range when compared against comparable Treasuries. This is
natural during a bond market rally and, in relative valuation terms, makes
municipals somewhat more attractive. Buying in the Treasury market has been
somewhat in a response to a "flight to quality" in financial assets as equity
markets deal with the negative consequences of the Asian financial market con-
tagion.
The Maryland economy has experienced a significant increase in its rate of
economic growth. Adding to the improving fundamentals is the State's fiscal
1997 surplus, currently estimated at $260 million. This should continue to al-
low the State of Maryland to maintain one of the premier municipal credit rat-
ings in the country. Major credit rating companies have also raised ratings
for several counties and other issuers due to the improving fundamentals. The
emphasis in the Fund will continue to be on investments rated among the top
three credit categories.
viii
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS................. 10.2%
FEDERAL FARM CREDIT BANK........... 1.5%
Notes
5.65%............................. 02/02/98 $ 6,000 $ 6,000,000
------------
FEDERAL HOME LOAN BANK............. 4.9%
Discount Notes
4.95%............................. 03/04/98 2,000 1,996,026
Floating Rate Notes**
5.76%............................. 12/05/97 11,000 10,997,167
Notes
5.71%............................. 01/21/98 6,000 6,000,000
------------
18,993,193
------------
FEDERAL HOME LOAN MORTGAGE CORP.... 1.0%
Notes
5.95%............................. 06/19/98 4,000 3,998,948
------------
STUDENT LOAN MARKETING
ASSOCIATION....................... 2.8%
Floating Rate Notes**
5.64%............................. 12/05/97 11,000 11,000,000
------------
TOTAL AGENCY OBLIGATIONS
(Cost $39,992,141).............. 39,992,141
------------
BANKERS' ACCEPTANCES............... 8.1%
Bank of America NT & SA
5.48%............................. 12/18/97 5,000 4,987,061
5.48%............................. 12/24/97 3,000 2,989,497
CoreStates Bank N.A.
5.56%............................. 12/23/97 5,000 4,983,011
Republic National Bank of New York
5.50%............................. 12/16/97 2,000 1,995,417
Wachovia Bank N.A,
5.50%............................. 12/19/97 8,000 7,978,000
5.62%............................. 01/16/98 9,000 8,935,370
------------
TOTAL BANKERS' ACCEPTANCES
(Cost $31,868,356).............. 31,868,356
------------
CERTIFICATES OF DEPOSIT............ 19.6%
DOMESTIC........................... 13.0%
Canadian Imperial Bank of Canada
5.62%............................. 01/08/98 10,000 10,000,000
5.73%............................. 02/19/98 8,000 8,000,000
CoreStates Bank N.A.
5.70%............................. 02/26/98 3,000 3,000,000
5.63%............................. 07/17/98 10,000 10,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
1
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- CONTINUED
DOMESTIC -- CONTINUED
Morgan Guaranty Trust Co.
5.59%.............................. 12/19/97 $ 8,000 $ 8,000,079
SunTrust Bank of Atlanta
5.72%.............................. 02/18/98 12,000 12,000,000
------------
51,000,079
------------
EURODOLLAR.......................... 1.5%
Morgan Guaranty Trust Co.
5.71%.............................. 01/06/98 6,000 5,999,773
------------
YANKEE.............................. 5.1%
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
5.88%.............................. 11/18/98 7,000 7,000,000
------------
20,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $76,999,852)............... 76,999,852
------------
COMMERCIAL PAPER.................... 43.7%
BANKS............................... 3.8%
Bank America Corp. FSA
5.55%.............................. 01/15/98 10,000 9,930,625
SunTrust Banks, Inc.
5.48%.............................. 12/22/97 5,000 4,984,017
------------
14,914,642
------------
CHEMICALS........................... 4.6%
E.I. duPont de Nemours & Co.
5.59%.............................. 01/26/98 10,000 9,913,044
5.56%.............................. 02/17/98 8,000 7,903,627
------------
17,816,671
------------
CONSUMER GOODS...................... 4.6%
Procter & Gamble Co.
5.47%.............................. 01/16/98 10,000 9,930,106
5.60%.............................. 02/06/98 3,000 2,968,733
5.58%.............................. 03/13/98 5,000 4,920,950
------------
17,819,789
------------
</TABLE>
See Accompanying Notes to Financial Statements.
2
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- CONTINUED
FINANCE............................ 15.7%
ABN AMRO NA Finance Inc.
5.64%............................. 03/20/98 $10,000 $ 9,829,233
Associates Corp N.A.
5.50%............................. 12/15/97 10,000 9,978,611
General Electric Capital Corp.
5.55%............................. 01/12/98 8,000 7,948,200
5.68%............................. 02/10/98 8,000 7,910,382
KFW International Finance Inc.
5.55%............................. 01/16/98 8,000 7,943,267
Norwest Financial, Inc.
5.51%............................. 01/06/98 6,000 5,966,940
5.59%............................. 02/04/98 12,000 11,878,883
------------
61,455,516
------------
FOODS.............................. 2.5%
Campbell Soup Co.
5.48%............................. 12/18/97 10,000 9,974,122
------------
PETROLEUM.......................... 4.1%
Chevron Corp.***
5.51%............................. 12/08/97 8,000 7,991,429
5.56%............................. 12/16/97 8,000 7,981,467
------------
15,972,896
------------
PHARMACEUTICALS.................... 2.6%
Merck & Co. Inc.
5.47%............................. 12/01/97 10,000 10,000,000
------------
UTILITIES -- GAS................... 2.3%
Southern Cal Gas Co.
5.49%............................. 12/11/97 9,000 8,986,275
------------
UTILITIES -- ELECTRIC.............. 3.5%
TECO Finance Corp.
5.48%............................. 12/12/97 8,600 8,585,600
5.57%............................. 02/06/98 5,000 4,948,168
------------
13,533,768
------------
TOTAL COMMERCIAL PAPER
(Cost $170,473,679)............. 170,473,679
------------
CORPORATE BONDS.................... 2.4%
FINANCE............................ 1.3%
Associates Corp. N.A.
6.38%............................. 08/15/98 5,000 5,015,889
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS -- CONTINUED
RETAIL DEPARTMENT STORES.......... 0.3%
Wal-Mart Stores, Inc.
5.50%............................ 03/01/98 $ 1,300 $ 1,299,473
------------
UTILITIES -- ELECTRIC............. 0.8%
Georgia Power Co.
5.50%............................ 04/01/98 3,000 2,993,422
------------
TOTAL CORPORATE BONDS
(Cost $9,308,784).............. 9,308,784
------------
REPURCHASE AGREEMENTS............. 16.0%
J.P. MORGAN SECURITIES, INC.
(Agreement dated 11/28/97 to be
repurchased at $30,014,200
collateralized by $30,754,000
(Value $30,610,000) U.S. Treasury
Notes, 4.75%, due 10/31/98)
5.68%............................ 12/01/97 30,000 30,000,000
MORGAN STANLEY & CO., INC.
(Agreement dated 11/28/97 to be
repurchased at $30,014,125
collateralized by $29,805,000
(Value $30,593,658) U.S. Treasury
Notes, 5.875%, due 6/30/00)
5.65%............................ 12/01/97 30,000 30,000,000
WACHOVIA BANK N.A.
(Agreement dated 11/28/97 to be
repurchased at $2,761,300
collateralized by $2,760,000
(Value $2,817,225) U.S. Treasury
Notes, 6.00%, due 8/15/99)
5.65%............................ 12/01/97 2,760 2,760,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $62,760,000)............. 62,760,000
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $391,402,812*)............. 100.0% 391,402,812
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (0.0)% (36,882)
----- ------------
NET ASSETS (equivalent to $1.00
per share based on 391,474,756
shares outstanding).............. 100.0% $391,365,930
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($391,365,930 / 391,474,756)..... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of November 30, 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.
*** Security was purchased pursuant to Section 4(2) of the Securities Act of
1933 and may not be resold except to qualified buyers.
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS................. 72.3%
FEDERAL FARM CREDIT BANK........... 11.3%
Discount Notes
5.40%............................. 12/05/97 $ 4,000 $ 3,997,600
5.47%............................. 01/09/98 5,000 4,970,371
5.48%............................. 01/20/98 15,000 14,885,833
5.50%............................. 02/18/98 12,000 11,855,167
-----------
35,708,971
-----------
FEDERAL HOME LOAN BANK............. 13.4%
Discount Notes
5.39%............................. 12/12/97 10,000 9,983,531
5.47%............................. 02/06/98 10,000 9,898,197
5.50%............................. 02/13/98 5,000 4,943,472
Floating Rate Notes**
5.53%............................. 12/16/97 7,000 6,999,857
5.76%............................. 12/05/97 6,000 5,998,455
Notes
5.73%............................. 01/27/98 4,500 4,499,930
-----------
42,323,442
-----------
FEDERAL HOME LOAN MORTGAGE CORP. .. 15.1%
Discount Notes
5.40%............................. 12/10/97 13,000 12,982,450
5.415%............................ 12/29/97 10,000 9,957,883
5.50%............................. 01/23/98 12,000 11,902,833
5.47%............................. 02/06/98 11,000 10,888,017
5.95%............................. 06/19/98 2,000 1,999,474
-----------
47,730,657
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION....................... 14.0%
Discount Notes
5.41%............................. 12/09/97 12,000 11,985,573
5.40%............................. 12/18/97 8,000 7,979,600
5.38%............................. 12/24/97 5,000 4,982,814
5.47%............................. 01/21/98 5,000 4,961,254
5.48%............................. 02/05/98 6,000 5,939,720
5.53%............................. 02/25/98 8,460 8,348,239
-----------
44,197,200
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS -- CONTINUED
STUDENT LOAN MARKETING
ASSOCIATION....................... 6.6%
Floating Rate Notes**
5.64%............................. 12/05/97 $10,000 $ 10,000,000
Notes
6.03%............................. 05/15/98 5,000 5,000,780
5.88%............................. 12/10/98 6,000 6,000,000
------------
21,000,780
------------
TENNESSEE VALLEY AUTHORITY......... 11.9%
Discount Notes
5.39%............................. 12/18/97 13,000 12,966,911
5.45%............................. 01/12/98 13,000 12,917,342
5.53%............................. 01/26/98 12,000 11,896,773
------------
37,781,026
------------
TOTAL AGENCY OBLIGATIONS
(Cost $228,742,076)............. 228,742,076
------------
U.S. TREASURY OBLIGATIONS.......... 2.5%
U.S. TREASURY NOTES................ 2.5%
5.875%............................ 04/30/98 8,000 7,992,267
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,992,267)............... 7,992,267
------------
REPURCHASE AGREEMENTS.............. 27.5%
MORGAN STANLEY & CO., INC.
(Agreement dated 11/28/97 to be
repurchased at $30,014,125
collateralized by $30,175,000
(Value $30,586,626) U.S. Treasury
Notes, 5.50%, due 12/31/00)
5.65%............................. 12/01/97 30,000 30,000,000
REPUBLIC NATIONAL BANK OF NEW YORK
(Agreement dated 11/28/97 to be
repurchased at $31,185,702
collateralized by $20,295,000
(Value $20,471,571) U.S. Treasury
Notes, 5.75%, due 9/30/99 and
$11,620,000 (Value $11,387,600)
U.S. Treasury Bills, due 5/14/98)
5.66%............................. 12/01/97 31,171 31,171,000
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- CONTINUED
WACHOVIA BANK N.A.
(Agreement dated 11/28/97 to be
repurchased at $26,012,242
collateralized by $26,138,000
(Value $26,527,229) U.S. Treasury
Notes, 5.25%, due 7/31/98)
5.65%............................ 12/01/97 $26,000 $ 26,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $87,171,000)............. 87,171,000
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $323,905,343*)............. 102.3% 323,905,343
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (2.3)% (7,129,239)
----- ------------
NET ASSETS (equivalent to $1.00
per share based on 316,902,309
shares outstanding).............. 100.0% $316,776,104
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($316,776,104 / 316,902,309)..... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of November 30, 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
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
ALABAMA............................. 1.8%
City of Montgomery, TECP, PCR,
General Electric Co.
3.70% (Aaa/P-1, AAA/A-1+).......... 01/08/98 $1,500 $ 1,500,000
-----------
COLORADO............................ 0.6%
Colorado State TRAN
4.00% (NA/NA, NA/SP-1+)............ 06/26/98 500 500,463
-----------
FLORIDA............................. 4.2%
Jacksonville Electric Authority,
TECP, LA: Morgan Guaranty Trust Co.
3.80% (Aa1/P-1, AA/A-1+)........... 01/05/98 3,500 3,500,000
-----------
GEORGIA............................. 2.5%
Burke County, Development Authority,
PCR, VRDN, Georgia Power Co.
