<PAGE>
M.S.D.&T. Funds, Inc.
.........................................
Annual Report
MAY 31, 1998
<PAGE>
Table of Contents
Chairman's Letter i
Funds Reviews iv
Statements of Net Assets
Prime Money Market Fund 1
Government Money Market Fund 3
Tax-Exempt Money Market Fund 4
Tax-Exempt Money Market Fund (Trust) 7
Growth & Income Fund 10
Equity Income Fund 12
Equity Growth Fund 15
International Equity Fund 17
Diversified Real Estate Fund 20
Limited Maturity Bond Fund 22
Total Return Bond Fund 25
Maryland Tax-Exempt Bond Fund 28
Intermediate Tax-Exempt Bond Fund 30
National Tax-Exempt Bond Fund 33
Statement of Operations 38
Statement of Changes in Net Assets 41
Financial Highlights 46
Notes to Financial Statements 54
Report of Independent Accountants 64
Important Tax Information 65
<PAGE>
Dear Shareholder,
It is a pleasure to present the annual report for the M.S.D.&T. Funds, Inc.
(the "Company") for the fiscal year ended May 31, 1998. The report includes
financial information and fund synopses for the M.S.D.&T. Funds, including the
new Diversified Real Estate, Equity Income, Equity Growth, Total Return Bond,
National Tax-Exempt Bond and Intermediate Tax-Exempt Bond Funds which were in-
troduced during the fiscal year. In addition, the names of two of the Funds
have been changed to more accurately reflect their investment strategy. The
Value Equity Fund was renamed the Growth & Income Fund while the Intermediate
Fixed Income Fund is now known as the Limited Maturity Bond Fund. The Company
has increased the depth and breadth of its product line to better meet the in-
dividual investment needs of shareholders. Total assets under management in
the M.S.D.&T. Funds have increased from $1.1 billion at May 31, 1997 to ap-
proximately $2.4 billion at May 31, 1998.
During fiscal 1998, investors in the M.S.D.&T. Funds were rewarded with total
returns well above historical averages as the domestic financial markets con-
tinued their bull run.(1) Market yields fell and prices rose on term fixed in-
come securities throughout the twelve-month period, spurring stock markets
higher. The most notable event of the year was the onset, and subsequent
spread, of the Asian crisis. Beginning somewhat innocently last summer in a
few relatively small economies of the Pacific Rim, events in Asia have become
headline news almost daily and have affected virtually every financial market
in the world(2). Benefiting from a "flight to quality" flow of funds, the
United States currency and securities markets maintained an upward bias.
The investment adviser believes the financial effects from Asia will diminish
as the new fiscal year progresses. One of the favorable side effects from the
turbulence in world markets has been that interest rates on long-term debt se-
curities have fallen materially, providing a boost to domestic housing and
capital goods spending. In addition, higher equity valuations appear to have
reinforced consumer confidence and led to impressive spending on goods and
services. This has resulted in very strong job growth, which is unusual late
in a business cycle. As the situation in Asia stabilizes, concerns of domestic
growth too strong for the Federal Reserve Bank's liking may reappear. Higher
short-term interest rates are forecast during the fiscal year. This would most
likely have a dampening effect on the United States bond and stock markets.
Yields on short-term securities continued to fluctuate within a narrow band
over the past twelve months. Since raising the Federal Funds rate in March
1997, the central bank has left the base rate on overnight money unchanged.
International factors from the fallout of the Pacific Rim have kept the Fed
from reacting to strong domestic economic activity over the past twelve
months. The absence of significant inflationary pressures has kept short-term
yields relatively stable. The M.S.D.&T. Money Market Funds continue to gener-
ate competitive returns while providing shareholders with stability of princi-
pal. The seven-day current yields for each Money Market Fund as of May 31,
1998 is detailed below:
<TABLE>
<CAPTION>
PRIME(3) GOVERNMENT(3) TAX-EXEMPT(3) TAX-EXEMPT (TRUST)(3)
-------- ------------- ------------- ---------------------
<S> <C> <C> <C>
5.19% 5.13% 3.29% 3.51%
5.45%(4) 5.81%(4)
</TABLE>
<PAGE>
The pages that follow discuss the objectives, performance, structure and
strategy of each of the M.S.D.&T. Funds, as well as providing a detailed list
of assets held as of May 31, 1998(5). We appreciate your investment in the
M.S.D.&T. Funds and welcome any comments or questions regarding the Company.
Best Regards,
/s/ Leslie B. Disharoon
Leslie B. Disharoon
Chairman and President
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., INCLUDING CHARGES AND EX-
PENSES, PLEASE CALL 1-800-551-2145 TO RECEIVE A PROSPECTUS, WHICH SHOULD BE
READ CAREFULLY BEFORE INVESTING. BISYS FUND SERVICES SERVES AS THE FUNDS' DIS-
TRIBUTOR.
ii
<PAGE>
(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
GROWTH & EQUITY EQUITY INTERNATIONAL REAL ESTATE
INCOME FUND INCOME FUND GROWTH FUND EQUITY FUND FUND
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Total Return for the one
year ended June 30,
1998................... 26.14% N/A N/A 6.69% N/A
Annualized Total Return
for five years ended
June 30, 1998.......... 19.31% N/A N/A 10.92% N/A
Inception Date.......... 2/28/91 3/1/98 3/1/98 7/2/93 8/1/97
Average annual total
return since inception
to June 30, 1998....... 16.95% 13.49% 25.73% 10.93% 4.40%
<CAPTION>
LIMITED TOTAL MARYLAND INTERMEDIATE NATIONAL
MATURITY RETURN TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
--------- --------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Total Return for the one
year ended June 30,
1998................... 7.72% N/A 8.04% N/A N/A
Annualized Total Return
for five years ended
June 30, 1998.......... 5.57% N/A 5.03% N/A N/A
Inception Date.......... 3/14/91 3/1/98 6/2/92 3/1/98 3/1/98
Average annual total
return since inception
to June 30, 1998....... 6.51% 7.41% 6.20% 3.96% 6.20%
</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 May 31, 1998 would have been:
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-EXEMPT TAX-EXEMPT (TRUST)
----- ---------- ---------- ------------------
<S> <C> <C> <C>
5.14% 5.09% 3.22% 3.46%
</TABLE>
(4) Taxable Equivalent Yield. Assumes 39.6% tax bracket. A portion of income
may be subject to some state and/or local taxes and for certain investors a
portion of income may be subject to the Federal alternative minimum tax.
(5) The composition of the Funds' holdings is subject to change.
iii
<PAGE>
THE M.S.D.&T. GROWTH & INCOME FUND
The overall U.S. equity markets as measured by the S&P 500 Index returned
30.7% for the fiscal year ended May 31, 1998. The Dow Jones Industrial Index,
a guide for large capitalization stocks, returned 25.9% for the period. The
Growth & Income Fund performed in line with its large-cap orientation and re-
turned 29.4% for the fiscal year. The Fund's returns also compared favorably
in peer group comparisons.
The Growth & Income Fund has carried minimal cash reserves during the year and
has remained well diversified in a blend of issues having both growth and
value characteristics. For the fourth consecutive year the U.S. equity markets
produced returns well in excess of long-term averages with growth stocks
outperforming value stocks.
The Growth & Income Fund has above-market weightings in the Consumer Staples,
Healthcare and Technology sectors. It is under-represented in Consumer
Cyclicals and Utilities. The top five holdings are Pfizer (4%), Johnson &
Johnson (3%), Bristol-Myers Squibb (3%), General Electric (3%) and IBM (3%).
The Growth & Income Fund continues to focus on companies the adviser believes
has consistent and superior earnings and dividend growth. The adviser believes
that these stocks will generate superior returns even in a deteriorating mar-
ket environment. The Fund's profile continues to show a higher dividend yield
and lower ratio of price to earnings than is present in the general market.
THE M.S.D.&T EQUITY INCOME FUND
The Equity Income Fund commenced operations on March 1, 1998 and has produced
a total return of 2.28% for the three months ended May 31, 1998. Over the same
time period, the S&P 500 Index returned 4.36% and the Lipper Equity Income Av-
erage produced 2.83%. The Fund's performance during its initial three months
of operation was led by holdings in DuPont, H.F. Ahmanson, Pfizer, Nordstrom
and McDonald's. On the other hand, results were constrained by holdings in
Technology (Intel and Electronic Data Services), Electrical Equipment (AMP),
and Tobacco (Philip Morris and Gallaher Group).
An increase in the volatility of the domestic stock markets during the spring
prompted an effort to modestly increase cash reserves in the Fund. These sales
were offset to some extent by cash outflows.
The Equity Income Fund remains broadly diversified and is not overweighted in
any particular industry group. The Fund's largest holding is in Energy, which
represents about 13% of total Fund assets. The Fund's profile shows a lower
price to earnings, price to book, and price to sales ratio, as well as a
higher yield, than is available in the general market.
iv
<PAGE>
THE M.S.D.&T. EQUITY GROWTH FUND
The Fund's investment style is to seek growth, and specifically focuses on
those companies offering sustainable increases in earnings. As corroboration,
the Fund's average stock has a long-term earnings growth rate that is more
than double that of the S&P 500 Index. However, the Fund tends not to pay
lofty prices for this growth, with the Fund's average stock priced at a modest
premium to the S&P 500 Index on a price-to-earnings ratio. Looking ahead, the
Fund will continue with this focus, searching for reasonably priced stocks of
companies offering well above average earnings growth.
The Equity Growth Fund's total return since inception on March 1, 1998 through
May 31, 1998 is 2.89%, while the S&P 500 Index returned 4.36% and the Lipper
Equity Growth Fund Average returned 2.64%. Although broadly diversified, the
Fund is concentrated in several sectors with companies offering attractive
earnings growth potential. Technology, the Fund's single largest sector,
lagged significantly over the latest three-month period as weakness in per-
sonal computer sales and renewed Asian economic concerns bruised these stocks.
Healthcare also lagged the market as firm specific results hurt several
stocks. Offsetting some of this weakness was the Fund's best performing area,
Consumer Staples, which benefited as investors sought the perceived safety of
this group's recurring revenues.
Specific stocks with strong performance during the quarter include Ericsson,
Pioneer Hy-Bred, Home Depot, IBM, and Rubbermaid. Stocks turning in the weak-
est results were Teradyne, Electronic Data Systems, Chiron, Smithkline-
Beecham, and Genzyme.
THE M.S.D.&T INTERNATIONAL EQUITY FUND
For the fiscal year ended May 31, 1998, the International Equity Fund produced
a total return of 12.77%. The Fund's benchmark, the MSCI World ex-US Index,
gained 6.71% over the same period. Currency problems played a major role in
the disappointing performance of the emerging markets as well as the developed
markets of the Pacific Basin. European markets, on the other hand, enjoyed ex-
ceptionally strong performance.
The Japanese market continued to struggle throughout the fiscal year. The mar-
ket's weakness was a response to a very poor economy and ongoing problems in
the banking sector. Currency devaluation in many of its neighboring countries
set off a wave of higher interest rates, higher inflation, economic recession
and corporate insolvency throughout the region. At fiscal year end, the Fund's
Pacific Basin exposure was concentrated in defensive stocks such as utilities
and Japanese blue chip stocks, which may benefit from the weaker yen.
Latin American stocks also fell during the year ended May 31, 1998. The impact
of the Asian currency crisis led to falls in many of the region's currencies
and subsequent declines in the equity markets, although government
privatizations are acting as the incentive to many investors. Eastern European
markets had mixed performance during the year. Political upheaval in Russia
created problems during early 1998 although the region was up 8.04% in U.S.
dollar terms for the one-year period.
Continental European stocks had an extremely positive year. The adviser be-
lieves the move toward the European Monetary Union was one major reason for
the strong performance, as countries worked to meet the criteria for inclu-
sion. Corporate restructuring was also a major theme, particularly in the fi-
nancial, pharmaceutical and chemical industries.
v
<PAGE>
THE M.S.D.&T. DIVERSIFIED REAL ESTATE FUND
The Diversified Real Estate Fund began operations on August 1, 1997. The
Fund's total return for the ten-months since inception was 4.31%. The total
return for the benchmark Wilshire Real Estate Index for the same ten-month pe-
riod was 3.66%.
REITs performed very well in 1997 with total returns in many property types
above 20%. This performance has not extended into 1998, even though the under-
lying real estate market fundamentals continue to improve.
The under-performance of the REIT sector is related to this relatively small
sector's continued need for capital. Total REIT market capitalization grew by
14% in the first five months of 1998 and raised almost $19 billion in new debt
and equity capital. Much of the new capital was raised directly through Unit
Investment Trusts, where the shares bypass the secondary markets thus reducing
the amount of capital available for share purchases on the open market. An ad-
ditional contributing factor to the poor performance of REITs has been govern-
ment statements raising concern over their tax status. The adviser believes
that the government will concern itself with only the few paired share REITs
and with certain private REITs established by corporations solely to avoid
taxes.
The investment adviser believes that REITs will continue to represent an in-
creasing percentage of real estate ownership. The adviser also believes that
improving real estate market fundamentals will lead to growth and increasingly
attractive dividend yields. This in turn should have a positive impact on REIT
values.
vi
<PAGE>
THE M.S.D.&T. LIMITED MATURITY BOND FUND
Fixed income markets enjoyed strong returns for the fiscal year ended May 31,
1998. Interest rates declined between 70 and 100 basis points across the Trea-
sury yield curve as fixed income investors sought to lock-in attractive yields
over and above the inflation rate. Investors were heartened by the approximate
100 basis point decline in the inflation rate, which makes fixed income in-
vestments more attractive.
The Fund enjoyed a healthy 8.15% total return over the period, as income was
supplemented with capital appreciation. The benchmark Lehman Intermediate
Government/Corporate Bond Index returned 8.84% over the same period. The
Index's longer maturity structure in a declining interest rate environment led
to its stronger return over this period.
During the year, the Fund continued to emphasize high quality investments,
with modest exposure to credits rated below "AA." Holdings in the Finance sec-
tor and asset-backed securities were increased while the Industrial sector and
mortgage-backed securities were reduced. Average maturity was shortened from
3.7 to 2.2 years by fiscal year end, primarily by reducing the exposure within
the five- to ten-year maturity range.
Toward the end of the fiscal year, two operating parameters were changed for
the Fund. First, minimum acceptable credit rating at the time of investment
has been broadened to include BAA/BBB which should aid in increasing the yield
to shareholders. Secondly, the Fund's minimum portfolio average life has been
reduced to two years. This change should aid in protecting capital values in
periods of rising interest rates.
THE M.S.D.&T. TOTAL RETURN BOND FUND
The Total Return Bond Fund began operations on March 1, 1998. During the three
months ended May 31, 1998, yields on U.S. Treasury bonds have traded within a
fairly narrow range. The Fund recorded a 1.69% total return for the period
while its benchmark, the Lehman Brothers Aggregate Bond Index, posted 1.82%
for the same time frame.
The Fund's current investments emphasize mortgage-backed pass-through, asset-
backed, and short-term reserve securities vis-a-vis the unmanaged Lehman Ag-
gregate Index. Holdings of U.S. Treasury's and corporate bonds are relatively
underweighted to the benchmark. In addition, the Fund holds several invest-
ments in Brady bonds of Latin American countries which are not included in the
Lehman Index. In an environment where it is anticipated that bond prices will
continue in a narrow trading range, the emphasis in the portfolio is to in-
crease the Fund's yield.
As the new fiscal year progresses, it is the adviser's forecast that the ef-
fects of the Asian crisis, which have been very supportive to the bond market,
will diminish. Rather, the focus of bond buyers will most likely return to the
underlying strength of the domestic economy. The Total Return Bond Fund's av-
erage maturity is currently 6.8 years, approximately 80% of the Lehman Aggre-
gate Index's 8.6 years, in anticipation of rising interest rates. The adviser
anticipates a strategy focusing on producing a competitive income return while
protecting principal values in what could become a hostile financial market
environment.
vii
<PAGE>
THE M.S.D.&T. MARYLAND TAX-EXEMPT BOND FUND
For the fiscal year ended May 31, 1998, the Maryland Tax-Exempt Bond Fund re-
corded a total return of 9.03% while its benchmark, the Lehman Brothers Munic-
ipal Bond Index, posted 9.38%. The slight under-performance can best be at-
tributed to the higher credit quality (and thus lower yields) in Maryland
credits when compared to the overall national market. It is the adviser's ex-
pectation that Maryland municipal debt will be a strong performer in fiscal
year 1999 due to the solid economic and financial condition of the various is-
suers. In anticipation of rising interest rates later this year, the weighted
average life of the Fund will remain slightly shorter than that of the unman-
aged Lehman Brothers Municipal Bond Index.
THE M.S.D.&T. NATIONAL TAX-EXEMPT AND INTERMEDIATE TAX-EXEMPT BOND FUNDS
The National Tax-Exempt and Intermediate Tax-Exempt Bond Funds commenced oper-
ations on March 1, 1998. For the three months ended May 31, 1998, the National
Tax-Exempt Bond Fund recorded a total return of 1.64% while its benchmark, the
Lehman Brothers Municipal Bond Index, returned 1.21%. In the same time period,
the Intermediate Tax-Exempt Bond Fund recorded a total return of 1.07% while
its benchmark, the Lehman Brothers 7-Year Municipal Bond Index, returned
0.88%.
During this time period, the municipal market traded within a fairly narrow
range following its U.S. Treasury counterpart. The overall financial health of
the nation's municipalities continued to improve as a result of the strong
economy. New issuance volume was heavy as evidenced by the $3.4 billion Long
Island Power Authority offering in May, the largest deal in municipal bond
market history.
The investment adviser believes that bond prices will continue in a narrow
trading range and a defensive posture should be taken as the new fiscal year
progresses. It is also the adviser's intention to increase the Funds' diversi-
fication by reducing the initial concentration in Maryland issues and rein-
vesting among other high quality issues. The weighted average life of the Na-
tional Tax-Exempt Bond Fund remains slightly shorter than that of the unman-
aged Lehman Brothers Municipal Bond Index whereas the Intermediate Tax-Exempt
Bond Fund will be gradually extended to include higher-yielding securities in
the five- and ten-year sector of the market.
viii
<PAGE>
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Growth & Income Fund ans the S&P 500 Stock Index
[LINE GRAPH APPEARS HERE]
Average Annual
Total Return
as of May 31, 1998
- --------------------
1 Year
- --------------------
29.40%
- --------------------
5 Year
- --------------------
18.48%
- --------------------
Since
Inception
(2/28/91)
- --------------------
16.79%
- --------------------
M.S.D.&T. GROWTH S&P 500
DATE & INCOME FUND STOCK INDEX
- ---- -------------------- ------------
NOV 90 $10,000 $10,000
MAY 91 10,686 10,707
NOV 91 10,426 10,473
MAY 92 11,709 11,765
NOV 92 12,160 12,403
MAY 93 13,204 13,127
NOV 93 13,292 13,652
MAY 94 13,320 13,685
NOV 94 13,568 13,811
MAY 95 15,480 16,668
NOV 95 16,792 19,150
MAY 96 18,150 21,408
NOV 96 20,734 24,486
MAY 97 23,837 27,350
NOV 97 27,245 31,067
MAY 98 30,845 35,748
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Equity Income Fund and the S&P 500 Stock Index
[LINE GRAPH APPEARS HERE]
Total Return
as of May 31, 1998
- --------------------
Since
Inception
(3/1/98)
- --------------------
2.28%
- --------------------
LEHMAN 7-YEAR
M.S.D.& T. EQUITY MUNICIPAL
DATE INCOME FUND BOND INDEX
- ---- ---------------------- ----------------
FEB 98 $10,000 $10,000
MAR 98 10,390 10,512
APR 98 10,482 10,618
MAY 98 10,228 10,436
Past performance is not predictive of future performance.
The S&P 500 Stock Index is an unmanaged index generally representative of the
performance of the U.S. stock market.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
ix
<PAGE>
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Equity Growth Fund and the S&P 500 Stock Index
[LINE GRAPH APPEARS HERE]
Total Return
as of May 31, 1998
- ------------------
Since
Inception
(3/1/98)
- ------------------
2.89%
- ------------------
M.S.D.&T. EQUITY S&P 500
DATE GROWTH FUND STOCK INDEX
---- ---------------- -----------
FEB 98 $10,000 $10,000
MAR 98 $10,340 $10,512
APR 98 $10,586 $10,618
MAY 98 $10,289 $10,436
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. International Equity Fund and the
MSCI World ex-US Index
[LINE GRAPH APPEARS HERE]
Average Annual Total Return
as of May 31, 1998
- ---------------------------
Since
1 Year Inception
(7/2/93)
- ---------------------------
12.77% 11.37%
- ---------------------------
M.S.D.&T. INTERNATIONAL MSCI WORLD
DATE EQUITY FUND EX-US INDEX
---- ----------------------- -----------
MAY 93 -- --
NOV 93 $10,502 $10,031
MAY 94 $11,898 $11,536
NOV 94 $11,811 $11,518
MAY 95 $11,996 $12,105
NOV 95 $12,389 $12,410
MAY 96 $13,707 $13,438
NOV 96 $14,211 $13,891
MAY 97 $15,052 $14,452
NOV 97 $14,558 $13,602
MAY 98 $16,974 $15,422
Past performance is not predictive of future performance.
The S&P 500 Stock Index is an unmanaged index generally representative of the
performance of the U.S. stock market.
The MSCI World ex-US Index is an unmanaged index of foreign securities that
reflects the strategic emerging markets allocation.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
x
<PAGE>
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Diversified Real Estate Fund and the
Wilshire Real Estate Index
[LINE GRAPH APPEARS HERE]
Total Return
as of May 31, 1998
- --------------------
Since
6 mon Inception
(8/1/97)
- --------------------
- -1.95% 4.31%
- --------------------
M.S.D.&T. DIVERSIFIED WILSHIRE REAL
DATE REAL ESTATE FUND ESTATE INDEX
- ---- ---------------- -------------
JUL 97 $10,000 $10,000
AUG 97 9,970 9,926
SEP 97 10,800 10,905
OCT 97 10,468 10,441
NOV 97 10,639 10,651
DEC 97 10,842 10,889
JAN 98 10,627 10,735
FEB 98 10,525 10,598
MAR 98 10,688 10,806
APR 98 10,472 10,466
MAY 98 10,431 10,366
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Limited Maturity Bond Fund and the
Lehman G/C Intermediate Bond Index
[LINE GRAPH APPEARS HERE]
Average Annual Total Return
as of May 31, 1998
- ----------------------------
Since
1 Year 5 Year Inception
3/14/91
- ----------------------------
8.15% 5.70% 6.82%
- ----------------------------
LEHMAN G/C
M.S.D.&T. LIMITED INTERMEDIATE
DATE MATURITY BOND FUND BOND INDEX
- ---- ------------------ -----------
FEB 91 $ -- $ --
AUG 91 10,387 10,488
FEB 92 10,907 11,122
AUG 92 11,506 11,864
FEB 93 11,891 12,408
AUG 93 12,280 12,960
FEB 94 12,305 12,984
AUG 94 12,275 12,916
FEB 95 12,623 13,267
AUG 95 13,387 14,138
FEB 96 13,844 14,692
AUG 96 13,818 14,765
FEB 97 14,437 15,427
AUG 97 14,913 16,012
FEB 98 15,542 16,749
MAY 98 15,776 17,011
Past performance is not predictive of future performance.
The Wilshire Real Estate Index is an unmanaged index generally representative
of the U.S. REIT market.
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unman-
aged index generally representative of the performance of intermediate term
government and corporate bonds.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
xi
<PAGE>
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Total Return Bond Fund and the
Lehman Aggregate Bond Index
Total Return
as of May 31, 1998
- ------------------
Since
Inception
(3/1/98)
- ------------------
1.69%
[LINE GRAPH APPEARS HERE]
LEHMAN
M.S.D.&T. TOTAL AGGREGATE
DATE RETURN BOND FUND BOND INDEX
- ---- ---------------- ------------
FEB 98 10,000 10,000
MAR 98 10,040 10,034
APR 98 10,089 10,087
MAY 98 10,169 10,182
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Maryland Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index
[LINE GRAPH APPEARS HERE]
Average Annual Total Return
as of May 31, 1998
- ---------------------------
Since
1 Year 5 Year Inception
6/2/92
- ---------------------------
9.03% 5.39% 6.24%
LEHMAN
M.S.D.&T. MARYLAND MUNICPAL
DATE TAX-EXEMPT BOND FUND BOND INDEX
- ---- -------------------- ------------
MAY 92 -- --
NOV 92 10,281 10,348
MAY 93 10,939 11,012
NOV 93 11,462 11,494
MAY 94 11,154 11,284
NOV 94 10,681 10,890
MAY 95 11,877 12,312
NOV 95 12,372 12,949
MAY 96 12,213 12,874
NOV 96 12,914 13,711
MAY 97 13,186 13,942
NOV 97 13,888 14,695
MAY 98 14,377 15,250
Past performance is not predictive of future performance.
The Lehman Aggregate Bond Index is an unmanaged index comprised of the Lehman
Brothers Government/Corporate Bond Index and two Lehman Brothers asset-backed
securities indexes.
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
xii
<PAGE>
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. Intermediate Tax-Exempt Bond Fund and the
Lehman 7-Year Municipal Bond Index
[LINE GRAPH APPEARS HERE]
Total Return
as of May 31, 1998
- --------------------
Since
Inception
(3/1/98)
- --------------------
1.07%
- --------------------
LEHMAN 7-YEAR
M.S.D.&T. INTERMEDIATE MUNICIPAL
DATE TAX-EXEMPT BOND FUND BOND INDEX
- ---- ---------------------- ----------------
FEB 98 $10,000 $10,000
MAR 98 10,043 10,001
APR 98 10,035 9,942
MAY 98 10,107 10,089
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment In
M.S.D.&T. National Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index
[LINE GRAPH APPEARS HERE]
Total Return
as of May 31, 1998
- --------------------
Since
Inception
(3/1/98)
- --------------------
1.64%
- --------------------
LEHMAN
M.S.D.&T. NATIONAL MUNICIPAL
DATE TAX-EXEMPT BOND FUND BOND INDEX
- ---- -------------------- ------------
FEB 98 $10,000 $10,000
MAR 98 10,069 10,009
APR 98 10,026 9,964
MAY 98 10,164 10,121
Past performance is not predictive of future performance.
