<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1998
Registration No. 333-44511
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [ X ]
Post-Effective Amendment No. ___ [ ]
relating solely to:
THE MONITOR GROWTH FUND, THE MONITOR INTERMEDIATE
GOVERNMENT INCOME FUND, THE MONITOR MICHIGAN TAX-FREE FUND
and THE MONITOR MONEY MARKET FUND,
each a series of
THE MONITOR FUNDS
(Exact Name of Registrant as Specified in Charter)
41 South High Street
Columbus, Ohio 43287
(Address of Principal Executive Office)
1-800-544-8347
(Registrant's Telephone Number)
David G. Lee, Senior Vice President
SEI Fund Resources
One Freedom Valley Road
Oaks, Pennsylvania 19456
(Name and Address of Agent for Service)
Copy to:
Paul R. Rentenbach
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
(313) 568-6915 (FAX)
------------------------------------------
It is proposed that this filing will become effective on March 6, 1998, pursuant
to Rule 488.
------------------------------------------
Pursuant to Rule 429, this Registration Statement relates to shares previously
registered by the Registrant on Form N-1A (Registration Nos. 33-11905).
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<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A Item Location in Proxy Statement/Prospectus
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<S> <C> <C>
Item 1 Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus............................................. Cover Page
Item 2 Beginning and Outside Back Cover
Page of Prospectus..................................... Table of Contents
Item 3 Fee Table, Synopsis Information,
and Risk Factors....................................... Summary; Comparative Fee and Expense Tables;
Comparison of Investment Objectives, Policies,
Restrictions and Risk Factors
Item 4 Information About the Transaction...................... Information Relating to the Proposed Reorganization
Item 5 Information About the Registrant....................... Comparative Fee and Expense Tables; Comparison of
Investment Objectives, Policies, Restrictions and Risk Factors;
Additional Information About The Monitor Funds; Additional
Information About The Investment Adviser
Item 6 Information About the Company
Being Acquired......................................... Comparative Fee and Expense Tables; Comparison of
Investment Objectives, Policies, Restrictions and Risk Factors;
Additional Information About FMB Funds; Financial Highlights;
Financial Statements
Item 7 Voting Information Offered............................. Information Relating to Voting Matters
Item 8 Interest of Certain Persons and
Experts................................................ Not Applicable
Item 9 Additional Information Required for
Reoffering by Persons Deemed to
be Underwriters........................................ Not Applicable
Part B Item Location in Statement of Additional Information
- ----------- -----------------------------------------------
Item 10 Cover Page............................................. Cover Page
Item 11 Table of Contents...................................... Table of Contents
Item 12 Additional Information About the
Registrant............................................. General; Combined Statement of Additional Information
of The Monitor Funds, dated April 30, 1997, as supplemented
on November 20, 1997 and February 6, 1998
Item 13 Additional Information About the
Company Being Acquired................................. Statement of Additional Information of FMB Funds, Inc.,
dated March 27, 1997
Item 14 Financial Statements................................... Financial Statements of FMB Funds, Inc., for the fiscal year
ended November 30, 1997; Annual Report to Shareholders of The
Monitor Funds for the fiscal year ended December 31, 1996; Semi-
Annual Report to Shareholders of The Monitor Funds for the six-
months ended June 30, 1997; Pro Forma Financial Statements for The
Monitor Growth Fund and The Monitor Money Market Fund as of and for
the period ended June 30, 1997
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE>
IMPORTANT SHAREHOLDER INFORMATION
FMB FUNDS, INC.
The document you hold in your hands contains your Combined Proxy
Statement/Prospectus and proxy card. A proxy card is, in essence, a ballot.
When you vote your proxy, it tells us how to vote on your behalf on important
issues relating to FMB Funds. If you simply sign the proxy without specifying
a vote, your shares will be voted in accordance with the recommendations of
the Board of Directors.
We urge you to spend a few minutes with the Combined Proxy
Statement/Prospectus, fill out your proxy card, and return it to us. Voting
your proxy, and doing so promptly, enables FMB Funds to avoid conducting
additional mailings. When Shareholders do not return their proxies in
sufficient numbers, the Funds may bear the expense of follow-up solicitations.
Please take a few moments to exercise your right to vote. Thank you.
The Combined Proxy Statement/Prospectus constitutes the Proxy Statement of
FMB Funds, Inc., for the meeting of its shareholders. It also constitutes the
Prospectus of The Monitor Funds for its portfolios which are to issue shares
in connection with the proposed reorganization--The Monitor Money Market Fund,
The Monitor Growth Fund, The Monitor Intermediate Government Income Fund and
the Monitor Michigan Tax-Free Fund.
<PAGE>
FMB FUNDS, INC.
ONE FREEDOM VALLEY ROAD
OAKS, PENNSYLVANIA 19456
February 20, 1998
Dear FMB Funds Shareholder:
By this time you should have received the FMB Funds' 1997 Annual Report to
Shareholders, which informs you of the merger of FMB-Trust and The Huntington
National Bank, and the impending combination of the two banks' proprietary
fund families, FMB Funds and Monitor Funds. In the Management Letter, I
explained that you, as a shareholder of FMB Funds, would receive additional
information and would be asked to vote on the proposed combination.
The enclosed proxy materials provide notice that Joint Shareholder Meeting
(the "Meeting") for each series of the FMB Funds have been scheduled for
Tuesday, March 17, 1998. The purpose of the Meeting is to submit important
matters regarding the future of FMB Funds to its shareholders for a vote.
