<PAGE>
M.S.D.&T. Funds, Inc.
---------------------
Annual Report
May 31, 1999
<PAGE>
Table of Contents
Chairman's Letter i
Funds Reviews ii
Statements of Net Assets
Prime Money Market Fund 1
Government Money Market Fund 3
Tax-Exempt Money Market Fund 5
Growth & Income Fund 8
Equity Income Fund 10
Equity Growth Fund 13
International Equity Fund 15
Diversified Real Estate Fund 19
Limited Maturity Bond Fund 21
Total Return Bond Fund 24
Maryland Tax-Exempt Bond Fund 27
Intermediate Tax-Exempt Bond Fund 30
National Tax-Exempt Bond Fund 33
Investment Abbreviations 37
Statements of Operations 38
Statements of Changes in Net Assets 41
Financial Highlights 47
Notes to Financial Statements 53
Report of Independent Accountants 64
Voting Results of Annual Meeting of Shareholders 65
Important Tax Information 66
<PAGE>
Dear Shareholder,
It is a pleasure to present the annual report for M.S.D.&T. Funds, Inc. for
the fiscal year ended May 31, 1999. The report includes financial information
and fund synopses for the Equity, Bond and Money Market Funds. Also included
is a Statement of Net Assets for each of the Funds listing the securities held
as of May 31, 1999.
During the past twelve months the capital markets have experienced significant
volatility as fears of deflation have evolved into fears of inflation. The
Asian crisis, Russia's devaluation/debt moratorium and liquidity problems at a
large hedge fund shocked financial markets that had been priced in a non-
threatening equilibrium. This unanticipated series of international events re-
sulted in a significant sell-off in equity markets with the U.S. Treasury bond
market benefiting from a massive inflow of funds seeking safety. The Federal
Reserve Board recognized the potential consequences to the economy and lowered
the base rate three times in 25 basis point increments to restore investor
confidence. By the end of the calendar year, stock markets enjoyed a meaning-
ful recovery and the domestic economy remained vibrant.
A major factor in the continuation of the domestic economic expansion has been
the wealth-effect injected into the consumer sector by an appreciating stock
market. In effect, a cycle of rising equity prices increasing confidence and
spending has become self-reinforcing. However, the recent increase in the
price of oil may be the first tangible sign that inflation is creeping back
into the system. The dynamics of the marketplace may change as investors have
begun to anticipate a less accommodative Federal Reserve. Falling interest
rates have served as the catalyst for increased earnings (via economic activi-
ty) and stock price/earnings multiples. Investors may now be faced with valu-
ing assets in a more challenging environment.
The pages that follow discuss the objectives, performance, structure and
strategy of each of the M.S.D.&T. Funds. We appreciate your investment in the
Funds and welcome any questions or comments.
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. The
Money Market Funds are neither insured nor guaranteed by the FDIC or any other
government agency. Although the Money Market Funds strive to maintain a net
asset value of $1.00 per share, it is possible to lose money by investing in
the Funds. Yields will fluctuate as market conditions change. Past performance
is not a guarantee of future results. For more complete information on
M.S.D.&T. Funds, Inc., including expenses and ongoing fees, please call 1-800-
551-2145 to receive a prospectus, which should be read carefully before in-
vesting. BISYS Fund Services serves as the Funds' distributor.
<PAGE>
The M.S.D.&T. Growth & Income Fund
The Growth & Income Fund returned 18.20% for the fiscal year ended May 31,
1999. The overall U.S. equity markets as measured by the S&P 500 Index re-
turned 21.03% for the fiscal year. Lipper Analytical, Inc. reported that the
average growth & income fund returned 11.48% over the same period (1).
The U.S. economy continues to grow at a robust pace with low inflation. Corpo-
rate earnings continue to exceed expectations. With foreign economies showing
improvement, corporate earnings are expected to continue to grow. The Growth &
Income Fund carries minimal cash reserves and remains well diversified in a
blend of issues having both growth and value characteristics.
The Growth & Income Fund has above market weightings as compared to the S&P
500 Index in capital goods, consumer staples and health care. Relative to the
S&P 500 Index, the Fund benefited from its weighting in financial, consumer
cyclical, utilities and technology sectors. The Fund's weighting in communica-
tion services, health care and consumer staples tempered its returns. The ad-
viser feels that the capital goods and consumer staples sectors should benefit
from improvements in overseas economies. Health care has displayed positive
growth trends in the past and continues to enjoy superior characteristics rel-
ative to many other industries. The adviser continues to monitor the legisla-
tive agenda on health care. The Growth & Income Fund is under represented in
consumer cyclicals, financials and utilities. The top five holdings at May 31,
1999 are IBM (4.8%), Cisco (4.0%), Southwest Airlines (3.2%), Hewlett Packard
(3.1%) and Pfizer (2.9%) (2).
The Growth & Income Fund continues to focus on companies with consistent and
excellent earnings history and dividend growth. The adviser believes that
these stocks will generate competitive returns even if a deteriorating market
were to materialize.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Growth & Income Fund and the S&P 500 Stock Index
Growth & Income S&P 500
--------------- -------
Feb-91 25,000 25,000
Aug-91 27,136 27,371
Feb-92 28,700 28,996
Aug-92 29,217 29,539
Feb-93 31,171 32,085
Aug-93 33,437 34,033
Feb-94 33,920 34,762
Aug-94 34,442 35,897
Feb-95 36,385 37,321
Aug-95 40,178 43,596
Feb-96 43,611 50,273
Aug-96 44,690 51,760
Feb-97 54,675 63,425
Aug-97 63,815 72,803
Feb-98 73,879 85,626
Aug-98 66,727 78,693
Feb-99 86,411 102,527
May-99 91,162 108,144
The S&P 500 Index is an unmanaged index generally representative of the per-
formance of the U.S. stock market. Lipper Analytical, Inc. is an independent
mutual fund rating agency.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
ii
<PAGE>
The M.S.D.&T. Equity Income Fund
The end of the fiscal year for the Equity Income Fund showed remarkably con-
trasting results, depending on the time period used for comparison. For exam-
ple, the Fund returned 15.30% vs. 21.03% for the S&P 500 Index for the twelve
months ended May 31, 1999. However for the first five months of 1999, the Eq-
uity Income Fund produced a return of 8.20%, ahead of the 6.47% return for the
S&P 500 Index, reflecting the market's recent embrace of more cyclical and
commodity-based stocks. The Fund's returns exceeded the performance of the
Lipper Equity Income Average for both time periods: 8.6% (for twelve months)
and 5.7% (first five months)(1).
During the first ten months of the fiscal year, the adviser trimmed positions
in some of the high profile, large capitalization names in the portfolio which
were then being driven to extreme levels by the market. Proceeds were
redeployed into more cyclical stocks.
Over the past twelve months, the Fund's performance was led by Electronic Data
Services (2.0%), BellSouth (1.4%), Hewlett-Packard (1.3%) and Intel (1.4%).
More recently (first five months of this year), leaders have been DeBeers
(0.3%), Browning Ferris (1.0%), Readers Digest (0.3%) and Halliburton
(1.3%)(2).
The Fund continues to be broadly diversified but with overweight positions
(versus the S&P 500 Index) in the energy and capital goods sectors, and under-
weight positions in technology and communication services sectors. Consistent
with its objectives, the Fund's price to earnings, price to sales and price to
book value ratios remain below those for the general market, while providing a
higher yield.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Equity Income Fund and the S&P 500 Stock Index
M.S.D.&T. Equity Income Fund S&P 500 Stock Index
---------------------------- -------------------
Feb-98 25,000 25,000
Mar-98 25,975 26,280
Apr-98 26,205 26,545
May-98 25,570 26,088
Jun-98 26,071 27,148
Jul-98 25,114 26,859
Aug-98 22,471 22,976
Sep-98 23,684 24,448
Oct-98 25,360 26,436
Nov-98 26,699 28,038
Dec-98 27,249 29,654
Jan-99 26,966 30,894
Feb-99 26,590 29,934
Mar-99 27,396 31,133
Apr-99 29,747 32,338
May-99 29,483 31,574
The S&P 500 Index is an unmanaged index generally representative of the per-
formance of the U.S. stock market. Lipper Analytical, Inc., an independent mu-
tual fund rating agency, calculates the Lipper Equity Income Average.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
iii
<PAGE>
The M.S.D.&T. Equity Growth Fund
For the fiscal year ended May 31, 1999, the Equity Growth Fund returned 23.13%
vs. 21.03% for the S&P 500 Index(1). On a total return basis, the portfolio's
best performing stocks for the last 12-months have been AirTouch Communications
(1.5%) with a 111% total return, Cisco (2.3%) which also returned 111% and IBM
(2.0%) which returned 94%. Our "duds" included Autodesk (1.7%) with a -34% re-
turn, Compaq which returned -29% before it was sold earlier this year and
Disney (1.5%) which dropped 23%(2). However, it is important to note that among
all of the Fund's holdings, winners more than offset losers.
Looking back over 1998, the salient event of the year was the fall crisis de-
rived from foreign economic weakness which culminated in a nasty correction,
with the Dow Jones Industrial Average and the S&P declining 17% and 19% from
their highs, respectively. However, the Federal Reserve deftly cut short-term
interest rates in three 25 basis point increments. Thus reassured, investors
regained confidence and the markets closed 1998 with a resounding fourth quar-
ter rally. During the third quarter of 1998, those sectors with higher per-
ceived risk (such as cable) were punished more than those with lower risk
(utilities). However, the Fund's sector weightings during the period allowed
the Fund to outperform the S&P 500 Index with the Fund falling 9.71% while the
S&P dropped 9.95%. During that tumultuous period, the Fund's cash position in-
creased slightly and the adviser undertook relatively modest transactional ac-
tivity.
Most of 1999 has seen increasing concerns of economic overheating, with strong
job growth, high levels of housing starts, and signs of rising commodity pric-
es. As a result, the Federal Reserve appears poised to raise rates. The effect
has been a decline in high price/earnings ratio stocks, such as drugs and tech-
nology, and a rebound in lower priced, cyclical commodity and manufacturing
companies. The Fund has responded to this shift in macro fundamentals by sell-
ing shares of stocks with extreme valuations and buying cyclical companies with
attractive growth prospects. This is not to say the adviser has abandoned
growth investing. The adviser has simply adjusted the portfolio to current mar-
ket conditions. An example of such a move would be the purchase of Williams
Company (1.3%), a natural gas pipeline firm which is also constructing an ad-
vanced telecommunications network, and the sale of some Pfizer (0.9%).
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Equity Growth Fund and the S&P 500 Stock Index
M.S.D.&T. Equity Growth Fund S&P 500 Stock Index
---------------------------- -------------------
Feb-98 25,000 25,000
Mar-98 25,850 26,280
Apr-98 26,464 26,545
May-98 25,722 26,088
Jun-98 26,972 27,148
Jul-98 26,756 26,859
Aug-98 22,857 22,976
Sep-98 24,351 24,448
Oct-98 26,442 26,436
Nov-98 28,150 28,038
Dec-98 30,118 29,654
Jan-99 32,026 30,894
Feb-99 30,403 29,934
Mar-99 31,604 31,133
Apr-99 31,974 32,338
May-99 31,671 31,574
The S&P 500 Index is an unmanaged index generally representative of the perfor-
mance of the U.S. stock market.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the Fund
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
iv
<PAGE>
The M.S.D.&T. International Equity Fund(3)
The International Equity Fund returned -1.02% for the fiscal year ended May
31, 1999, trailing its MSCI All-World ex-U.S. benchmark return of 4.71%(1).
The Fund's value investment style contributed to the disappointing relative
performance as growth stocks led the international markets. As in the U.S.,
however, equity market favor began to shift towards value stocks late in the
fiscal year and relative investment performance has improved for the calendar
year-to-date.
Japanese stocks gained just over 20% in U.S. dollar terms during the period.
The market was buoyed by several factors including the government's injection
of capital into the banking system and serious moves towards corporate re-
structuring. The Fund's Japanese allocation was gradually increased, focusing
on companies with high international demand and strong management teams. The
Fund's allocation to other Pacific markets also increased, focusing on Singa-
pore and Hong Kong, reflecting a more positive outlook for the region.
Continental European stocks started the year positively, mainly in anticipa-
tion of the Euro currency. Since then, however, most markets have seen de-
clines and the Euro has depreciated significantly since its January 1, 1999
launch. The Fund's exposure to Continental Europe was reduced during the sec-
ond half of the fiscal year given better opportunities elsewhere. UK stocks
gained almost 6% during the year, benefiting from numerous interest rate cuts
and an expanding economy. The overweight position was gradually reduced and
the allocation is now in line with the benchmark.
The emerging markets had a volatile year. Brazil's currency devaluation during
the first quarter of 1999 was a major hurdle, but markets handled it very
smoothly as it had been widely anticipated. Asian economies struggled early in
the period but rebounded as the benefits of large current account surpluses,
currency devaluations and improved global liquidity began to accrue. The
Fund's emerging markets allocation ended the fiscal year at benchmark weight.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. International Equity Fund and the
MSCI World ex-Us Index
M.S.D.&T. International Equity Fund MSCI World ex-US Index
----------------------------------- ----------------------
Jun-93 25,000 25,000
Aug-93 27,450 27,273
Oct-93 27,400 27,480
Dec-93 28,358 26,888
Feb-94 29,543 29,080
Apr-94 29,996 29,005
Jun-94 29,971 29,248
Aug-94 31,221 30,228
Oct-94 30,993 30,250
Dec-94 29,679 28,978
Feb-95 28,023 27,783
Apr-95 29,782 30,628
Jun-95 29,627 29,740
Aug-95 31,128 30,403
Oct-95 30,584 30,178
Dec-95 32,044 32,283
Feb-96 32,592 32,543
Apr-96 34,653 34,215
Jun-96 34,736 33,783
Aug-96 33,804 32,870
Oct-96 34,305 33,400
Dec-96 35,308 34,280
Feb-97 35,376 33,623
Apr-97 35,661 33,923
Jun-97 39,344 38,147
Aug-97 36,885 35,951
Oct-97 36,599 34,447
Dec-97 36,750 34,370
Feb-98 40,665 37,797
Apr-98 43,016 39,317
Jun-98 41,978 38,385
Aug-98 36,602 33,274
Oct-98 38,229 36,004
Dec-98 41,155 39,242
Feb-99 39,833 38,372
Apr-99 43,923 42,321
The MSCI World ex-US Index is an unmanaged index of foreign securities that
reflects a strategic emerging markets allocation.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
v
<PAGE>
The M.S.D.&T. Diversified Real Estate Fund
Real estate stock performance for the fiscal year ended May 31, 1999 was
marked by continued deterioration through mid-April, followed by a pronounced
improvement for the final month and a half. While the Fund and the respective
real estate indices still show negative total returns for the 52-week period,
the recent rally has propelled REITs to very respectable year-to-date returns
that surpass even the S&P 500 Index. The April REIT rally was sparked by sev-
eral factors including news reports that Warren Buffett had invested in sev-
eral REITs and a significant REIT sector investment made by a large public
pension fund. Since then, interest in and cash flow to the sector has improved
markedly.
The Fund had a -1.80% return for the fiscal year ended May 31, 1999, which on
a relative performance basis is 3.80% better than the -5.60% return of the
Wilshire Real Estate Index. Calendar year-to-date performance has been 9.32%
for the Fund versus 8.84% for the Wilshire Index(1). The Fund is overweight in
the office and apartment sectors while being relatively underweight in the re-
tail sector versus the unmanaged Index. Year-to-date the office and apartment
REITs in the Fund have returned 10.3% and 9.5% respectively while the retail
REITs had a -.05% return. The adviser does not intend to make any significant
adjustments to the Fund's allocation strategy in the near term.
The adviser expects the recent rapid price gain in REIT equities to slow as
the value of the stocks approach the underlying value of the real estate. With
the real estate market supply and demand fundamentals roughly in equilibrium
and with REIT operating company managements unlikely to issue significant eq-
uity, the adviser expects moderate appreciation combined with solid dividend
yields to drive total returns for REITs.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Diversified Real Estate and the
Wilshire Real Estate Index
M.S.D.&T. Diversified Real Estate Fund Wilshire Real Estate Index
-------------------------------------- --------------------------
Jul-97 25,000 25,000
Aug-97 24,925 24,815
Sep-97 27,000 27,262
Oct-97 26,170 26,103
Nov-97 26,597 26,628
Dec-97 27,105 27,222
Jan-98 26,569 26,838
Feb-98 26,314 26,494
Mar-98 26,722 27,016
Apr-98 26,181 26,165
May-98 26,078 25,914
Jun-98 26,001 25,777
Jul-98 24,567 23,983
Aug-98 22,435 21,491
Sep-98 23,579 22,694
Oct-98 22,954 22,252
Nov-98 23,297 22,621
Dec-98 23,428 22,173
Jan-99 22,973 21,614
Feb-99 22,545 21,282
Mar-99 22,438 21,265
Apr-99 24,927 23,314
May-99 25,610 23,711
The Wilshire Real Estate Index is an unmanaged index generally representative
of the U.S. REIT market.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
vi
<PAGE>
The M.S.D.&T. Limited Maturity Bond Fund
Fixed income markets produced modest returns for the twelve months ended May
31, 1999. Investors experienced a turbulent environment as interest rates on
Treasury securities declined dramatically in the summer and early fall in re-
sponse to the Russian debt crisis and the problems at Long Term Capital Manage-
ment. Conversely, as economic statistics pointed to continued strong domestic
economic growth and a bottoming of the observed inflation statistics, interest
rates rose along most sectors of the coupon curve during the latter half of the
fiscal year.
The Fund enjoyed a 4.63% total return for the fiscal year ended May 31, 1999.
By comparison, the Lehman Mutual Fund 1-5 Year Government/Corporate Index re-
turned 5.21%(1). The Lehman Mutual Fund Short (1-5 year) Government/Corporate
Index has replaced the Lehman Intermediate Government/Corporate Index as the
Fund's benchmark index. The new benchmark index has characteristics (average
maturity and average effective duration) that are closer to the operating pa-
rameters of the Limited Maturity Bond Fund.
Yield spreads on non-Treasury securities widened dramatically during the turbu-
lence in the first half of the fiscal year, only to narrow somewhat in the lat-
ter half. During the year, the Fund broadened its quality exposure by increas-
ing the "A" and "BAA" area of the corporate bond market while reducing U.S.
Treasury holdings. Additionally, the mortgage pass-through sector was increased
to garner higher yields. The Fund's average maturity was modestly increased
from 2.2 to 2.6 years.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Limited Maturity Bond Fund, the
Lehman Mutual Fund Short 1-5 Year Gov/Corp Bond Index and the
Lehman Intermediate Gov/Corp Bond Index
Limited Maturity Lehman 1-5 Year Lehman G/C Intermediate
Bond Fund G/C Bond Index Bond Index
---------------- --------------- -----------------------
Feb-91 25,000 25,000 25,000
May-91 25,251 25,600 25,428
Aug-91 25,888 26,340 26,220
Nov-91 26,806 27,308 27,285
Feb-92 27,204 27,779 27,805
May-92 27,697 28,306 28,375
Aug-92 28,701 29,403 29,660
Nov-92 28,631 29,362 29,560
Feb-93 29,653 30,521 31,020
May-93 29,895 30,781 31,325
Aug-93 30,635 31,553 32,400
Nov-93 30,670 31,675 32,438
Feb-94 30,700 31,755 32,460
May-94 30,175 31,289 31,705
Aug-94 30,626 31,798 32,290
Nov-94 30,284 31,506 31,845
Feb-95 31,496 32,613 33,168
May-95 32,930 33,912 34,790
Aug-95 33,401 34,437 35,345
Nov-95 34,425 35,337 36,465
Feb-96 34,542 35,727 36,730
May-96 34,044 35,613 36,388
Aug-96 34,473 36,182 36,913
Nov-96 36,167 37,452 38,593
Feb-97 36,017 37,601 38,568
May-97 36,468 38,121 39,075
Aug-97 37,284 38,936 40,031
Nov-97 38,110 39,727 41,036
Feb-98 38,857 40,481 41,874
May-98 39,439 41,071 42,528
Aug-98 40,267 42,055 43,835
Nov-98 40,980 42,927 45,039
Feb-99 41,017 42,921 44,800
May-99 41,263 43,212 44,809
The Lehman Intermediate Government/Corporate Bond Index is an unmanaged index
generally representative of the performance of intermediate term government and
corporate bonds. The Lehman Mutual Fund Short (1-5 Year) Government/Corporate
Bond Index is an unmanaged index generally representative of the performance of
government and corporate bonds with remaining maturities of between 1 and 5
years.
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 Fund
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
vii
<PAGE>
The M.S.D.&T. Total Return Bond Fund
The bond market experienced significant interest rate volatility and yield
spread fluctuations during the fiscal year ended May 31, 1999. For the first
six months of the period, bond market yields moved lower, gently at first as
the domestic economy appeared to slow, and then more dramatically with the on-
set of the international financial market crisis. During the world equity mar-
ket meltdown in October, corporate bond yield spreads to the Treasury market
increased to decade wide levels. However, the second half of the fiscal year
saw upward pressures on term interest rates and a narrowing in incremental
yields between bond market sectors, as the United States experienced robust
growth.
For the fiscal year ended May 31, 1999, the Total Return Bond Fund recorded a
total rate of return of 4.48% while its benchmark, the unmanaged Lehman Broth-
ers Aggregate Bond Index, returned 4.35%(1).
The Total Return Bond Fund began the fiscal year with an underweight position
vis-a-vis the Lehman Aggregate Bond Index in mortgage-backed securities and
corporate bonds. During the late summer and into the fall, Treasury issues
were sold and higher yielding debt instruments were added to the Fund. In ad-
dition, the portfolio's effective duration was extended as yield levels
dropped to generational lows. With the turn of the calendar year and the reas-
sessment that domestic economic activity would likely be higher than the mar-
ket's expectations, sales of longer term securities were initiated. These ma-
neuvers resulted in the Fund outperforming the unmanaged bond index.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Total Return Bond Fund and the
Lehman Aggregate Bond Index
Total Return Lehman Aggregate
------------ ----------------
Feb-98 25,000 25,000
Mar-98 25,100 25,086
Apr-98 25,222 25,217
May-98 25,423 25,456
Jun-98 25,599 25,672
Jul-98 25,702 25,726
Aug-98 25,958 26,146
Sep-98 26,469 26,757
Oct-98 26,440 26,616
Nov-98 26,617 26,767
Dec-98 26,718 26,848
Jan-99 26,897 27,038
Feb-99 26,516 26,565
Mar-99 26,675 26,711
Apr-99 26,778 26,797
May-99 26,561 26,561
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 indices.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
viii
<PAGE>
The M.S.D.&T. Maryland Tax-Exempt Bond Fund(4)
The Maryland municipal bond market landscape suffered from a severe drought in
supply throughout the fiscal year while at the same time facing insatiable de-
mand. The end result was a much lower general yield level in local municipal
credits as compared to national credits. In addition, a narrowing in quality
spreads within the Maryland market between higher rated and lower rated debt
transpired. The continued strong credit quality within the State also contrib-
uted to lower yield levels.
For the fiscal year ended May 31, 1999, the Maryland Tax-Exempt Bond Fund re-
corded a total rate of return of 3.81% while its benchmark, the unmanaged Leh-
man Brothers Municipal Bond Index, returned 4.67%(1).
The adviser maintained duration similar to that of the unmanaged Index while
positioning the Fund along the more attractive maturities on the yield curve.
A number of new high-quality credits were added to the Fund for better diver-
sification. The overall outlook for the State and its various municipalities
remains quite positive from a credit perspective and the taxable equivalent
yield the Fund offers to most Maryland in-state investors remains very attrac-
tive.