The Lehman 7-Year Municipal Bond Index is an unmanaged index generally repre-
sentative of the total return of outstanding municipal bonds with remaining
maturities of 7 years or less.
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds.
The above indexes do not reflect the deduction of expenses associated with a
mutual fund such as investment management fees.
The value of shares of the Funds will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
xiii
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 3.4%
FEDERAL HOME LOAN BANK -- 2.5%
Floating Rate Notes**
5.60%, 06/05/98.......................................... $11,000 $ 10,998,763
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 0.9%
Notes
5.95%, 06/19/98.......................................... 4,000 3,999,905
------------
TOTAL AGENCY OBLIGATIONS
(Cost $14,998,668)....................................... 14,998,668
------------
BANKERS' ACCEPTANCES -- 3.8%
Wachovia Bank, N.A.
5.48%, 06/15/98.......................................... 13,000 12,972,296
Northern Trust Co.
5.50%, 06/29/98.......................................... 4,200 4,182,033
------------
TOTAL BANKERS' ACCEPTANCES
(Cost $17,154,329)....................................... 17,154,329
------------
CERTIFICATES OF DEPOSIT -- 32.8%
DOMESTIC -- 7.8%
CoreStates Bank N.A.**
5.60%, 06/05/98.......................................... 10,000 10,000,000
First National Bank of Chicago
5.54%, 07/28/98.......................................... 10,000 10,000,157
5.56%, 08/14/98.......................................... 10,000 10,000,000
Morgan Guaranty Trust Co.
5.80%, 07/28/98.......................................... 5,000 5,000,118
------------
35,000,275
------------
EURODOLLAR -- 1.8%
Morgan Guaranty Trust Co. N.Y.
5.52%, 06/25/98.......................................... 8,000 8,000,052
------------
YANKEE -- 23.2%
ABN AMRO N.A. Finance
5.50%, 02/02/99.......................................... 7,000 6,991,816
Bank of America
5.53%, 06/29/98.......................................... 10,000 10,000,077
5.52%, 07/13/98.......................................... 10,000 10,000,000
Bank of Montreal
5.55%, 07/21/98.......................................... 10,000 10,000,000
5.56%, 08/21/98.......................................... 10,000 10,000,000
Canadian Imperial Bank of Canada
5.52%, 08/20/98.......................................... 10,000 10,000,000
5.57%, 08/27/98.......................................... 10,000 10,000,238
Rabobank Netherlands
5.53%, 06/18/98.......................................... 12,000 12,000,000
5.50%, 08/03/98.......................................... 8,000 7,999,818
Swiss Bank Corp.
5.88%, 11/18/98.......................................... 7,000 7,000,000
5.69%, 01/07/99.......................................... 10,000 9,992,727
------------
103,984,676
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $146,985,003)...................................... 146,985,003
------------
COMMERCIAL PAPER -- 45.4%
BANKS -- 5.8%
SunTrust Banks, Inc.
5.51%, 07/21/98.......................................... 10,000 9,923,472
Toronto Dominion Holdings
5.47%, 06/08/98.......................................... 8,000 7,991,491
Wachovia Corp.
5.50%, 06/01/98.......................................... 8,000 8,000,000
------------
25,914,963
------------
CHEMICALS -- 1.8%
E.I. duPont deNemours & Co.
5.45%, 06/04/98.......................................... 8,000 7,996,367
------------
CONSUMER GOODS -- 1.8%
Procter & Gamble Co.
5.43%, 06/03/98.......................................... 8,200 8,197,526
------------
DIVERSIFIED -- 1.3%
Minnesota Mining and Manufacturing
5.37%, 06/09/98.......................................... 6,000 5,992,840
------------
FINANCE -- 18.1%
Associates Corp. N.A.
5.49%, 08/25/98.......................................... 12,000 11,844,450
CIT Group Holdings Inc.
5.50%, 08/24/98.......................................... 11,000 10,858,833
General Electric Capital Corp.
5.51%, 08/10/98.......................................... 10,000 9,892,861
5.50%, 08/19/98.......................................... 10,000 9,879,306
KFW International Financial Inc.
5.49%, 07/28/98.......................................... 10,000 9,913,075
</TABLE>
See Accompanying Notes to Financial Statements.
1
<PAGE>
M.S.D.&T. FUNDS, INC.
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
COMMERCIAL PAPER -- CONTINUED
FINANCE -- CONTINUED
Merrill Lynch & Co.
5.51%, 06/24/98.......................................... $ 8,000 $ 7,971,838
5.49%, 07/02/98.......................................... 10,000 9,952,725
Morgan Stanley Dean Witter
5.51%, 07/17/98.......................................... 11,000 10,922,554
------------
81,235,642
------------
PETROLEUM -- 1.8%
Chevron Transport Corp.***
5.49%, 07/08/98.......................................... 8,000 7,954,860
------------
PHARMACEUTICALS -- 3.3%
Pfizer Inc.
5.50%, 06/01/98.......................................... 15,000 15,000,000
------------
TECHNOLOGY -- 2.7%
Motorola, Inc.
5.51%, 07/24/98.......................................... 12,000 11,902,657
------------
UTILITIES -- GAS -- 1.8%
Southern Cal Gas Co.
5.49%, 06/24/98.......................................... 8,000 7,971,940
------------
UTILITIES -- ELECTRIC -- 7.0%
Jacksonville Electric Authority, Florida
5.53%, 06/08/98.......................................... 9,576 9,576,000
TECO Finance Corp.
5.45%***, 07/06/98....................................... 7,000 6,962,910
5.52%, 07/24/98.......................................... 5,100 5,058,554
5.52%, 07/28/98.......................................... 10,000 9,912,600
------------
31,510,064
------------
TOTAL COMMERCIAL PAPER
(Cost $203,676,859)...................................... 203,676,859
------------
CORPORATE BONDS -- 2.2%
FINANCIAL SERVICES
Associates Corp. N.A.
6.38%, 08/15/98.......................................... 5,000 5,004,637
Norwest Financial Inc.
6.25%, 03/15/99.......................................... 5,000 5,027,778
------------
TOTAL CORPORATE BONDS
(Cost $10,032,415)....................................... 10,032,415
------------
REPURCHASE AGREEMENTS -- 12.5%
BANK OF AMERICA
(Agreement dated 05/29/98 to be repurchased at
$18,008,265 collateralized by $16,545,000 (Value
$18,387,787.89) U.S. Treasury Notes, 7.00%, due
07/15/06) 5.51%, 06/01/98............................... 18,000 18,000,000
J.P. MORGAN SECURITIES, INC.
(Agreement dated 05/29/98 to be repurchased at
$18,008,280 collateralized by $16,981,000 (Value
$18,463,722) U.S. Treasury Bonds, 6.50%, due 11/15/26)
5.52%, 06/01/98......................................... 18,000 18,000,000
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at
$20,187,705 collateralized by $20,420,000 (Value
$20,614,628) U.S. Treasury Notes, 5.75%, due 10/31/02)
5.47%, 06/01/98......................................... 20,179 20,178,507
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $56,178,507)....................................... 56,178,507
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES -- 100.1%
(Cost $449,025,781*).......... 449,025,781
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.1)%.............. (275,184)
-------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share
based on 448,859,423 shares
outstanding).................. $ 448,750,597
=============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($448,750,597 / 448,859,423).. $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1998 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 be resold only to qualified buyers.
See Accompanying Notes to Financial Statements.
2
<PAGE>
M.S.D.&T. FUNDS, INC.
GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 72.9%
FEDERAL HOME LOAN BANK -- 21.9%
Discount Notes
5.38%, 07/21/98....................................... $15,000 $ 14,887,813
5.28%, 08/14/98....................................... 11,400 11,276,272
Floating Rate Notes**
5.56%, 06/02/98....................................... 10,000 9,994,586
5.60%, 06/08/98....................................... 6,000 5,999,326
5.43%, 06/08/98....................................... 10,000 9,995,932
5.60%, 06/08/98....................................... 15,500 15,490,518
Notes
5.625%, 09/23/98...................................... 13,000 13,000,000
5.435%, 02/02/99...................................... 5,000 4,997,109
------------
85,641,556
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 22.7%
Discount Notes
5.41%, 06/05/98....................................... 25,000 24,984,986
5.41%, 06/12/98....................................... 14,000 13,976,857
5.31%, 07/02/98....................................... 10,000 9,954,275
5.28%, 07/06/98....................................... 11,000 10,943,533
5.40%, 07/22/98....................................... 12,000 11,908,200
Floating Rate Notes**
5.46%, 06/30/98....................................... 15,000 14,992,144
Notes
5.95%, 06/19/98....................................... 2,000 1,999,953
------------
88,759,948
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 25.7%
Discount Notes
5.40%, 06/11/98....................................... 10,000 9,985,000
5.41%, 06/12/98....................................... 10,000 9,983,469
5.40%, 07/02/98....................................... 9,175 9,132,336
5.40%, 07/17/98....................................... 15,000 14,896,500
5.42%, 07/24/98....................................... 10,000 9,920,206
5.40%, 07/27/98....................................... 10,000 9,916,000
5.39%, 08/07/98 ...................................... 10,000 9,899,686
5.40%, 08/27/98....................................... 12,000 11,843,400
Floating Rate Notes**
5.58%, 06/08/98....................................... 15,000 14,994,082
------------
100,570,679
------------
STUDENT LOAN MARKETING ASSOCIATION -- 2.6%
Floating Rate Notes**
5.38%, 06/08/98....................................... 10,000 9,989,871
------------
9,989,871
------------
TOTAL AGENCY OBLIGATIONS
(Cost $284,962,054)................................... 284,962,054
------------
REPURCHASE AGREEMENTS -- 27.4%
BANK OF AMERICA
(Agreement dated 05/29/98 to be repurchased at
$35,016,071 collateralized by $32,170,000 (Value
$35,753,106) U.S. Treasury Notes, 7.0%, due 07/15/06)
5.51%, 06/01/98........................................ 35,000 35,000,000
J.P. MORGAN SECURITIES, INC.
(Agreement dated 05/29/98 to be repurchased at
$35,016,100 collateralized by $28,306,000 (Value
$35,849,011) U.S. Treasury Bonds, 8.0%, due 11/15/21)
5.52%, 06/01/98........................................ 35,000 35,000,000
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at
$27,189,866 collateralized by $27,500,000 (Value
$27,762,109) U.S. Treasury Notes, 5.75%, due 10/31/02)
5.47%, 06/01/98........................................ 27,177 27,177,478
WACHOVIA BANK N.A.
(Agreement dated 05/29/98 to be repurchased at
$10,004,600 collateralized by $9,586,000 (Value
$10,196,521) U.S. Treasury Notes, 8.875%, due 05/15/00)
5.52%, 06/01/98........................................ 10,000 10,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $107,177,478)..................................... 107,177,478
------------
TOTAL INVESTMENTS IN SECURITIES -- 100.3%
(Cost $392,139,532*)........................................ 392,139,532
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3)%.............. (1,006,329)
------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share based on 391,259,409 shares
outstanding)................................................ $391,133,203
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($391,133,203 / 391,259,409)................................ $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1998 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.
3
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
COLORADO -- 0.6%
Colorado State TRAN
4.00%, 06/26/98........................................ $ 500 $ 500,056
-----------
FLORIDA -- 6.2%
Jacksonville Electric Authority, TECP, LA: Morgan
Guaranty Trust Co. NY
3.70%, 08/11/98........................................ 2,000 2,000,000
Volusia County Health Facilities, VRDN, Pooled Hospital
Learning Program, SPA: SunTrust Bank**
3.90%, 06/05/98........................................ 3,600 3,600,000
-----------
5,600,000
-----------
GEORGIA -- 3.6%
Bartow County Development Authority, PCR, VRDN, Georgia
Power Co., PLT Bowen Project**
3.95%, 06/01/98........................................ 1,500 1,500,000
Burke County, Development Authority, PCR, VRDN, Georgia
Power Co.**
3.95%, 06/01/98........................................ 1,700 1,700,000
-----------
3,200,000
-----------
HAWAII -- 1.1%
Hawaii State, GO,
Prerefunded @ 101.5
7.10%, 06/01/98........................................ 1,000 1,015,000
-----------
ILLINOIS -- 6.9%
Illinois Educational Facilities, VRDN, Northwestern
University, LIC: Northern Trust Co.**
3.80%, 06/16/98........................................ 2,100 2,100,000
3.60%, 07/09/98........................................ 1,600 1,600,000
North Carolina Eastern Municipal Power Agency, TECP,
LOC: Canadian Imperial Bank
3.50%, 06/11/98........................................ 2,500 2,500,000
-----------
6,200,000
-----------
INDIANA -- 2.1%
City of Mount Vernon, TECP, PCR, General Electric Co.
3.65%, 07/06/98........................................ 1,860 1,860,000
-----------
KANSAS -- 3.7%
Kansas State, VRDN, Department of Transportation Highway
Revenue, LA: Kansas State Pooled Money Investment
Board**
4.20%, 06/05/98........................................ 3,300 3,300,000
-----------
KENTUCKY -- 2.9%
Trimble County, TECP, PCR, Louisville Gas & Electric
3.60%, 07/08/98........................................ 2,650 2,650,000
-----------
LOUISIANA -- 4.4%
Plaquemine Parish Port & Harbor Terminal District, TECP,
TECO Energy, Inc.
3.65%, 08/07/98........................................ 4,000 4,000,000
-----------
MARYLAND -- 0.6%
Montgomery County, Parking Authority, RB, Bethesda
Parking Lot, Prerefunded @ 100
7.00%, 06/01/98........................................ 500 500,000
-----------
MICHIGAN -- 5.0%
University of Michigan, VRDN, Hospital Revenue**
4.00%, 06/01/98........................................ 4,500 4,500,000
-----------
MINNESOTA -- 7.8%
Minneapolis, GO, Special School District
3.85%, 06/05/98........................................ 4,000 4,000,000
City of Rochester, TECP, Mayo Foundation/Mayo Clinic
3.75%, 07/14/98........................................ 3,000 3,000,000
-----------
7,000,000
-----------
MISSISSIPPI -- 1.7%
Jackson County, VRDN, Port Facilities, Chevron USA
Inc.**
4.05%, 06/01/98........................................ 1,500 1,500,000
-----------
MISSOURI -- 2.1%
Missouri State Health & Educational Facilities, VRDN,
Washington University Project, SPA: Morgan Guaranty
Trust Co. NY**
3.85%, 06/05/98........................................ 1,850 1,850,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
NORTH CAROLINA -- 6.4%
City of Durham, VRDN, COP, SPA: Wachovia Bank N.A.**
3.70%, 06/05/98........................................ $ 2,800 $ 2,800,000
City of Winston-Salem, VRDN, COP, SPA: Wachovia Bank
N.A.**
3.85%, 06/05/98........................................ 3,000 3,000,000
-----------
5,800,000
-----------
OHIO -- 1.7%
Cuyahoga County, VRDN, Hospital Revenue, Cleveland
Clinic**
3.90%, 06/05/98........................................ 1,500 1,500,000
-----------
OREGON -- 4.4%
State of Oregon, GO, VRDN, Veterans Welfare Board, LOC:
Morgan Guaranty Trust Co. NY**
3.85%, 06/05/98........................................ 4,000 4,000,000
-----------
PENNSYLVANIA -- 3.3%
Pennsylvania State TAN
4.50%, 06/30/98........................................ 3,000 3,001,840
-----------
SOUTH CAROLINA -- 2.0%
York County, PCR, TECP,
Duke Power Project
3.30%, 06/08/98........................................ 1,800 1,800,000
-----------
TENNESSEE -- 2.9%
Tennessee State, VRDN, BAN, SPA: Tennsessee State
Retirement System**
3.90%, 06/05/98........................................ 2,600 2,600,000
-----------
TEXAS -- 14.4%
City of Austin, TECP, LOC: Morgan Guaranty Trust Co. NY
3.50%, 06/10/98........................................ 1,150 1,150,000
Harris County, Health Facilities Development, VRDN,
Methodist Hospital, SPA: Morgan Guaranty Trust Co. NY**
4.00%, 06/01/98........................................ 2,500 2,500,000
Harris County, Health Facilities Development, VRDN, St.
Luke's Episcopal Hospital Project, SPA: Morgan Guaranty
Trust Co. NY**
4.05%, 06/01/98......................................... 3,750 3,750,000
San Antonio Electric & Gas, RB
7.00%, 02/01/99......................................... 1,500 1,533,873
State of Texas, TRAN
4.75%, 08/31/98......................................... 4,000 4,008,934
-----------
12,942,807
-----------
UTAH -- 3.3%
Intermountain Power Agency
Utah Power, TECP, LOC:
Bank of America
3.90%, 06/08/98......................................... 3,000 3,000,000
-----------
VIRGINIA -- 3.7%
Fairfax County Hospital Association, IDA, VRDN,
Inova Health System, SPA:
Credit Suisse**
3.75%, 06/05/98......................................... 1,800 1,800,000
Henrico County, Virginia State Public School Authority,
Prerefunded @ 101
6.75%, 01/15/99......................................... 1,500 1,544,185
-----------
3,344,185
-----------
WISCONSIN -- 4.5%
State of Wisconsin, GO
4.50%, 06/15/98......................................... 2,000 2,000,722
6.50% Prerefunded @ 101, 05/01/99....................... 2,000 2,069,181
-----------
4,069,903
-----------
TOTAL MUNICIPAL BONDS
(Cost $85,733,791)...................................... 85,733,791
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 4.2%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 1,661,816 $ 1,661,816
Municipal Fund for Temporary Investments -- MuniFund..... 2,150,512 2,150,512
-----------
TOTAL INVESTMENT COMPANIES
(Cost $3,812,328)....................................... 3,812,328
-----------
TOTAL INVESTMENTS IN SECURITIES -- 99.5%
(Cost $89,546,119*)................................................ 89,546,119
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5%....................... 418,485
-----------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share based on 89,972,404 shares
outstanding)...................................................... $89,964,604
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($89,964,604 / 89,972,404)......................................... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1998 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.
6
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
COLORADO -- 2.6%
Colorado State TRAN
4.00%, 06/26/98........................................ $ 1,500 $ 1,500,168
-----------
FLORIDA -- 3.4%
Volusia County Health Facilities, VRDN, Aces-Pooled
Hospital Learning Program, SPA:
SunTrust Bank**
3.90%, 06/07/98........................................ 2,000 2,000,000
-----------
GEORGIA -- 1.8%
Bartow County Development Authority, PCR, VRDN, Georgia
Power Co. PLT Bowen Project**
3.95%, 06/01/98........................................ 500 500,000
Downtown Savannah Authority, RB, Chatham County House
Renovation Improvement, Prerefunded @ 102
6.75%, 01/01/99........................................ 500 518,880
-----------
1,018,880
-----------
HAWAII -- 1.8%
Honolulu City & County, RB, Prerefunded @ 101.5
6.90%, 10/01/98........................................ 1,000 1,025,899
-----------
ILLINOIS -- 3.4%
Illinois Health Facilities Authority, TECP, St. Lukes
Medical Center, LOC: Northern Trust
3.80%, 06/16/98........................................ 2,000 2,000,000
-----------
KANSAS -- 4.0%
Kansas State, VRDN, Department of Transportation Highway
Revenue, LA: Kansas State Pooled Money Investment
Board**
4.20%, 06/05/98........................................ 2,300 2,300,000
-----------
KENTUCKY -- 3.4%
Jefferson County, PCR, TECP, Louisville Gas & Electric
3.45%, 06/25/98........................................ 2,000 2,000,000
-----------
LOUISIANA -- 3.8%
Plaquemine Parish Port & Harbor Terminal District, TECP,
TECO Energy, Inc.
3.65%, 08/07/98........................................ 2,200 2,200,000
-----------
MARYLAND -- 0.8%
Montgomery County, RB, Parking Authority, Bethesda
Parking Lot, Prerefunded @ 100
7.00%, 06/01/98........................................ 500 500,000
-----------
MICHIGAN -- 3.6%
University of Michigan, VRDN, Hospital Revenue**
4.00%, 06/01/98........................................ 2,120 2,120,000
-----------
MINNESOTA -- 6.0%
City of Rochester, TECP, Mayo Foundation/Mayo Clinic
3.75%, 07/14/98........................................ 1,500 1,500,000
University of Minneapolis, VRDN, Gateway Project, SPA:
Norwest Bank**
3.85%, 06/05/98........................................ 2,000 2,000,000
-----------
3,500,000
-----------
MISSISSIPPI -- 3.8%
Jackson County, VRDN, Port Facilities, Chevron USA
Inc.**
4.05%, 06/01/98........................................ 2,200 2,200,000
-----------
MISSOURI -- 3.3%
Boone County Missouri, VDRN, GTD Minnesota Mining &
Manufacturing Project PCR**
3.80%, 06/05/98........................................ 500 500,000
Missouri State Health & Educational Facilities, VRDN,
Washington University Project, SPA: Morgan Guaranty
Trust**
3.85%, 06/05/98........................................ 1,440 1,440,000
-----------
1,940,000
-----------
NORTH CAROLINA -- 8.1%
City of Durham, VRDN, COP, SPA: Wachovia Bank of North
Carolina**
3.70%, 06/05/98........................................ 2,200 2,200,000
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
NORTH CAROLINA -- CONTINUED
North Carolina Eastern Municipal Power Agency, TECP,
LOC: Candian Imperial Bank
3.60%, 07/17/98........................................ $ 2,500 $ 2,500,000
-----------
4,700,000
-----------
OHIO -- 2.6%
Cuyahoga County, VRDN,
Hospital Revenue, Cleveland Clinic**
3.90%, 06/05/98........................................ 1,500 1,500,000
-----------
OREGON -- 4.1%
Oregon State, GO, VRDN,
Veterans Welfare Board, LOC: Morgan Guaranty Trust
Co.**
3.85%, 06/05/98........................................ 2,400 2,400,000
-----------
PENNSYLVANIA -- 8.1%
Delaware County, IDA, VRDN, General Electric Capital
Corp.**
3.80%, 06/05/98........................................ 2,200 2,200,000
Pennsylvania State, GO
4.50%, 06/30/98........................................ 2,500 2,501,613
-----------
4,701,613
-----------
SOUTH CAROLINA -- 2.6%
York County, PCR, TECP,
Duke Power Co. Project
3.30%, 06/08/98........................................ 1,500 1,500,000
-----------
TENNESSEE -- 4.3%
Tennessee State, VRDN, BAN, SPA: Tennsessee State
Retirement System**
3.90%, 06/05/98........................................ 2,500 2,500,000
-----------
TEXAS -- 14.6%
Gulf Coast Waste Disposal Authority, PCR, VRDN, Exxon
Project**
4.00%, 06/01/98........................................ 2,000 2,000,000
Harris County, Health Facilities Development, VRDN,
Methodist Hospital, SPA: Morgan Guaranty Trust Co.**
4.00%, 06/01/98........................................ 2,000 2,000,000
Harris County, Health Facilities Development, VRDN, St.
Luke's Episcopal Hospital Project, SPA: Morgan Guaranty
Trust Co.**
4.05%, 06/01/98......................................... 1,980 1,980,000
State of Texas, TRAN
4.75%, 08/31/98......................................... 2,500 2,505,584
-----------
8,485,584
-----------
UTAH -- 3.4%
Intermountain Power Agency Utah Power, TECP, LOC: Bank of
America
3.70%, 09/15/98......................................... 2,000 2,000,000
-----------
VIRGINIA -- 2.1%
Fairfax County Hospital Association, IDA, VRDN, Inova
Health System, SPA: Credit Suisse**
3.75%, 06/05/98......................................... 1,200 1,200,000
-----------
WISCONSIN -- 3.5%
State of Wisconsin, GO
4.50%, 06/15/98......................................... 1,000 1,000,361
6.50% Prerefunded @ 101, 05/01/99....................... 1,000 1,034,590
-----------
2,034,951
-----------
WYOMING -- 1.7%
Sweetwater County, TECP, PacificCorp, LOC: Union Bank of
Switzerland
3.60%, 08/11/98......................................... 1,000 1,000,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $56,327,095)...................................... 56,327,095
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 2.8%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 455,354 455,354
Municipal Fund for Temporary Investments--MuniFund....... 1,181,959 1,181,959
-----------
TOTAL INVESTMENT COMPANIES
(Cost $1,637,313)....................................... 1,637,313
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
M.S.D.&T. FUNDS, INC.
TAX-EXEMPT MONEY MARKET FUND (TRUST)
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
VALUE
-----
<S> <C>
TOTAL INVESTMENTS IN SECURITIES -- 99.6%
(Cost $57,964,408*).......... $57,964,408
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.4%.......... 257,100
-----------
NET ASSETS -- 100.0%
(equivalent to $1.00 per
share based on 58,222,655
shares outstanding).......... $58,221,508
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($58,221,508 / 58,222,655).. $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1998 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.