3.80% (A1/VMIG1, A+/A-1)**......... 12/01/97 2,100 2,100,000
-----------
HAWAII.............................. 1.2%
Hawaii State, GO, Prerefunded @101.5
7.10% (NA/NA, AAA/A+).............. 06/01/98 1,000 1,030,704
-----------
ILLINOIS............................ 4.5%
Illinois Educational Facilities,
VRDN, Northwestern University, LIC:
Northern Trust Co.
3.90% (Aa1/VMIG1, AA+/A-1+)**...... 12/05/97 3,726 3,726,000
-----------
INDIANA............................. 2.2%
City of Mount Vernon, TECP, PCR,
General Electric Co.
3.70% (Aaa/P-1, AAA/A-1+).......... 01/09/98 1,860 1,860,000
-----------
KANSAS.............................. 4.0%
Kansas State, VRDN, Department of
Transportation Highway Revenue, LA:
Kansas State Pooled Money
Investment Board
3.75% (Aa/VMIG1, AA/A-1+)**........ 12/05/97 3,300 3,300,000
-----------
KENTUCKY............................ 3.2%
Trimble County, TECP, PCR, LG&E
3.75% (Aa2/VMIG1, AA/A-1+)......... 02/12/98 2,650 2,650,000
-----------
LOUISIANA........................... 7.1%
Ascension Parish, VRDN, PCR, Shell
Oil Co.
3.80% (NA/NA, AAA/A-1+)**.......... 12/01/97 1,900 1,900,000
Plaquemine Parish Port & Harbor
Terminal District, TECP, TECO
Energy, Inc.
3.75% (A1/P-1, AA-/A-1+)........... 01/12/98 1,200 1,200,000
3.70% (A1/P-1, AA-/A-1+)........... 02/04/98 2,800 2,800,000
-----------
5,900,000
-----------
</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
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MARYLAND............................. 6.0%
Howard County, GO, Consolidated
Public Improvement
5.00% (Aaa/NA, AA+/NA).............. 02/15/98 $1,000 $ 1,002,568
Maryland State, GO
8.20% (Aaa/NA, AAA/NA).............. 03/01/98 1,000 1,010,844
Montgomery County, Parking Authority,
Bethesda Parking Lot, Prerefunded @
102
7.00% (Aaa/NA, AAA/NA).............. 06/01/98 500 507,227
Montgomery County, TECP, SPA: Union
Bank of Switzerland
3.70% (Aaa/P-1, AAA/A-1+)........... 02/06/98 2,450 2,450,000
-----------
4,970,639
-----------
MICHIGAN............................. 4.8%
University of Michigan, VRDN,
Hospital Revenue
3.90% (Aa2/VMIG1, AA/NA)**.......... 12/01/97 4,000 4,000,000
-----------
MINNESOTA............................ 4.2%
Minneapolis, GO, Special School
District
3.75% (Aa1/NA, AA+/NA).............. 06/03/97 1,000 1,002,182
City of Rochester, TECP, Mayo
Foundation/Mayo Clinic
3.70% (NA/NA, AA+/A-1+)............. 02/10/98 1,500 1,500,000
3.85% (NA/NA, AA+/A-1+)............. 02/10/98 1,000 1,000,000
-----------
3,502,182
-----------
MISSISSIPPI.......................... 2.4%
Jackson County, VRDN, Port
Facilities, Chevron USA Inc.
3.90% (Aa2/P-1, NA/NA)**............ 12/01/97 2,000 2,000,000
-----------
MISSOURI............................. 2.2%
Missouri State Health & Educational
Facilities, VRDN, Washington
University Project, SPA: Morgan
Guaranty Trust
3.90% (Aa1/VMIG1, AA/A-1+)**........ 12/05/97 1,850 1,850,000
-----------
NORTH CAROLINA....................... 13.4%
City of Durham, VRDN, COP, SPA:
Wachovia Bank N.A.
3.80% (Aa1/VMIG1, AAA/A-1+)**....... 12/03/97 2,800 2,800,000
City of Winston-Salem, VRDN, COP,
SPA: Credit Suisse
3.90% (Aa1/VMIG1, AAA/A-1+)**....... 12/05/97 2,900 2,900,000
North Carolina Eastern Municipal
Power Agency, TECP, LOC: CIBC
3.75% (NA/P-1, NA/A-1+)............. 01/15/98 2,500 2,500,000
North Carolina Educational
Facilities, VRDN, Duke University,
SPA: Wachovia Bank N.A.
3.90% (Aa1/VMIG1, AA+/A-1+)**....... 12/05/97 500 500,000
</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
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
NORTH CAROLINA -- CONTINUED
North Carolina Educational
Facilities, VRDN, Wake Forest
University
3.90% (Aa3/VMIG1, NA/NA)**.......... 12/05/97 $2,400 $ 2,400,000
-----------
11,100,000
-----------
OHIO................................. 1.8%
Cuyahoga County, VRDN, Hospital
Revenue, Cleveland Clinic
3.85% (Aa3/VMIG1, AA-/A-1+)**....... 12/05/97 1,500 1,500,000
-----------
OREGON............................... 4.8%
State of Oregon, GO, VRDN, Veterans
Welfare Board, LOC: Morgan Guaranty
Trust Co.
3.85% (Aa1/VMIG1, AAA/A-1+)**....... 12/03/97 4,000 4,000,000
-----------
PENNSYLVANIA......................... 1.8%
Pennsylvania State TAN
4.50% (NA/MIG1, NA/SP-1+)........... 06/30/98 1,500 1,506,344
-----------
SOUTH CAROLINA....................... 4.0%
South Carolina Public Service
Authority, TECP, LIQ: NationsBank
3.75% (Aa2/P-1, AA/A-1+)............ 12/05/97 2,000 2,000,000
York County, PCR, TECP, Duke Power
Project
3.75% (Aa3/VMIG1, AA-/A-1).......... 03/05/98 1,300 1,300,000
-----------
3,300,000
-----------
TENNESSEE............................ 1.2%
Tennessee State, VRDN, BAN, SPA:
Tennessee State Consolidated
Retirement System
3.75% (NA/SP-1+, NA/A-1+)**......... 12/05/97 1,000 1,000,000
-----------
TEXAS................................ 12.3%
City of Austin, TECP, LOC: Morgan
Guaranty Trust Co.
3.70% (Aa1/P-1, AAA/A-1+)........... 02/05/98 1,000 1,000,000
Harris County, Health Facilities
Development, VRDN, Methodist
Hospital, SPA: Morgan Guaranty Trust
Co. 50%
3.85% (NA/NA, AA/A-1+)**............ 12/01/97 1,400 1,400,000
Harris County, Health Facilities
Development, VRDN, St. Luke's
Episcopal Hospital Project, SPA:
Morgan Guaranty Trust Co.
3.85% (NA/NA, AA/A-1+)**............ 12/01/97 3,800 3,800,000
State of Texas, TRAN
4.75% (NA/MIG1, NA/SP-1+)........... 08/31/98 4,000 4,026,804
-----------
10,226,804
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS MATURITY PAR (000) VALUE
------------- -------- --------- -----
<S> <C> <C> <C> <C>
VIRGINIA......................... 5.7%
Fairfax County Hospital
Association, IDA, VRDN, Inova
Health System, SPA: Credit
Suisse
3.90% (Aa2/VMIG1, AA/A-1+)...... 12/05/97 1,800 $ 1,800,000
Richmond Public Utilities, RB,
Prerefunded @ 102
7.80% (Aaa/NA, AAA/NA).......... 01/15/98 1,100 1,127,519
Virginia State Transportation
Board, RB, Prerefunded @ 102
7.80% (Aaa/NA, AAA/NA).......... 03/01/98 1,750 1,801,314
-----------
4,728,833
-----------
TOTAL MUNICIPAL BONDS
(Cost $79,751,969)............ 79,751,969
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES............. 3.9%
Goldman Sachs Financial Square
Tax-Free Money Market Fund...... 2,085,407 2,085,407
Municipal Fund for Temporary
Investments -- MuniFund......... 1,123,216 1,123,216
-----------
TOTAL INVESTMENT COMPANIES
(Cost $3,208,623)............. 3,208,623
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $82,960,592*)............. 99.8% 82,960,592
OTHER ASSETS IN EXCESS OF
LIABILITIES..................... 0.2% 167,375
----- -----------
NET ASSETS (equivalent to $1.00
per share based on 83,135,768
shares outstanding)............. 100.0% $83,127,967
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($83,127,967 / 83,135,768)...... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of November 30, 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.
11
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
ALABAMA............................. 3.9%
City of Montgomery, TECP, PCR,
General Electric Co.
3.60% (Aaa/P-1, AAA/A-1+)......... 12/01/97 $2,000 $ 2,000,000
-----------
COLORADO............................ 2.9%
Colorado State TRAN
4.50% (NA/NA, NA/SP-1+)........... 06/26/98 1,500 1,501,389
-----------
FLORIDA............................. 2.0%
Jacksonville Electric Authority,
TECP, LA: Morgan Guaranty Trust Co.
3.60% (Aa1/P-1, AA/A-1+).......... 12/04/97 1,000 1,000,000
-----------
ILLINOIS............................ 8.2%
Illinois Educational Facilities,
VRDN, Northwestern University, LIC:
Northern Trust Co.
3.90% (Aa1/VMIG1, AA+/A-1+)**..... 12/05/97 2,193 2,193,000
Illinois Health Facilities
Authority, TECP, St. Lukes Medical
Center, LOC: Northern Trust
3.70% (Aa3/VMIG1, AA-/A-1+)....... 02/10/98 2,000 2,000,000
-----------
4,193,000
-----------
KANSAS.............................. 4.5%
Kansas State, VRDN, Department of
Transportation Highway Revenue, LA:
Kansas State Pooled Money
Investment Board
3.75% (Aa/VMIG1, AA/A-1+)**....... 12/05/97 2,300 2,300,000
-----------
KENTUCKY............................ 3.9%
Jefferson County, PCR, TECP,
Louisville Gas & Electric
3.65% (Aa2/VMIG1, AA-/A-1+)....... 01/16/98 2,000 2,000,000
-----------
LOUISIANA........................... 2.4%
Plaquemine Parish Port & Harbor
Terminal District, TECP,
TECO Energy, Inc.
3.75% (A1/P-1, AA-/A-1+).......... 01/12/98 1,200 1,200,000
-----------
MARYLAND............................ 6.0%
Maryland State, GO,
Prerefunded @ 100.5
6.60% (Aaa/NA, AAA/NA)............ 05/15/98 650 661,367
Montgomery County, Parking
Authority, Bethesda Parking Lot,
Prerefunded @ 100
7.00% (Aaa/NA, AAA/NA)............ 06/01/98 500 507,227
Montgomery County, TECP, SPA: Union
Bank of Switzerland
3.70% (Aaa/P-1, AAA/A-1+)......... 02/06/98 1,900 1,900,000
-----------
3,068,594
-----------
MICHIGAN............................ 4.2%
University of Michigan, VRDN,
Hospital Revenue
3.90% (Aa2/VMIG1, AA/NA)**........ 12/01/97 2,120 2,120,000
-----------
MINNESOTA........................... 3.5%
City of Rochester, TECP, Mayo
Foundation/Mayo Clinic
3.75% (NA/NA, AA+/A-1+)........... 12/03/97 1,800 1,800,000
-----------
MISSISSIPPI......................... 2.9%
Jackson County, VRDN, Port
Facilities, Chevron USA Inc.
3.90% (Aa2/P-1, NA/NA)**.......... 12/01/97 1,500 1,500,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MISSOURI............................ 2.8%
Missouri State Health & Educational
Facilities, VRDN,
Washington University Project, SPA:
Morgan Guaranty Trust
3.90% (Aa1/VMIG1, AA/A-1+)**...... 12/03/97 $1,440 $ 1,440,000
-----------
NORTH CAROLINA...................... 11.1%
City of Durham, VRDN, COP, SPA:
Wachovia Bank of North Carolina
3.80% (Aa1/VMIG1, AAA/A-1+)**..... 12/03/97 2,200 2,200,000
North Carolina Eastern Municipal
Power Agency, TECP, LOC: CIBC
3.80% (NA/P-1, NA/A-1+)........... 01/20/98 1,500 1,500,000
North Carolina Educational
Facilities, VRDN, Duke University
3.90% (Aa1/VMIG1, AA+/A-1+)**..... 12/05/97 400 400,000
North Carolina Educational
Facilities, VRDN, Wake Forest
University Project, SPA: Wachovia
Bank N.A.
3.90% (Aa3/VMIG1, NA/NA)**........ 12/05/97 1,545 1,545,000
-----------
5,645,000
-----------
OHIO................................ 2.9%
Cuyahoga County, VRDN, Hospital
Revenue, Cleveland Bank
3.85% (Aa3/VMIG1, AA-/A-1+)**..... 12/05/97 1,500 1,500,000
-----------
OREGON.............................. 4.7%
Oregon State, GO, VRDN, Veterans
Welfare Board, LOC:
Morgan Guaranty Trust Co.