Comparison of Change in Value of $25,000 Investment In
M.S.D.&T. Maryland Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index
MD tax-exempt Lehman Muni bond
------------- ----------------
May-92 25,000 25,000
Nov-92 25,971 25,870
May-93 27,639 27,530
Nov-93 28,961 28,735
May-94 28,190 28,210
Nov-94 26,994 27,225
May-95 30,015 30,780
Nov-95 31,267 32,373
May-96 30,866 32,185
Nov-96 32,638 34,278
May-97 32,966 34,855
Nov-97 34,719 36,736
May-98 35,943 38,125
Nov-98 37,139 39,589
May-99 37,314 39,907
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
ix
<PAGE>
The M.S.D.&T. Intermediate Tax-Exempt Bond Fund(4)
Municipal bonds in the short and intermediate maturity range experienced the
same "seesaw" in yields that Treasuries did over the twelve months ended May
31, 1999. However, the municipal market continued to move with much less vola-
tility. For example, during this time period the 5-year U.S. Treasury Note
traded in a range of approximately 1.51% (4.08% to 5.59%) whereas 5-year AAA
general obligation municipals traded in a much narrower range of 0.34% (3.74%
to 4.08%). A high volume of new issues and continued credit quality improve-
ment of the nation's municipalities was experienced in this time period as
well.
The Fund's total rate of return for the fiscal year ended May 31, 1999 was
4.58% while its benchmark, the unmanaged Lehman Brothers 7-Year Municipal Bond
Index, returned 4.72%(1). The adviser maintained very high credit quality
throughout the period with over 90% of the issues rated AA or AAA. A few op-
portunities arose in certain states in reaction to various supply and demand
imbalances. For example, the exposure in Florida, Michigan, Kentucky and South
Carolina was increased in the Fund whereas the number of Illinois, Pennsylva-
nia and Virginia securities was decreased. The average maturity of the Fund
was maintained shorter than that of the Index during this time period as well.
The focus for this Fund will continue to be relative value analysis among dif-
ferent states and sectors with a general laddered maturity investment style.
Comparison of Change In Value of $25,000 Investment In
M.S.D.&T. Intermediate Tax-Exempt Bond Fund and the
Lehman 7-Year Municipal Bond Index
Intermediate Tax-Exempt Lehman 7 year MUNI
----------------------- ------------------
Feb-98 25,000 25,000
Mar-98 25,107 25,001
Apr-98 25,086 24,856
May-98 25,268 25,222
Jun-98 25,324 25,292
Jul-98 25,409 25,376
Aug-98 25,747 25,761
Sep-98 26,033 26,094
Oct-98 26,067 26,133
Nov-98 26,097 26,203
Dec-98 26,205 26,258
Jan-99 26,471 26,642
Feb-99 26,389 26,493
Mar-99 26,421 26,482
Apr-99 26,501 26,546
May-99 26,426 26,416
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 above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
x
<PAGE>
The M.S.D.&T. National Tax-Exempt Bond Fund(4)
The twelve months ended May 31, 1999 have been remarkable for municipal bond
investors. During this time period, municipal bond yields reached their most
attractive levels as a percentage of U.S. Treasury yields since the tax reform
scares of 1986. For example, 30-year AAA general obligation municipal debt was
yielding approximately 98% of the 30-year U.S. Treasury bond's yield during
the October global liquidity crisis. Even more astounding, 30-year AAA insured
revenue issues were yielding upwards of 104% of the 30-year Treasury while
still remaining federally tax-exempt on interest income. This past fiscal year
also was marked by heavy new issuance as the nation's municipalities financed
new projects and refinanced outstanding debt by taking advantage of the low
interest rate environment. A general improvement in credit quality and an
overall narrowing of quality spreads between municipal issues took shape as
well. So far in 1999, municipals have experienced muted volatility and per-
formed extremely well as compared to their Treasury counterparts during a ris-
ing interest rate environment.
The Fund's total rate of return for the fiscal year ended May 31, 1999 was
4.43% while its benchmark, the unmanaged Lehman Brothers Municipal Bond Index,
returned 4.67%(1). The adviser maintained very high credit quality throughout
the period with over 90% of the issues rated AA or AAA. A neutral to defensive
stance was taken in the portfolio throughout most of the period with more em-
phasis put on positioning along the municipal yield curve. The adviser intends
to maintain high credit quality and minimize exposure to questionable sectors
such as health care. The primary focus will continue to be on isolating rela-
tively attractive maturities on the yield curve, relative value analysis be-
tween different states and sectors while maintaining duration similar to that
of the benchmark.
Comparison of change In Value of $25,000 Investment In
M.S.D.&T. National Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index
National Tax Exempt Lehman Muni
------------------- -----------
Feb-98 25,000 25,000
Mar-98 25,172 25,022
Apr-98 25,063 24,909
May-98 25,410 25,303
Jun-98 25,504 25,402
Jul-98 25,550 25,466
Aug-98 25,927 25,860
Sep-98 26,250 26,184
Oct-98 26,244 26,184
Nov-98 26,337 26,275
Dec-98 26,433 26,341
Jan-99 26,767 26,654
Feb-99 26,616 26,537
Mar-99 26,635 26,574
Apr-99 26,677 26,641
May-99 26,536 26,486
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds.
The above index does not reflect the deduction of expenses associated with a
mutual fund such as investment management fees. The value of shares of the
Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
xi
<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>
Total Return Average Annual
for the Annualized Total Total Return
Inception one year ended Return for five years since inception
Date June 30, 1999 ended June 30, 1999 to June 30, 1999
--------- -------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Growth & Income Fund.... 2/28/91 21.15% 24.10% 17.45%
Equity Income Fund...... 3/1/98 16.86% N/A 16.01%
Equity Growth Fund...... 3/1/98 23.30% N/A 23.90%
International Equity
Fund................... 7/2/93 5.98% 8.22% 10.09%
Diversified Real Estate
Fund................... 8/1/97 -2.45% N/A 0.76%
Limited Maturity Bond
Fund................... 3/14/91 4.21% 6.47% 6.23%
Total Return Bond Fund.. 3/1/98 3.43% N/A 4.40%
Maryland Tax-Exempt Bond
Fund................... 6/2/92 2.08% 5.63% 5.61%
Intermediate Tax-Exempt
Bond Fund.............. 3/1/98 3.10% N/A 3.31%
National Tax-Exempt Bond
Fund................... 3/1/98 2.44% N/A 3.36%
</TABLE>
(2) Portfolio composition is subject to change.
(3) 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.
(4) The Maryland Tax-Exempt Bond, Intermediate Tax-Exempt Bond and National
Tax-Exempt Bond Funds' income may be subject to certain state and local taxes
and, depending on your tax status, the federal alternative minimum tax.
xii
<PAGE>
M.S.D.&T. Funds, Inc.
PRIME MONEY MARKET FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 18.1%
Domestic -- 6.6%
Bank of America
4.85%, 10/06/99.......................................... $10,000 $ 10,000,000
Nations Bank
4.86%, 07/12/99.......................................... 10,000 10,000,000
State Street Bank & Trust
4.85%, 06/29/99.......................................... 15,000 15,000,000
------------
35,000,000
------------
Yankee -- 11.5%
Bank of Montreal
4.87%, 06/17/99.......................................... 10,000 10,000,000
4.90%, 07/19/99.......................................... 7,000 7,000,000
Canadian Imperial Bank of Canada
4.83%, 06/14/99.......................................... 10,000 10,000,000
Rabobank Netherlands
4.81%, 06/14/99.......................................... 10,000 10,000,000
Swiss Bank Corp.
5.22%, 05/10/00.......................................... 12,000 11,998,911
Toronto Dominion
4.86%, 06/24/99.......................................... 12,000 12,000,000
------------
60,998,911
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $95,998,911)....................................... 95,998,911
------------
COMMERCIAL PAPER -- 58.7%
Banks -- 4.1%
SunTrust Banks, Inc.
4.80%, 06/23/99.......................................... 10,000 9,970,667
Toronto Dominion Holdings
4.77%, 06/09/99.......................................... 12,000 11,987,280
------------
21,957,947
------------
Beverages -- 3.7%
Coca-Cola Co., Inc.
4.77%, 08/17/99.......................................... 20,000 19,795,950
------------
Chemicals -- 4.1%
E.I. duPont deNemours & Co.
4.81%, 06/16/99.......................................... 22,000 21,955,908
------------
Consumer Goods -- 2.8%
Proctor & Gamble Co.
4.85%, 07/07/99.......................................... 15,000 14,927,250
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
COMMERCIAL PAPER -- Continued
Finance -- 21.0%
Associates Corp. N.A.
4.79%, 08/09/99.......................................... $20,000 $ 19,816,383
Centric Capital Corp.
4.87%, 07/20/99.......................................... 12,354 12,272,110
4.84%, 09/13/99.......................................... 10,000 9,860,178
CIT Group Holdings, Inc.
4.78%, 07/13/99.......................................... 12,000 11,933,080
General Electric Capital Corp.
4.84%, 07/20/99.......................................... 12,000 11,920,947
4.81%, 08/03/99.......................................... 10,000 9,915,825
KFW International Financial, Inc.
4.79%, 06/23/99.......................................... 14,000 13,959,019
Norwest Financial, Inc.
4.82%, 06/04/99.......................................... 10,000 9,995,983
4.80%, 06/14/99.......................................... 12,000 11,979,200
------------
111,652,725
------------
Foods -- 2.7%
Campbell Soup
4.83%, 02/01/00.......................................... 15,000 14,506,937
------------
Petroleum -- 4.2%
Chevron Transport Corp.
4.80%, 06/11/99.......................................... 22,000 21,970,667
------------
Pharmaceuticals -- 4.4%
Pfizer, Inc.
4.75%, 06/03/99.......................................... 23,000 22,993,930
------------
Telecommunications -- 3.8%
BellSouth Corp.
4.76%, 07/26/99.......................................... 20,000 19,854,556
------------
Utilities--Electric -- 7.9%
Duke Power Co.
4.77%, 07/16/99.......................................... 12,000 11,928,450
Northern Power Co.
4.84%, 08/23/99.......................................... 17,000 16,810,299
TECO Finance Corp.
4.82%, 06/01/99.......................................... 13,100 13,100,000
------------
41,838,749
------------
TOTAL COMMERCIAL PAPER
(Cost $311,454,619)...................................... 311,454,619
------------
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CORPORATE BONDS -- 6.8%
Financial Services
First Chicago Corp.
9.875%, 07/01/99......................................... $ 4,000 $ 4,013,083
Goldman Sachs, FRN**
5.06%, 06/02/99.......................................... 10,000 10,001,475
Merrill Lynch, FRN**
4.79%, 06/30/99.......................................... 10,000 10,000,000
J.P. Morgan & Co., Inc., FRN**
4.85%, 07/01/99.......................................... 12,000 11,999,310
------------
TOTAL CORPORATE BONDS
(Cost $36,013,868)....................................... 36,013,868
------------
REPURCHASE AGREEMENTS -- 16.9%
Banc of America Securities, LLC
(Agreement dated 5/28/99 to be repurchased at $19,868,525
collateralized by $21,270,000 (Value $20,257,697) U.S.
Treasury Bills due 05/25/00) 4.77%, 06/01/99............ 19,858 19,858,000
Merrill Lynch Government Securities, Inc.
(Agreement dated 5/28/99 to be repurchased at $20,010,556
collateralized by $19,690,000 (Value $20,412,091) U.S.
Treasury Notes, 6.25%, due 02/15/03) 4.75%, 06/01/99.... 20,000 20,000,000
J.P. Morgan Securities, Inc.
(Agreement dated 5/28/99 to be repurchased at $20,010,578
collateralized by $15,324,000 (Value $20,404,361) U.S.
Treasury Notes, 8.75%, due 08/15/20) 4.76%, 06/01/99.... 20,000 20,000,000
Wachovia Bank N.A.
(Agreement dated 5/28/99 to be repurchased at $30,015,900
collateralized by $20,552,000 (Value $30,614,780) U.S.
Treasury Notes, 10.625%, due 08/15/15) 4.77%, 06/01/99.. 30,000 30,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $89,858,000)....................................... 89,858,000
------------
</TABLE>
<TABLE>
<CAPTION>
Value
-----
<S> <C>
TOTAL INVESTMENTS IN
SECURITIES -- 100.5%
(Cost
$533,325,398*)... $533,325,398
LIABILITIES IN
EXCESS OF OTHER
ASSETS -- (0.5)%.. (2,490,067)
------------
NET ASSETS --
100.0%
(equivalent to
$1.00 per share
based on
530,941,026 shares
outstanding)...... $530,835,331
============
NET ASSET VALUE,
OFFERING AND
REDEMPTION PRICE
PER SHARE
($530,835,331 /
530,941,026)..... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1999 and the maturity date shown is the
shorter 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.
2
<PAGE>
M.S.D.&T. Funds, Inc.
GOVERNMENT MONEY MARKET FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 83.1%
Federal Home Loan Bank -- 24.6%
Discount Notes
4.73%, 06/16/99....................................... $10,000 $ 9,980,292
4.74%, 06/23/99....................................... 10,000 9,971,033
4.72%, 08/06/99....................................... 15,000 14,870,200
4.76%, 08/20/99....................................... 15,000 14,841,333
4.82%, 11/05/99....................................... 8,000 7,831,836
Floating Rate Notes**
5.07%, 06/24/99....................................... 8,000 7,999,338
5.08%, 07/12/99....................................... 20,000 19,993,074
Notes
5.02%, 06/03/99....................................... 9,150 9,149,720
4.67%, 07/16/99....................................... 15,000 14,911,687
------------
109,548,513
------------
Federal Home Loan Mortgage Corp. -- 24.5%
Discount Notes
4.75%, 06/22/99....................................... 12,000 11,966,750
4.715%, 06/29/99...................................... 15,000 14,944,992
4.69%, 07/02/99....................................... 13,000 12,947,498
4.76%, 07/14/99....................................... 15,000 14,914,717
4.73%, 08/13/99....................................... 15,000 14,856,129
4.80%, 08/16/99....................................... 15,000 14,848,000
4.79%, 08/24/99....................................... 20,000 19,776,467
Notes
5.54%, 08/13/99....................................... 5,000 5,007,889
------------
109,262,442
------------
Federal National Mortgage Association -- 25.0%
Discount Notes
4.76%, 06/02/99....................................... 15,000 14,998,011
4.80%, 06/08/99....................................... 12,000 11,988,800
4.76%, 06/18/99....................................... 15,000 14,966,283
4.75%, 06/22/99....................................... 10,000 9,972,292
4.76%, 06/25/99....................................... 10,000 9,968,333
4.74%, 07/19/99....................................... 15,000 14,905,200
4.74%, 08/05/99....................................... 10,000 9,914,417
4.72%, 09/24/99....................................... 15,000 14,773,833
Floating Rate Notes**
4.82%, 09/17/99....................................... 10,000 10,000,488
------------
111,487,657
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Student Loan Marketing Association -- 9.0%
Floating Rate Notes**
5.27%, 06/17/99.......................................... $15,000 $ 15,000,000
5.27%, 07/12/99.......................................... 10,000 9,998,151
4.98%, 08/18/99.......................................... 15,000 15,000,000
------------
39,998,151
------------
TOTAL AGENCY OBLIGATIONS
(Cost $370,296,763)...................................... 370,296,763
------------
REPURCHASE AGREEMENTS -- 17.1%
Banc of America Securities, LLC
(Agreement dated 5/28/99 to be repurchased at $15,908,681
collateralized by $15,900,000 (Value $16,724,594) U.S.
Treasury Notes, 7.75%, due 11/30/99) 4.77%, 06/01/99.... 16,380 16,380,000
J.P. Morgan Securities, Inc.
(Agreement dated 5/28/99 to be repurchased at $20,010,578
collateralized by $15,324,000 (Value $20,404,361) U.S.
Treasury Notes, 8.75%, due 8/15/20) 4.76%, 06/01/99..... 20,000 20,000,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/28/99 to be repurchased at $20,010,600
collateralized by $16,435,000 (Value $20,386,713) U.S.
Treasury Notes, 11.875%, due 11/15/03) 4.77%, 06/01/99.. 20,000 20,000,000
Wachovia Bank N.A.
(Agreement dated 5/28/99 to be repurchased at $20,010,600
collateralized by $13,701,000 (Value $20,409,357) U.S.
Treasury Notes, 10.625%, due 8/15/15) 4.77%, 06/01/99... 20,000 20,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $76,380,000)....................................... 76,380,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
M.S.D.&T. Funds, Inc.
GOVERNMENT MONEY MARKET FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Value
-----
<S> <C>
TOTAL INVESTMENTS IN
SECURITIES -- 100.2%
(Cost
$446,676,763*)... $ 446,676,763
LIABILITIES IN
EXCESS OF OTHER
ASSETS -- (0.2)%.. (1,154,558)
-------------
NET ASSETS --
100.0%
(equivalent to
$1.00 per share
based on
445,648,410 shares
outstanding)...... $ 445,522,205
=============
NET ASSET VALUE,
OFFERING AND
REDEMPTION PRICE
PER SHARE
($445,522,205 /
445,648,410)..... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1999 and the maturity date shown is the
shorter of (i) the next interest readjustment date or (ii) the date on which
the principal amount can be recovered through demand.
See Accompanying Notes to Financial Statements.
4
<PAGE>
M.S.D.&T. Funds, Inc.
TAX-EXEMPT MONEY MARKET FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
ALASKA -- 0.7%
Alaska Marine, VRDN, Exxon Corp., Valdez Project**
3.35%, 06/01/99........................................... $1,000 $ 1,000,000
------------
DISTRICT OF COLUMBIA -- 0.7%
Howard University, Washington, D.C., RB, ETM
6.80%, 10/01/99........................................... 1,000 1,012,169
------------
FLORIDA -- 3.8%
Volusia County Health Facilities, VRDN, FGIC, Aces-Pooled
Hospital Loan Program, SPA: SunTrust Bank**
3.35%, 06/07/99........................................... 5,500 5,500,000
------------
ILLINOIS -- 9.4%
Bedford Park Illinois, VRDN, Environmental Revenue,
Minnesota Mining & Manufacturing**
3.40%, 06/07/99........................................... 500 500,000
Illinois Development Finance Authority, VRDN, GTD BP Amoco
Oil PCR **
3.40%, 06/01/99........................................... 1,200 1,200,000
Illinois Educational Facilities, VRDN, Northwestern
University, LIC: First National Bank of Chicago**
3.30%, 06/07/99........................................... 4,000 4,000,000
Illinois Educational Facilities, VRDN, Northwestern
University, SPA: Northern Trust Co.**
3.30%, 06/07/99........................................... 1,700 1,700,000
Illinois Health Facility, TECP, St Luke's Medical Center,
LOC: Northern Trust Co.
2.95%, 06/10/99........................................... 2,100 2,100,000
3.15%, 06/28/99........................................... 4,010 4,010,000
------------
13,510,000
------------
KENTUCKY -- 1.4%
Jefferson County, TECP, PCR, Louisville Gas & Electric
2.80%, 07/21/99........................................... 2,000 2,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
LOUISIANA -- 6.1%
East Baton Rouge Parish, VRDN, PCR, Exxon Co.**
3.35%, 06/01/99........................................... $1,300 $ 1,300,000
Plaquemine Parish Port & Harbor Terminal District, TECP,
GTD: TECO Energy, Inc.
2.95%, 06/09/99........................................... 2,700 2,700,000
3.20%, 07/12/99........................................... 3,500 3,500,000
St. Charles Parish, VRDN, PCRB, Shell Oil Co. Project**
3.35%, 06/01/99........................................... 1,200 1,200,000
------------
8,700,000
------------
MARYLAND -- 2.1%
Maryland State & Local Facilities, GO
5.00%, 03/15/00........................................... 2,000 2,028,818
Maryland Department of Transportation, RB,
Prerefunded 11/01/99 @ 102
6.80%, 11/01/99........................................... 1,000 1,035,541
------------
3,064,359
------------
MICHIGAN -- 3.2%
University of Michigan, VRDN, Hospital Revenue**
3.30%, 06/01/99........................................... 4,620 4,620,000
------------
MINNESOTA -- 4.2%
Minneapolis, GO, Special School District, University
Gateway Project
3.20%, 06/07/99........................................... 6,000 6,000,000
------------
MISSISSIPPI -- 1.5%
Harrison County, VRDN, PCRB, E.I. duPont deNemours & Co.**
3.30%, 06/01/99........................................... 1,100 1,100,000
Jackson County, VRDN, Port Facilities, Chevron USA, Inc.**
3.40%, 06/01/99........................................... 1,000 1,000,000
------------
2,100,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
M.S.D.&T. Funds, Inc.
TAX-EXEMPT MONEY MARKET FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MISSOURI -- 2.6%
Boone County, IDA, VRDN, PCR, GTD Minnesota Mining &
Manufacturing Project**
3.40%, 06/07/99............................................ $ 500 $ 500,000
Missouri State Health & Educational Facilities, VRDN,
Washington University Project, SPA: Morgan Guaranty Trust
Co. NY**
3.25%, 06/07/99............................................ 3,190 3,190,000
------------
3,690,000
------------
NEBRASKA -- 1.1%
Nebraska Public Power, RB, ETM
4.125%, 01/01/00........................................... 1,500 1,509,599
------------
NEVADA -- 1.8%
Clark County School District, INS: FGIC, Prerefunded 5/01/00
@ 102
7.20%, 05/01/00............................................ 2,500 2,639,094
------------
NORTH CAROLINA -- 12.9%
City of Charlotte, Water & Sewer, GO
4.75%, 02/01/00............................................ 2,980 3,013,917
City of Durham, VRDN, COP, SPA: Wachovia Bank N.A.**
3.30%, 06/07/99............................................ 5,000 5,000,000
City of Winston-Salem, VRDN, COP, SPA: Wachovia Bank N.A.**
3.25%, 06/07/99............................................ 3,000 3,000,000
North Carolina Eastern Municipal Power Agency, TECP, LOC:
Canadian Imperial Bank
3.25%, 07/08/99............................................ 2,500 2,500,000
2.70%, 07/14/99............................................ 2,500 2,500,000
North Carolina Educational Facilities, VRDN, SPA: Wachovia
Bank N.A., Wake Forest University Project**
3.25%, 06/07/99............................................ 2,500 2,500,000
------------
18,513,917
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
OHIO -- 7.4%
Cuyahoga County, VRDN, Hospital Revenue, Cleveland Clinic**
3.40%, 06/01/99........................................... $1,800 $ 1,800,000
3.30%, 06/07/99........................................... 3,000 3,000,000
Warren County, Health Care, VRDN, Otterbein Homes, LOC:
Fifth Third Bank**
3.35%, 06/07/99........................................... 5,800 5,800,000
------------
10,600,000
------------
OREGON -- 1.8%
State of Oregon, GO, VRDN, Veterans Welfare Board, LOC:
Morgan Guaranty Trust Co. NY**
3.20%, 06/07/99........................................... 2,600 2,600,000
------------
PENNSYLVANIA -- 2.6%
Delaware County, IDA, VRDN, General Electric Capital
Corp.**
3.20%, 06/07/99........................................... 2,200 2,200,000
Pennsylvania State, GO, Prerefunded 5/01/00 @ 101.5
7.00%, 05/01/00........................................... 1,475 1,547,261
------------
3,747,261
------------
SOUTH CAROLINA -- 4.9%
Berkeley County, VRDN, PCR, Amoco Chemical Co. Project**
3.40%, 06/01/99........................................... 2,200 2,200,000
York County, PCR, TECP, Duke Power Project
2.70%, 06/17/99........................................... 4,800 4,800,000
------------
7,000,000
------------
TEXAS -- 19.1%
City of Austin, TECP, LOC: Morgan Guaranty Trust Co. NY
3.25%, 06/25/99........................................... 1,150 1,150,000
Corpus Christi, GO, GTD, Independent School District
5.00%, 08/15/99........................................... 1,875 1,882,249
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
M.S.D.&T. Funds, Inc.