9
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- 97.5%
AEROSPACE -- 1.0%
Boeing Corp. .......................................... 80,700 $ 3,843,337
------------
AIRLINES -- 1.8%
Southwest Airlines Co. ................................ 248,400 6,629,175
------------
BANKS -- 7.1%
First Union Corp. (N.C.)............................... 52,346 2,895,388
J.P. Morgan & Co. ..................................... 60,400 7,500,925
Regions Financial Corp. ............................... 198,500 8,163,313
SunTrust Banks Inc. ................................... 60,000 4,740,000
Union Planters Corp. .................................. 53,900 3,153,150
------------
26,452,776
------------
BEVERAGES -- 2.0%
Pepsico Inc. .......................................... 183,200 7,476,850
------------
CHEMICALS -- 5.9%
Air Products & Chemicals Inc. ......................... 69,900 6,081,300
E.I. duPont deNemours & Co. ........................... 114,300 8,801,100
RPM Inc. .............................................. 422,250 7,178,250
------------
22,060,650
------------
COMPUTER EQUIPMENT -- 5.6%
Hewlett-Packard Co. ................................... 138,200 8,585,675
IBM.................................................... 88,600 10,399,425
Teradyne Inc.*......................................... 60,100 1,848,075
------------
20,833,175
------------
COMPUTERS -- 0.3%
Gateway 2000, Inc.*.................................... 20,750 935,047
------------
COMPUTER SOFTWARE -- 1.4%
Cisco Systems Inc.*.................................... 68,000 5,142,500
------------
CONSUMER GOODS -- 5.0%
Colgate-Palmolive Co. ................................. 90,900 7,908,300
Procter & Gamble Co. .................................. 76,100 6,387,644
Unilever NV ADR........................................ 56,200 4,436,287
------------
18,732,231
------------
ELECTRICAL EQUIPMENT -- 3.4%
General Electric Co. .................................. 124,250 10,359,344
Hubbell, Inc. "B"...................................... 51,800 2,437,838
------------
12,797,182
------------
ELECTRONICS -- 3.7%
Amp, Inc. ............................................. 142,200 $ 5,403,600
Intel Corp. ........................................... 115,800 8,272,462
------------
13,676,062
------------
FOODS -- 7.8%
Bestfoods.............................................. 68,400 3,860,325
ConAgra................................................ 165,600 4,843,800
Giant Food, Inc. "A"................................... 45,500 1,956,500
Kellogg Co. ........................................... 96,100 3,970,131
McCormick & Co., Inc. ................................. 134,900 4,519,150
Nestle Registered ADR.................................. 86,900 9,323,970
Universal Foods........................................ 26,000 619,125
------------
29,093,001
------------
INDUSTRIAL GOODS -- 1.6%
Corning Inc. .......................................... 151,700 5,982,669
------------
INSURANCE -- 8.0%
Chubb Corp. ........................................... 98,700 7,852,819
General RE Corp. ...................................... 22,350 4,914,206
Ingersoll-Rand Co. .................................... 34,950 1,574,934
Jefferson Pilot Corp. ................................. 150,250 8,601,812
Timken Co. ............................................ 40,000 1,505,000
Unum Corp. ............................................ 95,400 5,300,662
------------
29,749,433
------------
MACHINERY & HEAVY EQUIPMENT -- 5.4%
Caterpillar, Inc. ..................................... 160,000 8,790,000
Deere & Co. ........................................... 63,500 3,294,063
Illinois Tool Works, Inc. ............................. 121,120 7,993,920
------------
20,077,983
------------
MEDICAL INSTRUMENTS & SUPPLIES -- 2.9%
Johnson & Johnson...................................... 158,500 10,946,406
------------
OFFICE EQUIPMENT -- 1.1%
Pitney Bowes Inc. ..................................... 88,700 4,168,900
------------
OIL EQUIPMENT & SERVICES -- 2.7%
Halliburton Co. ....................................... 84,572 4,006,599
Schlumberger Ltd. ..................................... 79,500 6,205,969
------------
10,212,568
------------
PETROLEUM -- 5.4%
Amoco Corp. ........................................... 148,650 6,215,428
Burmah Castrol PLC ADR................................. 35,400 1,429,275
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. FUNDS, INC.
GROWTH & INCOME FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- CONTINUED
PETROLEUM -- CONTINUED
Chevron Corp. ......................................... 78,100 $ 6,238,238
Exxon Corp. ........................................... 90,000 6,345,000
------------
20,227,941
------------
PAPER PRODUCTS -- 0.4%
Union Camp Corp. ...................................... 28,000 1,531,250
------------
PHARMACEUTICALS -- 12.6%
Abbott Laboratories.................................... 69,700 5,170,869
American Home Products................................. 64,000 3,092,000
Amgen Inc. ............................................ 71,000 4,295,500
Bristol-Myers Squibb Co. .............................. 96,900 10,416,750
Merck & Co., Inc. ..................................... 37,600 4,401,550
Pfizer Inc. ........................................... 126,380 13,246,204
Schering Plough Corp. ................................. 77,900 6,519,256
------------
47,142,129
------------
RETAIL DEPARTMENT STORES -- 3.7%
May Department Stores Co. ............................. 113,800 7,318,762
Wal-Mart Stores, Inc. ................................. 104,200 5,750,537
Nordstrom Inc. ........................................ 12,350 889,972
------------
13,959,271
------------
TECHNOLOGY -- 1.5%
Motorola, Inc. ........................................ 109,700 5,807,244
------------
TELECOMMUNICATIONS -- 3.6%
BellSouth Corp. ....................................... 27,000 1,741,500
Ericsson (LM) Tel -- ADR............................... 113,600 3,166,600
Lucent Technologies Inc. .............................. 121,236 8,600,179
------------
13,508,279
------------
TOBACCO -- 2.1%
Philip Morris Inc. .................................... 212,820 7,954,148
------------
UTILITIES-TELEPHONE -- 1.5%
MCI Communications Corp. .............................. 107,000 5,721,156
------------
TOTAL COMMON STOCK
(Cost $217,228,769).................................... 364,661,363
------------
PAR
(000) VALUE
----- -----
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.2%
REPUBLIC NATIONAL BANK OF NEW YORK
(Agreement dated 05/29/98 to be repurchased at
$8,136,876.69, collateralized by $7,940,000 (Value
$8,294,355.21) U.S. Treasury Bills, 6.75%, due 05/31/99)
5.66%, 06/01/98......................................... $8,133 $ 8,133,149
------------
TOTAL REPURCHASE AGREEMENT
(Cost $8,133,149)........................................ 8,133,149
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.7%
(Cost $225,361,918**)............................................. 372,794,512
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%...................... 1,070,145
------------
NET ASSETS -- 100.0%
(equivalent to $21.37 per share based on 17,496,834 shares
outstanding)..................................................... $373,864,657
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($373,864,657 / 17,496,834)....................................... $21.37
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $225,433,076. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost................................ $149,558,816
Excess of tax cost over value................................ $ (2,197,380)
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
M.S.D.&T. FUNDS, INC.
EQUITY INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- 96.4%
AEROSPACE -- 4.6%
Boeing Corp. .......................................... 101,200 $ 4,819,650
Kaman Corp. ........................................... 129,406 2,377,835
Raytheon Co. -- Class B................................ 34,300 1,875,781
United Technologies.................................... 59,446 5,587,924
------------
14,661,190
------------
AIRLINES -- 1.5%
Southwest Airlines Co. ................................ 184,825 4,932,517
------------
BANKING -- 3.1%
First Union Corp. N.C. ................................ 76,140 4,211,494
J. P. Morgan & Co. .................................... 22,306 2,770,126
Regions Financial Corp. ............................... 72,300 2,973,338
------------
9,954,958
------------
BEVERAGES -- 1.1%
Pepsico Inc. .......................................... 84,000 3,428,250
------------
CHEMICALS -- 2.4%
E.I. duPont deNemours & Co. ........................... 100,562 7,743,274
------------
COMPUTER EQUIPMENT & SOFTWARE -- 2.2%
Gateway 2000, Inc.*.................................... 65,300 2,942,581
Electronic Data Services Corp. ........................ 109,900 3,997,613
------------
6,940,194
------------
CONSUMER GOODS -- 4.1%
Fortune Brands......................................... 35,000 1,345,313
Procter & Gamble Co. .................................. 90,000 7,554,375
Rubbermaid Inc. ....................................... 75,417 2,460,480
V F Corp. ............................................. 35,060 1,864,754
------------
13,224,922
------------
ELECTRICAL EQUIPMENT -- 2.8%
General Electric Co. .................................. 106,200 8,854,425
------------
ELECTRIC UTILITY -- 2.7%
Dayton Power and Light Co. ............................ 117,651 2,029,480
Pacificorp............................................. 98,410 2,269,581
Texas Utilities........................................ 40,262 1,590,349
Wisconsin Energy Corp. ................................ 94,604 2,790,818
------------
8,680,228
------------
ELECTRONICS -- 3.9%
Amp, Inc. ............................................. 123,500 $ 4,693,000
Intel Corp. ........................................... 79,420 5,673,566
Motorola, Inc. ........................................ 42,000 2,223,375
------------
12,589,941
------------
ENGINEERING -- 1.7%
Fluor Corp. ........................................... 111,600 5,321,925
------------
FINANCIAL SERVICES -- 2.8%
H. F. Ahmanson......................................... 80,000 6,100,000
CIT Group Inc. ........................................ 89,400 2,816,100
------------
8,916,100
------------
FOOD PRODUCTS -- 1.5%
Bestfoods.............................................. 43,008 2,427,264
McCormick & Co., Inc. ................................. 70,879 2,374,447
------------
4,801,711
------------
FOOD PROCESSING -- 0.7%
Universal Foods........................................ 92,000 2,190,750
------------
GAS UTILITY -- 1.5%
Market Span Corp. ..................................... 139,934 4,714,027
------------
INDUSTRIAL GOODS -- 2.0%
Corning Inc. .......................................... 99,616 3,928,606
Harsco Corp. .......................................... 54,758 2,388,818
------------
6,317,424
------------
INSURANCE -- 7.0%
Aetna Inc. ............................................ 10,500 820,969
Chubb Corp. ........................................... 51,036 4,060,552
General RE Corp. ...................................... 18,534 4,075,163
HSB Group.............................................. 69,750 3,069,000
Jefferson Pilot Corp. ................................. 53,475 3,061,443
Lincoln National Corp. ................................ 40,000 3,595,000
Marsh & McLennan Co. .................................. 42,074 3,684,105
------------
22,366,232
------------
IRON/STEEL -- 0.9%
Worthington Industries Inc. ........................... 165,600 2,918,700
------------
MACHINERY & EQUIPMENT -- 3.5%
Browning-Ferris Industries............................. 56,182 1,997,972
Caterpillar, Inc. ..................................... 105,992 5,822,935
Deere & Co. ........................................... 65,211 3,382,821
------------
11,203,728
------------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. FUNDS, INC.
EQUITY INCOME FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- CONTINUED
MANUFACTURING -- 3.3%
Minnesota Mining & Manufacturing....................... 20,000 $ 1,852,500
Tupperware Corp. ...................................... 175,650 4,742,550
Eastman Kodak Co. ..................................... 53,600 3,825,700
------------
10,420,750
------------
MEDICAL EQUIPMENT & SUPPLIES -- 2.8%
Johnson & Johnson...................................... 129,088 8,915,140
------------
METALS & MINING -- 1.8%
Aluminum Co. of America................................ 23,373 1,621,502
Homestake Mining Co. .................................. 55,007 598,200
Timken Co. ............................................ 88,900 3,344,863
------------
5,564,565
------------
NATURAL GAS UTILITY -- 0.9%
Equitable Resources, Inc. ............................. 105,386 3,003,501
------------
OFFICE/BUSINESS EQUIPMENT & SUPPLIES -- 0.9%
Hewlett-Packard Co. ................................... 48,500 3,013,063
------------
OIL & GAS EQUIPMENT/SERVICES -- 3.6%
Dresser Industries, Inc. .............................. 59,018 2,748,026
Enron Corp. ........................................... 65,400 3,278,175
Halliburton Co. ....................................... 30,400 1,440,200
Schlumberger Ltd. ..................................... 50,796 3,965,263
------------
11,431,664
------------
OIL & GAS EXPLORATION PRODUCT & SERVICES -- 10.2%
Amoco Corp. ........................................... 122,888 5,138,255
Atlantic Richfield Co. ................................ 39,688 3,130,391
British Petroleum ADR.................................. 50,952 4,515,620
Chevron Corp. ......................................... 69,697 5,567,048
Exxon Corp. ........................................... 90,956 6,412,398
Mobil Corp. ........................................... 64,596 5,038,488
Murphy Oil Corp. ...................................... 58,434 2,939,961
------------
32,742,161
------------
PAPER PRODUCTS -- 1.1%
P.H. Glatfelter Co. ................................... 55,179 900,107
Union Camp Corp. ...................................... 49,400 2,701,563
------------
3,601,670
------------
PHARMACEUTICALS -- 8.9%
American Home Products................................. 94,000 4,541,375
Amgen Inc.*............................................ 77,700 4,700,850
Bristol-Myers Squibb Co. .............................. 50,200 5,396,500
Merck & Company, Inc. ................................. 70,000 8,194,375
Pfizer Inc. ........................................... 55,054 5,770,346
------------
28,603,446
------------
PRINTING & PUBLISHING -- 2.1%
R.R. Donnelley & Sons Co. ............................. 66,500 2,992,500
Readers Digest Assn. .................................. 40,000 1,140,000
Washington Post Co. ................................... 5,012 2,707,733
------------
6,840,233
------------
RAILROADS -- 0.8%
Norfolk Southern Corp. ................................ 76,968 2,410,060
------------
RESTAURANTS -- 0.9%
McDonald's Corp. ...................................... 42,600 2,795,625
------------
RETAIL STORES -- 2.9%
American Stores Co. ................................... 90,000 2,244,375
May Department Stores Co. ............................. 41,800 2,688,263
Nordstrom Inc. ........................................ 60,900 4,388,605
------------
9,321,243
------------
TELECOMMUNICATIONS -- 3.8%
BellSouth Corp. ....................................... 110,160 7,105,320
GTE Corp. ............................................. 87,000 5,073,188
------------
12,178,508
------------
TOBACCO -- 2.4%
Gallaher Group ADR..................................... 124,973 2,530,703
Philip Morris Inc. .................................... 140,640 5,256,420
------------
7,787,123
------------
TOTAL COMMON STOCK
(Cost $151,132,969).................................... 308,389,248
------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
M.S.D.&T. FUNDS, INC.
EQUITY INCOME FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
REPURCHASE AGREEMENT -- 3.2%
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at
$10,194,640 collateralized by $10,320,000 (Value
$10,418,363) U.S. Treasury Notes, 5.75%, due
10/31/02) 5.47%, 06/01/98........................... $10,189,995 $ 10,189,995
------------
TOTAL REPURCHASE AGREEMENT
(Cost $10,189,995)................................... 10,189,995
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.6%
(Cost $161,322,964**)............................................. 318,579,243
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%...................... 1,392,254
------------
NET ASSETS -- 100.0%
(equivalent to $10.21 per share based on 31,332,478 shares
outstanding)..................................................... $319,971,497
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($319,971,497 / 31,332,478)....................................... $10.21
======
</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................................. $158,344,518
Excess of tax cost over value................................. $ (1,088,239)
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
M.S.D.&T. FUNDS, INC.
EQUITY GROWTH FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- 97.8%
AIRLINES -- 2.4%
Southwest Airlines Co. ................................. 31,000 $ 827,313
-----------
BANKING -- 5.3%
Comerica, Inc. ......................................... 7,500 493,125
First Union Corp. N.C. ................................. 7,340 405,993
Regions Financial Corp. ................................ 8,500 349,563
Union Planters Corp. ................................... 10,000 585,000
-----------
1,833,681
-----------
BEVERAGES -- 1.5%
Pepsico Inc. ........................................... 12,600 514,238
-----------
BROADCASTING -- 0.8%
Cox Communications*..................................... 6,500 283,969
-----------
CHEMICALS -- 2.4%
Imperial Chemical Industries ADR........................ 6,000 447,750
RPM Inc. ............................................... 23,125 393,125
-----------
840,875
-----------
COMMUNICATIONS EQUIPMENT -- 2.9%
Airtouch Communications Inc.*........................... 14,000 666,750
DSC Communications Corp.*............................... 21,000 358,969
-----------
1,025,719
-----------
COMPUTER EQUIPMENT & SOFTWARE -- 5.2%
American Power Conversion*.............................. 10,000 300,000
Cisco Systems, Inc.*.................................... 6,000 453,750
Electronic Data Services Corp. ......................... 14,000 509,250
Gateway 2000, Inc.*..................................... 12,000 540,750
-----------
1,803,750
-----------
CONSUMER GOODS -- 2.7%
Colgate-Palmolive Co. .................................. 5,000 435,000
Rubbermaid Inc. ........................................ 16,000 522,000
-----------
957,000
-----------
ELECTRIC & ELECTRONIC -- 1.3%
Teradyne Inc.*.......................................... 15,000 461,250
-----------
ELECTRICAL EQUIPMENT -- 4.9%
Emerson Electric Co. ................................... 6,400 388,800
General Electric & Co. ................................. 11,400 950,475
Honeywell Inc. ......................................... 4,500 377,718
-----------
1,716,993
-----------
ELECTRONICS -- 3.7%
Amp, Inc. .............................................. 9,000 342,000
Intel Corp. ............................................ 9,000 642,938
Motorola, Inc. ......................................... 6,095 322,653
-----------
1,307,591
-----------
ENTERTAINMENT -- 1.3%
Walt Disney Co. ........................................ 4,000 452,500
-----------
FINANCIAL SERVICES -- 1.8%
American Express Co. ................................... 6,100 626,013
-----------
FOOD PRODUCTS -- 3.8%
Bestfoods............................................... 6,000 338,625
Hershey Foods Corp. .................................... 6,500 450,125
Nestle Registered ADR*.................................. 5,000 536,450
-----------
1,325,200
-----------
FOOD PROCESSING -- 1.5%
Pioneer Hi-Bred International Inc. ..................... 13,500 513,844
-----------
INSURANCE -- 9.2%
Aetna Inc. ............................................. 5,000 390,938
Allstate Corp. ......................................... 5,500 517,688
General Re Corp. ....................................... 4,000 879,500
Lincoln National Corp. ................................. 8,000 719,000
Unum Corp. ............................................. 13,000 722,312
-----------
3,229,438
-----------
MACHINERY & EQUIPMENT -- 3.7%
Applied Industrial Technologies Inc. ................... 15,900 373,650
Illinois Tool Works, Inc. .............................. 9,000 594,000
Regal Beloit Corp. ..................................... 10,000 326,250
-----------
1,293,900
-----------
MANUFACTURING -- 1.4%
Newell Co. ............................................. 10,000 482,500
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 4.2%
Baxter International.................................... 12,000 686,250
Johnson & Johnson....................................... 11,100 766,594
-----------
1,452,844
-----------
OFFICE/BUSINESS EQUIPMENT & SUPPLIES -- 2.1%
Hewlett-Packard Co. .................................... 5,000 310,625
IBM..................................................... 3,500 410,812
-----------
721,437
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. FUNDS, INC.
EQUITY GROWTH FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK -- CONTINUED
OIL/GAS--EQUIPMENT & SERVICES -- 1.8%
Halliburton Co. ........................................ 5,534 $ 262,173
Schlumberger Ltd. ...................................... 4,600 359,087
-----------
621,260
-----------
OIL & GAS EXPLORATION PRODUCT & SERVICES -- 6.0%
British Petroleum ADR................................... 6,000 531,750
Exxon Corp. ............................................ 7,500 528,750
Mobil Corp. ............................................ 7,000 546,000
Murphy Oil Corp. ....................................... 10,000 503,125
-----------
2,109,625
-----------
PHARMACEUTICALS -- 9.3%
American Home Products.................................. 16,000 773,000
Amgen Inc.*............................................. 3,400 205,700
Bristol-Myers Squibb Co. ............................... 2,000 215,000
Chiron Corp.*........................................... 9,000 162,562
Genzyme Corp.*.......................................... 4,400 120,450
Merck & Co., Inc. ...................................... 5,000 585,313
Pfizer Inc. ............................................ 6,000 628,875
SmithKline Beecham...................................... 10,000 538,125
-----------
3,229,025
-----------
PRINTING & PUBLISHING -- 0.9%
Gannett Company, Inc. .................................. 5,000 329,688
-----------
RESTAURANTS -- 1.5%
McDonald's Corp. ....................................... 8,000 525,000
-----------
RETAIL STORES -- 3.1%
Home Depot Inc. ........................................ 7,500 589,219
Wal-Mart Stores, Inc. .................................. 9,000 496,688
-----------
1,085,907
-----------
TECHNOLOGY -- 3.4%
Microsoft*.............................................. 10,000 848,125
Storage Technology Corp.*............................... 4,000 335,500
-----------
1,183,625
-----------
TELECOMMUNICATIONS -- 4.2%
BellSouth Corp. ........................................ 3,800 245,100
MCI Communications...................................... 14,000 748,562
Worldcom Inc.*.......................................... 10,100 459,550
-----------
1,453,212
-----------
TELECOMMUNICATIONS-SERVICES & EQUIPMENT -- 5.5%
Cable & Wireless ADR.................................... 18,000 624,375
Cincinnati Bell Inc. ................................... 13,000 413,562
Ericsson Tel--Sp ADR.................................... 16,000 446,000
Lucent Technologies..................................... 5,916 419,666
-----------
1,903,603
-----------
TOTAL COMMON STOCK
(Cost $22,683,608)...................................... 34,111,000
-----------
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.1%.
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at $745,530,
collateralized by $760,000 (Value $767,244) U.S.
Treasury Notes, 5.75%, due 10/31/02) 5.47%, Maturity
06/01/98............................................... $745,190 745,190
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $745,190)......................................... 745,190
-----------
TOTAL INVESTMENTS IN SECURITIES -- 99.9%
(Cost $23,428,798**)............................................... 34,856,190
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% 19,844
-----------
NET ASSETS -- 100.0%
(equivalent to $10.28 per share based on 3,392,111 shares
outstanding)....................................................... $34,876,034
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($34,876,034 / 3,392,111).......................................... $10.28
======
</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.................................. $11,762,766
Excess of tax cost over value.................................. $ (335,374)
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK, WARRANTS & RIGHTS -- 95.3%
BRAZIL -- 2.3%
Celesc GDR.............................................. 3,000 $ 268,653
Telebras ADR............................................ 8,700 927,638
Unibanco GDR............................................ 24,324 761,645
-----------
1,957,936
-----------
GREECE -- 1.8%
Alpha Credit Bank*...................................... 11,000 1,148,588
National Bank of Greece GDR*............................ 13,220 374,126
-----------
1,522,714
-----------
FINLAND -- 0.8%
Nokia "A'............................................... 10,000 658,917
-----------
FRANCE -- 13.5%
AXA--UAP................................................ 16,500 1,878,144
Bouygues................................................ 4,000 723,411
Danone*................................................. 4,000 1,077,093
Dexia France............................................ 10,000 1,358,903
Lyonnaise Des Eaux*..................................... 5,000 853,284
Michelin................................................ 10,000 618,777
Pinault Printemps La Redoute............................ 1,500 1,234,796
SGS Thomson Microelectronics*........................... 2,600 209,555
Societe Generale........................................ 8,250 1,634,068
Total "B'............................................... 8,500 1,055,615
Vivendi................................................. 4,500 904,097
-----------
11,547,743
-----------
GERMANY -- 9.8%
Allianz................................................. 2,875 913,560
Commerzbank............................................. 40,000 1,615,444
GEA Preferred........................................... 2,950 1,158,296
Man..................................................... 3,000 1,199,803
Mannesman............................................... 1,515 1,409,378
Veba.................................................... 11,000 743,497
Volkswagen.............................................. 1,588 1,292,460
-----------
8,332,438
-----------
HONG KONG -- 0.4%
First Tractor........................................... 750,000 302,458
-----------
INDIA -- 0.5%
State Bank of India GDR................................. 35,000 468,125
-----------
ITALY -- 5.9%
ENI..................................................... 66,000 466,974
Istituto Nazionale delle Assicurazioni (INA)............ 380,000 1,184,255
Telecom Italia.......................................... 180,000 1,361,168
Telecom Italia Mobile................................... 170,000 1,005,891
Unicem.................................................. 90,000 982,582
-----------
5,000,870
-----------
JAPAN -- 11.8%
18th Bank............................................... 84,000 461,935
Bridgestone............................................. 28,000 638,545
Dowa Fire & Marine...................................... 148,000 438,985
Eisai................................................... 30,000 397,936
Fuji Photo Film......................................... 15,000 507,704
Hitachi................................................. 91,000 599,596
Hitachi Cable........................................... 27,000 130,552
Ito Yokado.............................................. 11,000 547,757
Komori.................................................. 26,000 480,351
Kuraray................................................. 50,000 418,215
Mabuchi Motors.......................................... 8,600 558,582
Matsushita Electric Industrial.......................... 35,000 548,118
Mitsui Fudosan.......................................... 44,000 355,963
Nintendo................................................ 4,800 448,598
Nippon Telegraph & Telephone............................ 45 370,223
Ricoh................................................... 44,000 475,040
Sanwa Bank.............................................. 33,000 289,121
Shin-Etsu Chemical...................................... 29,000 538,917
Shiseido................................................ 27,000 313,716
Sony.................................................... 6,000 506,620
Sumitomo Trust & Banking................................ 60,000 315,664
Suzuki Motor............................................ 57,000 464,425
Tsubaki Nakashima....................................... 52,000 303,973
-----------
10,110,536
-----------
MALAYSIA -- 0.2%
Tenaga Nasional......................................... 120,000 198,412
-----------
MEXICO -- 0.9%
Cemex CPO*.............................................. 180,000 742,171
Cemex CPO Rights........................................ 180,000 1,838
-----------
744,009
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK, WARRANTS &
RIGHTS -- CONTINUED
NETHERLANDS -- 6.0%
ING..................................................... 7,800 $ 536,157
Philips Electronics..................................... 14,000 1,331,658
Vedior.................................................. 19,200 611,625
Vendex International.................................... 17,000 1,150,778
Ver Ned Uitgev Ver Bezit................................ 43,500 1,493,971
-----------
5,124,189
-----------
NORWAY -- 0.5%
Petroleum Geo-Services*................................. 7,050 465,174
-----------
PHILIPPINES -- 0.1%
Benpres Holdings Corp GDR*.............................. 30,000 110,910
Far East Bank & Trust................................... 1,152 1,361
-----------
112,271
-----------
POLAND -- 0.9%
Bank Handlowy Warszawie GDR*............................ 45,000 786,600
-----------
SINGAPORE -- 1.8%
Development Bank of Singapore (Foreign)................. 70,200 423,547
GP Batteries International.............................. 170,000 375,746
Singapore Press......................................... 56,144 459,481
United Overseas Bank (Foreign).......................... 60,000 234,766
-----------
1,493,540
-----------
SOUTH AFRICA -- 1.3%
AECI.................................................... 140,000 768,424
Murray & Roberts........................................ 220,000 379,751
-----------
1,148,175
-----------
SPAIN -- 4.5%
Adolgo Dominguez*....................................... 29,000 983,181
Argentaria.............................................. 3,250 277,286
Banco Santander......................................... 25,000 1,260,615
Telefonica de Espana.................................... 30,000 1,342,233
-----------
3,863,315
-----------
SWEDEN -- 1.1%
Forenings Sparbanken.................................... 30,000 902,192
Mandamus Units*......................................... 30,000 9,577
-----------
911,769
-----------
SWITZERLAND -- 8.3%
CS Group Registered..................................... 5,800 1,278,753
Nestle Registered....................................... 1,100 2,360,499
Novartis Registered, Non-Voting......................... 1,066 1,808,114
Roche Holdings 1/10 PC Non-Voting....................... 125 1,287,934
UBS Registered (SCHW Bangesell)......................... 1,000 336,799
-----------
7,072,099
-----------
UNITED KINGDOM -- 22.9%
Abbey National.......................................... 39,000 695,119
Asda.................................................... 215,000 637,217
Barclays................................................ 26,939 717,808
BBA..................................................... 45,000 391,858
BG...................................................... 120,000 617,873
Boots................................................... 32,000 488,950
British Aerospace*...................................... 72,000 638,713
British Petroleum....................................... 77,872 1,144,778
British Telecom......................................... 75,000 788,240
Bryant.................................................. 135,000 280,685
Cadbury Schweppes....................................... 40,000 612,818
Diageo.................................................. 75,168 863,552
General Electric Co..................................... 50,000 409,918
Glaxo Wellcome.......................................... 55,000 1,497,798
Granada................................................. 35,000 655,787
HSBC Holdings........................................... 30,000 786,161
IMS Group............................................... 190,000 353,210
Jarvis Hotels........................................... 135,000 376,447
Kingfisher.............................................. 29,000 514,519
Land Securities......................................... 40,000 627,494
Limelight............................................... 210,000 145,540
Lloyds TSB.............................................. 95,000 1,389,602
NFC..................................................... 107,500 326,059
Norwich Union........................................... 50,000 362,220
Prudential.............................................. 36,000 477,567
Royal & Sun Alliance.................................... 50,000 530,793
Rubicon................................................. 110,000 426,021
SmithKline Beecham...................................... 93,000 1,015,332
Unilever................................................ 70,000 769,365
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCK, WARRANTS &
RIGHTS -- CONTINUED
UNITED KINGDOM -- CONTINUED
Whitbread............................................... 30,172 $ 489,063
Yorkshire Water......................................... 70,000 526,798
-----------
19,557,305
-----------
TOTAL COMMON STOCK, WARRANTS & RIGHTS
(Cost $64,623,580)...................................... 81,378,595
-----------
<CAPTION>
PAR
(000)
-----
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 1.7%
EURODOLLAR TIME DEPOSIT
State Street Bank & Trust Co. 4.50%, 6/02/98............ $ 1,480 1,480,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,480,000)....................................... 1,480,000
-----------
TOTAL INVESTMENTS IN SECURITIES -- 97.0%
(Cost $66,103,580**)............................................... 82,858,595
OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.0%....................... 2,543,684
-----------
NET ASSETS -- 100%
(equivalent to $13.90 per share based on 6,144,913 shares
outstanding) -- 100.0%............................................. $85,402,279
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($85,402,279 / 6,144,913).......................................... $13.90
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $66,104,338. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $21,755,438
Excess of tax cost over value.................................. $(5,001,181)
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. FUNDS, INC.