After evaluating a variety of factors, including asset size, similarity of
investment objectives, and the opportunity for more efficient service delivery
and economies of scale, the Board of Directors of FMB Funds has concluded that
it would be in the best interests of shareholders of each series of FMB Funds
to combine all four portfolios of FMB Funds with four portfolios of Monitor
Funds that have similar investment objectives and policies. The accompanying
proxy statement will provide you with information relating to this proposal,
on which you are being asked to vote.
As a shareholder, you are welcome to join us at the Meeting. However, most
shareholders cast their votes by completing and signing the enclosed proxy
card. PLEASE REMEMBER: IN ORDER TO CONDUCT THE MEETING OF AN FMB PORTFOLIO, A
MAJORITY OF SHARES OF EACH FMB FUNDS PORTFOLIO MUST BE REPRESENTED, EITHER IN
PERSON OR BY PROXY. REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, WE NEED YOUR VOTE. PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE. IF YOU HAVE
INVESTED IN MORE THAN ONE FMB PORTFOLIO, YOU WILL RECEIVE A PROXY CARD FOR
EACH ONE, AND EACH PROXY CARD SHOULD BE SIGNED, DATED AND PROMPTLY RETURNED.
If you send in a proxy and decide to attend the Meeting, you may revoke your
proxy and vote in person if you desire to do so.
We ask that you read the enclosed proxy information thoroughly. In addition
to this material, we have included a list of commonly asked questions and
answers regarding the proposed combination with Monitor Funds. If you have
additional questions, please contact your account administrator, investment
sales representative, or call FMB Funds directly at 1-800-453-4324.
Please remember--your vote is very important.
Sincerely,
LOGO
Michael R. Mucciolo
Chairman of the Board
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE
PROPOSED COMBINATION OF FMB FUNDS WITH MONITOR FUNDS
Q.WHY IS THE FMB BOARD PROPOSING TO REORGANIZE THE FMB FUNDS?
A.FMB-Trust was merged into The Huntington National Bank on October 1, 1997.
The Huntington National Bank is the surviving legal entity of the merger. In
conjunction with the banks' merger, the Boards of the two banks' proprietary
mutual fund groups have approved the consolidation of the FMB Funds into the
Huntington proprietary mutual fund group, known as the Monitor Funds. Before
approving the integration of FMB Funds into Monitor Funds, the Directors of
FMB Funds evaluated a wide range of factors including the expanded array of
investment options available to shareholders, the potential for improved
service delivery, and the opportunity for increased economies of scale. After
careful consideration, the Directors concluded that the Agreement and Plan for
Reorganization was in the best interests of FMB Funds' shareholders. Through
the enclosed proxy statement, the Directors have submitted this proposal to
you for a vote.
Q.WHAT HAPPENS TO MY FMB FUNDS' INVESTMENT IF THE REORGANIZATION PLAN IS
APPROVED?
A.The Reorganization provides for the transfer of all of the assets of each
portfolio of FMB Funds into a corresponding portfolio of Monitor Funds in
exchange for shares of the corresponding Monitor Fund. Each FMB Funds'
shareholder will receive shares of a Monitor Fund equal in value to their FMB
Fund shares. For each FMB Fund other than the FMB Money Market Fund, the per
share net asset value of your Fund will change. However, in these cases, the
number of shares that you will own will be adjusted so that there will be NO
CHANGE in the total value of your account as a result of the Reorganization.
Q.HOW WILL THE REORGANIZATION AFFECT THE INVESTMENT OBJECTIVES, MANAGEMENT AND
POLICIES OF THE FUND?
A.Your FMB Fund investment will be combined with a Monitor Fund with a
substantially similar investment objective. For example, the FMB Money Market
Fund will become part of the Monitor Money Market Fund. The two funds have
investment objectives and policies which are compatible. Additionally, the
investment management team responsible for managing the Monitor Funds includes
the talents and expertise of the previous fund managers of FMB Funds.
Q.WILL FEES AND EXPENSES CHANGE AS A RESULT OF THE MERGER?
A.The sales loads of Monitor Funds are lower than those of the corresponding
FMB Funds. Further, the fees and operating expenses of the Monitor Funds are,
or will be after waiver by Huntington Bank, equal to or less than the fees and
expenses of the FMB Funds. Monitor Funds continue to maintain expense ratios
which are lower than industry averages as tracked by Lipper Analytical
Services, Inc. You will find detailed expense information in the fee table
information presented within the proxy materials.
Q.WHAT ARE MONITOR FUNDS?
A.Monitor Funds are the proprietary mutual funds managed by the investment
professionals within the Trust Division of The Huntington National Bank.
Securities for each Fund are carefully selected through extensive research and
study of economic conditions and market trends. The Huntington National Bank
is recognized for its expertise and its disciplined, team approach to
financial management and is nationally ranked among the top 100 bank money
managers.
Q.WHAT WILL HAPPEN TO MY INVESTMENT IN FMB MONEY MARKET FUND?
A.The FMB Money Market Fund will be combined with MONITOR MONEY MARKET FUND, a
fund with a similar investment objective and investment policies. MONITOR
MONEY MARKET FUND offers preservation of principal and a high degree of
liquidity by investing in short-term money market instruments, like commercial
paper and CD's.
i
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Q.WHAT WILL HAPPEN TO MY INVESTMENT IN FMB DIVERSIFIED EQUITY FUND?