3.85% (Aa1/VMIG1, AAA/A-1+)**..... 12/03/97 2,400 2,400,000
-----------
PENNSYLVANIA........................ 3.0%
Montgomery County, Higher Education
& Health Authority, RB,
Bryn Mawr Hospital Project,
Prerefunded @ 102
9.375% (Aaa/NA, AAA/NA)........... 12/01/97 500 510,000
Pennsylvania State GO, INS: AMBAC
6.30% (Aaa/NA, AAA/NA)............ 01/01/98 1,000 1,002,190
-----------
1,512,190
-----------
SOUTH CAROLINA...................... 2.9%
South Carolina Public Service
Authority, TECP, LIQ: NationsBank
3.65% (Aa2/P-1, AA/A-1+).......... 12/02/97 1,500 1,500,000
-----------
TENNESSEE........................... 4.9%
Tennessee State, VRDN, BAN, SPA:
Tennsessee State Consolidated
Retirement System
3.75% (NA/SP-1+, NA/A-1+)**....... 12/05/97 2,500 2,500,000
-----------
</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 -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
TEXAS............................... 9.8%
Harris County, Health Facilities
Development, VRDN, Methodist
Hospital, SPA: Morgan Guaranty
Trust Co.
3.85% (NA/NA, AA/A-1+)**.......... 12/01/97 $2,000 $ 2,000,000
Harris County, Health Facilities
Development, VRDN, St. Luke's
Episcopal Hospital Project, SPA:
Morgan Guaranty Trust Co.
3.85% (NA/NA, AA/A-1+)**.......... 12/01/97 500 500,000
State of Texas, TRAN
4.75% (NA/MIG1, NA/SP-1+)......... 08/31/98 2,500 2,516,752
-----------
5,016,752
-----------
VIRGINIA............................ 5.3%
Fairfax County Hospital Association,
IDA, VRDN, Inova Health System,
SPA: Credit Suisse
3.90% (Aa2/VMIG1, AA/A-1+)........ 12/05/97 500 500,000
Virginia State Transportation Board,
RB, Prerefunded @ 102
7.80% (Aaa/NA, AAA/NA)............ 03/01/98 500 514,661
6.80% (Aa2/NA, AA/NA)............. 05/15/98 1,650 1,705,225
-----------
2,719,886
-----------
WYOMING............................. 2.0%
Sweetwater County, TECP,
Pacificcorp, LOC: Union Bank
3.65% (Aaa/P-1, AAA/A-1+)......... 01/13/98 1,000 1,000,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $47,916,811).............. 47,916,811
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES................ 5.9%
Goldman Sachs Financial Square Tax-
Free Money Market Fund............. 1,585,494 1,585,494
Municipal Fund for Temporary
Investments--MuniFund.............. 1,404,830 1,404,830
-----------
TOTAL INVESTMENT COMPANIES
(Cost $2,990,324)............... 2,990,324
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $50,907,135*)................ 99.7% 50,907,135
OTHER ASSETS IN EXCESS OF
LIABILITIES........................ 0.3% 95,904
----- -----------
NET ASSETS (equivalent to $1.00 per
share based on 51,004,186 shares
outstanding)....................... 100.0% $51,003,039
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($51,003,039 / 51,004,186)......... $1.00
===========
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of November 30, 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.
14
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK............................... 98.6%
AIRLINES................................... 1.8%
Southwest Airlines Co. .................. 124,050 $ 3,031,472
------------
BANKS...................................... 7.5%
CoreStates Financial Corp. .............. 54,000 4,174,875
J.P. Morgan & Co. ....................... 29,100 3,322,856
Regions Financial Corp. ................. 59,000 2,278,875
SunTrust Banks Inc. ..................... 39,000 2,769,000
------------
12,545,606
------------
BEVERAGES.................................. 2.2%
Pepsico Inc. ............................ 100,000 3,687,500
------------
CHEMICALS.................................. 6.0%
Air Products & Chemicals Inc. ........... 45,900 3,519,956
E.I. duPont deNemours & Co. ............. 90,000 5,450,625
RPM Inc. ................................ 50,000 1,000,000
------------
9,970,581
------------
COMPUTER EQUIPMENT......................... 5.6%
Hewlett-Packard Co. ..................... 71,400 4,359,862
International Business Machine Corp. .... 43,000 4,711,187
Teradyne Inc.* .......................... 7,000 229,688
------------
9,300,737
------------
COMPUTER SOFTWARE.......................... 2.0%
Cicso Systems Inc.* ..................... 26,000 2,242,500
Electronic Data Services Corp. .......... 27,000 1,026,000
------------
3,268,500
------------
CONSUMER GOODS............................. 4.0%
Colgate Palmolive Co. ................... 57,400 3,835,038
Proctor & Gamble Co. .................... 37,000 2,823,563
------------
6,658,601
------------
ELECTRICAL EQUIPMENT....................... 4.8%
ABB AB ADR............................... 16,000 1,984,000
General Electric Co. .................... 60,000 4,425,000
Hubbell, Inc. "B"........................ 36,300 1,649,381
------------
8,058,381
------------
ELECTRONICS................................ 2.8%
Intel Corp. ............................. 61,000 4,735,125
------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK -- CONTINUED
FOODS...................................... 5.8%
CPC International, Inc. ................. 24,000 $ 2,481,000
Giant Food, Inc. "A"..................... 45,500 1,535,625
McCormick & Co., Inc. ................... 80,000 2,120,000
Nestle Registered ADR.................... 47,400 3,549,075
------------
9,685,700
------------
INDUSTRIAL GOODS........................... 3.2%
Corning Inc. ............................ 79,500 3,373,781
PPG Industries Inc. ..................... 33,500 1,940,906
------------
5,314,687
------------
INSURANCE.................................. 7.6%
Chubb Corp. ............................. 47,200 3,348,250
General RE Corp. ........................ 13,000 2,580,500
Jefferson Pilot Corp. ................... 45,100 3,441,694
UNUM Corp. .............................. 70,000 3,320,625
------------
12,691,069
------------
IRON/STEEL................................. 0.8%
Worthington Industries Inc. ............. 75,000 1,359,375
------------
MACHINERY & HEAVY EQUIPMENT................ 4.4%
Caterpillar, Inc. ....................... 70,000 3,355,625
Illinois Tool Works, Inc. ............... 72,100 3,951,981
------------
7,307,606
------------
MEDICAL INSTRUMENTS & SUPPLIES............. 3.0%
Johnson & Johnson........................ 79,000 4,972,063
------------
NATURAL GAS................................ 1.2%
Questar Corp. ........................... 48,900 1,916,269
------------
OIL EQUIPMENT & SERVICES................... 4.1%
Halliburton Co. ......................... 49,844 2,688,461
Schlumberger Ltd. ADR.................... 50,600 4,165,012
------------
6,853,473
------------
OFFICE EQUIPMENT........................... 1.2%
Pitney Bowes Inc. ....................... 22,800 1,916,625
------------
PETROLEUM.................................. 6.0%
Amoco Corp. ............................. 31,925 2,873,250
Atlantic Richfield Co. .................. 42,900 3,496,350
Exxon Corp. ............................. 58,800 3,586,800
------------
9,956,400
------------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK -- CONTINUED
PHARMACEUTICALS............................ 10.8%
Abbott Laboratories...................... 39,000 $ 2,535,000
Bristol-Myers Squibb Co. ................ 57,700 5,402,163
Merck & Co., Inc. ....................... 10,000 945,625
Pfizer Inc. ............................. 84,800 6,169,200
Schering Plough Corp. ................... 48,000 3,009,000
------------
18,060,988
------------
RETAIL DEPARTMENT STORES................... 3.1%
May Department Stores Co. ............... 44,300 2,381,125
Wal-Mart Stores, Inc. ................... 70,000 2,795,625
------------
5,176,750
------------
TECHNOLOGY................................. 2.0%
Motorola, Inc. .......................... 54,000 3,395,250
------------
TELECOMMUNICATIONS......................... 3.3%
Ericsson (LM) Tel -- ADR................. 26,000 1,051,375
GTE Corp. ............................... 31,500 1,592,719
Lucent Technologies Inc. ................ 36,559 2,929,290
------------
5,573,384
------------
TOBACCO.................................... 2.5%
Philip Morris Inc. ...................... 96,500 4,197,750
------------
UTILITIES -- TELEPHONE..................... 2.9%
MCI Communications Corp. ................ 109,100 4,793,581
------------
TOTAL COMMON STOCK
(Cost $102,941,726).................... 164,427,473
------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT................. 1.4%
REPUBLIC NATIONAL BANK OF NEW YORK
(Agreement dated 11/28/97 to be
repurchased at $2,402,132,
collateralized by $2,500,000 (Value
$2,450,000) U.S. Treasury Bills, due
5/14/98)
5.66%.............................. 12/01/97 $2,401 $ 2,401,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,401,000)................ 2,401,000
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $105,342,726*)................ 100.0% 166,828,473
LIABILITIES IN EXCESS OF OTHER
ASSETS.............................. (0.0)% (34,215)
----- ------------
NET ASSETS (equivalent to $20.74 per
share based on 8,042,636 shares
outstanding)........................ 100.0% $166,794,258
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($166,794,258 / 8,042,636).......... $20.74
============
</TABLE>
- --------
* Cost for Federal income tax purposes is $105,413,884. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost........ $61,606,355
Excess of tax cost over value........ $ (191,766)
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS................................... 94.3%
AUSTRALIA................................. 1.7%
CSR Limited............................... 120,000 $ 394,121
MIM Holdings.............................. 325,000 235,720
News Corp. ............................... 94,000 502,970
Telstra Corp. ............................ 98,000 184,402
-----------
1,317,213
-----------
BRAZIL.................................... 4.1%
Celesc GDR*............................... 9,000 927,000
Cia Paranaense Energy ADR................. 56,000 843,500
Telecommunicacoes Brasileiras............. 6,700 699,313
Unibanco GDR.............................. 24,324 699,315
-----------
3,169,128
-----------
FINLAND................................... 0.9%
Valmet.................................... 50,000 745,628
-----------
FRANCE.................................... 9.7%
Assurances Generales de France............ 18,000 1,024,479
AXA -- UAP................................ 16,500 1,197,359
Bouygues.................................. 4,000 404,506
Christian Dior............................ 3,500 345,643
Compagne Generale Des Eaux................ 9,500 1,255,190
Compagne Generale Des Eaux Warrants*...... 9,500 5,809
Dexia France.............................. 10,000 1,038,369
Michelin.................................. 10,000 538,664
Pinault Printemps La Redoute.............. 1,500 767,343
SGS Thomson Microelectronics*............. 5,200 366,692
Total "B'................................. 6,000 630,136
-----------
7,574,190
-----------
GERMANY................................... 8.9%
Commerzbank............................... 40,000 1,394,693
GEA Preferred............................. 2,950 968,376
Man....................................... 4,450 1,327,056
Mannesman................................. 3,120 1,448,712
Metro..................................... 11,664 537,628
Veba...................................... 21,000 1,244,168
-----------
6,920,633
-----------
HONG KONG................................. 1.7%
First Tractor Co. ........................ 560,000 333,234
Hong Kong Electric........................ 160,000 541,247
Jardine Matheson.......................... 77,800 412,340
-----------
1,286,821
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS --CONTINUED
INDIA..................................... 0.6%
State Bank of India GDR*.................. 35,000 $ 448,875
-----------
INDONESIA................................. 0.2%
Bank Dagang Nasional...................... 1,600,000 175,463
-----------
ITALY..................................... 5.2%
CSP International......................... 50,000 564,220
Fiat Preferred............................ 187,000 286,768
Istituto Nazionale delle Assicurazioni
(INA).................................... 380,000 661,902
Telecom Italia............................ 180,000 1,121,842
Telecom Italia Mobile..................... 170,000 688,146
Unicem.................................... 90,000 723,937
-----------
4,046,815
-----------
JAPAN..................................... 15.1%
18th Bank................................. 84,000 500,215
Amada..................................... 70,000 351,577
Bridgestone............................... 37,000 803,056
Daiwa Securities.......................... 40,000 139,471
Dowa Fire & Marine........................ 148,000 516,043
Fuji Photo Film........................... 23,000 827,189
Hitachi................................... 80,000 567,287
Hitachi Cable............................. 27,000 192,940
Ito Yokado................................ 11,000 496,454
Komori Corp. ............................. 22,000 344,760
Mabuchi Motors............................ 13,000 681,450
Matsushita Electric Industrial............ 47,000 732,850
Mitsui Fudosan............................ 39,000 412,537
Mitsui Chemicals.......................... 100,000 274,241
Ricoh..................................... 55,000 663,663
Sanwa Bank................................ 22,000 241,332
Shin-Etsu Chemical........................ 35,000 830,950
Shiseido.................................. 28,000 379,549
Sony...................................... 6,000 512,439
Sumitomo Trust & Banking.................. 60,000 395,847
Suzuki Motor.............................. 79,000 860,411
Tokyo Electron............................ 13,000 498,100
Tsubaki Nakashima......................... 52,000 297,434
Yamaha Motor.............................. 41,000 274,351
-----------
11,794,146