TAX-EXEMPT MONEY MARKET FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
TEXAS -- Continued
Gulf Coast Waste Disposal Authority, PCR, VRDN, Exxon
Project**
3.35%, 06/01/99.......................................... $2,500 $ 2,500,000
Harris County, Health Facilities Development, VRDN,
Methodist Hospital, SPA: Morgan Guaranty Trust Co. NY**
3.40%, 06/01/99.......................................... 1,000 1,000,000
Harris County, Health Facilities Development, VRDN, RB,
St. Luke's Episcopal Hospital Project, SPA: Morgan
Guaranty Trust Co. NY**
3.25%, 06/01/99.......................................... 5,000 5,000,000
North Central Texas Health Facilities Development, VRDN,
RB, Presbyterian Medical Center, SPA: Bank of America
Corp.**
3.25%, 06/01/99.......................................... 2,700 2,700,000
North Central Texas Health Facilities Development, VRDN,
RB, Presbyterian Medical Center, SPA: NationsBank**
3.25%, 06/01/99.......................................... 4,100 4,100,000
State of Texas, GO, TECP
3.35%, 06/06/99.......................................... 5,000 5,000,000
State of Texas, Water Development, VRDN, SPA:
Canadian Imperial Bank**
3.40%, 06/01/99.......................................... 4,000 4,000,000
------------
27,332,249
------------
VIRGINIA -- 1.1%
City of Richmond, GO, Prerefunded 1/15/00 @ 102
6.875%, 01/15/00......................................... 1,500 1,563,813
------------
WASHINGTON -- 5.1%
Pierce County, Economic Development, VRDN, RB, Sea-Land
Services, Inc. Project, LOC: Wachovia Bank N.A.**
3.30%, 06/07/99.......................................... 3,000 3,000,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
WASHINGTON -- Continued
Washington State Higher
Education Facilities,
Prerefunded 11/01/99 @ 100,
Seattle University Project
7.35%, 11/01/99................ $4,185 $ 4,260,492
------------
7,260,492
------------
WISCONSIN -- 0.9%
State of Wisconsin, GO
4.80%, 11/01/99................ 1,250 1,259,096
------------
WYOMING -- 0.9%
Lincoln County, VRDN, PCRB,
Exxon Corp. Project**
3.40%, 06/01/99................ 1,300 1,300,000
------------
TOTAL MUNICIPAL BONDS
(Cost $136,522,049)............ 136,522,049
------------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 4.5%
Goldman Sachs Financial Square
Tax-Free Money Market Fund..... 3,740,193 3,740,193
Provident Institutional Funds --
MuniFund....................... 2,688,580 2,688,580
------------
TOTAL INVESTMENT COMPANIES
(Cost $6,428,773).............. 6,428,773
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.8%
(Cost $142,950,822*)............ 142,950,822
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.2%............ 269,911
------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share
based on 143,229,375 shares
outstanding)................... $143,220,733
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
($143,220,733 / 143,229,375)... $1.00
=====
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 1999 and the maturity date shown is the
shorter of (i) the next interest readjustment date or (ii) the date on
which the principal amount can be recovered through demand.
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. Funds, Inc.
GROWTH & INCOME FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- 98.6%
Airlines -- 3.2%
Southwest Airlines Co.................................. 421,800 $ 13,523,962
------------
Banks -- 5.9%
Comerica, Inc.......................................... 70,000 4,230,625
J.P. Morgan & Co....................................... 60,400 8,414,475
Regions Financial Corp................................. 110,000 4,166,250
SunTrust Banks, Inc.................................... 125,700 8,484,750
------------
25,296,100
------------
Beverages -- 2.2%
Pepsico, Inc........................................... 262,900 9,415,106
------------
Chemicals -- 2.7%
Air Products & Chemicals, Inc.......................... 85,800 3,517,800
E.I. duPont deNemours & Co............................. 34,100 2,231,419
RPM, Inc............................................... 422,250 5,858,719
------------
11,607,938
------------
Computer Equipment -- 7.9%
Hewlett-Packard Co..................................... 138,200 13,033,988
I B M.................................................. 177,200 20,610,575
------------
33,644,563
------------
Computer Services -- 0.4%
America Online, Inc.*.................................. 14,200 1,695,125
------------
Computer Software -- 5.5%
Cabletron Systems*..................................... 130,000 1,933,750
Cisco Systems, Inc.*................................... 156,200 17,006,275
Microsoft*............................................. 55,500 4,478,156
------------
23,418,181
------------
Consumer Goods -- 8.1%
Colgate-Palmolive Co................................... 90,900 9,078,637
Gillette Co............................................ 113,100 5,768,100
Newell Rubbermaid, Inc................................. 209,400 8,480,700
Procter & Gamble Co.................................... 76,100 7,105,837
Unilever N V........................................... 64,375 4,204,492
------------
34,637,766
------------
Electrical Equipment -- 4.5%
Emerson Electric Co.................................... 122,600 7,831,075
General Electric Co.................................... 110,250 11,211,047
------------
19,042,122
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Electronics -- 3.0%
Intel Corp............................................. 197,000 $ 10,650,312
3Com Corp.*............................................ 75,000 2,062,500
------------
12,712,812
------------
Financial Services -- 1.2%
Freddie Mac............................................ 87,000 5,073,188
------------
Food Products -- 5.4%
Bestfoods.............................................. 60,000 3,000,000
Conagra................................................ 140,900 3,672,206
McCormick & Co., Inc................................... 70,600 2,144,475
Nestle Registered ADR.................................. 86,900 7,827,952
Pioneer Hi-Bred International.......................... 168,000 6,300,000
------------
22,944,633
------------
Industrial Goods -- 1.8%
Corning, Inc........................................... 141,700 7,740,363
------------
Insurance -- 6.1%
Berkshire Hathaway, Inc.*.............................. 3,196 7,408,328
Chubb Corp............................................. 102,000 7,146,375
Jefferson Pilot Corp................................... 167,650 11,347,809
------------
25,902,512
------------
Machinery & Heavy Equipment -- 4.0%
Caterpillar, Inc....................................... 143,800 7,891,025
Illinois Tool Works, Inc............................... 121,120 9,295,960
------------
17,186,985
------------
Medical Instruments & Supplies -- 2.1%
Johnson & Johnson...................................... 94,900 8,790,113
------------
Office Equipment -- 1.3%
Pitney Bowes, Inc...................................... 88,700 5,654,625
------------
Oil/Gas Equipment & Services -- 2.4%
Halliburton Co......................................... 84,572 3,499,167
Schlumberger Ltd. ADR.................................. 112,300 6,759,056
------------
10,258,223
------------
Oil & Gas Exploration Product & Services -- 2.6%
Chevron Corp........................................... 78,100 7,238,894
Mobil Corp............................................. 40,000 4,050,000
------------
11,288,894
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
M.S.D.&T. Funds, Inc.
GROWTH & INCOME FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Pharmaceuticals -- 15.5%
Abbott Laboratories.................................... 109,400 $ 4,943,513
American Home Products................................. 70,000 4,033,750
Amgen, Inc.*........................................... 157,400 9,955,550
Bristol-Myers Squibb Co................................ 174,400 11,968,200
Covance, Inc.*......................................... 207,200 4,390,050
Merck & Co., Inc....................................... 173,000 11,677,500
Pfizer, Inc............................................ 115,480 12,356,360
Schering Plough Corp................................... 155,800 7,020,738
------------
66,345,661
------------
Retail Department Stores -- 5.4%
Home Depot, Inc........................................ 86,000 4,891,250
May Department Stores Co............................... 170,700 7,393,444
Nordstrom, Inc......................................... 50,000 1,775,000
Wal-Mart Stores, Inc................................... 208,400 8,883,050
------------
22,942,744
------------
Telecommunications -- 3.2%
BellSouth Corp......................................... 74,000 3,491,875
Lucent Technologies, Inc............................... 181,072 10,298,470
------------
13,790,345
------------
Tobacco -- 1.9%
Philip Morris, Inc..................................... 212,820 8,206,871
------------
Utilities-Telephone -- 2.3%
MCI WorldCom, Inc.*.................................... 113,097 9,768,753
------------
TOTAL COMMON STOCK
(Cost $241,371,543).................................... 420,887,585
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- 1.6%
Banc of America Securities, LLC
(Agreement dated 5/28/99 to be repurchased at
$3,874,052 collateralized by $4,030,000 (Value
$3,955,002) U.S. Treasury Bills, due 10/21/99) 4.77%,
06/01/99............................................. $3,872 $ 3,872,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/28/99 to be repurchased at
$3,001,590 collateralized by $2,880,000 (Value
$3,070,126) U.S. Treasury Notes, 7.625%, due 2/15/07)
4.77%, 06/01/99...................................... 3,000 3,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,872,000)............................................ 6,872,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 100.2%
(Cost $248,243,545**)........................................ 427,759,585
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2)%............... (721,967)
------------
NET ASSETS -- 100.0%
(equivalent to $24.43 per share based on 17,479,070 shares
outstanding)................................................. $427,037,618
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($427,037,618 / 17,479,070).................................. $24.43
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $248,385,223. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost................................ $183,893,771
Excess of tax cost over value................................ $ (4,519,409)
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY INCOME FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- 95.0%
Aerospace -- 6.1%
Boeing Corp. .......................................... 110,000 $ 4,647,500
Kaman Corp............................................. 129,406 1,714,630
Lockheed Martin Corp................................... 85,000 3,437,187
Raytheon Co. -- Class B................................ 54,300 3,695,794
United Technologies.................................... 9,000 5,585,625
------------
19,080,736
------------
Apartments -- 0.3%
Archstone Communities.................................. 45,000 1,012,500
------------
Banking -- 4.4%
First Union Corp. N.C. ................................ 76,140 3,507,199
J. P. Morgan & Co...................................... 32,306 4,500,630
Regions Financial Corp. ............................... 72,300 2,738,362
Union Planters Corp.................................... 72,000 2,974,500
------------
13,720,691
------------
Beverages -- 1.0%
Pepsico, Inc........................................... 84,000 3,008,250
------------
Building Products -- 0.8%
Armstrong World Industries............................. 45,000 2,621,250
------------
Chemicals -- 2.1%
E.I. duPont deNemours & Co. ........................... 100,562 6,580,526
------------
Computer Equipment & Software -- 2.2%
Autodesk, Inc.......................................... 30,000 828,750
Electronic Data Services Corp. ........................ 109,900 6,181,875
------------
7,010,625
------------
Consumer Goods -- 3.0%
Black & Decker......................................... 47,000 2,676,061
Procter & Gamble Co.................................... 60,000 5,602,500
V F Corp. ............................................. 35,060 1,612,760
------------
9,891,321
------------
Electrical Equipment -- 2.2%
General Electric Co.................................... 67,000 6,813,063
------------
Electric Utility -- 2.8%
Edison International................................... 85,000 2,337,500
FPL Group, Inc......................................... 25,000 1,454,687
Southern Co. .......................................... 85,000 2,411,875
Texas Utilities........................................ 60,000 2,700,000
------------
8,904,062
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Electronics -- 2.0%
Intel Corp. ........................................... 80,000 $ 4,325,000
3Com Corp.*............................................ 75,000 2,062,500
------------
6,387,500
------------
Engineering -- 1.4%
Fluor Corp............................................. 120,000 4,470,000
------------
Financial Services -- 2.7%
CIT Group, Inc......................................... 114,500 3,320,500
Washington Mutual, Inc. ............................... 134,400 5,132,400
------------
8,452,900
------------
Food Products -- 1.4%
Bestfoods.............................................. 43,008 2,150,400
McCormick & Co., Inc. ................................. 70,879 2,152,950
------------
4,303,350
------------
Food Processing -- 0.9%
Universal Foods........................................ 120,000 2,752,500
------------
Industrial Goods -- 1.1%
Corning, Inc. ......................................... 30,000 1,638,750
Harsco Corp. .......................................... 54,758 1,786,480
------------
3,425,230
------------
Insurance -- 7.2%
Aetna, Inc. ........................................... 42,000 3,814,125
Chubb Corp. ........................................... 61,036 4,276,335
HSB Group.............................................. 92,000 3,777,750
Jefferson Pilot Corp................................... 53,475 3,619,589
Lincoln National Corp.................................. 40,000 4,070,000
UNUM Corp.............................................. 55,000 2,959,688
------------
22,517,487
------------
Iron/Steel -- 0.7%
Worthington Industries, Inc. .......................... 165,600 2,121,750
------------
Machinery & Equipment -- 4.7%
Browning-Ferris Industries............................. 76,182 3,161,553
Caterpillar, Inc....................................... 85,000 4,664,375
Deere & Co. ........................................... 112,211 4,271,031
Stanley Works.......................................... 80,000 2,605,000
------------
14,701,959
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY INCOME FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Manufacturing -- 3.9%
Eastman Kodak Co....................................... 60,000 $ 4,057,500
Fleetwood Enterprises.................................. 50,000 1,271,875
International Flavors & Fragrances..................... 55,000 2,261,875
Minnesota Mining & Manufacturing....................... 30,000 2,572,500
Tupperware Corp. ...................................... 95,000 2,113,750
------------
12,277,500
------------
Medical Equipment & Supplies -- 2.1%
Johnson & Johnson...................................... 70,000 6,483,750
------------
Metals & Mining -- 2.4%
DeBeers ADR............................................ 50,000 1,071,875
Homestake Mining Co.................................... 90,007 703,180
Phelps Dodge Corp...................................... 70,000 3,626,875
Timken Co. ............................................ 104,000 2,138,500
------------
7,540,430
------------
Natural Gas Utility -- 2.4%
Equitable Resources, Inc. ............................. 120,386 3,799,683
Keyspan Energy Corp. .................................. 139,934 3,778,218
------------
7,577,901
------------
Office Properties -- 0.7%
Equity Office Properties............................... 75,000 2,118,750
------------
Office/Business Equipment & Supplies -- 2.7%
Deluxe Corp. .......................................... 110,000 3,966,875
Hewlett-Packard Co. ................................... 48,500 4,574,156
------------
8,541,031
------------
Oil/Gas Equipment & Services -- 3.5%
Enron Corp............................................. 30,000 2,141,250
Halliburton Co......................................... 100,000 4,137,500
Schlumberger Ltd. ADR.................................. 80,796 4,862,909
------------
11,141,659
------------
Oil & Gas Exploration Product & Services -- 10.8%
Atlantic Richfield Co. ................................ 39,688 3,321,390
BP Amoco ADR........................................... 70,000 7,498,750
Chevron Corp........................................... 69,697 6,460,041
Exxon Corp............................................. 90,956 7,265,110
Mobil Corp. ........................................... 64,596 6,540,345
Murphy Oil Corp. ...................................... 58,434 2,866,918
------------
33,952,554
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Paper Products -- 1.5%
P.H. Glatfelter Co. ................................... 80,179 $ 1,067,383
Potlatch Corp. ........................................ 90,000 3,543,750
------------
4,611,133
------------
Pharmaceuticals -- 6.5%
American Home Products................................. 90,000 5,186,250
Bristol-Myers Squibb Co. .............................. 90,000 6,176,250
Merck & Co., Inc. ..................................... 72,000 4,860,000
Pfizer, Inc............................................ 40,000 4,280,000
------------
20,502,500
------------
Printing & Publishing -- 2.2%
R.R. Donnelley & Sons Co. ............................. 90,000 3,262,500
Readers Digest Assn. -- Class A........................ 25,000 915,625
Washington Post Co..................................... 5,012 2,788,865
------------
6,966,990
------------
Railroads -- 0.9%
Norfolk Southern Corp. ................................ 86,968 2,848,202
------------
Retail Stores -- 2.3%
J.C. Penney............................................ 85,000 4,393,437
May Department Stores Co. ............................. 62,700 2,715,694
------------
7,109,131
------------
Telecommunications -- 3.3%
BellSouth Corp......................................... 90,000 4,246,875
GTE Corp. ............................................. 95,000 5,990,937
------------
10,237,812
------------
Tobacco -- 2.8%
Gallaher Group ADR..................................... 124,973 3,124,325
Philip Morris, Inc. ................................... 150,000 5,784,375
------------
8,908,700
------------
TOTAL COMMON STOCK
(Cost $162,752,937).................................... 298,593,743
------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY INCOME FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- 4.8%
Banc of America Securities, LLC
(Agreement dated 5/28/99 to be repurchased at $8,116,299
collateralized by $8,440,000 (Value $8,282,932) U.S.
Treasury Bills, due 10/21/99) 4.77%, 06/01/99.......... $8,112 $ 8,112,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/28/99 to be repurchased at $7,003,710
collateralized by $6,940,000 (Value $7,129,388) U.S.
Treasury Notes, 8.25%, due 05/15/05) 4.77%, 06/01/99... 7,000 7,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $15,112,000)...................................... 15,112,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.8%
(Cost $177,864,937**)........................................... 313,705,743
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%.................... 600,442
------------
NET ASSETS -- 100.0%
(equivalent to $10.25 per share based on 30,651,908 shares
outstanding).................................................... $314,306,185
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($314,306,185 / 30,651,908)..................................... $10.25
======
</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................................ $138,785,656
Excess of tax cost over value................................ $ (2,944,850)
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY GROWTH FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- 95.1%
Airlines -- 2.0%
Southwest Airlines Co. ................................... 29,100 $ 933,019
---------
Banking -- 2.3%
Comerica, Inc. ........................................... 7,500 453,281
Wells Fargo Co. .......................................... 16,000 640,000
---------
1,093,281
---------
Beverages -- 1.5%
Coca-Cola Co. ............................................ 3,000 204,937
Pepsico, Inc. ............................................ 13,600 487,050
---------
691,987
---------
Broadcasting -- 1.6%
Cox Communications*....................................... 20,000 781,250
---------
Communications Equipment -- 4.5%
Airtouch Communications, Inc.* ........................... 7,000 703,500
Sterling Commerce, Inc.* ................................. 37,000 1,438,375
---------
2,141,875
---------
Computer Equipment, Software and Services -- 12.9%
America Online, Inc.* .................................... 3,000 358,125
American Power Conversion* ............................... 20,000 778,750
Autodesk, Inc. ........................................... 29,000 801,125
Cisco Systems, Inc.* ..................................... 9,900 1,077,862
Gateway 2000, Inc.* ...................................... 11,000 668,938
I B M .................................................... 8,300 965,394
Microsoft*................................................ 18,000 1,452,375
Yahoo!, Inc.*............................................. 200 29,650
---------
6,132,219
---------
Consumer Goods -- 3.2%
Colgate-Palmolive Co...................................... 5,500 549,312
Gap, Inc. ................................................ 8,500 531,781
Newell Rubbermaid, Inc. .................................. 10,000 405,000
---------
1,486,093
---------
Cruise Lines -- 1.5%
Carnival Cruise........................................... 17,200 705,200
---------
Electrical & Electronic -- 3.4%
Avnet, Inc. .............................................. 20,000 871,250
Teradyne, Inc.* .......................................... 14,000 739,375
---------
1,610,625
---------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Electrical Equipment -- 2.2%
General Electric Co. .................................... 10,400 $1,057,550
----------
Electronics -- 6.2%
EMC Corp.* .............................................. 3,000 298,875
Intel Corp. ............................................. 20,000 1,081,250
Motorola, Inc. .......................................... 9,000 745,312
3Com Corp.* ............................................. 29,500 811,250
----------
2,936,687
----------
Entertainment -- 1.5%
Walt Disney Co. ......................................... 24,000 699,000
----------
Financial Services -- 8.2%
American Express Co. .................................... 6,800 824,075
CIT Group, Inc. ......................................... 18,000 522,000
Freddie Mac.............................................. 12,000 699,750
Morgan Stanley Dean Witter............................... 7,200 694,800
T. Rowe Price Assoc. .................................... 14,300 552,337
Washington Mutual, Inc. ................................. 16,000 611,000
----------
3,903,962
----------
Food Products -- 1.7%
Corn Products International.............................. 12,000 354,000
Nestle Registered ADR*................................... 5,000 450,400
----------
804,400
----------
Insurance -- 4.3%
Lincoln National Corp. .................................. 8,000 814,000
UNUM Corp. .............................................. 23,000 1,237,688
----------
2,051,688
----------
Medical Equipment & Supplies -- 6.5%
Baxter International..................................... 11,000 710,188
Boston Scientific Corp.* ................................ 15,000 569,063
Johnson & Johnson........................................ 10,100 935,513
Tyco International....................................... 10,000 873,750
----------
3,088,514
----------
Oil/Gas Equipment & Services -- 3.5%
Enron Corp. ............................................. 8,000 571,000
Halliburton Co. ......................................... 11,534 477,219
Williams Co. ............................................ 12,000 621,750
----------
1,669,969
----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY GROWTH FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Oil & Gas Exploration Product & Services -- 3.9%
Baker Hughes............................................ 18,000 $ 560,250
Exxon Corp.............................................. 7,500 599,063
Mobil Corp.............................................. 7,000 708,750
-----------
1,868,063
-----------
Pharmaceuticals -- 7.0%
American Home Products.................................. 13,000 749,125
Bristol-Myers Squibb Co................................. 16,000 1,098,000
Pfizer, Inc............................................. 4,000 428,000
Warner Lambert Co....................................... 17,200 1,066,400
-----------
3,341,525
-----------
Restaurants -- 0.6%
McDonald's Corp......................................... 8,000 308,000
-----------
Retail Stores -- 5.5%
Amazon.com*............................................. 200 23,750
Home Depot, Inc......................................... 14,000 796,250
Nordstrom, Inc.......................................... 15,000 532,500
Staples, Inc.*.......................................... 20,000 575,000
Wal-Mart Stores, Inc.................................... 16,000 682,000
-----------
2,609,500
-----------
Telecommunications -- 7.9%
AT&T Corp............................................... 6,000 333,000
Frontier Corp........................................... 13,000 684,125
MCI Worldcom, Inc.*..................................... 21,000 1,813,875
SBC Communications, Inc................................. 18,000 920,250
-----------
3,751,250
-----------
Telecommunications-Services & Equipment -- 3.2%
Cable & Wireless ADR.................................... 9,000 344,250
Lucent Technologies..................................... 4,832 274,820
Oak Industries*......................................... 18,500 891,469
-----------
1,510,539
-----------
TOTAL COMMON STOCK
(Cost $30,676,611)...................................... 45,176,196
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.9%
Banc of America Securities, LLC
(Agreement dated 5/28/99 to be repurchased at $2,347,243
collateralized by $2,440,000 (Value $2,394,592) U.S.