A.The FMB Diversified Equity Fund will be combined with MONITOR GROWTH FUND, a
large and medium-cap equity fund with a similar investment objective and
investment policies. MONITOR GROWTH FUND seeks to achieve long-term
appreciation of capital by investing primarily in equity securities. The
investment managers at Huntington seek to invest in companies which
demonstrate above-average earnings potential.
Q.WHAT WILL HAPPEN TO MY INVESTMENT IN FMB MICHIGAN TAX-FREE BOND FUND?
A.The FMB Michigan Tax-Free Bond Fund will be merged into MONITOR MICHIGAN
TAX-FREE FUND, a newly created Michigan municipal bond fund with a similar
investment objective and investment policies. MONITOR MICHIGAN TAX-FREE FUND
invests in Michigan state and municipal bonds and offers current income which
is exempt from both federal and Michigan personal income tax.
Q.WHAT WILL HAPPEN TO MY INVESTMENT IN FMB INTERMEDIATE GOVERNMENT INCOME
FUND?
A.The FMB Intermediate Government Income Fund will be merged into MONITOR
INTERMEDIATE GOVERNMENT FUND, a newly created fund with a similar investment
objective and investment policies. MONITOR INTERMEDIATE GOVERNMENT INCOME FUND
invests primarily in intermediate-term bonds issued and guaranteed by the U.S.
Government.
Q.WHAT WILL HAPPEN IF I DO NOT RETURN MY BALLOT?
A.The shareholder meeting of the FMB Funds that are scheduled to vote on the
proposed reorganization may only be conducted if a quorum is present, either
in person or by proxy, of each FMB Fund. For the purposes of each meeting, a
quorum represents 50% of the shares outstanding for each FMB Fund as of
January 23, 1998. If a quorum is not reached, then additional solicitations
will be needed--at additional expense--in order to achieve the appropriate
number of votes. PLEASE RETURN THE PROXY BALLOT AS SOON AS POSSIBLE TO AVOID
ADDITIONAL COSTS.
Q.WHO DO I CALL IF I HAVE QUESTIONS?
A.If you have questions concerning the proxy statement, or any of these
materials, please contact your trust account administrator, investment sales
representative, or FMB Funds directly at 1-800-453-4324.
ii
<PAGE>
FMB FUNDS, INC.
ONE FREEDOM VALLEY ROAD
OAKS, PENNSYLVANIA 19456
----------------
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 17, 1998
NOTICE IS HEREBY GIVEN THAT Joint Special Meeting (the "Meeting") of the
shareholders ("Shareholders") of the FMB Diversified Equity Fund, the FMB
Intermediate Government Income Fund, the FMB Michigan Tax-Free Bond Fund and
the FMB Money Market Fund, each of which is a separate portfolio of FMB Funds,
Inc. ("FMB Funds"), will be held at the offices of SEI Fund Resources, One
Freedom Valley Road, Oaks, Pennsylvania 19456, on March 17, 1998, at 10:00
a.m. (Eastern time) for the following purposes:
ITEM 1: To consider and act upon a proposal to approve an Agreement and Plan
of Reorganization (the "Reorganization Agreement") providing for (a)
the transfer of all of the assets and liabilities of the FMB
Diversified Equity Fund, the FMB Intermediate Government Income Fund,
the FMB Michigan Tax-Free Bond Fund and the FMB Money Market Fund (the
"FMB Portfolios") to corresponding investment portfolios (the "Monitor
Portfolios") of The Monitor Funds in exchange for Investment and Trust
shares, as applicable, of the Monitor Portfolios, (b) the distribution
of such Monitor Portfolios' shares to the shareholders of the FMB
Portfolios according to their respective interests, and (c) the
termination under state law and the Investment Company Act of 1940, as
amended, of FMB Funds, Inc.
ITEM 2: To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix I to the Combined Proxy
Statement/Prospectus is a copy of the Reorganization Agreement. Shareholders
of record as of the close of business on January 23, 1998, are entitled to
notice of, and to vote at, the Meeting or any adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE FMB
FUNDS' BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR
BY ATTENDING THE SPECIAL AND VOTING IN PERSON.
By Order of the Board of Directors,
LOGO
Michael R. Mucciolo
Chairman
February 20, 1998
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
FEBRUARY 20, 1998
FMB FUNDS, INC. THE MONITOR FUNDS
One Freedom Valley Road 41 South High Street
Oaks, Pennsylvania 19456 Columbus, Ohio 43287
(800) 453-4324 (800) 253-0412
This Combined Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of FMB Funds, Inc. ("FMB
Funds") in connection with Joint Special Meeting (the "Meeting") of
shareholders ("Shareholders") to be held on March 17, 1998, at 10:00 a.m.,
Eastern time, at the offices of SEI Fund Resources, One Freedom Valley Road,
Oaks, Pennsylvania 19456, at which Shareholders will be asked to consider and
approve a proposed Agreement and Plan of Reorganization dated as of February
1, 1998 (the "Reorganization Agreement"), by and between FMB Funds and The
Monitor Funds ("Monitor Funds") and the matters contemplated therein. A copy
of the Reorganization Agreement is attached as Appendix I.