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS --CONTINUED
MEXICO.................................... 1.9%
Altos Hornos de Mexico*................... 280,000 $ 677,277
Cemex CPO................................. 180,000 776,077
-----------
1,453,354
-----------
NETHERLANDS............................... 4.1%
ING....................................... 7,800 317,030
Philips Electronics....................... 9,000 594,431
Vedior.................................... 19,200 364,114
Vendex International...................... 17,000 887,648
Ver Ned Uitgev Ver Bezit.................. 43,500 1,041,575
-----------
3,204,798
-----------
PHILIPPINES............................... 0.6%
Far East Bank & Trust..................... 1,116 1,538
Far East Bank & Trust Rights*............. 960 931
Manila Electric........................... 80,000 277,921
Philippine National Bank*................. 77,875 193,402
-----------
473,792
-----------
SINGAPORE................................. 2.5%
DBS Land.................................. 125,000 212,711
Development Bank of Singapore (Foreign)... 50,000 470,948
GP Batteries International................ 170,000 493,177
Singapore Press (Foreign)................. 30,000 410,667
United Overseas Bank (Foreign)............ 62,000 369,851
-----------
1,957,354
-----------
SOUTH AFRICA.............................. 1.2%
AECI...................................... 140,000 579,425
Murray & Roberts.......................... 220,000 385,501
-----------
964,926
-----------
SPAIN..................................... 3.0%
Adolgo Dominguez*......................... 29,000 884,828
Banco Santander........................... 30,000 907,293
Telefonica de Espana...................... 20,000 576,697
-----------
2,368,818
-----------
SWEDEN.................................... 2.7%
Electrolux "B"............................ 10,000 787,465
Ericsson "B".............................. 30,200 1,232,098
Granges AB*............................... 5,000 79,653
-----------
2,099,216
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, WARRANTS &
RIGHTS --CONTINUED
SWITZERLAND............................... 7.0%
CS Group Registered....................... 5,800 $ 848,222
Nestle Registered......................... 1,100 1,618,727
Novartis Registered....................... 1,066 1,703,282
Roche Holdings 1/10 PC Non-Voting......... 145 1,297,759
-----------
5,467,990
-----------
UNITED KINGDOM............................ 23.2%
Abbey National............................ 50,000 790,593
Asda...................................... 250,000 679,185
Barclays.................................. 42,500 1,023,222
BBA....................................... 75,000 477,009
BG........................................ 120,000 568,115
Boots..................................... 52,000 763,080
Bryant.................................... 170,000 327,946
British Aerospace......................... 27,000 736,932
British Petroleum......................... 71,284 976,408
British Telecom........................... 100,000 768,269
BTR....................................... 120,000 414,966
Glaxo Wellcome............................ 40,000 926,640
Granada................................... 50,000 714,356
Grand Metropolitan........................ 115,000 1,043,355
IMS*...................................... 190,000 344,120
Jarvis Hotels............................. 175,000 459,951
Limelight................................. 210,000 129,140
Lloyds TSB................................ 95,000 1,089,982
Medeva.................................... 41,250 139,691
National Grid............................. 155,000 782,127
NFC....................................... 150,000 357,599
Prudential................................ 50,000 539,557
Royal Bank of Scotland.................... 55,000 632,432
Rubicon................................... 210,000 389,189
Senior Engineering........................ 82,500 213,359
Shell Transport & Trading................. 80,000 547,560
SOCO International*....................... 24,000 156,484
SmithKline Beecham........................ 68,000 678,806
Sun Life & Provincial..................... 2,010 13,190
Unilever.................................. 84,000 663,036
Yorkshire Water........................... 85,000 703,152
-----------
18,049,451
-----------
TOTAL COMMON STOCK, PREFERRED STOCK,
WARRANTS & RIGHTS
(Cost $66,771,857).................... 73,518,611
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PURCHASE OF PAR
NET ASSETS MATURITY (000) VALUE
----------- -------- ----- -----
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS..................... 5.4%
Eurodollar Time Deposit State Street Bank &
Trust Co.
4.50%.................................... 12/01/97 $4,181 $ 4,181,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,181,000)..................... 4,181,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $70,952,857**)...................... 99.7% 77,699,611
OTHER ASSETS IN EXCESS OF LIABILITIES...... 0.3% 217,338
----- -----------
NET ASSETS (equivalent to $12.73 per share
based on
6,121,717 shares outstanding)............. 100.0% $77,916,949
===== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
($77,916,949 / 6,121,717)................. $12.73
======
</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........ $13,520,499
Excess of tax cost over value........ $(6,773,745)
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. FUNDS, INC.
DIVERSIFIED REAL ESTATE FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
REAL ESTATE INVESTMENT TRUSTS................ 93.2%
APARTMENTS................................... 24.7%
AMLI Residential Properties.................. 2,200 $ 50,600
Avalon Properties............................ 1,800 55,350
Bay Apartment Communities.................... 2,600 103,838
Equity Residential........................... 1,000 50,000
Evans Withycombe Residential................. 6,900 171,637
Gables Residential........................... 1,900 51,656
Irvine Apartment Community................... 3,300 102,506
Merry Land & Investment...................... 4,600 107,812
Post Properties Inc.......................... 2,500 96,563
Security Capital Atlantic.................... 4,300 92,988
Security Capital Pacific..................... 8,800 213,950
Charles E Smith Residential.................. 1,700 58,650
Summit Properties............................ 2,500 51,875
United Dominion.............................. 7,000 102,813
Wellsford Real Properties.................... 8,500 131,750
----------
1,441,988
----------
DIVERSIFIED.................................. 3.5%
Colonial Properties Trust.................... 3,400 97,538
MGI Properties............................... 4,600 106,662
----------
204,200
----------
HEALTH CARE.................................. 4.5%
Health Care.................................. 2,000 51,125
Meditrust Corp............................... 3,004 114,152
Nationwide Health Properties................. 4,100 96,863
----------
262,140
----------
HOTELS & LODGING............................. 9.2%
Host Marriott Corp........................... 5,000 104,063
Jameson Inns Inc............................. 8,000 92,500
Patriot American Hotel....................... 4,000 125,000
RFS Hotel Investors Inc...................... 5,500 104,500
Starwood Lodging Trust....................... 2,100 112,612
----------
538,675
----------
OFFICE PROPERTIES............................ 24.1%
Arden Realty Group........................... 5,500 167,406
Cali Realty Corp............................. 2,800 111,125
Carramerica Realty Corp...................... 3,400 102,425
Cornersone Properties........................ 6,000 115,875
Cousin Properties............................ 3,400 102,850
Crescent Real Estate Equity.................. 3,000 115,500
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. FUNDS, INC.
DIVERSIFIED REAL ESTATE FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF NUMBER OF
NET ASSETS SHARES VALUE
------------- --------- -----
<S> <C> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- CONTINUED
OFFICE PROPERTIES -- CONTINUED
Equity Office Properties................... 4,000 $ 129,750
Highwood Properties........................ 3,000 107,813
Prentiss Properties........................ 7,700 199,237
Reckson Association Realty Corp............ 9,800 260,312
----------
1,412,293
----------
RETAIL..................................... 11.8%
CBL & Associates........................... 3,900 93,844
Federal Realty Trust....................... 3,800 95,712
IRT Properties............................. 7,800 94,087
Rouse Co................................... 3,300 103,950
Taubman Centers Inc........................ 7,800 96,525
Urban Shopping Centers..................... 3,100 103,269
Western Investment Trust................... 7,500 103,125
----------
690,512
----------
WHAREHOUSE/INDUSTRIAL...................... 15.4%
Centerpoint Properties..................... 1,500 49,688
Duke Realty Investments.................... 2,400 55,200
Eastgroup Properties....................... 4,900 105,350
First Industries Realty.................... 1,600 56,500
Liberty Property Trust..................... 3,800 106,163
Meridan Industrial......................... 2,200 51,150
Security Capital Industrial................ 2,200 55,411
Sovran Self Storage Inc.................... 3,400 103,700
Spieker Properties......................... 5,300 215,313
Weeks Corp................................. 3,100 99,200
----------
897,675
----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Cost $5,188,962)....................... 5,447,483
----------
WARRANTS................................... 0.1%
Security Capital Warrants.................. 871 4,682
----------
TOTAL WARRANTS
(Cost $0)............................... 4,682
----------
INVESTMENT COMPANIES....................... 6.2%
Goldman Sachs Financial Square Prime
Obligations Fund.......................... 181,900 181,900
Temporary Investment Fund -- TempFund...... 183,449 183,449
----------
TOTAL INVESTMENT COMPANIES
(Cost $365,349)......................... 365,349
----------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. FUNDS, INC.
DIVERSIFIED REAL ESTATE FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS VALUE
------------- -----
<S> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $5,554,311*)............................ 99.5% $5,817,514
OTHER ASSETS IN EXCESS OF LIABILITIES.......... 0.5% 30,329
----- ----------
NET ASSETS (equivalent to $10.58 per share
based on 552,698 shares outstanding).......... 100.0% $5,847,843
===== ==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
($5,847,843 / 552,698)........................ $10.58
======
</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........... $322,542
Excess of tax cost over value........... $(59,339)
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ------ -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS.................. 27.1%
FEDERAL HOME LOAN BANK.............. 2.5%
Debentures
6.34%.............................. 06/13/05 $1,000 $ 1,011,870
-----------
FEDERAL HOME LOAN MORTGAGE CORP. ... 5.3%
Debentures
7.01%.............................. 07/11/07 1,000 1,021,590
Mortgage Backed Securities
6.50% (Pool #E00201)............... 03/01/08 140 140,549
6.50% (Pool #E67991)............... 10/01/12 25 24,878
6.50% (Pool #E68311)............... 11/01/12 965 962,954
-----------
2,149,971
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION........................ 6.7%
Debentures
6.50%.............................. 07/29/02 1,000 999,480
Medium Term Notes
6.08%.............................. 09/03/03 500 491,860
Mortgage Backed Securities
6.00% (Pool #227994)............... 07/01/08 638 625,172
7.50% (Pool #282608)............... 05/01/09 612 627,223
-----------
2,743,735
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION........................ 12.6%
Mortgage Backed Securities
8.00% (Pool #308751)............... 11/15/06 222 230,872
8.00% (Pool #312726)............... 12/15/06 27 27,593
8.00% (Pool #319511)............... 12/15/06 64 66,108
6.50% (Pool #351994)............... 12/15/08 187 187,279
6.50% (Pool #359462)............... 01/15/09 217 217,971
6.00% (Pool #372668)............... 01/15/09 736 723,111
8.00% (Pool #389481)............... 04/15/09 239 247,728
8.00% (Pool #401484)............... 11/15/09 698 724,833
6.00% (Pool #410492)............... 01/15/11 152 149,021
6.00% (Pool #410497)............... 02/15/11 647 636,100
6.50% (Pool #398485)............... 03/15/11 154 154,582
6.50% (Pool #417313)............... 03/15/11 1,423 1,426,378
6.50% (Pool #421869)............... 04/15/11 88 87,981
6.50% (Pool #442244)............... 01/15/12 77 77,308
6.50% (Pool #442139)............... 03/12/12 200 200,160
-----------
5,157,025
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $10,985,596).............. 11,062,601
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS...................... 20.2%
BEVERAGES............................ 0.5%
Coca-Cola Co., Inc.
7.875% (Aa3, AA-)................... 09/15/98 $ 200 $ 202,720
----------
CHEMICALS............................ 0.6%
E.I. duPont de Nemours & Co.
6.00% (Aa3, AA-).................... 12/01/01 250 248,750
----------
FINANCE.............................. 5.6%
CIT Group Holdings
6.375% (Aa3, A+).................... 08/01/02 500 499,375
6.375% (Aa3, A+).................... 11/15/02 500 499,375
Norwest Financial, Inc.
6.125% (Aa3, AA-)................... 08/01/03 300 297,000
6.375% (Aa3, AA-)................... 11/15/03 1,000 1,005,000
----------
2,300,750
----------
PHARMACEUTICALS...................... 1.2%
SmithKline Beacham, PLC, Medium Term
Notes
6.625% (Aa3, AA-)................... 10/01/01 500 506,875
----------
RETAIL MERCHANDISING................. 2.5%
Sears Roebuck Acceptance Corp.