DIVERSIFIED REAL ESTATE FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 91.5%
APARTMENTS -- 22.8%
AMLI Residential Properties Trust....................... 2,200 $ 49,363
Avalon Properties, Inc. ................................ 4,600 129,375
Bay Apartment Communities............................... 3,600 132,300
Equity Residential Properties Trust..................... 4,450 217,772
Gables Residential Trust................................ 3,700 103,138
Irvine Apartment Communities............................ 3,300 98,588
Merry Land & Investment Co. ............................ 4,600 102,063
Post Properties Inc. ................................... 4,000 164,500
Security Capital Pacific................................ 8,800 198,550
Charles E Smith Residential Realty...................... 1,700 55,038
Summit Properties, Inc. ................................ 2,500 49,844
United Dominion Realty Trust, Inc. ..................... 7,000 98,875
Wellsford Real Properties*.............................. 8,500 119,000
-----------
1,518,406
-----------
DIVERSIFIED -- 4.1%
Colonial Properties Trust............................... 5,400 164,025
MGI Properties.......................................... 4,600 111,838
-----------
275,863
-----------
HEALTH CARE -- 4.1%
Health Care REIT, Inc. ................................. 3,500 90,344
Meditrust Companies..................................... 3,004 84,675
Nationwide Health Properties, Inc. ..................... 4,100 98,400
-----------
273,419
-----------
HOTELS & LODGING -- 7.7%
Host Marriott Corp.*.................................... 5,000 96,250
Jameson Inns Inc. ...................................... 6,000 66,750
Patriot American Hospitality............................ 4,000 95,750
RFS Hotel Investors Inc. ............................... 5,500 109,313
Starwood Hotels & Resorts............................... 3,100 146,281
-----------
514,344
-----------
OFFICE PROPERTIES -- 23.2%
Arden Realty Group, Inc. ............................... 5,500 150,906
Boston Properties, Inc. ................................ 2,800 95,200
Carramerica Realty Corp. ............................... 3,400 95,200
Cornersone Properties, Inc. ............................ 6,000 105,000
Cousins Properties Inc. ................................ 3,400 104,125
Crescent Real Estate Equities, Inc. .................... 3,000 102,750
Equity Office Properties Trust.......................... 9,200 253,000
Highwood Properties, Inc. .............................. 3,000 99,000
Mack Cali Realty Corp. ................................. 2,800 100,800
Prentiss Properties Trust............................... 7,700 196,831
Reckson Association Realty Corp. ....................... 9,800 243,775
-----------
1,546,587
-----------
RETAIL -- 11.0%
Burnham Pacific Property, Inc. ......................... 3,400 47,812
CBL & Associates Properties, Inc. ...................... 3,900 95,794
Federal Realty Investment Trust......................... 3,800 94,050
IRT Property Co. ....................................... 7,800 88,725
Rouse Co. .............................................. 3,300 99,206
Taubman Centers Inc. ................................... 7,800 106,762
Urban Shopping Centers, Inc. ........................... 3,100 102,300
Western Investment Real Estate Trust.................... 7,500 103,125
-----------
737,774
-----------
WAREHOUSE/INDUSTRIAL -- 18.6%
Centerpoint Properties.................................. 1,500 50,812
Duke Realty Investments, Inc. .......................... 2,400 54,300
Eastgroup Properties.................................... 4,900 98,306
First Industrial Realty Trust, Inc. .................... 1,600 49,600
Liberty Property Trust.................................. 6,800 179,775
Meridan Industrial Trust................................ 2,200 51,150
Public Storage Inc. .................................... 1,600 48,000
Security Capital Atlantic............................... 9,100 203,044
Security Capital Industrial Trust....................... 2,200 54,175
Sovran Self Storage Inc. ............................... 3,400 92,862
Spieker Properties, Inc. ............................... 5,300 211,006
Storage USA, Inc. ...................................... 1,400 52,062
Weeks Corp. ............................................ 3,100 99,006
-----------
1,244,098
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Cost $6,105,066)....................................... 6,110,491
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. FUNDS, INC.
DIVERSIFIED REAL ESTATE FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----
<S> <C> <C>
WARRANTS -- 0.0%
Security Capital Warrants (Expiration 09/18/98).......... 871 $ 871
----------
TOTAL WARRANTS
(Cost $0)........................................................... 871
----------
INVESTMENT COMPANIES -- 2.5%
Goldman Sachs Financial Square Prime Obligations Fund.... 128,169 128,169
Temporary Investment Fund--TempFund...................... 36,726 36,726
----------
TOTAL INVESTMENT COMPANIES
(Cost $164,895).......................................... 164,895
----------
<CAPTION>
PAR
(000)
-----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 5.9%
U.S. TREASURY BILLS
4.89%, 07/09/98.......................................... $ 100 99,490
5.065%, 08/20/98......................................... 300 296,745
----------
TOTAL TREASURY OBLIGATIONS
(Cost $396,107).......................................... 396,235
----------
TOTAL INVESTMENTS IN SECURITIES -- 99.9%
(Cost $6,666,068**)................................................. 6,672,492
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% 4,725
----------
NET ASSETS -- 100.0%
(equivalent to $10.13 per share based on 658,863 shares
outstanding)....................................................... $6,677,217
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($6,677,217 / 658,863).............................................. $ 10.13
==========
</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.................................... $ 143,825
Excess of tax cost over value.................................... $(137,401)
</TABLE>
21
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- ------------
<S> <C> <C>
AGENCY OBLIGATIONS -- 6.2%
FEDERAL HOME LOAN BANK -- 0.7%
Debentures
6.34%, 06/13/05.......................................... $ 1,000 $ 1,028,460
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 1.4%
Debentures
7.01%, 07/11/07.......................................... 1,000 1,032,910
Mortgage Backed Securities
6.50%, 03/01/08 (Pool #E00201)........................... 127 128,289
6.50%, 10/01/12 (Pool #E67991)........................... 24 24,128
6.50%, 11/01/12 (Pool #E68311)........................... 946 952,536
------------
2,137,863
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 1.0%
Medium Term Notes
6.08%, 09/03/03.......................................... 500 497,055
Mortgage Backed Securities
6.00%, 07/01/08 (Pool #227994)........................... 590 583,271
7.50%, 05/01/09 (Pool #282608)........................... 487 501,913
------------
1,582,239
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 3.1%
Mortgage Backed Securities
8.00%, 11/15/06 (Pool #308751)........................... 212 220,126
8.00%, 12/15/06 (Pool #312726)........................... 26 26,476
8.00%, 12/15/06 (Pool #319511)........................... 61 62,918
6.50%, 12/15/08 (Pool #351994)........................... 172 173,974
6.50%, 01/15/09 (Pool #359462)........................... 185 187,070
6.00%, 01/15/09 (Pool #372668)........................... 643 638,607
8.00%, 04/15/09 (Pool #389481)........................... 230 238,742
8.00%, 11/15/09 (Pool #401484)........................... 562 582,901
6.00%, 01/15/11 (Pool #410492)........................... 138 136,801
6.00%, 02/15/11 (Pool #410497)........................... 539 534,813
6.50%, 03/15/11 (Pool #398485)........................... 149 150,210
6.50%, 03/15/11 (Pool #417313)........................... 1,299 1,311,931
6.50%, 04/15/11 (Pool #421869)........................... 86 86,510
6.50%, 01/15/12 (Pool #442244)........................... 74 74,682
6.50%, 03/15/12 (Pool #442139)........................... 195 196,903
------------
4,622,664
------------
TOTAL AGENCY OBLIGATIONS
(Cost $9,220,712)........................................ 9,371,226
------------
CORPORATE BONDS -- 20.8%
BEVERAGES -- 1.1%
Coca-Cola Enterprises Putable Asset Trust
6.00%, 03/15/01.......................................... $ 1,000 $ 998,750
Coca-Cola Co., Inc.
7.875%, 09/15/98......................................... 200 200,968
Pepsico Inc. Medium Term Note
5.75% 01/02/03........................................... 500 498,125
------------
1,697,843
------------
CHEMICALS -- 0.8%
E.I. duPont deNemours & Co.
6.00%, 12/01/01.......................................... 250 250,000
E.I. duPont deNemours & Co. Medium Term Note
6.00%, 03/06/03.......................................... 1,000 1,001,250
------------
1,251,250
------------
FINANCE -- 9.8%
Associates Corp. North America
6.50%, 07/15/02.......................................... 2,000 2,027,500
CIT Group Holdings
6.375%, 08/01/02......................................... 3,500 3,539,375
6.375%, 11/15/02......................................... 500 505,625
Ford Motor Credit Corp.
6.55%, 09/10/02.......................................... 700 713,125
6.00%, 01/14/03.......................................... 2,800 2,793,000
General Motors Acceptance Corp.
6.375%, 12/01/01......................................... 1,000 1,008,750
Norwest Financial, Inc.
6.00%, 08/01/99.......................................... 3,000 3,001,350
6.125%, 08/01/03......................................... 300 300,375
6.375%, 11/15/03......................................... 1,000 1,015,000
------------
14,904,100
------------
FOODS -- 0.7%
Campbells Soup
6.15%, 12/01/02.......................................... 1,000 1,011,250
------------
PHARMACEUTICALS -- 0.7%
SmithKline Beacham, PLC,
Medium Term Notes
6.625%, 10/01/01......................................... 975 996,937
------------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- ------------
<S> <C> <C>
CORPORATE BONDS -- CONTINUED
PRINTING & PUBLISHING -- 1.3%
Dow Jones & Co. Inc.
5.75%, 12/01/00.......................................... $ 2,000 $ 1,992,500
------------
RETAIL MERCHANDISING -- 1.7%
Sears Acceptance Corp.
6.34%, 10/12/00.......................................... 2,600 2,616,250
------------
UTILITIES--GAS -- 2.3%
Consolidated Natural Gas Co.
5.75%, 08/01/03.......................................... 475 471,438
Northern Illinois Gas Co.
5.875%, 05/01/00......................................... 500 498,750
6.45%, 08/01/01.......................................... 2,500 2,537,500
------------
3,507,688
------------
UTILITIES--TELEPHONE -- 2.4%
Ameritech Capital Funding
6.125%, 10/15/01......................................... 1,200 1,207,500
New England Telephone & Telegraph Co.
5.05%, 10/01/98.......................................... 2,500 2,493,750
------------
3,701,250
------------
TOTAL CORPORATE BONDS
(Cost $31,494,238)....................................... 31,679,068
------------
ASSET-BACKED SECURITIES -- 7.4%
AUTO LOAN -- 3.9%
Banc One Auto Grantor Trust
6.27%, 11/20/03.......................................... 2,368 2,378,503
Ford Credit Auto Owner Trust
6.75%, 09/15/00.......................................... 2,000 2,019,000
Premier Auto Trust
6.575%, 10/06/00......................................... 1,500 1,510,965
------------
5,908,468
------------
CREDIT CARD -- 2.8%
Citibank Credit Card Master Trust
6.839%, 02/10/04......................................... 4,250 4,333,470
------------
STRANDED COST -- 0.7%
California Infrastructure
6.17%, 03/25/03.......................................... 1,000 1,008,210
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $11,184,467)....................................... 11,250,148
------------
U.S. TREASURY OBLIGATIONS -- 55.3%
U.S. TREASURY NOTES
5.875%, 08/15/98......................................... $ 3,000 $ 3,003,660
6.00%, 09/30/98.......................................... 2,000 2,004,360
7.125%, 10/15/98......................................... 1,000 1,006,740
5.50%, 11/15/98.......................................... 1,800 1,800,270
5.125%, 12/31/98......................................... 1,000 998,440
5.50%, 02/28/99.......................................... 8,150 8,150,896
7.00%, 04/15/99.......................................... 6,500 6,583,460
6.50%, 04/30/99.......................................... 1,000 1,008,720
6.875%, 07/31/99......................................... 1,000 1,014,650
7.50%, 10/31/99.......................................... 13,000 13,341,510
5.875%, 11/15/99......................................... 4,000 4,018,360
5.375%, 01/31/00......................................... 5,000 4,987,350
7.125%, 02/29/00......................................... 5,500 5,643,275
6.375%, 05/15/00......................................... 2,000 2,030,460
6.25%, 05/31/00.......................................... 3,500 3,547,040
6.00%, 08/15/00.......................................... 2,035 2,053,946
5.50%, 12/31/00.......................................... 600 599,106
6.25%, 04/30/01.......................................... 1,000 1,018,250
6.50%, 05/31/01.......................................... 4,040 4,142,454
6.125%, 12/31/01......................................... 4,000 4,067,040
6.25%, 02/28/02.......................................... 1,500 1,532,325
6.625%, 03/31/02......................................... 4,750 4,915,347
5.75%, 10/31/02.......................................... 5,000 5,028,650
6.25%, 02/15/03.......................................... 100 102,728
7.25%, 05/15/04.......................................... 800 866,032
7.875%, 11/15/04......................................... 500 560,320
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $82,867,134)....................................... 84,025,389
------------
COMMERCIAL PAPER -- 0.7%
FINANCE -- 0.7%
General Electric Capital Corporation
5.52%, 06/15/98... 1,000 997,853
------------
TOTAL COMMERCIAL PAPER
(Cost $997,853).......................................... 997,853
------------
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. FUNDS, INC.
LIMITED MATURITY BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- ------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 6.6%
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at $5,002,279
collateralized by $5,060,000 (Value $5,108,228) U.S.
Treasury Notes, 5.75%, due 10/31/02)
5.47%, 06/01/98.......................................... $5,000 $ 5,000,000
REPUBLIC NATIONAL BANK NEW YORK
(Agreement dated 05/29/98 to be repurchased at $5,051,163
collateralized by $4,930,000 (Value $5,150,021) U.S.
Treasury Bills, 6.75%, due 5/31/99)
5.50%, 06/01/98.......................................... 5,049 5,048,849
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,048,849)....................................... 10,048,849
------------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 2.0%
Goldman Sachs Financial Square Prime Obligations Fund... 1,500,000 1,500,000
Temporary Investment Fund--TempFund..................... 1,500,000 1,500,000
------------
TOTAL INVESTMENT COMPANIES
(Cost $3,000,000)..................................... 3,000,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.0%
(Cost $148,813,253*)............................................. 150,372,533
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%..................... 1,549,846
------------
NET ASSETS -- 100.0%
(equivalent to $10.45 per share based on 14,543,171 shares
outstanding).................................................... $151,922,379
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($151,922,379 / 14,543,171)...................................... $10.45
======
</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................................... $1,680,705
Excess of tax cost over value................................... $ (121,425)
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. FUNDS, INC.
TOTAL RETURN BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 46.8%
FEDERAL HOME LOAN BANK -- 1.5%
Mortgage Backed Securities
6.185%, 06/07/00.......................................... $1,500 $ 1,513,920
-----------
FEDERAL HOME LOAN MORTGAGE CORP. -- 9.5%
Debentures
7.30%, 08/24/06........................................... 1,000 1,038,710
Mortgage Backed Securities
6.25%, 12/15/16 (Pool #C2018PA)........................... 250 251,688
6.175%, 08/15/18 (Pool #2035)............................. 500 501,155
6.50%, 09/01/24 (Pool #G00320)............................ 2,607 2,596,602
7.50%, 07/01/26 (Pool #D72963)............................ 393 404,342
7.50%, 10/01/27 (Pool #D82914)............................ 376 386,903
6.50%, 10/01/27 (Pool #D83095)............................ 44 44,189
6.50%, 10/01/27 (Pool #D83337)............................ 1,050 1,046,004
6.50%, 10/01/27 (Pool #C00561)............................ 35 34,875
7.00%, 11/01/27 (Pool #D83947)............................ 2,265 2,300,695
6.00%, 05/01/28 (Pool #786307)............................ 1,000 1,000,000
-----------
9,605,163
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 23.7%
Debentures
5.875%, 02/02/06.......................................... 2,750 2,747,168
6.30% 12/03/01............................................ 600 600,810
Mortgage Backed Securities
5.70%, 06/25/17........................................... 1,000 992,830
6.00%, 11/18/17........................................... 1,250 1,247,813
Medium Term Notes
6.50%, 12/27/01........................................... 250 252,500
7.14%, 03/12/07........................................... 245 253,955
6.63%, 06/20/05........................................... 500 523,125
6.54%, 09/10/07........................................... 1,000 1,042,910
7.00%, 08/27/12........................................... 1,000 1,034,460
Mortgage Backed Securities
7.00%, 04/01/04 (Pool #377898)............................ 274 278,385
7.50%, 10/01/07 (Pool #177233)............................ 217 223,897
6.00%, 01/01/09 (Pool #265989)............................ 1,522 1,504,872
7.00%, 04/01/11 (Pool #338884)............................ 554 565,326
7.50%, 08/01/26 (Pool #349416)............................ 348 357,769
8.00%, 09/01/26 (Pool #250675)............................ 563 584,324
7.00%, 04/01/27 (Pool #313458)............................ 731 741,695
5.982%, 04/01/27 (Pool #378044)........................... 2,095 2,092,025
8.00%, 08/01/27 (Pool #392496)............................ 774 803,519
8.00%, 09/01/27 (Pool #398392)............................ 57 59,639
8.00%, 10/01/27 (Pool # 331320)........................... 162 168,706
7.50%, 10/01/27 (Pool #395593)............................ 939 966,104
8.00%, 10/01/27 (Pool #395770)............................ 20 21,084
7.50%, 10/01/27 (Pool #396031)............................ 1,118 1,149,956
7.00%, 10/01/27 (Pool #398928)............................ 375 380,828
6.50%, 10/01/27 (Pool #399065)............................ 486 483,479
8.00%, 10/01/27 (Pool #399081)............................ 888 922,111
8.00%, 10/01/27 (Pool #402178)............................ 436 452,393
7.00%, 11/01/27 (Pool #251286)............................ 957 971,457
6.50%, 11/01/27 (Pool #402786)............................ 190 188,943
6.50%, 12/01/27 (Pool #354802)............................ 638 634,335
6.50%, 01/01/28 (Pool #406700)............................ 1,824 1,814,650
-----------
24,061,068
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 11.1%
Mortgage Backed Securities
9.00%, 05/15/16 (Pool #163606)............................ 24 25,309
9.00%, 11/15/16 (Pool #181127)............................ 226 242,553
9.00%, 11/15/16 (Pool #183984)............................ 5 4,957
9.00%, 01/15/17 (Pool #175218)............................ 4 4,419
8.00%, 05/15/17 (Pool #180719)............................ 77 80,097
8.00%, 05/15/17 (Pool #217626)............................ 120 124,778
9.00%, 09/15/17 (Pool #222594)............................ 79 84,467
9.00%, 04/15/18 (Pool #236277)............................ 17 18,768
10.00%, 09/15/18 (Pool #255652)........................... 32 34,648
10.00%, 05/15/19 (Pool #274305)........................... 57 62,841
9.00%, 11/15/19 (Pool #247019)............................ 96 102,713
9.00%, 06/15/21 (Pool #305720)............................ 96 103,305
9.00%, 06/15/21 (Pool #309078)............................ 204 218,534
9.00%, 07/15/21 (Pool #309027)............................ 81 86,791
9.00%, 07/15/21 (Pool #309084)............................ 109 116,717
9.00%, 08/15/21 (Pool #296154)............................ 154 165,644
9.00%, 08/15/21 (Pool #306259)............................ 173 185,961
9.00%, 09/15/21 (Pool #272061)............................ 65 70,054
9.00%, 09/15/21 (Pool #305911)............................ 93 99,736
9.00%, 09/15/21 (Pool #308283)............................ 152 163,353
9.00%, 09/15/21 (Pool #308920)............................ 116 123,893
9.00%, 09/15/21 (Pool #313023)............................ 44 47,040
9.00%, 09/15/21 (Pool #314939)............................ 47 50,009
8.00%, 02/15/23 (Pool #332531)............................ 1,589 1,653,531
7.00%, 05/20/24 (Pool #1716).............................. 197 199,675
7.50%, 06/15/24 (Pool #376533)............................ 1,358 1,400,426
7.00%, 10/15/25 (Pool #409958)............................ 435 441,772
7.00%, 01/15/26 (Pool #382719)............................ 341 346,615
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. FUNDS, INC.
TOTAL RETURN BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
7.00%, 01/15/26 (Pool #422404)............................ $ 299 $ 303,502
6.50%, 02/15/26 (Pool #405214)............................ 147 146,540
7.00%, 02/15/26 (Pool #421686)............................ 1,086 1,103,754
6.50%, 02/15/26 (Pool #425085)............................ 118 117,935
6.50%, 03/15/26 (Pool #395468)............................ 215 214,080
7.50%, 07/15/27 Pool #452183)............................. 911 939,005
7.00%, 08/15/27 Pool #443508)............................. 329 334,223
8.50%, 08/15/27 (Pool #453213)............................ 458 483,674
8.00%, 09/15/27 (Pool #453740)............................ 303 315,457
7.00%, 09/15/27 (Pool #453980)............................ 336 341,370
7.00%, 10/15/27 (Pool #445227)............................ 359 364,978
7.00%, 10/15/27 (Pool #455319)............................ 306 310,648
-----------
11,233,772
-----------
TENNESSEE VALLEY AUTHORITY -- 1.0%
Debentures
6.00%, 11/01/00........................................... 1,000 1,000,000
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $46,631,134)........................................ 47,413,923
-----------
CORPORATE BONDS -- 7.6%
BEVERAGES -- 0.5%
Anheuser Busch Co., Inc.