The Reorganization Agreement provides that each class of shares of each of
the four investment portfolios of FMB Funds (the "FMB Portfolios") will
transfer substantially all of its assets and known liabilities to a similar
class of shares of a corresponding Monitor Funds investment portfolio (the
"Monitor Portfolios") and that in exchange for the transfers of these assets
and liabilities, each Monitor Portfolio will issue shares of these similar
classes to the corresponding FMB Portfolio. The FMB Portfolios will then make
liquidating distributions of such Monitor Portfolio shares to the Shareholders
of the FMB Portfolios, so that a holder of a class of shares in an FMB
Portfolio will receive a class of shares of the corresponding Monitor
Portfolio with the same aggregate net asset value as the Shareholder had in
the FMB Portfolio immediately before the Reorganization. Following the
Reorganization, Shareholders of an FMB Portfolio will then become shareholders
of a similar class of shares in the corresponding Monitor Portfolio, and FMB
Funds will be terminated under state law and the Investment Company Act of
1940, as amended (the "1940 Act").
The FMB Portfolios have two classes of shares outstanding, as do the Monitor
Portfolios. Holders of each class of shares of an FMB Portfolio will receive
the class of shares of the corresponding Monitor Portfolio as set forth under
"Information Relating to the Proposed Reorganization--Description of the
Reorganization Agreement".
The Monitor Diversified Equity Fund and the Monitor Money Market Fund
currently are conducting investment operations as described in this Combined
Proxy Statement/Prospectus. The Monitor Michigan Tax-Free Fund and the Monitor
Intermediate Government Income Fund were both recently organized for the
purpose of continuing the investment operations of the FMB Michigan Tax-Free
Bond Fund and the FMB Intermediate Government Income Fund, respectively.
This Combined Proxy Statement/Prospectus sets forth concisely the
information that a Shareholder of FMB Funds should know before voting on the
proposed Reorganization, and should be retained for future reference.
Additional information, including the audited financial statements of FMB
Funds as at and for the fiscal year ended November 30, 1997, and financial
highlights of the FMB Funds for the periods indicated, is set forth in the
Statement of Additional Information relating to this Combined Proxy
Statement/Prospectus, which is incorporated herein by reference and which is
available upon request and without charge by writing to the FMB Funds at One
Freedom Valley Road, Oaks, Pennsylvania 19456, or by calling the toll-free
number 1-800-453-4324.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange Commission ("SEC"), are incorporated into this
Combined Proxy Statement/Prospectus in whole or in part by reference. The
Prospectus of the Monitor Funds, dated April 30, 1997, and its Annual Report
for the year ended
<PAGE>
December 31, 1996, are incorporated herein by reference in their entirety. The
Prospectus of the Monitor Michigan Tax-Free Fund, dated November 20, 1997, and
the Prospectus of the Monitor Intermediate Government Income Fund, dated
February 9, 1998, are also incorporated herein by reference in their entirety.
Shareholders of the FMB Funds will receive with this Combined Proxy
Statement/Prospectus, copies of the relevant Monitor Funds' Prospectus
pertaining to the shares of the Monitor Portfolio that they will receive as a
result of the consummation of the Reorganization. A copy of the Monitor Funds'
1996 Annual Report is reproduced as Annex B to this Combined Proxy
Statement/Prospectus. Additional information about the operation and
management of the Monitor Portfolios is contained in the Monitor Funds'
Combined Statement of Additional Information, dated April 30, 1997, as
supplemented on November 20, 1997 and February 9, 1998, which is available
upon request and without charge by writing to the Monitor Funds at One Freedom
Valley Road, Oaks, Pennsylvania 19456, or by calling the toll-free telephone
number 1-800-253-0412.
The Prospectus of the FMB Funds, dated March 27, 1997, as supplemented on
January 27, 1998, is incorporated herein in its entirety by reference. Copies
of the FMB Funds' Prospectus and its Statement of Additional Information,
dated March 27, 1997, are available upon request and without charge by writing
to the FMB Funds at One Freedom Valley Road, Oaks, Pennsylvania 19456, or by
calling the toll-free number 1-800-453-4324.
This Combined Proxy Statement/Prospectus constitutes the Proxy Statement of
FMB Funds for the meeting of its Shareholders, and a Monitor Funds' Prospectus
for the shares of its Monitor Portfolios that are to be issued in connection
with the Reorganization. This Combined Proxy Statement/Prospectus was first
sent to Shareholders on or about February 20, 1998.
THE SECURITIES OF THE MONITOR PORTFOLIOS HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FMB FUNDS OR MONITOR
FUNDS.