7.00% (Aa2, A-)..................... 06/15/07 1,000 1,036,250
----------
UTILITIES -- ELECTRIC................ 2.5%
Wisconsin Electric Power Co.
6.625% (Aa3, AA).................... 11/15/06 1,000 1,018,750
----------
UTILITIES -- GAS..................... 2.4%
Consolidated Natural Gas Co.
5.75% (A1, AA-)..................... 08/01/03 475 463,125
Northern Illinois Gas Co.
5.875% (Aa1, AA).................... 05/01/00 500 494,375
----------
957,500
----------
UTILITIES -- TELEPHONE............... 4.9%
Ameritech Capital Funding
6.125% (Aa3, AA+)................... 10/15/01 500 499,375
New England Telephone & Telegraph Co.
5.05% (Aa2, AA-).................... 10/01/98 500 498,125
Southwestern Bell Tel
6.375% (Aa3, AA).................... 11/15/07 1,000 993,500
----------
1,991,000
----------
TOTAL CORPORATE BONDS
(Cost $8,218,390)................... 8,262,595
----------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ------ -----
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES................. 4.6%
FINANCE................................. 4.6%
Banc One Auto Grantor Trust
6.27% (Aaa, AAA)....................... 11/20/03 $ 850 $ 852,787
Ford Credit Auto Owner Trust
6.75% (Aaa, AAA)....................... 09/15/00 1,000 1,015,940
----------
TOTAL ASSET BACKED SECURITIES
(Cost $1,858,639).................. 1,868,727
----------
U.S. TREASURY OBLIGATIONS............... 33.2%
U.S. TREASURY NOTES
5.875%................................. 04/30/98 500 500,755
7.125%................................. 10/15/98 1,000 1,011,930
5.50%.................................. 11/15/98 1,800 1,796,310
5.125%................................. 12/31/98 1,000 994,090
5.50%.................................. 02/28/99 1,000 997,170
7.00%.................................. 04/15/99 1,000 1,016,290
6.50%.................................. 04/30/99 1,000 1,010,240
6.875%................................. 07/31/99 1,000 1,017,200
5.50%.................................. 12/31/00 600 594,618
6.25%.................................. 04/30/01 1,000 1,013,060
6.125%................................. 12/31/01 1,000 1,009,800
6.25%.................................. 02/15/03 100 101,761
7.25%.................................. 05/15/04 1,500 1,610,655
7.25%.................................. 08/15/04 300 322,809
7.875%................................. 11/15/04 500 556,550
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $13,307,323).................. 13,553,238
----------
COMMERCIAL PAPER........................ 4.8%
CHEMICALS............................... 2.4%
E.I. duPont de Nemours & Co.
5.60%.................................. 01/15/98 1,000 993,000
----------
FINANCE................................. 2.4%
General Electric Capital Corp.
5.71%.................................. 01/14/98 1,000 993,021
----------
TOTAL COMMERCIAL PAPER
(Cost $1,986,021)................... 1,986,021
----------
</TABLE>
See Accompanying Notes to Financial Statements.
29
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- --------- -----------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS............... 7.3%
MORGAN STANLEY & CO., INC.
(Agreement dated 11/28/97 to be
repurchased at $1,000,471
collateralized by $770,000 (Value
$1,020,958) U.S. Treasury Notes,
11.625%, due 11/15/04)
5.65%.............................. 12/01/97 $1,000 $ 1,000,000
REPUBLIC NATIONAL BANK NEW YORK
(Agreement dated 11/28/97 to be
repurchased at $1,978,933
collateralized by $2,070,000 (Value
$2,028,600) U.S. Treasury Bills,
due 5/14/98)
5.66%.............................. 12/01/97 1,978 1,978,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,978,000)............... 2,978,000
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANY.................. 2.4%
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 $40,333,969*)................ 99.6% 40,711,182
OTHER ASSETS IN EXCESS OF
LIABILITIES........................ 0.4% 164,137
----- -----------
NET ASSETS (equivalent to $10.47 per
share based on 3,904,748 shares
outstanding)....................... 100.0% $40,875,319
===== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($40,875,319 / 3,904,748).......... $10.47
======
</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........... $476,357
Excess of tax cost over value........... $(99,144)
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MARYLAND.............................. 97.2%
Anne Arundel County, GO, Consolidated
General Improvement
5.30% (Aa1, AA+).................... 07/15/12 $400 $ 405,000
Baltimore City, RB, (Waste Water
Project), INS: FGIC
5.50% (Aaa, AAA).................... 07/01/26 300 306,375
Baltimore County, GO, Refunding,
Consolidated Public Improvement
5.20% (Aaa, AAA).................... 04/01/09 400 409,500
Harford County, GO, Public
Improvement, UT
5.60% (Aa2, AA-).................... 09/01/06 325 344,094
Howard County, GO, Consolidated Public
Improvement
7.00% (Aaa, AAA).................... 05/15/08 200 213,500
5.25% (Aaa, AA+).................... 08/15/09 400 414,500
5.25% (Aaa, AA+).................... 08/15/12 250 255,938
Maryland National Capital Park &
Planning Commission,
Prince George's County, GO
5.15% (Aa2, AA)..................... 07/01/11 300 303,000
Maryland State & Local Facilities, GO
5.40% (Aaa, AAA).................... 05/15/00 100 103,125
5.00% (Aaa, AAA).................... 08/01/05 445 461,131
5.00% (Aaa, AAA).................... 08/01/12 500 506,250
Maryland State Health & Higher
Educational Facilities Authority, RB,
Francis Scott Key Medical Center,
INS: FGIC
5.00% (Aaa, AAA).................... 07/01/23 400 383,500
Maryland State Health & Higher
Educational Facilities Authority, RB,
Johns Hopkins Hospital
5.00% (Aa3, AA-).................... 07/01/23 300 292,875
Maryland State Health & Higher
Educational Facilities Authority, RB,
Loyola College, INS: MBIA
5.375% (Aaa, AAA)................... 10/01/26 500 507,500
Maryland State Health & Higher
Educational Facilities Authority, RB,
University of Maryland Medical
System, INS: FGIC
5.40% (Aaa, AAA).................... 07/01/07 300 313,875
Maryland State Stadium Authority, RB,
(Ocean City Convention Center)
5.375% (Aa, AA)..................... 12/15/15 400 403,000
Maryland State Transportation
Authority, RB
5.75% (A1, A+)...................... 07/01/15 150 152,438
Maryland Water Quality Financing
Administration, RB,
Revolving Loan Fund
5.50% (Aa2, AA)..................... 09/01/11 200 206,250
5.40% (Aa, AA)...................... 09/01/12 300 304,875
Montgomery County Revenue Authority,
RB, Olney Indoor Swim Project
5.25% (NA, AA-)..................... 10/01/12 250 255,312
</TABLE>
See Accompanying Notes to Financial Statements.
31
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE OF PAR
NET ASSETS MATURITY (000) VALUE
------------- -------- ----- -----
<S> <C> <C> <C> <C>
MARYLAND -- CONTINUED
Montgomery County, RB, Housing
Opportunity Community Housing
Multi-Family (Avalon Knoll)
5.70% (NA, AAA)................. 07/01/10 $150 $ 158,062
Prince George's County, GO,
Consolidated Public Improvement,
INS: MBIA
5.25% (Aaa, AAA)................ 03/15/15 400 405,000
Saint Marys County, GO,
Consolidated Public Improvement,
INS: MBIA
4.60% (Aaa, AAA)................ 09/01/04 500 505,000
University of Maryland System
Auxiliary Facilities & Tuition RB
5.125% (Aa3, AA+)............... 04/01/13 400 407,500
Washington County, GO, Refunding,
Consolidated Public Improvement
UT, INS: FGIC
5.25% (Aaa, AAA)................ 01/01/06 200 208,500
Washington Suburban Sanitation
District, GO, General
Construction
5.25% (Aa1, AA)................. 06/01/16 250 257,188
3.90% (Aa1, AA)................. 06/01/99 100 100,125
Washington Suburban Sanitation
District, GO, Water Supply
5.10% (Aa1, AA)................. 06/01/16 300 296,250
----------
TOTAL MUNICIPAL BONDS
(Cost $8,615,440)............. 8,879,663
----------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C> <C> <C>
INVESTMENT COMPANIES.............. 1.7%
Goldman Sachs Financial Square
Tax-Free Money Market Fund....... 98,442 98,442
Municipal Fund for Temporary
Investments -- MuniFund.......... 59,826 59,826
----------
TOTAL INVESTMENT COMPANIES
(Cost $158,268)............... 158,268
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $8,773,708*)............... 98.9% 9,037,931
OTHER ASSETS IN EXCESS OF
LIABILITIES...................... 1.1% 103,151
----- ----------
NET ASSETS (equivalent to $10.68
per share based on 855,793 shares
outstanding)..................... 100.0% $9,141,082
===== ==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($9,141,082 / 855,793)........... $10.68
==========
</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........... $266,903
Excess of tax cost over value........... $ (2,680)
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
M.S.D.&T. FUNDS, INC.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR American Depository Receipt
BAN Bond Anticipation Notes
COP Certificates of Participation
ETM Escrowed to Maturity in U.S. Government Obligations
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.
33
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
(UNAUDITED)
<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................ $10,897,845 $9,087,369 $1,559,089 $990,985
----------- ---------- ---------- --------
EXPENSES:
Investment advisory
fees................... 484,637 409,327 106,238 --
Administration fees..... 242,318 204,664 53,119 33,829
Accounting agent fees... 58,156 49,119 16,998 10,825
Custodian fees.......... 17,997 19,233 8,162 6,532
Directors' fees......... 8,383 7,079 1,837 1,170
Transfer agent fees..... 12,518 11,013 9,910 9,275
Legal................... 33,532 28,314 7,349 4,678
Audit................... 21,796 18,404 4,777 3,041
Other................... 27,827 19,509 7,048 5,478
----------- ---------- ---------- --------
907,164 766,662 215,438 74,828
Fees waived by
Investment Adviser..... (19,385) (32,746) (8,499) --
Fees waived by
Administrator.......... (73,589) (46,246) (24,210) (15,290)
----------- ---------- ---------- --------
TOTAL EXPENSES........ 814,190 687,670 182,729 59,538
----------- ---------- ---------- --------
NET INVESTMENT INCOME.... 10,083,655 8,399,699 1,376,360 931,447
----------- ---------- ---------- --------
REALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments sold.... (29,550) 58 (1,234) (669)
----------- ---------- ---------- --------
Net gain (loss) on
investments............ (29,550) 58 (1,234) (669)
----------- ---------- ---------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... $10,054,105 $8,399,757 $1,375,126 $930,778
=========== ========== ========== ========
</TABLE>
See Accompanying Notes to Financial Statements.
34
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH DIVERSIFIED LIMITED MARYLAND
& INCOME INTERNATIONAL REAL ESTATE MATURITY TAX-EXEMPT
FUND EQUITY FUND FUND BOND FUND BOND FUND
-------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $ 119,883 $ 54,945 $ 9,511 $1,304,505 $227,236
Dividends.............. 1,291,192 733,144(1) 91,583 -- --
----------- ----------- -------- ---------- --------
TOTAL INVESTMENT
INCOME.............. 1,411,075 788,089 101,094 1,304,505 227,236
----------- ----------- -------- ---------- --------
EXPENSES:
Investment advisory
fees.................. 498,506 338,872 14,858 73,256 22,026
Administration fees.... 103,855 52,949 2,322 26,163 5,507
Accounting agent fees.. 34,981 21,179 743 10,205 2,203
Custodian fees......... 7,935 31,671 1,355 8,151 2,466
Directors' fees........ 3,592 1,831 80 905 191
Transfer agent fees.... 17,653 12,467 7,304 13,690 9,881
Legal.................. 14,369 7,325 322 3,621 762
Audit.................. 10,092 4,761 209 3,106 495
Registration fees...... 2,982 952 4,017 3,478 782
Amortization of
organizational costs.. -- 2,436 33,942 -- --
Pricing service fees... 1,053 3,676 773 3,744 1,942
Other.................. 16,180 5,346 354 7,794 551
----------- ----------- -------- ---------- --------
711,198 483,465 66,279 154,113 46,806
Fees waived by
Investment Advisers... (119,399) (26,471) (14,858) (32,700) (20,176)
Fees reimbursed by
Investment Adviser.... -- -- (30,526) -- --
Fees waived by
Administrator......... (891) (20,696) (2,322) (16,151) (5,045)
----------- ----------- -------- ---------- --------
TOTAL EXPENSES....... 590,908 436,298 18,573 105,262 21,585
----------- ----------- -------- ---------- --------
NET INVESTMENT INCOME... 820,167 351,791 82,521 1,199,243 205,651
----------- ----------- -------- ---------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments........... 5,934,092 1,777,628 183 218,841 115,899
Foreign currency
transactions......... -- (134,527) -- -- --
----------- ----------- -------- ---------- --------
5,934,092 1,643,101 183 218,841 115,899
----------- ----------- -------- ---------- --------
Net unrealized
appreciation
(depreciation):
Investments........... 15,117,894 (5,257,402) 263,203 434,687 121,093
Translation of assets
and liabilities in
foreign currencies... -- 595,744 -- -- --
----------- ----------- -------- ---------- --------
15,117,894 (4,661,658) 263,203 434,687 121,093
----------- ----------- -------- ---------- --------
Net gain (loss) on
investments and
foreign currency
transactions.......... 21,051,986 (3,018,557) 263,386 653,528 236,992
----------- ----------- -------- ---------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $21,872,153 $(2,666,766) $345,907 $1,852,771 $442,643
=========== =========== ======== ========== ========
</TABLE>
- --------
(1)Net of withholding taxes of $104,289
See Accompanying Notes to Financial Statements.