6.75%, 06/01/05........................................... 500 510,625
-----------
FOREIGN AGENCIES -- 2.8%
Republic of Argentina FRB
6.625, 03/31/05........................................... 475 425,980
Republic of Korea
8.875%, 04/15/08.......................................... 1,500 1,395,000
Manitoba Province Canada
6.125%, 01/19/04.......................................... 1,000 1,008,750
-----------
2,829,730
-----------
FINANCE -- 3.5%
Chrysler Financial Corp.
5.88%, 12/21/98........................................... 800 800,136
Ford Motor Credit Corp.
8.00%, 01/15/99........................................... 325 329,134
General Motors Acceptance Corp.
7.125%, 05/01/01.......................................... 400 411,500
6.375%, 12/01/01.......................................... 2,000 2,017,500
-----------
3,558,270
-----------
PETROLEUM -- 0.3%
Mobil Oil Co.
9.17%, 02/29/00........................................... $ 288 $ 294,729
-----------
UTILITIES--ELECTRIC -- 0.5%
Duke Power Co.
7.50%, 04/01/99........................................... 500 506,250
-----------
TOTAL CORPORATE BONDS
(Cost $7,585,715)......................................... 7,699,604
-----------
ASSET-BACKED SECURITIES -- 10.7%
AUTO LOAN -- 5.9%
BancOne Auto Grantor Trust
6.27%, 11/20/03........................................... 1,739 1,746,501
Barnett Auto Trust
6.03%, 11/15/01........................................... 2,400 2,408,232
Chase Manhattan Grantor Trust
6.00%, 09/17/01 .......................................... 709 709,533
Premier Auto Trust
6.35%, 04/06/02........................................... 1,170 1,187,258
-----------
6,051,524
-----------
CREDIT CARD -- 4.8%
Chase Credit Card Master Trust
6.30%, 04/15/03........................................... 1,000 1,013,190
Citibank Credit Card Master Trust
6.839%, 02/10/02.......................................... 3,750 3,823,650
-----------
4,836,840
-----------
TOTAL ASSET-BACKED SECURITIES
(Cost $10,827,051)........................................ 10,888,364
-----------
U.S. TREASURY OBLIGATIONS -- 17.5%
U.S. Treasury Notes
9.25%, 08/15/98........................................... 775 781,231
5.125%, 12/31/98.......................................... 1,000 998,440
6.50%, 04/30/99........................................... 1,100 1,109,592
7.25%, 05/15/04........................................... 500 541,270
7.25%, 08/15/04........................................... 1,255 1,362,125
5.875%, 11/15/05.......................................... 500 507,055
U.S. Treasury Bonds
8.00%, 11/15/21........................................... 1,850 2,340,010
7.125%, 02/15/23.......................................... 400 463,248
6.25%, 08/15/23........................................... 5,000 5,234,250
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. FUNDS, INC.
TOTAL RETURN BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- CONTINUED
7.50%, 11/15/24........................................... $ 350 $ 425,054
6.875%, 08/15/25.......................................... 3,100 3,511,153
6.00%, 02/15/26 .......................................... 500 508,100
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $16,433,997)........................................ 17,781,528
-----------
REPURCHASE AGREEMENT -- 12.2%
MORGAN STANLEY & CO., INC.
(Agreement dated 05/29/98 to be repurchased at $12,327,757
collateralized by $12,460,000 (Value $12,578,759) U.S.
Treasury Notes, 5.75%, due 10/31/02)
5.47%, 06/01/98........................................... 12,322 12,322,140
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $12,322,140)........................................ 12,322,140
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C> <C>
INVESTMENT COMPANY -- 4.8%
Goldman Sachs Financial Square Prime Obligations Fund... 4,826,445 4,826,445
------------
TOTAL INVESTMENT COMPANY
(Cost $4,826,445)...................................... 4,826,445
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.6%
(Cost $98,626,482*)............................................... 100,932,004
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%...................... 431,495
------------
NET ASSETS -- 100.0%
(equivalent to $10.02 per share based on 10,119,849 shares
outstanding)...................................................... $101,363,499
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($101,363,499 / 10,119,849)....................................... $10.02
======
</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................................... $2,416,734
Excess of tax cost over value................................... $ (111,212)
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- -----------
<S> <C> <C>
MARYLAND -- 92.7%
Anne Arundel County, GO, CGI
5.30%, 07/15/12.......................................... $ 400 $ 412,000
Baltimore City, RB, Waste Water Project, INS: FGIC
5.50%, 07/01/26.......................................... 300 314,250
Baltimore County, GO, Refunding--CPI
5.20%, 04/01/09.......................................... 400 415,000
Baltimore GO, CPI, INS: FGIC
5.00%, 10/15/16.......................................... 500 502,500
Carroll County
4.80%, 12/01/12.......................................... 500 505,625
Frederick County, GO
5.00%, 08/01/09.......................................... 500 515,000
Harford County, GO, CPI, UT
5.60%, 09/01/06.......................................... 325 345,718
Harford County, GO, CPI, UT
5.00%, 12/01/14.......................................... 250 251,563
Howard County, GO, CPI
7.00%, 05/15/08.......................................... 200 211,500
5.25%, 08/15/09.......................................... 400 419,500
5.25%, 08/15/12.......................................... 250 266,250
Maryland National Capital Park & Planning Commission --
Prince George's County, GO
6.90%, 07/01/99.......................................... 250 258,365
5.15%, 07/01/03.......................................... 300 307,875
Maryland State & Local Facilities, GO
5.40%, 05/15/00.......................................... 100 103,000
5.00%, 08/01/05.......................................... 445 466,138
Maryland State Community Development, RB, Administration
Department of Housing & Community Development
5.00%, 01/01/05.......................................... 500 520,000
Maryland State Department of Transportation, MB
3.875%, 06/15/00......................................... 280 280,000
Maryland State Health & Higher Educational Facilities
Authority, RB, Francis Scott Key Medical Center
5.00%, 07/01/23.......................................... 400 395,000
Maryland State Health & Higher Educational Facilities
Authority, Greater Baltimore Medical Center, Prerefunded
@ 102
6.75%, 07/01/01.......................................... 500 548,125
Maryland State Health & Higher Educational Facilities
Authority, RB, Johns Hopkins Hospital
5.00%, 07/01/23.......................................... 300 293,250
Maryland State Health & Higher Educational Facilities
Authority, RB, Johns Hopkins University
5.25%, 07/01/17.......................................... 500 506,875
Maryland State Health & Higher Educational Facilities
Authority, RB, Loyola College, INS: MBIA
5.375%, 10/01/26......................................... 500 509,375
Maryland State Health & Higher Educational Facilities
Authority, RB, University of Maryland Medical System,
INS: FGIC
5.40%, 07/01/07.......................................... 300 316,875
Maryland State Stadium Authority, RB, Ocean City
Convention Center
5.375%, 12/15/15......................................... 400 410,500
Maryland State Transportation Authority, RB
5.75%, 07/01/15 ......................................... 150 155,438
Maryland Water Quality Financing Administration, RB,
Revolving Loan Fund
5.50%, 09/01/11.......................................... 200 209,750
5.40%, 09/01/12.......................................... 300 309,000
Montgomery County, GO, CPI
4.90%, 10/01/10.......................................... 500 510,625
Montgomery County Revenue Authority, RB, Olney Indoor Swim
Project
5.25%, 10/01/12.......................................... 250 259,687
Montgomery County, RB, Housing Opportunity Community
Housing Multi-Family, Avalon Knoll
5.70%, 07/01/10.......................................... 150 159,562
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
M.S.D.&T. FUNDS, INC.
MARYLAND TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- -----------
<S> <C> <C>
MARYLAND -- CONTINUED
Prince George's County, GO, CPI, INS: MBIA
5.25%, 03/15/15.......................................... $ 400 $ 412,000
Saint Mary's County, GO, CPI, INS: MBIA
4.60%, 09/01/04.......................................... 500 511,875
University of Maryland System Auxiliary Facilities &
Tuition RB
5.125%, 04/01/13......................................... 400 406,000
Washington County, GO, Refunding-- CPI, UT, INS: FGIC
5.25%, 01/01/06.......................................... 200 210,500
Washington Suburban Sanitation District, GO, General
Construction
3.90%, 06/01/99.......................................... 100 100,280
5.25%, 06/01/16.......................................... 250 260,313
Washington Suburban Sanitation District, GO, Water Supply
5.10%, 06/01/16.......................................... 300 301,125
Wicomico County, GO, CPI, INS: MBIA
3.75%, 12/01/98.......................................... 500 500,360
Worcester County, GO, CPI
5.00%, 08/01/99.......................................... 500 507,500
-----------
13,888,299
-----------
MISSISSIPPI -- 3.3%
Jackson County Port Facilities, VRDN, Chevron USA Inc.
Project**
4.05%, 06/01/98.......................................... 500 500,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $13,977,677)....................................... 14,388,299
-----------
<CAPTION>
NUMBER
OF
SHARES VALUE
------- -----------
<S> <C> <C>
INVESTMENT COMPANIES -- 5.7%
Goldman Sachs Financial Square Tax-Free Money Market
Fund..................................................... 127,828 $ 127,828
Municipal Fund for Temporary Investments--MuniFund........ 722,942 722,942
-----------
TOTAL INVESTMENT COMPANIES
(Cost $850,770).......................................... 850,770
-----------
TOTAL INVESTMENTS IN SECURITIES -- 101.7%
(Cost $14,828,447*)............................................... 15,239,069
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.7)%.................... (258,580)
-----------
NET ASSETS -- 100.0%
(equivalent to $10.82 per share based on 1,384,481 shares
outstanding)...................................................... $14,980,489
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($14,980,489 / 1,384,481)......................................... $10.82
======
</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..................................... $416,630
Excess of tax cost over value..................................... $ (6,008)
</TABLE>
** The rate shown is as of May 31, 1998 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.
29
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- -----------
<S> <C> <C>
ARIZONA -- 1.1%
Maricopa County High School District 210, GO
4.80%, 07/01/00...................................... $ 1,000 $ 1,017,500
-----------
COLORADO - 1.1%
Arapahoe County School District 005, GO, Cherry Creek
5.00%, 12/15/00...................................... 1,000 1,026,250
-----------
CONNECTICUT -- 1.1%
Connecticut State, GO
5.50%, 10/01/00...................................... 1,000 1,036,250
-----------
DELAWARE -- 3.3%
Delaware State, GO
5.00%, 04/01/01...................................... 2,000 2,057,500
New Castle County, GO
6.00%, 10/15/98...................................... 1,000 1,008,580
-----------
3,066,080
-----------
FLORIDA -- 2.9%
Jacksonville Electric Authority Revenue, RB, ETM
5.25%, 07/01/01...................................... 855 868,894
Jacksonville Electric Authority, RB,
St Johns River
6.40%, 10/01/00...................................... 1,750 1,850,625
-----------
2,719,519
-----------
GEORGIA -- 4.1%
Fulton County, GO
4.70%, 01/01/02...................................... 1,300 1,324,375
Georgia State, GO
5.50%, 04/01/99...................................... 2,450 2,488,098
-----------
3,812,473
-----------
HAWAII -- 1.1%
Hawaii State, GO
4.10%, 07/01/98...................................... 1,000 1,000,147
-----------
ILLINOIS -- 6.7%
Chicago Metropolitan Water Reclamation District--
Greater Chicago, GO
4.80%, 12/01/00...................................... 1,000 1,018,750
Illinois State Civic Center, RB, INS: AMBAC
5.00%, 12/15/07...................................... 2,105 2,182,675
Illinois State, GO
4.80%, 06/01/00...................................... 1,000 1,016,250
Illinois State, GO, INS: FGIC
5.25%, 07/01/02...................................... 2,000 2,085,000
-----------
6,302,675
-----------
KENTUCKY -- 2.2%
Kentucky State Turnpike Authority, RB, Economic
Development Road Revenue, INS: AMBAC
5.00%, 07/01/02...................................... 2,000 2,067,500
-----------
LOUISIANA -- 4.5%
Louisiana State, GO, INS: FGIC
5.50%, 04/15/02...................................... 2,000 2,092,500
St. Tammany Parish, RB, Justice Complex, INS: FGIC
5.30%, 04/01/08...................................... 2,050 2,155,063
-----------
4,247,563
-----------
MARYLAND -- 18.3%
Anne Arundel County, GO, CGI
4.40%, 02/01/99...................................... 2,220 2,232,697
Calvert County, GO
5.05%, 01/01/01...................................... 1,000 1,025,000
Harford County, GO, CPI
4.40%, 12/01/98...................................... 1,920 1,927,813
Harford County, GO
4.50%, 12/01/01...................................... 1,680 1,707,300
Howard County, GO,
Prerefunded @ 100
7.00%, 05/15/00...................................... 500 528,750
Howard County, GO, CPI, Prerefunded @100
5.75%, 02/15/01...................................... 1,000 1,043,750
Maryland State, GO, State & Local Facilites
5.00%, 03/15/00...................................... 2,000 2,042,500
4.50%, 10/15/00...................................... 1,000 1,016,250
5.20%, 10/15/01...................................... 1,000 1,040,000
Maryland State Department of Transportation, RB
6.00%, 09/01/00...................................... 1,000 1,045,000
Maryland State Stadium Authority Sports, RB
5.30%, 03/01/01...................................... 1,260 1,299,375
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- -----------
<S> <C> <C>
MARYLAND -- CONTINUED
St Mary's County, GO, Public Facilites and Hospital,
INS:AMBAC
4.10%, 07/01/00.......................................... $ 1,000 $ 1,006,250
Washington Suburban Sanitation District, GO, Water Supply
5.20%, 06/01/98.......................................... 1,000 1,000,038
Washington Suburban Sanitation District, GO, General
Construction
3.90%, 06/01/99.......................................... 300 300,840
-----------
17,215,563
-----------
MASSACHUSETTS -- 4.0%
Massachusetts State, GO, Construction Loan, INS: MBIA
5.00%, 01/01/01.......................................... 1,420 1,455,500
Massachusetts State, GO, Construction Loan, INS: FGIC
5.00%, 06/01/01.......................................... 1,260 1,296,225
Massachusetts State, GO
5.50%, 11/01/01.......................................... 1,000 1,047,500
-----------
3,799,225
-----------
MICHIGAN -- 2.5%
Michigan Municipal Bond Authority, RB, Pooled Project
5.75%, 10/01/05.......................................... 2,120 2,332,000
-----------
MINNESOTA -- 1.1%
St Paul Minnesota, GO
5.40%, 03/01/99.......................................... 1,000 1,013,560
-----------
MISSISSIPPI -- 1.3%
Mississippi State, GO, Capital Improvement
6.00%, 08/01/98.......................................... 1,175 1,179,160
-----------
MISSOURI -- 1.1%
Kansas City, RB, Water
5.60%, 12/01/01.......................................... 1,020 1,072,275
-----------
NEW JERSEY -- 2.1%
New Jersey State Transportation, RB, Transportation
System, ETM
5.00%, 12/15/98.......................................... 2,000 2,014,420
-----------
NEW MEXICO -- 1.1%
Albuquerque Water & Sewer, RB
5.50%, 07/01/01.......................................... 1,000 1,042,500
-----------
NORTH CAROLINA -- 3.3%
Greensboro, GO, CPI,
Prerefunded @ 102
6.25%, 03/01/02.......................................... 1,000 1,091,250
Wake County, GO
4.80%, 03/01/02.......................................... 1,000 1,026,250
Winston Salem, COP
4.20%, 07/01/98.......................................... 1,000 1,000,234
-----------
3,117,734
-----------
OHIO -- 2.2%
Columbus, GO
5.65%, 01/01/99.......................................... 1,000 1,011,810
Ohio State Public Facilities Commission, RB, Higher
Educational Capital Facilities
4.75%, 05/01/01.......................................... 1,000 1,018,750
-----------
2,030,560
-----------
PENNSYLVANIA -- 13.2%
Bethlehem Area School District, GO, INS: FGIC
5.50%, 09/01/06.......................................... 2,815 3,022,606
Bristol Township School District, GO, Prerefunded @ 102,
INS: MBIA
6.625%, 02/15/02......................................... 2,000 2,202,500
Dauphin County General Authority, RB, School District
Pooled Financing Program II, INS: AMBAC
4.45%, 09/01/01.......................................... 500 505,625
Pennsylvania State, GO
4.625%, 05/01/00......................................... 1,000 1,012,500
5.80%, 11/15/00.......................................... 1,000 1,043,750
Pennsylvania State, GO, INS: AMBAC
5.125%, 03/15/02......................................... 1,440 1,492,200
Philadelphia, RB, Water and Sewer, Prerefunded @ 102,
INS:MBIA
6.90%, 10/01/99.......................................... 3,000 3,172,500
-----------
12,451,681
-----------
SOUTH CAROLINA -- 1.2%
South Carolina State, GO, State Highway
5.40%, 08/01/00.......................................... 1,090 1,126,788
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
31
<PAGE>
M.S.D.&T. FUNDS, INC.
INTERMEDIATE TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
------- -----------
<S> <C> <C>
TEXAS -- 3.3%
Harris County, GO, Permanent Improvement
5.80%, 10/01/99........................................... $ 1,000 $ 1,027,500
San Antonio Electric & Gas, RB, Prerefunded @ 101.50
7.00%, 02/01/99........................................... 465 481,484
San Antonio Electric & Gas, RB, Unrefunded Balance
7.00%, 02/01/99........................................... 535 553,752
Texas Municipal Power Agency Revenue, RB, INS: FGIC
6.75%, 09/01/98........................................... 1,000 1,007,300
-----------
3,070,036
-----------
UTAH -- 1.3%
Utah State, GO
5.00%, 07/01/02........................................... 1,250 1,295,313
-----------
VIRGINIA -- 6.8%
Fairfax County, GO, INS: SAW
5.50%, 05/01/01........................................... 1,000 1,027,500
Fairfax County, GO, CPI, INS: SAW
5.00%, 06/01/99........................................... 1,000 1,013,840
Virginia State Public Building Authority, RB
5.10%, 08/01/00........................................... 1,000 1,023,750
Virginia State Public School Authority, RB, INS: SAW
6.00%, 08/01/01........................................... 1,180 1,250,800
Virginia State Public School Authority, RB
5.75%, 01/01/00........................................... 1,000 1,028,750
Virginia State Transportation Board, RB, Route 28 Project
5.80%, 04/01/01........................................... 1,000 1,043,750
-----------
6,388,390
-----------
WASHINGTON -- 3.3%
Washington State, GO
6.60%, 02/01/02........................................... 1,000 1,085,000
Washington State, GO, Motor
Vehicle Fuel
4.875%, 09/01/01.......................................... 2,000 2,050,000
-----------
3,135,000
-----------
WISCONSIN -- 3.3%
Milwaukee County, GO
5.25%, 09/01/00........................................... 1,000 1,028,750
Milwaukee Area Technical College District, GO
5.10%, 06/01/99........................................... 1,000 1,013,830
Wisconsin State, GO
5.75%, 05/01/00........................................... 1,000 1,032,500
-----------
3,075,080
-----------
TOTAL MUNICIPAL BONDS
(Cost $90,746,393)........................................ 91,655,242
-----------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 1.0%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 60,660 60,660
Municipal Fund for Temporary Investments -- MuniFund..... 878,258 878,258
-----------
TOTAL INVESTMENT COMPANIES
(Cost $938,918)......................................... 938,918
-----------
TOTAL INVESTMENTS IN SECURITIES -- 98.5%
(Cost $91,685,311*)..................................... 92,594,160
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%....................... 1,398,337
-----------
NET ASSETS -- 100.0%
(equivalent to $10.01 per share based on 9,390,918 shares
outstanding)....................................................... $93,992,497
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($93,992,497 / 9,390,918).......................................... $10.01
======
</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..................................... $914,834
Excess of tax cost over value..................................... $ (5,985)
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
M.S.D.&T. FUNDS, INC.
NATIONAL TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
--------- ------------
<S> <C> <C>
CALIFORNIA -- 4.3%
California State, GO
6.25%, 09/01/08....................................... $ 3,800 $ 4,355,750
East Bay Municipal Utility Water, RB, INS: MBIA
6.00%, 06/01/02....................................... 3,000 3,221,250
------------
7,577,000
------------
COLORADO -- 0.9%
Colorado Springs, RB, Utility Revenue, ETM
5.875%, 11/15/17...................................... 1,500 1,663,125
------------
DELAWARE -- 1.0%
Delaware State Economic Development Authority, RB,
Osteopathic Hospital Assoc., ETM
6.75%, 01/01/13....................................... 1,500 1,741,875
------------
FLORIDA -- 5.8%
Brevard County, GO, INS: AMBAC
5.375%, 09/01/11...................................... 1,180 1,267,025
Florida State, GO, Jacksonville Transportation,
Prerefunded @ 101
6.40%, 07/01/02....................................... 2,500 2,734,375
Florida State Board of Education, GO, Public Education
5.50%, 06/01/14....................................... 1,860 1,939,050
Florida State Turnpike Authority, RB, Turnpike Revenue
7.35%, 07/01/98....................................... 1,000 1,002,592
Lakeland Florida, RB, Electric & Water Revenue
5.90%, 10/01/07....................................... 1,075 1,190,563
Seacoast Florida Authority Water & Sewer, RB, INS: FGIC
5.50%, 03/01/16....................................... 2,000 2,137,500
------------
10,271,105
------------
HAWAII -- 0.6%
Hawaii State, GO
5.125%, 02/01/09...................................... 1,000 1,042,500
------------
ILLINOIS -- 1.2%
Illinois State, GO,
Prerefunded @ 102
6.60%, 06/01/09....................................... 2,000 2,175,000
------------
MARYLAND -- 13.8%
Anne Arundel County, GO
5.00%, 09/01/12....................................... 2,000 2,032,500
Baltimore County, GO, CPI
5.25%, 06/01/11....................................... 1,000 1,048,750
Baltimore County Metro
District, GO
6.80%, 04/01/00....................................... 1,000 1,050,000
Carroll County, GO, CPI
5.125%, 12/01/13...................................... 1,000 1,031,250
Carroll County, GO, GPI
4.80%, 12/01/12....................................... 355 358,994
Howard County, GO, CPI, Partially Prerefunded @ 102
8/15/03
5.25%, 08/15/09 1,000 1,048,750
Howard County, CPI, Partially Prerefunded @ 101 2/15/03
5.25%, 02/15/06....................................... 1,670 1,757,675
Maryland National Capital Park & Planning Commission --
Prince George's County, GO
5.00%, 07/01/08....................................... 1,000 1,040,000
Maryland State Community Development, RB,
Administration Department of Housing & Community
Development, Housing
5.00%, 01/01/05....................................... 360 374,400
Maryland State Community Development, RB,
Administration Department of Housing & Community
Development, Multi-Family
6.70%, 05/15/27....................................... 1,000 1,071,250
Maryland State Community Development, RB,
Administration Department of Housing & Community
Development, Single Family
6.55%, 04/01/17....................................... 1,330 1,424,763
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
M.S.D.&T. FUNDS, INC.
NATIONAL TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
--------- ------------
<S> <C> <C>
MARYLAND -- CONTINUED
Maryland State, GO, State & Local Facilities
4.50%, 10/15/03....................................... $ 1,000 $ 1,020,000
Maryland State Department of Transportation, RB,
Prerefunded @ 100.75
6.10%, 09/01/01....................................... 1,095 1,152,488
Maryland State Health & Higher Education Facilities
Authority, RB, Loyola College, INS: MBIA
5.375%, 10/01/26...................................... 2,000 2,037,500
Montgomery County, GO, CPI
5.50%, 04/01/16....................................... 1,000 1,045,000
Prince George's County, RB, Pkg Authority Revenue
Justice Center Facility Project
6.35%, 05/01/04....................................... 1,000 1,083,750
Washington Suburban Sanitation District, GO, Special
Assessment
5.50%, 06/01/00....................................... 1,960 2,021,250
Washington Suburban Sanitation District, GO, Water
Supply
5.10%, 06/01/16....................................... 1,200 1,204,500
5.00%, 06/01/14....................................... 1,250 1,256,250
Washington Suburban Sanitation District, GO
5.25%, 06/01/16....................................... 1,400 1,457,750
------------
24,516,820
------------
MASSACHUSETTS -- 6.1%
Massachusetts State, GO, Construction Loan
4.25%, 03/01/99....................................... 2,775 2,789,402
5.00%, 08/01/17....................................... 2,000 1,977,500
Massachusetts State Special Obligation, RB, Prerefunded
@ 100, INS: AMBAC
6.00%, 06/01/02....................................... 3,600 3,843,000
Massachusetts State Water Pollution, RB, Abatement
Pooled Loan Program
5.70%, 02/01/11....................................... 2,010 2,175,825
------------
10,785,727
------------
MICHIGAN -- 1.8%
Flat Rock Community School, GO, INS: MBIA
5.25%, 05/01/18....................................... 1,250 1,262,500
Michigan State Building Authority, RB, INS: AMBAC
6.75%, 10/01/07....................................... 1,800 1,966,500
------------
3,229,000
------------
MINNESOTA -- 4.6%
Minneapolis Special School District No. 001, GO
5.00%, 02/01/04....................................... 1,000 1,040,000
Minnesota Public Facilites Authority, RB, Water
Pollution Control
4.875%, 03/01/12...................................... 3,000 3,026,250
Minnesota State, GO
4.75%, 08/01/10....................................... 2,000 2,030,000
6.00%, 10/01/14....................................... 1,000 1,073,750
Rochester Minnesota Health Care, RB, Mayo
Foundation/Mayo Medical Center
5.90%, 11/15/09....................................... 1,000 1,108,750
------------
8,278,750
------------
MISSOURI -- 0.6%
Missouri State Environmental Improvements, RB, Water
Pollution Control State Revolving Fund
5.125%, 01/01/10...................................... 1,000 1,038,750
------------
NEVADA -- 1.7%
Nevada State, Colorado River Commission, RB,
Prerefunded @ 101
6.25%, 10/01/02....................................... 1,705 1,860,581
Nevada State, GO
6.30%, 07/01/04....................................... 1,125 1,222,031
------------
3,082,612
------------
NEW HAMPSHIRE -- 2.9%
New Hampshire Municipal Bond Bank, RB, INS: MBIA
5.625%, 08/15/01...................................... 4,900 5,138,875
------------
</TABLE>
See Accompanying Notes to Financial Statements.
