<PAGE>
M.S.D.&T. Funds, Inc.
..................................
Annual Report
MAY 31, 2000
<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 9
Equity Income Fund 11
Equity Growth Fund 13
International Equity Fund 15
Diversified Real Estate Fund 17
Limited Maturity Bond Fund 19
Total Return Bond Fund 22
Maryland Tax-Exempt Bond Fund 25
Intermediate Tax-Exempt Bond Fund 28
National Tax-Exempt Bond Fund 31
Investment Abbreviations 35
Statements of Operations 36
Statements of Changes in Net Assets 39
Financial Highlights 45
Notes to Financial Statements 53
Report of Independent Accountants 63
Important Tax Information 64
<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, 2000. This 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, 2000.
During the fiscal year the economy continued to lengthen its now record expan-
sion. Business conditions picked up the pace causing the Federal Reserve Board
(the Fed) to become an active participant. During the last twelve months the
central bank has increased short-term interest rates steadily in an attempt to
reduce inflationary trends. Initially this had no effect on equity prices.
More recently, however, stock price volatility has increased. In the fixed in-
come markets, news of central bank activity had the opposite effect with an
immediate sell-off in bonds followed by more sanguine markets. Helping the
bond market have been the efforts of the Treasury Department which has been
reducing the amount of outstanding long-term bonds as a result of the increas-
ing fiscal budget surplus.
The Funds' adviser believes that economic growth will begin to decelerate from
the torrid pace of the past several quarters. To be sure, there likely will be
periods when the financial markets will perceive growth to be too heady and
will discount further Fed activity, which should provide buying opportunities.
It is anticipated that the interest rate cycle should reach a peak during this
fiscal year and that certain equity sectors will become attractive for long-
term investments. International equities should also remain attractive as for-
eign economies continue their recoveries and the U.S. dollar begins its de-
scent.
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 investing. BISYS Fund Services serves as the Funds'
distributor.
<PAGE>
The M.S.D.&T. Growth & Income Fund
The Growth & Income Fund returned 7.23% and 12.11% over the six and twelve
months ended May 31, 2000, respectively./1/ The S&P 500 Index returned 2.90%
and 10.47% over the same periods. The U.S. equity markets, as measured by the
S&P 500 Index, have been extremely volatile during the first five months of
2000. The Index has moved by more than 1% from the previous days close 47% of
all trading days. The adviser believes that this volatility is due to the Fed
having raised the Fed Funds rate in an attempt to slow down what it believes
is an overheated U.S. economy. This raises the question in investors' minds as
to whether the recent pace of economic and corporate profit growth will con-
tinue. The adviser also believes that the increase in volatility is a result
of the short-term focus of many market participants and excessive valuations
placed on some Internet companies.
The adviser has positioned the Growth & Income Fund to navigate and benefit
from this volatility by building a well-diversified portfolio of high quality
companies that the adviser believes will provide competitive long-term re-
turns. As of May 31, 2000 the Fund is overweighted in the Health Care and Fi-
nancial Services sectors relative to the S&P 500 Index. Over the past six
months the Fund has added both value and growth companies such as Nokia
(1.1%), UNUMProvident (1.5%), Citigroup (0.7%) and United Parcel Service
(0.6%)./2/
The adviser believes that several foreign economies are gaining momentum. This
is especially true in Europe where the adviser sees an increased focus on cor-
porate restructuring and shareholder returns. The adviser is actively re-
searching such companies to find those that will benefit the Fund's sharehold-
ers.
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Growth & Income Fund and the S&P 500 Stock Index
Average Annual Total Return
as of May 31, 2000
Since
1 Year 5 Year Inception
(2/28/91)
12.11% 21.42% 16.42%
[GRAPH]
M.S.D.&T. Growth & Income Fund S&P 500 Stock Index
------------------------------ -------------------
Feb-91 $10,000.00 $10,000.00
Mar-91 10,100.00 10,242.10
Apr-91 10,150.00 10,266.37
May-91 10,690.00 10,709.27
Jun-91 10,269.18 10,218.67
Jul-91 10,652.51 10,694.97
Aug-91 10,854.26 10,948.33
Sep-91 10,713.59 10,765.05
Oct-91 10,906.72 10,909.84
Nov-91 10,428.98 10,470.29
Dec-91 11,275.00 11,667.77
Jan-92 11,285.25 11,450.29
Feb-92 11,480.00 11,598.57
Mar-92 11,325.20 11,372.98
Apr-92 11,665.26 11,706.77
May-92 11,706.48 11,764.14
Jun-92 11,551.91 11,589.20
Jul-92 11,915.09 12,062.62
Aug-92 11,686.75 11,815.70
Sep-92 11,894.26 11,954.53
Oct-92 11,852.45 11,995.90
Nov-92 12,161.20 12,404.36
Dec-92 12,192.81 12,556.56
Jan-93 12,298.90 12,661.53
Feb-93 12,468.54 12,834.11
Mar-93 12,818.42 13,104.91
Apr-93 12,871.57 12,788.16
May-93 13,212.82 13,130.25
Jun-93 13,052.86 13,168.72
Jul-93 12,967.13 13,115.78
Aug-93 13,374.70 13,613.39
Sep-93 13,224.54 13,508.98
Oct-93 13,536.92 13,788.48
Nov-93 13,300.63 13,657.49
Dec-93 13,452.51 13,822.74
Jan-94 13,851.64 14,292.72
Feb-94 13,567.84 13,904.67
Mar-94 13,196.72 13,298.43
Apr-94 13,305.82 13,468.91
May-94 13,327.78 13,690.07
Jun-94 12,987.45 13,354.66
Jul-94 13,378.85 13,793.23
Aug-94 13,776.90 14,358.75
Sep-94 13,677.39 14,007.68
Oct-94 13,990.16 14,322.43
Nov-94 13,578.36 13,800.81
Dec-94 13,777.30 14,005.48
Jan-95 14,038.06 14,368.64
Feb-95 14,554.16 14,928.59
Mar-95 14,829.42 15,369.13
Apr-95 15,145.99 15,821.75
May-95 15,492.32 16,454.14
Jun-95 15,607.76 16,836.37
Jul-95 16,094.40 17,394.67
Aug-95 16,071.14 17,438.33
Sep-95 16,606.07 18,174.23
Oct-95 16,290.58 18,109.34
Nov-95 16,805.51 18,904.34
Dec-95 17,103.42 19,268.44
Jan-96 17,283.35 19,924.34
Feb-96 17,444.42 20,109.04
Mar-96 17,555.92 20,302.69
Apr-96 17,865.20 20,601.95
May-96 18,164.20 21,133.27
Jun-96 18,151.74 21,213.79
Jul-96 17,462.64 20,276.57
Aug-96 17,876.03 20,704.20
Sep-96 18,615.12 21,869.43
Oct-96 19,166.89 22,472.59
Nov-96 20,751.56 24,171.29
Dec-96 20,539.11 23,692.46
Jan-97 21,805.02 25,172.77
Feb-97 21,870.15 25,370.12
Mar-97 21,270.97 24,327.66
Apr-97 22,535.40 25,780.02
May-97 23,841.80 27,349.51
Jun-97 25,017.56 28,574.22
Jul-97 26,943.26 30,847.79
Aug-97 25,525.95 29,121.18
Sep-97 26,705.88 30,716.00
Oct-97 26,187.42 29,690.24
Nov-97 27,251.74 31,063.50
Dec-97 27,553.42 31,596.98
Jan-98 27,602.53 31,946.41
Feb-98 29,551.44 34,250.58
Mar-98 30,850.70 36,004.52
Apr-98 31,479.23 36,366.76
May-98 30,850.80 35,741.65
Jun-98 31,558.19 37,193.37
Jul-98 30,800.41 36,797.34
Aug-98 26,690.94 31,477.21
Sep-98 28,461.11 33,493.77
Oct-98 31,012.81 36,218.22
Nov-98 32,929.86 38,413.33
Dec-98 34,772.82 40,626.94
Jan-99 35,515.99 42,325.84
Feb-99 34,564.23 41,010.90
Mar-99 35,902.09 42,653.02
Apr-99 37,046.83 44,303.69
May-99 36,464.71 43,257.50
Jun-99 38,234.05 45,654.62
Jul-99 37,271.67 44,232.70
Aug-99 37,601.38 44,012.38
Sep-99 35,653.12 42,807.23
Oct-99 37,556.42 45,515.01
Nov-99 38,125.91 46,442.01
Dec-99 40,378.85 49,177.21
Jan-00 39,370.31 46,706.70
Feb-00 40,046.76 45,822.49
Mar-00 42,420.70 50,302.42
Apr-00 41,590.32 48,789.07
May-00 40,881.09 47,787.53
Past performance is not predictive of future performance.
The S&P 500 Index is an unmanaged index generally representative of the per-
formance of the U.S. stock market. An investor cannot invest directly in an
index.
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 Equity Income Fund was down 10.98% for the fiscal year ended May 31,
2000./1/ Although interest-sensitive and cyclical issues that are heavily rep-
resented in the Fund have performed well over the past several months, for
most of the past year these stocks were out of favor as the Fed raised short-
term interest rates from 4.75% to 6.5%. In addition, the value/income yield
orientation of the portfolio precluded a sizeable participation in the tech-
nology stocks that drove certain stock market indices over most of the past
year.
Intel (2.9%), 3Com (0.8%), Schlumberger (sold), Autodesk (0.6%) and Hallibur-
ton (1.8%) were among the stocks that positively contributed to the portfo-
lio's performance over the past six to twelve months. Armstrong World (sold),
Procter & Gamble (1.6%), Crown Cork & Seal (0.6%), UNUMprovident (0.6%) and
Worthington Industries (1.0%) were among the most disappointing performers./2/
With the exception of Armstrong World, which has been sold, the adviser is
confident in the prospects for these stocks.
Late in the fiscal year, several technology issues were added to the Fund to
enhance the diversification of the portfolio. The adviser believes that these
companies should continue to benefit from strong spending to improve produc-
tivity in "old economy" industries. The Fund continues to maintain a definite
value/income yield orientation, with a price to earnings ratio significantly
lower than the S&P 500 Index and a current dividend yield higher than the S&P
500 Index.
Comparison Of Change in Value of $10,000 Investment In
M.S.D.&T. Equity Income Fund, the Russell 1000 Value Index
and the S&P 500 Stock Index
Average Annual Total Return
as of May 31, 2000
Since
1 Year Inception
(3/1/98)
-10.98% 2.18%
[GRAPH]
M.S.D.&T. Equity Russell 1000
Income Fund S&P 500 Stock Index Value Index
---------------- ------------------- ------------
Feb-98 $10,000.00 $10,000.00 $10,000.00
Mar-98 10,390.00 10,512.09 10,611.60
Apr-98 10,482.04 10,617.85 10,682.59
May-98 10,228.07 10,435.34 10,524.17
Jun-98 10,428.55 10,859.19 10,659.09
Jul-98 10,045.70 10,743.57 10,470.96
Aug-98 8,988.54 9,190.27 8,912.67
Sep-98 9,473.70 9,779.04 9,424.26
Oct-98 10,144.17 10,574.48 10,154.26
Nov-98 10,679.51 11,215.38 10,627.34
Dec-98 10,899.64 11,861.68 10,989.10
Jan-99 10,786.32 12,357.70 11,076.90
Feb-99 10,635.84 11,973.78 10,920.61
Mar-99 10,958.24 12,453.22 11,146.55
Apr-99 11,898.67 12,935.16 12,187.64
May-99 11,793.34 12,629.71 12,053.70
Jun-99 12,186.47 13,329.59 12,403.62
Jul-99 11,936.52 12,914.44 12,040.44
Aug-99 11,751.46 12,850.11 11,593.62
Sep-99 11,223.25 12,498.25 11,188.42
Oct-99 11,380.97 13,288.83 11,832.43
Nov-99 11,266.07 13,559.48 11,739.90
Dec-99 11,308.61 14,358.07 11,796.60
Jan-00 10,710.31 13,636.76 11,411.80
Feb-00 9,780.84 13,378.60 10,563.90
Mar-00 10,493.84 14,686.59 11,852.80
Apr-00 10,429.64 14,244.74 11,714.84
May-00 10,497.89 13,952.33 11,838.31
Past performance is not predictive of future performance.
The S&P 500 Index is an unmanaged index generally representative of the per-
formance of the U.S. stock market. The Russell 1000 Value Index is an unman-
aged index considered representative of large-cap value stocks. The Russell
1000 Value Index replaces the S&P 500 Index as the Fund's benchmark index. The
new Index is more reflective of the adviser's value style in the large-cap
universe. The Russell Index allows for the differentiation between growth and
value styles. An investor cannot invest directly in an index.
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.
iii
<PAGE>
The M.S.D.&T. Equity Growth Fund
For the fiscal year ended May 31, 2000, the Equity Growth Fund returned 17.94%
versus 10.47% for the S&P 500 Index and 24.99% for the Russell 1000 Growth In-
dex./1/ The Fund continues to carry a price to earnings ratio higher than the
S&P 500 Index but modestly lower then the Russell 1000 Growth Index. The Fund
is broadly diversified but currently maintains a focus in the Technology and
Communication Services sectors. This focus may change as market conditions
warrant.
The best performing stocks in the portfolio over the last twelve months were
technology issues. In particular, Teradyne (3.1%), Sun Microsystems (1.4%),
EMC Corp (2.3%), Intel (3.3%) and Cisco (2.9%) all returned well over 100% for
the year ended May 31, 2000./2/ The worst performing stocks were in the Finan-
cial Services, Consumer Cyclicals and Communication Services sectors.
The last few months of the fiscal year saw a weakening in the equity markets
with technology issues particularly hard hit. This sell off was in part due to
the interest rate increases by the Fed to slow the economy and avoid infla-
tion. This provided opportunities to add new positions or increase existing
holdings of the Fund at relatively inexpensive prices. These included new po-
sitions in Agilent (0.9%), Qualcomm (0.3%) and Texas Instruments (0.9%), and
increased positions in Microsoft (2.3%) and Lucent (2.2%). Throughout the year
the adviser eliminated some positions including AT&T Wireless, Edwards
Lifesciences, Cox Communications and Coke, and reduced others such as South-
west Airlines (0.9%).
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Equity Growth Fund, the Russell 1000 Growth Index
and the S&P 500 Stock Index
Average Annual Total Return
as of May 31, 2000
Since
1 Year Inception
(3/1/98)
17.94% 19.52%
[GRAPH]
M.S.D.&T. Equity Russell 1000
Growth Fund S&P 500 Stock Index Growth Index
---------------- ------------------- ------------
Feb-98 $10,000.00 $10,000.00 $10,000.00
Mar-98 10,340.00 10,512.09 10,398.60
Apr-98 10,585.61 10,617.85 10,542.52
May-98 10,288.94 10,435.34 10,243.32
Jun-98 10,788.63 10,859.19 10,870.72
Jul-98 10,702.43 10,743.57 10,798.76
Aug-98 9,142.62 9,190.27 9,178.08
Sep-98 9,740.59 9,779.04 9,883.14
Oct-98 10,576.78 10,574.48 10,677.45
Nov-98 11,260.17 11,215.38 11,489.68
Dec-98 12,047.26 11,861.68 12,525.71
Jan-99 12,810.35 12,357.70 13,261.22
Feb-99 12,161.13 11,973.78 12,655.45
Mar-99 12,641.64 12,453.22 13,322.01
Apr-99 12,789.45 12,935.16 13,339.06
May-99 12,668.41 12,629.71 12,929.15
Jun-99 13,302.36 13,329.59 13,834.71
Jul-99 12,934.28 12,914.44 13,395.04
Aug-99 12,437.23 12,850.11 13,613.92
Sep-99 12,154.56 12,498.25 13,327.89
Oct-99 13,319.23 13,288.83 14,334.41
Nov-99 14,159.28 13,559.48 15,107.75
Dec-99 15,172.38 14,358.07 16,679.11
Jan-00 14,902.46 13,636.76 15,897.02
Feb-00 15,550.39 13,378.60 16,674.23
Mar-00 16,110.23 14,686.59 17,867.77
Apr-00 15,491.01 14,244.74 17,017.62
May-00 14,940.97 13,952.33 16,160.62
Past performance is not predictive of future performance.
The S&P 500 Index is an unmanaged index generally representative of the per-
formance of the U.S. stock market. The Russell 1000 Growth Index is an unman-
aged index considered representative of large-cap growth stocks. The Russell
1000 Growth Index replaces the S&P 500 Index as the Fund's benchmark index.
The new Index is more reflective of the adviser's growth style in the large-
cap universe. The Russell Index allows for the differentiation between growth
and value styles. An investor cannot invest directly in an index.
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.
iv
<PAGE>
The M.S.D.&T. International Equity Fund/3/
The International Equity Fund returned 21.73% for the year ended May 31,
2000./1/ Over the same period the MSCI All-Country World ex-USA Index returned
19.07%. Early in the period there was much talk about Y2K issues, and in par-
ticular, whether the computer systems in some countries would survive intact.
Towards the end of the calendar year 1999, it started to become clear that
most countries and companies had completed their Y2K testing successfully.
This realization led to a very sharp year-end rally in international equity
markets. This rally was fueled by the market's burgeoning love affair with
technology-related stocks, whose values soared dramatically towards the end of
the year on into 2000.
The strongest areas for equity performance over the year were Japan and Conti-
nental Europe. In both areas the Fund returned over 30% from its portfolio
holdings. By contrast, the markets of the UK and Pacific Basin ex-Japan actu-
ally fell modestly over the period. Emerging markets were volatile, but the
Fund's holdings in that area returned 23%.
The UK market suffered over the year as it was the only major international
market where short interest rates were rising significantly. They now stand at
6% against 4.25% for the rest of Europe. The UK market is also relatively
light in technology-related stocks, and the market was very much concentrated
on European technology issues such as Nokia, Ericsson, Siemens, Alactel and
Philips.
Apart from technology exposure, the European markets benefited from improving
economic growth prospects and strong earnings per share growth. The major neg-
ative for European returns was the continued weakness of the Euro, which fell
by about 10% against the U.S. dollar over the year. The weaker Euro, however,
did further stimulate European growth forecasts as the currency became more
competitive.
Although the technology sectors have come off the boil in line with recent
profit-taking, the fortunes of that sector are still key to future portfolio
performance as technology now accounts for a large part of certain indices. As
we enter the new fiscal year, the Fund is underweight in technology in Japan,
with an emphasis on domestic recovery stocks instead. Within Europe, the Fund
is overweight in hardware and IT stocks and underweight in incumbent telecom
operators.
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. International Equity fund and
the MSCI World All-Country ex-US Index
Average Annual Total Return
as of May 31, 2000
Since
1 Year 5 Year Inception
(7/2/93)
21.73% 11.26% 10.90%
[GRAPH]
M.S.D.&T. International MSCI All-Country
Equity Fund World ex-US Index
----------------------- -----------------
Jun-93 $10,000.00 $10,000.00
Jul-93 10,320.00 10,317.73
Aug-93 10,980.00 10,844.79
Sep-93 10,850.00 10,631.69
Oct-93 10,960.00 11,011.34
Nov-93 10,502.17 10,224.10
Dec-93 11,343.14 11,077.88
Jan-94 11,766.67 11,985.64
Feb-94 11,817.04 11,874.48
Mar-94 11,635.70 11,326.58
Apr-94 11,998.37 11,721.04
May-94 11,897.63 11,733.93
Jun-94 11,988.30 11,814.70
Jul-94 12,245.81 12,032.57
Aug-94 12,488.30 12,444.60
Sep-94 12,114.46 12,183.72
Oct-94 12,397.36 12,472.19
Nov-94 11,811.34 11,878.51
Dec-94 11,871.45 11,864.21
Jan-95 11,405.70 11,291.65
Feb-95 11,209.05 11,229.12
Mar-95 11,685.15 11,854.88
Apr-95 11,912.85 12,276.89
May-95 11,995.65 12,210.61
Jun-95 11,850.75 12,040.79
Jul-95 12,730.50 12,696.89
Aug-95 12,451.05 12,245.17
Sep-95 12,616.65 12,471.27
Oct-95 12,233.70 12,139.96
Nov-95 12,388.95 12,393.98
Dec-95 12,817.61 12,876.71
Jan-96 13,025.88 13,020.35
Feb-96 13,036.87 13,022.44
Mar-96 13,388.62 13,275.54
Apr-96 13,861.29 13,747.57
May-96 13,707.40 13,517.86
Jun-96 13,894.27 13,597.56
Jul-96 13,477.20 13,131.25
Aug-96 13,521.68 13,206.38
Sep-96 13,910.87 13,531.14
Oct-96 13,721.83 13,391.47
Nov-96 14,211.10 13,899.58
Dec-96 14,123.29 13,732.23
Jan-97 13,841.89 13,490.60
Feb-97 14,150.25 13,744.15
Mar-97 14,195.93 13,720.81
Apr-97 14,264.45 13,845.81
May-97 15,052.48 14,682.29
Jun-97 15,737.72 15,500.98
Jul-97 16,034.95 15,818.96
Aug-97 14,753.99 14,609.38
Sep-97 15,668.96 15,347.66
Oct-97 14,639.62 13,998.15
Nov-97 14,559.56 13,819.40
Dec-97 14,700.14 13,967.20
Jan-98 15,166.93 14,381.68
Feb-98 16,265.98 15,360.36
Mar-98 17,084.17 15,879.63
Apr-98 17,206.29 15,977.49
May-98 16,974.26 15,667.75
Jun-98 16,791.09 15,598.35
Jul-98 17,219.92 15,748.48
Aug-98 14,640.62 13,521.04
Sep-98 14,198.45 13,243.21
Oct-98 15,291.59 14,629.64
Nov-98 16,089.94 15,413.11
Dec-98 16,461.83 15,934.96
Jan-99 16,310.81 15,918.51
Feb-99 15,933.24 15,580.62
Mar-99 16,663.20 16,348.74
Apr-99 17,569.36 17,184.83
May-99 16,801.64 16,405.47
Jun-99 17,795.90 17,199.65
Jul-99 18,422.75 17,565.74
Aug-99 18,485.97 17,666.72
Sep-99 18,283.66 17,760.22
Oct-99 19,029.67 18,431.20
Nov-99 20,281.46 19,160.86
Dec-99 22,717.03 21,001.38
Jan-00 21,564.02 19,934.83
Feb-00 22,346.42 20,467.85
Mar-00 22,277.78 21,231.39
May-00 20,809.07 20,026.75
Jun-00 20,452.19 19,533.35
Past performance is not predictive of future performance.
The MSCI All-Country World ex-US Index is an unmanaged index of foreign secu-
rities that reflects a strategic emerging markets allocation. An investor can-
not invest directly in an index.
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
The REIT sector began a strong rally in mid-March as investors sought income
and stability as an alternative to the higher volatility in other sectors. For
the first five months of 2000, REITs (as measured by the Wilshire Real Estate
Index) had a total return of 11.46% driven by very strong performances in Ho-
tels, Regional Malls and Office Properties sectors. The fundamentals in the
real estate market remain positive with a relative balance between supply and
demand in most property types and geographic regions. The adviser believes
that this should translate into modest appreciation and steady dividend growth
for real estate securities, providing that investors do not abandon the sector
as they did in 1998 and 1999.
For the one-year period ended May 31, 2000, the Diversified Real Estate Fund
had a total return of 1.59% versus a negative 0.65% for the Wilshire Real Es-
tate Index representing a positive 2.24% performance spread./1/ The adviser
intends to remain overweighted in Office and Apartment sectors and
underweighted in the Retail sector versus the index. The Fund is also
underweighted in the Hotel sector, which reflects the adviser's philosophy to
limit exposure to this relatively volatile sector particularly with the poten-
tial of a slowdown in the domestic economy. During the period, the Fund ad-
justed its Health Care exposure by selling some weaker names while adding to
more stable issues, although the adviser does not intend to further increase
the weighting in this sector at this time./2/
Comparison of Change In Value of $10,000 Investment In
M.S.D. & T. Diversified Real Estate Fund and the
Wilshire Real Estate Index
Average Annual
Total Return
as of May 31, 2000
1 Year Since Inception
(8/1/97)
1.59% 1.42%
[GRAPH]
M.S.D.&T. Diversified Wilshire Real
Real Estate Fund Estate Index
--------------------- -------------
Jul-97 $10,000.00 $10,000.00
Aug-97 9,970.00 9,926.00
Sep-97 10,800.00 10,904.70
Oct-97 10,467.98 10,441.25
Nov-97 10,638.93 10,651.12
Dec-97 10,841.96 10,888.64
Jan-98 10,627.77 10,735.11
Feb-98 10,525.78 10,597.70
Mar-98 10,688.97 10,806.48
Apr-98 10,472.56 10,466.07
May-98 10,431.37 10,365.60
Jun-98 10,400.48 10,310.66
Jul-98 9,826.68 9,593.04
Aug-98 8,973.99 8,596.32
Sep-98 9,431.53 9,077.72
Oct-98 9,181.55 8,953.35
Nov-98 9,318.74 9,121.68
Dec-98 9,371.10 8,991.24
Jan-99 9,189.24 8,796.13
Feb-99 9,018.08 8,726.64
Mar-99 8,975.29 8,679.51
Apr-99 9,970.71 9,604.75
May-99 10,244.03 9,767.07
Jun-99 10,145.64 9,601.03
Jul-99 9,825.32 9,233.31
Aug-99 9,681.64 9,094.81
Sep-99 9,416.39 8,685.54
Oct-99 9,248.82 8,523.99
Nov-99 9,113.80 8,390.17
Dec-99 9,506.06 8,705.64
Jan-00 9,494.67 8,741.33
Feb-00 9,335.29 8,574.37
Mar-00 9,665.44 8,949.93
Apr-00 10,233.45 9,588.06
May-00 10,407.09 9,703.11
Past performance is not predictive of future performance.