35
<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
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------ ----------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 10,083,655 $ 17,826,289 $ 8,399,699 $ 15,020,710
Net gain (loss) on
investments........... (29,550) 3,006 58 23,604
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 10,054,105 17,829,295 8,399,757 15,044,314
------------ ------------ ------------ ------------
Distributions to
shareholders from net
investment income
($.03, $.05, $.03, and
$.05 per share,
respectively).......... (10,083,655) (17,826,289) (8,399,699) (15,020,710)
Increase (decrease) in
net assets derived from
capital share
transactions........... 22,542,540 41,971,787 (24,032,977) 76,060,330
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS.......... 22,512,990 41,974,793 (24,032,919) 76,083,934
NET ASSETS:
Beginning of period.... 368,852,940 326,878,147 340,809,023 264,725,089
------------ ------------ ------------ ------------
End of period.......... $391,365,930 $368,852,940 $316,776,104 $340,809,023
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TAX-EXEMPT TAX-EXEMPT
TAX-EXEMPT TAX-EXEMPT MONEY MARKET MONEY MARKET
MONEY MARKET MONEY MARKET FUND (TRUST) FUND (TRUST)
FUND FOR THE FUND FOR THE FOR THE SIX FOR THE
SIX MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------ ----------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 1,376,360 $ 1,900,151 $ 931,447 $ 1,601,640
Net gain (loss) on
investments........... (1,234) -- (669) (478)
----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,375,126 1,900,151 930,778 1,601,162
----------- ----------- ----------- -----------
Distributions to
shareholders from:
Net investment income
($.02, $.03, $.02, and
$.03 per share,
respectively)......... (1,376,360) (1,900,151) (931,447) (1,601,640)
Net realized capital
gains................. -- -- -- (1,823)
----------- ----------- ----------- -----------
Total distributions
to shareholders..... (1,376,360) (1,900,151) (931,447) (1,603,463)
----------- ----------- ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 3,637,308 29,355,131 1,459,958 3,004,770
----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS.......... 3,636,074 29,355,131 1,459,289 3,002,469
NET ASSETS:
Beginning of period.... 79,491,893 50,136,762 49,543,750 46,541,281
----------- ----------- ----------- -----------
End of period.......... $83,127,967 $79,491,893 $51,003,039 $49,543,750
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
37
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED
REAL ESTATE
GROWTH & GROWTH & INTERNATIONAL INTERNATIONAL FUND FOR THE
INCOME FUND INCOME FUND EQUITY FUND EQUITY FUND PERIOD FROM
FOR THE SIX FOR THE FOR THE SIX FOR THE AUGUST 1,
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED 1997(1) TO
NOVEMBER 30, MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1997 1997 1997 1997 1997
------------ ----------- ------------- ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 820,167 $ 1,816,841 $ 351,791 $ 744,079 $ 82,521
Net realized gain
(loss) on investments
and foreign currency.. 5,934,092 4,813,430 1,643,101 854,034 183
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilities in
foreign currency...... 15,117,894 27,165,348 (4,661,658) 5,809,776 263,203
------------ ------------ ----------- ----------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 21,872,153 33,795,619 (2,666,766) 7,407,889 345,907
------------ ------------ ----------- ----------- ----------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.12, $.25, $.02,
$.24, and $.06 per
share,
respectively)........ (946,907) (1,864,057) (125,964) (1,565,408) (32,673)
AFBA Five Star Class
($.03 and $.21 per
share,
respectively)........ (3,042) (14,126)
Net realized capital
gains
Institutional Class
($.00, $.50, $.00,
$.24 and $.00 per
share,
respectively)........ -- (3,679,018) -- (1,379,819) --
AFBA Five Star Class
($.00 and $.50 per
share,
respectively)........ -- (43,603)
------------ ------------ ----------- ----------- ----------
Total distributions
to shareholders..... (949,949) (5,600,804) (125,964) (2,945,227) (32,673)
------------ ------------ ----------- ----------- ----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 21,620,840 25,654,867 4,037,397 11,703,559 5,752,813
AFBA Five Star Class.. 41,862 1,121,207
Proceeds of shares
issued due to the
exchange of AFBA Five
Star shares for
Institutional shares.. 516,427
Cost of shares redeemed
Institutional Class... (19,055,965) (21,862,834) (6,661,490) (9,029,741) (218,204)
AFBA Five Star Class.. (1,537,343) (43,474)
Cost of shares redeemed
due to exchange of
AFBA Five Star shares
for Institutional
shares................ (516,427)
Value of shares issued
in reinvestment of
dividends
Institutional Class... 554,513 3,559,863 20,429 500,517 --
AFBA Five Star Class.. 2,953 57,462
------------ ------------ ----------- ----------- ----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 1,626,860 8,487,091 (2,603,664) 3,174,335 5,534,609
------------ ------------ ----------- ----------- ----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 22,549,064 36,681,906 (5,396,394) 7,636,997 5,847,843
NET ASSETS:
Beginning of period.... 144,245,194 107,563,288 83,313,343 75,676,346 0
------------ ------------ ----------- ----------- ----------
End of period.......... $166,794,258 $144,245,194 $77,916,949 $83,313,343 $5,847,843
============ ============ =========== =========== ==========
</TABLE>
- --------
(1)Commencement of Operations
See Accompanying Notes to Financial Statements.
38
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED LIMITED MARYLAND MARYLAND
MATURITY MATURITY TAX-EXEMPT TAX-EXEMPT
BOND FUND BOND FUND BOND FUND BOND FUND
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------ ----------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income.. $ 1,199,243 $ 2,527,479 $ 205,651 $ 433,750
Net realized gain
(loss) on
investments........... 218,841 93,259 115,899 66,313
Net unrealized gain
(loss) on
investments........... 434,687 418,032 121,093 89,553
----------- ------------ ---------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,852,771 3,038,770 442,643 589,616
----------- ------------ ---------- -----------
Distributions to
shareholders from:
Net investment income
Institutional Class
($.25, $.59, $.25,
and $.50 per share,
respectively)........ (1,191,748) (2,489,799) (205,651) (433,750)
AFBA Five Star Class
($.10 and $.55
per share,
respectively)........ (7,495) (37,680)
----------- ------------ ---------- -----------
Total distributions
to shareholders..... (1,199,243) (2,527,479) (205,651) (433,750)
----------- ------------ ---------- -----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 4,592,010 8,581,841 975,115 946,151
AFBA Five Star Class.. 5,925 469,598
Proceeds of shares
issued due to exchange
of AFBA Five Star
shares for
Institutional shares.. 90,250
Cost of shares redeemed
Institutional Class... (8,118,357) (11,437,189) (420,835) (3,115,604)
AFBA Five Star Class.. (772,799) (13,985)
Cost of shares redeemed
due to exchange of
AFBA Five Star shares
for Institutional
shares................ (90,250)
Value of shares issued
in reinvestment of
dividends
Institutional Class... 656,128 1,258,860 52,001 125,579
AFBA Five Star Class.. 10,229 30,173
----------- ------------ ---------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... (3,626,864) (1,110,702) 606,281 (2,043,874)
----------- ------------ ---------- -----------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS.......... (2,973,336) (599,411) 843,273 (1,888,008)
NET ASSETS:
Beginning of period.... 43,848,655 44,448,066 8,297,809 10,185,817
----------- ------------ ---------- -----------
End of period.......... $40,875,319 $ 43,848,655 $9,141,082 $ 8,297,809
=========== ============ ========== ===========
</TABLE>
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>
PRIME MONEY MARKET FUND
----------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED ----------------------------------------------------------------
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From
Investment Operations:
Net Investment Income.. 0.0261 0.0498 0.0532 0.0491 0.0296 0.0297
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations.......... 0.0261 0.0498 0.0532 0.0491 0.0296 0.0297
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from
Net Investment
Income............... (0.0261) (0.0498) (0.0532) (0.0491) (0.0296) (0.0297)
-------- -------- -------- -------- -------- --------
Total Distributions.. (0.0261) (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 $ 1.00
======== ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------
Total Return............ 2.64% 5.10% 5.45% 5.02% 3.00% 3.01%
- ------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets,
End of Period (000)... $391,366 $368,853 $326,878 $382,059 $346,694 $432,415
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 0.42%(1) 0.43% 0.43% 0.43% 0.38% 0.37%
Before Expense
Waiver.............. 0.47%(1) 0.48% 0.48% 0.48% 0.47% 0.43%
Ratio of Net Income to
Average Net Assets.... 5.21%(1) 4.98% 5.33% 4.92% 2.95% 2.96%
</TABLE>
- --------
(1) Annualized.
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>
GOVERNMENT MONEY MARKET FUND
----------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED ----------------------------------------------------------------
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From
Investment Operations:
Net Investment Income.. 0.0257 0.0495 0.0526 0.0485 0.0294 0.0293
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations.......... 0.0257 0.0495 0.0526 0.0485 0.0294 0.0293
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0257) (0.0495) (0.0526) (0.0485) (0.0294) (0.0293)
-------- -------- -------- -------- -------- --------
Total Distributions.. (0.0257) (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 $ 1.00
======== ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------
Total Return............ 2.60% 5.06% 5.39% 4.95% 2.98% 2.97%
- ------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets,
End of Period (000)... $316,776 $340,809 $264,725 $263,752 $273,790 $255,637
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 0.42%(1) 0.43% 0.43% 0.43% 0.38% 0.37%
Before Expense
Waiver.............. 0.47%(1) 0.49% 0.48% 0.48% 0.47% 0.44%
Ratio of Net Income to
Average Net Assets.... 5.15%(1) 4.95% 5.27% 4.85% 2.94% 2.93%
</TABLE>
- --------
(1) Annualized.
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
----------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED ----------------------------------------------------------------
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.0162 0.0304 0.0321 0.0303 0.0202 0.0217
Net Realized Gain
on Investments........ -- -- -- -- 0.0004 --
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations.......... 0.0162 0.0304 0.0321 0.0303 0.0206 0.0217
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from
Net Investment
Income................ (0.0162) (0.0304) (0.0321) (0.0303) (0.0202) (0.0217)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- -- (0.0004) --
-------- -------- -------- -------- -------- --------
Total Distributions.. (0.0162) (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 $ 1.00
======== ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------
Total Return............ 1.64% 3.09% 3.26% 3.08% 2.08% 2.19%
- ------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets,
End of Period (000)... $ 83,128 $ 79,492 $ 50,137 $ 69,100 $ 82,222 $ 81,838
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 0.43%(1) 0.43% 0.43% 0.43% 0.38% 0.37%
Before Expense
Waiver.............. 0.51%(1) 0.53% 0.51% 0.52% 0.50% 0.44%
Ratio of Net Income to
Average Net Assets.... 3.24%(1) 3.05% 3.22% 3.01% 2.02% 2.16%
</TABLE>
- --------
(1) Annualized.
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>
TAX-EXEMPT MONEY MARKET FUND (TRUST)
----------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED ----------------------------------------------------------------
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From
Investment Operations:
Net Investment Income.. 0.0173 0.0325 0.0340 0.0320 0.0219 0.0238
Net Realized Gain on
Investments........... -- -- -- -- 0.0003 --
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations.......... 0.0173 0.0325 0.0340 0.0320 0.0222 0.0238
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.0173) (0.0325) (0.0340) (0.0320) (0.0219) (0.0238)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- -- (0.0003) --
-------- -------- -------- -------- -------- --------
Total Distributions... (0.0173) (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 $ 1.00
-------- -------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------
Total Return............ 1.74% 3.30% 3.45% 3.25% 2.24% 2.40%
- ------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets,
End of Period (000)... $ 51,003 $ 49,544 $ 46,541 $ 55,043 $ 73,230 $ 55,975
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 0.22%(1) 0.22% 0.22% 0.22% 0.20% 0.20%
Before Expense
Waiver.............. 0.28%(1) 0.28% 0.27% 0.28% 0.26% 0.21%
Ratio of Net Income to
Average Net Assets.... 3.44%(1) 3.24% 3.40% 3.14% 2.19% 2.38%
</TABLE>
- --------
(1) Annualized.