34
<PAGE>
M.S.D.&T. FUNDS, INC.
NATIONAL TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONTINUED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
--------- ------------
<S> <C> <C>
NEW JERSEY -- 3.1%
New Jersey State, GO
9.40%, 04/01/99....................................... $ 1,000 $ 1,046,450
New Jersey State Highway Authority, RB, Garden State
Parkway General Revenue, ETM
6.00%, 01/01/19....................................... 4,010 4,561,375
------------
5,607,825
------------
NEW YORK -- 8.1%
Municipal Assistance Corp for City of New York, RB
4.85%, 07/01/01....................................... 3,315 3,393,731
New York City Transitional Financial Authority, RB
5.00%, 05/01/06....................................... 2,000 2,082,500
New York State Power Authority, RB, General Purpose,
Prerefunded @ 102
5.25%, 01/01/03....................................... 1,375 1,457,500
New York State Power Authority, RB, Prerefunded @ 102,
INS: FGIC
5.25%, 01/01/03....................................... 2,250 2,390,625
New York State Power Authority Revenue, RB, INS: FGIC,
ETM
5.125%, 01/01/11...................................... 1,000 1,045,000
Triborough Bridge & Tunnel Authority, RB, General
Purpose
6.00%, 01/01/12....................................... 2,000 2,240,000
Westchester County, GO
6.70%, 02/01/05....................................... 1,560 1,782,300
------------
14,391,656
------------
NORTH CAROLINA -- 2.4%
Mecklenburg County, GO
5.90%, 03/01/04....................................... 1,000 1,068,750
North Carolina State, GO
5.10%, 06/01/09....................................... 3,000 3,165,000
------------
4,233,750
------------
OHIO -- 5.0%
Cleveland Waterworks Revenue, RB, INS: MBIA
5.50%, 01/01/21....................................... 3,000 3,243,750
Medina City School District, GO, Prerefunded @ 102,
INS: FGIC
6.20%, 12/01/02....................................... 3,000 3,300,000
Ohio State, GO
6.65%, 09/01/09....................................... 2,000 2,385,000
------------
8,928,750
------------
OKLAHOMA -- 1.2%
Oklahoma State Turnpike, RB, ETM
4.70%, 01/01/06....................................... 970 986,975
Tulsa County Home Finance Single Family, RB, INS: FGIC,
ETM
6.70%, 08/01/99....................................... 1,050 1,084,125
------------
2,071,100
------------
PENNSYLVANIA -- 10.7%
Avonworth School District, GO
4.25%, 11/15/00....................................... 1,000 1,002,500
Berks County, GO, INS: FGIC
5.60%, 11/15/08....................................... 1,700 1,770,125
Bethlehem School District, GO, INS: FGIC
5.50%, 09/01/06....................................... 2,000 2,147,500
Dauphin County General Authority, RB, School District
Pooled Program II, INS: AMBAC
4.45%, 09/01/32....................................... 3,500 3,539,375
Jim Thorpe Area School District, GO, INS: MBIA
5.375%, 03/15/27...................................... 2,000 2,030,000
Pennsylvania Convention Center Authority, RB, INS:
FGIC, ETM
6.00%, 09/01/19....................................... 2,675 2,972,594
Pennsylvania State, GO, INS: AMBAC
5.125%, 03/15/10...................................... 1,000 1,040,000
Pennsylvania State Higher Educational Facilities, RB,
University of Pennsylvania
5.90%, 09/01/15....................................... 2,500 2,634,375
Pittsburgh Water & Sewer, RB, INS: FGIC, ETM
6.00%, 09/01/16....................................... 1,755 1,974,375
------------
19,110,844
------------
</TABLE>
See Accompanying Notes to Financial Statements.
35
<PAGE>
M.S.D.&T. FUNDS, INC.
NATIONAL TAX-EXEMPT BOND FUND
STATEMENT OF NET ASSETS -- CONCLUDED
MAY 31, 1998
<TABLE>
<CAPTION>
PAR
(000) VALUE
--------- ------------
<S> <C> <C>
RHODE ISLAND -- 0.9%
Rhode Island State, Unrefunded Balance, INS: FGIC
6.25%, 06/15/07....................................... $1,545 $ 1,678,256
------------
TEXAS -- 10.8%
Beaumont, GO, INS: FGIC
4.75%, 03/01/99....................................... 3,000 3,025,380
Conroe Independent School District, GO, INS: PSFG
5.50%, 08/15/21....................................... 2,900 2,950,750
Corpus Cristi, GO, Independent School District, INS:
PSFG
5.00%, 08/15/99....................................... 1,875 1,903,125
Dallas Independent School District, GO, Unrefunded
Balance, INS: PSFG
5.60%, 08/15/04....................................... 1,080 1,146,150
El Paso, GO
5.25%, 08/15/15....................................... 2,500 2,546,875
Harris County, GO, Unrefunded Balance, Toll Road
6.50%, 08/15/15....................................... 790 863,075
San Antonio Electric & Gas, RB, Unrefunded Balance
6.00%, 02/01/08....................................... 1,785 1,894,330
Texas Water Development Board, RB
5.125%, 07/15/18...................................... 2,000 2,005,000
Trinity River Authority Waste Water Systems, RB, INS:
AMBAC
5.75%, 08/01/08....................................... 2,000 2,112,500
University of Texas, RB, Unrefunded Balance
7.00%, 08/15/07....................................... 675 744,188
------------
19,191,373
------------
UTAH -- 2.7%
Davis County School District, GO
4.875%, 06/01/05 2,700 2,801,250
Utah County Hospital Revenue, RB, IHC Health, INS: MBIA
5.25%, 08/15/26 2,000 1,985,000
------------
4,786,250
------------
VIRGINIA -- 5.3%
Norfolk Virginia, GO, INS: MBIA
5.75%, 06/01/13........................................ 1,500 1,593,750
Virginia State Public Building Authority, RB
5.10%, 08/01/01........................................ 2,625 2,707,031
5.20%, 08/01/13........................................ 1,000 1,025,000
5.20%, 08/01/14........................................ 1,000 1,021,250
Virginia State Transportation Board, RB, US Route 58
5.625%, 05/15/13....................................... 3,000 3,176,250
------------
9,523,281
------------
WISCONSIN -- 1.8%
Wisconsin State, GO
5.125%, 11/01/11 3,000 3,127,500
------------
TOTAL MUNICIPAL BONDS
(Cost $164,836,521).................................... 173,191,724
------------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 1.5%
Goldman Sachs Financial Square
Tax-Free Money Market Fund............................. 2,018,774 2,018,774
Municipal Fund for Temporary Investments -- MuniFund.... 742,676 742,676
------------
TOTAL INVESTMENT COMPANIES
(Cost $2,761,450)...................................... 2,761,450
------------
TOTAL INVESTMENTS IN SECURITIES -- 98.8%
(Cost $167,597,971*).............................................. 175,953,174
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%...................... 2,163,181
------------
NET ASSETS -- 100.0%
(equivalent to $10.05 per share based on 17,716,405 shares
outstanding)...................................................... $178,116,355
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($178,116,355 / 17,716,405)....................................... $10.05
======
</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................................... $8,355,469
Excess of tax cost over value................................... $ (266)
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
M.S.D.&T. FUNDS, INC.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR American Depository Receipt
BAN Bond Anticipation Notes
CGI Consolidated General Improvement
COP Certificates of Participation
CPI Consolidated Public Improvement
ETM Escrowed to Maturity in U.S. Government Obligations
FGIC Financial Guaranty Insurance Co.
FRN Floating Rate Notes
GDR Global Depository Receipt
GO General Obligation
GPI General Public Improvement
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
SAW State Aid Withholding
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.
37
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1998
<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............... $22,570,375 $19,979,361 $3,109,572 $2,019,101
----------- ----------- ---------- ----------
EXPENSES:
Investment advisory
fees.................. 1,002,413 897,079 215,756 --
Administration fees.... 501,206 448,539 107,878 70,331
Accounting agent fees.. 109,439 97,413 32,242 20,988
Custodian fees......... 30,333 31,653 14,590 12,202
Directors' fees........ 15,103 12,947 2,929 2,105
Transfer agent fees.... 27,286 20,661 19,073 17,970
Legal.................. 56,154 50,054 12,120 7,913
Audit.................. 60,790 53,218 12,820 8,509
Other.................. 71,095 51,293 14,577 11,495
----------- ----------- ---------- ----------
1,873,819 1,662,857 431,985 151,513
Fees waived by
Investment Adviser.... (40,097) (71,766) (17,260) --
Fees waived by
Administrator......... (149,670) (84,000) (43,625) (27,731)
----------- ----------- ---------- ----------
TOTAL EXPENSES....... 1,684,052 1,507,091 371,100 123,782
----------- ----------- ---------- ----------
NET INVESTMENT INCOME... 20,886,323 18,472,270 2,738,472 1,895,319
----------- ----------- ---------- ----------
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........ $20,856,773 $18,472,328 $2,737,238 $1,894,650
=========== =========== ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EQUITY EQUITY DIVERSIFIED
GROWTH INCOME GROWTH INTERNATIONAL REAL ESTATE
& INCOME FUND FUND EQUITY FUND
FUND FOR THE PERIOD FOR THE PERIOD FUND FOR THE PERIOD
FOR THE YEAR MARCH 1, 1998(2) MARCH 1, 1998(2) FOR THE YEAR AUGUST 1, 1997(2)
ENDED TO TO ENDED TO
MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998
------------ ---------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $ 236,904 $ 162,345 $ 12,475 $ 88,262 $ 23,951
Dividends.............. 2,787,836 1,636,286 112,532 1,525,410(1) 233,584
----------- ---------- ---------- ---------- --------
TOTAL INVESTMENT
INCOME.............. 3,024,740 1,798,631 125,007 1,613,672 257,535
----------- ---------- ---------- ---------- --------
EXPENSES:
Investment advisory
fees.................. 1,064,492 501,595 54,236 660,906 39,889
Administration fees.... 221,769 104,499 11,299 103,267 6,233
Accounting agent fees.. 67,481 25,080 2,712 41,307 1,832
Custodian fees......... 14,289 3,204 1,994 61,940 3,546
Directors' fees........ 5,687 391 42 3,259 96
Transfer agent fees.... 35,936 4,749 4,627 23,267 16,055
Legal.................. 24,542 8,010 869 11,654 653
Audit.................. 25,385 29,914 3,196 12,797 771
Registration fees...... 77,855 55,034 7,856 3,025 6,279
Organizational costs... -- 28,873 3,074 5,307 31,937
Printing costs......... 10,706 13,709 1,466 7,097 3,032
Other.................. 9,794 2,026 887 8,423 1,978
----------- ---------- ---------- ---------- --------
1,557,936 777,084 92,258 942,249 112,301
Fees waived by
Investment Advisers... (297,277) (129,579) (26,666) (50,027) (39,889)
Fees reimbursed by
Investment Adviser.... -- -- -- -- (16,318)
Fees waived by
Administrator......... -- (62,310) (2,317) (41,307) (6,233)
----------- ---------- ---------- ---------- --------
TOTAL EXPENSES....... 1,260,659 585,195 63,275 850,915 49,861
----------- ---------- ---------- ---------- --------
NET INVESTMENT INCOME... 1,764,081 1,213,436 61,732 762,757 207,674
----------- ---------- ---------- ---------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments........... 14,390,348 13,570,767 2,420,386 3,377,037 1,885
Foreign currency
transactions......... -- -- -- 331,418 --
----------- ---------- ---------- ---------- --------
14,390,348 13,570,767 2,420,386 3,708,455 1,885
----------- ---------- ---------- ---------- --------
Net unrealized
appreciation
(depreciation):
Investments........... 24,784,580 (7,001,182) (1,454,880) 4,748,956 6,424
Translation of assets
and liabilities in
foreign currencies... -- -- -- 145,184 --
----------- ---------- ---------- ---------- --------
24,784,580 (7,001,182) (1,454,880) 4,894,140 6,424
----------- ---------- ---------- ---------- --------
Net gain (loss) on
investments and
foreign currency
transactions.......... 39,174,928 6,569,585 965,506 8,602,595 8,309
----------- ---------- ---------- ---------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $40,939,009 $7,783,021 $1,027,238 $9,365,352 $215,983
=========== ========== ========== ========== ========
</TABLE>
- --------
(1) Net of withholding taxes of $217,989
(2) Commencement of Operations
See Accompanying Notes to Financial Statements.
39
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TOTAL INTERMEDIATE NATIONAL
LIMITED RETURN MARYLAND TAX-EXEMPT TAX-EXEMPT
MATURITY BOND FUND TAX-EXEMPT BOND FUND BOND FUND
BOND FUND FOR THE PERIOD BOND FUND FOR THE PERIOD FOR THE PERIOD
FOR THE YEAR MARCH 1, 1998(1) FOR THE YEAR MARCH 1, 1998(1) MARCH 1, 1998(1)
ENDED TO ENDED TO TO
MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998
------------ ---------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $2,693,862 $1,612,426 $507,047 $1,054,308 $2,195,446
---------- ---------- -------- ---------- ----------
EXPENSES:
Investment advisory
fees.................. 151,855 89,002 50,876 122,784 222,034
Administration fees.... 54,234 31,787 12,719 30,696 55,509
Accounting agent fees.. 17,947 7,629 4,766 9,823 17,763
Custodian fees......... 14,541 3,479 5,395 2,397 3,019
Directors' fees........ 1,761 118 365 116 207
Transfer agent fees.... 26,919 4,724 19,991 4,663 4,693
Legal.................. 6,072 2,433 1,408 2,346 4,245
Audit.................. 6,605 9,025 1,466 8,853 15,842
Registration fees...... 42,902 19,243 3,040 18,011 32,094
Organizational costs... -- 8,694 -- 8,567 15,285
Pricing service fees... 8,372 4,608 4,364 2,509 3,212
Other.................. 6,251 4,459 896 4,368 7,825
---------- ---------- -------- ---------- ----------
337,459 185,201 105,286 215,133 381,728
Fees waived by
Investment Adviser.... (88,067) (38,983) (44,200) (73,932) (130,803)
Fees waived by
Administrator......... (31,846) (31,787) (11,227) (30,696) (51,094)
---------- ---------- -------- ---------- ----------
TOTAL EXPENSES....... 217,546 114,431 49,859 110,505 199,831
---------- ---------- -------- ---------- ----------
NET INVESTMENT INCOME.. 2,476,316 1,497,995 457,188 943,803 1,995,615
---------- ---------- -------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss)................ 414,753 9,544 114,613 44,439 437,736
Net unrealized
appreciation
(depreciation)........ 652,638 157,571 267,492 32,609 512,032
---------- ---------- -------- ---------- ----------
Net gain (loss) on
investments........... 1,067,391 167,115 382,105 77,048 949,768
---------- ---------- -------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $3,543,707 $1,665,110 $839,293 $1,020,851 $2,945,383
========== ========== ======== ========== ==========
</TABLE>
- --------
(1) Commencement of Operations
See Accompanying Notes to Financial Statements.
40
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIME PRIME GOVERNMENT GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MAY 31, 1998 ENDED MAY 31, 1997 ENDED MAY 31, 1998 ENDED MAY 31, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 20,886,323 $ 17,826,289 $ 18,472,270 $ 15,020,710
Net gain (loss) on
investments........... (29,550) 3,006 58 23,604
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 20,856,773 17,829,295 18,472,328 15,044,314
------------ ------------ ------------ ------------
Distributions to
shareholders from net
investment income...... (20,886,323) (17,826,289) (18,472,270) (15,020,710)
Increase (decrease) in
net assets derived from
capital share
transactions........... 79,927,207 41,971,787 50,324,122 76,060,330
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 79,897,657 41,974,793 50,324,180 76,083,934
NET ASSETS:
Beginning of period.... 368,852,940 326,878,147 340,809,023 264,725,089
------------ ------------ ------------ ------------
End of period.......... $448,750,597 $368,852,940 $391,133,203 $340,809,023
============ ============ ============ ============
<CAPTION>
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT MONEY TAX-EXEMPT MONEY
MONEY MARKET FUND MONEY MARKET FUND MARKET FUND (TRUST) MARKET FUND (TRUST)
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MAY 31, 1998 ENDED MAY 31, 1997 ENDED MAY 31, 1998 ENDED MAY 31, 1997
------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 2,738,472 $ 1,900,151 $ 1,895,319 $ 1,601,640
Net gain (loss) on
investments........... (1,234) -- (669) (478)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,737,238 1,900,151 1,894,650 1,601,162
------------ ------------ ------------ ------------
Distributions to
shareholders from:
Net investment income.. (2,738,472) (1,900,151) (1,895,319) (1,601,640)
Net realized capital
gains................. -- -- -- (1,823)
------------ ------------ ------------ ------------
Total distributions to
shareholders.......... (2,738,472) (1,900,151) (1,895,319) (1,603,463)
------------ ------------ ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... 10,473,945 29,355,131 8,678,427 3,004,770
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 10,472,711 29,355,131 8,677,758 3,002,469
NET ASSETS:
Beginning of period.... 79,491,893 50,136,762 49,543,750 46,541,281
------------ ------------ ------------ ------------
End of period.......... $ 89,964,604 $ 79,491,893 $ 58,221,508 $ 49,543,750
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH & GROWTH & EQUITY INCOME FUND EQUITY GROWTH FUND
INCOME FUND INCOME FUND FOR THE PERIOD FROM FOR THE PERIOD FROM
FOR THE YEAR ENDED FOR THE YEAR ENDED MARCH 1, 1998(1) MARCH 1, 1998(1)
MAY 31, 1998 MAY 31, 1997 TO MAY 31, 1998 TO MAY 31, 1998
------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 1,764,081 $ 1,816,841 $ 1,213,436 $ 61,732
Net realized gain
(loss) on
investments........... 14,390,348 4,813,430 13,570,767 2,420,386
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... 24,784,580 27,165,348 (7,001,182) (1,454,880)
------------ ------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 40,939,009 33,795,619 7,783,021 1,027,238
------------ ------------ ------------ -----------
Distributions to
shareholders from:
Net investment income
Institutional Class... (1,930,172) (1,864,057) (594,910) (31,588)
AFBA Five Star Class.. (3,042) (14,126)
Net realized capital
gains
Institutional Class... (15,671,140) (3,679,018) -- --
AFBA Five Star Class.. -- (43,603)
------------ ------------ ------------ -----------
Total distributions
to shareholders..... (17,604,354) (5,600,804) (594,910) (31,588)
------------ ------------ ------------ -----------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 50,484,257 25,654,867 142,353 135,941
AFBA Five Star Class.. 41,862 1,121,207
Value of shares issued
in acquisition of
Common Funds.......... 181,773,462 328,878,344 35,428,852
Proceeds of shares
issued due to the
exchange of AFBA Five
Star shares for
Institutional shares.. 516,427
Cost of shares redeemed
Institutional Class... (34,968,577) (21,862,834) (16,237,364) (1,684,409)
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... 10,488,194 3,559,863 53 --
AFBA Five Star Class.. 2,953 57,462
------------ ------------ ------------ -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 206,284,808 8,487,091 312,783,386 33,880,384
------------ ------------ ------------ -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 229,619,463 36,681,906 319,971,497 34,876,034
NET ASSETS:
Beginning of period.... 144,245,194 107,563,288 -- --
------------ ------------ ------------ -----------
End of period.......... $373,864,657 $144,245,194 $319,971,497 $34,876,034
============ ============ ============ ===========
</TABLE>
- --------
(1) Commencement of Operations
See Accompanying Notes to Financial Statements.
42
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED REAL
INTERNATIONAL INTERNATIONAL ESTATE FUND
EQUITY FUND EQUITY FUND FOR THE PERIOD FROM
FOR THE YEAR ENDED FOR THE YEAR ENDED AUGUST 1, 1997(1)
MAY 31, 1998 MAY 31, 1997 TO MAY 31, 1998
------------------ ------------------ -------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 762,757 $ 744,079 $ 207,674
Net realized gain
(loss) on investments
and foreign currency.. 3,708,455 854,034 1,885
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilities in
foreign currency...... 4,894,140 5,809,776 6,424
------------ ----------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 9,365,352 7,407,889 215,983
------------ ----------- ----------
Distributions to
shareholders from:
Net investment income.. (940,289) (1,565,408) (157,428)
Net realized capital
gains................. (3,970,934) (1,379,819) --
Return of Capital
Distributions.......... -- -- (21,718)
------------ ----------- ----------
Total distributions
to shareholders..... (4,911,223) (2,945,227) (179,146)
------------ ----------- ----------
Capital Share
Transactions:
Proceeds of shares
sold.................. 11,904,930 11,703,559 6,873,111
Cost of shares
redeemed.............. (15,013,205) (9,029,741) (234,569)
Value of shares issued
in reinvestment of
dividends............. 743,082 500,517 1,838
------------ ----------- ----------
Increase (decrease) in
net assets derived from
capital share
transactions........... (2,365,193) 3,174,335 6,640,380
------------ ----------- ----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 2,088,936 7,636,997 6,677,217
NET ASSETS:
Beginning of period.... 83,313,343 75,676,346 --
------------ ----------- ----------
End of period.......... $ 85,402,279 $83,313,343 $6,677,217
============ =========== ==========
</TABLE>
- --------
(1) Commencement of Operations
See Accompanying Notes to Financial Statements.
43
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED LIMITED
MATURITY MATURITY TOTAL RETURN BOND FUND
BOND FUND BOND FUND FOR THE PERIOD FROM
FOR THE YEAR ENDED FOR THE YEAR ENDED MARCH 1, 1998(1)
MAY 31, 1998 MAY 31, 1997 TO MAY 31, 1998
------------------ ------------------ ----------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 2,476,316 $ 2,527,479 $ 1,497,995
Net realized gain
(loss) on
investments........... 414,753 93,259 9,544
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... 652,638 418,032 157,571
------------ ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 3,543,707 3,038,770 1,665,110
------------ ----------- ------------
Distributions to
shareholders from:
Net investment income
Institutional Class... (2,468,821) (2,489,799) (1,497,995)
AFBA Five Star Class.. (7,495) (37,680)
Net realized capital
gains
Institutional Class... (328,300) -- --
------------ ----------- ------------
Total distributions
to shareholders..... (2,804,616) (2,527,479) (1,497,995)
------------ ----------- ------------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class... 11,931,472 8,581,841 6,084,472
AFBA Five Star Class.. 5,925 469,598
Value of shares issued
in acquisition of
Common Funds.......... 108,063,470 99,660,947
Proceeds of shares
issued due to exchange
of AFBA Five Star
shares for
Institutional shares.. 90,250
Cost of shares redeemed
Institutional Class... (13,385,141) (11,437,189) (4,549,206)
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... 1,481,477 1,258,860 171
AFBA Five Star Class.. 10,229 30,173
------------ ----------- ------------
Increase (decrease) in
net assets derived
from capital share
transactions.......... 107,334,633 (1,110,702) 101,196,384
------------ ----------- ------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS.......... 108,073,724 (599,411) 101,363,499
NET ASSETS:
Beginning of period.... 43,848,655 44,448,066 --
------------ ----------- ------------
End of period.......... $151,922,379 $43,848,655 $101,363,499
============ =========== ============
</TABLE>
- --------
(1) Commencement of Operations
See Accompanying Notes to Financial Statements.