SHARES OF THE MONITOR PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE HUNTINGTON NATIONAL BANK, HUNTINGTON BANCSHARES
INCORPORATED OR ANY OF THEIR AFFILIATES. SHARES OF THE MONITOR PORTFOLIOS ARE
NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET
CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE MONITOR PORTFOLIOS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN
THE MONITOR FUNDS PORTFOLIOS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE MONITOR
MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
2
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TABLE OF CONTENTS
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SUMMARY................................................................... 4
Proposed Reorganization................................................. 4
Reasons for the Reorganization.......................................... 4
Federal Income Tax Consequences......................................... 4
Overview of the FMB Portfolios and the Monitor Portfolios............... 4
Arrangements with Service Providers--Monitor Funds...................... 5
Arrangements with Service Providers--FMB Funds.......................... 6
Comparison of Sales Charges and Exemptions.............................. 8
Comparative Purchase Procedures......................................... 9
Comparative Redemption Procedures....................................... 9
Comparative of Share Exchange Rights.................................... 10
Dividends and Distributions............................................. 10
Voting Information...................................................... 11
RISK FACTORS.............................................................. 11
COMPARATIVE FEE AND EXPENSE TABLES........................................ 17
Monitor Growth Fund/FMB Diversified Equity Fund......................... 17
Monitor Intermediate Government Income Fund/FMB Intermediate Government
Income Fund............................................................ 18
Monitor Michigan Tax-Free Fund/FMB Michigan Tax-Free Bond Fund.......... 18
Monitor Money Market Fund/FMB Money Market Fund......................... 19
Expense Ratios--FMB Portfolios.......................................... 20
Expense Ratios--Monitor Portfolios...................................... 20
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............ 21
Monitor Growth Fund/FMB Diversified Equity Fund......................... 21
Monitor Intermediate Government Income Fund/FMB Intermediate Government
Income Fund............................................................ 21
Monitor Michigan Tax-Free Fund/FMB Michigan Tax-free Bond Fund.......... 22
Monitor Money Market Fund/FMB Money Market Fund......................... 22
Investment Restrictions for All Portfolios.............................. 23
INFORMATION RELATING TO THE PROPOSED REORGANIZATION....................... 26
Description of the Reorganization Agreement............................. 26
Capitalization.......................................................... 28
Federal Income Tax Consequences......................................... 28
Comparison of Shareholder Rights........................................ 29
INFORMATION RELATING TO VOTING MATTERS.................................... 30
General................................................................. 30
Shareholder and Board Approvals......................................... 30
Appraisal Rights........................................................ 33
Quorum.................................................................. 33
Annual Meetings......................................................... 34
ADDITIONAL INFORMATION ABOUT THE MONITOR FUNDS............................ 34
ADDITIONAL INFORMATION ABOUT FMB FUNDS.................................... 35
ADDITIONAL INFORMATION ABOUT THE INVESTMENT ADVISER....................... 37
</TABLE>
3
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<TABLE>
<CAPTION>
PAGE
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FINANCIAL STATEMENTS..................................................... 38
OTHER BUSINESS........................................................... 38
SHAREHOLDER INQUIRIES.................................................... 38
APPENDIX A--Agreement and Plan of Reorganization
APPENDIX B--Monitor Funds Annual Report to Shareholders for the year
ended December 31, 1996
</TABLE>
4
<PAGE>
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Combined Proxy Statement/Prospectus, the prospectuses and statements of
additional information of FMB Funds and Monitor Funds, and the Reorganization
Agreement included with this Combined Proxy Statement/Prospectus as Appendix
A. FMB Fund's Annual Report to Shareholders for the year ended November 30,
1997, may be obtained free of charge by calling 1-800-453-4234 or writing to
SEI Fund Resources, Oaks, Pennsylvania 19456. The Monitor Funds Annual Report
to Shareholders for the year ended December 31, 1996 is included with this
Combined Proxy Statement/Propectus as Appendix B. The Monitor Funds Semi-
Annual Report to Shareholders for the six months ended June 30, 1997, may be
obtained free of charge by calling 1-800-253-0412 or writing to SEI Fund
Resources, Oaks, Pennsylvania 19456.
PROPOSED REORGANIZATION
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Boards
of both FMB Funds and Monitor Funds, including their members who are not
"interested persons" within the meaning of the Investment Company Act of 1940
(the "1940 Act"), have determined that the proposed Reorganization is in the
best interests of FMB Fund's Shareholders and Monitor Fund's shareholders,
respectively, and that the interests of existing Shareholders of FMB Funds and
Monitor Funds, respectively, will not be diluted as a result of such
Reorganization.
The merger of Huntington Bancshares, Incorporated and First Michigan Bank
Corporation, which occurred on October 1, 1997, resulted in a change in
control of FMB-Trust, the prior investment adviser for FMB Funds, and as a
result the advisory and sub-advisory contracts for FMB Funds were
automatically terminated. FMB Funds has entered into investment advisory
contracts with Huntington Bank, and these contracts were approved by
Shareholders of FMB Funds on September 26, 1997. The provisions of the
advisory contracts, including the fee rates, are the same as those of the
prior advisory contracts.
REASONS FOR THE REORGANIZATION
The primary reason for the Reorganization is the effect of the Holding
Company Merger. Due to the Holding Company Merger, the separate existence of
FMB-Trust, formerly the adviser for FMB Funds, was terminated, and its
operations (including its investment advisory activities) have been merged
into those of Huntington Bank. The Adviser has recommended that each of the
FMB Funds Portfolios be reorganized as described in this Combined Proxy
Statement/Prospectus. In light of this recommendation, after consideration of
the reasons therefor and the proposed operations of the combined funds after
the Reorganization, and in consideration of the fact that the Reorganization
will be tax-free and will not dilute the interests of FMB Funds Shareholders,
the Board of Directors of FMB Funds has authorized the Agreement and Plan of
Reorganization and recommended approval of the Reorganization by Shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The FMB Portfolios and the Shareholders of the FMB Portfolios will not
recognize any gain or loss for federal income tax purposes on the receipt of
shares of the Monitor Funds Portfolios in the proposed Reorganization.
Shareholders of the Monitor Funds Portfolios will also have no tax
consequences from the Reorganization. See "Information Relating to the
Proposed Reorganization-- Federal Income Tax Consequences."