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>
GROWTH & INCOME FUND
----------------------------------------------------------------------------------
INSTITUTIONAL SHARES
----------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1998 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 18.25 $ 14.58 $ 13.42 $ 12.14 $ 12.39 $ 11.36
-------- -------- -------- ------- ------- -------
Income From
Investment
Operations:
Net Investment
Income........... 0.10 0.74 0.33 0.35 0.29 0.29
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 2.51 3.68 1.89 1.55 (0.18) 1.13
-------- -------- -------- ------- ------- -------
Total From
Investment
Operations..... 2.61 4.42 2.22 1.90 0.11 1.42
-------- -------- -------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from
Net Investment
Income........... (0.12) (0.25) (0.35) (0.34) (0.28) (0.30)
Distributions to
Shareholders from
Net Capital
Gains............ 0.00 (0.50) (0.71) (0.28) (0.08) (0.09)
-------- -------- -------- ------- ------- -------
Total
Distributions.. (0.12) (0.75) (1.06) (0.62) (0.36) (0.39)
-------- -------- -------- ------- ------- -------
Net Asset Value,
End of Period..... $ 20.74 $ 18.25 $ 14.58 $ 13.42 $ 12.14 $ 12.39
======== ======== ======== ======= ======= =======
- -------------------------------------------------------------------------------------------------------
Total Return....... 14.30% 31.26% 17.24% 16.22% 0.87% 12.87%
- -------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $166,794 $142,452 $107,233 $91,277 $53,240 $46,754
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.71%(2) 0.73% 0.73% 0.73% 0.68% 0.68%
Before Expense
Waiver......... 0.86%(2) 0.89% 0.89% 0.89% 0.87% 0.88%
Ratio of Net
Income to Average
Net Assets....... 0.98%(2) 1.52% 2.38% 2.99% 2.41% 2.68%
Portfolio turnover
rate.............. 12.78% 27.10% 45.15% 33.26% 61.16% 11.99%
Average commission
rate paid(3)...... $ 0.0600 $ 0.0625
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
-------------------------------------------
AFBA FIVE
STAR SHARES
-------------------------------------------
FOR THE PERIOD FOR THE PERIOD
JUNE 1, 1997 FOR THE DECEMBER 31,
TO AUGUST 6, YEAR ENDED 1995(1) TO
1997(4) MAY 31, 1997 MAY 31, 1996
-------------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 18.22 $ 14.56 $13.61
------- ------- ------
Income From
Investment
Operations:
Net Investment
Income........... 0.02 0.62 0.14
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 1.92 3.75 0.91
------- ------- ------
Total From
Investment
Operations..... 1.94 4.37 1.05
------- ------- ------
Less Distributions:
Dividends to
Shareholders from
Net Investment
Income........... (0.03) (0.21) (0.10)
Distributions to
Shareholders from
Net Capital
Gains............ 0.00 (0.50) 0.00
------- ------- ------
Total
Distributions.. (0.03) (0.71) (0.10)
------- ------- ------
Net Asset Value,
End of Period..... $ 20.13 $ 18.22 $14.56
======= ======= ======
- ------------------------------------------------------------
Total Return....... 10.66% 30.92% 7.72%
- ------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $ 516 $ 1,793 $ 330
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.98%(2) 0.98% 0.98%(2)
Before Expense
Waiver......... 1.14%(2) 1.15% 1.15%(2)
Ratio of Net
Income to Average
Net Assets....... 0.61%(2) 1.74% 2.36%(2)
Portfolio turnover
rate.............. 12.78% 27.10% 45.15%
Average commission
rate paid(3)...... $0.0600 $0.0625
</TABLE>
- ----------
(1)Commencement of public offering.
(2)Annualized.
(3) Average commission rate paid on securities purchased and sold. Disclosure
is required for fiscal years beginning on or after September 1, 1995.
(4) On June 6, 1997, the Fund terminated its offering of AFBA Five Star Shares
to new investors and on August 8, 1997, AFBA Five Star Shares were ex-
changed for Institutional Shares of the Fund.
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>
INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEARS ENDED JULY 2, 1993(1)
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 TO MAY 31, 1994
----------------- ------------ ------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.18 $ 12.47 $ 11.60 $ 11.81 $ 10.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.06 0.31 0.09 0.03 0.08
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency...... (0.49) 0.88 1.51 0.08 1.81
------- ------- ------- ------- -------
Total From Investment
Operations.......... (0.43) 1.19 1.60 0.11 1.89
------- ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.02) (0.24) (0.07) (0.04) (0.07)
Distributions to
Shareholders from Net
Capital Gains......... 0.00 (0.24) (0.66) (0.28) (0.01)
------- ------- ------- ------- -------
Total Distributions.. (0.02) (0.48) (0.73) (0.32) (0.08)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 12.73 $ 13.18 $ 12.47 $ 11.60 $ 11.81
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------
Total Return............ (3.27)% 9.81% 14.27% 0.82% 18.98%
- --------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $77,917 $83,313 $75,676 $69,172 $47,472
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 1.03%(2) 1.05% 1.05% 1.05% 1.00%(2)
Before Expense
Waiver.............. 1.14%(2) 1.16% 1.17% 1.16% 1.20%(2)
Ratio of Net Income to
Average Net Assets.... 0.83%(2) 0.97% 0.78% 0.06% 0.82%(2)
Portfolio turnover
rate................... 25.61% 74.15% 53.58% 42.15% 39.49%
Average commission rate
paid(3)................ $0.0140 $0.0164
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
(3) 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.
45
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
DIVERSIFIED REAL ESTATE FUND
----------------------------
FOR THE PERIOD
AUGUST 1, 1997(1) TO
NOVEMBER 30, 1997
--------------------
(UNAUDITED)
<S> <C>
Net Asset Value, Beginning of Period.............. $ 10.00
-------
Income From Investment Operations:
Net Investment Income............................ 0.15
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency................ 0.49
-------
Total From Investment Operations............... 0.64
-------
Less Distributions:
Dividends to Shareholders from Net Investment
Income.......................................... (0.06)
Distributions to Shareholders from Net Capital
Gains........................................... 0.00
-------
Total Distributions............................ (0.06)
-------
Net Asset Value, End of Period.................... $ 10.58
=======
- -------------------------------------------------------------------------------
Total Return...................................... 6.39%
- -------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000).................. $ 5,848
Ratio of Expenses to Average Net Assets
After Expense Reimbursement and Waiver......... 1.00%(2)
Before Expense Reimbursement and Waiver........ 3.57%(2)
Ratio of Net Income to Average Net Assets........ 4.44%(2)
Portfolio turnover rate........................... 0.00%
Average commission rate paid(3)................... $0.0567
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
(3) Average commission rate paid on securities purchased and sold.
See Accompanying Notes to Financial Statements.
46
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND
----------------------------------------------------------------------------------
INSTITUTIONAL SHARES
----------------------------------------------------------------------------------
FOR THE SIX FOR THE YEARS ENDED
MONTHS ENDED ----------------------------------------------------------------
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1998 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 10.31 $ 10.19 $ 10.43 $ 10.10 $ 10.55 $ 10.31
------- ------- ------- ------- ------- -------
Income From
Investment
Operations:
Net Investment
Income........... 0.25 0.59 0.59 0.56 0.50 0.56
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 0.16 0.12 (0.24) 0.33 (0.39) 0.24
------- ------- ------- ------- ------- -------
Total From
Investment
Operations..... 0.41 0.71 0.35 0.89 0.11 0.80
------- ------- ------- ------- ------- -------
Less
Distributions:
Dividends to
Shareholders
from Net
Investment
Income........... (0.25) (0.59) (0.59) (0.56) (0.50) (0.56)
Distributions to
Shareholders
from Net Capital
Gains............ -- -- -- -- (0.06) --
------- ------- ------- ------- ------- -------
Total
Distributions.. (0.25) (0.59) (0.59) (0.56) (0.56) (0.56)
------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period.... $ 10.47 $ 10.31 $ 10.19 $ 10.43 $ 10.10 $ 10.55
======= ======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------
Total Return...... 4.50% 7.12% 3.38% 9.13% 0.94% 7.94%
- ------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End
of
Period (000)..... $40,875 $43,010 $44,102 $44,652 $35,008 $28,078
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.50%(2) 0.60% 0.60% 0.60% 0.55% 0.55%
Before Expense
Waiver......... 0.73%(2) 0.75% 0.72% 0.70% 0.66% 0.64%
Ratio of Net
Income to
Average Net
Assets........... 5.73%(2) 5.72% 5.66% 5.56% 4.75% 5.32%
Portfolio turnover
rate............. 43.13% 20.92% 52.79% 22.01% 48.58% 12.29%
</TABLE>
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND
-------------------------------------------
AFBA FIVE
STAR SHARES
-------------------------------------------
FOR THE PERIOD FOR THE PERIOD
JUNE 1, 1997 FOR THE DECEMBER 1,
TO AUGUST 6, YEAR ENDED 1995(1) TO
1997(3) MAY 31, 1997 MAY 31, 1996
-------------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $10.33 $10.20 $10.61
------ ------ ------
Income From
Investment
Operations:
Net Investment
Income........... 0.10 0.55 0.28
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 0.08 0.13 (0.41)
------ ------ ------
Total From
Investment
Operations..... 0.18 0.68 (0.13)
------ ------ ------
Less
Distributions:
Dividends to
Shareholders
from Net
Investment
Income........... (0.10) (0.55) (0.28)
Distributions to
Shareholders
from Net Capital
Gains............ -- -- --
------ ------ ------
Total
Distributions.. (0.10) (0.55) (0.28)
------ ------ ------
Net Asset Value,
End of Period.... $10.41 $10.33 $10.20
====== ====== ======
- -------------------------------------------------------------
Total Return...... 1.78% 6.80% (1.23)%
- -------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End
of
Period (000)..... $ 90 $ 839 $ 346
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.90%(2) 0.90% 0.90%(2)
Before Expense
Waiver......... 1.16%(2) 1.05% 1.06%(2)
Ratio of Net
Income to
Average Net
Assets........... 5.22%(2) 5.43% 5.50%(2)
Portfolio turnover
rate............. 43.13% 20.92% 52.79%
</TABLE>
- --------
(1)Commencement of public offering.
(2)Annualized.
(3) On June 6, 1997, the Fund terminated its offering of AFBA Five Star Shares
to new investors and on August 8, 1997, AFBA Five Star Shares were ex-
changed for Institutional Shares of the Fund.
See Accompanying Notes to Financial Statements.
47
<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 SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEARS ENDED JUNE 2, 1992(1)
NOVEMBER 30, 1997 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 TO MAY 31, 1993
----------------- ------------ ------------ ------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.38 $10.20 $ 10.40 $ 10.25 $ 10.55 $ 10.00
------ ------ ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.25 0.50 0.49 0.49 0.50 0.48
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.30 0.18 (0.20) 0.15 (0.28) 0.55
------ ------ ------- ------- ------- -------
Total From Investment
Operations.......... 0.55 0.68 0.29 0.64 0.22 1.03
------ ------ ------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income..... (0.25) (0.50) (0.49) (0.49) (0.50) (0.48)
Distributions to
Shareholders from Net
Capital Gains......... -- -- -- -- (0.02) --
------ ------ ------- ------- ------- -------
Total Distributions.. (0.25) (0.50) (0.49) (0.49) (0.52) (0.48)
------ ------ ------- ------- ------- -------
Net Asset Value, End of
Period................. $10.68 $10.38 $ 10.20 $ 10.40 $ 10.25 $ 10.55
====== ====== ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------
Total Return............ 5.32% 6.80% 2.84% 6.48% 1.99% 10.59%(3)
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $9,141 $8,298 $10,186 $12,360 $20,008 $15,707
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 0.49%(2) 0.55% 0.62% 0.62% 0.55% 0.55%(2)
Before Expense
Waiver.............. 1.06%(2) 1.13% 1.04% 0.97% 0.86% 0.94%(2)
Ratio of Net Income to
Average Net Assets.... 4.67%(2) 4.84% 4.74% 4.83% 4.66% 4.78%(2)
Portfolio turnover
rate................... 31.23% 28.11% 20.58% 36.80% 33.89% 17.59%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
See Accompanying Notes to Financial Statements.