44
<PAGE>
M.S.D.&T. FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE TAX-
MARYLAND MARYLAND EXEMPT NATIONAL TAX-EXEMPT
TAX-EXEMPT TAX-EXEMPT BOND FUND BOND FUND
BOND FUND BOND FUND FOR THE PERIOD FROM FOR THE PERIOD FROM
FOR THE YEAR ENDED FOR THE YEAR ENDED MARCH 1, 1998(1) MARCH 1, 1998(1)
MAY 31, 1998 MAY 31, 1997 TO MAY 31, 1998 TO MAY 31, 1998
------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 457,188 $ 433,750 $ 943,803 $ 1,995,615
Net realized gain
(loss) on
investments........... 114,613 66,313 44,439 437,736
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... 267,492 89,553 32,609 512,032
----------- ---------- ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 839,293 589,616 1,020,851 2,945,383
----------- ---------- ----------- ------------
Distributions to
shareholders from:
Net investment income.. (457,188) (433,750) (943,803) (1,995,615)
----------- ---------- ----------- ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 7,019,522 946,151 2,583,190 5,109,502
Value of shares issued
in acquisition of
Common Funds.......... 98,001,170 175,761,930
Cost of shares
redeemed.............. (817,640) (3,115,604) (6,668,912) (3,704,846)
Value of shares issued
in reinvestment of
dividends............. 98,693 125,579 1 1
----------- ---------- ----------- ------------
Increase (decrease) in
net assets derived
from capital share
transactions.......... 6,300,575 (2,043,874) 93,915,449 177,166,587
----------- ---------- ----------- ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 6,682,680 (1,888,008) 93,992,497 178,116,355
NET ASSETS:
Beginning of period.... 8,297,809 10,185,817 -- --
----------- ---------- ----------- ------------
End of period.......... $14,980,489 $8,297,809 $93,992,497 $178,116,355
=========== ========== =========== ============
</TABLE>
- --------
(1) Commencement of Operations
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>
PRIME MONEY MARKET FUND
----------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.0521 0.0498 0.0532 0.0491 0.0296
-------- -------- -------- -------- --------
Total From Investment
Operations............ 0.0521 0.0498 0.0532 0.0491 0.0296
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0521) (0.0498) (0.0532) (0.0491) (0.0296)
-------- -------- -------- -------- --------
Total Distributions.. (0.0521) (0.0498) (0.0532) (0.0491) (0.0296)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------
Total Return............ 5.33% 5.10% 5.45% 5.02% 3.00%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $448,751 $368,853 $326,878 $382,059 $346,694
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 0.42% 0.43% 0.43% 0.43% 0.38%
Before Expense
Waiver............... 0.47% 0.48% 0.48% 0.48% 0.47%
Ratio of Net Investment
Income to Average Net
Assets................ 5.21% 4.98% 5.33% 4.92% 2.95%
<CAPTION>
GOVERNMENT MONEY MARKET FUND
----------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.0515 0.0495 0.0526 0.0485 0.0294
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0515 0.0495 0.0526 0.0485 0.0294
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0515) (0.0495) (0.0526) (0.0485) (0.0294)
-------- -------- -------- -------- --------
Total Distributions.. (0.0515) (0.0495) (0.0526) (0.0485) (0.0294)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------
Total Return............ 5.27% 5.06% 5.39% 4.95% 2.98%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $391,133 $340,809 $264,725 $263,752 $273,790
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 0.42% 0.43% 0.43% 0.43% 0.38%
Before Expense
Waiver............... 0.46% 0.49% 0.48% 0.48% 0.47%
Ratio of Net Investment
Income to Average Net
Assets................ 5.15% 4.95% 5.27% 4.85% 2.94%
</TABLE>
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>
TAX-EXEMPT MONEY MARKET FUND
----------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.0318 0.0304 0.0321 0.0303 0.0202
Net Realized Gain on
Investments........... -- -- -- -- 0.0004
------- ------- ------- ------- -------
Total From Investment
Operations.......... 0.0318 0.0304 0.0321 0.0303 0.0206
------- ------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0318) (0.0304) (0.0321) (0.0303) (0.0202)
Net Capital Gains...... -- -- -- -- (0.0004)
------- ------- ------- ------- -------
Total Distributions.. (0.0318) (0.0304) (0.0321) (0.0303) (0.0206)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ 3.22% 3.09% 3.26% 3.08% 2.08%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $89,965 $79,492 $50,137 $69,100 $82,222
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 0.43% 0.43% 0.43% 0.43% 0.38%
Before Expense
Waiver............... 0.50% 0.53% 0.51% 0.52% 0.50%
Ratio of Net Investment
Income to Average Net
Assets................ 3.17% 3.05% 3.22% 3.01% 2.02%
<CAPTION>
TAX-EXEMPT MONEY MARKET FUND (TRUST)
----------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.0338 0.0325 0.0340 0.0320 0.0219
Net Realized Gain on
Investments........... -- -- -- -- 0.0003
------- ------- ------- ------- -------
Total From Investment
Operations.......... 0.0338 0.0325 0.0340 0.0320 0.0222
------- ------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0338) (0.0325) (0.0340) (0.0320) (0.0219)
Net Capital Gains...... -- -- -- -- (0.0003)
------- ------- ------- ------- -------
Total Distributions.. (0.0338) (0.0325) (0.0340) (0.0320) (0.0222)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ 3.43% 3.30% 3.45% 3.25% 2.24%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $58,222 $49,544 $46,541 $55,043 $73,230
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 0.22% 0.22% 0.22% 0.22% 0.20%
Before Expense
Waiver............... 0.27% 0.28% 0.27% 0.28% 0.26%
Ratio of Net Investment
Income to Average Net
Assets................ 3.37% 3.24% 3.40% 3.14% 2.19%
</TABLE>
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>
GROWTH & INCOME FUND
---------------------------------------------------------------------------------------------------
AFBA FIVE
INSTITUTIONAL SHARES STAR SHARES
---------------------------------------------------------------- ----------------------------------
FOR THE PERIOD FOR THE
FOR THE YEARS ENDED JUNE 1, 1997 YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 TO AUGUST 8, 1997 (3) MAY 31, 1997
------------ ------------ ------------ ------------ ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 18.25 $ 14.58 $ 13.42 $ 12.14 $ 12.39 $18.22 $14.56
-------- -------- -------- ------- ------- ------ ------
Income From
Investment
Operations:
Net Investment
Income........... 0.20 0.23 0.33 0.35 0.29 0.02 0.16
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 5.01 4.19 1.89 1.55 (0.18) 1.92 4.21
-------- -------- -------- ------- ------- ------ ------
Total From
Investment
Operations..... 5.21 4.42 2.22 1.90 0.11 1.94 4.37
-------- -------- -------- ------- ------- ------ ------
Less Distributions
to Shareholders
from:
Net Investment
Income........... (0.23) (0.25) (0.35) (0.34) (0.28) (0.03) (0.21)
Net Capital
Gains............ (1.86) (0.50) (0.71) (0.28) (0.08) 0.00 (0.50)
-------- -------- -------- ------- ------- ------ ------
Total
Distributions.. (2.09) (0.75) (1.06) (0.62) (0.36) (0.03) (0.71)
-------- -------- -------- ------- ------- ------ ------
Net Asset Value,
End of Period..... $ 21.37 $ 18.25 $ 14.58 $ 13.42 $ 12.14 $20.13 $18.22
======== ======== ======== ======= ======= ====== ======
- ------------------------------------------------------------------------------------------------------------------------
Total Return....... 29.40% 31.26% 17.24% 16.22% 0.87% 10.66% 30.92%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $373,864 $142,452 $107,233 $91,277 $53,240 $ -- $1,793
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.71% 0.73% 0.73% 0.73% 0.68% 0.98%(2) 0.98%
Before Expense
Waiver......... 0.88% 0.89% 0.89% 0.89% 0.87% 1.14%(2) 1.15%
Ratio of Net
Investment Income
to Average Net
Assets........... 0.99% 1.52% 2.38% 2.99% 2.41% 0.60%(2) 1.74%
Portfolio turnover
rate.............. 24.09% 27.10% 45.15% 33.26% 61.16% 12.78% 27.10%
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1995 (1)
TO MAY 31, 1996
---------------------
<S> <C>
Net Asset Value,
Beginning of
Period............ $13.61
---------------------
Income From
Investment
Operations:
Net Investment
Income........... 0.14
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 0.91
---------------------
Total From
Investment
Operations..... 1.05
---------------------
Less Distributions
to Shareholders
from:
Net Investment
Income........... (0.10)
Net Capital
Gains............ 0.00
---------------------
Total
Distributions.. (0.10)
---------------------
Net Asset Value,
End of Period..... $14.56
=====================
- ------------------------------------------
Total Return....... 7.72%
- ------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $ 330
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.98%(2)
Before Expense
Waiver......... 1.15%(2)
Ratio of Net
Investment Income
to Average Net
Assets........... 2.36%(2)
Portfolio turnover
rate.............. 45.15%
</TABLE>
- --------
(1) Commencement of public offering.
(2) Annualized.
(3) Since August 8, 1997, no AFBA Five Star Shares have been outstanding.
See Accompanying Notes to Financial Statements.
48
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
EQUITY INCOME EQUITY GROWTH DIVERSIFIED REAL
FUND FUND ESTATE FUND
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MARCH 1, 1998 (1) MARCH 1, 1998 (1) AUGUST 1, 1997 (1) TO
TO MAY 31, 1998 TO MAY 31, 1998 MAY 31, 1998
----------------- ----------------- ---------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.00 $ 10.00 $10.00
-------- ------- ------
Income From Investment
Operations:
Net Investment Income.. 0.04 0.02 0.32
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.19 0.27 0.12
-------- ------- ------
Total From Investment
Operations.......... 0.23 0.29 0.44
-------- ------- ------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.02) (0.01) (0.28)
Return of Capital
Distributions.......... -- -- (.03)
-------- ------- ------
Total Distributions.. (0.02) (0.01) (0.31)
-------- ------- ------
Net Asset Value, End of
Period................. $ 10.21 $ 10.28 $10.13
======== ======= ======
- -----------------------------------------------------------------------------------
Total Return............ 2.28% 2.89% 4.31%
- -----------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $319,971 $34,876 $6,677
Ratio of Expenses to
Average Net Assets
After Expense
Reimbursement and
Waiver............... 0.70%(2) 0.70%(2) 1.00%(2)
Before Expense
Reimbursement and
Waiver............... 0.93%(2) 1.02%(2) 2.25%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 1.45%(2) 0.68%(2) 4.17%(2)
Portfolio turnover
rate................... 2.00% 7.99% 0.84%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
See Accompanying Notes to Financial Statements.
49
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEARS ENDED JULY 2, 1993 (1)
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 TO MAY 31, 1994
------------ ------------ ------------ ------------ ----------------
<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.. 0.12 0.31 0.09 0.03 0.08
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency...... 1.42 0.88 1.51 0.08 1.81
------- ------- ------- ------- -------
Total From Investment
Operations.......... 1.54 1.19 1.60 0.11 1.89
------- ------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.15) (0.24) (0.07) (0.04) (0.07)
Net Capital Gains...... (0.67) (0.24) (0.66) (0.28) (0.01)
------- ------- ------- ------- -------
Total Distributions.. (0.82) (0.48) (0.73) (0.32) (0.08)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 13.90 $ 13.18 $ 12.47 $ 11.60 $ 11.81
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------
Total Return............ 12.77% 9.81% 14.27% 0.82% 18.98%
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $85,402 $83,313 $75,676 $69,172 $47,472
Ratio of Expenses to
Average Net Assets
After Expense
Waiver.............. 1.03% 1.05% 1.05% 1.05% 1.00%(2)
Before Expense
Waiver.............. 1.14% 1.16% 1.17% 1.16% 1.20%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 0.92% 0.97% 0.78% 0.06% 0.82%(2)
Portfolio turnover
rate................... 55.55% 74.15% 53.58% 42.15% 39.49%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
See Accompanying Notes to Financial Statements.
50
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND
--------------------------------------------------------------------------------------------------
AFBA FIVE
INSTITUTIONAL SHARES STAR SHARES
---------------------------------------------------------------- ---------------------------------
FOR THE PERIOD FOR THE
FOR THE YEARS ENDED JUNE 1, 1997 YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 TO AUGUST 8, 1997(3) MAY 31, 1997
------------ ------------ ------------ ------------ ------------ -------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 10.31 $ 10.19 $ 10.43 $ 10.10 $ 10.55 $10.33 $10.20
-------- ------- ------- ------- ------- ------ ------
Income From
Investment
Operations:
Net Investment
Income........... 0.60 0.59 0.59 0.56 0.50 0.10 0.55
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 0.22 0.12 (0.24) 0.33 (0.39) 0.08 0.13
-------- ------- ------- ------- ------- ------ ------
Total From
Investment
Operations..... 0.82 0.71 0.35 0.89 0.11 0.18 0.68
-------- ------- ------- ------- ------- ------ ------
Less Distributions
to Shareholders
from:
Net Investment
Income........... (0.60) (0.59) (0.59) (0.56) (0.50) (0.10) (0.55)
Net Capital
Gains............ (0.08) -- -- -- (0.06) -- --
-------- ------- ------- ------- ------- ------ ------
Total
Distributions.. (0.68) (0.59) (0.59) (0.56) (0.56) (0.10) (0.55)
-------- ------- ------- ------- ------- ------ ------
Net Asset Value,
End of Period..... $ 10.45 $ 10.31 $ 10.19 $ 10.43 $ 10.10 $10.41 $10.33
======== ======= ======= ======= ======= ====== ======
- -----------------------------------------------------------------------------------------------------------------------
Total Return....... 8.15% 7.12% 3.38% 9.13% 0.94% 1.78% 6.80%
- -----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $151,922 $43,010 $44,102 $44,652 $35,008 $ -- $ 839
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.50% 0.60% 0.60% 0.60% 0.55% 0.90%(2) 0.90%
Before Expense
Waiver......... 0.78% 0.75% 0.72% 0.70% 0.66% 1.16%(2) 1.05%
Ratio of Net
Investment Income
to Average Net
Assets........... 5.71% 5.72% 5.66% 5.56% 4.75% 5.25%(2) 5.43%
Portfolio turnover
rate.............. 48.24% 20.92% 52.79% 22.01% 48.58% 43.13% 20.92%
<CAPTION>
FOR THE PERIOD
DECEMBER 1, 1995(1)
TO MAY 31, 1996
-------------------
<S> <C>
Net Asset Value,
Beginning of
Period............ $10.61
-------------------
Income From
Investment
Operations:
Net Investment
Income........... 0.28
Net Realized and
Unrealized Gain
(Loss) on
Investments...... (0.41)
-------------------
Total From
Investment
Operations..... (0.13)
-------------------
Less Distributions
to Shareholders
from:
Net Investment
Income........... (0.28)
Net Capital
Gains............ --
-------------------
Total
Distributions.. (0.28)
-------------------
Net Asset Value,
End of Period..... $10.20
===================
- ----------------------------------------
Total Return....... (1.23)%
- ----------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $ 346
Ratio of Expenses
to Average Net
Assets
After Expense
Waiver......... 0.90%(2)
Before Expense
Waiver......... 1.06%(2)
Ratio of Net
Investment Income
to Average Net
Assets........... 5.50%(2)
Portfolio turnover
rate.............. 52.79%
</TABLE>
- --------
(1) Commencement of public offering.
(2) Annualized.
(3) Since August 8, 1997, no AFBA Five Star Shares have been outstanding.
See Accompanying Notes to Financial Statements.
51
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
INTERMEDIATE NATIONAL
TOTAL RETURN TAX-EXEMPT TAX-EXEMPT
BOND FUND BOND FUND BOND FUND
----------------- ----------------- -----------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MARCH 1, 1998 (1) MARCH 1, 1998 (1) MARCH 1, 1998 (1)
TO MAY 31, 1998 TO MAY 31, 1998 TO MAY 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 10.00 $ 10.00 $ 10.00
-------- ------- --------
Income From Investment
Operations:
Net Investment Income... 0.15 0.10 0.11
Net Realized and
Unrealized Gain (Loss)
on Investments......... 0.02 0.01 0.05
-------- ------- --------
Total From Investment
Operations........... 0.17 0.11 0.16
-------- ------- --------
Less Distributions to
Shareholders from:
Net Investment Income... (0.15) (0.10) (0.11)
-------- ------- --------
Total Distributions... (0.15) (0.10) (0.11)
-------- ------- --------
Net Asset Value, End of
Period.................. $ 10.02 $ 10.01 $ 10.05
======== ======= ========
- --------------------------------------------------------------------------------
Total Return............. 1.69% 1.07% 1.64%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000)........... $101,363 $93,992 $178,116
Ratio of Expenses to
Average Net Assets
After Expense
Reimbursement and
Waiver............... 0.45%(2) 0.45%(2) 0.45%(2)
Before Expense
Reimbursement and
Waiver............... 0.73%(2) 0.88%(2) 0.86%(2)
Ratio of Net Investment
Income to Average
Net Assets............ 5.89%(2) 3.84%(2) 4.49%(2)
Portfolio turnover rate.. 10.51% 10.13% 7.37%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
See Accompanying Notes to Financial Statements.
52
<PAGE>
M.S.D.&T. FUNDS, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MARYLAND TAX-EXEMPT BOND FUND
----------------------------------------------------------------
FOR THE YEARS ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.38 $10.20 $ 10.40 $ 10.25 $ 10.55
------- ------ ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.48 0.50 0.49 0.49 0.50
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.44 0.18 (0.20) 0.15 (0.28)
------- ------ ------- ------- -------
Total From Investment
Operations.......... 0.92 0.68 0.29 0.64 0.22
------- ------ ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.48) (0.50) (0.49) (0.49) (0.50)
Net Capital Gains...... -- -- -- -- (.02)
------- ------ ------- ------- -------
Total Distributions.. (0.48) (0.50) (0.49) (0.49) (0.52)
------- ------ ------- ------- -------
Net Asset Value, End of
Period................. $ 10.82 $10.38 $ 10.20 $ 10.40 $ 10.25
======= ====== ======= ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ 9.03% 6.80% 2.84% 6.48% 1.99%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $14,980 $8,298 $10,186 $12,360 $20,008
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 0.49% 0.55% 0.62% 0.62% 0.55%
Before Expense
Waiver............... 1.03% 1.13% 1.04% 0.97% 0.86%
Ratio of Net Investment
Income to Average Net
Assets................ 4.49% 4.84% 4.74% 4.83% 4.66%
Portfolio turnover
rate................... 55.95% 28.11% 20.58% 36.80% 33.89%
</TABLE>
See Accompanying Notes to Financial Statements.
53
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
M.S.D.&T. Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on March 7, 1989. The Articles of In-
corporation of the Company authorize the Board of Directors to issue up to ten
billion shares, having a par value of $.001 per share. The Company is a series
fund which currently issues fourteen classes of common stock representing in-
terests in fourteen 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 Mary-
land Tax-Exempt Bond Fund (Class G), the International Equity Fund (Class H),
the Diversified Real Estate Fund (Class J), the National Tax-Exempt Bond Fund
(Class K), the Total Return Bond Fund (Class L), the Equity Growth Fund (Class
M), the Equity Income Fund (Class N) and the Intermediate Tax-Exempt Bond Fund
(Class O) -- (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 valued
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 dilution 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, Equity Income Fund, Equity
Growth Fund, International Equity Fund, Diversified Real Estate Fund,
Limited Maturity Bond Fund, Total Return Bond Fund, Maryland Tax-Exempt
Bond Fund, Intermediate Tax-Exempt Bond Fund and National 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 (including securities
traded through the National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at the
current quoted bid price. Portfolio securities that are primarily traded
on foreign exchanges are generally valued at the closing values of such
securities on their
54
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
respective exchanges, provided that if such securities are not traded on
the valuation date, they will be valued at the preceding closing values
and provided further, that when an occurrence subsequent to the time of
valuation is likely to have changed the value, then the fair value of
those securities will be determined through consideration of other factors
by or under the direction of the Company's Board of Directors. Over-the-
counter securities and 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, Equity Income Fund, Equity Growth Fund, International Equity
Fund, Diversified Real Estate Fund, Limited Maturity Bond Fund, Total
Return Bond Fund, Maryland Tax-Exempt Bond Fund, Intermediate Tax-Exempt
Bond Fund and National 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
expenses of each of the Growth & Income Fund and Limited Maturity Bond
Fund (other than the expenses incurred under the Service Plan, de-
scribed in Note 2 below, 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 was earned or
expenses and realized and unrealized gains and losses were 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, Total Return Bond Fund,
Maryland Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund and
National Tax-Exempt Bond Fund; are declared and paid monthly to share-
holders of the Equity Income Fund and Equity Growth Fund; are declared
and paid quarterly to shareholders of the Growth & Income Fund and Di-
versified 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.
55
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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
regulated investment companies under the Internal Revenue Code of 1986,
as amended, and, among other things, is required to make the requisite
distributions to its shareholders which will relieve it from Federal
income or excise taxes. Therefore, no provision has been recorded for
Federal income or excise taxes.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal
year. The following losses will be treated as arising on the first day of
fiscal year ended May 31, 1999:
<TABLE>
<CAPTION>
CAPITAL LOSSES
DEFERRED
--------------
<S> <C>
International Equity Fund................................... $201,410
Maryland Tax-Exempt Bond Fund............................... 1,285
</TABLE>
E) Repurchase Agreements: The Prime Money Market Fund, Government Money
Market Fund, Growth & Income Fund, Equity Income Fund, Equity Growth
Fund, International Equity Fund, Diversified Real Estate Fund, Limited
Maturity Bond Fund, Total Return Bond Fund, Maryland Tax-Exempt Bond
Fund, Intermediate Tax-Exempt Bond Fund and National Tax-Exempt Bond
Fund may agree to purchase portfolio securities from financial institu-
tions, such as banks and broker-dealers, subject to the seller's agree-
ment to repurchase them at an agreed upon date and price. In the case
of the Prime Money Market Fund and Government Money Market Fund, col-
lateral 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-mar-
ket daily. Repurchase agreements are accounted for as collateralized
financings. The policy of the Funds is to obtain possession of collat-
eral with a market value equal to 102% of the repurchase agreement.
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 re-
spective period, purchases and sales of securities and income and ex-
penses at the rate of exchange prevailing on the dates of such transac-
tions. The International Equity Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in mar-
ket 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 en-
ters into forward foreign currency contracts in order to hedge its ex-
posure 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 dif-
ference between the original contracts
56
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
and the closing of such contracts is included in income as a component
of realized gain or loss on foreign currency. Such contracts, which pro-
tect the value of a Fund's investment securities against a decline in
the value of currency, do not eliminate fluctuations in the underlying
prices of the securities, but merely establish an exchange rate at a fu-
ture date. Also, although such contracts tend to minimize the risk of
loss due to a decline in the value of a hedged currency, at the same
time they tend to limit any potential gain that might be realized should
the value of such foreign currency increase.
H) International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic insta-
bility, foreign taxation and/or differences in auditing and other fi-
nancial 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 country, 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 each of the Growth & Income Fund, Eq-
uity Income Fund and Equity Growth Fund; .80% of the average daily net assets
of the International Equity Fund (.45% of which fee Mercantile pays to Black-
Rock, Inc. as sub-adviser); .80% of the average daily net assets of the Diver-
sified Real Estate Fund; .35% of the average daily net assets of each of the
Limited Maturity Bond Fund and Total Return Bond Fund; and .50% of the average
daily net assets of each of the Maryland Tax-Exempt Bond Fund, Intermediate
Tax-Exempt Bond Fund and National Tax-Exempt Bond Fund. For its services as
Administrator, Mercantile receives an administration fee computed daily and
payable monthly at an annual rate of .125% of the 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.
57
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
2. INVESTMENT ADVISER, ADMINISTRATOR, DISTRIBUTOR AND OTHER RELATED PARTY
TRANSACTIONS -- CONTINUED
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. BISYS Fund Services Ohio, Inc.,
an affiliate of the Distributor, receives fees for fund accounting services
provided to the Funds.
Each director of the Company received from the Company an annual fee of
$3,500 and a fee of $1,625 for each Board meeting attended and was 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 Mercantile serves as
a director, officer or employee of the Company. During the year ended May 31,
1998, the Funds paid legal fees to a law firm, a partner of which serves as
Secretary of the Company.