OVERVIEW OF THE FMB PORTFOLIOS AND THE MONITOR PORTFOLIOS
The investment objectives and policies of the FMB Michigan Tax-Free Bond
Fund and the Monitor Michigan Tax-Free Fund, and those of the FMB Intermediate
Government Income Fund and The Monitor
5
<PAGE>
Intermediate Government Income Fund are substantially equivalent. The
investment objectives of the FMB Diversified Equity Fund and the FMB Money
Market Fund are also substantially equivalent to those of the corresponding
Monitor Funds portfolios, but their investment policies differ in certain
ways. See "Comparison of Investment Objectives, Policies, and Restrictions"
below and the FMB Funds and Monitor Funds Prospectuses for a description of
the similarities and differences between the investment objectives and
policies of the FMB Portfolios and their corresponding Monitor Portfolios.
ARRANGEMENTS WITH SERVICE PROVIDERS -- MONITOR FUNDS
Huntington Bank also serves as the investment adviser for Monitor Funds and
is entitled to receive advisory fees from the Monitor Portfolios computed
daily and paid monthly, at the following annual rates, expressed as a
percentage of average daily net assets:
<TABLE>
<CAPTION>
ADVISORY FEE FOR YEAR
MONITOR PORTFOLIOS ENDED DECEMBER 31, 1997 (1)
------------------ ---------------------------
<S> <C>
Monitor Growth Fund.......................... 0.60%
Monitor Intermediate Government Income Fund
(2)......................................... 0.50%
Monitor Michigan Tax-Free Fund (2)........... 0.50%
Monitor Money Market Fund.................... 0.30%
</TABLE>
- --------
(1) For the year ended December 31, 1997, there were no waivers of advisory
fees by the Adviser.
(2) This is a new portfolio that has not commenced operations as of the date
hereof.
The Adviser manages the investments of each Monitor Portfolio, makes
decisions with respect to and places orders for all purchases and sales of a
Monitor Portfolio's securities, and maintains certain records relating to such
purchases and sales. See "Management of the Trust" in the Monitor Funds'
Prospectus accompanying this Combined Proxy Statement/Prospectus, for
additional information on the Adviser.
During the year ended December 31, 1997, administrative services were
provided to Monitor Funds by SEI Fund Resources ("SEI"), an indirect wholly-
owned subsidiary of SEI Investment Company. For its services, SEI was paid a
fee, computed daily and paid monthly, on each Monitor Portfolio's average
daily net assets, at the rate of 0.11%. For the six months ended June 30,
1997, SEI received administration fees of $567,230 from the two Monitor
Portfolios that were conducting business during that year. During the six
months ended June 30, 1997, Huntington Bank served as sub-administrator for
the Monitor Portfolios and was paid sub-administration fees by SEI of
$463,334. Effective January 12, 1998, Huntington Bank became the administrator
for the Monitor Portfolios, and is entitled to receive the same annual fee of
0.11% of each Monitor Portfolio's average daily net assets. State Street Bank
and Trust Company provides transfer agency services to the Monitor Portfolios.
Custodial services are provided to the Monitor Portfolios by Huntington Bank,
for which it receives an annual fee of 5.6 basis points (0.056%) of each
Monitor Portfolio's average daily net assets.
SEI Investments Distribution Co. ("SEI Distribution") serves as distributor
of both the Investment Shares class and the Trust Shares class of the Monitor
Portfolios. Monitor Funds has adopted a Distribution and Shareholder Services
Plan pursuant to Rule 12b-1 under the 1940 Act (the "Monitor 12b-1 Plan").
Under the Monitor 12b-1 Plan, Investment Shares of each of the Monitor
Portfolios bears the expense of distribution fees payable to SEI Distribution
at an annual rate of up to 0.25% of the average daily net asset value of such
Monitor Portfolio's outstanding Investment Class shares to finance activities
which are principally intended to result in the sale of Investment Class
shares. SEI Distribution may enter into agreements with financial institutions
and industry professionals which provide distribution and/or administrative
services as agents for their customers who beneficially own Investment Class
shares. Services provided by such financial institutions may include, without
limitation: printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of a Monitor
Portfolio's Investment Class shares, and personnel and communication equipment
used in servicing shareholder accounts and prospective shareholder inquiries.
The Monitor 12b-1 Plan is a "compensation" type plan as opposed to a
"reimbursement" type plan. Accordingly, payments by Investment
6
<PAGE>
Class shares under the Monitor 12b-1 Plan are based on the expressed fee
rather than on the specific amounts expended by SEI Distribution for
distribution purposes. Accordingly, SEI Distribution may be able to recover
such amounts or may earn a profit from payments made by Investment Shares of
Monitor Portfolios under the Monitor 12b-1 Plan. For the six months ended June
30, 1997, the Monitor Portfolios paid, in the aggregate, fees of $122,053 to
SEI Distribution pursuant to the Monitor 12b-1 Plan.
ARRANGEMENTS WITH SERVICE PROVIDERS -- FMB FUNDS
Since October 1, 1997, Huntington Bank has served as investment adviser for
FMB Funds. It assumed that function as the result of the merger of FMB-Trust
with and into Huntington Bank on that date. Under the advisory contracts with
FMB Funds, Huntington Bank is, and FMB-Trust was, entitled to receive advisory
fees, computed daily and paid monthly, at the following annual rates,
expressed as a percentage of average daily net assets:
<TABLE>
<CAPTION>
ADVISORY FEE FOR FISCAL
YEAR ENDED
NOVEMBER 30, 1997
---------------------------
FEE AFTER
FMB PORTFOLIOS ACTUAL FEE WAIVERS
-------------- ------------ -----------
<S> <C> <C>
FMB Diversified Equity Fund............... 1.00% 1.00%
FMB Intermediate Government Income Fund... 0.45% 0.45%
FMB Michigan Tax-Free Bond Fund........... 0.55% 0.35%
FMB Money Market Fund..................... 0.35% 0.35%
</TABLE>
Pursuant to the FMB Funds investment advisory contracts with Huntington
Bank, the Adviser provides investment research and management and conducts a
continuous investment program. The Adviser also directs the investments of the
FMB Funds' portfolios in accordance with each portfolio's investment
objectives, policies and limitations, and creates and maintains all necessary
books and records.