48
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
M.S.D.&T. Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on March 7, 1989. The Articles of 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 currently issues nine classes of common stock representing inter-
ests in nine 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 Growth &
Income Fund (Class E), the Limited Maturity Bond Fund (Class F), the Maryland
Tax-Exempt Bond Fund (Class G), the International Equity Fund (Class H) and
the Diversified Real Estate Fund (Class J) - (the "Funds").
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 Growth & Income Fund, International Equity Fund,
Diversified Real Estate Fund, Limited Maturity Bond Fund and Maryland
Tax-Exempt Bond Fund are valued at market value or, in the absence of a
market value with respect to any portfolio securities, at fair value. A
security that is primarily traded on a domestic security exchange (in-
cluding securities traded through the National Market System) is valued
at the last sale price on that exchange or, if there were no sales dur-
ing the day, at the current quoted bid price. Portfolio securities that
are primarily traded on foreign exchanges are generally valued at the
closing values of such securities on their respective exchanges, pro-
vided that if such securities are not traded on the valuation date, they
will be valued at the preceding closing values and provided further,
that when an occurrence subsequent to the time of valuation is likely to
49
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
have changed the value, then the fair value of those securities will be
determined through consideration of other factors by or under the direc-
tion 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 investments with maturities
of 60 days or less are valued at amortized cost which approximates fair
value. The net asset value per share of the Growth & Income Fund, Inter-
national Equity Fund, Diversified Real Estate Fund, Limited Maturity
Bond 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. Until August 8, 1997, the investment income and ex-
penses of each of the Growth & Income Fund and Limited Maturity Bond
Fund (other than the expenses incurred under the Service Plan and class
specific expenses) and realized and unrealized gains and losses on the
investments of each such Fund were allocated to the separate classes of
shares of each such Fund based upon their relative net asset value on
the date income is earned or expenses and realized and unrealized gains
and losses are incurred.
C) Dividends and Distributions to Shareholders: Dividends from net invest-
ment income are declared daily and paid monthly to shareholders of the
Money Market Funds, Limited Maturity Bond Fund and Maryland Tax-Exempt
Bond Fund; are declared and paid quarterly to shareholders of the Growth
& Income Fund and Diversified Real Estate Fund; and are declared and
paid semi-annually to shareholders 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 Internal Revenue Code of 1986, as
amended, and, among other things, is required to make the requisite dis-
tributions to its shareholders which will relieve it from Federal income
or excise taxes. Therefore, no provision has been recorded for Federal
income or excise taxes.
50
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Under current tax law, capital losses and foreign currency losses real-
ized after October 31 may be deferred and treated as occurring on the
first day of the following fiscal year. The following losses will be
treated as arising on the first day of fiscal year ended May 31, 1998:
<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, Growth & Income Fund, International Equity Fund, Diversi-
fied Real Estate Fund, Limited Maturity Bond Fund and Maryland Tax-Ex-
empt Bond Fund may agree to purchase portfolio securities from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon date and price. In the
case of the Prime Money Market Fund and Government Money Market Fund,
collateral for repurchase agreements 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 repurchase agreement at not less than the re-
purchase price (including accrued 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. Also, although such contracts tend to
minimize the risk of loss due to a decline in the value of a hedged cur-
rency, at the same time they tend to limit any potential gain that might
be realized should the value of such foreign currency increase.
51
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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.
I) Investing in the securities of companies principally engaged in the real
estate business is subject to the same risks as direct ownership of real
estate, such as supply and demand for properties, the economic health of
the company, different regions and local markets, and the strength of
specific industries renting properties.
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 Growth & Income Fund; .80% of the
average daily net assets of the International Equity Fund (.45% of which fee
Mercantile pays to CastleInternational Asset Management Limited as sub-advis-
er); .80% of the average daily net assets of the Diversified Real Estate Fund,
35% of the average daily net assets of the Limited Maturity Bond 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 com-
puted daily and payable monthly at an annual rate of .125% of the average
daily net assets of each Fund. Mercantile may, at its discretion, voluntarily
waive any portion of its advisory fee or its administration fee for any Fund.
Mercantile does not receive a fee for advisory services provided to the Tax-
Exempt Money Market Fund (Trust).
Under the Service Plan which was in effect with respect to AFBA Five Star
Shares, institutions ("Service Organizations") agreed to provide support serv-
ice to their clients who were the beneficial owners of AFBA Five Star Shares
of the Growth & Income and Limited Maturity Bond Funds. For these services,
the Funds agreed to pay the Service Organizations an annual rate of .25% of
the average daily net assets of each Fund's outstanding AFBA Five Star Shares.
Shares in each Fund are sold on a continuous basis without a sales load by
the Company's distributor, BISYS Fund Services ("the Distributor"). The 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 six months ended
November 30, 1997, the Funds paid legal fees to a law firm, a partner of which
serves as Secretary of the Company.
52
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
3. NET ASSETS
At November 30, 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......... $391,474,756 $316,902,310 $83,135,767 $51,004,186
Accumulated Realized
Gain (Loss) on
Investments............ (108,826) (126,206) (7,800) (1,147)
------------ ------------ ----------- -----------
$391,365,930 $316,776,104 $83,127,967 $51,003,039
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INTERNATIONAL DIVERSIFIED LIMITED MARYLAND
INCOME EQUITY REAL ESTATE MATURITY BOND TAX-EXEMPT
FUND FUND FUND FUND BOND FUND
-------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Capital Paid-In......... $ 97,292,290 $68,300,008 $5,534,609 $40,354,126 $9,325,928
Accumulated Realized
Gain (Loss) on
Investments............ 7,823,539 2,034,915 183 139,151 (449,069)
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency............... 61,485,747 7,341,722 263,203 377,213 264,223
Undistributed Net
Investment Income
(Distribution in Excess
of Net Investment
Income)................ 192,682 240,304 49,848 4,829
------------ ----------- ---------- ----------- ----------
$166,794,258 $77,916,949 $5,847,843 $40,875,319 $9,141,082
============ =========== ========== =========== ==========
</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 SIX FOR THE YEAR FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED MONTHS ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------ ----------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Shares Sold............. 188,374,580 1,174,068,226 253,560,084 1,219,474,458
Shares Redeemed......... (166,268,019) (1,132,965,297) (277,898,277) (1,143,857,569)
Shares Reinvested....... 435,979 868,858 305,216 443,441
------------ -------------- ------------ --------------
Net Increase (Decrease)
in Shares.............. 22,542,540 41,971,787 (24,032,977) 76,060,330
Shares Outstanding:
Beginning of Period.... 368,932,216 326,960,429 340,935,287 264,874,957
------------ -------------- ------------ --------------
End of Period.......... 391,474,756 368,932,216 316,902,310 340,935,287
============ ============== ============ ==============
</TABLE>
53
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND (TRUST)
------------------------------ ---------------------------------
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED MONTHS ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------ ----------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Shares Sold............. 64,654,923 290,334,386 26,176,062 174,863,800
Shares Redeemed......... (61,018,919) (260,981,502) (24,716,104) (171,859,030)
Shares Reinvested....... 1,304 2,247
----------- ------------ ----------- ------------
Net Increase (Decrease)
in Shares.............. 3,637,308 29,355,131 1,459,958 3,004,770
Shares Outstanding:
Beginning of Period.... 79,498,459 50,143,328 49,544,228 46,539,458
----------- ------------ ----------- ------------
End of Period.......... 83,135,767 79,498,459 51,004,186 49,544,228
=========== ============ =========== ============
<CAPTION>
GROWTH & INCOME FUND*
-----------------------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------------ ---------------------------------
FOR THE SIX FOR THE YEAR FOR THE PERIOD FOR THE YEAR
MONTHS ENDED ENDED JUNE 1, 1997 THROUGH ENDED
NOVEMBER 30, 1997 MAY 31, 1997 AUGUST 8, 1997 MAY 31, 1997
----------------- ------------ -------------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Shares Sold............. 1,130,683 1,687,124 2,163 74,788
Shares Redeemed......... (947,172) (1,464,735) (75,061) (2,711)
Shares Reinvested....... 27,930 226,513 153 3,642
Shares Issued Due to
Exchange of AFBA Five
Star Shares for
Institutional Shares... 25,655
Shares Redeemed Due to
Exchange of AFBA Five
Star Shares for
Institutional Shares... (25,655)
----------- ------------ ----------- ------------
Net Increase (Decrease)
in Shares.............. 237,096 448,902 (98,400) 75,719
Shares Outstanding:
Beginning of Period.... 7,805,540 7,356,638 98,400 22,681
----------- ------------ ----------- ------------
End of Period.......... 8,042,636 7,805,540 0 98,400
=========== ============ =========== ============
</TABLE>
- --------
* Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
54
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND DIVERSIFIED REAL ESTATE FUND
------------------------------ ---------------------------------
FOR THE SIX FOR THE YEAR FOR THE PERIOD
MONTHS ENDED ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997 NOVEMBER 30, 1997
----------------- ------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Shares Sold............. 293,847 840,256 572,809
Shares Redeemed......... (494,045) (626,614) (20,111)
Shares Reinvested....... 1,477 40,514 0
--------- ---------- -------
Net Increase (Decrease)
in Shares.............. (198,721) 254,156 552,698
Shares Outstanding:
Beginning of Period.... 6,320,438 6,066,282 0
--------- ---------- -------
End of Period.......... 6,121,717 6,320,438 552,698
========= ========== =======
<CAPTION>
LIMITED MATURITY BOND FUND**
----------------------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------------ ---------------------------------
FOR THE SIX FOR THE YEAR FOR THE PERIOD FOR THE YEAR
MONTHS ENDED ENDED JUNE 1, 1997 THROUGH ENDED
NOVEMBER 30, 1997 MAY 31, 1997 AUGUST 8, 1997 MAY 31, 1997
----------------- ------------ -------------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Shares Sold............. 440,346 843,216 570 45,744
Shares Redeemed......... (778,702) (1,121,470) (74,140) (1,349)
Shares Reinvested....... 63,019 122,208 984 2,918
Shares Issued Due to
Exchange of AFBA Five
Star Shares for
Institutional Shares... 8,670
Shares Redeemed Due to
Exchange of AFBA Five
Star Shares for
Institutional Shares... (8,670)
--------- ---------- ------- ------
Net Increase (Decrease)
in Shares ............. (266,667) (156,046) (81,256) 47,313
Shares Outstanding:
Beginning of Period.... 4,171,415 4,327,461 81,256 33,943
--------- ---------- ------- ------
End of Period.......... 3,904,748 4,171,415 0 81,256
========= ========== ======= ======
- --------
** Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
<CAPTION>
MARYLAND TAX-EXEMPT BOND FUND
------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997
----------------- ------------
(UNAUDITED)
<S> <C> <C>
Shares Sold............. 91,609 91,722
Shares Redeemed......... (39,807) (303,265)
Shares Reinvested....... 4,919 12,161
--------- ----------
Net Increase (Decrease)
in Shares.............. 56,721 (199,382)
Shares Outstanding:
Beginning of Period.... 799,072 998,454
--------- ----------
End of Period.......... 855,793 799,072
========= ==========
</TABLE>
55
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
5. FOREIGN CURRENCY CONTRACTS
A summary of foreign currency contracts which were outstanding at November
30, 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.. 12/1/97 AUD 7,938 $ 5,431 $ (16)
12/1/97 BP 11,652 19,632 (178)
10/14/98 JP 967,342,500 7,896,340 603,660
---------- --------
$7,921,403 $603,466
========== --------
$603,466
========
</TABLE>
Currency Legend
AUD Australian Dollar
BP British Pound
JP Japanese Yen
6. PURCHASES & SALES OF SECURITIES
For the six months ended November 30, 1997, total aggregate purchases and
proceeds from sales of investment securities (excluding short-term securities)
were as follows:
<TABLE>
<CAPTION>
U.S. U.S.
GOVERNMENT GOVERNMENT
PURCHASES* SALES* PURCHASES SALES
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Growth & Income Fund............ $23,103,354 $20,239,377 $ 0 $ 0
International Equity Fund....... 20,759,827 24,252,416 0 0
Diversified Real Estate Fund.... 5,369,204 0 0 0
Limited Maturity Bond Fund...... 9,509,657 937,145 6,998,928 14,182,274
Maryland Tax-Exempt Bond Fund... 3,397,777 2,635,474 0 0
</TABLE>
- --------
* (excluding short-term and U.S. Government securities)
56
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
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
Limited Maturity Bond 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. 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 Growth & Income Fund and
Limited Maturity Bond Fund. As of the close of business on August 8, 1997, all
outstanding AFBA Five Star Shares of a Fund were automatically exchanged for
Institutional Shares of the same Fund at net asset value without payment of
any exchange fee.
57
<PAGE>
Investment Adviser and Administrator:
[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 Funds' 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.