The Wilshire Real Estate Index is an unmanaged index generally representative
of the U.S. REIT market. An investor cannot invest directly in an index.
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
For the second consecutive year, the fixed income markets produced modest re-
turns for the twelve months ended May 31, 2000. Following a trend that was in-
itiated in late 1998, interest rates have been following an irregular path
higher. With the domestic economy enjoying spectacular late-cycle growth and
the observed inflation rate rising from cyclical lows, interest rates have
been increasing. In an effort to slow the pace of economic growth and fore-
stall an even larger increase in the inflation rate, the Fed, has
incrementally raised the benchmark Fed Funds rate by 1.75% during the twelve
months ended May 31, 2000.
Along the yield curve, interest rates on one- to five-year Treasury maturities
have moved 0.90% to 1.25% higher. Further along the curve, ten-year Treasury
rates increased approximately 0.60%. Longer term Treasury rates have not moved
as quickly as short-term rates due to the systematic buyback of Treasury debt
by the Federal government.
In this environment, the Limited Maturity Bond Fund enjoyed a 3.42% total re-
turn over the period./1/ By comparison, the Fund effectively matched the per-
formance of the Lehman Mutual Fund Short 1-5 Year Government/Corporate Bond
Index, which returned 3.41%. Income returns in the bond market were muted by
the capital depreciation caused by the rise in interest rates.
Yield spreads on non-Treasury securities continued to widen during the fiscal
period. This widening in yield spreads has been caused by the ongoing shrink-
ing supply of Treasuries, which makes these issues more expensive, and a
heightened awareness for credit risk as several well-known corporate issuers
have suffered reversals in their business fortunes. During the year, the Fund
broadened its quality exposure by increasing the "AA", "A" and "BAA" areas of
the corporate bond market while reducing U.S. Treasury holdings. Additionally,
the Fund's investments in the Federal Agency sector were increased. The Fund's
average maturity was modestly increased from 2.6 to 2.9 years over the course
of the year.
Comparison of Change In Value of $10,000 Investment In
M.S.D. & T. Limited Maturity Bond Fund and the
Lehman Mutual Fund Short 1-5 Year Gov/Corp Bond Index
Average Annual Total Return
as of May 31, 2000
1 Year 5 Year Since Inception
(3/14/91)
3.42% 5.32% 5.97%
[GRAPH]
M.S.D.&T. Limited Lehman MF Short 1-5 Year
Maturity Bond Fund Gov/Corp Bond Index
------------------ -----------------------
Feb-91 $10,000.00 $10,000.00
Mar-91 9,968.13 10,070.00
Apr-91 10,048.56 10,175.74
May-91 10,100.31 10,239.84
Jun-91 10,122.10 10,262.37
Jul-91 10,208.08 10,367.05
Aug-91 10,355.16 10,536.03
Sep-91 10,500.89 10,679.32
Oct-91 10,607.18 10,803.20
Nov-91 10,722.42 10,923.11
Dec-91 10,920.42 11,127.38
Jan-92 10,855.13 11,079.53
Feb-92 10,881.48 11,111.66
Mar-92 10,847.66 11,077.21
Apr-92 10,941.09 11,183.55
May-92 11,078.61 11,322.23
Jun-92 11,203.96 11,469.42
Jul-92 11,384.73 11,647.20
Aug-92 11,480.59 11,761.34
Sep-92 11,608.19 11,900.12
Oct-92 11,497.00 11,782.31
Nov-92 11,452.32 11,744.61
Dec-92 11,582.45 11,876.15
Jan-93 11,746.51 12,063.79
Feb-93 11,861.08 12,208.56
Mar-93 11,901.78 12,253.73
Apr-93 11,974.66 12,349.31
May-93 11,958.00 12,312.26
Jun-93 12,086.20 12,446.46
Jul-93 12,101.51 12,471.36
Aug-93 12,253.91 12,621.01
Sep-93 12,301.86 12,662.66
Oct-93 12,327.86 12,695.58
Nov-93 12,268.01 12,670.19
Dec-93 12,315.83 12,722.14
Jan-94 12,411.23 12,830.28
Feb-94 12,280.01 12,701.98
Mar-94 12,127.77 12,574.96
Apr-94 12,056.42 12,502.02
May-94 12,070.01 12,515.77
Jun-94 12,072.30 12,537.05
Jul-94 12,208.27 12,677.47
Aug-94 12,250.56 12,719.30
Sep-94 12,147.44 12,651.89
Oct-94 12,155.42 12,667.07
Nov-94 12,113.65 12,602.47
Dec-94 12,160.83 12,630.19
Jan-95 12,356.72 12,823.44
Feb-95 12,598.59 13,045.28
Mar-95 12,672.73 13,119.64
Apr-95 12,808.32 13,257.40
May-95 13,172.15 13,564.97
Jun-95 13,245.65 13,645.00
Jul-95 13,232.74 13,677.75
Aug-95 13,360.52 13,774.86
Sep-95 13,461.50 13,853.38
Oct-95 13,603.20 13,986.37
Nov-95 13,769.82 14,134.63
Dec-95 13,913.11 14,257.60
Jan-96 14,004.36 14,388.77
Feb-96 13,816.90 14,290.92
Mar-96 13,724.80 14,246.62
Apr-96 13,643.75 14,235.22
May-96 13,617.41 14,245.19
Jun-96 13,762.78 14,370.55
Jul-96 13,789.74 14,422.28
Aug-96 13,789.30 14,472.76
Sep-96 13,990.62 14,633.41
Oct-96 14,249.31 14,838.27
Nov-96 14,466.89 14,980.72
Dec-96 14,344.33 14,941.77
Jan-97 14,385.27 15,010.50
Feb-97 14,406.73 15,040.52
Mar-97 14,322.72 14,992.39
Apr-97 14,488.73 15,137.82
May-97 14,587.00 15,248.33
Jun-97 14,712.94 15,368.79
Jul-97 14,969.53 15,596.25
Aug-97 14,913.70 15,574.41
Sep-97 15,056.25 15,719.25
Oct-97 15,201.37 15,860.73
Nov-97 15,243.90 15,890.86
Dec-97 15,369.86 16,006.87
Jan-98 15,547.13 16,192.55
Feb-98 15,542.72 16,192.55
Mar-98 15,603.25 16,249.22
Apr-98 15,675.88 16,328.84
May-98 15,775.53 16,428.45
Jun-98 15,848.99 16,520.45
Jul-98 15,909.31 16,589.83
Aug-98 16,106.75 16,822.09
Sep-98 16,349.15 17,136.66
Oct-98 16,379.12 17,184.64
Nov-98 16,391.87 17,170.90
Dec-98 16,462.39 17,229.28
Jan-99 16,524.08 17,315.42
Feb-99 16,406.94 17,168.24
Mar-99 16,515.91 17,297.01
Apr-99 16,542.13 17,354.09
May-99 16,505.19 17,284.67
Jun-99 16,515.75 17,333.07
Jul-99 16,545.04 17,350.40
Aug-99 16,574.90 17,388.57
Sep-99 16,700.84 17,527.68
Oct-99 16,748.15 17,575.00
Nov-99 16,791.98 17,604.88
Dec-99 16,780.69 17,590.80
Jan-00 16,761.23 17,555.62
Feb-00 16,889.06 17,689.04
Mar-00 17,021.82 17,819.94
Apr-00 17,019.00 17,823.50
May-00 17,069.66 17,876.97
Past performance is not predictive of future performance.
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. An in-
vestor cannot invest directly in an index.
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.
vii
<PAGE>
The M.S.D.&T. Total Return Bond Fund
Interest rates on U. S. Treasury instruments rose along the yield curve during
the fiscal year ended May 31, 2000. However, the upward move in yields was
more pronounced on shorter-dated debt obligations than longer-term bonds. The
primary reason for the more than one percent increase on notes with less than
five years to maturity was that the Fed raised the base rate five times during
the period in an attempt to moderate inflationary growth in the economy. At
the same time, the Treasury Department was buying back outstanding bonds as a
result of the fiscal surplus exceeding estimates. This had the beneficial ef-
fect of limiting the increases in yields of longer-term government issues.
The Total Return Bond Fund maintained an effective duration less than its
benchmark, the Lehman Brothers Aggregate Bond Index, throughout the fiscal
year. As interest rates rose, the portfolio's effective duration has been in-
creased with purchases targeted at 10- and 30-year maturities. Sector
weightings within the portfolio have been shifted to capture the widening
yield spreads in non-Treasury debt. Indeed, the portfolio currently holds only
11% in U. S. Treasuries (almost all in long bonds) while the unmanaged Lehman
Brothers Aggregate Bond Index sports a nearly 33% weighting. The Fund has rel-
atively small holdings in high-yield bonds and emerging market debt with an
overweighted position in mortgage-backed securities and federal agency issues.
Maturities with less than one year constitute slightly more than 10% of the
Fund at present. The adviser anticipates that the bond market will sell-off on
fears that the central bank will continue to raise short-term interest rates.
In periods of bond market duress, reserves will be extended on the yield curve
and the portfolio's effective duration will be lengthened.
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Total Return Bond Fund and the
Lehman Aggregate Bond Index
Average Annual Total Return
as of May 31, 2000
Since
1 Year Inception
(3/1/98)
2.55% 3.88%
[GRAPH]
M.S.D.&T. Total Lehman Aggregate
Return Bond Fund Bond Index
---------------- ----------------
Feb-98 $10,000.00 $10,000.00
Mar-98 10,040.05 10,034.00
Apr-98 10,088.80 10,086.18
May-98 10,169.40 10,182.00
Jun-98 10,239.70 10,268.54
Jul-98 10,280.65 10,290.11
Aug-98 10,383.00 10,457.84
Sep-98 10,587.44 10,702.55
Oct-98 10,576.09 10,645.82
Nov-98 10,646.92 10,706.51
Dec-98 10,687.23 10,738.63
Jan-99 10,758.84 10,814.87
Feb-99 10,606.50 10,625.61
Mar-99 10,669.85 10,684.05
Apr-99 10,711.37 10,718.24
May-99 10,624.55 10,623.92
Jun-99 10,590.69 10,589.92
Jul-99 10,557.22 10,545.44
Aug-99 10,546.37 10,540.17
Sep-99 10,677.13 10,662.44
Oct-99 10,699.05 10,701.89
Nov-99 10,709.47 10,700.82
Dec-99 10,674.92 10,649.45
Jan-00 10,641.96 10,614.31
Feb-00 10,788.14 10,742.74
Mar-00 10,926.12 10,884.55
Apr-00 10,904.67 10,852.98
May-00 10,895.70 10,847.56
Past performance is not predictive of future performance.
The Lehman Aggregate Bond Index is an unmanaged index comprised of the Lehman
Brothers Government/Corporate Bond Index and two Lehman Brothers asset-backed
securities indices. An investor cannot invest directly in an index.
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 primary theme in the Maryland municipal bond market has been the ongoing
diminished supply of Maryland paper, caused by a combination of a slowdown in
new issuance and strong demand from retail and institutional buyers alike. The
steady to improved credit ratings of Maryland issuers, a result of current
economic prosperity and prudent fiscal responsibility, have united with the
supply and demand factors, ensuing in historically narrow quality spreads.
The effective duration of the Maryland Tax-Exempt Bond Fund had been shortened
during 1999 and early 2000 as the Fed pushed short-term interest rates higher.
With the Fed Funds rate up 1.75% since last May, the effects of higher rates
on the economy are beginning to be felt. The adviser believes that the result-
ing slowdown in economic growth should begin to emerge during the summer and
fall of 2000. As inflation continues to remain relatively benign, the adviser
also believes that the Fed is close to finishing this cycle of rate increases.
The adviser intends to take advantage of any decline in municipal bond prices
to lengthen the effective duration of the portfolio in anticipation of a fu-
ture lower yield environment.
Comparison of Change In Value of $10,000 Investment In
M.S.D.& T. Maryland Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index/1/
Average Annual Total Return
as of May 31, 2000
Since
1 Year 5 Year Inception
(6/2/92)
-0.87% 4.27% 5.02%
[GRAPH]
M.S.D.& T. Maryland Lehman Municipal
Tax-Exempt Bond Fund Bond Index
-------------------- ----------------
May-92 $10,000.00 $10,000.00
Jun-92 10,104.09 10,168.00
Jul-92 10,446.12 10,473.04
Aug-92 10,278.82 10,371.36
Sep-92 10,342.03 10,438.47
Oct-92 10,132.14 10,336.79
Nov-92 10,388.53 10,521.85
Dec-92 10,504.42 10,628.61
Jan-93 10,640.95 10,752.66
Feb-93 11,043.33 11,141.08
Mar-93 10,900.35 11,023.13
Apr-93 11,003.65 11,134.98
May-93 11,055.77 11,197.00
Jun-93 11,275.72 11,384.09
Jul-93 11,279.36 11,398.33
Aug-93 11,547.10 11,636.26
Sep-93 11,686.67 11,768.44
Oct-93 11,700.73 11,790.81
Nov-93 11,584.51 11,687.10
Dec-93 11,823.32 11,934.18
Jan-94 11,966.60 12,069.42
Feb-94 11,640.16 11,757.26
Mar-94 11,155.23 11,278.35
Apr-94 11,198.05 11,374.94
May-94 11,275.82 11,473.57
Jun-94 11,187.98 11,407.02
Jul-94 11,377.11 11,615.53
Aug-94 11,400.60 11,656.22
Sep-94 11,211.53 11,485.34
Oct-94 11,045.20 11,280.90
Nov-94 10,797.62 11,076.46
Dec-94 10,990.17 11,320.57
Jan-95 11,262.72 11,644.01
Feb-95 11,532.07 11,982.72
Mar-95 11,658.85 12,120.52
Apr-95 11,670.77 12,135.06
May-95 12,006.18 12,522.58
Jun-95 11,868.06 12,412.73
Jul-95 11,974.58 12,530.71
Aug-95 12,104.62 12,690.40
Sep-95 12,186.85 12,769.73
Oct-95 12,329.79 12,954.85
Nov-95 12,506.94 13,170.47
Dec-95 12,591.95 13,296.59
Jan-96 12,678.30 13,398.30
Feb-96 12,594.09 13,306.76
Mar-96 12,417.00 13,136.91
Apr-96 12,356.89 13,099.28
May-96 12,346.59 13,094.19
Jun-96 12,455.70 13,236.58
Jul-96 12,554.83 13,357.62
Aug-96 12,520.11 13,354.57
Sep-96 12,679.96 13,541.72
Oct-96 12,818.88 13,694.28
Nov-96 13,055.20 13,945.51
Dec-96 12,984.31 13,886.51
Jan-97 13,000.31 13,912.96
Feb-97 13,098.44 14,041.11
Mar-97 12,914.18 13,853.97
Apr-97 13,017.47 13,970.93
May-97 13,186.44 14,180.46
Jun-97 13,341.42 14,331.36
Jul-97 13,765.91 14,728.28
Aug-97 13,602.39 14,590.20
Sep-97 13,731.35 14,763.21
Oct-97 13,810.35 14,858.36
Nov-97 13,887.63 14,945.87
Dec-97 14,096.59 15,163.79
Jan-98 14,227.47 15,320.16
Feb-98 14,209.64 15,324.82
Mar-98 14,209.51 15,338.46
Apr-98 14,167.23 15,269.26
May-98 14,377.40 15,510.80
Jun-98 14,414.16 15,571.29
Jul-98 14,438.85 15,610.22
Aug-98 14,637.39 15,852.18
Sep-98 14,795.00 16,050.33
Oct-98 14,806.37 16,050.33
Nov-98 14,855.76 16,106.51
Dec-98 14,880.32 16,146.78
Jan-99 15,041.20 16,338.92
Feb-99 14,964.99 16,267.03
Mar-99 14,975.60 16,289.81
Apr-99 15,011.79 16,330.53
May-99 14,925.66 16,235.81
Jun-99 14,713.43 16,002.02
Jul-99 14,751.06 16,059.62
Aug-99 14,649.10 15,931.15
Sep-99 14,644.14 15,937.52
Oct-99 14,514.25 15,765.39
Nov-99 14,651.32 15,932.51
Dec-99 14,564.38 15,813.01
Jan-00 14,505.69 15,745.02
Feb-00 14,643.40 15,927.66
Mar-00 14,929.10 16,276.48
Apr-00 14,883.46 16,180.44
May-00 14,795.44 16,096.31
Past performance is not predictive of future performance.
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds. An investor cannot invest
directly in an index.
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/
In the fiscal year ended May 31, 2000 the municipal yield curve has essen-
tially shifted upward by approximately 1% to 1.25%, taking the lead from the
Fed, which increased short-term taxable rates by 1.75% during that time frame.
Unlike the Treasury curve, which has inverted, the municipal curve has re-
mained upward sloping. Short to intermediate-term municipal interest rates
rose not only due to the Fed's actions, but also as a result of selling pres-
sures from corporations and mutual funds raising cash. This supply glut fi-
nally started to ebb in the second quarter of 2000, as retail buyers moved
some cash out of the stock markets and into fixed income products, including
short and intermediate tax-exempt bonds. In addition to the diversity factor,
before-tax yields of 5.5% (8.59% yield to maturity after-tax in the 36% tax
bracket) on 10-year insured municipals lured investors to tax-exempt invest-
ments. An overall increase in the creditworthiness of issuers resulted in a
narrowing of most sector spreads over the first half of 2000.
The adviser kept the effective duration of the Intermediate Tax-Exempt Bond
Fund short relative to both its peer group and benchmark for most of the fis-
cal year as the Fed continued its tightening mode. The duration was extended
slightly during the first quarter of 2000 to take advantage of the rally that
occurred during February and March. Recent economic factors indicate that
growth may be slowing, implying that the Fed may nearly be done raising rates.
Given benign inflation pressures, dips in the municipal bond market will be
utilized by the adviser to lengthen the average maturity of the Fund to take
advantage of the expected decline in intermediate term interest rates.
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. Intermediate Tax-Exempt Bond Fund and the
Lehman 7-Year Municipal Bond Index /1/
Average Annual Total Return
as of May 31, 2000
Since
1 Year Inception
0.64% 2.78%
[GRAPH]
M.S.D.&T. Intermediate Lehman 7-Year
Tax-Exempt Bond Fund Municipal Bond Index
---------------------- --------------------
2/28/98 $10,000.00 $10,000.00
3/31/98 10,042.63 10,001.00
4/30/98 10,034.21 9,942.99
5/31/98 10,107.40 10,089.16
6/30/98 10,129.70 10,117.41
7/31/98 10,163.40 10,150.79
8/31/98 10,298.87 10,305.09
9/30/98 10,413.22 10,438.02
10/31/98 10,426.90 10,453.68
11/30/98 10,438.93 10,481.90
12/31/98 10,481.86 10,503.91
1/31/99 10,588.29 10,657.27
2/28/99 10,555.78 10,597.59
3/31/99 10,568.33 10,593.35
4/30/99 10,600.52 10,618.78
5/31/99 10,570.30 10,566.74
6/30/99 10,443.76 10,413.53
7/31/99 10,497.93 10,484.34
8/31/99 10,509.16 10,460.22
9/30/99 10,541.67 10,498.93
10/31/99 10,542.75 10,454.83
11/30/99 10,586.32 10,531.15
12/31/99 10,570.50 10,489.03
1/31/00 10,572.86 10,463.85
2/29/00 10,605.90 10,506.76
3/31/00 10,674.70 10,655.95
4/30/00 10,655.57 10,616.52
5/31/00 10,637.70 10,593.17
Past performance is not predictive of future results.
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. An investor cannot invest directly in an index.
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 Fed's policy since June 1999 of raising short-term interest rates at peri-
odic intervals has resulted in the Fed Funds rate increasing from 4.75% last
May to 6.50%. Despite the rise in rates, the economy continued to steam along,
as GDP increased by 7.3% in the fourth quarter of 1999 and 5.4% in the first
quarter of 2000. The unemployment rate hit a 20-year low of 3.9% in April,
while the wealth effect created by a NASDAQ market that gained over 100% from
May 1999 through March 2000 fueled personal income and spending. While the Fed
ratcheted up short-term rates, market participants pushed intermediate and
long-term interest rates (taxable and tax-exempt) higher through all of 1999
and early 2000.
Strong outflows of funds from tax-exempt mutual funds pushed municipal yields
to their highest levels in five years early in the first quarter of 2000. How-
ever, a combination of factors, including an announced Treasury buyback of
government debt, converged in late January/early February of 2000 that re-
sulted in a rally of longer maturity Treasury bonds, which carried over to the
tax-exempt market. The rally lasted until early April, when continued strength
in the economy and fears of inflation caused bond market participants to sell
off. By the end of May, municipal interest rates had nearly returned to the
highs of January.
The effective duration of the National Tax-Exempt Bond Fund had been shortened
throughout 1999 and early 2000, and then lengthened slightly during the spring
rally. Credit and sector spreads (except hospitals) remained narrow due to low
issuance. The cumulative effect of the Fed's tightening of credit should start
to show up in the second half of 2000. The dampening of interest rate sensi-
tive sectors (e.g. housing and auto purchases) combined with the expected
slowdown in wealth effect spending due to the stock market correction should
result in economic growth returning to a more sustainable level (2.5 to 3.5%).
The Fed will continue its vigilance in keeping inflation at bay, but it ap-
pears that this cycle of interest rate increases may be nearing an end. As a
result, any increase in yields will be looked at as a buying opportunity and
will be used to extend the Fund's average maturity.
Comparison of Change In Value of $10,000 Investment In
M.S.D.&T. National Tax-Exempt Bond Fund and the
Lehman Municipal Bond Index /1/
Average Annual Total Return
as of May 31, 2000
Since
1 Year Inception
(3/1/98)
-0.55% 2.43%
[GRAPH]
M.S.D.&T. National Lehman Municipal
Tax-Exempt Bond Fund Bond Fund
-------------------- ----------------
2/28/98 $10,000.00 $10,000.00
3/31/98 10,068.82 10,008.90
4/30/98 10,025.32 9,963.74
5/31/98 10,164.17 10,121.36
6/30/98 10,201.55 10,160.83
7/31/98 10,219.87 10,186.24
8/31/98 10,370.69 10,344.12
9/30/98 10,500.07 10,473.42
10/31/98 10,497.53 10,473.42
11/30/98 10,534.63 10,510.08
12/31/98 10,573.10 10,536.36
1/31/99 10,706.81 10,661.74
2/28/99 10,646.51 10,614.83
3/31/99 10,654.15 10,629.69
4/30/99 10,670.90 10,656.26
5/31/99 10,614.57 10,594.46
6/30/99 10,450.24 10,441.90
7/31/99 10,490.37 10,479.49
8/31/99 10,443.91 10,395.65
9/30/99 10,450.67 10,399.81
10/31/99 10,382.46 10,287.49
11/30/99 10,477.17 10,396.54
12/31/99 10,423.63 10,318.56
1/31/00 10,399.71 10,274.19
2/29/00 10,484.09 10,393.38
3/31/00 10,694.44 10,620.99
4/30/00 10,636.11 10,558.33
5/31/00 10,556.53 10,503.42
Past performance is not predictive of future performanc.
The Lehman Municipal Bond Index is an unmanaged index generally representative
of the total return of outstanding municipal bonds. An investor cannot invest
directly in an index.
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 Annualized Total Average Annual
for the one Return for five Total Return
year ended years ended since inception to
Inception June 30, June 30, June 30,
Date 2000 2000 2000
--------- ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Growth & Income Fund.... 2/28/91 11.38% 22.23% 16.78%
Equity Income Fund...... 3/1/98 -16.48% N/A 0.76%
Equity Growth Fund...... 3/1/98 15.12% N/A 20.03%
International Equity
Fund................... 7/2/93 19.72% 12.45% 11.41%
Diversified Real Estate
Fund................... 8/1/97 5.77% N/A 2.45%
Limited Maturity Bond
Fund................... 3/14/91 4.69% 5.47% 6.06%
Total Return Bond Fund.. 3/1/98 4.86% N/A 4.59%
Maryland Tax-Exempt Bond
Fund................... 6/2/92 2.70% 4.95% 5.24%
Intermediate Tax-Exempt
Bond Fund.............. 3/1/98 3.16% N/A 3.25%
National Tax-Exempt Bond
Fund................... 3/1/98 3.47% N/A 3.41%
</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, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
BANK NOTES -- 3.9%
Bank of America
6.08%, 07/24/00.......................................... $10,000 $ 10,000,000
6.75%, 08/17/00.......................................... 10,000 10,000,000
------------
TOTAL BANK NOTES
(Cost $20,000,000)....................................... 20,000,000
------------
CERTIFICATES OF DEPOSIT -- 15.2%
Domestic -- 3.9%
Morgan Guaranty Trust
6.47%, 07/10/00.......................................... 10,000 10,000,000
SunTrust Banks, Inc.