Administrative services are also provided to FMB Funds by SEI. For its
services, SEI receives a fee, calculated daily and paid monthly, at the annual
rate of 0.20% of the average aggregate daily net assets of each FMB Portfolio.
For the fiscal year ended November 30, 1997, SEI received administration fees
totaling $770,987 from all four of the FMB Portfolios. SEI also serves as
transfer agent for the FMB Funds and State Street Bank and Trust Company
serves as sub-transfer agent pursuant to an agreement with the SEI. Custodial
services are provided to the FMB Portfolios by Bankers Trust Company.
SEI Distribution also serves as distributor of both the Consumer Service
Class of shares and the Institutional Class of shares of FMB Funds, and under
the distribution agreement, it acts as agent for FMB Funds in connection with
the offering of Consumer Service Class shares of each FMB Portfolio. FMB Funds
has also adopted a separate Amended and Restated Distribution for each FMB
Portfolio pursuant to Rule 12b-1 under the 1940 Act (the "FMB 12b-1 Plans").
Under each FMB 12b-1 Plan, the Consumer Service Class shares of each of the
FMB Portfolios bears the expense of distribution fees payable to SEI
Distribution at an annual rate of up to 0.35% for the FMB Diversified Equity
Fund, the FMB Intermediate Government Income Fund and the FMB Michigan Tax-
Free Bond Fund, and up to 0.25% for the FMB Money Market Fund, of the average
daily net asset value of each such FMB Portfolio's outstanding Consumer
Service Class shares to finance activities which are principally intended to
result in the sale of Consumer Service Class shares. SEI Distribution may
enter into agreements with financial institutions and industry professionals
which provide distribution and/or administrative services as agents for their
customers who beneficially own Consumer Service Class shares. Services
provided by such financial institutions may include, without limitation,
printing and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of an FMB Portfolio's shares,
and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries.
7
<PAGE>
The FMB 12b-1 Plan is a "compensation" type plan as opposed to a
"reimbursement" type plan. Accordingly, payments by Consumer Service Class
shares under the FMB 12b-1 Plans are based on the expressed fee rather than on
the specific amounts expended by SEI Distribution for distribution purposes.
SEI Distribution may be able to recover such amounts or may earn a profit from
payments made by Consumer Service Class shares of FMB Funds under the FMB 12b-
1 Plans. For the fiscal year ended November 30, 1997, FMB Funds paid, in the
aggregate, fees of $94,225 to SEI Distribution pursuant to the FMB 12b-1
Plans.
COMPARATIVE SALES CHARGES AND EXEMPTIONS
Monitor Portfolios --
(a) Trust Shares of each Monitor Portfolio are sold without a sales
charge.
(b) Investment Shares of the Monitor Growth Fund are sold with a 4.00%
maximum front-end sales charge. Investment Shares of the Monitor
Intermediate Government Income Fund and the Monitor Michigan Tax-Free Fund
are sold with a 2.00% maximum front-end sales charge. Investment Shares of
the Monitor Money Market Fund are sold without any sales charge.
(c) The Monitor Portfolios which have a front-end sales charge offer
sales charge exemptions to the following classes of shareholders: (i)
current officers, directors, employees (and their spouses and immediate
family members) and retired officers and employees (including their
spouses) of Huntington Bancshares Incorporated and its subsidiaries, (ii)
persons who participate in certain financial services programs offered by
the banking subsidiaries of Huntington Bancshares Incorporated and (iii)
persons who are current members of certain affinity groups (such as trade
associations or membership associations) that have entered into written
agreements with Huntington Bank and the Distributor or Monitor Portfolios
providing for such a load waiver.
(d) The Monitor Portfolios also reduce these front-end sales charges
through quantity discounts, accumulated purchases, use of a 13-month letter
of intent, use of the reinstatement privilege and concurrent purchases of
two or more Monitor Portfolios that each have a front-end sales charge
FMB Portfolios --
(a) Institutional Shares of the FMB Portfolios are sold without a sales
charge.
(b) Consumer Service Shares of the FMB Diversified Equity Fund are sold
with a 5.75% maximum front-end sales charge. Consumer Service Shares of the
FMB Intermediate Government Income Fund and the FMB Michigan Tax-Free Bond
Fund are sold with a 4.75% maximum front-end sales charge. Consumer Service
Shares of the FMB Money Market Fund are sold without a sales charge.
(c) The FMB Portfolios which have a front-end sales charge offer sales
charge exemptions to the following classes of shareholders: (i) trust,
investment management and other accounts managed or administered by the
Adviser pursuant to a written management or administration agreement, (ii)
any person purchasing shares with the proceeds of a redemption from any
mutual fund other than an FMB Fund that has assessed a front-end sales
charge, (iii) the Distributor or any of its affiliates, (iv) Directors and
officers of FMB Funds, (v) directors of officers of the Distributor, the
Adviser or their affiliates or full-time employees of any of them who have
been so employed for at least 90 days (including members of their immediate
families and their retirement plans or accounts), provided that the
Distributor, the Adviser or the affiliate, as the case may be, agrees to
permit such purchases at net asset value and (vi) representatives of
selling brokers purchasing shares for themselves or member of their
immediate families.