Treasury Bills, due 10/21/99) 4.77%, 06/01/99.......... $ 2,346 $ 2,346,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,346,000)....................................... 2,346,000
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $33,022,611**).................................... 47,522,196
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.0)%.......... (1,660)
------------
NET ASSETS -- 100.0%
(equivalent to $11.48 per share based on 4,140,373
shares outstanding).................................... $ 47,520,536
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($47,520,536 / 4,140,373)............................... $11.48
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $33,198,827. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $14,704,917
Excess of tax cost over value.................................. $ (381,548)
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- 96.4%
Australia -- 1.6%
Broken Hill Properties................................. 13,000 $ 133,684
Goodman Fielder........................................ 140,000 137,304
John Fairfax Ltd....................................... 69,000 184,065
National Australian Bank............................... 27,000 438,015
North Limited.......................................... 111,000 201,758
Telstra................................................ 35,000 173,460
------------
1,268,286
------------
Belgium -- 0.4%
AGFA Gevaert........................................... 13,000 299,045
------------
Brazil -- 0.5%
CIA Paranaense ADR..................................... 56,000 420,000
------------
China -- 0.3%
Guangdong Kelon Elec................................... 270,000 207,170
------------
Denmark -- 0.6%
Tele Danmank 'B'....................................... 5,000 512,264
------------
Finland -- 0.9%
Nokia 'A'.............................................. 10,000 713,108
------------
France -- 10.6%
Alcatel Alsthom........................................ 5,000 595,998
AXA.................................................... 6,250 722,126
Banque National de Paris............................... 6,300 532,259
Danone................................................. 4,000 1,104,167
Dexia France........................................... 4,400 612,813
France Telecom......................................... 5,700 438,059
Lafarge Coppee S.A..................................... 6,000 542,046
Lyonnaise Des Eaux..................................... 4,000 664,591
S.O.I.T.E.C............................................ 7,589 226,152
Soc Nationale Elf...................................... 5,500 798,220
Total 'B'.............................................. 8,500 1,035,418
Valeo.................................................. 3,600 294,737
Vivendi................................................ 13,500 1,002,220
Vivendi Rights (expires 6/15/99)....................... 13,500 13,975
------------
8,582,781
------------
Germany -- 7.2%
Allianz................................................ 2,575 705,423
DaimlerChrysler........................................ 9,600 830,635
GEA Preferred.......................................... 29,500 700,195
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- Continued
Germany -- Continued
Hoechst................................................ 11,600 $ 517,913
Man.................................................... 27,000 793,306
Mannesman.............................................. 7,000 958,827
Siemens................................................ 8,000 539,536
Veba................................................... 13,500 772,133
------------
5,817,968
------------
Greece -- 0.1%
National Bank of Greece GDR*........................... 3,470 48,580
------------
Hong Kong -- 1.4%
Dao Heng Bank Group.................................... 81,100 314,798
Hong Kong Electric..................................... 118,000 369,773
Hutchison Whampoa...................................... 39,000 325,650
South China Morning Post............................... 340,000 168,805
------------
1,179,026
------------
Hungary -- 0.5%
Matav ADR.............................................. 14,400 403,200
------------
Indonesia -- 0.9%
Astra Internasional*................................... 1,003,000 308,141
Bank Internasional*.................................... 1,500,000 41,475
Indah Kiat Paper*...................................... 245,000 112,903
Indofood Sukses*....................................... 110,000 108,817
Telekomunikasi......................................... 421,000 195,302
------------
766,638
------------
Ireland -- 0.8%
Bank of Ireland........................................ 33,000 611,549
------------
Italy -- 5.8%
BCA Nazionale Lavaro................................... 75,000 231,342
Credito Italiano....................................... 200,000 943,143
Ente Naz Idroc......................................... 136,000 851,798
INA.................................................... 340,000 796,339
Telecom Italia......................................... 75,000 442,294
Telecom Italia Spa..................................... 140,000 1,446,292
------------
4,711,208
------------
Japan -- 23.0%
Asahi Glass Company.................................... 70,000 453,650
Bridgestone............................................ 36,000 944,545
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- Continued
Japan -- Continued
Daiwa Sec.............................................. 115,000 $ 607,267
Eisai.................................................. 33,000 615,915
Fuji Photo Film........................................ 19,000 679,358
Hitachi................................................ 76,000 559,212
Honda Motor............................................ 12,000 492,634
Industrial Bank........................................ 67,000 474,135
Ito Yokado............................................. 9,000 537,080
Kawasaki Steel*........................................ 190,000 339,679
Kuraray................................................ 57,000 620,857
Mabuchi Motors......................................... 8,600 672,653
Matsushita Electric Industrial......................... 43,000 779,424
Mitsubishi Heavy Industry*............................. 109,000 425,823
Mitsui Fudosan......................................... 85,000 709,858
Nintendo............................................... 6,100 716,934
Nippon Telegraph & Telephone........................... 78 761,793
Nishimatsu............................................. 124,000 683,529
NSK Limited............................................ 76,000 364,211
NTT Mobile Comm........................................ 4 218,838
Ricoh.................................................. 62,000 687,634
Sanwa Bank............................................. 61,000 592,733
Sekisui Chemical....................................... 108,000 668,631
Shin-Etsu Chemical..................................... 25,000 775,948
Shiseido............................................... 27,000 400,016
Sony................................................... 3,000 282,072
Sumitomo Bank.......................................... 51,000 617,555
Sumitomo Marine & Fire................................. 135,000 880,483
Suzuki Motor........................................... 28,000 397,682
Teijin................................................. 133,000 512,978
Toshiba Corp........................................... 59,000 364,782
Toyota Motor........................................... 8,000 218,507
Trans Cosmos........................................... 7,000 336,037
Tsubaki Nakashima...................................... 52,000 347,327
------------
18,739,780
------------
Mexico -- 1.0%
Corporacion Geo*....................................... 90,000 344,710
Fomento Economico*..................................... 135,000 440,158
------------
784,868
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- Continued
Netherlands -- 5.9%
Equant*................................................ 8,400 $ 693,869
ING.................................................... 7,800 417,984
Kononklijke Ahold...................................... 15,000 524,635
Laurus................................................. 7,700 177,127
Philips Electronics.................................... 10,750 924,518
Seagull Holding........................................ 28,000 456,724
Vedior................................................. 23,975 444,967
Vendex International................................... 11,000 322,049
Ver Ned Uitgev Ver Bezit............................... 20,500 872,407
------------
4,834,280
------------
New Zealand -- 0.1%
Contact Energy Ltd.*................................... 25,000 45,706
------------
Norway -- 0.3%
Petroleum Geo-Services*................................ 14,100 227,937
------------
Philippines -- 0.4%
Long Distance Tele..................................... 2,000 56,242
Metropolitan Bank...................................... 15,000 144,875
San Miguel Corp........................................ 62,000 139,317
------------
340,434
------------
Poland -- 0.6%
Bank Handlowy Warszawie GDR*........................... 42,400 498,192
------------
Singapore -- 4.1%
Allgreen Properties*................................... 100,000 95,088
Development Bank of Singapore (Foreign Shares)......... 70,200 724,498
GP Batteries International............................. 209,000 332,030
Parkway Holdings....................................... 66,000 141,588
Sembcorp Industries.................................... 118,000 157,358
Singapore Airlines (Foreign Shares).................... 38,000 339,300
Singapore Press........................................ 30,929 423,212
Singapore Telecom...................................... 447,000 754,190
United Overseas Bank (Foreign Shares).................. 60,000 396,585
------------
3,363,849
------------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- Continued
South Africa -- 0.6%
Anglo American Corp.*.................................. 11,000 $ 498,371
------------
South Korea -- 1.2%
Housing & Commercial Bank GDR.......................... 23,000 630,350
Korea Telecom ADR*..................................... 10,200 324,488
------------
954,838
------------
Spain -- 2.8%
Argentaria............................................. 29,000 651,635
Banco Santander........................................ 23,400 489,347
Endesa................................................. 10,000 213,410
Telefonica de Espana................................... 19,250 925,488
------------
2,279,880
------------
Sweden -- 0.3%
Ericsson............................................... 10,400 278,398
------------
Switzerland -- 4.4%
CS Group Registered.................................... 2,300 400,059
Holdersbank............................................ 250 297,993
Nestle Registered...................................... 385 693,670
Novartis Registered, Non-Voting........................ 400 581,808
Roche Holdings 1/10 PC Non-Voting...................... 80 848,557
UBS Registered......................................... 2,700 783,314
------------
3,605,401
------------
Thailand -- 1.4%
Bangkok Bank*.......................................... 91,000 281,734
Bangkok Expressway*.................................... 470,000 338,471
Golden Land Property*.................................. 440,000 177,682
PTT Expl & Prod*....................................... 13,000 105,694
Siam Cement Co Ltd..................................... 10,000 259,523
------------
1,163,104
------------
United Kingdom -- 18.7%
Abbey National......................................... 23,000 473,221
Astrazeneca............................................ 12,000 475,337
Barclays............................................... 18,000 537,350
BG..................................................... 92,000 507,497
BP Amoco............................................... 101,000 1,806,164
British Aerospace...................................... 48,000 314,584
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK, PREFERRED STOCK & RIGHTS -- Continued
United Kingdom -- Continued
British Telecom........................................ 63,000 $ 1,052,923
Bryant................................................. 135,000 312,589
Cable & Wireless....................................... 10,000 122,584
Cadbury's Schweppes.................................... 58,000 394,063
Diageo................................................. 20,000 211,036
General Electric Co.................................... 53,000 500,647
Glaxo Wellcome......................................... 37,000 1,041,706
Granada................................................ 23,000 479,118
Halifax*............................................... 37,000 475,200
HSBC Holdings.......................................... 17,000 564,703
Jarvis Hotels.......................................... 95,000 226,820
Kingfisher............................................. 33,635 424,707
Land Securities........................................ 31,000 440,861
Limelight*............................................. 210,000 190,125
Lloyds................................................. 37,000 485,576
National Westminster Bank.............................. 11,000 253,115
Norwich Union.......................................... 46,000 326,169
Peninsular Oriental Steam.............................. 26,000 375,795
Rolls-Royce............................................ 65,000 272,368
Royal & Sun Alliance................................... 46,364 378,524
Scottish & South Energy................................ 39,000 369,025
SmithKline Beecham..................................... 61,000 799,567
Vodafone............................................... 41,000 784,440
Whitbread.............................................. 18,000 323,910
Yorkshire Water........................................ 41,000 288,416
------------
15,208,140
------------
TOTAL COMMON STOCK, PREFERRED STOCK & RIGHTS
(Cost $68,444,295)..................................... 78,364,001
------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 1.5%
Eurodollar Time Deposit
State Street Bank & Trust Co.
3.75%, 06/01/99.......................................... $1,247 $ 1,247,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,247,000)........................................ 1,247,000
-----------
TOTAL INVESTMENTS IN SECURITIES -- 97.9%
(Cost $69,691,295**)..................................... 79,611,001
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.1%..................... 1,689,857
-----------
NET ASSETS -- 100.0 %
(equivalent to $13.35 per share based on 6,090,442 shares
outstanding)..................................................... $81,300,858
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($81,300,858 / 6,090,442)................................ $13.35
======
</TABLE>
- --------
* Non-income producing securities.
** Cost for Federal income tax purposes is $70,119,969. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $13,512,821
Excess of tax cost over value.................................. $(4,021,789)
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. Funds, Inc.
DIVERSIFIED REAL ESTATE FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 96.8%
Apartments -- 21.9%
AMLI Residential Properties Trust....................... 8,200 $ 185,012
Archstone Communities................................... 10,000 225,000
Avalonbay Communities................................... 7,134 252,365
Equity Residential Properties Trust..................... 4,450 213,322
Gables Residential Trust................................ 5,700 136,800
Home Property........................................... 5,000 130,312
Post Properties, Inc.................................... 4,000 167,500
Charles E Smith Residential Realty...................... 5,700 197,006
Summit Properties, Inc.................................. 5,500 106,906
United Dominion Realty Trust, Inc. ..................... 9,000 99,563
------------
1,713,786
------------
Construction -- 0.5%
Centex Corp. ........................................... 1,000 37,062
------------
Diversified -- 13.2%
Colonial Properties Trust............................... 5,400 151,537
Duke Realty Investments, Inc............................ 7,400 171,125
Eastgroup Properties.................................... 9,900 201,094
Liberty Property Trust.................................. 6,800 164,050
MGI Properties.......................................... 4,600 128,225
Spieker Properties, Inc................................. 5,300 216,969
------------
1,033,000
------------
Health Care -- 4.0%
Meditrust Companies..................................... 2,004 27,805
Nationwide Health Properties, Inc. ..................... 6,100 124,288
Omega Healthcare Investors, Inc. ....................... 6,000 157,500
------------
309,593
------------
Hotels & Lodging -- 6.2%
Crestline Capital Corp.*................................ 1,300 21,044
Host Marriott Corp...................................... 13,000 162,500
Jameson Inns, Inc....................................... 6,000 54,937
Patriot American Hospitality, Inc.*..................... 4,000 20,750
Patriot American Hospitality, Inc., Preferred Stock B... 70 1,680
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- Continued
Hotels & Lodging -- Continued
RFS Hotel Investors, Inc. ............................. 8,000 $ 109,500
Starwood Hotels & Resorts.............................. 3,600 117,900
------------
488,311
------------
Investment Company -- 1.1%
Wellsford Real Properties*............................. 8,500 88,719
------------
Office Properties -- 26.5%
Arden Realty Group, Inc................................ 5,500 140,594
Boston Properties, Inc................................. 2,800 100,625
Carramerica Realty Corp................................ 5,400 134,662
Cornerstone Properties, Inc............................ 8,000 132,500
Corporate Office Properties Trust...................... 1,000 8,000
Cousins Properties, Inc................................ 5,400 187,312
Crescent Real Estate Equities, Inc. ................... 8,500 196,031
Equity Office Properties Trust......................... 9,200 259,900
Highwood Properties, Inc............................... 6,000 157,875
Mack Cali Realty Corp.................................. 4,800 155,400
Prentiss Properties Trust.............................. 12,000 283,500
Reckson Association Realty Corp. ...................... 9,800 253,575
Reckson Services Realty Corporation*................... 4,704 65,856
------------
2,075,830
------------
Retail -- 12.1%
Burnham Pacific Property, Inc. ........................ 3,400 37,613
CBL & Associates Properties, Inc. ..................... 3,900 100,669
Federal Realty Investment Trust........................ 3,800 87,875
IRT Property Company................................... 7,800 75,563
Prime Retail........................................... 5,000 44,688
Rouse Co. ............................................. 7,300 187,975
Simon Property Group, Inc.............................. 4,000 117,000
Taubman Centers, Inc................................... 7,800 106,763
Urban Shopping Centers, Inc............................ 3,100 102,300
Western Investment Real Estate Trust................... 7,500 90,000
------------
950,446
------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. Funds, Inc.
DIVERSIFIED REAL ESTATE FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- Continued
Storage -- 3.8%
Public Storage, Inc.................................... 5,600 $ 163,450
Sovran Self Storage, Inc............................... 3,400 84,788
Storage USA, Inc. ..................................... 1,400 46,725
------------
294,963
------------
Warehouse/Industrial -- 7.5%
Centerpoint Properties Trust........................... 5,000 179,375
First Industrial Realty Trust, Inc. ................... 5,100 138,019
Prologis Trust......................................... 8,620 176,171
Weeks Corp............................................. 3,100 96,875
------------
590,440
------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Cost $7,767,152)................................................ 7,582,150
------------
INVESTMENT COMPANIES -- 2.1%
Goldman Sachs Financial Square Prime Obligations Fund... 24,152 24,152
Provident Institutional Funds--TempFund................. 140,701 140,701
------------
TOTAL INVESTMENT COMPANIES
(Cost $164,853).................................................. 164,853
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
------- ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 1.3%
U.S. Treasury Bills
4.39%, 06/17/99..................................... $ 100 $ 99,805
------------
TOTAL TREASURY OBLIGATIONS
(Cost $99,805).............................................. 99,805
------------
TOTAL INVESTMENTS IN SECURITIES -- 100.2%
(Cost $8,031,810**)......................................... 7,846,808
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2)%.............. (17,672)
------------
NET ASSETS -- 100.0%
(equivalent to $9.37 per share based on 835,621 shares
outstanding)................................................ $ 7,829,136
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($7,829,136 / 835,621)...................................... $9.37
=====
</TABLE>
- --------
* Non-income producing securities.
** Aggregate cost for Federal income tax purposes. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................$ 304,501
Excess of tax cost over value................................ $(489,503)
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 19.7%
Federal Farm Credit Bank -- 1.2%
Debentures
5.125%, 04/02/01......................................... $ 2,000 $ 1,982,100
------------
Federal Home Loan Mortgage Corp. -- 8.2%
Debentures
5.00%, 01/15/04.......................................... 1,000 958,520
7.01%, 07/11/07.......................................... 1,000 1,021,660
Mortgage Backed Securities
6.00%, 04/01/14.......................................... 11,900 11,628,442
------------
13,608,622
------------
Federal National Mortgage Association -- 6.9%
Mortgage Backed Securities
6.50%, 04/01/14 (Pool #323654)........................... 9,600 9,560,928
6.00%, 04/01/14 (Pool #484807)........................... 1,992 1,944,145
------------
11,505,073
------------
Government National Mortgage Association -- 3.4%
Mortgage Backed Securities
6.00%, 06/15/13 (Pool #456934)........................... 2,376 2,321,937
6.00%, 07/15/13 (Pool #433894)........................... 3,407 3,328,901
------------
5,650,838
------------
TOTAL AGENCY OBLIGATIONS
(Cost $33,280,183)....................................... 32,746,633
------------
CORPORATE BONDS -- 25.9%
Beverages -- 2.9%
Coca-Cola Enterprises Putable Asset Trust
6.00%, 03/15/01.......................................... 1,000 997,500
Coca-Cola Co., Inc.
5.75%, 11/01/08.......................................... 1,000 936,250
Pepsico, Inc. Medium Term Note
5.75%, 01/02/03.......................................... 3,000 2,955,000
------------
4,888,750
------------
Chemicals -- 1.2%
E.I. duPont deNemours & Co. Medium Term Note
6.00%, 03/06/03.......................................... 2,000 1,975,000
------------
Finance -- 7.0%
Associates Corp. North America
6.50%, 07/15/02.......................................... 2,000 2,012,500
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CORPORATE BONDS -- Continued
Finance -- Continued
Ford Motor Credit Corp.
6.00%, 01/14/03.......................................... $ 2,800 $ 2,768,500
IBM Credit
5.76%, 05/15/01.......................................... 2,000 1,997,500
Norwest Financial, Inc.
6.00%, 08/01/99.......................................... 1,000 1,001,220
6.375%, 11/15/03......................................... 1,000 1,001,250
SunTrust Banks, Inc.
6.25%, 06/01/08.......................................... 2,000 1,950,000
Toyota Motor Credit
5.625%, 11/13/03......................................... 1,000 972,500
------------
11,703,470
------------
Foods -- 0.6%
Campbell Soup
6.15%, 12/01/02.......................................... 1,000 1,003,750
------------
Manufacturing -- 0.8%
Minnesota Mining and Manufacturing
5.62%, 07/15/09.......................................... 1,450 1,382,988
------------
Printing & Publishing -- 1.2%
Dow Jones & Co., Inc.
5.75%, 12/01/00.......................................... 2,000 1,995,000
------------
Railroads -- 1.3%
Union Pacific Corp.
6.125%, 01/15/04......................................... 2,150 2,096,250
------------
Retail Merchandising -- 1.6%
Sears Roebuck Acceptance Corp.
6.34%, 10/12/00.......................................... 2,600 2,617,160
------------
Telecommunications -- 2.2%
Motorola, Inc.
5.80%, 10/15/08.......................................... 1,675 1,582,875
MCI WorldCom, Inc.
6.125%, 08/15/01......................................... 2,000 1,997,500
------------
3,580,375
------------
Utilities--Gas -- 5.2%
Baltimore Gas & Electric Co.
6.50%, 02/15/03.......................................... 3,000 3,011,250
Consolidated Natural Gas Co.
5.75%, 08/01/03.......................................... 475 464,906
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CORPORATE BONDS -- Continued
Utilities--Gas -- Continued
Enron Corp.
6.625%, 11/15/05....................................... $ 2,750 $ 2,698,438
Northern Illinois Gas Co.
6.45%, 08/01/01........................................ 2,500 2,518,750
------------
8,693,344
------------
Utilities--Telephone -- 1.9%
Ameritech Capital Funding
6.125%, 10/15/01....................................... 1,200 1,203,000
AT&T Corp.
5.625%, 03/15/04....................................... 2,000 1,950,000
------------
3,153,000
------------
TOTAL CORPORATE BONDS
(Cost $43,674,257)..................................... 43,089,087
------------
FOREIGN BONDS -- 0.6%
Governments -- 0.6%
Ontario Province Global Notes
5.50%, 10/01/08........................................ 1,000 932,500
------------
TOTAL FOREIGN BONDS
(Cost $994,381)........................................ 932,500
------------
ASSET-BACKED SECURITIES -- 8.0%
Auto Loan -- 2.0%
Banc One Auto Grantor Trust
6.27%, 11/20/03........................................ 1,321 1,332,859
Ford Credit Auto Owner Trust
6.75%, 09/15/00........................................ 1,106 1,113,454
Premier Auto Trust
6.575%, 10/06/00....................................... 959 963,596
------------
3,409,909
------------
Credit Card -- 2.6%
Citibank Credit Card Master Trust
6.839%, 02/10/04....................................... 4,250 4,273,163
------------
Recreational Vehicles -- 1.8%
Cit RV Trust
5.99%, 05/15/09........................................ 3,000 3,009,375
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
ASSET-BACKED SECURITIES -- Continued
Stranded Cost -- 1.6%
California Infrastructure
6.17%, 03/25/03.......................................... $ 1,000 $ 1,004,500
Comed Transitional Funding Trust
5.34%, 03/25/04.......................................... 1,700 1,664,793
------------
2,669,293
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $13,361,960)....................................... 13,361,740
------------
U.S. TREASURY OBLIGATIONS -- 29.8%
U.S. Treasury Bills
4.465%, 08/12/99......................................... 5,000 4,955,200
U.S. Treasury Notes
6.875%, 07/31/99......................................... 1,000 1,003,430
7.50%, 10/31/99.......................................... 13,000 13,138,320
5.875%, 11/15/99......................................... 4,000 4,018,120
5.375%, 01/31/00......................................... 5,000 5,014,650
7.125%, 02/29/00......................................... 5,500 5,586,075
6.375%, 05/15/00......................................... 2,000 2,021,880
6.25%, 05/31/00.......................................... 3,500 3,535,910
6.00%, 08/15/00.......................................... 2,035 2,052,908
5.00%, 02/28/01.......................................... 1,000 993,980
6.50%, 05/31/01.......................................... 4,040 4,123,062
6.125%, 12/31/01......................................... 3,000 3,042,900
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $49,038,797)....................................... 49,486,435
------------
REPURCHASE AGREEMENTS -- 9.4%
Banc of America Securities LLC
(Agreement dated 5/28/99 to be repurchased at $5,630,982
collateralized by $5,470,000 (Value $5,753,681) U.S. Treasury
Notes, 7.75%, due 11/30/99)
4.77%, 06/01/99.......................................... 5,628 5,628,000
Merrill Lynch & Co., Inc.
(Agreement dated 5/28/98 to be repurchased at $5,002,638
collateralized by $4,925,000 (Value $5,105,614) U.S. Treasury
Notes, 6.25%, due 2/15/03)
4.75%, 06/01/99.......................................... 5,000 5,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- Continued
Morgan Stanley & Co., Inc.