6.78%, 04/18/01.......................................... 10,000 10,003,338
------------
20,003,338
------------
Yankee -- 11.3%
Bank of Montreal
6.9375%, 11/20/00........................................ 10,000 10,000,000
Canadian Imperial Bank of Canada
6.00%, 06/02/00.......................................... 10,000 10,000,000
6.97%, 11/30/00.......................................... 10,000 10,000,000
Toronto Dominion
6.20%, 07/12/00.......................................... 10,000 10,000,000
UBS AG
5.60%, 06/14/00.......................................... 8,000 7,999,850
7.22%, 05/14/01.......................................... 10,000 10,000,000
------------
57,999,850
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $78,003,188)....................................... 78,003,188
------------
COMMERCIAL PAPER -- 43.7%
Banks -- 1.9%
SunTrust Banks, Inc.
6.48%, 06/22/00.......................................... 10,000 9,962,200
------------
Beverages -- 1.9%
Coca-Cola Co., Inc.
6.38%, 08/07/00.......................................... 10,000 9,881,261
------------
Chemicals -- 2.9%
E.I. duPont deNemours & Co.
6.32%, 07/26/00.......................................... 5,000 4,951,722
5.87%, 09/18/00.......................................... 10,000 9,822,269
------------
14,773,991
------------
Consumer Goods -- 2.9%
Gillette Co.
6.47%, 06/29/00.......................................... 15,000 14,924,517
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
COMMERCIAL PAPER -- Continued
Education -- 1.9%
Harvard University
6.25%, 06/12/00.......................................... $10,000 $ 9,980,903
------------
Electronics -- 3.9%
Emerson Electric
6.03%, 06/02/00.......................................... 20,000 19,996,650
------------
Finance -- 17.6%
Associates Corp. N.A.
6.45%, 06/09/00.......................................... 10,000 9,985,667
Centric Capital Corp.
6.52%, 06/19/00.......................................... 5,000 4,983,700
5.93%, 07/19/00.......................................... 6,000 5,952,560
6.38%, 07/26/00.......................................... 6,000 5,941,517
CIT Group Holdings, Inc.
6.56%, 07/10/00.......................................... 12,000 11,914,720
General Electric Capital Corp.
6.56%, 07/07/00.......................................... 22,000 21,855,680
Goldman Sachs Group, Inc.
6.04%, 07/25/00.......................................... 10,000 9,909,400
KFW International Financial Inc.
5.88%, 06/05/00.......................................... 10,000 9,993,467
Morgan Stanley Dean Witter
6.47%, 06/21/00.......................................... 10,000 9,964,056
------------
90,500,767
------------
Insurance -- 2.9%
Marsh USA
5.97%, 06/26/00.......................................... 15,000 14,937,812
------------
Petroleum -- 3.9%
Chevron Transport Corp.
6.46%, 06/26/00.......................................... 20,000 19,910,278
------------
Utilities -- 3.9%
Northern Power Co.
6.05%, 06/05/00.......................................... 10,000 9,993,278
6.11%, 07/06/00.......................................... 10,000 9,940,597
------------
19,933,875
------------
TOTAL COMMERCIAL PAPER
(Cost $224,802,254)...................................... 224,802,254
------------
CORPORATE BONDS -- 9.7%
Automotive -- 0.5%
Ford Motor Credit Corp.
6.84%, 06/05/00.......................................... 2,775 2,775,275
------------
</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, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
CORPORATE BONDS -- Continued
Banking -- 3.9%
BankOne Corp., FRN**
6.22%, 04/25/01.......................................... $10,000 $ 10,000,000
First Chicago Corp.
5.98%, 09/05/00.......................................... 10,000 9,998,995
------------
19,998,995
------------
Finance -- 4.3%
Merrill Lynch & Co., FRN**
6.80%, 08/03/00.......................................... 12,000 12,006,204
Wachovia Securities, Inc. FRN**
6.51%, 04/30/01.......................................... 10,000 10,000,000
------------
22,006,204
------------
Retail Stores -- 1.0%
Wal-Mart Stores, Inc.
5.85%, 06/01/00.......................................... 5,200 5,200,000
------------
TOTAL CORPORATE BONDS
(Cost $49,980,474)....................................... 49,980,474
------------
REPURCHASE AGREEMENTS -- 27.7%
Banc of America Securities, LLC
(Agreement dated 5/31/00 to be repurchased at $27,741,900
collateralized by $29,750,000 (Value $28,279,477) U.S.
Treasury Notes, 5.625%, due 5/15/08)
6.36%, 06/01/00.......................................... 27,737 27,737,000
Goldman Sachs Group, Inc.
(Agreement dated 5/31/00 to be repurchased at $24,004,207
collateralized by $24,370,000 (Value $24,478,460) U.S.
Treasury Notes, 6.25%, due 08/15/23)
6.31%, 06/01/00.......................................... 24,000 24,000,000
Merrill Lynch Government Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $24,004,167
collateralized by $24,060,000 (Value $24,470,262) U.S.
Treasury Notes, 6.875%, due 05/15/06)
6.25%, 06/01/00.......................................... 24,000 24,000,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- Continued
J.P. Morgan Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $20,003,489
collateralized by $17,107,000 (Value $20,360,700) U.S.
Treasury Notes, 8.00%, due 11/15/21)
6.28%, 06/01/00......................................... $20,000 $ 20,000,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/31/00 to be repurchased at $23,004,025
collateralized by $18,215,000 (Value $23,458,618) U.S.
Treasury Notes, 9.125%, due 05/15/18)
6.30%, 06/01/00......................................... 23,000 23,000,000
Wachovia Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $24,004,200
collateralized by $24,705,000 (Value $24,483,684) U.S.
Treasury Notes, 5.875%, due 09/30/02)
6.30%, 06/01/00......................................... 24,000 24,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $142,737,000)..................................... 142,737,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 100.2%
(Cost $515,522,916*)............................................. 515,522,916
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2)%................... (794,694)
------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share based on 514,833,918 shares
outstanding)..................................................... $514,728,222
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($514,728,222 / 514,833,918)..................................... $1.00
=====
</TABLE>
--------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 2000.
See Accompanying Notes to Financial Statements.
2
<PAGE>
M.S.D.&T. Funds, Inc.
GOVERNMENT MONEY MARKET FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 76.6%
Federal Farm Credit Bureau -- 4.2%
Notes
5.73%, 06/01/00........................................ $10,000 $ 10,000,000
5.94%, 06/01/00........................................ 10,000 10,000,000
------------
20,000,000
------------
Federal Home Loan Bank -- 22.3%
Discount Notes
5.95%, 06/02/00........................................ 15,000 14,997,521
6.32%, 06/21/00........................................ 15,000 14,947,333
6.00%, 06/30/00........................................ 5,000 4,975,954
6.03%, 07/14/00........................................ 10,000 9,927,975
6.41%, 07/26/00........................................ 10,000 9,902,069
5.39%, 07/28/00........................................ 5,000 4,957,329
6.12%, 09/08/00........................................ 6,627 6,515,467
Notes
5.52%, 06/22/00........................................ 10,000 10,000,000
5.705%, 07/14/00....................................... 15,000 15,000,000
7.05%, 05/17/01........................................ 15,000 15,000,000
------------
106,223,648
------------
Federal Home Loan Mortgage Corp. -- 19.3%
Discount Notes
5.97%, 06/08/00........................................ 10,000 9,988,392
5.97%, 06/22/00........................................ 10,000 9,965,175
6.335%, 06/27/00....................................... 15,000 14,931,371
6.065%, 07/13/00....................................... 10,000 9,929,242
6.41%, 07/18/00........................................ 15,000 14,874,471
6.445%, 07/25/00....................................... 15,000 14,854,988
6.12%, 09/14/00........................................ 7,642 7,505,590
Notes
6.80%, 05/08/01........................................ 10,000 10,000,000
------------
92,049,229
------------
Federal National Mortgage Association -- 22.4%
Discount Notes
5.21%, 06/01/00........................................ 10,000 10,000,000
5.87%, 06/08/00........................................ 10,000 9,988,489
5.80%, 07/20/00........................................ 30,000 29,757,450
5.88%, 07/27/00........................................ 25,000 24,762,700
6.52%, 08/17/00........................................ 15,000 14,791,138
Notes
5.90%, 11/20/00........................................ 2,500 2,493,073
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Federal National Mortgage Association -- Continued
Floating Rate Notes**
6.01%, 08/02/00.......................................... $ 5,000 $ 4,999,428
6.49%, 08/09/00.......................................... 10,000 9,998,869
------------
106,791,147
------------
Student Loan Marketing Association -- 8.4%
Floating Rate Notes**
6.09%, 08/17/00.......................................... 10,000 10,000,000
6.17%, 11/16/00.......................................... 10,000 10,000,000
6.26%, 07/20/00.......................................... 10,000 10,000,000
6.54%, 10/02/00.......................................... 10,000 10,000,000
------------
40,000,000
------------
TOTAL AGENCY OBLIGATIONS
(Cost $365,064,024)...................................... 365,064,024
------------
REPURCHASE AGREEMENTS -- 23.5%
Banc of America Securities, LLC
(Agreement dated 5/31/00 to be repurchased at $21,419,783
collateralized by $22,970,000 (Value $21,834,608) U.S.
Treasury Notes, 5.625%, due 5/15/08)
6.36%, 06/01/00.......................................... 21,416 21,416,000
Goldman Sachs Group, Inc.
(Agreement dated 5/31/00 to be repurchased at $20,003,506
collateralized by $18,810,000 (Value $20,371,153) U.S.
Treasury Notes, 7.25%, due 05/15/16)
6.31%, 06/01/00.......................................... 20,000 20,000,000
Merrill Lynch Government Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $16,002,778
collateralized by $15,580,000 (Value $16,314,245) U.S.
Treasury Notes, 7.00%, due 07/15/06)
6.25%, 06/01/00.......................................... 16,000 16,000,000
</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, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- Continued
J.P. Morgan Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $20,003,489
collateralized by $22,265,000 (Value $20,353,360) U.S.
Treasury Notes, 5.50%, due 08/15/28)
6.28%, 06/01/00.......................................... $20,000 $ 20,000,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/31/00 to be repurchased at $15,002,625
collateralized by $10,665,000 (Value $15,270,892) U.S.
Treasury Notes, 12.50%, due 08/15/14)
6.30%, 06/01/00.......................................... 15,000 15,000,000
Wachovia Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $20,003,500
collateralized by $20,355,000 (Value $20,411,350) U.S.
Treasury Notes, 6.625%, due 04/30/02)
6.30%, 06/01/00.......................................... 20,000 20,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $112,416,000)...................................... 112,416,000
------------
</TABLE>
<TABLE>
<CAPTION>
Value
-----
<S> <C>
TOTAL INVESTMENTS IN SECURITIES -- 100.1%
(Cost $477,480,024*)............................................ $477,480,024
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)%.................. (590,090)
------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share based on 477,016,139 shares
outstanding).................................................... $476,889,934
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($476,889,934 / 477,016,139).................................... $1.00
=====
</TABLE>
--------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 2000.
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, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
ALASKA -- 2.0%
Alaska Marine, VRDN, Exxon Mobil Corp., Valdez
Project**
4.35%, 06/01/00....................................... $ 3,000 $ 3,000,000
------------
CONNECTICUT -- 2.0%
Connecticut State Health & Education, VRDN, RB, Yale
University**
4.10%, 06/07/00....................................... 3,000 3,000,000
------------
DISTRICT OF COLUMBIA -- 2.0%
George Washington University, VRDN, RB, MBIA, SPA: Bank
of America**
4.35%, 06/07/00....................................... 3,000 3,000,000
------------
FLORIDA -- 9.7%
Broward County Water & Sewer, RB, INS: AMBAC
4.30%, 10/02/00....................................... 2,500 2,503,777
Jacksonville Electric Authority, RB, St. Johns River
6.40%, 10/02/00....................................... 1,750 1,764,374
Jacksonville Electric Authority, TECP, SPA: Morgan
Guaranty Trust Co. NY
4.20%, 08/15/00....................................... 1,000 1,000,000
Palm Beach County Health Facilities, VRDN, RB,
Refunding Bonds**
4.60%, 06/07/00....................................... 3,665 3,665,000
Volusia County Health Facilities, VRDN, FGIC, Aces-
Pooled Hospital Loan Program, SPA: SunTrust Bank**
3.85%, 06/07/00....................................... 5,400 5,400,000
------------
14,333,151
------------
GEORGIA -- 1.9%
Cobb County & Marietta Water Authority, RB
5.00%, 11/01/00....................................... 1,850 1,858,613
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
GEORGIA -- Continued
Bartow County, Georgia Power Company Plant, VRDN, PCRB,
Bartow Project **
4.35%, 06/01/00....................................... $ 1,000 $ 1,000,000
------------
2,858,613
------------
ILLINOIS -- 6.1%
Bedford Park Illinois, VRDN, Environmental Revenue,
GTD: Minnesota Mining & Manufacturing Co. **
4.00%, 06/07/00....................................... 500 500,000
Illinois Educational Facilities, VRDN, Northwestern
University, LIC: First National Bank of Chicago/Bank
One**
4.30%, 06/07/00....................................... 4,000 4,000,000
Illinois Educational Facilities, VRDN, Northwestern
University, SPA: Northern Trust Co.**
4.30%, 06/07/00....................................... 1,700 1,700,000
Illinois Health Facility, TECP, Rush Presbyterian
Hospital/St Luke's Medical Center, LOC: Northern Trust
Co.
4.10%, 06/07/00....................................... 2,845 2,845,000
------------
9,045,000
------------
INDIANA -- 3.0%
City of Mt. Vernon, TECP, PCRB, General Electric Co.
Project
4.30%, 06/15/00....................................... 4,500 4,500,000
------------
KENTUCKY -- 3.4%
Jefferson County, TECP, PCRB, Louisville Gas & Electric
Co. Project
3.60%, 06/08/00....................................... 2,000 2,000,000
Trimble County, TECP, PCRB, Louisville Gas & Electric
Co. Project
3.50%, 06/06/00....................................... 3,000 3,000,000
------------
5,000,000
------------
</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, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
LOUISIANA -- 3.1%
Plaquemine Parish Port & Harbor Terminal District,
TECP, GTD: TECO Energy, Inc.
4.35%, 06/05/00....................................... $ 3,000 $ 3,000,000
St. Charles Parish, VRDN, PCRB, Shell Oil, Co.
Project**
4.30%, 06/01/00....................................... 1,550 1,550,000
------------
4,550,000
------------
MARYLAND -- 6.9%
Harford County, GO, GPI
4.40%, 12/01/00....................................... 1,480 1,483,942
Harford County, GO, ETM, CPI
4.40%, 12/01/00....................................... 210 210,559
Howard County, GO, BAN
4.50%, 04/13/01....................................... 2,000 2,005,018
Maryland Economic Development Corp., VRDN, LOC: Bank of
America**
4.35%, 06/07/00....................................... 5,000 5,000,000
Maryland State & Local Facilities, GO
4.10%, 08/01/00....................................... 500 500,238
St Mary's County, GO, Public Facilites and Hospital,
INS:AMBAC
4.10%, 07/03/00....................................... 1,000 1,000,219
------------
10,199,976
------------
MASSACHUSETTS -- 1.3%
State of Massachusetts, GO, Prerefunded 12/01/00 @ 102
7.50%, 12/01/00....................................... 1,875 1,943,712
------------
MICHIGAN -- 3.8%
University of Michigan, VRDN, Hospital Revenue**
4.35%, 06/01/00....................................... 2,620 2,620,000
University of Michigan, VRDN, RB, Medical Services**
4.35%, 06/01/00....................................... 3,000 3,000,000
------------
5,620,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MINNESOTA -- 7.7%
Minneapolis, GO, Special School District, University
Gateway Project, SPA: Norwest Bank
4.15%, 06/07/00....................................... $ 6,000 $ 6,000,000
City of Rochester, RB, TECP, Health-Mayo Foundation
4.20%, 06/06/00....................................... 5,400 5,400,000
------------
11,400,000
------------
MISSISSIPPI -- 0.7%
Harrison County, VRDN, PCRB, E.I. duPont deNemours &
Co.**
4.35%, 06/01/00....................................... 1,100 1,100,000
------------
MISSOURI -- 2.3%
Boone County, IDA, VRDN, PCR, GTD: Minnesota Mining &
Manufacturing Project**
4.00%, 06/07/00....................................... 500 500,000
Missouri State Health & Educational Facilities, VRDN,
Washington University Project, SPA: Morgan Guaranty
Trust Co. NY**
4.10%, 06/07/00....................................... 1,550 1,550,000
4.10%, 06/07/00....................................... 1,340 1,340,000
------------
3,390,000
------------
NEW JERSEY -- 0.7%
State of New Jersey, GO
4.50%, 03/01/01....................................... 1,000 1,003,630
------------
NEW YORK -- 2.0%
City of New York, New York Water Financial Authority,
VRDN, INS: FGIC**
4.45%, 06/01/00....................................... 3,000 3,000,000
------------
NORTH CAROLINA -- 5.1%
City of Durham, VRDN, COP, SPA: Wachovia Bank N.A.**
4.40%, 06/07/00....................................... 5,000 5,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
M.S.D.&T. Funds, Inc.
TAX-EXEMPT MONEY MARKET FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
NORTH CAROLINA -- Continued
North Carolina Educational Facilities, VRDN, SPA:
Wachovia Bank N.A., Wake Forest University Project**
4.30%, 06/07/00....................................... $ 2,500 $ 2,500,000
------------
7,500,000
------------
OHIO -- 9.1%
Cuyahoga County, VRDN, Hospital Revenue, Cleveland
Clinic, SPA: Bank of America**
4.35%, 06/01/00....................................... 2,300 2,300,000
4.15%, 06/07/00....................................... 3,000 3,000,000
Ohio State Highway Improvements, GO
5.00%, 05/01/01....................................... 2,500 2,518,761
Warren County, Ohio Health Care, VRDN, Otterbein Homes,
LOC: Fifth Third Bank**
4.35%, 06/07/00....................................... 5,645 5,645,000
------------
13,463,761
------------
OREGON -- 2.4%
Oregon State Board of Higher Education, GO
5.70%, 10/16/00....................................... 1,000 1,006,506
State of Oregon, GO, VRDN, RB, Veterans Welfare Board,
LOC: Morgan Guaranty Trust Co. NY**
4.05%, 06/07/00....................................... 2,600 2,600,000
------------
3,606,506
------------
PENNSYLVANIA -- 3.3%
Delaware County, IDA, VRDN, General Electric Capital
Corp.**
3.95%, 06/07/00....................................... 2,200 2,200,000
Delaware County, IDA, VRDN, GTD: United Parcels
Project**
4.30%, 06/01/00....................................... 2,700 2,700,000
------------
4,900,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
SOUTH CAROLINA -- 5.5%
Berkeley County, FRN, PCR, BP Amoco Chemical Co. Project
4.35%, 06/01/00........................................ $ 2,200 $ 2,200,000
Lexington & Richland Counties, GO, School District #5
4.50%, 03/01/01........................................ 2,910 2,915,186
York County, PCR, TECP, Duke Power Project
4.10%, 07/06/00........................................ 3,000 3,000,000
------------
8,115,186
------------
TEXAS -- 9.3%
Harris County, Health Facilities Development, VRDN,
Methodist Hospital, SPA: Morgan Guaranty Trust Co. NY**
4.35%, 06/01/00........................................ 2,900 2,900,000
North Central Texas Health Facilities Development, VRDN,
RB, Presbyterian Medical Center, INS: MBIA, SPA: Bank
of America**
4.40%, 06/01/00........................................ 1,600 1,600,000
North Central Texas Health Facilities Development, VRDN,
RB, Presbyterian Medical Center, INS: MBIA: Bank of
America **
4.40%, 06/01/00........................................ 2,200 2,200,000
State of Texas, TRAN
4.50%, 08/31/00........................................ 7,000 7,013,096
------------
13,713,096
------------
WASHINGTON -- 1.4%
State of Washington, Public Power Supply System, RB,
Prerefunded 07/01/00 @ 102, Nuclear Project
7.375%, 07/03/00....................................... 2,000 2,044,774
------------
WYOMING -- 0.9%
Sublette County, VRDN, PCRB, Exxon Mobil Corp. Project**
4.35%, 06/01/00........................................ 1,300 1,300,000
------------
TOTAL MUNICIPAL BONDS
(Cost $141,587,405).................................... 141,587,405
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
M.S.D.&T. Funds, Inc.
TAX-EXEMPT MONEY MARKET FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 4.0%
Goldman Sachs Financial Square Tax-Free Money Market
Fund................................................... 2,795,510 $ 2,795,510
Provident Institutional Funds -- MuniFund............... 3,115,925 3,115,925
------------
TOTAL INVESTMENT COMPANIES
(Cost $5,911,435)...................................... 5,911,435
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.6%
(Cost $147,498,840*).............................................. 147,498,840
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%...................... 530,321
------------
NET ASSETS -- 100.0%
(equivalent to $1.00 per share based on 148,044,111 shares
outstanding)...................................................... $148,029,161
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($148,029,161 / 148,044,111)...................................... $1.00
=====
</TABLE>
--------
* Aggregate cost for Federal income tax purposes.
** The rate shown is as of May 31, 2000 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.
8
<PAGE>
M.S.D.&T. Funds, Inc.
GROWTH & INCOME FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- 94.3%
Basic Materials -- 0.9%
RPM, Inc. .............................................. 422,250 $ 4,116,937
------------
Capital Goods -- 6.9%
Caterpillar, Inc. ...................................... 143,800 5,500,350
Emerson Electric Co. ................................... 122,600 7,233,400
General Electric Co. ................................... 124,350 6,543,919
Illinois Tool Works, Inc. .............................. 92,420 5,366,136
Ingersoll-Rand Co. ..................................... 189,500 8,634,094
------------
33,277,899
------------
Communication Services & Utilities -- 7.3%
BellSouth Corp. ........................................ 53,600 2,502,450
Corning, Inc. .......................................... 85,900 16,616,281
Kyocera ADR............................................. 20,700 3,396,094
Qwest Communications International*..................... 55,900 2,365,269
Vodafone ADR............................................ 86,300 3,953,619
WorldCom, Inc.*......................................... 169,645 6,382,893
------------
35,216,606
------------
Consumer Cyclical -- 8.8%
Home Depot, Inc. ....................................... 164,950 8,051,622
May Department Stores Co. .............................. 170,700 5,131,669
Southwest Airlines Co. ................................. 741,390 14,225,421
United Parcel Service................................... 45,800 2,742,275
Wal-Mart Stores, Inc. .................................. 217,200 12,516,150
------------
42,667,137
------------
Consumer Staples -- 10.2%
Colgate-Palmolive Co. .................................. 192,500 10,130,312
Gillette Co. ........................................... 159,200 5,313,300
Nestle Registered ADR................................... 86,900 8,253,762
Pepsico, Inc. .......................................... 349,180 14,207,261
Philip Morris, Inc. .................................... 174,520 4,559,335
Procter & Gamble Co. ................................... 104,600 6,955,900
------------
49,419,870
------------
Energy -- 3.7%
Chevron Corp. .......................................... 57,100 5,278,181
Exxon Mobil Corp. ...................................... 52,806 4,399,400
Schlumberger Ltd. ADR................................... 112,300 8,261,069
------------
17,938,650
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Financial -- 15.4%
American International Group, Inc. ..................... 53,900 $ 6,067,119
Berkshire Hathaway, Inc.*............................... 3,896 7,347,856
Chubb Corp. ............................................ 114,300 8,001,000
Citigroup, Inc. ........................................ 53,600 3,333,250
Comerica, Inc. ......................................... 176,600 8,940,375
Freddie Mac............................................. 133,400 5,936,300
Goldman Sachs Group, Inc. .............................. 43,400 3,192,612
Jefferson Pilot Corp. .................................. 167,650 11,504,981
Morgan Stanley Dean Witter.............................. 54,400 3,913,400
SunTrust Banks, Inc. ................................... 157,600 9,416,600
UNUMProvident Corp. .................................... 311,000 7,055,812
------------
74,709,305
------------
Health Care -- 15.1%
Amgen, Inc.*............................................ 239,200 15,219,100
Biogen, Inc.*........................................... 32,600 1,776,700
Bristol Myers Squibb Co. ............................... 188,300 10,368,269
Covance, Inc.*.......................................... 306,400 2,183,100
Johnson & Johnson....................................... 94,900 8,493,550
Merck & Co., Inc. ...................................... 165,400 12,342,975
Pfizer, Inc. ........................................... 275,840 12,292,120
Warner-Lambert Co. ..................................... 85,300 10,417,263
------------
73,093,077
------------
Technology -- Communications -- 3.9%
Alcatel................................................. 39,600 2,160,675
Lucent Technologies..................................... 181,072 10,389,006
Nokia Corp. ADR......................................... 100,400 5,220,800
Qualcomm, Inc.*......................................... 18,000 1,194,750
------------
18,965,231
------------
Technology -- Hardware -- 19.1%
3Com Corp.*............................................. 95,100 3,976,369
American Power Conversion*.............................. 46,400 1,644,300
Cabletron Systems*...................................... 145,100 3,328,231
Cisco Systems, Inc.*.................................... 460,980 26,275,860
EMC Corp/Mass*.......................................... 22,800 2,651,925
Hewlett-Packard Co. .................................... 135,400 16,264,925
I B M................................................... 177,200 19,015,775
Intel Corp. ............................................ 131,000 16,325,875
Texas Instruments, Inc. ................................ 45,000 3,251,250
------------
92,734,510
------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
M.S.D.&T. Funds, Inc.
