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M. S. D. & T. FUNDS, INC.
Equity Income Fund
Equity Growth Fund
Total Return Bond Fund
Intermediate Tax-Exempt Bond Fund
National Tax-Exempt Bond Fund
Supplement dated July 24, 1998
to Prospectus dated February 18, 1998
Equity Income Fund and Equity Growth Fund--Convertible Securities
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The Equity Income Fund and Equity Growth Fund each may invest up to 10% of
its total assets in convertible securities that are rated at the time of
purchase in the fourth highest rating category or lower by one or more
unaffiliated national statistical rating organizations ("Rating Agencies").
Convertible securities rated in the fourth highest rating category are
considered to have speculative characteristics, even though they are of
investment grade quality, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher-rated debt obligations.
Lower quality debt securities (including convertible securities), also known as
"junk bonds," are considered to be speculative and involve greater risk of
default or price changes due to the issuer's creditworthiness. The market
prices of these securities may fluctuate more than those of higher quality
securities and may decline significantly in periods of general economic
difficulty, which may follow periods of rising rates. Securities in the lowest
quality category may present the risk of default, or may be in default.
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M. S. D. & T. FUNDS, INC.
Growth & Income Fund
International Equity Fund
Limited Maturity Bond Fund
Maryland Tax-Exempt Bond Fund
Supplement dated July 24, 1998
to Prospectus dated September 26, 1997
Growth & Income Fund--Convertible Securities
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The Growth & Income Fund may invest up to 10% of its total assets in
convertible securities that are rated at the time of purchase in the fourth
highest rating category or lower by one or more unaffiliated national
statistical rating organizations ("Rating Agencies"). Convertible securities
rated in the fourth highest rating category are considered to have speculative
characteristics, even though they are of investment grade quality, and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case with
higher-rated debt obligations. Lower quality debt securities (including
convertible securities), also known as "junk bonds," are considered to be
speculative and involve greater risk of default or price changes due to the
issuer's creditworthiness. The market prices of these securities may fluctuate
more than those of higher quality securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
rates. Securities in the lowest quality category may present the risk of
default, or may be in default.
Limited Maturity Bond Fund--Credit Quality; Average Weighted Maturity
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The third sentence of the first paragraph under the heading "Investment
Objectives, Policies and Risks - - Limited Maturity Bond Fund" on page 8 of the
Prospectus is amended to read as follows:
The Fund will purchase only those securities that are rated at the
time of purchase within the four highest rating categories by a Rating
Agency or, if unrated, are determined by the Adviser to be of
comparable quality. Securities rated in the lowest of the four highest
rating categories are considered to have speculative characteristics,
even though they are of investment grade equality, and changes in
economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is
the case with higher-rated debt obligations.
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The last sentence of the first paragraph under the heading "Investment
Objectives, Policies and Risks - - Limited Maturity Bond Fund" on page 8 of the
Prospectus is amended to read as follows:
The Adviser expects that until normal market conditions the Fund's
portfolio securities will have an average weighted maturity of between
two to five years.
International Equity Fund--Sub-Adviser
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The International Equity Fund's sub-adviser, CastleInternational Asset
Management Limited, is now known as BlackRock International Ltd. ("BlackRock")
and its address has changed to 345 Park Avenue, New York, New York 10137.
BlackRock is a subsidiary of PNC Holding Corp., which owns an 80% equity
interest in BlackRock with the remaining 20% equity interest being held by
senior BlackRock professionals.
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