(Agreement dated 5/28/99 to be repurchased at $5,002,650
collateralized by $4,960,000 (Value $5,095,355) U.S. Treasury
Notes, 8.25%, due 5/15/05)
4.77%, 06/01/99........................................ $ 5,000 $ 5,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $15,628,000)..................................... 15,628,000
------------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 6.0%
Goldman Sachs Financial Square Prime Obligations Fund... 5,000,000 5,000,000
Provident Institutional Funds--TempFund................. 5,000,000 5,000,000
------------
TOTAL INVESTMENT COMPANIES
(Cost $10,000,000)..................................... 10,000,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.4%
(Cost $165,977,578*)................................... 165,244,395
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6%...................... 1,012,866
------------
NET ASSETS -- 100.0%
(equivalent to $10.32 per share based on 16,111,070
shares outstanding)................................... $166,257,261
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($166,257,261 / 16,111,070)............................ $10.32
======
</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.................................. $ 564,332
Excess of tax cost over value.................................. $(1,297,515)
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 49.8%
Federal Home Loan Bank -- 1.4%
Notes
6.185%, 06/07/00.................................... $ 1,500 $ 1,511,910
------------
Federal Home Loan Mortgage Corp. -- 16.3%
Collateralized Mortgage Obligation
6.25%, 12/15/16 (Pool #2018PAG)..................... 250 250,765
6.175%, 08/15/18 (Pool #2035)....................... 500 501,320
6.80%, 10/15/26..................................... 2,167 2,166,953
Debentures
7.30%, 08/24/06..................................... 1,000 1,028,000
Mortgage Backed Securities
6.00%, 02/01/14 (Pool #E74547)...................... 975 953,139
6.50%, 09/01/24 (Pool #G00320)...................... 2,240 2,193,253
7.50%, 07/01/26 (Pool #D72963)...................... 191 195,138
6.50%, 10/01/27 (Pool #C00561)...................... 31 29,893
7.50%, 10/01/27 (Pool #D82914)...................... 222 226,717
6.50%, 10/01/27 (Pool #D83095)...................... 33 32,783
6.50%, 10/01/27 (Pool #D83337)...................... 874 855,333
7.00%, 11/01/27 (Pool #D83947)...................... 1,752 1,756,510
6.00%, 05/01/28 (Pool #786307)...................... 804 807,810
6.50%, 03/01/29 (Pool #C00731)...................... 4,027 3,942,983
5.728%, 04/01/29 (ARM).............................. 2,500 2,487,500
------------
17,428,097
------------
Federal National Mortgage Association -- 16.4%
Collateralized Mortgage Obligations
5.70%, 06/25/17 (Pool #X-225C)...................... 679 677,938
6.00%, 11/18/17 (Pool #1998-26)..................... 1,250 1,242,313
6.75%, 03/25/19..................................... 1,073 1,079,383
Debentures
5.125%, 02/13/04.................................... 1,000 962,940
Medium Term Notes
6.50%, 12/27/01..................................... 250 251,473
7.14%, 03/12/07..................................... 245 250,892
7.00%, 08/27/12..................................... 1,000 1,019,360
Mortgage Backed Securities
7.00%, 04/01/04 (Pool #377898)...................... 147 149,460
7.50%, 10/01/07 (Pool #177233)...................... 131 134,565
6.00%, 01/01/09 (Pool #265989)...................... 1,248 1,217,921
7.00%, 04/01/11 (Pool #338884)...................... 400 406,051
7.50%, 08/01/26 (Pool #349416)...................... 158 161,559
8.00%, 09/01/26 (Pool #250675)...................... 314 325,891
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Federal National Mortgage Association -- Continued
7.00%, 04/01/27 (Pool #313458)........................... $ 507 $ 507,835
8.00%, 08/01/27 (Pool #392496)........................... 488 506,915
8.00%, 09/01/27 (Pool #398392)........................... 46 47,737
8.00%, 10/01/27 (Pool # 331320).......................... 103 106,573
7.50%, 10/01/27 (Pool #395593)........................... 614 626,890
8.00%, 10/01/27 (Pool #395770)........................... 15 15,634
7.50%, 10/01/27 (Pool #396031)........................... 764 780,610
7.00%, 10/01/27 (Pool #398928)........................... 276 276,075
6.50%, 10/01/27 (Pool #399065)........................... 409 399,819
8.00%, 10/01/27 (Pool #399081)........................... 520 539,926
8.00%, 10/01/27 (Pool #402178)........................... 199 206,999
7.00%, 11/01/27 (Pool #251286)........................... 758 759,408
6.50%, 11/01/27 (Pool #402786)........................... 160 156,376
6.50%, 12/01/27 (Pool #354802)........................... 629 615,234
6.50%, 01/01/28 (Pool #406700)........................... 1,679 1,642,414
7.00%, 03/01/29 (Pool #491183)........................... 2,456 2,458,652
------------
17,526,843
------------
Government National Mortgage Association -- 14.8%
Mortgage Backed Securities
9.00%, 05/15/16 (Pool #163606)........................... 12 12,371
9.00%, 11/15/16 (Pool #181127)........................... 151 161,327
9.00%, 11/15/16 (Pool #183984)........................... 5 4,827
9.00%, 01/15/17 (Pool #175218)........................... 4 4,303
8.00%, 05/15/17 (Pool #180719)........................... 45 46,511
8.00%, 05/15/17 (Pool #217626)........................... 89 92,187
9.00%, 09/15/17 (Pool #222594)........................... 39 41,646
9.00%, 04/15/18 (Pool #236277)........................... 11 11,452
10.00%, 09/15/18 (Pool #255652).......................... 17 19,046
10.00%, 05/15/19 (Pool #274305).......................... 37 40,460
9.00%, 11/15/19 (Pool #247019)........................... 74 79,132
9.00%, 06/15/21 (Pool #305720)........................... 86 91,432
9.00%, 06/15/21 (Pool #309078)........................... 129 137,122
9.00%, 07/15/21 (Pool #309027)........................... 53 56,385
9.00%, 07/15/21 (Pool #309084)........................... 68 72,285
9.00%, 08/15/21 (Pool #296154)........................... 104 111,471
9.00%, 08/15/21 (Pool #306259)........................... 97 103,117
9.00%, 09/15/21 (Pool #272061)........................... 44 47,047
9.00%, 09/15/21 (Pool #305911)........................... 74 78,544
9.00%, 09/15/21 (Pool #308283)........................... 139 148,213
9.00%, 09/15/21 (Pool #308920)........................... 100 106,710
9.00%, 09/15/21 (Pool #313023)........................... 26 27,723
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Government National Mortgage Association -- Continued
9.00%, 09/15/21 (Pool #314939)........................... $ 18 $ 19,300
8.00%, 02/15/23 (Pool #332531)........................... 1,191 1,238,502
7.00%, 05/20/24 (Pool #1716)............................. 164 163,157
7.00%, 10/15/25 (Pool #409958)........................... 374 374,144
7.00%, 01/15/26 (Pool #382719)........................... 323 323,525
7.00%, 01/15/26 (Pool #422404)........................... 295 295,086
6.50%, 02/15/26 (Pool #405214)........................... 138 134,932
7.00%, 02/15/26 (Pool #421686)........................... 861 862,534
6.50%, 02/15/26 (Pool #425085)........................... 104 101,521
6.50%, 03/15/26 (Pool #395468)........................... 196 191,357
7.00%, 01/15/27 (Pool #436748)........................... 394 394,424
7.00%, 02/15/27 (Pool #428935)........................... 354 354,142
7.00%, 08/15/27 (Pool #443508)........................... 242 242,007
8.50%, 08/15/27 (Pool #453213)........................... 357 376,910
6.50%, 08/20/27 (Pool #80104)............................ 1,260 1,280,160
8.00%, 09/15/27 (Pool #453740)........................... 224 233,176
7.00%, 09/15/27 (Pool #453980)........................... 302 302,178
7.00%, 09/15/27 (Pool #454825)........................... 34 34,325
7.00%, 10/15/27 (Pool #445227)........................... 333 333,284
7.00%, 10/15/27 (Pool #453576)........................... 95 95,254
7.00%, 10/15/27 (Pool #455319)........................... 278 278,237
7.00%, 11/15/27 (Pool #452737)........................... 421 421,731
7.00%, 12/15/27 (Pool #443780)........................... 374 374,942
7.00%, 04/15/28 (Pool #471672)........................... 54 53,742
6.50%, 07/15/28 (Pool #468090)........................... 980 957,003
6.50%, 12/15/28 (Pool #471541)........................... 1,478 1,443,007
6.50%, 01/15/29 (Pool #490890)........................... 1,006 982,754
7.00%, 03/15/29 (Pool #470151)........................... 2,483 2,486,780
------------
15,841,425
------------
Tennessee Valley Authority -- 0.9%
Debentures
6.00%, 11/01/00.......................................... 1,000 1,002,500
------------
TOTAL AGENCY OBLIGATIONS
(Cost $53,344,773)....................................... 53,310,775
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CORPORATE BONDS -- 17.3%
Banking and Financial Services -- 7.7%
American Express Credit Corp.
6.25%, 08/10/05........................................ $ 1,000 $ 1,000,330
Associates Corp. of North America
6.25%, 11/01/08........................................ 1,000 970,000
CIT Group, Inc.
5.625%, 10/15/03....................................... 1,000 967,500
General Motors Acceptance Corp.
6.375%, 12/01/01....................................... 2,000 2,012,500
General Motors Acceptance Corp.
7.125%, 05/01/01....................................... 400 408,500
Merrill Lynch, Inc.
6.00%, 02/12/03........................................ 1,000 987,500
SunTrust Banks, Inc.
6.25%, 06/01/08........................................ 2,000 1,950,000
------------
8,296,330
------------
Beverages -- 1.4%
Anheuser Busch Co., Inc.
6.75%, 06/01/05........................................ 500 505,000
Coca Cola Co., Inc.
5.75%, 11/01/08........................................ 1,000 936,250
------------
1,441,250
------------
Defense -- 2.3%
United Tech Corp.
6.50%, 06/01/09........................................ 2,500 2,478,125
------------
Electrical and Electronic -- 4.0%
IBM Corp.
6.50%, 01/15/28........................................ 2,500 2,362,500
Motorola, Inc.
5.80%, 10/15/08........................................ 1,000 945,000
6.50%, 11/15/28........................................ 1,050 968,625
------------
4,276,125
------------
Petroleum -- 0.1%
Mobil Oil Corp.
9.17%, 02/29/00........................................ 149 153,206
------------
Telecommunications -- 1.8%
AT&T
6.00%, 03/15/09........................................ 2,000 1,910,000
------------
TOTAL CORPORATE BONDS
(Cost $19,160,197)..................................... 18,555,036
------------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets -- Concluded
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
FOREIGN BONDS -- 4.0%
Government -- 3.1%
Republic of Korea
8.875%, 04/15/08....................................... $ 1,000 $ 1,050,000
Manitoba Province Canada
6.125%, 01/19/04....................................... 1,000 997,500
Mexico
6.25%, 12/31/19........................................ 1,750 1,295,000
------------
3,342,500
------------
Utilities -- 0.9%
Korea Electric Power
6.375%, 12/01/03....................................... 1,000 940,000
------------
TOTAL FOREIGN BONDS
(Cost $4,138,726)...................................... 4,282,500
------------
ASSET-BACKED SECURITIES -- 9.3%
Auto Loan -- 3.9%
BancOne Auto Grantor Trust
6.27%, 11/20/03........................................ 970 978,699
Barnett Auto Trust
6.03%, 11/15/01........................................ 1,962 1,997,423
Premier Auto Trust
6.35%, 04/06/02........................................ 1,170 1,176,072
------------
4,152,194
------------
Credit Card -- 4.5%
Chase Credit Card Master Trust
6.30%, 04/15/03........................................ 1,000 1,009,460
Citibank Credit Card Master Trust
6.839%, 02/10/04....................................... 3,750 3,770,438
------------
4,779,898
------------
Electric Utility -- 0.9%
Comed Transitional Fdg Trust
5.34%, 03/25/04........................................ 1,000 979,290
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $9,896,350)...................................... 9,911,382
------------
U.S. TREASURY OBLIGATIONS -- 7.7%
U.S. Treasury Notes
6.125%, 11/15/27....................................... 2,000 2,022,880
U.S. Treasury Bonds
8.00%, 11/15/21........................................ 1,000 1,226,370
6.25%, 08/15/23........................................ 700 714,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- Continued
6.875%, 08/15/25....................................... $ 3,100 $ 3,424,942
6.00%, 02/15/26........................................ 850 844,305
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,747,440)...................................... 8,232,497
------------
REPURCHASE AGREEMENT -- 5.2%
Morgan Stanley & Co., Inc.
(Agreement dated 5/28/99 to be repurchased at
$5,596,965 collateralized by $5,545,000 (Value
$5,696,320) U.S. Treasury Notes, 8.25%, due 5/15/05)
4.77%, 06/01/99....................................... 5,594 5,594,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,594,000)................................................. 5,594,000
------------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 6.3%
Goldman Sachs Financial Square Prime Obligations Fund... 3,830,705 3,830,705
Offitbank High Yield Mutual Fund........................ 302,331 2,947,723
------------
TOTAL INVESTMENT COMPANIES
(Cost $6,844,755)................................................. 6,778,428
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.6%
(Cost $106,726,241*).............................................. 106,664,618
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%...................... 483,975
------------
NET ASSETS -- 100.0%
(equivalent to $9.82 per share based on 10,906,968 shares
outstanding)...................................................... $107,148,593
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($107,148,593 / 10,906,968)....................................... $9.82
=====
</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.................................. $ 1,324,541
Excess of tax cost over value.................................. $(1,386,164)
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. Funds, Inc.
MARYLAND TAX-EXEMPT BOND FUND
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- 97.1%
Allegany County, PCRB, Westvaco Corp. Project
5.90%, 07/01/04........................................... $ 200 $ 212,750
Annapolis MD, GO, CPI
5.00%, 11/01/16........................................... 440 436,700
Anne Arundel County, GO, CGI
5.30%, 07/15/12........................................... 400 411,000
Baltimore City, GO, CPI, INS: FGIC
5.00%, 10/15/16........................................... 500 498,125
Baltimore City, RB, Waste Water Project, INS: FGIC
5.50%, 07/01/26........................................... 300 309,000
Baltimore County, GO,
Refunding --CPI
5.20%, 04/01/09........................................... 400 412,500
Calvert County, GO
5.05%, 01/01/01........................................... 1,000 1,021,250
Carroll County, GO, CPI
4.80%, 12/01/12........................................... 855 852,862
Cecil County, GO, CPI, INS: FGIC
6.50%, 12/01/99........................................... 850 863,779
Charles County, GO
6.25%, 06/01/02........................................... 500 533,125
4.40%, 06/01/03........................................... 350 356,125
Frederick County, GO
5.00%, 08/01/09........................................... 500 513,125
4.20%, 07/01/11........................................... 500 476,875
Harford County, GO, CPI, UT
5.60%, 09/01/06........................................... 325 345,313
5.00%, 12/01/14........................................... 250 252,188
Howard County, GO, CPI, Prerefunded 8/15/03 @ 102
5.25%, 08/15/09........................................... 180 191,700
Howard County, GO, CPI,
Unrefunded Balance
5.25%, 08/15/09........................................... 220 229,625
Howard County, GO, Prerefunded 8/15/03 @ 102
5.25%, 08/15/12........................................... 250 265,938
Maryland National Capital Park & Planning Commission --
Prince George's County, GO
6.90%, 07/01/99........................................... 250 250,733
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Maryland National Capital Park & Planning Commission --
Prince George's County, GO, Prerefunded 7/01/03 @ 102
5.15%, 07/01/11........................................... $ 10 $ 10,588
Maryland National Capital Park & Planning Commission --
Prince George's County, GO,
Unrefunded Balance
5.15%, 07/01/11........................................... 290 296,525
Maryland State Community Development, RB, Administration
Department of Housing & Community Development
5.00%, 01/01/05........................................... 860 884,725
5.125%, 06/01/17.......................................... 325 325,813
5.05%, 05/15/18........................................... 250 247,500
5.15%, 06/01/22........................................... 390 390,487
Maryland State Department of Transportation, RB
4.60%, 12/15/02........................................... 500 512,500
Maryland State Health & Higher Educational Facilities
Authority, RB, Anne Arundel County Medical Center, INS:
FSA
5.125%, 07/01/28.......................................... 1,015 994,700
Maryland State Health & Higher Educational Facilities
Authority, RB, Charity Obligation
5.00%, 11/01/29........................................... 750 724,688
Maryland State Health & Higher Educational Facilities
Authority, RB, College of Notre Dame, INS: MBIA
4.45%, 10/01/12........................................... 290 278,400
Maryland State Health & Higher Educational Facilities
Authority, RB, Francis Scott Key Medical Center, INS: FGIC
5.00%, 07/01/23........................................... 400 386,500
Maryland State Health & Higher Educational Facilities
Authority, RB, Howard County General Hospital, ETM
5.50%, 07/01/21........................................... 335 345,468
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. Funds, Inc.
MARYLAND TAX-EXEMPT BOND FUND
Statement of Net Assets -- Continued
May 31, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Maryland State Health & Higher Educational Facilities
Authority, RB, Johns Hopkins Hospital
5.00%, 07/01/23........................................... $ 300 $ 290,250
Maryland State Health & Higher Educational Facilities
Authority, RB, Johns Hopkins University
5.25%, 07/01/17........................................... 500 507,500
Maryland State Health & Higher Educational Facilities
Authority, RB, Loyola College, INS: MBIA
5.375%, 10/01/26.......................................... 550 557,562
Maryland State Health & Higher Educational Facilities
Authority, RB, University of Maryland Medical System, INS:
FGIC
5.40%, 07/01/07........................................... 300 316,500
Maryland State Stadium Authority Sports Facilities, RB
5.30%, 03/01/01........................................... 1,260 1,293,075
Maryland State Stadium Authority Lease Revenue, RB, Ocean
City Convention Center
5.375%, 12/15/15.......................................... 400 407,500
Maryland State Transportation Authority, RB
5.50%, 07/01/03........................................... 1,000 1,056,250
5.75%, 07/01/15........................................... 150 153,188
Maryland Water Quality Financing Administration, RB,
Revolving Loan Fund
5.50%, 09/01/11........................................... 200 208,000
5.40%, 09/01/12........................................... 300 306,750
Montgomery County, GO, CPI
4.875%, 05/01/09.......................................... 350 361,375
4.90%, 10/01/10........................................... 500 508,125
Montgomery County Revenue Authority, RB,
Olney Indoor Swim Project
5.25%, 10/01/12........................................... 250 255,937
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Montgomery County, RB, Housing Opportunity Community Housing
Multi-Family, Avalon Knoll
5.70%, 07/01/10............................................ $ 150 $ 158,438
Prince George's County, GO, CPI,
INS: AMBAC
5.25%, 03/15/03............................................ 500 523,750
Prince George's County, GO,
INS: MBIA
5.25%, 03/15/15............................................ 400 409,500
Saint Mary's County, GO, CPI,
INS: AMBAC
4.10%, 07/01/00............................................ 700 706,013
Saint Mary's County, GO, Construction, INS: MBIA
4.60%, 09/01/04............................................ 500 513,125
University of Maryland System Auxiliary Facilities &
Tuition, RB
5.00%, 04/01/05............................................ 250 260,625
5.125%, 04/01/13........................................... 400 409,500
5.00%, 04/01/15............................................ 500 501,250
Washington County, GO, Refunding -- CPI UT, INS: FGIC
5.25%, 01/01/06............................................ 200 210,000
Washington Suburban Sanitary District, GO, General
Construction
5.10%, 06/01/16............................................ 300 301,500
Washington Suburban Sanitary District, GO, Water Supply
5.25%, 06/01/16............................................ 250 258,437
Wicomico County, GO, CPI, INS: FGIC
4.05%, 02/01/07............................................ 250 245,312
5.00%, 02/01/15............................................ 755 756,887
Worcester County, GO, CPI
5.00%, 08/01/99............................................ 500 501,495
-----------
TOTAL MUNICIPAL BONDS
(Cost $25,570,461)......................................... 25,808,451
-----------
</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, 1999
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 1.5%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 219,175 $ 219,175
Provident Institutional Funds --MuniFund................. 171,971 171,971
-----------
TOTAL INVESTMENT COMPANIES
(Cost $391,146)......................................... 391,146
-----------
TOTAL INVESTMENTS IN SECURITIES -- 98.6%
(Cost $25,961,607*)................................................ 26,199,597
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.4%....................... 365,730
-----------
NET ASSETS -- 100.0%
(equivalent to $10.78 per share based on 2,463,434 shares
outstanding)....................................................... $26,565,327
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($26,565,327 / 2,463,434).......................................... $10.78
======
</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.................................... $ 354,623
Excess of tax cost over value.................................... $(116,633)
</TABLE>
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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Connecticut -- 1.1%
Connecticut State, GO
5.50%, 10/01/00........................................... $1,000 $ 1,026,250
-----------
Delaware -- 3.6%
Delaware State, GO
4.25%, 03/01/02........................................... 3,250 3,286,563
-----------
District of Columbia -- 3.5%
District of Columbia, RB, Howard University, INS: MBIA
5.25%, 10/01/02........................................... 3,040 3,165,400
-----------
Florida -- 13.5%
Broward County Water & Sewer, RB
4.30%, 10/01/00........................................... 2,500 2,528,125
Florida Board of Education, GO
6.00%, 01/01/06........................................... 2,665 2,924,838
Florida Gas Utility, RB, INS: FSA
4.00%, 12/01/04........................................... 1,790 1,785,525
Florida State Division Board of Finance, RB, INS: FSA
5.25%, 07/01/05........................................... 3,000 3,172,500
Jacksonville Electric Authority, RB, St Johns River
6.40%, 10/01/00........................................... 1,750 1,815,625
-----------
12,226,613
-----------
Georgia -- 6.2%