GROWTH & INCOME FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Technology -- Other -- 0.7%
Agilent Technologies, Inc.*............................. 49,000 $ 3,607,625
------------
Technology -- Software -- 2.3%
Microsoft*.............................................. 28,900 1,808,056
Oracle Corp.*........................................... 89,400 6,425,625
RealNetworks, Inc.*..................................... 27,400 994,963
Yahoo!, Inc.*........................................... 17,000 1,922,062
------------
11,150,706
------------
TOTAL COMMON STOCK
(Cost $281,332,219).................................... 456,897,553
------------
<CAPTION>
Par
(000)
-----
<S> <C> <C>
REPURCHASE AGREEMENTS -- 6.2%
Banc of America Securities, LLC
(Agreement dated 5/31/00 to be repurchased at
$10,030,772 collateralized by $10,029,000 (Value
$10,228,140) U.S. Treasury Notes, 5.625%, due 5/15/08)
6.36%, 06/01/00........................................ $10,029 10,029,000
Goldman Sachs Group, Inc.
(Agreement dated 5/31/00 to be repurchased at $5,000,876
collateralized by $3,950,000 (Value $5,111,092) U.S.
Treasury Notes, 13.75%, due 8/15/04)
6.31%, 06/01/00........................................ 5,000 5,000,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/31/00 to be repurchased at
$10,001,750 collateralized by $8,960,000 (Value
$10,188,957) U.S. Treasury Notes, 10.00%, due 5/15/10)
6.30%, 06/01/00........................................ 10,000 10,000,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- Continued
Wachovia Bank N.A.
(Agreement dated 5/31/00 to be repurchased at $5,000,875
collateralized by $5,066,000 (Value $5,100,037) U.S.
Treasury Notes, 6.25%, due 2/28/02)
6.30%, 06/01/00......................................... $ 5,000 $ 5,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $30,029,000)...................................... 30,029,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 100.5%
(Cost $311,361,219**)............................................ 486,926,553
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5)%................... (2,488,472)
------------
NET ASSETS -- 100.0%
(equivalent to $25.50 per share based on 19,001,235 shares
outstanding)..................................................... $484,438,081
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($484,438,081 / 19,001,235)...................................... $25.50
======
</TABLE>
--------
* Non-income producing securities.
** Cost for Federal income tax purposes is $311,432,378. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost................................. $193,442,684
Excess of tax cost over value................................. $(17,948,509)
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY INCOME FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- 80.1%
Basic Materials -- 6.9%
Air Products & Chemicals................................ 60,300 $ 2,087,887
E.I. duPont deNemours & Co.............................. 45,900 2,249,100
International Paper Co.................................. 62,550 2,177,522
International Flavors & Fragrances...................... 58,950 2,004,300
Phelps Dodge Corp....................................... 37,300 1,673,838
RPM, Inc................................................ 134,900 1,315,275
Worthington Industries, Inc............................. 155,500 1,885,438
------------
13,393,360
------------
Capital Goods -- 9.3%
Boeing Corp............................................. 64,900 2,535,155
Caterpillar, Inc........................................ 58,000 2,218,500
Crown Cork & Seal Co.................................... 71,300 1,221,013
General Electric Co..................................... 128,300 6,751,788
Minnesota Mining & Manufacturing Co..................... 35,000 3,001,250
Timken Co............................................... 128,100 2,417,888
------------
18,145,594
------------
Communication Services & Utilities -- 10.3%
AT&T Corp............................................... 33,150 1,149,890
BellSouth............................................... 51,450 2,402,072
Enron Corp.............................................. 70,700 5,152,263
GTE Corp................................................ 58,900 3,725,425
Qwest Communications International*..................... 42,800 1,810,975
Southern Co............................................. 118,300 3,068,406
Worldcom, Inc.*......................................... 75,100 2,825,638
------------
20,134,669
------------
Consumer Cyclicals -- 7.4%
Armstrong Holding, Inc.................................. 44,600 766,563
Carnival Cruise......................................... 95,200 2,582,300
Dana Corp............................................... 55,300 1,427,430
Fleetwood Enterprises................................... 96,700 1,377,975
General Motors Corp..................................... 32,491 2,294,677
Wal-Mart Stores, Inc.................................... 70,200 4,045,275
Whirlpool Corp.......................................... 35,000 1,984,063
------------
14,478,283
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Consumer Staples -- 6.4%
Albertson's, Inc........................................ 47,700 $ 1,747,013
Conagra................................................. 71,800 1,655,887
Pepsico, Inc............................................ 77,700 3,161,419
Philip Morris Co., Inc.................................. 28,000 731,500
Procter & Gamble Co..................................... 45,600 3,032,400
Tupperware Corp......................................... 93,200 2,056,225
------------
12,384,444
------------
Energy -- 8.3%
BP Amoco ADR............................................ 91,294 4,964,111
Chevron Corp............................................ 30,700 2,837,831
Exxon Mobil Corp........................................ 59,800 4,982,088
Halliburton Co.......................................... 67,500 3,442,500
------------
16,226,530
------------
Finance -- 7.7%
Chubb Corp. ............................................ 36,200 2,534,000
CIT Group, Inc.......................................... 146,100 2,675,456
First Union Corp. (N.C.)................................ 50,500 1,776,969
J.P. Morgan & Co. ...................................... 30,550 3,933,313
Regions Financial Corp. ................................ 60,050 1,358,631
Union Planters Corp. ................................... 50,500 1,578,125
UNUMProvident Corp. .................................... 53,900 1,222,856
------------
15,079,350
------------
Health -- 7.8%
American Home Products.................................. 80,900 4,358,488
Bristol Myers Squibb Co. ............................... 49,800 2,742,112
Johnson & Johnson....................................... 41,300 3,696,350
Merck & Co., Inc. ...................................... 59,850 4,466,306
------------
15,263,256
------------
Technology -- Communications -- 1.7%
Lucent Technologies..................................... 56,300 3,230,213
------------
Technology -- Hardware -- 8.5%
3Com Corp.*............................................. 37,700 1,576,331
Hewlett-Packard Co. .................................... 33,000 3,964,125
IBM..................................................... 50,400 5,408,550
Intel Corp. ............................................ 44,600 5,558,275
------------
16,507,281
------------
Technology -- Other -- 2.5%
Electronic Data Services................................ 58,350 3,752,634
General Motors--Class H*................................ 11,405 1,122,680
------------
4,875,314
------------
</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, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Technology -- Software -- 1.4%
Auto Desk............................................... 30,950 $ 1,150,953
Microsoft*.............................................. 24,950 1,560,934
------------
2,711,887
------------
Transportation -- 1.9%
Norfolk Southern Corp. ................................. 105,000 1,870,312
Southwest Airlines Co. ................................. 96,100 1,843,919
------------
3,714,231
------------
TOTAL COMMON STOCK
(Cost $119,448,128).................................... 156,144,412
------------
<CAPTION>
Par
(000)
-----
<S> <C> <C>
REPURCHASE AGREEMENTS -- 19.3%
Banc of America Securities, LLC
(Agreement dated 5/31/00 to be repurchased at $7,563,336
collateralized by $7,780,000 (Value $7,725,297) U.S.
Treasury Bills, 4.875%, due 3/31/01)
6.36%, 06/01/00........................................ $ 7,562 7,562,000
Goldman Sachs Group, Inc.
(Agreement dated 5/31/00 to be repurchased at $8,001,402
collateralized by $7,950,000 (Value $8,158,305) U.S.
Treasury Bills, 5.25%, due 1/01)
6.31%, 06/01/00........................................ 8,000 8,000,000
Merrill Lynch Government Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $6,001,042
collateralized by $6,015,000 (Value $6,117,566) U.S.
Treasury Notes, 6.875%, due 5/15/06)
6.25%, 06/01/00........................................ 6,000 6,000,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- Continued
Morgan Stanley & Co., Inc.
(Agreement dated 5/31/00 to be repurchased at $8,001,400
collateralized by $6,690,000 (Value $8,139,712) U.S.
Treasury Notes, 10.375%, due 11/15/12)
6.30%, 06/01/00.......................................... $ 8,000 $ 8,000,000
Wachovia Bank, N.A.
(Agreement dated 5/31/00 to be repurchased at $8,001,400
collateralized by $8,105,000 (Value $8,159,455) U.S.
Treasury Bills, 6.25%, due 2/28/02)
6.30%, 06/01/00.......................................... 8,000 8,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $37,562,000)....................................... 37,562,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.4%
(Cost $157,010,128**)............................................. 193,706,412
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6%...................... 1,242,052
------------
NET ASSETS -- 100.0%
(equivalent to $7.07 per share based on 27,562,869 shares
outstanding)...................................................... $194,948,464
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($194,948,464 / 27,562,869)....................................... $7.07
=====
</TABLE>
--------
* Non-income producing securities.
** Cost for Federal income tax purposes is $157,779,514. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost................................. $ 49,832,237
Excess of tax cost over value................................. $(13,905,339)
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
M.S.D.&T. Funds, Inc.
EQUITY GROWTH FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C> <C>
COMMON STOCK -- 95.0%
Basic Materials -- 0.4%
Corn Products International.......................... 12,000 $ 294,750
------------
Capital Goods -- 5.2%
American Power Conversion*........................... 40,000 1,417,500
General Electric Co.................................. 31,200 1,641,900
Tyco International................................... 20,000 941,250
------------
4,000,650
------------
Communication Services & Utilities -- 13.2%
AT&T Corp. .......................................... 24,000 832,500
Cable & Wireless ADR................................. 9,000 446,625
Enron Corp. ......................................... 16,000 1,166,000
Global Crossing Ltd.*................................ 26,650 667,916
Qwest Communications International*.................. 22,000 930,875
SBC Communications, Inc. ............................ 27,000 1,179,563
Sprint............................................... 24,000 1,452,000
Vodafone ADR......................................... 35,000 1,603,437
Williams Co. ........................................ 16,000 665,000
Worldcom, Inc.*...................................... 31,500 1,185,187
------------
10,129,103
------------
Consumer Cyclicals -- 10.0%
Carnival Cruise...................................... 64,200 1,741,425
Gap, Inc. ........................................... 30,000 1,051,875
Home Depot, Inc. .................................... 21,000 1,025,063
Nordstom, Inc. ...................................... 30,000 753,750
Staples, Inc.*....................................... 60,000 885,000
Target Corp. ........................................ 20,000 1,253,750
Wal-Mart Stores, Inc. ............................... 16,000 922,000
------------
7,632,863
------------
Consumer Staples -- 2.8%
Colgate-Palmolive Co. ............................... 11,000 578,875
McDonald's Corp. .................................... 8,000 286,500
Nestle ADR*.......................................... 5,000 474,900
Pepsico, Inc. ....................................... 15,600 634,725
Time Warner, Inc. ................................... 2,500 197,344
------------
2,172,344
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Energy -- 3.4%
Baker Hughes............................................ 18,000 $ 652,500
Exxon Mobil Corp. ...................................... 16,741 1,394,735
Halliburton Co. ........................................ 11,534 588,234
------------
2,635,469
------------
Financial Services -- 7.6%
American Express Co. ................................... 20,400 1,097,775
CIT Group, Inc. ........................................ 18,000 329,625
Comerica, Inc. ......................................... 7,500 379,688
Freddie Mac............................................. 12,000 534,000
Lincoln National Corp. ................................. 16,000 620,000
Morgan Stanley Dean Witter.............................. 14,400 1,035,900
T. Rowe Price Assoc. ................................... 14,300 546,081
UNUMProvident Corp. .................................... 23,000 521,812
Wells Fargo Co. ........................................ 16,000 724,000
------------
5,788,881
------------
Health -- 14.4%
American Home Products.................................. 20,000 1,077,500
Amgen, Inc.*............................................ 19,000 1,208,875
Baxter International.................................... 11,000 731,500
Biogen, Inc.*........................................... 2,000 109,000
Boston Scientific Corp.*................................ 20,000 512,500
Bristol Myers Squibb Co. ............................... 16,000 881,000
Chiron Corp.*........................................... 13,200 500,775
Genzyme Corp.*.......................................... 10,000 568,125
Johnson & Johnson....................................... 10,100 903,950
Pfizer, Inc. ........................................... 12,000 534,750
Schering-Plough Corp. .................................. 40,000 1,935,000
Warner Lambert Co. ..................................... 17,200 2,100,550
------------
11,063,525
------------
Technology -- Communications -- 4.5%
Ericsson ADR............................................ 42,000 861,000
Lucent Technologies..................................... 30,000 1,721,250
Nokia Corp. ADR......................................... 12,000 624,000
Qualcomm, Inc.*......................................... 4,000 265,500
------------
3,471,750
------------
</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, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK -- Continued
Technology -- Hardware -- 21.2%
3Com Corp.*.............................................. 29,500 $ 1,233,469
Cisco Systems*........................................... 39,600 2,257,200
EMC Corp/Mass*........................................... 15,000 1,744,687
Gateway, Inc.*........................................... 22,000 1,089,000
IBM...................................................... 8,300 890,692
Intel Corp. ............................................. 20,000 2,492,500
Motorola, Inc. .......................................... 9,000 843,750
Sun Microsystems*........................................ 14,000 1,072,750
Teradyne, Inc.*.......................................... 28,000 2,408,000
Texas Instruments, Inc. ................................. 10,000 722,500
Xilinx, Inc.*............................................ 20,000 1,522,500
-----------
16,277,048
-----------
Technology -- Other -- 5.3%
Agilent Technologies, Inc.*.............................. 9,000 662,625
Avnet, Inc............................................... 20,000 1,383,750
Electronic Data Services................................. 11,800 758,888
General Motors -- Class H*............................... 13,000 1,279,688
-----------
4,084,951
-----------
Technology -- Software -- 6.1%
American Online, Inc.*................................... 6,000 318,000
Auto Desk................................................ 29,000 1,078,438
Computer Assoc. International............................ 13,500 695,250
Microsoft*............................................... 28,000 1,751,750
Oracle Corp.*............................................ 10,000 718,750
RealNetworks, Inc.*...................................... 2,400 87,150
-----------
4,649,338
-----------
Transportation -- 0.9%
Southwest Airlines Co. .................................. 34,000 652,375
-----------
TOTAL COMMON STOCK
(Cost $52,508,167)...................................... 72,853,047
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.1%
Banc of America Securities, LLC
(Agreement dated 5/31/00 to be repurchased at $3,111,550
collateralized by $2,460,000 (Value $3,199,305) U.S.
Treasury Bonds, 9.25% due 2/15/16)
6.36%, 06/01/00........................................... $ 3,111 $ 3,111,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $3,111,000)......................................... 3,111,000
-----------
TOTAL INVESTMENTS IN SECURITIES -- 99.1%
(Cost $55,619,167**)............................................... 75,964,047
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9%...................... 673,004
-----------
NET ASSETS -- 100.0%
(equivalent to $12.67 per share based on 6,048,686 shares
outstanding)....................................................... $76,637,051
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($76,637,051 / 6,048,686).......................................... $12.67
======
</TABLE>
--------
* Non-income producing securities.
** Cost for Federal income tax purposes is $55,784,668. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $22,792,798
Excess of tax cost over value.................................. $(2,613,419)
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK & PREFERRED STOCK -- 91.7%
Argentina -- 0.4%
Telecom Argentina SA ADR................................ 20,000 $ 491,250
------------
Australia -- 0.7%
Amp Ltd................................................. 50,000 434,176
Fosters Brewing Group................................... 170,000 413,153
------------
847,329
------------
Brazil -- 1.9%
Cervejaria Brahma ADR................................... 82,000 1,204,375
Tele Norte Leste ADR.................................... 52,503 1,030,371
------------
2,234,746
------------
Chile -- 0.8%
Telecom de Chile ADR.................................... 46,000 908,500
------------
Finland -- 1.4%
Nokia................................................... 32,750 1,694,789
------------
France -- 9.0%
Alcatel................................................. 45,535 2,504,206
Aventis................................................. 28,500 1,842,246
AXA..................................................... 11,103 1,626,925
Total Fina Elf.......................................... 16,961 2,656,753
Vivendi................................................. 18,884 2,014,011
------------
10,644,141
------------
Germany -- 4.8%
Allianz Holding NPV..................................... 5,952 2,136,210
Deutsche Bank........................................... 27,374 2,102,029
Sap Vorzug NPV.......................................... 2,810 1,480,215
------------
5,718,454
------------
Hong Kong -- 2.1%
Cable and Wireless...................................... 194,000 443,173
Cheung Kong............................................. 75,000 685,800
China Telecom*.......................................... 53,000 396,208
CLP Holdings............................................ 49,000 227,644
First Pacific Co........................................ 1,000,000 352,926
Henderson Land Development Co........................... 49,000 191,170
South China Morning Post................................ 340,000 244,353
------------
2,541,274
------------
India -- 0.8%
Icici ADR............................................... 46,000 897,000
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK & PREFERRED STOCK -- Continued
Israel -- 0.1%
Radvision Ltd. ADR*..................................... 8,000 $ 145,000
------------
Italy -- 1.6%
Telecom Italia Mobile................................... 180,390 1,868,683
------------
Japan -- 24.4%
Asahi Glass Company..................................... 144,000 1,336,020
Bank Tokyo -- Mitshubishi............................... 121,000 1,517,065
Bridgestone Corp. ...................................... 66,000 1,507,870
Daiwa Securities Group.................................. 48,000 583,979
Fuji Heavy Ind. ........................................ 150,000 1,114,464
Industiral Bank of Japan................................ 82,000 639,703
Japan Airlines Co. ..................................... 378,000 1,140,933
Kirin Brewery Co. ...................................... 113,000 1,364,290
Mabuchi Motors Co. ..................................... 5,200 541,370
Mitsubishi Chemical Corp. .............................. 338,000 1,321,550
Mitsubishi Corp. ....................................... 146,000 1,212,203
Mitsui Fudosan.......................................... 178,000 1,836,619
Nintendo Co. ........................................... 8,400 1,248,200
Nippon Steel Corp. ..................................... 546,000 1,196,712
Nippon Telegraph & Telephone Corp. ..................... 96 1,141,210
Ricoh Co. .............................................. 89,000 1,859,762
Sankyo Co. ............................................. 65,000 1,500,115
Sekisui House........................................... 120,000 1,167,959
Sumitomo Bank........................................... 137,000 1,796,554
Takashimaya Co. ........................................ 30,000 270,258
Tokyo Electric Power Co. ............................... 75,400 1,883,685
Toppan Printing Co. .................................... 134,000 1,421,202
Toshiba Corp. .......................................... 130,000 1,255,630
------------
28,857,353
------------
Mexico -- 0.7%
Grupo Fin. Banorte 'O'*................................. 640,000 875,096
------------
Netherlands -- 10.0%
Buhrmann................................................ 59,047 1,787,932
Elsevier................................................ 148,100 1,381,730
Ing Group............................................... 34,804 2,069,307
Kononklijke Ahold....................................... 56,847 1,597,424
Philips Electronics..................................... 37,952 1,684,525
TNT Post Group.......................................... 59,300 1,422,176
United Pan-Europe Communications*....................... 23,137 595,872
VNU..................................................... 26,117 1,324,893
------------
11,863,859
------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
M.S.D.&T. Funds, Inc.
INTERNATIONAL EQUITY FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK & PREFERRED STOCK -- Continued
Singapore -- 1.0%
DBS Group Holdings Ltd. ................................ 114,542 $ 1,143,356
------------
South Africa -- 1.7%
De Beers-Centenary Link Units........................... 25,000 541,277
Johnnies Industrial Ltd. ............................... 76,300 959,637
Profurn Ltd. ........................................... 1,050,000 572,864
------------
2,073,778
------------
South Korea -- 0.7%
Housing & Commercial Bank GDR........................... 17,560 318,707
Korea Telecom ADR....................................... 14,000 518,000
------------
836,707
------------
Spain -- 3.3%
Banco Santander......................................... 152,222 1,483,714
Repsol.................................................. 111,791 2,371,063
------------
3,854,777
------------
Sweden -- 5.6%
Electrolux.............................................. 88,000 1,484,071
Ericsson................................................ 140,752 2,850,007
Nordic Baltic Holding................................... 250,000 1,650,385
Tele1 Europe AB......................................... 56,180 676,301
------------
6,660,764
------------
Switzerland -- 6.3%
Credit Suisse Group..................................... 9,300 1,728,331
Novartis Ag............................................. 1,225 1,799,570
Roche Holdings NPV...................................... 193 2,026,799
Zurich Allied........................................... 3,768 1,845,110
------------
7,399,810
------------
Taiwan -- 0.8%
Acer Inc. GDR*.......................................... 42,000 425,250
Synnex Technology Intl GDR.............................. 23,000 511,290
------------
936,540
------------
Thailand -- 0.2%
Bangkok Bank*........................................... 102,000 120,329
Golden Land Property*................................... 440,000 65,094
------------
185,423
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
COMMON STOCK & PREFERRED STOCK -- Continued
United Kingdom -- 13.4%
Barclays................................................ 71,412 $ 1,851,932
Cable & Wireless........................................ 98,981 1,645,171
Centrica................................................ 380,000 1,374,527
Glaxo Wellcome.......................................... 69,151 1,945,754
Granada Group........................................... 173,790 1,541,700
Reuters Group........................................... 75,000 1,112,058
Scottish & Newcastle.................................... 163,000 1,358,272
Scottish Power.......................................... 193,305 1,535,680
Vodafone Airtouch....................................... 773,886 3,530,914
------------
15,896,008
------------
TOTAL COMMON STOCK & PREFERRED STOCK
(Cost $104,568,061).................................... 108,574,637
------------
<CAPTION>
Par
(000)
-----
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 6.3%
Eurodollar Time Deposit
State Street Bank & Trust Co.
5.0%, 6/1/00........................................... $ 7,422 7,422,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $7,422,000)...................................... 7,422,000
------------
TOTAL INVESTMENTS IN SECURITIES -- 98.0%
(Cost $111,990,061**)............................................. 115,996,637
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.0%...................... 2,385,767
------------
NET ASSETS -- 100.0%
(equivalent to $14.90 per share based on 7,944,285 shares
outstanding)...................................................... $118,382,404
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($118,382,404 / 7,944,285)........................................ $14.90
======
</TABLE>
--------
* Non-income producing securities.
** Cost for Federal income tax purposes is $112,162,791. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $11,299,748
Excess of tax cost over value.................................. $(7,465,902)
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
M.S.D.&T. Funds, Inc.
DIVERSIFIED REAL ESTATE FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 95.5%
Apartments -- 27.1%
AMLI Residential Properties Trust........................ 8,200 $ 187,062
Apartment Investment Management Co....................... 5,000 200,312
Archstone Communities.................................... 15,500 347,781
Avalonbay Communities.................................... 9,634 382,951
BRE Properties, Inc. .................................... 7,000 188,563
Equity Residential Properties Trust...................... 8,950 399,394
Gables Residential Trust................................. 10,200 251,175
Home Properties of New York.............................. 10,000 285,000
Post Properties, Inc. ................................... 9,000 394,875
Charles E Smith Residential Realty....................... 7,700 291,156
Summit Properties, Inc................................... 14,000 297,500
United Dominion Realty Trust, Inc. ...................... 13,500 145,125
-----------
3,370,894
-----------
Construction -- 0.2%
Centex Corporation....................................... 1,000 20,750
-----------
Diversified -- 11.7%
Colonial Properties Trust................................ 6,400 166,800
Duke Realty Investments, Inc............................. 15,678 338,057
Eastgroup Properties..................................... 12,900 277,350
Liberty Property Trust................................... 10,800 270,000
Spieker Properties, Inc.................................. 6,300 292,556
Vornado Realty Trust..................................... 3,000 104,813
-----------
1,449,576
-----------
Health Care -- 3.6%
Health Care Property Investors........................... 9,000 240,187
Meditrust Companies*..................................... 8,004 15,006
Nationwide Health Properties, Inc........................ 12,100 166,375
Omega Healthcare Investors, Inc.......................... 7,000 33,687
-----------
455,255
-----------
Hotels & Lodging -- 1.6%
RFS Hotel Investors, Inc................................. 5,000 60,000
Starwood Hotels & Resorts................................ 4,600 135,988
-----------
195,988
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- Continued
Office Properties -- 26.4%
Arden Realty Group, Inc.................................. 8,500 $ 195,500
Boston Properties, Inc................................... 8,300 289,981
Carramerica Realty Corp.................................. 13,400 335,000
Cornerstone Properties, Inc.............................. 8,000 144,000
Corporate Office Properties Trust........................ 15,000 130,313
Cousins Properties, Inc.................................. 7,400 283,513
Crescent Real Estate Equities, Inc....................... 7,500 153,281
Equity Office Properties Trust........................... 11,200 297,500
Frontline Capital Group*................................. 2,004 29,183
Highwood Properties, Inc................................. 11,000 264,688
Mack Cali Realty Corp.................................... 14,800 399,600
Prentiss Properties Trust................................ 16,000 384,000
Reckson Association Realty Corp.......................... 16,800 368,550
-----------
3,275,109
-----------
Retail -- 15.4%
Burnham Pacific Property, Inc............................ 2,400 15,450
CBL & Associates Properties, Inc......................... 6,900 167,325
Federal Realty Investment Trust.......................... 5,800 127,238
General Growth Properties, Inc........................... 5,000 158,125
IRT Property Company..................................... 9,800 79,013
Kimco Realty Corp........................................ 4,500 182,250
New Plan Excel Realty.................................... 10,000 138,125
Regency Realty Corp...................................... 8,000 168,500
Rouse Co................................................. 8,300 198,681
Simon Property Group, Inc................................ 10,500 257,250
Taubman Centers, Inc..................................... 15,800 171,825
Urban Shopping Centers, Inc.............................. 5,100 170,850
Western Investment Real Estate Trust..................... 7,500 82,500
-----------
1,917,132
-----------
Storage -- 2.5%
Public Storage, Inc...................................... 5,600 124,950
Sovran Self Storage, Inc................................. 5,400 112,050
Storage USA, Inc......................................... 2,400 72,150
-----------
309,150
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
M.S.D.&T. Funds, Inc.