3. NET ASSETS
At May 31, 1998, 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......... $448,859,423 $391,259,409 $89,972,404 $58,222,655
Accumulated Realized
Gain (Loss) on
Investments............ (108,826) (126,206) (7,800) (1,147)
------------ ------------ ----------- -----------
$448,750,597 $391,133,203 $89,964,604 $58,221,508
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH & EQUITY EQUITY INTERNATIONAL DIVERSIFIED
INCOME INCOME GROWTH EQUITY REAL ESTATE
FUND FUND FUND FUND FUND
------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Capital Paid-In......... $301,950,238 $312,783,386 $33,880,384 $68,538,479 $6,640,380
Accumulated Realized
Gain (Loss) on
Investments and Foreign
Currency............... 608,655 13,570,767 2,420,386 (202,083) 1,885
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency............... 71,152,433 (7,001,182) (1,454,880) 16,897,520 6,424
Undistributed Net
Investment Income...... 153,331 618,526 30,144 168,363 28,528
------------ ------------ ----------- ----------- ----------
$373,864,657 $319,971,497 $34,876,034 $85,402,279 $6,677,217
============ ============ =========== =========== ==========
</TABLE>
58
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. NET ASSETS -- CONTINUED
<TABLE>
<CAPTION>
LIMITED TOTAL MARYLAND INTERMEDIATE NATIONAL
MATURITY BOND RETURN BOND TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND BOND FUND BOND FUND BOND FUND
------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Capital Paid-In......... $151,315,623 $101,196,384 $15,020,222 $93,915,449 $177,166,587
Accumulated Realized
Gain (Loss) on
Investments............ 3,747 3,306 (450,355) 44,439 437,736
Net Unrealized
Appreciation
(Depreciation) on
Investments............ 595,164 157,571 410,622 32,609 512,032
Undistributed Net
Investment Income ..... 7,845 6,238 -- -- --
------------ ------------ ----------- ----------- ------------
$151,922,379 $101,363,499 $14,980,489 $93,992,497 $178,116,355
============ ============ =========== =========== ============
</TABLE>
4. CAPITAL STOCK
Transactions in shares of the Company are summarized as follows:
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND
---------------------------- ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1998 MAY 31, 1997
------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares Sold............. 576,074,807 1,174,068,226 565,932,193 1,219,474,458
Shares Redeemed......... (497,024,467) (1,132,965,297) (516,412,638) (1,143,857,569)
Shares Reinvested....... 876,867 868,858 804,567 443,441
------------ -------------- ------------- ---------------
Net Increase (Decrease)
in Shares.............. 79,927,207 41,971,787 50,324,122 76,060,330
Shares Outstanding:
Beginning of Period.... 368,932,216 326,960,429 340,935,287 264,874,957
------------ -------------- ------------- ---------------
End of Period.......... 448,859,423 368,932,216 391,259,409 340,935,287
============ ============== ============= ===============
</TABLE>
<TABLE>
<CAPTION>
TAX- TAX-EXEMPT MONEY
EXEMPT MONEY MARKET FUND MARKET FUND (TRUST)
-------------------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1998 MAY 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 130,461,894 290,334,386 57,909,674 174,863,800
Shares Redeemed......... (119,994,966) (260,981,502) (49,231,247) (171,859,030)
Shares Reinvested....... 7,017 2,247
------------ ------------ ----------- ------------
Net Increase (Decrease)
in Shares.............. 10,473,945 29,355,131 8,678,427 3,004,770
Shares Outstanding:
Beginning of Period.... 79,498,459 50,143,328 49,544,228 46,539,458
------------ ------------ ----------- ------------
End of Period.......... 89,972,404 79,498,459 58,222,655 49,544,228
============ ============ =========== ============
</TABLE>
59
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
GROWTH & INCOME FUND*
-----------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------- ---------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JUNE 1, 1997 FOR THE YEAR
ENDED ENDED THROUGH ENDED
MAY 31, 1998 MAY 31, 1997 AUGUST 8, 1997 MAY 31, 1997
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Shares Sold.............. 2,469,614 1,687,124 2,163 74,788
Shares Redeemed.......... (1,673,194) (1,464,735) (75,061) (2,711)
Shares Reinvested........ 511,819 226,513 153 3,642
Shares Issued Due to
Acquisition of Common
Funds................... 8,357,400
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............... 9,691,294 448,902 (98,400) 75,719
Shares Outstanding:
Beginning of Period..... 7,805,540 7,356,638 98,400 22,681
---------- ---------- ------- ------
End of Period........... 17,496,834 7,805,540 -- 98,400
========== ========== ======= ======
</TABLE>
- --------
* Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
<TABLE>
<CAPTION>
DIVERSIFIED REAL
INTERNATIONAL EQUITY FUND ESTATE FUND
------------------------- ----------------
EQUITY INCOME FUND EQUITY GROWTH FUND FOR THE PERIOD
FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE YEAR AUGUST 1, 1997
MARCH 1, 1998 THROUGH MARCH 1, 1998 THROUGH ENDED ENDED THROUGH
MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1997 MAY 31, 1998
--------------------- --------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Shares Sold............. 13,770 13,002 899,337 840,256 680,394
Shares Redeemed......... (1,569,131) (163,776) (1,136,494) (626,614) (21,706)
Shares Reinvested....... 5 -- 61,632 40,514 175
Shares Issued Due to
Acquisition of Common
Funds.................. 32,887,834 3,542,885
---------- --------- ---------- --------- -------
Net Increase (Decrease)
in Shares.............. 31,332,478 3,392,111 (175,525) 254,156 658,863
Shares Outstanding:
Beginning of Period.... -- -- 6,320,438 6,066,282 --
---------- --------- ---------- --------- -------
End of Period.......... 31,332,478 3,392,111 6,144,913 6,320,438 658,863
========== ========= ========== ========= =======
</TABLE>
60
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CAPITAL STOCK -- CONTINUED
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND*
-----------------------------------------------------
INSTITUTIONAL SHARES AFBA FIVE STAR SHARES
------------------------- ---------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JUNE 1, 1997 FOR THE YEAR
ENDED ENDED THROUGH ENDED
MAY 31, 1998 MAY 31, 1997 AUGUST 8, 1997 MAY 31, 1997
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Shares Sold.............. 1,139,538 843,216 570 45,744
Shares Redeemed.......... (1,279,065) (1,121,470) (74,140) (1,349)
Shares Reinvested........ 141,784 122,208 984 2,918
Shares Issued Due to
Acquisition of Common
Funds................... 10,360,829
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............... 10,371,756 (156,046) (81,256) 47,313
Shares Outstanding:
Beginning of Period..... 4,171,415 4,327,461 81,256 33,943
---------- ---------- ------- ------
End of Period........... 14,543,171 4,171,415 -- 81,256
========== ========== ======= ======
</TABLE>
- --------
* Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
<TABLE>
<CAPTION>
NATIONAL TAX-
MARYLAND TAX- INTERMEDIATE TAX- EXEMPT
TOTAL RETURN BOND FUND EXEMPT BOND FUND EXEMPT BOND FUND BOND FUND
---------------------- ------------------------- ----------------- --------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MARCH 1, 1998 FOR THE YEAR FOR THE YEAR MARCH 1, 1998 MARCH 1, 1998
THROUGH ENDED ENDED THROUGH THROUGH
MAY 31, 1998 MAY 31, 1998 MAY 31, 1997 MAY 31, 1998 MAY 31, 1998
---------------------- ------------ ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Shares Sold............. 608,803 652,667 91,722 258,403 510,766
Shares Redeemed......... (455,066) (76,513) (303,265) (667,602) (370,554)
Shares Reinvested....... 17 9,255 12,161 -- --
Shares Issued Due to
Acquisition of Common
Funds.................. 9,966,095 9,800,117 17,576,193
---------- --------- -------- --------- ----------
Net Increase (Decrease)
in Shares.............. 10,119,849 585,409 (199,382) 9,390,918 17,716,405
Shares Outstanding:
Beginning of Period.... -- 799,072 998,454 -- --
---------- --------- -------- --------- ----------
End of Period.......... 10,119,849 1,384,481 799,072 9,390,918 17,716,405
========== ========= ======== ========= ==========
</TABLE>
61
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
5. FOREIGN CURRENCY CONTRACTS
A summary of foreign currency contracts held by the International Equity
Fund at May 31, 1998 is as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE APPRECIATION/
DATES DELIVER/RECEIVE FOR (DEPRECIATION)
---------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Foreign Currency Sales... 11/16/98 JP 454,018,250 $3,500,000 $147,046
---------- --------
$147,046
========
CURRENCY LEGEND
---------------
JP Japanese Yen
</TABLE>
6. PURCHASES & SALES OF SECURITIES
For the year ended May 31, 1998, total aggregate purchases and proceeds from
sales of investment securities (excluding short-term securities) were as fol-
lows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
PURCHASES * SALES * PURCHASES SALES
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Growth & Income Fund.... $53,647,614 $43,951,166 $ 0 $ 0
Equity Income Fund...... 6,391,955 23,061,143 0 0
Equity Growth Fund...... 2,785,169 4,079,211 0 0
International Equity
Fund................... 44,432,410 50,752,795 0 0
Diversified Real Estate
Fund................... 6,150,195 46,830 0 0
Limited Maturity Bond
Fund................... 13,997,727 6,198,942 6,998,928 16,356,830
Total Return Bond Fund.. 1,878,787 1,181,657 7,160,204 13,846,080
Maryland Tax-Exempt Bond
Fund................... 10,119,183 5,489,472 0 0
Intermediate Tax-Exempt
Bond Fund.............. 9,595,626 14,108,150 0 0
National Tax-Exempt Bond
Fund................... 12,388,725 24,401,409 0 0
</TABLE>
- --------
* (excluding short-term and U.S. Government securities)
7. CAPITAL LOSS CARRYOVERS
At May 31, 1998, the following Funds had capital loss carryovers:.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER YEAR
------------ -----------------
<S> <C> <C>
Prime Money Market Fund....................... $108,826 2003 through 2005
Government Money Market Fund.................. 126,206 2003 through 2005
Tax-Exempt Money Market Fund.................. 7,800 2003 through 2005
Tax-Exempt Money Market Fund (Trust).......... 1,147 2003 through 2005
Maryland Tax-Exempt Bond Fund................. 449,071 2003 through 2005
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the respective Funds.
62
<PAGE>
M.S.D.&T. FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
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.
9. ACQUISITION OF COMMON & COLLECTIVE TRUST FUNDS
On March 1, 1998, the Equity Income Fund, Equity Growth Fund, Total Return
Bond Fund, Intermediate Tax-Exempt Bond Fund and National Tax-Exempt Bond Fund
commenced operations with the acquisition of all of the assets of various com-
mon and collective trust funds maintained by Mercantile-Safe Deposit & Trust
Co. On May 22, 1998, the Growth & Income Fund and Limited Maturity Bond Fund
acquired all of the assets of various common and collective trust funds main-
tained by Mercantile-Safe Deposit & Trust Co. The following is a summary of
shares issued, net assets acquired, net asset value per share and unrealized
appreciation as of the date acquired:
<TABLE>
<CAPTION>
NET ASSET UNREALIZED
SHARES NET ASSETS VALUE APPRECIATION
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Growth & Income Fund........... 8,357,400 $181,773,462 $21.75 $ 76,280,161
Equity Income Fund............. 32,887,834 328,878,344 10.00 164,257,461
Equity Growth Fund............. 3,542,885 35,428,852 10.00 12,882,272
Limited Maturity Bond Fund..... 10,360,829 108,063,470 10.43 964,116
Total Return Bond Fund......... 9,966,095 99,660,947 10.00 2,147,951
Intermediate Tax-Exempt Bond
Fund.......................... 9,800,117 98,001,170 10.00 876,240
National Tax-Exempt Bond Fund.. 17,576,193 175,761,930 10.00 7,843,171
</TABLE>
63
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of M.S.D.&T. Funds, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial high-
lights present fairly, in all material respects, the financial position of the
M.S.D.&T. Funds, Inc. ("the Funds") comprised of the Prime Money Market Fund,
Government Money Market Fund, Tax-Exempt Money Market Fund, Tax-Exempt Money
Market Fund (Trust), Growth & Income Fund, Equity Income Fund, Equity Growth
Fund, International Equity Fund, Diversified Real Estate Fund, Limited Matu-
rity Bond Fund, Total Return Bond Fund, Maryland Tax-Exempt Bond Fund, Inter-
mediate Tax-Exempt Bond Fund and National Tax-Exempt Bond Fund, respectively,
at May 31, 1998, the results of its operations for the periods then ended and
the changes in its net assets and its financial highlights for each of the pe-
riods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accor-
dance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements are free of material misstatement. An audit includes examin-
ing, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of secu-
rities at May 31, 1998 by correspondence with the custodians and brokers and
the application of alternative auditing procedures where securities purchased
had not been settled, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 17, 1998
64
<PAGE>
IMPORTANT TAX INFORMATION
(UNAUDITED)
During the fiscal year ended May 31, 1998:
100.0% of the distributions paid by Prime Money Market Fund, Government
Money Market Fund and Total Return Bond Fund were derived from net investment
income and short-term capital gains and are taxable as ordinary income.
100.0% of the distributions paid by Tax-Exempt Money Market Fund, Tax-Exempt
Money Market Fund (Trust), Maryland Tax-Exempt Bond Fund, Intermediate Tax-Ex-
empt Bond Fund and National Tax-Exempt Bond Fund were exempt-interest divi-
dends, excludable from gross income for Federal income tax purposes.
11.0% of the distributions paid by Growth & Income Fund were derived from
net investment income and short-term capital gains and are taxable as ordinary
income and 89.0% were derived from long-term capital gains and are taxable at
a long-term capital gain rate. Of such distributions derived from net invest-
ment income and short-term capital gains, 100% qualify for the dividends re-
ceived deduction available to corporate shareholders.
100% of the distributions paid by Equity Income Fund and Equity Growth Fund
were derived from net investment income and short-term capital gains and are
taxable as ordinary income. Of such distributions derived from net investment
income and short-term capital gains, 100% qualify for the dividends received
deduction available corporate shareholders.
21.2% of the distributions paid by International Equity Fund were derived
from net investment income and short-term capital gains and are taxable as or-
dinary income and 78.8% were derived from long-term capital gains and are tax-
able at a long-term capital gain rate. The foreign taxes paid or withheld per
share represent taxes incurred by the International Equity Fund on interest
and dividends received by the Fund from foreign sources. Foreign taxes paid or
withheld should be included in taxable income with an offsetting deduction
from gross income or as a credit for taxes paid to foreign governments. For-
eign taxes withheld as of May 31, 1998 were $217,989. You should consult your
tax advisor regarding the appropriate treatment of foreign taxes paid.
86.6% of the distributions paid by Diversified Real Estate Fund were derived
from net investment income and short-term capital gains and are taxable as or-
dinary income and 12.1% are return of capital. 1.3% were derived from long-
term capital gains distributions which were paid to the Fund and their charac-
ter is being passed through to the Fund's shareholders and are taxable at a
long-term capital gain rate. (20%: 0.4%, 28%: 0.5%, 25%: 0.4%).
90.1% of the distributions paid by Limited Maturity Bond Fund were derived
from net investment income and short-term capital gains and are taxable as or-
dinary income and 9.9% were derived from long-term capital gains and are tax-
able at a long-term capital gain rate.
65
<PAGE>
CAPITAL GAIN DISTRIBUTIONS
(UNAUDITED)
During the fiscal year ending May 31, 1998, the M.S.D.&T. Funds distributed
capital gains to shareholders of Growth & Income Fund, International Equity
Fund and Limited Maturity Bond Fund on 12/23/97 and to shareholders of Growth
& Income Fund and Limited Maturity Bond Fund on 5/19/98. The Securities and
Exchange Commission requires mutual funds to disclose to shareholders the com-
position of the capital gain distribution. The figures listed below may differ
from those cited elsewhere in the report due to differences in the calculation
of income and gains for Securities and Exchange Commission (book) purposes and
Internal Revenue Service (tax) purposes. Pursuant to this requirement, these
percentages are listed below:
<TABLE>
<CAPTION>
SHORT- LONG- LONG-
TERM TERM 20% TERM 28%
------ -------- --------
<S> <C> <C> <C>
Growth & Income Fund................................... 0% 76.6% 23.4%
International Equity Fund.............................. 2.6% 61.4% 36.0%
Limited Maturity Bond Fund............................. 15.4% 52.6% 32.0%
</TABLE>
Short-term capital gain distributions are taxable to you as ordinary income.
Long-term capital gain distributions are taxable to you as long term capital
gains.
66
<PAGE>
Investment Adviser and Administrator:
[LOGO OF MERCANTILE APPEARS HERE]
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 not bank deposits or obligations of, or guaranteed,
endorsed or otherwise supported by Mercantile-Safe Deposit and Trust Company,
its parent company or its affiliates and are not federally insured or 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 010
<NAME> PRIME MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 449,026
<INVESTMENTS-AT-VALUE> 449,026
<RECEIVABLES> 1,888
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 450,914
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,164
<TOTAL-LIABILITIES> 2,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 448,859
<SHARES-COMMON-STOCK> 448,859
<SHARES-COMMON-PRIOR> 368,932
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (109)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 448,750
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,570
<OTHER-INCOME> 0
<EXPENSES-NET> 1,684
<NET-INVESTMENT-INCOME> 20,886
<REALIZED-GAINS-CURRENT> (30)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20,856
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,886
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 576,075
<NUMBER-OF-SHARES-REDEEMED> (497,024)
<SHARES-REINVESTED> 876
<NET-CHANGE-IN-ASSETS> 79,898
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (79)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,002
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,874
<AVERAGE-NET-ASSETS> 400,965
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 020
<NAME> GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 392,140
<INVESTMENTS-AT-VALUE> 392,140
<RECEIVABLES> 892
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 393,032
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,899
<TOTAL-LIABILITIES> 1,899
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 391,259
<SHARES-COMMON-STOCK> 391,259
<SHARES-COMMON-PRIOR> 340,935
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (126)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 391,133
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,979
<OTHER-INCOME> 0
<EXPENSES-NET> 1,507
<NET-INVESTMENT-INCOME> 18,472
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,472
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 565,932
<NUMBER-OF-SHARES-REDEEMED> (516,413)
<SHARES-REINVESTED> 805
<NET-CHANGE-IN-ASSETS> 50,324
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (126)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 897
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,663
<AVERAGE-NET-ASSETS> 358,831
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 030
<NAME> TAX-EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 89,546
<INVESTMENTS-AT-VALUE> 89,546
<RECEIVABLES> 714
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,260
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 296
<TOTAL-LIABILITIES> 296
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,972
<SHARES-COMMON-STOCK> 89,972
<SHARES-COMMON-PRIOR> 79,498
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 89,964
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,109
<OTHER-INCOME> 0
<EXPENSES-NET> 371
<NET-INVESTMENT-INCOME> 2,738
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,738
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 130,462
<NUMBER-OF-SHARES-REDEEMED> (119,995)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 10,473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 432
<AVERAGE-NET-ASSETS> 86,302
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 040
<NAME> TAX-EXEMPT MONEY MARKET FUND (TRUST)
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 57,964
<INVESTMENTS-AT-VALUE> 57,964
<RECEIVABLES> 464
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,428
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206
<TOTAL-LIABILITIES> 206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,223
<SHARES-COMMON-STOCK> 58,223
<SHARES-COMMON-PRIOR> 49,544
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 58,222
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,019
<OTHER-INCOME> 0
<EXPENSES-NET> 124
<NET-INVESTMENT-INCOME> 1,895
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,894
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,895
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,910
<NUMBER-OF-SHARES-REDEEMED> (49,231)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,678
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 152
<AVERAGE-NET-ASSETS> 56,264
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 050
<NAME> GROWTH & INCOME FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 225,362
<INVESTMENTS-AT-VALUE> 372,795
<RECEIVABLES> 1,337
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 374,132
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 267
<TOTAL-LIABILITIES> 267
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 301,950
<SHARES-COMMON-STOCK> 17,497
<SHARES-COMMON-PRIOR> 7,904
<ACCUMULATED-NII-CURRENT> 153
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 71,153
<NET-ASSETS> 373,865
<DIVIDEND-INCOME> 2,788
<INTEREST-INCOME> 237
<OTHER-INCOME> 0
<EXPENSES-NET> 1,261
<NET-INVESTMENT-INCOME> 1,764
<REALIZED-GAINS-CURRENT> 14,390
<APPREC-INCREASE-CURRENT> 24,785
<NET-CHANGE-FROM-OPS> 40,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,933
<DISTRIBUTIONS-OF-GAINS> 15,671
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,855
<NUMBER-OF-SHARES-REDEEMED> (1,774)
<SHARES-REINVESTED> 512
<NET-CHANGE-IN-ASSETS> 229,619
<ACCUMULATED-NII-PRIOR> 322
<ACCUMULATED-GAINS-PRIOR> 1,889
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,064
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,558
<AVERAGE-NET-ASSETS> 187,151
<PER-SHARE-NAV-BEGIN> 18.25
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> 5.01
<PER-SHARE-DIVIDEND> (.23)
<PER-SHARE-DISTRIBUTIONS> (1.86)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.37
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 060
<NAME> LIMITED MATURITY BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 148,813
<INVESTMENTS-AT-VALUE> 150,373
<RECEIVABLES> 1,917
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 152,290
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 368
<TOTAL-LIABILITIES> 368
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 151,316
<SHARES-COMMON-STOCK> 14,543
<SHARES-COMMON-PRIOR> 4,253
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 595
<NET-ASSETS> 151,922
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,694
<OTHER-INCOME> 0
<EXPENSES-NET> 218
<NET-INVESTMENT-INCOME> 2,476
<REALIZED-GAINS-CURRENT> 415
<APPREC-INCREASE-CURRENT> 653
<NET-CHANGE-FROM-OPS> 3,544
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,476
<DISTRIBUTIONS-OF-GAINS> 328
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,509
<NUMBER-OF-SHARES-REDEEMED> (1,362)
<SHARES-REINVESTED> 143
<NET-CHANGE-IN-ASSETS> 108,074
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (80)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 337
<AVERAGE-NET-ASSETS> 50,156
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> .22
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> (.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 070
<NAME> MARYLAND TAX-EXEMPT BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 14,828
<INVESTMENTS-AT-VALUE> 15,239
<RECEIVABLES> 303
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,542
<PAYABLE-FOR-SECURITIES> 493
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69
<TOTAL-LIABILITIES> 562
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,020
<SHARES-COMMON-STOCK> 1,384
<SHARES-COMMON-PRIOR> 799
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (450)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 410
<NET-ASSETS> 14,980
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 507
<OTHER-INCOME> 0
<EXPENSES-NET> 50
<NET-INVESTMENT-INCOME> 457
<REALIZED-GAINS-CURRENT> 115
<APPREC-INCREASE-CURRENT> 267
<NET-CHANGE-FROM-OPS> 839
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 457
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 653
<NUMBER-OF-SHARES-REDEEMED> (77)
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> 6,683
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (565)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 105
<AVERAGE-NET-ASSETS> 10,342
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 080
<NAME> INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 66,104
<INVESTMENTS-AT-VALUE> 82,859
<RECEIVABLES> 6,929
<ASSETS-OTHER> 433
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,221
<PAYABLE-FOR-SECURITIES> 1,301
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,518
<TOTAL-LIABILITIES> 4,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,538
<SHARES-COMMON-STOCK> 6,145
<SHARES-COMMON-PRIOR> 6,320
<ACCUMULATED-NII-CURRENT> 168
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (202)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,898
<NET-ASSETS> 85,402
<DIVIDEND-INCOME> 1,526
<INTEREST-INCOME> 88
<OTHER-INCOME> 0
<EXPENSES-NET> 851
<NET-INVESTMENT-INCOME> 763
<REALIZED-GAINS-CURRENT> 3,708
<APPREC-INCREASE-CURRENT> 4,894
<NET-CHANGE-FROM-OPS> 9,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 940
<DISTRIBUTIONS-OF-GAINS> 3,971
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 899
<NUMBER-OF-SHARES-REDEEMED> (1,136)
<SHARES-REINVESTED> 62
<NET-CHANGE-IN-ASSETS> 2,089
<ACCUMULATED-NII-PRIOR> 14
<ACCUMULATED-GAINS-PRIOR> 392
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 661
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 942
<AVERAGE-NET-ASSETS> 82,485
<PER-SHARE-NAV-BEGIN> 13.18
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 1.42
<PER-SHARE-DIVIDEND> (.15)
<PER-SHARE-DISTRIBUTIONS> (.67)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.90
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 090
<NAME> DIVERSIFIED REAL ESTATE FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 6,666
<INVESTMENTS-AT-VALUE> 6,672
<RECEIVABLES> 11
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,683
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,640
<SHARES-COMMON-STOCK> 659
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6
<NET-ASSETS> 6,677
<DIVIDEND-INCOME> 234
<INTEREST-INCOME> 24
<OTHER-INCOME> 0
<EXPENSES-NET> 50
<NET-INVESTMENT-INCOME> 208
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 6
<NET-CHANGE-FROM-OPS> 216
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 157
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 22
<NUMBER-OF-SHARES-SOLD> 680
<NUMBER-OF-SHARES-REDEEMED> (21)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,677
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 112
<AVERAGE-NET-ASSETS> 5,974
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .12
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.03)
<PER-SHARE-NAV-END> 10.13
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 100
<NAME> NATIONAL TAX-EXEMPT BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 167,598
<INVESTMENTS-AT-VALUE> 175,953
<RECEIVABLES> 2,910
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 747
<TOTAL-LIABILITIES> 747
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 177,166
<SHARES-COMMON-STOCK> 17,716
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 438
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 512
<NET-ASSETS> 178,116
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,196
<OTHER-INCOME> 0
<EXPENSES-NET> 200
<NET-INVESTMENT-INCOME> 1,996
<REALIZED-GAINS-CURRENT> 437
<APPREC-INCREASE-CURRENT> 512
<NET-CHANGE-FROM-OPS> 2,945
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,996
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,087
<NUMBER-OF-SHARES-REDEEMED> (371)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 178,116
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 222
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 382
<AVERAGE-NET-ASSETS> 176,580
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> .05
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 110
<NAME> TOTAL RETURN BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 98,626
<INVESTMENTS-AT-VALUE> 100,932
<RECEIVABLES> 984
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 101,916
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 553
<TOTAL-LIABILITIES> 553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,196
<SHARES-COMMON-STOCK> 10,120
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 101,363
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,612
<OTHER-INCOME> 0
<EXPENSES-NET> 114
<NET-INVESTMENT-INCOME> 1,498
<REALIZED-GAINS-CURRENT> 9
<APPREC-INCREASE-CURRENT> 158
<NET-CHANGE-FROM-OPS> 1,665
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,498
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,575
<NUMBER-OF-SHARES-REDEEMED> (455)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 101,363
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 89
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 185
<AVERAGE-NET-ASSETS> 100,829
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.15)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 120
<NAME> EQUITY GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 23,429
<INVESTMENTS-AT-VALUE> 34,856
<RECEIVABLES> 50
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,906
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30
<TOTAL-LIABILITIES> 30
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,880
<SHARES-COMMON-STOCK> 3,392
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 30
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,420
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,454)
<NET-ASSETS> 34,876
<DIVIDEND-INCOME> 113
<INTEREST-INCOME> 12
<OTHER-INCOME> 0
<EXPENSES-NET> 63
<NET-INVESTMENT-INCOME> 62
<REALIZED-GAINS-CURRENT> 2,420
<APPREC-INCREASE-CURRENT> (1,455)
<NET-CHANGE-FROM-OPS> 1,027
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,556
<NUMBER-OF-SHARES-REDEEMED> (164)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,876
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92
<AVERAGE-NET-ASSETS> 35,673
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .27
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.28
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 130
<NAME> EQUITY INCOME FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 161,323
<INVESTMENTS-AT-VALUE> 318,579
<RECEIVABLES> 2,142
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 320,721
<PAYABLE-FOR-SECURITIES> 426
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 324
<TOTAL-LIABILITIES> 750
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 312,783
<SHARES-COMMON-STOCK> 31,332
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 618
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,571
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,001)
<NET-ASSETS> 319,971
<DIVIDEND-INCOME> 1,636
<INTEREST-INCOME> 162
<OTHER-INCOME> 0
<EXPENSES-NET> 585
<NET-INVESTMENT-INCOME> 1,213
<REALIZED-GAINS-CURRENT> 13,571
<APPREC-INCREASE-CURRENT> (7,001)
<NET-CHANGE-FROM-OPS> 7,783
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 595
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,901
<NUMBER-OF-SHARES-REDEEMED> (1,569)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 319,971
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 502
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 777
<AVERAGE-NET-ASSETS> 329,546
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 140
<NAME> INTERMEDIATE TAX-EXEMPT BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 91,685
<INVESTMENTS-AT-VALUE> 92,594
<RECEIVABLES> 6,153
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98,747
<PAYABLE-FOR-SECURITIES> 4,317
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 438
<TOTAL-LIABILITIES> 4,755
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,915
<SHARES-COMMON-STOCK> 9,391
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33
<NET-ASSETS> 93,992
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,054
<OTHER-INCOME> 0
<EXPENSES-NET> 110
<NET-INVESTMENT-INCOME> 944
<REALIZED-GAINS-CURRENT> 44
<APPREC-INCREASE-CURRENT> 33
<NET-CHANGE-FROM-OPS> 1,021
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 944
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,058
<NUMBER-OF-SHARES-REDEEMED> (667)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 93,992
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215
<AVERAGE-NET-ASSETS> 97,146
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