Fulton County, GO
4.70%, 01/01/02........................................... 1,300 1,327,625
Private Colleges & Universities Authority, RB, Emory
University
5.375%, 11/01/05.......................................... 4,000 4,280,000
-----------
5,607,625
-----------
Illinois -- 4.2%
Elgin County, GO
5.50%, 01/01/01........................................... 1,200 1,233,000
Metropolitan Pier & Exposition Authority, RB, INS: AMBAC
6.40%, 06/01/03........................................... 2,395 2,604,563
-----------
3,837,563
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Kentucky -- 5.1%
Kentucky State Turnpike Authority, RB, Economic Development
Road Revenue, INS: AMBAC
5.00%, 07/01/02........................................... $2,000 $ 2,062,500
Kentucky Property and Building, RB, INS: AMBAC
4.90%, 09/01/06........................................... 2,500 2,587,500
-----------
4,650,000
-----------
Louisiana -- 2.3%
Louisiana State, GO, INS: FGIC
5.50%, 04/15/02........................................... 2,000 2,090,000
-----------
Maryland -- 1.5%
Howard County, GO, CPI, Prerefunded 02/15/01 @ 100
5.75%, 02/15/02........................................... 1,000 1,033,750
St Mary's County, GO, Public Facilities and Hospital, INS:
AMBAC
4.10%, 07/01/00........................................... 300 302,577
-----------
1,336,327
-----------
Massachusetts -- 3.0%
Massachusetts State, GO, Construction Loan, INS: MBIA
5.00%, 01/01/01........................................... 1,420 1,448,400
Massachusetts State, GO, Construction Loan, INS: FGIC
5.00%, 06/01/01........................................... 1,260 1,291,500
-----------
2,739,900
-----------
Michigan -- 9.1%
Detroit Michigan Sewer, RB, INS: MBIA
5.25%, 07/01/08........................................... 1,245 1,304,137
Michigan Municipal Bond Authority, RB, Pooled Project
5.75%, 10/01/05........................................... 2,120 2,286,950
Michigan State Environmental Protection Program, GO,
Prerefunded 11/01/02 @ 102
6.25%, 11/01/06........................................... 2,000 2,182,500
Michigan State Unversity, RB
5.00%, 08/15/07........................................... 2,380 2,481,150
-----------
8,254,737
-----------
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Nebraska -- 3.4%
American Public Energy Agency NE Gas Supply, RB, INS: AMBAC
5.00%, 06/01/07........................................... $3,000 $ 3,105,000
-----------
New Hampshire -- 3.0%
New Hampshire, GO
5.00%, 09/01/07........................................... 2,575 2,690,875
-----------
New Mexico -- 3.6%
Albuquerque Water & Sewer, RB
5.50%, 07/01/01........................................... 1,000 1,037,500
Sante Fe, RB, Prerefunded 06/01/04 @ 100, INS: AMBAC
6.30%, 06/01/24........................................... 2,000 2,197,500
-----------
3,235,000
-----------
North Carolina -- 1.1%
Wake County, GO
4.80%, 03/01/02........................................... 1,000 1,026,250
-----------
Ohio -- 1.1%
Ohio State Public Facilities Commission, RB, Higher
Educational Capital Facilities
4.75%, 05/01/01........................................... 1,000 1,018,750
-----------
Oklahoma -- 5.8%
Oklahoma State Capital Improvements Authority, RB, INS:
MBIA
5.00%, 12/01/04........................................... 2,595 2,727,993
Tulsa Community College Area School District, GO
4.00%, 04/01/03........................................... 2,575 2,578,219
-----------
5,306,212
-----------
Pennsylvania -- 7.3%
Pennsylvania Intergovernmental Coop Authority, Special Tax,
INS: FGIC
5.00%, 06/15/06........................................... 4,000 4,150,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Pennsylvania -- Continued
Pennsylvania State, GO
4.625%, 05/01/00........................................... $1,000 $ 1,012,670
Pennsylvania State, GO, INS: AMBAC
5.125%, 03/15/02........................................... 1,440 1,488,600
-----------
6,651,270
-----------
South Carolina -- 4.0%
South Carolina Transportation, RB, INS: MBIA
5.00%, 10/01/04............................................ 3,495 3,647,906
-----------
Texas -- 3.4%
Harris County, GO, Permanent Improvement
5.80%, 10/01/99............................................ 1,000 1,008,730
San Antonio Electric & Gas, RB
5.00%, 02/01/05............................................ 2,000 2,082,500
-----------
3,091,230
-----------
Utah -- 2.3%
Alpine School District, GO
5.40%, 03/15/04............................................ 2,000 2,072,500
-----------
Virginia -- 1.1%
Virginia State Transportation Board, RB, Route 28 Project
5.80%, 04/01/01............................................ 1,000 1,036,250
-----------
Wisconsin -- 7.6%
Appleton Water, RN
3.95%, 07/01/02............................................ 3,000 3,001,080
Fox Valley Technical College, GO
4.60%, 04/01/07............................................ 2,690 2,733,712
Milwaukee Technical College District, GO
3.25%, 06/01/00............................................ 1,150 1,149,920
-----------
6,884,712
-----------
TOTAL MUNICIPAL BONDS
(Cost $87,669,113)......................................... 87,986,933
-----------
</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, 1999
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 2.3%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 1,713,839 $ 1,713,839
Provident Institutional Funds --MuniFund................. 377,056 377,056
-----------
TOTAL INVESTMENT COMPANIES
(Cost $2,090,895)....................................... 2,090,895
-----------
TOTAL INVESTMENTS IN SECURITIES -- 99.1%
(Cost $89,760,008*)................................................ 90,077,828
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9%....................... 817,274
-----------
NET ASSETS -- 100.0%
(equivalent to $10.00 per share based on 9,089,368 shares
outstanding)....................................................... $90,895,102
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($90,895,102 / 9,089,368).......................................... $10.00
======
</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.................................... $ 512,776
Excess of tax cost over value.................................... $(194,956)
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Arizona -- 1.1%
Maricopa County School District, GO, INS: FGIC
4.00%, 07/01/10.......................................... $2,000 $ 1,882,500
------------
Colorado -- 0.9%
Colorado Springs, RB, Utility Revenue, ETM
5.875%, 11/15/17......................................... 1,500 1,655,625
------------
Connecticut -- 1.2%
Connecticut State, RB, Transportation Infrastructure, INS:
FGIC
5.25%, 10/01/14.......................................... 2,000 2,052,500
------------
Delaware -- 1.0%
Delaware State Economic Development Authority, RB,
Osteopathic Hospital Assoc., ETM
6.75%, 01/01/13.......................................... 1,500 1,725,000
------------
Florida -- 9.3%
Brevard County, GO, INS: AMBAC
5.375%, 09/01/11......................................... 1,180 1,255,225
Florida Board of Education, RB
6.00%, 01/01/06.......................................... 6,000 6,585,000
Florida State Division Board of Finance, RB
5.25%, 07/01/05.......................................... 2,000 2,115,000
Florida State, GO, Jacksonville Transportation,
Prerefunded 07/01/02 @ 101
6.40%, 07/01/22.......................................... 2,500 2,706,250
Florida State Board of Education, GO, Public Education
5.50%, 06/01/14.......................................... 1,860 1,929,750
Seacoast Florida Authority Water & Sewer, RB, INS: FGIC
5.50%, 03/01/16.......................................... 2,000 2,115,000
------------
16,706,225
------------
Kentucky -- 3.6%
Kentucky Property and Building, RB, INS: AMBAC
4.90%, 09/01/06.......................................... 4,000 4,140,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Kentucky -- Continued
Lexington-Fayette Urban County, GO, County Detention
Center Project
4.75%, 05/01/11.......................................... $2,290 $ 2,284,275
------------
6,424,275
------------
Maryland -- 9.5%
Anne Arundel County, GO
5.00%, 09/01/12.......................................... 2,000 2,027,500
Baltimore County, GO, CPI
5.25%, 06/01/11.......................................... 1,000 1,041,250
Baltimore County Metro District, GO
6.80%, 04/01/00.......................................... 1,000 1,029,120
Carroll County, GO, CPI
5.125%, 12/01/13......................................... 1,000 1,018,750
Howard County, GO, CPI, Prerefunded 02/15/03 @ 101
5.25%, 02/15/06.......................................... 1,670 1,753,500
Howard County, GO, Prerefunded 08/15/03 @ 102
5.25%, 08/15/09.......................................... 450 479,250
Howard County, GO, Unrefunded Balance
5.25%, 08/15/09.......................................... 550 574,062
Maryland National Capital Park & Planning Commission --
Prince George's County, GO, Prerefunded 07/01/05 @ 101
5.00%, 07/01/08.......................................... 190 199,262
Maryland National Capital Park & Planning Commission --
Prince George's County, GO, Unrefunded Balance
5.00%, 07/01/08.......................................... 810 840,375
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Multi-Family
6.70%, 05/15/27.......................................... 1,000 1,061,250
Maryland State Community Development, RB, Administration
Department of Housing & Community Development, Single
Family
6.55%, 04/01/17.......................................... 1,290 1,357,725
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Maryland -- Continued
Maryland State Health & Higher Education Facilities
Authority, RB, Loyola College, INS: MBIA
5.375%, 10/01/26......................................... $2,000 $ 2,027,500
Montgomery County, GO, CPI
5.50%, 04/01/16.......................................... 1,000 1,038,750
Prince George's County, RB, Parking Authority Revenue
Justice Center Facility Project
6.35%, 05/01/04.......................................... 1,000 1,068,750
Washington Suburban Sanitation District, GO
5.25%, 06/01/16.......................................... 1,400 1,447,250
------------
16,964,294
------------
Massachusetts -- 3.3%
Massachusetts State Special Obligation, RB, Prerefunded
06/01/02 @ 100, INS: AMBAC
6.00%, 06/01/13.......................................... 3,600 3,811,500
Massachusetts State Water Pollution, RB, Abatement Pooled
Loan Program
5.70%, 02/01/11.......................................... 2,010 2,150,700
------------
5,962,200
------------
Michigan -- 3.8%
Ann Arbor, GO
4.00%, 09/01/09.......................................... 1,335 1,279,930
4.00%, 09/01/10.......................................... 1,340 1,264,625
Michigan State Building Authority, RB, INS: AMBAC
6.75%, 10/01/07.......................................... 1,800 1,953,000
Michigan State Environmental Protection Program, GO,
Prerefunded 11/01/02 @ 102
6.25%, 11/01/06.......................................... 2,000 2,182,500
------------
6,680,055
------------
Minnesota -- 0.6%
Minnesota State, GO, Prerefunded 10/01/04 @ 100
6.00%, 10/01/14.......................................... 1,000 1,090,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Nebraska -- 1.2%
American Public Energy NE Gas Supply, RB, INS: AMBAC
5.00%, 06/01/06.......................................... $2,000 $ 2,072,500
------------
Nevada -- 4.9%
Clark County School District, GO, Prerefunded 06/15/06 @
101, INS: FGIC
5.60%, 06/15/09.......................................... 2,000 2,167,500
Clark County, GO, Las Vegas Convention & Visitors
Authority, INS: MBIA
5.50%, 07/01/09.......................................... 2,075 2,207,281
Nevada State, GO
5.50%, 05/15/08.......................................... 4,000 4,290,000
------------
8,664,781
------------
New Hampshire -- 2.9%
New Hampshire, GO
5.00%, 09/01/07.......................................... 5,000 5,225,000
------------
New Jersey -- 7.9%
New Jersey State, GO
6.00%, 07/15/05.......................................... 4,200 4,604,250
New Jersey State Highway Authority, RB, Garden State
Parkway General Revenue, ETM
6.00%, 01/01/19.......................................... 4,005 4,480,594
New Jersey Transportation, RB, INS: FSA
5.50%, 06/15/04.......................................... 4,750 5,058,750
------------
14,143,594
------------
New York -- 7.3%
New York State Power Authority, RB, General Purpose,
Prerefunded 01/01/03 @102
5.25%, 01/01/18.......................................... 2,250 2,382,188
New York State Power Authority, RB, Prerefunded 01/01/03
@102, INS: FGIC
5.25%, 01/01/18.......................................... 1,375 1,455,781
New York State Power Authority Revenue, RB, INS: FGIC, ETM
5.125%, 01/01/11......................................... 1,000 1,035,000
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
New York -- Continued
New York City Transitional Finance Authority, RB
5.125%, 11/01/12......................................... $4,005 $ 4,080,094
Triborough Bridge & Tunnel Authority, RB, General Purpose
6.00%, 01/01/12.......................................... 2,000 2,230,000
Westchester County, GO, Partially ETM
6.70%, 02/01/05.......................................... 1,560 1,755,000
------------
12,938,063
------------
Ohio -- 3.1%
Cleveland Waterworks Revenue, RB, INS: MBIA
5.50%, 01/01/21.......................................... 3,000 3,165,000
Ohio State, GO
6.65%, 09/01/09.......................................... 2,000 2,322,500
------------
5,487,500
------------
Oklahoma -- 1.1%
Oklahoma State Turnpike, RB, ETM
4.70%, 01/01/06.......................................... 870 879,788
Tulsa County Home Finance Single Family, RB, INS: FGIC,
ETM
6.70%, 08/01/99.......................................... 1,050 1,055,681
------------
1,935,469
------------
Oregon -- 2.3%
Clackamas County School District, GO, INS: FGIC
5.25%, 06/01/12.......................................... 3,945 4,073,213
------------
Pennsylvania -- 10.4%
Avonworth School District, GO
4.25%, 11/15/00.......................................... 1,000 1,002,040
Berks County, GO, INS: FGIC
5.60%, 11/15/08.......................................... 1,700 1,761,625
Dauphin County General Authority, RB, School District
Pooled Program II, INS: AMBAC
4.45%, 09/01/01.......................................... 4,000 4,060,000
Jim Thorpe Area School District, GO, INS: MBIA
5.375%, 03/15/27......................................... 2,000 2,020,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Pennsylvania -- Continued
Pennsylvania Convention Center Authority, RB, INS: FGIC,
ETM
6.00%, 09/01/19.......................................... $2,675 $ 2,969,250
Pennsylvania Intergovernmental Coop Authority, RB, Special
Tax, INS: FGIC
5.00%, 06/15/07.......................................... 2,000 2,070,000
Pennsylvania State Higher Educational Facilities, RB,
University of Pennsylvania
5.90%, 09/01/15.......................................... 2,500 2,646,875
Pittsburgh Water & Sewer, RB, INS: FGIC, ETM
6.00%, 09/01/16.......................................... 1,755 1,950,244
------------
18,480,034
------------
Rhode Island -- 0.9%
Rhode Island State, RB, Unrefunded Balance, INS: FGIC
6.25%, 06/15/07.......................................... 1,545 1,660,875
------------
Tennessee -- 5.7%
Memphis. GO
5.00%, 07/01/11.......................................... 3,265 3,313,975
Metropolitan Government Nashville & Davidson County, RB,
Meharry Medical College, Prerefunded 12/01/04 @ 102, INS:
AMBAC
6.875%, 12/01/24......................................... 6,000 6,907,500
------------
10,221,475
------------
Texas -- 6.0%
Conroe Independent School District, GO, INS: PSFG
5.50%, 08/15/21.......................................... 2,900 2,954,375
Dallas Independent School District, GO, Unrefunded
Balance, INS: PSFG
5.60%, 08/15/04.......................................... 1,080 1,142,100
El Paso, GO
5.25%, 08/15/15.......................................... 2,500 2,528,125
San Antonio Electric & Gas, RB, Unrefunded Balance
6.00%, 02/01/08.......................................... 1,785 1,876,481
</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, 1999
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Texas -- Continued
Trinity River AuthorityWaste Water Systems, RB, Prerefunded
08/01/03 @ 100
5.75%, 08/01/08........................................... $ 135 $ 144,113
Trinity River AuthorityWaste Water Systems, RB, INS: AMBAC
5.75%, 08/01/08........................................... 1,865 1,951,256
------------
10,596,450
------------
Utah -- 3.8%
Davis County School District, GO
4.875%, 06/01/05.......................................... 2,700 2,804,625
Salt Lake City Redevelopment Agency, TAN
4.35%, 10/01/03........................................... 2,040 2,065,500
Utah County Hospital Revenue, RB, IHC Health, INS: MBIA
5.25%, 08/15/26........................................... 2,000 1,965,000
------------
6,835,125
------------
Virginia -- 2.7%
Norfolk Virginia, GO, INS: MBIA
5.75%, 06/01/13........................................... 1,500 1,599,375
Virginia State Transportation Board, RB, US Route 58
5.625%, 05/15/13.......................................... 3,000 3,191,250
------------
4,790,625
------------
Wisconsin -- 2.9%
Appleton Water, RN
3.95%, 07/01/02........................................... 2,000 2,000,720
Wisconsin State, GO
5.125%, 11/01/11.......................................... 3,000 3,097,500
------------
5,098,220
------------
TOTAL MUNICIPAL BONDS
(Cost $167,638,790)....................................... 173,365,598
------------
</TABLE>
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 1.4%
Goldman Sachs Financial Square Tax-Free Money Market
Fund................................................... 1,138,679 $ 1,137,679
Provident Institutional Funds -- MuniFund............... 1,430,960 1,430,960
------------
TOTAL INVESTMENT COMPANIES
(Cost $2,568,639)...................................... 2,568,639
------------
TOTAL INVESTMENTS IN SECURITIES -- 98.8%
(Cost $170,207,429*).............................................. 175,934,237
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%...................... 2,132,716
------------
NET ASSETS -- 100.0%
(equivalent to $9.93 per share based on 17,936,893 shares
outstanding)...................................................... $178,066,953
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($178,066,953 / 17,936,893)....................................... $9.93
=====
</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................................... $6,184,423
Excess of tax cost over value................................... $ (457,615)
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
M.S.D.&T. Funds, Inc.
INVESTMENT ABBREVIATIONS
<TABLE>
<C> <S>
ADR American Depository Receipt
AMBAC American Municipal Bond Assurance Corp.
ARM Adjustable Rate Mortgage
BAN Bond Anticipation Notes
CGI Consolidated General Improvement
COP Certificates of Deposit
CPI Consolidated Public Improvement
ETM Escrowed to Maturity in U.S. Government
Obligations
FGIC Financial Guaranty Insurance Co.
FRN Floating Rate Notes
FSA Financial Surety Assurance
GDR Global Depository Receipt
GO General Obligation
GPI General Public Improvement
GTD Guaranteed
IDA Industrial Development Authority
INS Insured
LIC Line of Credit
LOC Letter of Credit
MBIA Municipal Bond Investor Association
MPB Municipal Put Bonds
PCR Pollution Control Revenue
PCRB Pollution Control Revenue Bonds
PSFG Permanent School Fund Guaranty
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>
37
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
Prime Government Tax-Exempt
Money Market Money Market Money Market
Fund Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest............................ $25,617,930 $21,976,884 $3,675,761
----------- ----------- ----------
EXPENSES:
Investment advisory fees............ 1,227,398 1,069,791 289,078
Administration fees................. 613,699 534,896 144,539
Accounting agent fees............... 98,192 85,583 34,689
Custodian fees...................... 29,494 29,273 11,719
Directors' fees..................... 17,785 15,150 4,302
Transfer agent fees................. 50,497 37,267 27,786
Professional Services............... 97,041 84,340 23,699
Other............................... 64,107 52,489 26,168
----------- ----------- ----------
2,198,213 1,908,789 561,980
Fees waived by Investment Adviser... (98,192) (128,375) (34,689)
Fees waived by Administrator........ (258,923) (175,727) (93,673)
----------- ----------- ----------
TOTAL EXPENSES.................... 1,841,098 1,604,687 433,618
----------- ----------- ----------
NET INVESTMENT INCOME................ 23,776,832 20,372,197 3,242,143
----------- ----------- ----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments sold................... 3,130 -- 306
----------- ----------- ----------
Net gain (loss) on investments...... 3,130 -- 306
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... $23,779,962 $20,372,197 $3,242,449
=========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
Equity Diversified
Growth & Equity Growth International Real Estate
Income Fund Income Fund Fund Equity Fund Fund
----------- ----------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $ 213,518 $ 627,455 $ 74,031 $ 89,307 $ 22,531
Dividends.............. 5,646,513 6,903,092 336,513 1,379,329(1) 358,363
----------- ------------ ---------- ----------- ---------
TOTAL INVESTMENT
INCOME.............. 5,860,031 7,530,547 410,544 1,468,636 380,894
----------- ------------ ---------- ----------- ---------
EXPENSES:
Investment advisory
fees.................. 2,350,435 1,832,407 228,130 644,863 50,180
Administration fees.... 489,674 381,751 47,527 100,760 7,841
Accounting agent fees.. 117,522 91,620 11,407 40,304 1,882
Custodian fees......... 13,756 15,156 10,740 60,446 4,265
Directors' fees........ 14,580 12,093 1,366 3,222 246
Transfer agent fees.... 56,088 30,712 20,262 28,208 18,991
Professional Services.. 76,201 61,877 7,506 15,988 1,257
Registration fees...... 3,748 44,896 11,730 8,123 4,495
Other.................. 31,898 28,204 6,158 14,739 3,160
----------- ------------ ---------- ----------- ---------
3,153,902 2,498,716 344,826 916,653 92,317
Fees waived by
Investment Advisers... (411,721) (353,844) (73,751) (70,270) (28,021)
Fees waived by
Administrator......... -- (7,061) (4,922) (40,305) (1,571)
----------- ------------ ---------- ----------- ---------
TOTAL EXPENSES....... 2,742,181 2,137,811 266,153 806,078 62,725
----------- ------------ ---------- ----------- ---------
NET INVESTMENT INCOME... 3,117,850 5,392,736 144,391 662,558 318,169
----------- ------------ ---------- ----------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments............ 31,093,571 59,394,028 4,500,635 5,691,602 (180,671)
Foreign currency
transactions.......... -- -- -- (245,747) --
----------- ------------ ---------- ----------- ---------
31,093,571 59,394,028 4,500,635 5,445,855 (180,671)
----------- ------------ ---------- ----------- ---------
Change in net
unrealized
appreciation
(depreciation):
Investments............ 32,083,447 (21,415,473) 3,072,193 (6,835,309) (191,425)
Translation of assets
and liabilities in
foreign currencies.... -- -- -- (148,368) --
----------- ------------ ---------- ----------- ---------
32,083,447 (21,415,473) 3,072,193 (6,983,677) (191,425)
----------- ------------ ---------- ----------- ---------
Net gain (loss) on
investments and
foreign currency
transactions.......... 63,177,018 37,978,555 7,572,828 (1,537,822) (372,096)
----------- ------------ ---------- ----------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $66,294,868 $ 43,371,291 $7,717,219 $ (875,264) $ (53,927)
=========== ============ ========== =========== =========
</TABLE>
- --------
(1) Net of witholding taxes of $227,364
See Accompanying Notes to Financial Statements.