DIVERSIFIED REAL ESTATE FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- Continued
Warehouse/Industrial -- 7.0%
Centerpoint Properties Trust............................. 6,000 $ 220,125
First Industrial Realty Trust, Inc....................... 11,100 322,594
Prologis Trust........................................... 15,620 323,139
-----------
865,858
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Cost $11,915,024)...................................... 11,859,712
-----------
INVESTMENT COMPANIES -- 4.4%
Goldman Sachs Financial Square Prime Obligations Fund.... 249,260 249,260
Provident Institutional Funds --TempFund................. 291,860 291,860
-----------
TOTAL INVESTMENT COMPANIES
(Cost $541,120)......................................... 541,120
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
-----
<S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES -- 99.9%
(Cost $12,456,144**)........ $12,400,832
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%......... 18,025
-----------
NET ASSETS -- 100.0%
(equivalent to $8.99 per
share based on 1,381,584
shares outstanding)......... $12,418,857
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($12,418,857 / 1,381,584)... $8.99
=====
</TABLE>
--------
* Non-income producing securities.
** Aggregate cost for Federal income tax purposes is $12,482,669. The aggre-
gate gross unrealized appreciation (depreciation) for all securities is as
follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................... $ 610,759
Excess of tax cost over value.................................... $(692,596)
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 20.4%
Federal Farm Credit Banks -- 1.2%
Debentures
5.125%, 04/02/01........................................ $ 2,000 $ 1,969,640
-----------
Federal Home Loan Mortgage Corp. -- 7.4%
Debentures
5.00%, 01/15/04......................................... 1,000 924,890
7.01%, 07/11/07......................................... 1,000 955,300
Mortgage Backed Securities
6.00%, 04/01/14......................................... 10,798 10,069,473
-----------
11,949,663
-----------
Federal National Mortgage Association -- 8.8%
Notes
6.375%, 06/15/09........................................ 4,675 4,332,182
Mortgage Backed Securities
6.50%, 04/01/14 (Pool #323654).......................... 8,540 8,112,700
6.00%, 04/01/14 (Pool #484807).......................... 1,823 1,696,552
-----------
14,141,434
-----------
Government National Mortgage Association -- 3.0%
Mortgage Backed Securities
6.00%, 06/15/13 (Pool #456934).......................... 2,151 2,010,394
6.00%, 07/15/13 (Pool #433894).......................... 3,025 2,827,604
-----------
4,837,998
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $34,883,308)...................................... 32,898,735
-----------
DOMESTIC CORPORATE BONDS -- 33.6%
Automotive -- 3.5%
Ford Motor Credit Corp.
6.00%, 01/14/03......................................... 2,800 2,684,500
Ford Motor Credit Corp.
7.50%, 03/15/05......................................... 2,000 1,960,000
Toyota Motor Credit Corp.
5.625%, 11/13/03........................................ 1,000 943,750
-----------
5,588,250
-----------
Beverages -- 2.9%
Coca-Cola Enterprises Putable Asset Trust
6.00%, 03/15/01......................................... 1,000 986,250
Coca-Cola Enterprises
5.75%, 11/01/08......................................... 1,000 866,250
Pepsico Inc. Medium Term Note
5.75%, 01/02/03......................................... 3,000 2,857,500
-----------
4,710,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
DOMESTIC CORPORATE BONDS -- Continued
Chemicals -- 1.2%
E.I. duPont deNemours & Co. Medium Term Note
6.00%, 03/06/03........................................... $ 2,000 $ 1,927,500
-----------
Computer Software -- 1.2%
Sun Microsystems, Inc.
7.65%, 08/15/09........................................... 2,000 1,947,500
-----------
Defense -- 1.2%
United Technologies Corp.
7.00%, 09/15/06........................................... 2,000 1,940,000
-----------
Finance -- 5.6%
Associates Corp. North America
6.50%, 07/15/02........................................... 2,000 1,957,500
IBM Credit
5.76%, 05/15/01........................................... 2,000 1,967,500
Norwest Financial, Inc.
6.375%, 11/15/03.......................................... 1,000 961,250
SunTrust Banks, Inc.
6.25%, 06/01/08........................................... 2,000 1,787,500
Wachovia Corp.
6.70%, 06/21/04........................................... 2,500 2,425,000
-----------
9,098,750
-----------
Foods -- 0.6%
Campbell Soup Co.
6.15%, 12/01/02........................................... 1,000 975,000
-----------
Home Furnishings -- 1.4%
Leggett, Inc.
7.65%, 02/15/05........................................... 2,250 2,255,625
-----------
Manufacturing -- 0.8%
Minnesota Mining & Manufacturing Co.
5.62%, 07/15/09........................................... 1,348 1,235,280
-----------
Printing & Publishing -- 2.5%
Dow Jones & Co., Inc.
5.75%, 12/01/00........................................... 2,000 1,990,000
Times Mirror Corp.
6.65%, 10/15/01........................................... 2,000 1,977,500
-----------
3,967,500
-----------
Railroads -- 1.2%
Union Pacific Corp.
6.125%, 01/15/04.......................................... 2,150 2,018,313
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
DOMESTIC CORPORATE BONDS -- Continued
Real Estate -- 0.6%
Operating LP
6.75%, 02/15/08........................................... $1,000 $ 892,500
-----------
Retail Merchandising -- 2.6%
Sears Roebuck Acceptance Corp.
6.34%, 10/12/00........................................... 2,600 2,591,186
Wal-Mart Stores
6.875%, 08/10/09.......................................... 1,750 1,669,063
-----------
4,260,249
-----------
Telecommunications -- 1.2%
WorldCom, Inc.
6.125%, 08/15/01.......................................... 2,000 1,970,000
-----------
Utilities -- Gas/Gas & Electric -- 6.4%
Baltimore Gas & Electric
6.50%, 02/15/03........................................... 3,000 2,921,250
Consolidated Natural Gas Co.
5.75%, 08/01/03........................................... 475 445,313
Enron Corp.
6.625%, 11/15/05.......................................... 2,750 2,557,500
Northern Illinois Gas Co.
6.45%, 08/01/01........................................... 2,500 2,471,875
Wisconsin Electric Power
6.625%, 12/01/02.......................................... 2,000 1,970,000
-----------
10,365,938
-----------
Utilities -- Telephone -- 0.7%
Ameritech Capital Funding
6.125%, 10/15/01.......................................... 1,200 1,179,000
-----------
TOTAL DOMESTIC CORPORATE BONDS
(Cost $56,212,472)........................................ 54,331,405
-----------
FOREIGN BONDS -- 0.5%
Governments -- 0.5%
Ontario Province Global Notes
5.50%, 10/01/08........................................... 1,000 875,000
-----------
TOTAL FOREIGN BONDS
(Cost $994,855)........................................... 875,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
ASSET-BACKED SECURITIES -- 7.0%
Auto Loan -- 0.4%
Banc One Auto Grantor Trust
6.27%, 11/20/03........................................... $ 622 $ 617,435
-----------
Credit Card -- 2.6%
Citibank Credit Card Master Trust
6.839%, 02/10/04.......................................... 4,250 4,199,085
-----------
Recreational Vehicles -- 1.8%
CIT RV Trust
5.99%, 05/15/09........................................... 3,000 2,920,920
-----------
Stranded Cost -- 2.2%
California Infrastructure
6.17%, 03/25/03........................................... 1,000 994,340
6.16%, 06/25/03........................................... 1,000 993,080
Comed Transitional Funding Trust
5.34%, 03/25/04........................................... 1,700 1,639,191
-----------
3,626,611
-----------
TOTAL ASSET-BACKED SECURITIES
(Cost $11,569,384)........................................ 11,364,051
-----------
U.S. TREASURY OBLIGATIONS -- 16.4%
U.S. Treasury Bills -- 3.0%
6.07%, 11/24/00........................................... 5,000 4,850,000
-----------
U.S. Treasury Notes -- 13.4%
6.00%, 08/15/00........................................... 2,035 2,036,282
5.00%, 02/28/01........................................... 1,000 988,270
6.50%, 05/31/01........................................... 4,040 4,031,920
5.875%, 11/30/01.......................................... 6,000 5,925,540
6.125%, 12/31/01.......................................... 3,000 2,971,680
5.875%, 02/15/04.......................................... 2,000 1,951,500
5.625%, 05/15/08.......................................... 1,500 1,422,975
6.00%, 08/15/09........................................... 2,300 2,239,579
-----------
21,567,746
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $26,544,249)........................................ 26,417,746
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
M.S.D.&T. Funds, Inc.
LIMITED MATURITY BOND FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
REPURCHASE AGREEMENTS -- 15.3%
Banc of America Securities LLC
(Agreement dated 5/31/00 to be repurchased at $6,723,188
collateralized by $6,880,000 (Value $6,873,550) U.S.
Treasury Notes, 5.75%, due 11/15/00)
6.36%, 06/01/00........................................... $ 6,722 $ 6,722,000
Merrill Lynch Government Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $6,001,042
collateralized by $5,845,000 (Value $6,120,460) U.S.
Treasury Notes, 7.00%, due 07/15/06)
6.25%, 06/01/00........................................... 6,000 6,000,000
Morgan Stanley & Co., Inc.
(Agreement dated 5/31/00 to be repurchased at $6,001,050
collateralized by $4,840,000 (Value $6,110,763) U.S.
Treasury Notes, 8.75%, due 05/15/20)
6.30%, 06/01/00........................................... 6,000 6,000,000
Wachovia Securities, Inc.
(Agreement dated 5/31/00 to be repurchased at $6,001,050
collateralized by $6,228,000 (Value $6,119,983) U.S.
Treasury Notes, 5.75%, due 10/31/02)
6.30%, 06/01/00........................................... 6,000 6,000,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $24,722,000)........................................ 24,722,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 6.2%
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 $164,926,268*).............................................. 160,608,937
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6%...................... 897,786
------------
NET ASSETS -- 100.0%
(equivalent to $10.07 per share based on 16,044,582 shares
outstanding)...................................................... $161,506,723
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($161,506,723 / 16,044,582)....................................... $10.07
======
</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.................................. $ 54,320
Excess of tax cost over value.................................. $(4,371,651)
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- 55.5%
Federal Home Loan Bank -- 1.2%
Notes
6.185%, 06/07/00.......................................... $1,500 $ 1,500,012
------------
Federal Home Loan Mortgage Corp. -- 13.9%
Collateralized Mortgage Obligation
6.25%, 12/15/16 (Pool #2018PAC)........................... 216 213,466
6.175%, 08/15/18 (Pool #2035)............................. 500 488,620
6.80%, 10/15/26 (Pool #2051).............................. 1,852 1,772,167
Debentures
7.30%, 08/24/06........................................... 1,000 971,070
Mortgage Backed Securities
6.00%, 02/01/14 (Pool #E74547)............................ 848 791,165
6.50%, 09/01/24 (Pool #G00320)............................ 2,036 1,889,006
7.50%, 07/01/26 (Pool #D72963)............................ 165 160,400
6.50%, 10/01/27 (Pool #C00561)............................ 28 25,711
7.50%, 10/01/27 (Pool #D82914)............................ 178 173,809
6.50%, 10/01/27 (Pool #D83095)............................ 29 27,120
6.50%, 10/01/27 (Pool #D83337)............................ 676 626,775
7.00%, 11/01/27 (Pool #D83947)............................ 1,549 1,472,602
5.93%, 05/01/28 (Pool #786307)............................ 506 505,178
6.50%, 03/01/29 (Pool #C00731)............................ 3,801 3,526,933
5.696%, 04/01/29 (Pool #) ARM............................. 2,042 1,996,381
7.00%, 01/01/30 (Pool #C35372)............................ 2,987 2,840,783
------------
17,481,186
------------
Federal National Mortgage Association -- 19.8%
Collateralized Mortgage Obligation
5.70%, 06/25/17 (Pool #X-225C)............................ 314 311,079
6.00%, 11/18/17 (Pool #1998-26)........................... 1,136 1,112,397
6.25%, 03/25/19 (Pool #PAC93-37).......................... 545 540,748
Notes
5.125%, 02/13/04.......................................... 1,000 927,490
6.375%, 06/15/09.......................................... 6,275 5,814,854
8.00%, 05/01/30........................................... 5,085 5,044,872
Medium Term Notes
6.50%, 12/27/01........................................... 250 247,380
7.14%, 03/12/07........................................... 245 236,538
7.00%, 08/27/12........................................... 1,000 930,760
Mortgage Backed Securities
7.00%, 04/01/04 (Pool #377898)............................ 99 95,970
7.50%, 10/01/07 (Pool #177233)............................ 113 111,524
6.00%, 01/01/09 (Pool #265989)............................ 1,037 964,720
7.00%, 04/01/11 (Pool #338884)............................ 328 317,453
7.50%, 08/01/26 (Pool #349416)............................ 122 118,853
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Federal National Mortgage Association -- Continued
Mortgage Backed Securities -- Continued
8.00%, 09/01/26 (Pool #250675)............................ $ 247 $ 245,557
7.00%, 04/01/27 (Pool #313458)............................ 442 420,093
8.00%, 08/01/27 (Pool #392496)............................ 438 434,125
8.00%, 09/01/27 (Pool #398392)............................ 27 26,715
8.00%, 10/01/27 (Pool # 331320)........................... 89 88,378
7.50%, 10/01/27 (Pool #395593)............................ 499 484,528
8.00%, 10/01/27 (Pool #395770)............................ 12 11,742
7.50%, 10/01/27 (Pool #396031)............................ 621 603,818
7.00%, 10/01/27 (Pool #398928)............................ 241 229,252
6.50%, 10/01/27 (Pool #399065)............................ 371 343,770
8.00%, 10/01/27 (Pool #399081)............................ 383 380,092
8.00%, 10/01/27 (Pool #402178)............................ 197 195,322
7.00%, 11/01/27 (Pool #251286)............................ 673 639,187
6.50%, 11/01/27 (Pool #402786)............................ 140 129,126
6.50%, 12/01/27 (Pool #354802)............................ 520 481,762
6.50%, 01/01/28 (Pool #406700)............................ 1,545 1,429,905
7.00%, 03/01/29 (Pool #491183)............................ 2,206 2,094,065
------------
25,012,075
------------
Government National Mortgage Association -- 19.8%
Mortgage Backed Securities
9.00%, 05/15/16 (Pool #163606)............................ 10 10,551
9.00%, 11/15/16 (Pool #181127)............................ 117 119,962
9.00%, 11/15/16 (Pool #183984)............................ 4 4,543
9.00%, 01/15/17 (Pool #175218)............................ 4 4,053
8.00%, 05/15/17 (Pool #180719)............................ 39 39,375
8.00%, 05/15/17 (Pool #217626)............................ 68 67,762
9.00%, 04/15/18 (Pool #236277)............................ 11 10,813
10.00%, 09/15/18 (Pool #255652)........................... 9 9,160
10.00%, 05/15/19 (Pool #274305)........................... 37 39,140
9.00%, 11/15/19 (Pool #247019)............................ 52 53,751
9.00%, 06/15/21 (Pool #305720)............................ 84 86,904
9.00%, 06/15/21 (Pool #309078)............................ 126 130,168
9.00%, 07/15/21 (Pool #309027)............................ 52 53,548
9.00%, 07/15/21 (Pool #309084)............................ 28 28,407
9.00%, 08/15/21 (Pool #296154)............................ 48 49,509
9.00%, 08/15/21 (Pool #306259)............................ 73 74,816
9.00%, 09/15/21 (Pool #272061)............................ 33 34,236
9.00%, 09/15/21 (Pool #305911)............................ 61 62,938
9.00%, 09/15/21 (Pool #308283)............................ 70 72,256
9.00%, 09/15/21 (Pool #308920)............................ 99 101,465
9.00%, 09/15/21 (Pool #313023)............................ 13 13,540
9.00%, 09/15/21 (Pool #314939)............................ 14 14,126
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
AGENCY OBLIGATIONS -- Continued
Government National Mortgage Association -- Continued
Mortgage Backed Securities -- Continued
8.00%, 02/15/23 (Pool #332531)............................ $ 930 $ 932,194
7.00%, 05/20/24 (Pool #1716).............................. 143 137,100
7.00%, 10/15/25 (Pool #409958)............................ 332 319,151
7.00%, 01/15/26 (Pool #382719)............................ 284 272,396
7.00%, 01/15/26 (Pool #422404)............................ 221 212,607
6.50%, 02/15/26 (Pool #405214)............................ 123 115,084
7.00%, 02/15/26 (Pool #421686)............................ 781 750,046
6.50%, 02/15/26 (Pool #425085)............................ 99 92,405
6.50%, 03/15/26 (Pool #395468)............................ 159 148,418
7.00%, 01/15/27 (Pool #436748)............................ 333 320,228
7.00%, 02/15/27 (Pool #428935)............................ 314 301,514
7.00%, 08/15/27 (Pool #443508)............................ 215 206,113
8.50%, 08/15/27 (Pool #453213)............................ 240 244,689
6.75%, 08/20/27 (Pool #80104)............................. 862 851,672
8.00%, 09/15/27 (Pool #453740)............................ 160 160,523
7.00%, 09/15/27 (Pool #453980)............................ 273 261,839
7.00%, 09/15/27 (Pool #454825)............................ 31 30,152
7.00%, 10/15/27 (Pool #445227)............................ 328 314,853
7.00%, 10/15/27 (Pool #453576)............................ 91 87,244
7.00%, 10/15/27 (Pool #455319)............................ 252 242,243
7.00%, 11/15/27 (Pool #452737)............................ 390 374,956
7.00%, 12/15/27 (Pool #443780)............................ 335 321,979
7.00%, 04/15/28 (Pool #471672)............................ 49 46,826
6.50%, 07/15/28 (Pool #468090)............................ 899 842,035
6.50%, 12/15/28 (Pool #471541)............................ 1,433 1,341,643
6.50%, 01/15/29 (Pool #490890)............................ 974 912,271
7.00%, 03/15/29 (Pool #470151)............................ 2,352 2,258,326
7.50%, 10/15/29 (Pool #521954)............................ 995 977,133
7.50%, 10/15/29 (Pool 30 Yr).............................. 2,462 2,418,547
7.50%, 11/15/29 (Pool #434587)............................ 4,036 3,965,575
7.50%, 12/15/29 (Pool #434626)............................ 4,493 4,414,415
------------
24,955,200
------------
Tennessee Valley Authority -- 0.8%
Bond
6.00%, 11/01/00........................................... 1,000 996,250
------------
TOTAL AGENCY OBLIGATIONS
(Cost $72,304,382)........................................ 69,944,723
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
DOMESTIC CORPORATE BONDS -- 12.5%
Automotive -- 2.6%
Ford Motor Co.
6.375%, 02/01/29.......................................... $1,150 $ 925,750
General Motors Acceptance Corp.
7.125%, 05/01/01.......................................... 400 398,500
6.375%, 12/01/01.......................................... 2,000 1,970,000
------------
3,294,250
------------
Banking and Financial Services -- 3.7%
American Express Credit Corp.
6.25%, 08/10/05........................................... 1,000 984,980
CIT Group, Inc.
5.625%, 10/15/03.......................................... 1,000 933,750
Merrill Lynch, Inc.
6.00%, 02/12/03........................................... 1,000 958,750
SunTrust Banks, Inc.
6.25%, 06/01/08........................................... 2,000 1,787,500
------------
4,664,980
------------
Beverages -- 1.1%
Anheuser Busch Co., Inc.
6.75%, 06/01/05........................................... 500 481,875
Coca Cola Co., Inc.
5.75%, 11/01/08........................................... 1,000 866,250
------------
1,348,125
------------
Computer Software -- 1.5%
Sun MicroSystems
7.65%, 08/15/09........................................... 2,000 1,947,500
------------
Defense -- 1.8%
United Tech Corp.
6.50%, 06/01/09........................................... 2,500 2,318,750
------------
Real Estate -- 0.9%
Operating LP
6.75%, 02/15/08........................................... 1,250 1,115,625
------------
Telecommunications -- 0.9%
Lucent Technologies
6.50%, 01/15/28........................................... 1,250 1,075,000
------------
TOTAL DOMESTIC CORPORATE BONDS
(Cost $16,548,731)........................................ 15,764,230
------------
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
M.S.D.&T. Funds, Inc.
TOTAL RETURN BOND FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
FOREIGN BONDS -- 4.6%
Deutschland
4.20%, 07/04/09........................................... $2,500 $ 2,197,489
Manitoba Province Canada
6.125%, 01/19/04.......................................... 1,000 960,000
Mexico
6.25%, 12/31/19........................................... 2,000 1,595,600
Republic of Korea
8.875%, 04/15/08.......................................... 1,000 1,000,000
------------
TOTAL FOREIGN BONDS
(Cost $5,840,593)......................................... 5,753,089
------------
ASSET-BACKED SECURITIES -- 5.6%
Auto Loan -- 1.1%
BancOne Auto Grantor Trust
6.27%, 11/20/03........................................... 456 453,373
Barnett Auto Trust
6.03%, 11/15/01........................................... 68 68,271
Premier Auto Trust
6.35%, 04/06/02........................................... 835 833,916
------------
1,355,560
------------
Credit Card -- 3.7%
Chase Credit Card Master Trust
6.30%, 04/15/03........................................... 1,000 999,190
Citibank Credit Card Master Trust
6.839%, 02/10/04.......................................... 3,750 3,705,075
------------
4,704,265
------------
Electric Utility -- 0.8%
Comed Transitional Fdg Trust
5.34%, 03/25/04........................................... 1,000 964,230
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $7,139,279)......................................... 7,024,055
------------
U.S. TREASURY OBLIGATIONS -- 10.5%
U.S. Treasury Notes
5.625%, 05/15/08.......................................... 1,000 948,650
6.00%, 08/15/09........................................... 2,450 2,385,639
6.125%, 11/15/27.......................................... 2,000 1,957,020
U.S. Treasury Bonds
8.00%, 11/15/21........................................... 1,000 1,186,550
6.25%, 08/15/23........................................... 700 691,475
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- Continued
U.S. Treasury Bonds -- Continued
6.875%, 08/15/25....................................... $ 3,100 $ 3,311,017
6.00%, 02/15/26........................................ 2,875 2,758,505
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,829,386)..................................... 13,238,856
------------
REPURCHASE AGREEMENT -- 3.7%
Banc of America Securities LLC
(Agreement dated 5/31/00 to be repurchased at $4,716,833
collateralized by $4,830,000 (Value $4,817,170) U.S.
Treasury Notes, 6.5%, due 5/31/01)
6.36%, 06/01/00........................................ 4,716 4,716,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,716,000)...................................... 4,716,000
------------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 6.8%
Goldman Sachs Financial Square Prime Obligations Fund... 3,830,705 3,830,705
Offit High Yield Bond Fund.............................. 500,000 4,715,000
------------
TOTAL INVESTMENT COMPANIES
(Cost $8,827,705)...................................... 8,545,705
------------
TOTAL INVESTMENTS IN SECURITIES -- 99.2%
(Cost $128,206,076*).............................................. 124,986,658
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8%...................... 975,528
------------
NET ASSETS -- 100.0%
(equivalent to $9.43 per share based on 13,361,687 shares
outstanding)...................................................... $125,962,186
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($125,962,186 / 13,361,687)....................................... $9.43
=====
</TABLE>
--------
* Cost for Federal income tax purposes is $128,224,154. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $ 876,021
Excess of tax cost over value.................................. $(4,113,517)
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
M.S.D.&T. Funds, Inc.
MARYLAND TAX-EXEMPT BOND FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- 93.2%
Allegany County, PCRB, Westvaco Corp. Project
5.90%, 07/01/04............................................ $ 200 $ 202,500
Annapolis MD, GO, CPI
5.00%, 11/01/16............................................ 440 400,400
Anne Arundel County, GO, CGI
5.30%, 07/15/12............................................ 400 394,000
Baltimore City, GO, CPI, INS: FGIC
5.00%, 10/15/16............................................ 500 456,250
Baltimore City, RB, Refunding -- Auto Parking Revenue, INS:
FGIC
5.90%, 07/01/13............................................ 1,000 1,035,000
Baltimore City, RB, Waste Water Project, INS: FGIC
5.50%, 07/01/26............................................ 300 279,000
Baltimore County, GO, Refunding -- CPI
5.20%, 04/01/09............................................ 400 398,500
Baltimore County, GO, Water Utility Improvements,
Prerefunded 7/01/02 @ 102
6.125%, 07/01/12........................................... 300 312,375
Carroll County, GO, CPI
4.80%, 12/01/12............................................ 855 789,806
Charles County, GO
6.25%, 06/01/02............................................ 500 513,125
4.40%, 06/01/03............................................ 350 341,687
Frederick County, GO
5.00%, 07/01/02............................................ 750 751,875
5.00%, 08/01/09............................................ 500 489,375
Harford County, GO, CPI, UT
5.50%, 12/01/07............................................ 920 938,400
5.00%, 12/01/14............................................ 125 115,625
Harford County, GO, CPI, UT, Prerefunded 12/1/07 @ 102
5.00%, 12/01/14............................................ 125 124,844
Howard County, GO, CPI
5.25%, 08/15/09............................................ 130 130,000
Howard County, GO, CPI, Prerefunded 8/15/03 @ 102
5.25%, 08/15/09............................................ 180 184,050
Howard County, GO, CPI, Prerefunded 8/15/05 @ 100
5.25%, 08/15/09............................................ 90 90,563
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Howard County, GO, Prerefunded 8/15/03 @ 102
5.25%, 08/15/12........................................... $ 250 $ 255,313
Maryland National Capital Park & Planning Commission --
Prince George's County, GO, GPI, Prerefunded 7/01/03 @ 102
5.15%, 07/01/11........................................... 10 10,188
5.375%, 01/15/14.......................................... 450 436,500
Maryland National Capital Park & Planning Commission --
Prince George's County, GO, Unrefunded Balance
5.15%, 07/01/11........................................... 290 282,750
Maryland State & Local Facilities, GPI, GO
5.00%, 10/15/04........................................... 1,000 1,000,000
5.25%, 06/15/06........................................... 500 504,375
Maryland State Community Development, RB, Administration
Department of Housing & Community Development, Single
Family
5.80%, 04/01/17........................................... 500 488,125
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Infrastructure
5.125%, 06/01/17.......................................... 325 299,000
5.15%, 06/01/22........................................... 390 350,025
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Multi-family
5.05%, 05/15/18........................................... 250 225,938
Maryland State Health & Higher Educational Facilities
Authority, RB, INS: AMBAC, ETM
4.10%, 07/01/01........................................... 900 894,393
Maryland State Health & Higher Educational Facilities
Authority, College of Notre Dame, INS: MBIA
4.45%, 10/01/12........................................... 290 254,837
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
M.S.D.&T. Funds, Inc.