39
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31, 1999
<TABLE>
<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>
INVESTMENT INCOME:
Interest............... $ 9,479,608 $ 6,696,227 $1,020,663 $3,917,736 $ 8,664,066
----------- ----------- ---------- ---------- -----------
EXPENSES:
Investment advisory
fees.................. 553,881 373,874 111,675 460,842 900,218
Administration fees.... 197,815 133,526 27,919 115,211 225,054
Accounting agent fees.. 47,476 32,046 8,934 36,867 72,017
Custodian fees......... 18,415 19,341 6,633 12,148 12,473
Directors' fees........ 5,887 3,996 681 3,576 6,890
Transfer agent fees.... 34,694 23,269 21,502 22,327 25,518
Professional Services.. 30,591 21,395 4,222 18,637 36,228
Registration fees...... 11,009 19,371 4,634 14,834 25,546
Pricing service fees... 11,423 21,680 6,985 6,697 11,221
Other.................. 12,044 8,603 1,969 7,666 14,334
----------- ----------- ---------- ---------- -----------
923,235 657,101 195,154 698,805 1,329,499
Fees waived by
Investment Adviser.... (171,586) (138,868) (83,180) (258,071) (501,170)
Fees waived by
Administrator......... (39,563) (37,541) (11,467) (25,975) (18,131)
----------- ----------- ---------- ---------- -----------
TOTAL EXPENSES....... 712,086 480,692 100,507 414,759 810,198
----------- ----------- ---------- ---------- -----------
NET INVESTMENT INCOME... 8,767,522 6,215,535 920,156 3,502,977 7,853,868
----------- ----------- ---------- ---------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss)................ 618,107 882,355 14,267 1,239,988 2,462,303
Change in net
unrealized
appreciation
(depreciation)........ (2,292,463) (2,367,146) (172,632) (591,029) (2,628,395)
----------- ----------- ---------- ---------- -----------
Net gain (loss) on
investments........... (1,674,356) (1,484,791) (158,365) 648,959 (166,092)
----------- ----------- ---------- ---------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ 7,093,166 $ 4,730,744 $ 761,791 $4,151,936 $ 7,687,776
=========== =========== ========== ========== ===========
</TABLE>
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 Money Market Money Market Money Market
Fund For the Fund For the Fund For the Fund For the
Year Ended Year Ended Year Ended Year Ended
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 23,776,832 $ 20,886,323 $ 20,372,197 $ 18,472,270
Net gain (loss) on
investments........... 3,130 (29,550) -- 58
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 23,779,962 20,856,773 20,372,197 18,472,328
------------ ------------ ------------ ------------
Distributions to
shareholders from net
investment income...... (23,776,832) (20,886,323) (20,372,197) (18,472,270)
Increase (decrease) in
net assets derived from
capital share
transactions........... 82,081,604 79,927,207 54,389,002 50,324,122
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 82,084,734 79,897,657 54,389,002 50,324,180
NET ASSETS:
Beginning of period.... 448,750,597 368,852,940 391,133,203 340,809,023
------------ ------------ ------------ ------------
End of period.......... $530,835,331 $448,750,597 $445,522,205 $391,133,203
============ ============ ============ ============
<CAPTION>
Tax-Exempt Tax-Exempt
Money Market Money Market
Fund For the Fund For the
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 3,242,143 $ 2,738,472
Net gain (loss) on
investments........... 306 (1,234)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 3,242,449 2,737,238
------------ ------------
Distributions to
shareholders from:
Net investment income.. (3,242,143) (2,738,472)
------------ ------------
Proceeds of shares
issued due to exchange
of Tax-Exempt Money
Market Fund (Trust)
shares for Tax-Exempt
Money Market Fund
shares................. 61,656,240
Increase (decrease) in
net assets derived from
capital share
transactions........... (8,400,417) 10,473,945
------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 53,256,129 10,472,711
NET ASSETS:
Beginning of period.... 89,964,604 79,491,893
------------ ------------
End of period.......... $143,220,733 $ 89,964,604
============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Equity
Growth & Growth & Equity Income Fund
Income Fund Income Fund Income Fund For the
For the For the For the Period From
Year Ended Year Ended Year Ended March 1, 1998(1)
May 31, 1999 May 31, 1998 May 31, 1999 To May 31, 1998
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 3,117,850 $ 1,764,081 $ 5,392,736 $ 1,213,436
Net realized gain
(loss) on
investments........... 31,093,571 14,390,348 59,394,028 13,570,767
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... 32,083,447 24,784,580 (21,415,473) (7,001,182)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 66,294,868 40,939,009 43,371,291 7,783,021
------------ ------------ ------------ ------------
Distributions to
shareholders from:
Net investment income
Institutional Class.... (2,509,416) (1,930,172) (5,358,080) (594,910)
AFBA Five Star Class... -- (3,042) -- --
Net realized capital
gains
Institutional Class.... (10,393,342) (15,671,140) (34,800,822) --
------------ ------------ ------------ ------------
Total distributions to
shareholders......... (12,902,758) (17,604,354) (40,158,902) (594,910)
------------ ------------ ------------ ------------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class.... 62,772,358 50,484,257 7,959,869 142,353
AFBA Five Star Class... -- 41,862 -- --
Value of shares issued
in conversion of
Common Funds.......... -- 181,773,462 -- 328,878,344
Proceeds of shares
issued due to the
exchange of AFBA Five
Star shares for
Institutional shares.. -- 516,427 -- --
Cost of shares redeemed
Institutional Class.... (74,027,633) (34,968,577) (48,808,503) (16,237,364)
AFBA Five Star Class... -- (1,537,343) -- --
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.... 11,036,126 10,488,194 31,970,933 53
AFBA Five Star Class... -- 2,953 -- --
------------ ------------ ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... (219,149) 206,284,808 (8,877,701) 312,783,386
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 53,172,961 229,619,463 (5,665,312) 319,971,497
NET ASSETS:
Beginning of period.... 373,864,657 144,245,194 319,971,497 --
------------ ------------ ------------ ------------
End of period.......... $427,037,618 $373,864,657 $314,306,185 $319,971,497
============ ============ ============ ============
</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>
Equity
Growth Fund International International
For the Equity Growth Fund Equity Fund Equity Fund
Year Ended For the Period From For the For the
May 31, March 1, 1998(1) Year Ended Year Ended
1999 To May 31, 1998 May 31, 1999 May 31, 1998
----------- ------------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 144,391 $ 61,732 $ 662,558 $ 762,757
Net realized gain
(loss) on investments
and foreign currency.. 4,500,635 2,420,386 5,445,855 3,708,455
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilities in
foreign currency...... 3,072,193 (1,454,880) (6,983,677) 4,894,140
----------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 7,717,219 1,027,238 (875,264) 9,365,352
----------- ----------- ------------ ------------
Distributions to
shareholders from:
Net investment income.. (156,729) (31,588) (500,860) (940,289)
Net realized capital
gains................. (3,417,673) -- (1,929,077) (3,970,934)
----------- ----------- ------------ ------------
Total distributions to
shareholders......... (3,574,402) (31,588) (2,429,937) (4,911,223)
----------- ----------- ------------ ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 10,492,031 135,941 46,141,273 11,904,930
Value of shares issued
in conversion of
Common Funds.......... -- 35,428,852 -- --
Cost of shares
redeemed.............. (5,201,138) (1,684,409) (48,595,061) (15,013,205)
Value of shares issued
in reinvestment of
dividends............. 3,210,792 -- 1,657,568 743,082
----------- ----------- ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... 8,501,685 33,880,384 (796,220) (2,365,193)
----------- ----------- ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 12,644,502 34,876,034 (4,101,421) 2,088,936
NET ASSETS:
Beginning of period.... 34,876,034 -- 85,402,279 83,313,343
----------- ----------- ------------ ------------
End of period.......... $47,520,536 $34,876,034 $ 81,300,858 $ 85,402,279
=========== =========== ============ ============
</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>
Diversified Real Limited Limited
Diversified Real Estate Fund Maturity Maturity
Estate Fund For the Bond Fund Bond Fund
For the Period From For the For the
Year Ended August 1, 1997(1) Year Ended Year Ended
May 31, 1999 To May 31, 1998 May 31, 1999 May 31, 1998
---------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 318,169 $ 207,674 $ 8,767,522 $ 2,476,316
Net realized gain
(loss) on
investments........... (180,671) 1,885 618,107 414,753
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (191,425) 6,424 (2,292,463) 652,638
---------- ---------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ (53,927) 215,983 7,093,166 3,543,707
---------- ---------- ------------ ------------
Distributions to
shareholders from:
Net investment income
Institutional Class.... (355,953) (157,428) (8,767,522) (2,468,821)
AFBA Five Star Class... -- -- -- (7,495)
Net realized capital
gains
Institutional Class.... -- -- (383,653) (328,300)
Return of Capital
Distributions.......... (9,103) (21,718) -- --
---------- ---------- ------------ ------------
Total distributions to
shareholders......... (365,056) (179,146) (9,151,175) (2,804,616)
---------- ---------- ------------ ------------
Capital Share
Transactions:
Proceeds of shares sold
Institutional Class.... 1,705,488 6,873,111 33,879,887 11,931,472
AFBA Five Star Class... -- -- -- 5,925
Value of shares issued
in conversion of
Common Funds.......... -- -- -- 108,063,470
Proceeds of shares
issued due to exchange
of AFBA Five Star
shares for
Institutional shares.. -- -- -- 90,250
Cost of shares redeemed
Institutional Class.... (161,537) (234,569) (19,269,521) (13,385,141)
AFBA Five Star Class... -- -- -- (772,799)
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.... 26,951 1,838 1,782,525 1,481,477
AFBA Five Star Class... -- -- -- 10,229
---------- ---------- ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... 1,570,902 6,640,380 16,392,891 107,334,633
---------- ---------- ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 1,151,919 6,677,217 14,334,882 108,073,724
NET ASSETS:
Beginning of period.... 6,677,217 -- 151,922,379 43,848,655
---------- ---------- ------------ ------------
End of period.......... $7,829,136 $6,677,217 $166,257,261 $151,922,379
========== ========== ============ ============
</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>
Total Return Maryland Maryland
Total Return Bond Fund Tax-Exempt Tax-Exempt
Bond Fund For the Bond Fund Bond Fund
For the Year Period From For the For the
Ended March 1, 1998(1) Year Ended Year Ended
May 31, 1999 To May 31, 1998 May 31, 1999 May 31, 1998
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 6,215,535 $ 1,497,995 $ 920,156 $ 457,188
Net realized gain
(loss) on
investments........... 882,355 9,544 14,267 114,613
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (2,367,146) 157,571 (172,632) 267,492
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 4,730,744 1,665,110 761,791 839,293
------------ ------------ ----------- -----------
Distributions to
shareholders from:
Net investment income.. (6,215,535) (1,497,995) (920,156) (457,188)
Net realized capital
gains................. (627,475) -- -- --
------------ ------------ ----------- -----------
Total Distributions to
Shareholders......... (6,843,010) (1,497,995) (920,156) (457,188)
Capital Share
Transactions:
Proceeds of shares
sold.................. 21,723,424 6,084,472 17,972,231 7,019,522
Value of shares issued
in acquisition of
Common Funds.......... -- 99,660,947 -- --
Cost of shares
redeemed.............. (14,669,153) (4,549,206) (6,342,407) (817,640)
Value of shares issued
in reinvestment of
dividends............. 843,089 171 113,379 98,693
------------ ------------ ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 7,897,360 101,196,384 11,743,203 6,300,575
------------ ------------ ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 5,785,094 101,363,499 11,584,838 6,682,680
NET ASSETS:
Beginning of period.... 101,363,499 -- 14,980,489 8,297,809
------------ ------------ ----------- -----------
End of period.......... $107,148,593 $101,363,499 $26,565,327 $14,980,489
============ ============ =========== ===========
</TABLE>
- --------
(1) Commencement of Operations
See Accompanying Notes to Financial Statements.
45
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate National
Intermediate Tax-Exempt National Tax-Exempt
Tax-Exempt Bond Fund Tax-Exempt Bond Fund
Bond Fund For the Bond Fund For the
For the Period From For the Period From
Year Ended March 1, 1998(1) Year Ended March 1, 1998(1)
May 31, 1999 To May 31, 1998 May 31, 1999 To May 31, 1998
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 3,502,977 $ 943,803 $ 7,853,868 $ 1,995,615
Net realized gain
(loss) on
investments........... 1,239,988 44,439 2,462,303 437,736
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (591,029) 32,609 (2,628,395) 512,032
----------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 4,151,936 1,020,851 7,687,776 2,945,383
----------- ----------- ------------ ------------
Distributions to
shareholders from:
Net investment income.. (3,502,977) (943,803) (7,853,868) (1,995,615)
Net realized capital
gains................. (721,135) -- (2,125,685) --
----------- ----------- ------------ ------------
Total Distributions to
Shareholders......... (4,224,112) (943,803) (9,979,553) (1,995,615)
Capital Share
Transactions:
Proceeds of shares
sold.................. 7,895,070 2,583,190 15,739,980 5,109,502
Value of shares issued
in acquisition of
Common Funds.......... -- 98,001,170 -- 175,761,930
Cost of shares
redeemed.............. (11,552,185) (6,668,912) (15,382,582) (3,704,846)
Value of shares issued
in reinvestment of
dividends............. 631,896 1 1,884,977 1
----------- ----------- ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... (3,025,219) 93,915,449 2,242,375 177,166,587
----------- ----------- ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (3,097,395) 93,992,497 (49,402) 178,116,355
NET ASSETS:
Beginning of period.... 93,992,497 -- 178,116,355 --
----------- ----------- ------------ ------------
End of period.......... $90,895,102 $93,992,497 $178,066,953 $178,116,355
=========== =========== ============ ============
</TABLE>
- --------
(1) Commencement of Operations
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>
Prime Money Market Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<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.. 0.0486 0.0521 0.0498 0.0532 0.0491
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0486 0.0521 0.0498 0.0532 0.0491
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0486) (0.0521) (0.0498) (0.0532) (0.0491)
-------- -------- -------- -------- --------
Total Distributions.. (0.0486) (0.0521) (0.0498) (0.0532) (0.0491)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------
Total Return............ 4.97% 5.33% 5.10% 5.45% 5.02%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $530,835 $448,751 $368,853 $326,878 $382,059
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.42% 0.43% 0.43% 0.43%
Before Expense
Waiver................ 0.45% 0.47% 0.48% 0.48% 0.48%
Ratio of Net Investment
Income to Average Net
Assets................ 4.84% 5.21% 4.98% 5.33% 4.92%
<CAPTION>
Government Money Market Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<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.. 0.0478 0.0515 0.0495 0.0526 0.0485
-------- -------- -------- -------- --------
Total From Investment
Operations.......... 0.0478 0.0515 0.0495 0.0526 0.0485
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0478) (0.0515) (0.0495) (0.0526) (0.0485)
-------- -------- -------- -------- --------
Total Distributions.. (0.0478) (0.0515) (0.0495) (0.0526) (0.0485)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------
Total Return............ 4.89% 5.27% 5.06% 5.39% 4.95%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $445,522 $391,133 $340,809 $264,725 $263,752
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.42% 0.43% 0.43% 0.43%
Before Expense
Waiver................ 0.45% 0.46% 0.49% 0.48% 0.48%
Ratio of Net Investment
Income to Average Net
Assets................ 4.76% 5.15% 4.95% 5.27% 4.85%
</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>
Tax-Exempt Money Market Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<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.. 0.0285 0.0318 0.0304 0.0321 0.0303
Net Realized Gain on
Investments........... -- -- -- -- --
-------- -------- -------- -------- -------
Total From Investment
Operations.......... 0.0285 0.0318 0.0304 0.0321 0.0303
-------- -------- -------- -------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0285) (0.0318) (0.0304) (0.0321) (0.0303)
Net Capital Gains...... -- -- -- -- --
-------- -------- -------- -------- -------
Total Distributions.. (0.0285) (0.0318) (0.0304) (0.0321) (0.0303)
-------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
- ------------------------------------------------------------------------------------------
Total Return............ 2.89% 3.22% 3.09% 3.26% 3.08%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $143,221 $ 89,965 $ 79,492 $ 50,137 $69,100
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.43% 0.43% 0.43% 0.43%
Before Expense
Waiver................ 0.49% 0.50% 0.53% 0.51% 0.52%
Ratio of Net Investment
Income to Average Net
Assets................ 2.80% 3.17% 3.05% 3.22% 3.01%
<CAPTION>
Growth & Income Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 21.37 $ 18.25 $ 14.58 $ 13.42 $ 12.14
-------- -------- -------- -------- -------
Income From Investment
Operations:
Net Investment Income.. 0.18 0.20 0.23 0.33 0.35
Net Realized and
Unrealized Gain (Loss)
on Investments........ 3.62 5.01 4.19 1.89 1.55
-------- -------- -------- -------- -------
Total From Investment
Operations.......... 3.80 5.21 4.42 2.22 1.90
-------- -------- -------- -------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.14) (0.23) (0.25) (0.35) (0.34)
Net Capital Gains...... (0.60) (1.86) (0.50) (0.71) (0.28)
-------- -------- -------- -------- -------
Total Distributions.. (0.74) (2.09) (0.75) (1.06) (0.62)
-------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $ 24.43 $ 21.37 $ 18.25 $ 14.58 $ 13.42
======== ======== ======== ======== =======
- ------------------------------------------------------------------------------------------
Total Return............ 18.20% 29.40% 31.26% 17.24% 16.22%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $427,038 $373,864 $142,452 $107,233 $91,277
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.70% 0.71% 0.73% 0.73% 0.73%
Before Expense
Waiver................ 0.81% 0.88% 0.89% 0.89% 0.89%
Ratio of Net Investment
Income to Average Net
Assets................ 0.80% 0.99% 1.52% 2.38% 2.99%
Portfolio turnover
rate................... 26.48% 24.09% 27.10% 45.15% 33.26%
</TABLE>
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 Fund Equity Growth Fund Diversified Real Estate Fund
----------------------------- ----------------------------- ------------------------------
For the For the Period For the For the Period For the For the Period
Year Ended March 1, 1998(1) Year Ended March 1, 1998(1) Year Ended August 1, 1997(1)
May 31, 1999 to May 31, 1998 May 31, 1999 to May 31, 1998 May 31, 1999 to May 31, 1998
------------ ---------------- ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.21 $ 10.00 $ 10.28 $ 10.00 $10.13 $10.00
-------- -------- ------- ------- ------ ------
Income From Investment
Operations:
Net Investment Income.. 0.17 0.04 0.04 0.02 0.53 0.35
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.23 0.19 2.23 0.27 (0.76) 0.09
-------- -------- ------- ------- ------ ------
Total From Investment
Operations.......... 1.40 0.23 2.27 0.29 (0.23) 0.44
-------- -------- ------- ------- ------ ------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.17) (0.02) (0.05) (0.01) (0.52) (0.28)
Return of Capital...... -- -- -- -- (0.01) (0.03)
Net Capital Gains...... (1.19) 0.00 (1.02) 0.00 0.00 0.00
-------- -------- ------- ------- ------ ------
Total Distributions.. (1.36) (0.02) (1.07) (0.01) (0.53) (0.31)
-------- -------- ------- ------- ------ ------
Net Asset Value, End of
Period................. $ 10.25 $ 10.21 $ 11.48 $ 10.28 $ 9.37 $10.13
======== ======== ======= ======= ====== ======
- --------------------------------------------------------------------------------------------------------------------
Total Return............ 15.30% 2.28% 23.13% 2.89% (1.80)% 4.31%
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $314,306 $319,971 $47,521 $34,876 $7,829 $6,677
Ratio of Expenses to
Average Net Assets
After Expense
Reimbursement and
Waiver................ 0.70% 0.70%(2) 0.70% 0.70%(2) 1.00% 1.00%(2)
Before Expense
Reimbursement and
Waiver................ 0.82% 0.93%(2) 0.91% 1.02%(2) 1.47% 2.25%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 1.77% 1.45%(2) 0.38% 0.68%(2) 6.03% 4.17%(2)
Portfolio turnover
rate................... 24.47% 2.00% 62.49% 7.99% 14.35% 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 Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.90 $ 13.18 $ 12.47 $ 11.60 $ 11.81
Income From Investment
Operations:
Net Investment Income.. 0.11 0.12 0.31 0.09 0.03
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency...... (0.27) 1.42 0.88 1.51 0.08
-------- -------- ------- ------- -------
Total From Investment
Operations.......... (0.16) 1.54 1.19 1.60 0.11
-------- -------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.08) (0.15) (0.24) (0.07) (0.04)
Net Capital Gains...... (0.31) (0.67) (0.24) (0.66) (0.28)
-------- -------- ------- ------- -------
Total Distributions.. (0.39) (0.82) (0.48) (0.73) (0.32)
-------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 13.35 $ 13.90 $ 13.18 $ 12.47 $ 11.60
======== ======== ======= ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ (1.02)% 12.77% 9.81% 14.27% 0.82%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $ 81,301 $ 85,402 $83,313 $75,676 $69,172
Ratio of Expenses to
Average Net Assets
After Expense Waiver. 1.00% 1.03% 1.05% 1.05% 1.05%
Before Expense
Waiver.............. 1.14% 1.14% 1.16% 1.17% 1.16%
Ratio of Net Investment
Income to Average Net
Assets................ 0.82% 0.92% 0.97% 0.78% 0.06%
Portfolio turnover
rate................... 67.33% 55.55% 74.15% 53.58% 42.15%
<CAPTION>
Limited Maturity Bond Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.45 $ 10.31 $ 10.19 $ 10.43 $ 10.10
-------- -------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.58 0.60 0.59 0.59 0.56
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.10) 0.22 0.12 (0.24) 0.33
-------- -------- ------- ------- -------
Total From Investment
Operations.......... 0.48 0.82 0.71 0.35 0.89
-------- -------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.58) (0.60) (0.59) (0.59) (0.56)
Net Capital Gains...... (0.03) (0.08) -- -- --
-------- -------- ------- ------- -------
Total Distributions.. (0.61) (0.68) (0.59) (0.59) (0.56)
-------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 10.32 $ 10.45 $ 10.31 $ 10.19 $ 10.43
======== ======== ======= ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ 4.63% 8.15% 7.12% 3.38% 9.13%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $166,257 $151,922 $43,010 $44,102 $44,652
Ratio of Expenses to
Average Net Assets
After Expense Waiver. 0.45% 0.50% 0.60% 0.60% 0.60%
Before Expense
Waiver.............. 0.58% 0.78% 0.75% 0.72% 0.70%
Ratio of Net Investment
Income to Average Net
Assets................ 5.54% 5.71% 5.72% 5.66% 5.56%
Portfolio turnover
rate................... 59.73% 48.24% 20.92% 52.79% 22.01%
</TABLE>
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>
Intermediate Tax-Exempt Bond
Total Return Bond Fund Fund National Tax-Exempt Bond Fund
----------------------------- ----------------------------- -----------------------------
For the For the Period For the For the Period For the For the Period
Year Ended March 1, 1998(1) Year Ended March 1, 1998(1) Year Ended March 1, 1998(1)
May 31, 1999 to May 31, 1998 May 31, 1999 to May 31, 1998 May 31, 1999 to May 31, 1998
------------ ---------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.02 $ 10.00 $ 10.01 $ 10.00 $ 10.05 $ 10.00
-------- -------- ------- ------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.59 0.15 0.38 0.10 0.44 0.11
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.14) 0.02 0.07 0.01 0.00 0.05
-------- -------- ------- ------- -------- --------
Total From Investment
Operations.......... 0.45 0.17 0.45 0.11 0.44 0.16
-------- -------- ------- ------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.59) (0.15) (0.38) (0.10) (0.44) (0.11)
Net Capital Gains...... (0.06) 0.00 (0.08) 0.00 (0.12) 0.00
-------- -------- ------- ------- -------- --------
Total Distributions.. (0.65) (0.15) (0.46) (0.10) (0.56) (0.11)
-------- -------- ------- ------- -------- --------
Net Asset Value, End of
Period................. $ 9.82 $ 10.02 $ 10.00 $ 10.01 $ 9.93 $ 10.05
======== ======== ======= ======= ======== ========
- -------------------------------------------------------------------------------------------------------------------
Total Return............ 4.48% 1.69% 4.58% 1.07% 4.43% 1.64%
- -------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $107,149 $101,363 $90,895 $93,992 $178,067 $178,116
Ratio of Expenses to
Average Net Assets
After Expense
Reimbursement and
Waiver................ 0.45% 0.45%(2) 0.45% 0.45%(2) 0.45% 0.45%(2)
Before Expense
Reimbursement and
Waiver................ 0.62% 0.73%(2) 0.76% 0.88%(2) 0.74% 0.86%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 5.82% 5.89%(2) 3.80% 3.84%(2) 4.36% 4.49%(2)
Portfolio turnover
rate................... 74.94% 10.51% 149.02% 10.13% 123.30% 7.37%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized.
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>
Maryland Tax-Exempt Bond Fund
----------------------------------------------------------------
For the Years Ended
May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996 May 31, 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.82 $ 10.38 $10.20 $ 10.40 $ 10.25
------- ------- ------ ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.45 0.48 0.50 0.49 0.49
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.04) 0.44 0.18 (0.20) 0.15
------- ------- ------ ------- -------
Total From Investment
Operations.......... 0.41 0.92 0.68 0.29 0.64
------- ------- ------ ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.45) (0.48) (0.50) (0.49) (0.49)
Net Capital Gains...... -- -- -- -- --
------- ------- ------ ------- -------
Total Distributions.. (0.45) (0.48) (0.50) (0.49) (0.49)
------- ------- ------ ------- -------
Net Asset Value, End of
Period................. $ 10.78 $ 10.82 $10.38 $ 10.20 $ 10.40
======= ======= ====== ======= =======
- ------------------------------------------------------------------------------------------
Total Return............ 3.81% 9.03% 6.80% 2.84% 6.48%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $26,565 $14,980 $8,298 $10,186 $12,360
Ratio of Expenses to
Average Net Assets
After Expense Waiver. 0.45% 0.49% 0.55% 0.62% 0.62%
Before Expense
Waiver.............. 0.87% 1.03% 1.13% 1.04% 0.97%
Ratio of Net Investment
Income to Average Net
Assets................ 4.12% 4.49% 4.84% 4.74% 4.83%
Portfolio turnover
rate................... 22.78% 55.95% 28.11% 20.58% 36.80%
</TABLE>
See Accompanying Notes to Financial Statements.
52
<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 thirteen classes of common stock representing in-
terests in thirteen 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 Growth & Income Fund (Class E), the Limited Maturity Bond
Fund (Class F), the Maryland Tax-Exempt Bond Fund (Class G), the International
Equity Fund (Class H), the Diversified Real Estate Fund (Class J), the Na-
tional 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 In-
termediate Tax-Exempt Bond Fund (Class O)--(the "Funds").
On April 24, 1998, the Board of Directors of the Company approved the con-
solidation of the Tax-Exempt Money Market Fund (Trust) with the Tax-Exempt
Money Market Fund. The consolidation was effective on January 4, 1999 through
(i) the redemption of all of the outstanding shares of the Tax-Exempt Money
Market Fund (Trust) by the shareholders of record, (ii) the issuance to the
redeeming shareholders of the same number of shares of the Tax-Exempt Money
Market Fund that such shareholders redeemed from the Tax-Exempt Money Market
Fund (Trust), and (iii) the transfer of substantially all of the assets of the
Tax-Exempt Money Market Fund (Trust) to the Tax-Exempt Money Market Fund. The
aggregate net assets of the Funds immediately before the combination were
$61,657,387 for the Tax-Exempt Money Market Fund (Trust) and $93,339,760 for
the Tax-Exempt Money Market Fund.
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 and Tax-Exempt Money Market Fund (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 per-
formed pursuant to procedures adopted by the Company's Board of Direc-
tors in an attempt to avoid dilution or other unfair results to share-
holders. 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.