MARYLAND TAX-EXEMPT BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Maryland State Health & Higher Educational Facilities
Authority, RB, Helix Health Inc., INS: AMBAC, ETM
5.125%, 07/01/11....................................... $ 600 $ 583,500
5.125%, 07/01/12....................................... 555 535,575
Maryland State Health & Higher Educational Facilities
Authority, RB, Howard County General Hospital, ETM
5.50%, 07/01/21........................................ 335 316,156
Maryland State Health & Higher Educational Facilities
Authority, RB, Refunding, Johns Hopkins University
5.25%, 07/01/16........................................ 750 708,750
5.25%, 07/01/17........................................ 500 469,375
Maryland State Health & Higher Educational Facilities
Authority, RB, Loyola College
5.25%, 10/01/29........................................ 500 435,625
Maryland State Health & Higher Educational Facilities
Authority, RB, University of Maryland Medical System,
INS: FGIC
5.40%, 07/01/07........................................ 300 303,000
Maryland State Stadium Authority Sports Facilities, RB
5.30%, 03/01/01........................................ 1,260 1,266,237
Maryland State Stadium Authority Lease Revenue, RB,
Ocean City Convention Center
5.375%, 12/15/15....................................... 400 383,000
Maryland State Transportation Authority, RB
5.50%, 07/01/03........................................ 1,000 1,013,750
5.75%, 07/01/15........................................ 150 150,000
Maryland Water Quality Financing Administration, RB,
Revolving Loan Fund
5.50%, 09/01/11........................................ 200 200,250
Maryland Water Quality Financing Administration, RB,
Revolving Loan Fund, Prerefunded 9/01/03 @ 100
5.40%, 09/01/12........................................ 300 303,000
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Montgomery County Revenue Authority, RB, Olney Indoor
Swim Project
5.25%, 10/01/12........................................ $ 250 $ 244,062
Montgomery County, GO, CPI
5.375%, 05/01/05....................................... 1,000 1,013,750
Montgomery County, GO, CPI, Prerefunded 10/01/00 @ 102
6.90%, 10/01/01........................................ 1,000 1,026,830
Montgomery County, RB, Housing Opportunity Community
Housing Multi-Family, Avalon Knoll, FNMA COLL
5.70%, 07/01/10........................................ 150 150,000
Prince George's County Hospital, RB, Prerefunded 7/01/02
@ 102
7.20%, 07/01/06........................................ 500 531,250
Prince George's County, GO, INS: AMBAC
5.25%, 03/15/03........................................ 500 504,375
Prince George's County, RB, IDA
6.00%, 07/01/09........................................ 675 701,156
Prince George's County, GO, INS: MBIA
5.25%, 03/15/15........................................ 400 383,000
Saint Mary's County, GO
5.50%, 10/01/14........................................ 1,000 988,750
University of Maryland System Auxiliary Facilities &
Tuition, RB
5.125%, 04/01/13....................................... 400 386,500
5.00%, 04/01/15........................................ 500 459,375
Washington County, GO, INS: FGIC
5.00%, 01/01/16........................................ 675 615,938
Washington County, GO, INS: FGIC
5.25%, 01/01/06........................................ 200 201,000
Washington Suburban Sanitary District, GO, General
Construction, Prerefunded 6/01/01 @ 102
6.90%, 06/01/09........................................ 285 296,431
Wicomico County, GO, INS: FGIC
4.05%, 02/01/07........................................ 250 228,125
5.00%, 02/01/15........................................ 755 693,656
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
M.S.D.&T. Funds, Inc.
MARYLAND TAX-EXEMPT BOND FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
MARYLAND -- Continued
Worcester County, GO
5.20%, 08/01/08...................................... $1,310 $ 1,305,087
-----------
TOTAL MUNICIPAL BONDS
(Cost $30,241,308).................................. 29,346,322
-----------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 5.7%
Goldman Sachs Financial Square Tax-Free Money Market
Fund................................................. 1,140,023 1,140,023
Provident Institutional Funds --MuniFund.............. 652,024 652,024
-----------
TOTAL INVESTMENT COMPANIES
(Cost $1,792,047).................................... 1,792,047
-----------
TOTAL INVESTMENTS IN SECURITIES -- 98.9%
(Cost $32,033,355*)............................................. 31,138,369
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1%.................... 333,445
-----------
NET ASSETS -- 100.0%
(equivalent to $10.23 per share based on 3,075,082 shares
outstanding).................................................... $31,471,814
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($31,471,814 / 3,075,082)....................................... $10.23
======
</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.................................... $ 61,112
Excess of tax cost over value.................................... $(956,098)
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE TAX-EXEMPT BOND FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Alabama -- 0.4%
Alabama State, GO
4.60%, 10/01/05........................................... $ 305 $ 293,563
-----------
Alaska -- 1.3%
North Slope Boro, GO, INS: MBIA
5.90%, 06/30/03........................................... 1,000 1,025,000
-----------
Arizona -- 1.3%
Mesa, GO, INS: AMBAC
6.00%, 07/01/02........................................... 1,000 1,021,250
-----------
Connecticut -- 2.6%
Connecticut State Clean Water, RB, Prerefunded 8/1/02 @ 102
6.125%, 02/01/12.......................................... 2,000 2,087,500
-----------
Delaware -- 2.5%
Delaware Transportation Authority, RB
5.70%, 07/01/06........................................... 2,000 2,037,500
-----------
District of Columbia -- 3.7%
District of Columbia, RB, Howard University, INS: MBIA
5.25%, 10/01/02........................................... 3,040 3,055,200
-----------
Georgia -- 10.0%
Fulton County, GO, Prerefunded 1/01/04 @ 102
5.40%, 01/01/08........................................... 2,000 2,047,500
Georgia State, GO
5.50%, 08/01/06........................................... 2,000 2,040,000
Private Colleges & Universities Authority, RB, Emory
University
5.375%, 11/01/05.......................................... 4,000 4,055,000
-----------
8,142,500
-----------
Illinois -- 8.0%
Elgin County, GO
5.50%, 01/01/01........................................... 1,200 1,205,316
Illinois Education Facilities Authority, RB, Prerefunded
12/1/03 @ 102
5.70%, 12/01/25........................................... 3,625 3,756,406
University of Illinois Participation Certificate, INS: MBIA
5.75%, 08/15/08........................................... 1,605 1,643,119
-----------
6,604,841
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Kentucky -- 2.5%
Kentucky State Turnpike Authority, RB, Economic Development
Road Revenue, INS: AMBAC
5.00%, 07/01/02........................................... $2,000 $ 2,002,500
-----------
Maryland -- 5.0%
Howard County, GO, CPI, Prerefunded 02/15/01 @ 100
5.75%, 02/15/02........................................... 1,000 1,007,350
Maryland Health and Higher Education -- Helix Health, RB,
ETM, INS: AMBAC
4.10%, 07/01/01........................................... 1,000 993,770
Maryland State, GO
4.50%, 10/15/00........................................... 1,000 999,250
Worcester County, GO
5.00%, 08/01/00........................................... 1,050 1,050,767
-----------
4,051,137
-----------
Massachusetts -- 4.3%
Massachusetts State, GO, Construction Loan, INS: MBIA
5.00%, 01/01/01........................................... 1,420 1,423,124
Massachusetts State Health and Educational, RB, Prerefunded
7/1/04 @ 100
6.375%, 07/01/16.......................................... 2,000 2,090,000
-----------
3,513,124
-----------
Minnesota -- 3.6%
Minnesota State, GO
4.75%, 06/01/03........................................... 3,000 2,973,750
-----------
Missouri -- 2.4%
St. Louis Convention & Sports Complex, RB, Prerefunded
8/15/03 @ 100
7.90%, 08/15/21........................................... 1,820 1,972,425
-----------
Nebraska -- 2.2%
Nebraska Public Power District, RB, INS: MBIA
5.00%, 01/01/03........................................... 1,760 1,760,000
-----------
New Jersey -- 2.4%
New Jersey Economic Development, RB
5.00%, 05/01/05........................................... 2,000 1,990,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE TAX-EXEMPT BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
New Mexico -- 4.2%
Bernalillo County, GO
3.875%, 08/01/03.......................................... $2,000 $ 1,902,500
New Mexico State Highway, RB
5.50%, 06/15/03........................................... 1,500 1,520,625
-----------
3,423,125
-----------
New York -- 4.2%
New York State Dorm Authority, RB
5.25%, 07/01/07........................................... 1,015 1,003,581
New York State, GO
5.00%, 03/01/08........................................... 2,500 2,428,125
-----------
3,431,706
-----------
Ohio -- 4.2%
Ohio State Building Auth, Lausche Office Building, RB
6.00%, 10/01/03........................................... 2,385 2,456,550
Ohio State Public Facilities Commission, RB, Higher
Educational Capital Facilities
4.75%, 05/01/01........................................... 1,000 1,000,840
-----------
3,457,390
-----------
Oklahoma -- 5.2%
Oklahoma City, GO
6.00%, 03/01/03........................................... 1,750 1,791,563
Tulsa Community College Area School District, GO
4.00%, 04/01/03........................................... 2,575 2,468,780
-----------
4,260,343
-----------
Oregon -- 1.6%
Lane County of Oregon Community College, GO
5.20%, 06/01/02........................................... 1,300 1,306,500
-----------
South Carolina -- 5.5%
South Carolina State Public Service Authority, Santee
Cooper, RB, Prerefunded 7/1/02 @ 102
6.40%, 07/01/06........................................... 1,900 1,987,875
South Carolina Transportation, RB, INS: MBIA
5.00%, 10/01/04........................................... 2,495 2,482,525
-----------
4,470,400
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Texas -- 5.0%
San Antonio General Improvements, GO
5.50%, 08/01/04............................................ $3,000 $ 3,048,750
University of Texas, RB
6.00%, 08/15/01............................................ 1,000 1,012,500
-----------
4,061,250
-----------
Utah -- 2.5%
Alpine School District, GO
5.40%, 03/15/04............................................ 2,000 2,010,000
-----------
Virginia -- 2.7%
Virginia State Public Building Authority, RB
5.50%, 08/01/02............................................ 1,210 1,225,125
Virginia State Public School Authority, RB
5.00%, 04/01/03............................................ 1,000 1,000,000
-----------
2,225,125
-----------
Washington -- 2.5%
Washington State, GO
6.30%, 09/01/02............................................ 1,000 1,025,000
Washington State, GO
5.25%, 01/01/07............................................ 1,000 997,500
-----------
2,022,500
-----------
Wisconsin -- 4.0%
Milwaukee Technical College District, GO
3.25%, 06/01/00............................................ 1,150 1,149,959
Wisconsin State, GO
6.125%, 11/01/06........................................... 2,000 2,100,000
-----------
3,249,959
-----------
TOTAL MUNICIPAL BONDS
(Cost $77,437,713)......................................... 76,448,588
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
29
<PAGE>
M.S.D.&T. Funds, Inc.
INTERMEDIATE TAX-EXEMPT BOND FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -----
<S> <C> <C>
INVESTMENT COMPANIES -- 5.2%
Goldman Sachs Financial Square Tax-Free Money Market
Fund.................................................... 2,366,684 $ 2,366,684
Provident Institutional Funds --MuniFund................. 1,851,461 1,851,461
-----------
TOTAL INVESTMENT COMPANIES
(Cost $4,218,145)....................................... 4,218,145
-----------
TOTAL INVESTMENTS IN SECURITIES -- 99.0%
(Cost $81,655,858*)................................................ 80,666,733
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%....................... 831,246
-----------
NET ASSETS -- 100.0%
(equivalent to $9.62 per share based on 8,470,563 shares
outstanding)....................................................... $81,497,979
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($81,497,979 / 8,470,563).......................................... $9.62
=====
</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.................................. $ 48,145
Excess of tax cost over value.................................. $(1,037,270)
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
M.S.D.&T. Funds, Inc.
NATIONAL TAX-EXEMPT BOND FUND
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Arizona -- 1.7%
Mesa, GO, INS: AMBAC
6.00%, 07/01/02.......................................... $1,000 $ 1,021,250
Tempe Excise Tax, RB
5.00%, 07/01/02.......................................... 2,000 2,002,500
------------
3,023,750
------------
Colorado -- 0.9%
Colorado Springs, RB, Utility Revenue, ETM
5.875%, 11/15/17......................................... 1,500 1,537,500
------------
Delaware -- 0.9%
Delaware State Economic Development Authority, RB,
Osteopathic Hospital Assoc., ETM
6.75%, 01/01/13.......................................... 1,500 1,618,125
------------
Florida -- 1.8%
Brevard County, GO, INS: AMBAC
5.375%, 09/01/11......................................... 1,180 1,172,625
Palm Beach, GO
5.50%, 12/01/14.......................................... 2,000 1,980,000
------------
3,152,625
------------
Georgia -- 1.2%
Georgia State, GO
5.50%, 07/01/11.......................................... 2,000 2,025,000
------------
Illinois -- 3.1%
Chicago, GO, INS: FGIC
5.375%, 01/01/24......................................... 1,000 900,000
Illinois Education Northwestern University, RB, PUT
11/1/13 @ 100
5.20%, 11/01/32.......................................... 3,500 3,338,125
Illinois Education University of Chicago, RB, Prerefunded
12/1/03 @ 102
5.70%, 12/01/25.......................................... 1,000 1,036,250
------------
5,274,375
------------
Indiana -- 2.3%
Eagle Union Middle School Building, RB, INS: AMBAC
5.75%, 07/15/12.......................................... 2,055 2,072,981
Indiana State Bond Bank, RB
5.50%, 08/01/04.......................................... 1,800 1,824,750
------------
3,897,731
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Kansas -- 1.2%
Johnson County, GO
5.45%, 09/01/02.......................................... $2,120 $ 2,143,850
------------
Maryland -- 10.9%
Anne Arundel County, GO
5.00%, 09/01/12.......................................... 2,000 1,912,500
Baltimore, Board of Ed Admin., Certificates of
Participation, INS: MBIA
5.00%, 04/01/13.......................................... 2,830 2,656,663
Baltimore County, GO
5.25%, 06/01/11.......................................... 1,000 988,750
Carroll County, GO
5.125%, 12/01/13......................................... 1,000 957,500
Frederick County, GO
5.25%, 07/01/15.......................................... 1,000 957,500
Howard County, GO, Prerefunded 08/15/03 @ 102
5.25%, 08/15/09.......................................... 450 460,125
Howard County, GO, Prerefunded 08/15/05 @ 100
5.25%, 08/15/09.......................................... 240 241,500
Howard County, GO, Unrefunded Balance
5.25%, 08/15/09.......................................... 310 310,000
Maryland Health and Education, RB, Helix Health Inc., ETM,
INS: AMBAC
5.125%, 07/01/11......................................... 2,000 1,945,000
5.125%, 07/01/12......................................... 1,500 1,447,500
Maryland National Capital Park & Planning Commission,
Prince George's County, GO, Prerefunded 07/01/05 @ 101
5.00%, 07/01/08.......................................... 190 190,475
Maryland National Capital Park & Planning Commission,
Prince George's County, GO, Unrefunded Balance
5.00%, 07/01/08.......................................... 810 795,825
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Multi-Family
6.70%, 05/15/27.......................................... 1,000 1,025,000
</TABLE>
See Accompanying Notes to Financial Statements.
31
<PAGE>
M.S.D.&T. Funds, Inc.
NATIONAL TAX-EXEMPT BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Maryland -- Continued
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Residential
5.70%, 09/01/19.......................................... $2,025 $ 1,971,844
Maryland State Community Development, RB, Administration
Department of Housing & Community Development,
Single Family
6.55%, 04/01/17.......................................... 1,250 1,279,687
Prince George's County, RB, Pkg Authority Revenue Justice
Center Facility Project
6.35%, 05/01/04.......................................... 1,000 1,033,750
Washington Suburban Sanitation District, GO
5.25%, 06/01/16.......................................... 650 622,375
------------
18,795,994
------------
Massachusetts -- 4.5%
Massachusetts State, GO, INS: FSA
5.00%, 06/01/06.......................................... 2,000 1,982,500
Massachusetts State Special Obligation, RB, Prerefunded
06/01/02 @100, ETM, INS: AMBAC
6.00%, 06/01/13.......................................... 3,600 3,667,500
Massachusetts State Water Pollution, RB, Abatement Pooled
Loan Program
5.70%, 02/01/11.......................................... 2,010 2,040,150
------------
7,690,150
------------
Michigan -- 4.6%
Ann Arbor, GO
4.00%, 09/01/09.......................................... 1,335 1,161,450
4.00%, 09/01/10.......................................... 1,340 1,149,050
Michigan Muni Bond Authority, Clean Water, RB
5.625%, 10/01/13......................................... 2,000 1,997,500
Michigan State Building Authority, RB, Prerefunded 10/1/01
@ 102, INS: AMBAC
6.75%, 10/01/07.......................................... 1,800 1,876,500
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Michigan -- Continued
Traverse City Area Public Schools, GO, INS: FGIC
4.50%, 05/01/10.......................................... $1,865 $ 1,706,475
------------
7,890,975
------------
Minnesota -- 1.2%
Minnesota State, GO
4.75%, 06/01/03.......................................... 1,075 1,065,595
Minnesota State, GO, Prerefunded 10/01/04 @ 100
6.00%, 10/01/14.......................................... 1,000 1,035,000
------------
2,100,595
------------
Missouri -- 1.3%
St. Louis Convention & Sports Complex, RB, Prerefunded
8/15/03 @ 100
7.90%, 08/15/21.......................................... 2,000 2,167,500
------------
New Jersey -- 8.3%
New Jersey Economic Development, RB, INS: FSA
5.00%, 05/01/05.......................................... 2,000 1,990,000
New Jersey State, GO
5.25%, 08/01/09.......................................... 4,225 4,214,438
New Jersey State Highway Authority, RB, Garden State
Parkway General Revenue, ETM
6.00%, 01/01/19.......................................... 4,005 4,110,131
New Jersey State Turnpike Authority, RB, INS: MBIA
5.50%, 01/01/07.......................................... 4,000 4,060,000
------------
14,374,569
------------
New York -- 7.4%
New York City Transitional Finance Authority, RB
5.125%, 08/15/21......................................... 2,500 2,206,250
New York State Dorm Authority, Westchester County, RB,
INS: AMBAC
5.25%, 08/01/15.......................................... 2,000 1,862,500
New York State Energy Research and Development Authority,
RB, INS: MBIA
5.15%, 03/01/16.......................................... 3,190 2,922,838
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
M.S.D.&T. Funds, Inc.
NATIONAL TAX-EXEMPT BOND FUND
Statement of Net Assets -- Continued
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
New York -- Continued
New York State Environmental Facility, RB
6.00%, 06/15/18.......................................... $2,000 $ 2,022,500
Triborough Bridge & Tunnel Authority, RB, General Purpose
6.00%, 01/01/12.......................................... 2,000 2,090,000
Westchester County, GO, Partially ETM
6.70%, 02/01/05.......................................... 1,560 1,663,350
------------
12,767,438
------------
North Carolina -- 0.5%
Mecklenburg County, GO
4.50%, 02/01/16.......................................... 1,000 855,000
------------
Ohio -- 4.8%
Cincinnati, GO
5.00%, 12/01/02.......................................... 3,340 3,348,350
Cleveland Waterworks Revenue, RB, INS: MBIA
5.50%, 01/01/21.......................................... 3,000 2,883,750
Ohio State, GO
6.65%, 09/01/09.......................................... 2,000 2,142,500
------------
8,374,600
------------
Oklahoma -- 0.4%
Oklahoma State Turnpike, RB, ETM
4.70%, 01/01/06.......................................... 765 733,444
------------
Oregon -- 1.5%
Multnomah County, GO
5.25%, 04/01/07.......................................... 2,635 2,635,000
------------
Pennsylvania -- 7.6%
Avonworth School District, GO
4.25%, 11/15/00.......................................... 1,000 996,870
Dauphin County General Authority, RB, School District
Pooled Program II, INS: AMBAC, Mandatory PUT 9/1/01
4.45%, 09/01/32.......................................... 4,000 3,975,000
Northeastern Hospital & Ed Authority, Wyoming Seminary,
RB, INS: MBIA
5.00%, 10/01/18.......................................... 2,235 1,969,595
Pennsylvania State, GO
5.75%, 01/15/09.......................................... 1,840 1,897,500
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Pennsylvania -- Continued
Pennsylvania State Higher Educational Facilities, RB,
University of Pennsylvania
5.90%, 09/01/15.......................................... $2,500 $ 2,512,500
Pittsburgh Water & Sewer, RB, INS: FGIC, ETM
6.00%, 09/01/16.......................................... 1,755 1,807,650
------------
13,159,115
------------
Rhode Island -- 0.9%
Rhode Island State, GO, Unrefunded Balance, INS: FGIC
6.25%, 06/15/07.......................................... 1,545 1,606,800
------------
Tennessee -- 1.4%
Shelby County, GO
5.00%, 08/01/05.......................................... 2,395 2,380,030
------------
Texas -- 9.8%
Burleson Independent School District, GO, Prerefunded
8/1/06 @ 100, INS: PSFG
6.75%, 08/01/24.......................................... 2,500 2,703,125
Dallas Independent School District, GO, Unrefunded
balance, INS: PSFG
5.60%, 08/15/04.......................................... 1,080 1,093,500
Dallas Waterworks and Sewer, RB
4.90%, 04/01/05.......................................... 2,000 1,975,000
Galena Park Independent School District, GO, INS: PSFG
4.875%, 08/15/16......................................... 1,000 885,000
Houston Higher Education, RB, Rice University
5.375%, 11/15/29......................................... 2,000 1,820,000
Manor Independent School District, GO, INS: PSFG
5.00%, 08/01/17.......................................... 2,270 2,011,787
San Antonio, GO
5.50%, 08/01/04.......................................... 1,750 1,778,437
San Antonio Electric & Gas, RB, Unrefunded Balance
6.00%, 02/01/08.......................................... 1,785 1,818,468
Texas State, GO
4.70%, 10/01/11.......................................... 1,000 917,500
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
M.S.D.&T. Funds, Inc.
NATIONAL TAX-EXEMPT BOND FUND
Statement of Net Assets -- Concluded
May 31, 2000
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Texas -- Continued
Trinity River Authority Waste Water Systems, RB,
Prerefunded 08/01/03 @ 100
5.75%, 08/01/08.......................................... $ 135 $ 137,700
Trinity River Authority Waste Water Systems, RB,
Unrefunded Balance, INS: AMBAC
5.75%, 08/01/08.......................................... 1,865 1,885,980
------------
17,026,497
------------
Utah -- 2.4%
Davis County School District, GO
4.875%, 06/01/05......................................... 2,700 2,656,125
Salt Lake City, GO
6.00%, 12/15/03.......................................... 1,500 1,548,750
------------
4,204,875
------------
Virginia -- 5.9%
Fairfax County, GO
5.50%, 06/01/02.......................................... 2,315 2,343,938
Newport News, GO, INS: MBIA
5.375%, 07/01/05......................................... 2,300 2,331,625
Norfolk, GO, INS: MBIA
5.75%, 06/01/13.......................................... 1,500 1,518,750
Virginia State Public Schools, RB
5.00%, 04/01/02.......................................... 1,000 1,000,000
Virginia State Transportation Board, RB, US Route 58
5.625%, 05/15/13......................................... 3,000 3,007,500
------------
10,201,813
------------
Washington -- 4.1%
Central Puget Sound, RB, INS: FGIC
5.25%, 02/01/17.......................................... 1,000 928,750
King County School District, GO, INS: FGIC
5.50%, 12/01/12.......................................... 3,675 3,656,625
Seattle, GO
5.625%, 12/01/16......................................... 2,500 2,440,625
------------
7,026,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
(000) Value
----- -----
<S> <C> <C>
Wisconsin -- 1.7%
Wisconsin State, GO
5.125%, 11/01/11....................................... $3,000 $ 2,906,250
------------
TOTAL MUNICIPAL BONDS
(Cost $159,642,694).................................... 159,569,601
------------
<CAPTION>
Number of
Shares
---------
<S> <C> <C>
INVESTMENT COMPANIES -- 6.6%
Goldman Sachs Financial Square Tax-Free Money Market
Fund................................................... 4,114,042 4,114,042
Provident Institutional Funds --MuniFund................ 7,352,530 7,352,530
------------
TOTAL INVESTMENT COMPANIES
(Cost $11,466,572)..................................... 11,466,572
------------
TOTAL INVESTMENTS IN SECURITIES -- 98.9%
(Cost $171,109,266*).............................................. 171,036,173
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1%...................... 1,884,283
------------
NET ASSETS -- 100.0%
(equivalent to $9.38 per share based on 18,426,437 shares
outstanding)...................................................... $172,920,456
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($172,920,456 / 18,426,437)....................................... $9.38
=====
</TABLE>
--------
* Aggregate cost for Federal income tax purposes. The aggregate gross
unrealized appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................. $ 1,495,332
Excess of tax cost over value.................................. $(1,568,425)
</TABLE>
See Accompanying Notes to Financial Statements.
34
<PAGE>
M.S.D.&T. Funds, Inc.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
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>
35
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31, 2000
<TABLE>
<CAPTION>
Prime Government Tax-Exempt
Money Market Money Market Money Market
Fund Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest............................ $28,012,932 $24,188,575 $5,671,308
----------- ----------- ----------
EXPENSES:
Investment advisory fees............ 1,252,683 1,094,389 401,386
Administration fees................. 626,341 547,194 200,693
Accounting agent fees............... 100,215 87,551 48,166
Custodian fees...................... 36,569 31,944 14,046
Directors' fees..................... 21,391 18,387 6,497
Transfer agent fees................. 30,130 18,701 20,706
Professional Services............... 77,126 66,245 24,544
Other............................... 47,930 45,567 20,824
----------- ----------- ----------
2,192,385 1,909,978 736,862
Fees waived by Investment Adviser... (100,215) (131,327) (48,166)
Fees waived by Administrator........ (212,955) (136,979) (85,642)
Expenses paid indirectly............ (191) (89) (975)
----------- ----------- ----------
TOTAL EXPENSES.................... 1,879,024 1,641,583 602,079
----------- ----------- ----------
NET INVESTMENT INCOME................ 26,133,908 22,546,992 5,069,229
----------- ----------- ----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments sold................... -- -- (6,309)
----------- ----------- ----------
Net gain (loss) on investments...... -- -- (6,309)
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... $26,133,908 $22,546,992 $5,062,920
=========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31, 2000
<TABLE>
<CAPTION>
Growth Equity International Diversified
& Income Equity Growth Equity Real Estate
Fund Income Fund Fund Fund Fund
-------- ----------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............... $ 681,601 $ 593,554 $ 205,843 $ 248,224 $ 31,151
Dividends.............. 4,871,438 6,719,226 400,293 1,284,575(1) 584,437
----------- ------------ ---------- ----------- ---------
TOTAL INVESTMENT
INCOME.............. 5,553,039 7,312,780 606,136 1,532,799 615,588
----------- ------------ ---------- ----------- ---------
EXPENSES:
Investment advisory
fees.................. 2,715,790 1,571,719 359,188 819,930 74,363
Administration fees.... 565,790 327,442 74,831 128,114 11,619
Accounting agent fees.. 135,789 78,586 17,959 51,246 2,789
Custodian fees......... 14,827 20,705 8,878 76,915 7,297
Directors' fees........ 18,312 12,354 2,192 3,810 350
Transfer agent fees.... 43,002 20,622 21,432 25,771 19,023
Professional Services.. 68,222 44,075 8,359 14,509 1,332
Registration fees...... 20,721 6,577 9,896 13,961 4,452
Other.................. 31,893 23,724 6,928 14,705 3,115
----------- ------------ ---------- ----------- ---------
3,614,346 2,105,804 509,663 1,148,961 124,340
Fees waived by
Investment Advisers... (445,855) (271,976) (74,714) (72,803) (30,336)
Fees waived by
Administrator......... -- -- (14,966) (51,246) (1,032)
Expenses paid
indirectly............ (70) (155) (930) -- (18)
----------- ------------ ---------- ----------- ---------
TOTAL EXPENSES....... 3,168,421 1,833,673 419,053 1,024,912 92,954
----------- ------------ ---------- ----------- ---------
NET INVESTMENT INCOME... 2,384,618 5,479,107 187,083 507,887 522,634
----------- ------------ ---------- ----------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain
(loss) from:
Investments........... 53,050,056 62,225,721 2,052,901 23,818,514 (192,093)
Foreign currency
transactions......... -- -- -- (743,411) --
----------- ------------ ---------- ----------- ---------
53,050,056 62,225,721 2,052,901 23,075,103 (192,093)
----------- ------------ ---------- ----------- ---------
Change in net
unrealized appreciatin
(depreciation):
Investments........... (3,950,708) (99,144,522) 5,845,295 (5,913,130) 129,690
Translation of assets
and liablilities in
foreign currencies... -- -- -- (4,387) --
----------- ------------ ---------- ----------- ---------
(3,950,708) (99,144,522) 5,845,295 (5,917,517) 129,690
----------- ------------ ---------- ----------- ---------
Net gain (loss) on
investments and
foreign currency
transactions.......... 49,099,348 (36,918,801) 7,898,196 17,157,586 (62,403)
----------- ------------ ---------- ----------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $51,483,966 $(31,439,694) $8,085,279 $17,665,473 $ 460,231
=========== ============ ========== =========== =========
</TABLE>
--------
(1) Net of witholding taxes of $173,479
See Accompanying Notes to Financial Statements.
37
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Operations
For the Year Ended May 31,2000
<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............... $ 9,958,192 $ 7,990,722 $ 1,396,939 $ 3,761,612 $ 8,972,872
----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory
fees.................. 569,562 414,529 144,853 437,394 872,187
Administration fees.... 203,415 148,046 36,213 109,349 218,047
Accounting agent fees.. 48,820 35,531 11,588 34,992 69,775
Custodian fees......... 15,531 20,558 7,124 10,636 12,602
Directors' fees........ 6,859 4,660 1,132 3,738 7,319
Transfer agent fees.... 29,349 20,403 21,462 18,897 19,024
Professional Services.. 25,169 17,783 4,354 13,643 26,850
Registration fees...... 12,225 9,498 3,872 4,040 5,309
Pricing service fees... 7,574 22,933 8,306 5,993 11,368
Other.................. 11,342 7,996 2,220 6,365 12,102
----------- ----------- ----------- ----------- -----------
929,846 701,937 241,124 645,047 1,254,583
Fees waived by
Investment Adviser.... (156,329) (153,968) (95,499) (244,980) (453,537)
Fees waived by
Administrator......... (40,683) (13,844) (15,172) (6,095) (16,011)
Expenses paid
indirectly............ (540) (1,159) (86) (317) (66)
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES....... 732,294 532,966 130,367 393,655 784,969
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME... 9,225,898 7,457,756 1,266,572 3,367,957 8,187,903
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss)................ (227,592) (1,281,910) (326,079) (1,522,345) (3,259,587)
Change in net
unrealized
appreciation
(depreciation)....... (3,584,148) (3,157,795) (1,132,976) (1,306,945) (5,799,901)
----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments........... (3,811,740) (4,439,705) (1,459,055) (2,829,290) (9,059,488)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ 5,414,158 $ 3,018,051 $ (192,483) $ 538,667 $ (871,585)
=========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
38
<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, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 26,133,908 $ 23,776,832 $ 22,546,992 $ 20,372,197
Net gain (loss) on
investments........... -- 3,130 -- --
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 26,133,908 23,779,962 22,546,992 20,372,197
------------ ------------ ------------ ------------
Distributions to
shareholders from net
investment income...... (26,133,908) (23,776,832) (22,546,992) (20,372,197)
Increase (decrease) in
net assets derived from
capital share
transactions........... (16,107,109) 82,081,604 31,367,729 54,389,002
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (16,107,109) 82,084,734 31,367,729 54,389,002
NET ASSETS:
Beginning of period.... 530,835,331 448,750,597 445,522,205 391,133,203
------------ ------------ ------------ ------------
End of period.......... $514,728,222 $530,835,331 $476,889,934 $445,522,205
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Tax-Exempt Tax-Exempt
Money Market Money Market
Fund For the Fund For the
Year Ended Year Ended
May 31, 2000 May 31, 1999
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................. $ 5,069,229 $ 3,242,143
Net gain (loss) on investments.................... (6,309) 306
------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 5,062,920 3,242,449
------------ ------------
Distributions to shareholders from:
Net investment income............................. (5,069,229) (3,242,143)
------------ ------------
Proceeds of shares issued due to exchange of Tax-
Exempt Money Market Fund (Trust) shares for Tax-
Exempt Money Market Fund shares................... 61,657,387
Increase (decrease) in net assets derived from
capital share transactions........................ 4,814,737 (8,401,564)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions....................... 4,814,737 53,255,823
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............ 4,808,428 53,256,129
NET ASSETS:
Beginning of period............................... 143,220,733 89,964,604
------------ ------------
End of period..................................... $148,029,161 $143,220,733
============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Growth & Growth & Equity Equity
Income Fund Income Fund Income Fund Income Fund
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 2,384,618 $ 3,117,850 $ 5,479,107 $ 5,392,736
Net realized gain
(loss) on
investments........... 53,050,056 31,093,571 62,225,721 59,394,028
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (3,950,708) 32,083,447 (99,144,522) (21,415,473)
------------ ------------ ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 51,483,966 66,294,868 (31,439,694) 43,371,291
------------ ------------ ------------- ------------
Distributions to
shareholders from:
Net investment income.. (2,756,775) (2,509,416) (5,737,319) (5,358,080)
Net realized capital
gains................. (28,939,728) (10,393,342) (55,928,207) (34,800,822)
------------ ------------ ------------- ------------
Total distributions to
shareholders.......... (31,696,503) (12,902,758) (61,665,526) (40,158,902)
------------ ------------ ------------- ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 83,977,515 62,772,358 29,151,362 7,959,869
Cost of shares
redeemed.............. (56,701,569) (74,027,633) (58,470,978) (48,808,503)
Value of shares issued
in reinvestment of
dividends............. 10,337,054 11,036,126 3,067,115 31,970,933
------------ ------------ ------------- ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... 37,613,000 (219,149) (26,252,501) (8,877,701)
------------ ------------ ------------- ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 57,400,463 53,172,961 (119,357,721) (5,665,312)
NET ASSETS:
Beginning of period.... 427,037,618 373,864,657 314,306,185 319,971,497
------------ ------------ ------------- ------------
End of period.......... $484,438,081 $427,037,618 $ 194,948,464 $314,306,185
============ ============ ============= ============
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Equity Equity International International
Growth Fund Growth Fund Equity Fund Equity Fund
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 187,083 $ 144,391 $ 507,887 $ 662,558
Net realized gain
(loss) on investments
and foreign currency.. 2,052,901 4,500,635 23,075,103 5,445,855
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilites in
foreign currency...... 5,845,295 3,072,193 (5,917,517) (6,983,677)
------------ ----------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 8,085,279 7,717,219 17,665,473 (875,264)
------------ ----------- ------------- ------------
Distributions to
shareholders from:
Net investment income.. (169,695) (156,729) (407,956) (500,860)
Net realized capital
gains................. (3,679,543) (3,417,673) (8,388,963) (1,929,077)
------------ ----------- ------------- ------------
Total distributions to
shareholders.......... (3,849,238) (3,574,402) (8,796,919) (2,429,937)
------------ ----------- ------------- ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 35,283,729 10,492,031 133,050,988 46,141,273
Cost of shares
redeemed.............. (10,738,175) (5,201,138) (106,160,792) (48,595,061)
Value of shares issued
in reinvestment of
dividends............. 334,920 3,210,792 1,322,796 1,657,568
------------ ----------- ------------- ------------
Increase (decrease) in
net assets derived
from capital share
transactions.......... 24,880,474 8,501,685 28,212,992 (796,220)
------------ ----------- ------------- ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 29,116,515 12,644,502 37,081,546 (4,101,421)
NET ASSETS:
Beginning of period.... 47,520,536 34,876,034 81,300,858 85,402,279
------------ ----------- ------------- ------------
End of period.......... $ 76,637,051 $47,520,536 $ 118,382,404 $ 81,300,858
============ =========== ============= ============
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Diversified Real Diversified Real Limited Maturity Limited Maturity
Estate Fund Estate Fund Bond Fund Bond Fund
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 522,634 $ 318,169 $ 9,225,898 $ 8,767,522
Net realized gain
(loss) on
investments........... (192,093) (180,671) (227,592) 618,107
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... 129,690 (191,425) (3,584,148) (2,292,463)
----------- ---------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 460,231 (53,927) 5,414,158 7,093,166
----------- ---------- ------------ ------------
Distributions to
shareholders from:
Net investment income.. (432,543) (355,953) (9,236,858) (8,767,522)
Net realized capital
gains................. -- -- (235,068) (383,653)
Return of Capital
Distributions......... (81,542) (9,103) -- --
----------- ---------- ------------ ------------
Total distributions to
shareholders.......... (514,085) (365,056) (9,471,926) (9,151,175)
----------- ---------- ------------ ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 5,757,288 1,705,488 23,253,108 33,879,887
Cost of shares
redeemed.............. (1,166,881) (161,537) (25,431,253) (19,269,521)
Value of shares issued
in reinvestment of
dividends............. 53,168 26,951 1,485,375 1,782,525
----------- ---------- ------------ ------------
Increase (decrease) in
net assets derived
from capital share
transactions.......... 4,643,575 1,570,902 (692,770) 16,392,891
----------- ---------- ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 4,589,721 1,151,919 (4,750,538) 14,334,882
NET ASSETS:
Beginning of period.... 7,829,136 6,677,217 166,257,261 151,922,379
----------- ---------- ------------ ------------
End of period.......... $12,418,857 $7,829,136 $161,506,723 $166,257,261
=========== ========== ============ ============
</TABLE>
--------
See Accompanying Notes to Financial Statements.
42
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Maryland Maryland
Total Return Total Return Tax-Exempt Tax-Exempt
Bond Fund Bond Fund Bond Fund Bond Fund
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 7,457,756 $ 6,215,535 $ 1,266,572 $ 920,156
Net realized gain
(loss) on
investments........... (1,281,910) 882,355 (326,079) 14,267
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (3,157,795) (2,367,146) (1,132,976) (172,632)
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 3,018,051 4,730,744 (192,483) 761,791
------------ ------------ ----------- -----------
Distributions to
shareholders from:
Net investment income.. (7,457,756) (6,215,535) (1,266,572) (920,156)
Net realized capital
gains................. (351,578) (627,475) -- --
------------ ------------ ----------- -----------
Total Distributions to
Shareholders.......... (7,809,334) (6,843,010) (1,266,572) (920,156)
------------ ------------ ----------- -----------
Capital Share
Transactions:
Proceeds of shares
sold.................. 35,124,163 21,723,424 12,923,356 17,972,231
Cost of shares
redeemed.............. (11,967,889) (14,669,153) (6,690,738) (6,342,407)
Value of shares issued
in reinvestment of
dividends............. 448,602 843,089 132,924 113,379
------------ ------------ ----------- -----------
Increase (decrease) in
net assets derived from
capital share
transactions........... 23,604,876 7,897,360 6,365,542 11,743,203
------------ ------------ ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 18,813,593 5,785,094 4,906,487 11,584,838
NET ASSETS:
Beginning of period.... 107,148,593 101,363,499 26,565,327 14,980,489
------------ ------------ ----------- -----------
End of period.......... $125,962,186 $107,148,593 $31,471,814 $26,565,327
============ ============ =========== ===========
</TABLE>
--------
See Accompanying Notes to Financial Statements.
43
<PAGE>
M.S.D.&T. Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate Intermediate National National
Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt
Bond Fund Bond Fund Bond Fund Bond Fund
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment income.. $ 3,367,957 $ 3,502,977 $ 8,187,903 $ 7,853,868
Net realized gain
(loss) on
investments........... (1,522,345) 1,239,988 (3,259,587) 2,462,303
Net increase (decrease)
in unrealized
appreciation
(depreciation) on
investments........... (1,306,945) (591,029) (5,799,901) (2,628,395)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 538,667 4,151,936 (871,585) 7,687,776
------------ ------------ ------------ ------------
Distributions to
shareholders from:
Net investment income.. (3,376,524) (3,502,977) (8,203,188) (7,853,868)
Net realized capital
gains................. (563,276) (721,135) (774,342) (2,125,685)
------------ ------------ ------------ ------------
Total Distributions
to Shareholders..... (3,939,800) (4,224,112) (8,977,530) (9,979,553)
------------ ------------ ------------ ------------
Capital Share
Transactions:
Proceeds of shares
sold.................. 8,856,010 7,895,070 22,665,947 15,739,980
Cost of shares
redeemed.............. (14,859,537) (11,552,185) (17,976,012) (15,382,582)
Value of shares issued
in reinvestment of
dividends............. 7,537 631,896 12,683 1,884,977
------------ ------------ ------------ ------------
Increase (decrease) in
net assets derived from
capital share
transactions........... (5,995,990) (3,025,219) 4,702,618 2,242,375
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (9,397,123) (3,097,395) (5,146,497) (49,402)
NET ASSETS:
Beginning of period.... 90,895,102 93,992,497 178,066,953 178,116,355
------------ ------------ ------------ ------------
End of period.......... $ 81,497,979 $ 90,895,102 $172,920,456 $178,066,953
============ ============ ============ ============
</TABLE>
--------
See Accompanying Notes to Financial Statements.
44
<PAGE>
M.S.D.&T. Funds, Inc.
Financial Highlights
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Prime Money Market Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<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.. 0.0522 0.0486 0.0521 0.0498 0.0532
-------- -------- -------- -------- --------
Total From Investment
Operations............ 0.0522 0.0486 0.0521 0.0498 0.0532
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0522) (0.0486) (0.0521) (0.0498) (0.0532)
-------- -------- -------- -------- --------
Total Distributions.... (0.0522) (0.0486) (0.0521) (0.0498) (0.0532)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------
Total Return............ 5.34% 4.97% 5.33% 5.10% 5.45%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $514,728 $530,835 $448,751 $368,853 $326,878
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.38% 0.42% 0.43% 0.43%
Before Expense Waiver.. 0.44% 0.45% 0.47% 0.48% 0.48%
Ratio of Net Investment
Income to Average Net
Assets................ 5.22% 4.84% 5.21% 4.98% 5.33%
</TABLE>
<TABLE>
<CAPTION>
Government Money Market Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<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.. 0.0514 0.0478 0.0515 0.0495 0.0526
-------- -------- -------- -------- --------
Total From Investment
Operations............ 0.0514 0.0478 0.0515 0.0495 0.0526
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0514) (0.0478) (0.0515) (0.0495) (0.0526)
-------- -------- -------- -------- --------
Total Distributions.... (0.0514) (0.0478) (0.0515) (0.0495) (0.0526)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------
Total Return............ 5.27% 4.89% 5.27% 5.06% 5.39%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $476,890 $445,522 $391,133 $340,809 $264,725
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.38% 0.42% 0.43% 0.43%
Before Expense Waiver.. 0.44% 0.45% 0.46% 0.49% 0.48%
Ratio of Net Investment
Income to Average Net
Assets................ 5.15% 4.76% 5.15% 4.95% 5.27%
</TABLE>
See Accompanying Notes to Financial Statements.
45
<PAGE>
M.S.D.&T. Funds, Inc.
Financial Highlights
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Tax-Exempt Money Market Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<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.. 0.0317 0.0285 0.0318 0.0304 0.0321
-------- -------- -------- -------- --------
Total From Investment
Operations............ 0.0317 0.0285 0.0318 0.0304 0.0321
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.0317) (0.0285) (0.0318) (0.0304) (0.0321)
-------- -------- -------- -------- --------
Total Distributions.... (0.0317) (0.0285) (0.0318) (0.0304) (0.0321)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------
Total Return............ 3.21% 2.89% 3.22% 3.09% 3.26%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $148,029 $143,221 $ 89,965 $ 79,492 $ 50,137
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.38% 0.38% 0.43% 0.43% 0.43%
Before Expense Waiver.. 0.46% 0.49% 0.50% 0.53% 0.51%
Ratio of Net Investment
Income to Average Net
Assets................ 3.16% 2.80% 3.17% 3.05% 3.22%
</TABLE>
<TABLE>
<CAPTION>
Growth & Income Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 24.43 $ 21.37 $ 18.25 $ 14.58 $ 13.42
-------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.13 0.18 0.20 0.23 0.33
Net Realized and
Unrealized Gain (Loss)
on Investments........ 2.75 3.62 5.01 4.19 1.89
-------- -------- -------- -------- --------
Total From Investment
Operations............ 2.88 3.80 5.21 4.42 2.22
-------- -------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.16) (0.14) (0.23) (0.25) (0.35)
Net Capital Gains...... (1.65) (0.60) (1.86) (0.50) (0.71)
-------- -------- -------- -------- --------
Total Distributions.... (1.81) (0.74) (2.09) (0.75) (1.06)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 25.50 $ 24.43 $ 21.37 $ 18.25 $ 14.58
======== ======== ======== ======== ========
------------------------------------------------------------------------------------------
Total Return............ 12.11% 18.20% 29.40% 31.26% 17.24%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $484,438 $427,038 $373,864 $142,452 $107,233
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.70% 0.70% 0.71% 0.73% 0.73%
Before Expense Waiver.. 0.80% 0.81% 0.88% 0.89% 0.89%
Ratio of Net Investment
Income to Average Net
Assets................ 0.53% 0.80% 0.99% 1.52% 2.38%
Portfolio turnover
rate................... 28.46% 26.48% 24.09% 27.10% 45.15%
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
M.S.D.&T. Funds, Inc.
Financial Highlights
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Equity Income Fund Equity Growth Fund
-------------------------------- --------------------------------
For the For the
Period Period
For the For the March 1, For the For the March 1,
Year Ended Year Ended 1998 (1) Year Ended Year Ended 1998 (1)
May 31, May 31, to May 31, May 31, May 31, to May 31,
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.25 $ 10.21 $ 10.00 $ 11.48 $ 10.28 $ 10.00
-------- -------- -------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.18 0.17 0.04 0.04 0.04 0.02
Net Realized and
Unrealized Gain (Loss)
on Investments........ (1.22) 1.23 0.19 2.01 2.23 0.27
-------- -------- -------- ------- ------- -------
Total From Investment
Operations............ (1.04) 1.40 0.23 2.05 2.27 0.29
-------- -------- -------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.19) (0.17) (0.02) (0.04) (0.05) (0.01)
Net Capital Gains...... (1.95) (1.19) -- (0.82) (1.02) --
-------- -------- -------- ------- ------- -------
Total Distributions.... (2.14) (1.36) (0.02) (0.86) (1.07) (0.01)
-------- -------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 7.07 $ 10.25 $ 10.21 $ 12.67 $ 11.48 $ 10.28
======== ======== ======== ======= ======= =======
------------------------------------------------------------------------------------------------
Total Return............ (10.98)% 15.30% 2.28% 17.94% 23.13% 2.89%
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $194,948 $314,306 $319,971 $76,637 $47,521 $34,876
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.70% 0.70% 0.70%(2) 0.70% 0.70% 0.70%(2)
Before Expense Waiver.. 0.80% 0.82% 0.93%(2) 0.85% 0.91% 1.02%(2)
Ratio of Net Investment
Income to Average
Net Assets............. 2.09% 1.77% 1.45%(2) 0.31% 0.38% 0.68%(2)
Portfolio turnover
rate................... 58.67% 24.47% 2.00% 13.66% 62.49% 7.99%
</TABLE>
--------
(1) Commencement of operations.
(2) Annualized.