53
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
Investments held by the Growth & Income Fund, Equity Income Fund, Eq-
uity 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 (in-
cluding securities traded through the National Market System) is valued
at the last sale price on that exchange or, if there were no sales dur-
ing the day, at the current quoted bid price. Portfolio securities that
are primarily traded on foreign exchanges are generally valued at the
closing values of such securities on their respective exchanges, pro-
vided that if such securities are not traded on the valuation date,
they will be valued at the preceding closing values and provided fur-
ther, that when an occurrence subsequent to the time of valuation is
likely to have changed the value, then the fair value of those securi-
ties 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. Investments in mu-
tual funds are valued at the closing net asset value per share on the
day of valuation. 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, Mary-
land Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund and Na-
tional Tax-Exempt Bond Fund will fluctuate as the values of their re-
spective 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.
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 Na-
tional Tax-Exempt Bond Fund; are declared and paid monthly to sharehold-
ers of the Growth & Income Fund, Equity Income Fund and Equity Growth
Fund; are declared and paid quarterly to shareholders of the Diversified
Real Estate Fund; and are
54
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
declared and paid semi-annually to shareholders of the International Eq-
uity Fund. Any net realized capital gains are distributed annually. In-
come distributions and capital gains distributions are determined in ac-
cordance with income tax regulations which may differ from generally ac-
cepted accounting principles; accordingly, periodic reclassifications
are made within the Funds' capital accounts to reflect income and gains
available for distribution under income tax resolutions.
D) Federal Income Taxes: Each of the Funds is a separate taxable entity and
intends to continue to qualify for the tax treatment applicable to regu-
lated investment companies under Subchapter M of 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, cap-
ital losses realized after October 31 may be deferred and treated as oc-
curring 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, 2000:
<TABLE>
<CAPTION>
Capital Losses
Deferred
--------------
<S> <C>
International Equity Fund................................... $233,286
Maryland Tax-Exempt Bond Fund............................... 473
</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, collateral
for repurchase agreements may have longer maturities than the maximum
permissible remaining maturity of portfolio investments. The seller will
be required on a daily basis to maintain the value of the securities
subject to the repurchase agreement at not less than the repurchase
price (including accrued interest), plus the transaction costs the Funds
could expect to incur if the seller defaults, marked-to-market daily.
Repurchase agreements are accounted for as collateralized financings.
The policy of the Funds is to obtain possession of collateral 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 respec-
tive period, purchases and sales of securities and income and expenses
at the rate of exchange prevailing on the dates of such transactions.
The International Equity Fund does not isolate that portion of the re-
sults of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
55
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
G) Forward Foreign Currency Contracts: The International Equity Fund enters
into forward foreign currency contracts in order to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio
holdings. All commitments are marked-to-market daily at the applicable
foreign exchange rate and any resulting unrealized gains or losses are
recorded currently. The gain or loss arising from the difference between
the original contracts and the closing of such contracts is included in
income as a component of realized gain or loss on foreign currency. Such
contracts, which protect the value of a Fund's investment securities
against a decline in the value of currency, do not eliminate fluctua-
tions in the underlying prices of the securities, but merely establish
an exchange rate at a future date. Also, although such contracts tend to
minimize the risk of loss due to a decline in the value of a hedged cur-
rency, at the same time they tend to limit any potential gain that might
be realized should the value of such foreign currency increase.
H) International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic insta-
bility, foreign taxation and/or differences in auditing and other finan-
cial standards.
I) Investing in the securities of companies principally engaged in the real
estate business is subject to the same risks as direct ownership of real
estate, such as supply and demand for properties, the economic health of
the 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 an Investment
Advisory Agreement and an Administration Agreement. For its services as Advis-
er, Mercantile receives an advisory fee computed daily and payable monthly at
an annual rate of (a) .25% of the first $1 billion of the Prime Money Market,
Government Money Market and Tax-Exempt Money Market Funds' average daily net
assets during the preceding month plus .20% of such Funds' average daily net
assets in excess of $1 billion during the preceding month, (b) .60% of the
first $1 billion of the Growth & Income, Equity Income and Equity Growth
Funds' average daily net assets during the preceding month plus .40% of such
Funds' average daily net assets in excess of $1 billion during the preceding
month, (c) .35% of the first $1 billion of the Limited Maturity Bond and Total
Return Bond Funds' average daily net assets during the preceding month plus
.20% of such Funds' average daily net assets in excess of $1 billion during
the preceding month, (d) .50% of the first $1 billion of the Maryland Tax-Ex-
empt Bond, National Tax-Exempt Bond and Intermediate Tax-Exempt Bond Funds'
average daily net assets during the preceding month plus .25% of such Funds'
average daily net assets in excess of $1 billion during the preceding month,
(e) .80% of the first $1 billion of the International Equity Fund's average
daily net assets during the preceding month plus .70% of such Fund's average
daily net assets in excess of $1 billion during the preceding month (Mercan-
tile pays a sub-advisory fee to BlackRock, Inc. at an annual rate of .45% of
56
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
2. INVESTMENT ADVISER, ADMINISTRATOR, DISTRIBUTOR AND OTHER RELATED PARTY
TRANSACTIONS -- Continued
the average daily net assets), and (f) .80% of the first $1 billion of the Di-
versified Real Estate Fund's average daily net assets during the preceding
month plus .60% of such Fund's average daily net assets in excess of $1 bil-
lion during the preceding month. 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 ad-
ministration fee for any Fund.
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
$9,500 and a fee of $2,000 for each Board meeting attended and was reimbursed
for all out-of-pocket expenses relating to attendance at meetings. The Chair-
man of the Board of Directors and President receives an additional fee of
$7,500 for his services in these capacities. No person who is a director, of-
ficer or employee of Mercantile serves as a director, officer or employee of
the Company. During the fiscal year ended May 31, 1999, 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, 1999, net assets consisted of the following:
<TABLE>
<CAPTION>
Prime Government Tax-Exempt
Money Market Money Market Money Market
Fund Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
Capital Paid-In..................... $530,941,027 $445,648,410 $143,228,227
Accumulated Realized Gain (Loss) on
Investments........................ (105,696) (126,205) (7,494)
------------ ------------ ------------
$530,835,331 $445,522,205 $143,220,733
============ ============ ============
</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......... $225,450,928 $139,619,351 $29,496,723 $67,742,259 $8,178,308
Accumulated Realized
Gain (Loss) on
Investments and Foreign
Currency............... 21,308,884 38,163,973 3,503,328 3,495,858 (166,236)
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency............... 179,516,042 135,840,806 14,499,585 9,913,843 (245,047)
Undistributed Net
Investment Income...... 761,764 682,055 20,900 148,898 62,111
------------ ------------ ----------- ----------- ----------
$427,037,618 $314,306,185 $47,520,536 $81,300,858 $7,829,136
============ ============ =========== =========== ==========
</TABLE>
57
<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......... $166,744,398 $106,937,099 $26,763,425 $90,005,423 $171,550,506
Accumulated Realized
Gain (Loss) on
Investments............ 235,086 273,117 (436,088) 563,292 774,354
Net Unrealized
Appreciation
(Depreciation) on
Investments............ (733,183) (61,623) 237,990 317,820 5,726,808
Undistributed Net
Investment Income...... 10,960 -- -- 8,567 15,285
------------ ------------ ----------- ----------- ------------
$166,257,261 $107,148,593 $26,565,327 $90,895,102 $178,066,953
============ ============ =========== =========== ============
</TABLE>
4. CAPITAL STOCK
Transactions in shares of the Company are summarized as follows:
<TABLE>
<CAPTION>
Prime Government Money Market
Money Market Fund Fund
-------------------------- --------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 766,296,619 576,074,807 709,317,736 565,932,193
Shares Redeemed......... (685,216,360) (497,024,467) (656,540,088) (516,412,638)
Shares Reinvested....... 1,001,344 876,867 1,611,353 804,567
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Shares.............. 82,081,603 79,927,207 54,389,001 50,324,122
Shares Outstanding:
Beginning of Period.... 448,859,423 368,932,216 391,259,409 340,935,287
------------ ------------ ------------ ------------
End of Period.......... 530,941,026 448,859,423 445,648,410 391,259,409
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Tax-Exempt
Money Market Fund
--------------------------
For the Year For the Year
Ended Ended
May 31, 1999 May 31, 1998
------------ ------------
<S> <C> <C>
Shares Sold........................................ 144,300,142 130,461,894
Shares Redeemed.................................... (152,722,958) (119,994,966)
Shares Reinvested.................................. 22,400 7,017
Shares Issued Due to Exchange of Tax-Exempt Money
Market Fund (Trust) Shares for Tax-Exempt Money
Market Fund Shares................................ 61,657,387 --
------------ ------------
Net Increase (Decrease) in Shares.................. 53,256,971 10,473,945
Shares Outstanding:
Beginning of Period............................... 89,972,404 79,498,459
------------ ------------
End of Period..................................... 143,229,375 89,972,404
============ ============
</TABLE>
58
<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
Ended Ended through
May 31, 1999 May 31, 1998 August 8, 1997
------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Shares Sold................ 2,778,002 2,469,614 2,163
Shares Redeemed............ (3,292,178) (1,673,194) (75,061)
Shares Reinvested.......... 496,412 511,819 153
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.................... (17,764) 9,691,294 (98,400)
Shares Outstanding:
Beginning of Period....... 17,496,834 7,805,540 98,400
---------- ---------- -------
End of Period............. 17,479,070 17,496,834 0
========== ========== =======
</TABLE>
- --------
* Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
<TABLE>
<CAPTION>
Equity Income Fund Equity Growth Fund
--------------------------- ---------------------------
For the Period For the Period
For the Year March 1, 1998 For the Year March 1, 1998
Ended through Ended through
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold............. 818,862 13,770 934,758 13,002
Shares Redeemed......... (4,951,404) (1,569,131) (494,334) (163,776)
Shares Reinvested....... 3,451,972 5 307,838 --
Shares Issued Due to
Acquisition of Common
Funds.................. -- 32,887,834 -- 3,542,885
---------- ---------- --------- ---------
Net Increase (Decrease)
in Shares.............. (680,570) 31,332,478 748,262 3,392,111
Shares Outstanding:
Beginning of Period.... 31,332,478 0 3,392,111 0
---------- ---------- --------- ---------
End of Period.......... 30,651,908 31,332,478 4,140,373 3,392,111
========== ========== ========= =========
</TABLE>
59
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
4. CAPITAL STOCK -- Continued
<TABLE>
<CAPTION>
Diversified Real Estate
International Equity Fund Fund
------------------------- ---------------------------
For the Period
For the Year For the Year For the Year August 1, 1997
Ended Ended Ended through
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold............. 3,532,140 899,337 192,039 680,394
Shares Redeemed......... (3,716,761) (1,136,494) (18,434) (21,706)
Shares Reinvested....... 130,150 61,632 3,153 175
---------- ---------- ------- -------
Net Increase (Decrease)
in Shares.............. (54,471) (175,525) 176,758 658,863
Shares Outstanding:
Beginning of Period.... 6,144,913 6,320,438 658,863 0
---------- ---------- ------- -------
End of Period.......... 6,090,442 6,144,913 835,621 658,863
========== ========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity Bond Fund*
---------------------------------------------------
Institutional Shares AFBA Five Star Shares
------------------------- ---------------------
For the Period
For the Year For the Year June 1, 1997
Ended Ended through
May 31, 1999 May 31, 1998 August 8, 1997
------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold................ 3,237,655 1,139,538 570
Shares Redeemed............ (1,839,478) (1,279,065) (74,140)
Shares Reinvested.......... 169,722 141,784 984
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.................... 1,567,899 10,371,756 (81,256)
Shares Outstanding:
Beginning of Period....... 14,543,171 4,171,415 81,256
---------- ---------- -------
End of Period............. 16,111,070 14,543,171 0
========== ========== =======
</TABLE>
- --------
* Transactions in shares reflect the exchange of AFBA Five Star Shares for In-
stitutional Shares on August 8, 1997.
60
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
4. CAPITAL STOCK -- Continued
<TABLE>
<CAPTION>
Maryland
Total Return Bond Fund Tax-Exempt Bond Fund
--------------------------- ---------------------------
For the Period
For the Year March 1, 1998 For the Year For the Year
Ended through Ended Ended
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 2,162,872 608,803 1,651,881 652,667
Shares Redeemed......... (1,459,049) (455,066) (583,325) (76,513)
Shares Reinvested....... 83,296 17 10,397 9,255
Shares Issued Due to
Acquisition of Common
Funds.................. -- 9,966,095 -- --
---------- ---------- ---------- ----------
Net Increase (Decrease)
in Shares.............. 787,119 10,119,849 1,078,953 585,409
Shares Outstanding:
Beginning of Period.... 10,119,849 0 1,384,481 799,072
---------- ---------- ---------- ----------
End of Period.......... 10,906,968 10,119,849 2,463,434 1,384,481
========== ========== ========== ==========
<CAPTION>
Intermediate National
Tax-Exempt Bond Fund Tax-Exempt Bond Fund
--------------------------- ---------------------------
For the Period For the Period
For the Year March 1, 1998 For the Year March 1, 1998
Ended through Ended through
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares Sold............. 782,513 258,403 1,558,731 510,766
Shares Redeemed......... (1,146,751) (667,602) (1,524,874) (370,554)
Shares Reinvested....... 62,688 -- 186,631 --
Shares Issued Due to
Acquisition of Common
Funds.................. -- 9,800,117 -- 17,576,193
---------- ---------- ---------- ----------
Net Increase (Decrease)
in Shares.............. (301,550) 9,390,918 220,488 17,716,405
Shares Outstanding:
Beginning of Period.... 9,390,918 0 17,716,405 0
---------- ---------- ---------- ----------
End of Period.......... 9,089,368 9,390,918 17,936,893 17,716,405
========== ========== ========== ==========
</TABLE>
61
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
5. PURCHASES & SALES OF SECURITIES
For the fiscal year ended May 31, 1999, total aggregate purchases and pro-
ceeds from sales of investment securities (excluding short-term securities)
were as follows:
<TABLE>
<CAPTION>
U.S. Government U.S. Government
Purchases * Sales * Purchases Sales
----------- ------- --------------- ---------------
<S> <C> <C> <C> <C>
Growth & Income Fund.... $102,075,727 $110,291,320 $ 0 $ 0
Equity Income Fund...... 71,283,234 119,046,203 0 0
Equity Growth Fund...... 26,368,469 22,876,101 0 0
International Equity
Fund................... 52,607,529 54,478,416 0 0
Diversified Real Estate
Fund................... 2,704,398 847,046 0 0
Limited Maturity Bond
Fund................... 41,058,530 23,664,423 45,372,125 60,677,639
Total Return Bond Fund.. 27,974,303 10,556,380 56,851,742 59,342,989
Maryland Tax-Exempt Bond
Fund................... 16,514,153 4,737,662 0 0
Intermediate Tax-Exempt
Bond Fund.............. 134,845,760 138,591,724 0 0
National Tax-Exempt Bond
Fund................... 218,114,288 216,288,774 0 0
</TABLE>
- --------
* (excluding short-term and U.S. Government securities)
6. CAPITAL LOSS CARRYOVERS
At May 31, 1999, the following Funds had capital loss carryovers:.
<TABLE>
<CAPTION>
Capital Loss Capital Loss Expiration
Carryover Utilized Carryover Year
------------------ ------------ ----------
<S> <C> <C> <C>
Prime Money Market Fund.. $3,130 $105,696 2003 through 2006
Government Money Market
Fund.................... 126,205 2003 through 2004
Tax-Exempt Money Market
Fund.................... 306 7,494 2003 through 2006
Diversified Real Estate
Fund.................... 178,786 2006
Maryland Tax-Exempt Bond
Fund.................... 14,267 436,087 2003 through 2004
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the respective Funds.
7. 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.
62
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Concluded
8. 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>
9. LINE OF CREDIT
A financing agreement is in place with all the M.S.D.&T. Funds except Inter-
national Equity Fund and Fifth Third Bank. Under the agreement, Fifth Third
Bank is providing an unsecured line of credit facility, in the uncommitted ag-
gregate amount of $25 million, to be accessed by the Funds for temporary or
emergency purposes only. Borrowings under this facility bear interest at the
overnight Federal Funds Rate plus .50% per annum. For the year ended May 31,
1999, the Funds had no borrowings under the line of credit.
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, statements of changes in net assets and financial
highlights present fairly, in all material respects, the financial position of
the M.S.D.&T. Funds, Inc. (comprised of the Prime Money Market Fund, Govern-
ment Money Market Fund, Tax-Exempt 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-Ex-
empt Bond Fund and collectively referred to as the "Funds"), at May 31, 1999,
the results of their operations, the changes in their net assets and the fi-
nancial highlights for each of the periods presented, in conformity with gen-
erally accepted accounting principles. These financial statements and finan-
cial highlights (hereafter referred to as "financial statements") are the re-
sponsibility 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 accordance with generally accepted au-
diting standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 securities at May 31, 1999 by corre-
spondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 16, 1999
64
<PAGE>
VOTING RESULTS OF ANNUAL MEETING OF SHAREHOLDERS
The proposals described below were submitted to a vote of shareholders of
the Company at an Annual Meeting of Shareholders held on July 24, 1998 (the
"Meeting"):
Proposal No. 1--The election of a Board of five (5) Directors consisting of
Leslie B. Disharoon, Decatur H. Miller, Edward D. Miller, John R. Murphy and
George E. Packard, III:
At the Meeting, the shareholders of the Company approved Proposal No. 1 as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
748,167,443.377 129,206.503 --
</TABLE>
Proposal No. 2--The ratification of the selection of Coopers & Lybrand
L.L.P. as the Company's independent accountants for the fiscal year ending May
31, 1999:
At the Meeting, the shareholders of the Company approved Proposal No. 2 as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
650,377,137.925 1,641,620.311 96,277,891.643
</TABLE>
Proposal No. 3--The approval of a new investment advisory agreement between
the Company and Mercantile-Safe Deposit & Trust Company with respect to the
Prime Money Market Fund, Government Money Market Fund, Tax-Exempt Money Market
Fund, Growth & Income Fund, International Equity Fund, Limited Maturity Bond
Fund, Maryland Tax-Exempt Bond Fund, Diversified Real Estate Fund, Equity In-
come Fund, Equity Growth Fund, Total Return Bond Fund, National Tax-Exempt
Bond Fund and Intermediate Tax-Exempt Bond Fund (the "Funds"):
At the Meeting, the shareholders of the Company voting on a Fund-by-Fund ba-
sis approved Proposal No.3 as follows:
<TABLE>
<CAPTION>
Fund For Against Abstain
- ---- --- ------- -------
<S> <C> <C> <C>
Prime Money Market Fund............. 322,685,516.117 913,283.150 100,411.422
Government Money Market Fund........ 181,636,308.998 341,398.959 59,586,451.063
Tax-Exempt Money Market Fund........ 50,722,877.380 -- --
Growth & Income Fund................ 14,461,930.745 78,927.841 78,419.498
International Equity Fund........... 5,026,099.229 8,018.184 3,309.817
Limited Maturity Bond Fund.......... 11,746,716.514 43,463.748 116,231.366
Maryland Tax-Exempt Bond Fund....... 1,131,566.218 16,861.722 17,387.656
Diversified Real Estate Fund........ 624,173.863 -- --
Equity Income Fund.................. 25,865,046.939 141,168.112 103,054.879
Equity Growth Fund.................. 2,540,801.315 -- 228,444.907
Total Return Bond Fund.............. 8,900,277.853 221,131.336 93,888.530
National Tax-Exempt Bond Fund....... 14,189,546.828 -- 162,787.925
Intermediate Tax-Exempt Bond Fund... 7,523,315.004 -- 345,094.364
</TABLE>
65
<PAGE>
IMPORTANT TAX INFORMATION
(Unaudited)
During the fiscal year ended May 31, 1999, the distributions paid by the
Funds were derived from the following:
<TABLE>
<CAPTION>
Long-Term Capital
Net Investment Income Exempt Interest Dividends Gains (taxable at
and Short-Term Capital (excludable from gross a long-term
Gains (taxable as income for Federal income capital gain
ordinary income) tax purposes) rate)
---------------------- ------------------------- -----------------
<S> <C> <C> <C>
Prime Money Market...... 100.0% -- --
Government Money
Market................. 100.0% -- --
Tax-Exempt Money
Market................. -- 100.0% --
Growth & Income(1)...... 19.3% -- 80.7%
Equity Income(1)........ 23.1% -- 76.9%
Equity Growth(1)........ 8.2% -- 91.8%
International
Equity(2).............. 20.3% -- 79.7%
Diversified Real Estate
Fund................... 100.0% -- --
Limited Maturity Bond... 95.8% -- 4.2%
Total Return Bond....... 90.7% -- 9.3%
Maryland Tax-Exempt
Bond................... -- 100.0% --
Intermediate Tax-Exempt
Bond................... 10.2% 82.9% 6.9%
National Tax-Exempt
Bond................... 9.0% 78.6% 12.4%
</TABLE>
- --------
(1) 100% of distributions derived from net investment income and short-term
capital gains qualify for the dividends received deduction available to
corporate shareholders.
(2) 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 in-
cluded in taxable income with an offsetting deduction from gross income or
as a credit for taxes paid to foreign governments. See following page. You
should consult your tax advisor regarding the appropriate treatment of
foreign taxes paid.
66
<PAGE>
CAPITAL GAIN DISTRIBUTIONS
During the fiscal year ending May 31, 1999, the M.S.D.&T. Funds distributed
capital gains to shareholders of Growth & Income Fund, Equity Income Fund, Eq-
uity Growth Fund, International Equity Fund, Total Return Bond Fund, Limited
Maturity Bond Fund, Intermediate Tax-Exempt Bond Fund and National Tax-Exempt
Bond Fund on 12/18/98. The Securities and Exchange Commission requires mutual
funds to disclose to shareholders the composition of the capital gain distri-
bution. The figures listed below may differ from those cited elsewhere in the
report due to differences in the calculation of income and gains for Securi-
ties and Exchange Commission (book) purposes and Internal Revenue Service
(tax) purposes. Pursuant to this requirement, these percentages are listed be-
low:
<TABLE>
<CAPTION>
Short- Long-
Term Term
------ -----
<S> <C> <C>
Growth & Income Fund.............................................. 0.0% 100.0%
Equity Income Fund................................................ 11.9% 88.1%
Equity Growth Fund................................................ 4.1% 95.9%
International Equity Fund......................................... 0.0% 100.0%
Total Return Bond Fund............................................ 0.0% 100.0%
Limited Maturity Bond Fund........................................ 0.0% 100.0%
Intermediate Tax-Exempt Bond Fund................................. 59.9% 40.1%
National Tax-Exempt Bond Fund..................................... 42.2% 57.8%
</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.
67
<PAGE>
Income by Country for the M.S.D.&T. International Equity Fund
Fiscal Year Ended May 31, 1999
<TABLE>
<CAPTION>
Percentage of Percentage of
Gross Income: Taxes Paid:
------------- -------------
<S> <C> <C>
Australia................. 0.72% 0.07%
China..................... 0.39 0.00
Denmark................... 0.80 0.89
Finland................... 0.31 0.41
France.................... 9.82 15.67
Germany................... 10.60 6.86
Greece.................... 0.00 0.21
Hong Kong................. 1.66 0.00
Hungary................... 0.00 0.21
Indonesia................. 0.16 0.24
Italy..................... 3.99 4.47
Japan..................... 7.05 7.98
Mexico.................... 1.19 0.00
Netherlands............... 9.37 10.04
Philippines............... 0.03 0.17
Poland.................... 0.00 2.08
Singapore................. 3.56 5.35
South Africa.............. 1.09 0.04
Spain..................... 3.03 1.59
Switzerland............... 4.48 5.12
Thailand.................. 0.00 11.30
United Kingdom............ 31.97 27.29
United States............. 9.78 0.01
100.00 100.00
</TABLE>
Foreign taxes withheld as of May 31, 1999 were $227,364, or 13.4% of gross
income.
68
<PAGE>
Investment Adviser and Administrator:
[Logo of Mercantile]
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 & 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.