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>
International Equity Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.35 $ 13.90 $ 13.18 $ 12.47 $ 11.60
-------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.07 0.11 0.12 0.31 0.09
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency...... 2.89 (0.27) 1.42 0.88 1.51
-------- ------- ------- ------- -------
Total From Investment
Operations............ 2.96 (0.16) 1.54 1.19 1.60
-------- ------- ------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.07) (0.08) (0.15) (0.24) (0.07)
Net Capital Gains...... (1.34) (0.31) (0.67) (0.24) (0.66)
-------- ------- ------- ------- -------
Total Distributions.... (1.41) (0.39) (0.82) (0.48) (0.73)
-------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 14.90 $ 13.35 $ 13.90 $ 13.18 $ 12.47
======== ======= ======= ======= =======
------------------------------------------------------------------------------------------
Total Return............ 21.73% (1.02)% 12.77% 9.81% 14.27%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $118,382 $81,301 $85,402 $83,313 $75,676
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 1.00% 1.00% 1.03% 1.05% 1.05%
Before Expense Waiver.. 1.12% 1.14% 1.14% 1.16% 1.17%
Ratio of Net Investment
Income to Average Net
Assets................ 0.50% 0.82% 0.92% 0.97% 0.78%
Portfolio turnover
rate................... 155.72% 67.33% 55.55% 74.15% 53.58%
</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>
Diversified Real Estate Fund Total Return Bond Fund
-------------------------------- --------------------------------
For the For the
Period Period
For the For the August 1, For the For the March 1,
Year Ended Year Ended 1997 (1) Year Ended Year Ended 1998 (1)
May 31, May 31, to May 31, May 31, May 31, to May 31,
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.37 $10.13 $10.00 $ 9.82 $ 10.02 $ 10.00
------- ------ ------ -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.50 0.53 0.35 0.60 0.59 0.15
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.39) (0.76) 0.09 (0.36) (0.14) 0.02
------- ------ ------ -------- -------- --------
Total From Investment
Operations.......... 0.11 (0.23) 0.44 0.24 0.45 0.17
------- ------ ------ -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.42) (0.52) (0.28) (0.60) (0.59) (0.15)
Return of Capital...... (0.07) (0.01) (0.03)
Net Capital Gains...... -- -- -- (0.03) (0.06) --
------- ------ ------ -------- -------- --------
Total Distributions.. (0.49) (0.53) (0.31) (0.63) (0.65) (0.15)
------- ------ ------ -------- -------- --------
Net Asset Value, End of
Period................. $ 8.99 $ 9.37 $10.13 $ 9.43 $ 9.82 $ 10.02
======= ====== ====== ======== ======== ========
------------------------------------------------------------------------------------------------
Total Return............ 1.59% (1.80)% 4.31% 2.55% 4.48% 1.69%
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $12,419 $7,829 $6,677 $125,962 $107,149 $101,363
Ratio of Expenses to
Average Net Assets
After Expense Waiver.. 1.00% 1.00% 1.00%(2) 0.45% 0.45% 0.45%(2)
Before Expense
Waiver............... 1.34% 1.47% 2.25%(2) 0.59% 0.62% 0.73%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 5.62% 6.03% 4.17%(2) 6.30% 5.82% 5.89%(2)
Portfolio turnover
rate................... 10.36% 14.35% 0.84% 38.96% 74.94% 10.51%
</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>
Limited Maturity Bond Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.32 $ 10.45 $ 10.31 $ 10.19 $ 10.43
-------- -------- -------- ------- -------
Income From Investment
Operations:
Net Investment Income.. 0.58 0.58 0.60 0.59 0.59
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.24) (0.10) 0.22 0.12 (0.24)
-------- -------- -------- ------- -------
Total From Investment
Operations........... 0.34 0.48 0.82 0.71 0.35
-------- -------- -------- ------- -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.58) (0.58) (0.60) (0.59) (0.59)
Net Capital Gains...... (0.01) (0.03) (0.08) -- --
-------- -------- -------- ------- -------
Total Distributions... (0.59) (0.61) (0.68) (0.59) (0.59)
-------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 10.07 $ 10.32 $ 10.45 $ 10.31 $ 10.19
======== ======== ======== ======= =======
------------------------------------------------------------------------------------------
Total Return............ 3.42% 4.63% 8.15% 7.12% 3.38%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $161,507 $166,257 $151,922 $43,010 $44,102
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.45% 0.45% 0.50% 0.60% 0.60%
Before Expense Waiver.. 0.57% 0.58% 0.78% 0.75% 0.72%
Ratio of Net Investment
Income to Average Net
Assets................ 5.67% 5.54% 5.71% 5.72% 5.66%
Portfolio turnover
rate................... 30.95% 59.73% 48.24% 20.92% 52.79%
</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>
Maryland Tax-Exempt Bond Fund
----------------------------------------------------------------
For the Years Ended
----------------------------------------------------------------
May 31, 2000 May 31, 1999 May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.78 $ 10.82 $ 10.38 $10.20 $ 10.40
------- ------- ------- ------ -------
Income From Investment
Operations:
Net Investment Income.. 0.45 0.45 0.48 0.50 0.49
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.55) (0.04) 0.44 0.18 (0.20)
------- ------- ------- ------ -------
Total From Investment
Operations............ (0.10) 0.41 0.92 0.68 0.29
------- ------- ------- ------ -------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.45) (0.45) (0.48) (0.50) (0.49)
------- ------- ------- ------ -------
Total Distributions.... (0.45) (0.45) (0.48) (0.50) (0.49)
------- ------- ------- ------ -------
Net Asset Value, End of
Period................. $ 10.23 $ 10.78 $ 10.82 $10.38 $ 10.20
======= ======= ======= ====== =======
------------------------------------------------------------------------------------------
Total Return............ (0.87)% 3.81% 9.03% 6.80% 2.84%
------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $31,472 $26,565 $14,980 $8,298 $10,186
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.45% 0.45% 0.49% 0.55% 0.62%
Before Expense Waiver.. 0.83% 0.87% 1.03% 1.13% 1.04%
Ratio of Net Investment
Income to Average Net
Assets................ 4.37% 4.12% 4.49% 4.84% 4.74%
Portfolio turnover
rate................... 60.16% 22.78% 55.95% 28.11% 20.58%
</TABLE>
See Accompanying Notes to Financial Statements.
51
<PAGE>
M.S.D.&T. Funds, Inc.
Financial Highlights
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Intermediate Tax-Exempt Bond Fund National Tax-Exempt Bond Fund
------------------------------------------ ------------------------------------------
For the For the For the Period For the For the For the Period
Year Ended Year Ended March 1, 1998(1) Year Ended Year Ended March 1, 1998(1)
May 31, 2000 May 31, 1999 to May 31, 1998 May 31, 2000 May 31, 1999 to May 31, 1998
------------ ------------ ---------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.00 $ 10.01 $ 10.00 $ 9.93 $ 10.05 $ 10.00
------- ------- ------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income.. 0.38 0.38 0.10 0.45 0.44 0.11
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.32) 0.07 0.01 (0.51) -- 0.05
------- ------- ------- -------- -------- --------
Total From Investment
Operations............ 0.06 0.45 0.11 (0.06) 0.44 0.16
------- ------- ------- -------- -------- --------
Less Distributions to
Shareholders from:
Net Investment Income.. (0.38) (0.38) (0.10) (0.45) (0.44) (0.11)
Net Capital Gains...... (0.06) (0.08) -- (0.04) (0.12) --
------- ------- ------- -------- -------- --------
Total Distributions.... (0.44) (0.46) (0.10) (0.49) (0.56) (0.11)
------- ------- ------- -------- -------- --------
Net Asset Value, End of
Period................. $ 9.62 $ 10.00 $ 10.01 $ 9.38 $ 9.93 $ 10.05
======= ======= ======= ======== ======== ========
---------------------------------------------------------------------------------------------------------------
Total Return............ 0.64% 4.58% 1.07% (0.55)% 4.43% 1.64%
---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Period (000).......... $81,498 $90,895 $93,992 $172,920 $178,067 $178,116
Ratio of Expenses to
Average Net Assets
After Expense Waiver... 0.45% 0.45% 0.45%(2) 0.45% 0.45% 0.45%(2)
Before Expense Waiver.. 0.74% 0.76% 0.88%(2) 0.72% 0.74% 0.86%(2)
Ratio of Net Investment
Income to Average Net
Assets................ 3.85% 3.80% 3.84%(2) 4.69% 4.36% 4.49%(2)
Portfolio turnover
rate................... 140.28% 149.02% 10.13% 113.69% 123.30% 7.37%
</TABLE>
--------
(1)Commencement of operations.
(2)Annualized.
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. Expenses paid indirectly reflect credits earned on
daily uninvested cash balances at the custodian and are used to reduce
the Fund's custody charges.
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
54
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
shareholders of the Growth & Income Fund, Equity Income Fund and Equity
Growth Fund; are declared and paid quarterly to shareholders of the Di-
versified Real Estate Fund; and are declared and paid semi-annually to
shareholders of the International Equity Fund. Any net realized capital
gains are distributed at least annually with respect to the Money Market
Funds, Limited Maturity Bond Fund, Total Return Bond Fund, Maryland Tax-
Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund and National Tax-Ex-
empt Bond Fund and at least semi-annually with respect to the Growth &
Income Fund, Equity Income Fund, Equity Growth Fund, Diversified Real
Estate Fund and International Equity Fund.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally
accepted 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, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fis-
cal year. The following losses will be treated as arising on the first
day of fiscal year ended May 31, 2001:
<TABLE>
<CAPTION>
Capital Losses
Deferred
--------------
<S> <C>
Diversified Real Estate Fund................................ $ 20,971
Limited Maturity Bond Fund.................................. 219,484
Total Return Bond Fund...................................... 1,152,716
Maryland Tax-Exempt Bond Fund............................... 302,871
Intermediate Tax-Exempt Bond Fund........................... 681,507
National Tax-Exempt Bond Fund............................... 1,464,745
</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
55
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
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 de-
faults, marked-to-market daily. Repurchase agreements are accounted for
as collateralized financings. The policy of the Funds is to obtain pos-
session of collateral with a market value equal to 102% of the repur-
chase 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.
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.
J) The International Equity Fund is subject to foreign income taxes by cer-
tain countries in which it invests. Foreign income taxes are accrued by
the Fund and withheld from dividend and interest income. Gains realized
upon disposition of Thailand securities held by the International Equity
Fund are subject to capital gain tax in Thailand. The tax on realized
gains is paid prior to repatriation of sales proceeds.
56
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
2. INVESTMENT ADVISER, ADMINISTRATOR, DISTRIBUTOR AND OTHER RELATED PARTY
TRANSACTIONS
Mercantile-Safe Deposit & 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 International Ltd. at an annual rate
of .45% of the average daily net assets), and (f) .80% of the first $1 billion
of the Diversified Real Estate Fund's average daily net assets during the pre-
ceding month plus .60% of such Fund's average daily net assets in excess of $1
billion during the preceding month. For its services as Administrator, Mercan-
tile receives an administration fee computed daily and payable monthly at an
annual rate of .125% of the average daily net assets of each Fund. Mercantile
may, at its discretion, voluntarily waive any portion of its advisory fee or
its administration fee for any Fund.
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 Distribu-
tor receives no fee for these services. BISYS Fund Services Ohio, Inc., an af-
filiate of the Distributor, receives fees for fund accounting and transfer
agent 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 Chairman 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, officer or employee
of Mercantile serves as a director, officer or employee of the Company. During
the fiscal year ended May 31, 2000, the Funds paid legal fees to a law firm, a
partner of which serves as Secretary of the Company.
57
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
3. NET ASSETS
At May 31, 2000, 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..................... $514,833,918 $477,016,139 $148,042,964
Accumulated Realized Gain (Loss) on
Investments........................ (105,696) (126,205) (13,803)
------------ ------------ ------------
$514,728,222 $476,889,934 $148,029,161
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
International Diversified
Growth & Equity Equity Equity Real Estate
Income Fund Income Fund Growth Fund Fund Fund
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Capital Paid-In......... $263,063,928 $113,366,850 $54,377,197 $ 95,955,251 $ 12,740,341
Accumulated Realized
Gain (Loss) on
Investments and Foreign
Currency............... 45,419,212 44,461,487 1,876,686 18,181,998 (373,391)
Net Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency............... 175,565,334 36,696,284 20,344,880 3,996,326 (55,312)
Undistributed Net
Investment Income...... 389,607 423,843 38,288 248,829 107,219
------------ ------------ ----------- ------------ ------------
$484,438,081 $194,948,464 $76,637,051 $118,382,404 $ 12,418,857
============ ============ =========== ============ ============
<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......... $166,043,538 $130,525,280 $33,128,967 $ 84,009,433 $176,253,124
Accumulated Realized
Gain (Loss) on
Investments............ (219,484) (1,343,676) (762,167) (1,522,329) (3,259,575)
Net Unrealized
Appreciation
(Depreciation) on
Investments............ (4,317,331) (3,219,418) (894,986) (989,125) (73,093)
Undistributed Net
Investment Income...... -- -- -- -- --
------------ ------------ ----------- ------------ ------------
$161,506,723 $125,962,186 $31,471,814 $ 81,497,979 $172,920,456
============ ============ =========== ============ ============
</TABLE>
4. CAPITAL STOCK
Transactions in shares of the Company are summarized as follows:
<TABLE>
<CAPTION>
Government Money
Prime Money Market Fund Market Fund
-------------------------- --------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 625,428,345 766,296,619 725,454,493 709,317,736
Shares Redeemed......... (642,810,864) (685,216,360) (695,928,694) (656,540,088)
Shares Reinvested....... 1,275,411 1,001,344 1,841,930 1,611,353
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Shares.............. (16,107,108) 82,081,603 31,367,729 54,389,001
Shares Outstanding:
Beginning of Period.... 530,941,026 448,859,423 445,648,410 391,259,409
------------ ------------ ------------ ------------
End of Period.......... 514,833,918 530,941,026 477,016,139 445,648,410
============ ============ ============ ============
</TABLE>
58
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
4. CAPITAL STOCK -- Continued
<TABLE>
<CAPTION>
Tax-Exempt
Money Market Fund Growth & Income Fund
-------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold.............. 215,040,601 144,298,995 3,358,116 2,778,002
Shares Redeemed.......... (210,256,955) (152,722,958) (2,258,249) (3,292,178)
Shares Reinvested........ 31,090 22,400 422,298 496,412
Shares Issued Due to
Exchange of Tax-Exempt
Money Market Fund
(Trust) Shares for Tax-
Exempt Money Market Fund
Shares.................. -- 61,658,534 -- --
------------ ------------ ---------- ----------
Net Increase (Decrease)
in Shares............... 4,814,736 53,256,971 1,522,165 (17,764)
Shares Outstanding:
Beginning of Period..... 143,229,375 89,972,404 17,479,070 17,496,834
------------ ------------ ---------- ----------
End of Period........... 148,044,111 143,229,375 19,001,235 17,479,070
============ ============ ========== ==========
<CAPTION>
Equity Income Fund Equity Growth Fund
-------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold.............. 3,835,154 818,862 2,747,952 934,758
Shares Redeemed.......... (7,332,195) (4,951,404) (866,277) (494,334)
Shares Reinvested........ 408,002 3,451,972 26,638 307,838
------------ ------------ ---------- ----------
Net Increase (Decrease)
in Shares............... (3,089,039) (680,570) 1,908,313 748,262
Shares Outstanding:
Beginning of Period..... 30,651,908 31,332,478 4,140,373 3,392,111
------------ ------------ ---------- ----------
End of Period........... 27,562,869 30,651,908 6,048,686 4,140,373
============ ============ ========== ==========
</TABLE>
<TABLE>
<CAPTION>
International Equity Fund Diversified Real Estate Fund
------------------------- ---------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 8,630,933 3,532,140 678,072 192,039
Shares Redeemed......... (6,861,852) (3,716,761) (138,435) (18,434)
Shares Reinvested....... 84,762 130,150 6,326 3,153
---------- ---------- --------------- -------------
Net Increase (Decrease)
in Shares.............. 1,853,843 (54,471) 545,963 176,758
Shares Outstanding:
Beginning of Period.... 6,090,442 6,144,913 835,621 658,863
---------- ---------- --------------- -------------
End of Period.......... 7,944,285 6,090,442 1,381,584 835,621
========== ========== =============== =============
</TABLE>
59
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
4. CAPITAL STOCK -- Continued
<TABLE>
<CAPTION>
Limited Maturity Bond Fund Total Return Bond Fund
----------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 2,287,159 3,237,655 3,664,392 2,162,872
Shares Redeemed......... (2,499,396) (1,839,478) (1,256,466) (1,459,049)
Shares Reinvested....... 145,749 169,722 46,793 83,296
------------- ------------- ---------- ----------
Net Increase (Decrease)
in Shares.............. (66,488) 1,567,899 2,454,719 787,119
Shares Outstanding:
Beginning of Period.... 16,111,070 14,543,171 10,906,968 10,119,849
------------- ------------- ---------- ----------
End of Period.......... 16,044,582 16,111,070 13,361,687 10,906,968
============= ============= ========== ==========
<CAPTION>
Maryland Tax-Exempt Intermediate Tax-Exempt
Bond Fund Bond Fund
----------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares Sold............. 1,245,097 1,651,881 902,088 782,513
Shares Redeemed......... (646,229) (583,325) (1,521,664) (1,146,751)
Shares Reinvested....... 12,780 10,397 771 62,688
------------- ------------- ---------- ----------
Net Increase (Decrease)
in Shares.............. 611,648 1,078,953 (618,805) (301,550)
Shares Outstanding:
Beginning of Period.... 2,463,434 1,384,481 9,089,368 9,390,918
------------- ------------- ---------- ----------
End of Period.......... 3,075,082 2,463,434 8,470,563 9,089,368
============= ============= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
National Tax-Exempt
Bond Fund
-------------------------
For the Year For the Year
Ended Ended
May 31, 2000 May 31, 1999
------------ ------------
<S> <C> <C>
Shares Sold........................................... 2,373,803 1,558,731
Shares Redeemed....................................... (1,885,583) (1,524,874)
Shares Reinvested..................................... 1,324 186,631
---------- ----------
Net Increase (Decrease) in Shares..................... 489,544 220,488
Shares Outstanding:
Beginning of Period.................................. 17,936,893 17,716,405
---------- ----------
End of Period........................................ 18,426,437 17,936,893
========== ==========
</TABLE>
60
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Continued
5. PURCHASES & SALES OF SECURITIES
For the fiscal ended May 31, 2000, total aggregate purchases and proceeds from
sales of investment securities (excluding short-term securities) were as fol-
lows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Purchases* Sales* Purchases Sales
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Growth & Income Fund........ $125,609,350 $138,698,728 $ 0 $ 0
Equity Income Fund.......... 144,831,836 250,362,366 0 0
Equity Growth Fund.......... 27,560,101 7,781,446 0 0
International Equity Fund... 162,492,711 150,178,023 0 0
Diversified Real Estate
Fund....................... 5,301,337 915,626 0 0
Limited Maturity Bond Fund.. 18,314,943 7,238,020 22,098,358 42,965,985
Total Return Bond Fund...... 16,741,577 17,201,623 47,863,729 23,893,857
Maryland Tax-Exempt Bond
Fund....................... 23,036,445 16,092,199 0 0
Intermediate Tax-Exempt Bond
Fund....................... 112,788,392 123,017,828 0 0
National Tax-Exempt Bond
Fund....................... 188,735,246 193,284,618 0 0
</TABLE>
--------
* (excluding short-term and U.S. Government securities)
6. CAPITAL LOSS CARRYOVERS
At May 31, 2000, the following Funds had capital loss carryovers:
<TABLE>
<CAPTION>
Capital Loss Expiration
Carryover Year
------------ ----------
<S> <C> <C>
Prime Money Market Fund..................... $ 105,696 2003 through 2006
Government Money Market Fund................ 126,205 2003 through 2004
Tax-Exempt Money Market Fund................ 13,803 2003 through 2008
Diversified Real Estate Fund (as of
12/31/99**)................................ 166,530 2006 through 2007
Total Return Bond Fund...................... 172,881 2008
Maryland Tax-Exempt Bond Fund............... 459,297 2003 through 2008
Intermediate Tax-Exempt Bond Fund........... 840,837 2008
National Tax-Exempt Bond Fund............... 1,794,842 2008
</TABLE>
The capital loss carryovers are available to offset possible future capital
gains, if any, of the respective Funds.
--------
** 12/31/99 is the tax year end for the Diversified Real Estate Fund.
61
<PAGE>
M.S.D.&T. Funds, Inc.
Notes to Financial Statements -- Concluded
7. LINE OF CREDIT
The Company has established a line of credit with Fifth Third Bank with re-
spect to all Funds except the International Equity Fund. The line of credit,
which is in an uncommitted aggregate amount of $25 million, may be accessed by
the Funds for temporary or emergency purposes only. Each Fund may borrow up to
10% of its respective net assets. If a Fund's borrowings under the line of
credit exceed 5% of its net assets that Fund may not purchase additional secu-
rities. Borrowings under the line of credit bear interest at the overnight
Federal Funds rate plus .50% per annum. At May 31, 2000, the Funds had no out-
standing borrowings under the line of credit. During the year ended May 31,
2000, the following Funds borrowed amounts and paid interest as noted in the
table below.
<TABLE>
<CAPTION>
Interest Weighted Average
Range of Borrowings Paid Interest Rate
------------------- -------- ----------------
<S> <C> <C> <C>
Prime Money Market Fund..... $190,267--$467,446 $264 5.83%
Government Money Market
Fund....................... $990,436--$2,659,785 $994 6.65%
Total Return Bond Fund...... $785,205 $616 7.06%
</TABLE>
8. SUBSEQUENT EVENT
The Company distributed capital gains to shareholders of the Growth & Income
Fund, Equity Income Fund, Equity Growth Fund and International Equity Fund on
June 5, 2000. The record and declaration date was June 2, 2000.
<TABLE>
<CAPTION>
Total Capital
Gain Distribution
-----------------
<S> <C>
Growth & Income Fund....................................... $45,490,351
Equity Income Fund......................................... $45,230,847
Equity Growth Fund......................................... $ 2,042,180
International Equity Fund.................................. $19,091,116
</TABLE>
62
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
M.S.D.&T. Funds, Inc.:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial high-
lights present fairly, in all material respects, the financial position of
Prime Money Market Fund, Government Money Market Fund, Tax-Exempt Money Market
Fund, Growth & Income Fund, Equity Income Fund, Equity Growth Fund, Interna-
tional 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 (comprising M.S.D.&T. Funds,
Inc., hereafter referred to as the "Funds") at May 31, 2000, and the results
of each of their operations, the changes in each of their net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accor-
dance with auditing standards generally accepted in the United States of Amer-
ica, which require that we plan and perform the audit to obtain reasonable as-
surance about whether the financial statements are free of material
misstatment. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the ac-
counting 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, 2000 by corre-
spondence with the custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
July 18, 2000
63
<PAGE>
IMPORTANT TAX INFORMATION
(Unaudited)
During the fiscal year ended May 31, 2000, the distributions paid by the Funds
were derived from the following:
<TABLE>
<CAPTION>
Net Investment Income
and Short-Term Exempt Interest Dividends
Capital Gains (excludable from gross Long-Term Capital Gains
(taxable as ordinary income for Federal income (taxable at a long-term
income) tax purposes) capital gain rate)
--------------------- ------------------------- -----------------------
<S> <C> <C> <C>
Prime Money Market...... 100.0% -- --
Government Money
Market................. 100.0% -- --
Tax-Exempt Money
Market................. -- 100.0% --
Growth & Income(1)...... 8.7% -- 91.3%
Equity Income(1)........ 17.7% -- 82.3%
Equity Growth(1)........ 4.4% -- 95.6%
International
Equity(2).............. 15.2% -- 84.8%
Limited Maturity Bond... 98.0% -- 2.0%
Total Return Bond....... 96.7% -- 3.3%
Maryland Tax-Exempt
Bond................... -- 100.0% --
Intermediate Tax-Exempt
Bond................... 6.5% 85.8% 7.7%
National Tax-Exempt
Bond................... 7.1% 91.3% 1.6%
</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.
64
<PAGE>
IMPORTANT TAX INFORMATION -- Continued
(Unaudited)
CAPITAL GAIN DISTRIBUTIONS
During the fiscal year ending May 31, 2000, 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 December 21, 1999. The Securities and Exchange Commission re-
quires mutual funds to disclose to shareholders the composition of the capital
gain distribution. The figures listed below may differ from those cited else-
where in the report due to differences in the calculation of income and gains
for Securities and Exchange Commission (book) purposes and Internal Revenue
Service (tax) purposes. Pursuant to this requirement, these percentages are
listed below:
<TABLE>
<CAPTION>
Short-Term Long-Term
---------- ---------
<S> <C> <C>
Growth & Income Fund................................ 0.0% 100.0%
Equity Income Fund.................................. 9.3% 90.7%
Equity Growth Fund.................................. 0.0% 100.0%
International Equity Fund........................... 11.0% 89.0%
Total Return Bond Fund.............................. 27.1% 72.9%
Limited Maturity Bond Fund.......................... 18.1% 81.9%
Intermediate Tax-Exempt Bond Fund................... 45.8% 54.2%
National Tax-Exempt Bond Fund....................... 81.7% 18.3%
</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.
65
<PAGE>
IMPORTANT TAX INFORMATION--Concluded
(Unaudited)
Income by Country for the M.S.D.&T. International Equity Fund
Fiscal Year Ended May 31, 2000
<TABLE>
<CAPTION>
Percentage of Percentage of
Gross Income: Taxes Paid:
------------- -------------
<S> <C> <C>
Australia........................................... 2.50% 0.30%
Brazil.............................................. 1.42 0.21
Finland............................................. 0.75 1.11
France.............................................. 13.25 29.92
Germany............................................. 5.55 6.27
Hong Kong........................................... 3.87 0.00
India............................................... 0.60 0.00
Italy............................................... 4.23 6.16
Japan............................................... 7.44 10.99
Malaysia............................................ 0.25 0.69
Mexico.............................................. 0.53 0.23
Netherlands......................................... 5.75 3.91
Philippines......................................... 0.02 0.06
Poland.............................................. 0.61 0.90
Singapore........................................... 3.14 7.88
South Africa........................................ 2.76 0.00
South Korea......................................... 0.31 0.00
Spain............................................... 2.80 4.14
Sweden.............................................. 2.51 3.71
Switzerland......................................... 4.09 6.03
Thailand............................................ -0.08 0.00
United Kingdom...................................... 23.25 17.58
United States....................................... 14.45 -0.09
------ ------
100.00 100.00
</TABLE>
Foreign taxes withheld as of May 31, 2000 were $173,479, or 42.5% of distrib-
uted income.
66
<PAGE>
Investment Adviser and Administrator:
[LOGO]
Custodian (except for the International Equity Fund)
Distributor and Transfer Agent:
Custodian for the International Equity Fund