(d) The FMB Portfolios also reduce these front-end sales charges through
quantity discounts, accumulated purchases and use of a 13-month letter of
intent.
8
<PAGE>
COMPARATIVE PURCHASE PROCEDURES
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS-- FMB PORTFOLIOS--
INVESTMENT AND CONSUMER SERVICE AND
TRUST SHARES INSTITUTIONAL SHARES
-------------------- --------------------
<S> <C> <C>
Minimum Initial Investment and Trust--$1,000, Consumer Service--$500, except
Investment: except that minimum is waived that minimum is $250 for IRA
for shareholders using the accounts and minimum is waived
automatic investment plan. for shareholders using the
automatic investment plan.
Institutional--No minimum,
except $50 for automatic
investment plan and $25 for
shareholders using the direct
deposit plan.
Minimum Subsequent
Investment: Investment--$50 Consumer Service--$25
Trust--$500 Institutional--None, except for
automatic investment plan and
direct deposit plan.
Automatic Investment Investment and Trust--Yes. Consumer Service--Yes. Minimum
Plan: Minimum purchase is $50 purchase is $25. Institutional--
Yes. Minimum purchase is $50,
but payroll direct deposit
minimum is $25.
Purchase Methods: Investment and Trust--By Consumer Service and
telephone Institutional--By mail, through
authorized brokers or financial
institutions.
Payment Methods: Investment and Trust--By check Consumer Service and
or wire transfer Institutional--By check or wire
transfer; in-kind purchases
allowed under certain
conditions; payroll direct
deposit plan available.
</TABLE>
The Monitor Portfolios and FMB Portfolios each reserve the right to reject
any purchase order.
COMPARATIVE REDEMPTION PROCEDURES
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS-- FMB PORTFOLIOS--
INVESTMENT AND CONSUMER SERVICE AND
TRUST SHARES INSTITUTIONAL SHARES
-------------------- --------------------
<S> <C> <C>
Redemption Methods: Investment and Trust--By mail Consumer Service and
Institutional--
or telephone. By mail or telephone.
Payment Methods: Investment and Trust--By check Consumer Service and
or wire transfer (wire Institutional-- By check or wire
transfers require fee payment transfer. Redemption in kind is
for amounts under $100,000) optional for redemption requests
in excess of $250,000 or 1% of
net assets within any 90-day
period.
Check Writing Privilege: Investment--Money Market Fund Consumer Service--Money Market
only Fund only
Trust--None Institutional--None.
Automatic Cash
Withdrawal Plan: Investment--Yes Consumer Service--Yes
Trust--No Institutional--No
</TABLE>
9
<PAGE>
A shareholder may be required to redeem Investment Shares in any Monitor
Portfolio if the balance in the shareholder's account drops below $1,000 as
the result of a redemption request and the shareholder does not increase the
balance to at least $1,000 upon 30 days' notice. The FMB Portfolios may redeem
involuntarily, upon 30 days' notice, Consumer Service shares of a shareholder
whose account decreases to a value of less than $500 because of redemptions
unless the shareholder makes an additional investment during that period in an
amount that will increase the value of the account to at least $500 upon 30
days' notice. Monitor Portfolios and the FMB Portfolios may also redeem shares
involuntarily when appropriate in light of their responsibilities under the
1940 Act, and may make payment for redemptions in securities in lieu of cash.
COMPARATIVE SHARE EXCHANGE RIGHTS
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS-- FMB PORTFOLIOS--
INVESTMENT AND CONSUMER SERVICE AND
TRUST SHARES INSTITUTIONAL SHARES
-------------------- --------------------
<S> <C> <C>
By Mail: Yes Yes
By Telephone: Yes Yes
Minimum: Inapplicable $1,000 minimum
</TABLE>
Shareholders of the Monitor Portfolios may exchange Investment Shares or
Trust Shares of any Monitor Portfolio for shares of the same class of any of
the ten other series of Monitor Funds at the respective net asset values per
share next determined after receipt of a request to exchange shares. For
Investment Shares of the Monitor Portfolios, no sales charge applies when
shares are exchanged from a Monitor Portfolio that imposes a sales charge to a
Monitor Portfolio with no sales charge. However, if a shareholder desires to
exchange Investment Shares of a Monitor Portfolio that does not impose a sales
charge to one which does, the shareholder will be required to pay the
applicable sales charge. In order to make an exchange, shareholders must
continue to satisfy the minimum initial and subsequent purchase amounts and
the applicable minimum account balance.
DIVIDENDS AND DISTRIBUTIONS
All Monitor Portfolios and FMB Portfolios distribute their net capital gains
to shareholders at least annually. The following table summarizes the policies
concerning the declaration and payment of dividends from net investment
income.
Dividends declared daily, paid monthly
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS FMB PORTFOLIOS
------------------ --------------
<S> <C>
Money Market Fund Money Market Fund
Intermediate Government Income Fund
Michigan Tax-Free Bond Fund
Dividends declared monthly, paid monthly
<CAPTION>
MONITOR PORTFOLIOS FMB PORTFOLIOS
------------------ --------------
<S> <C>
Growth Fund None
Intermediate Government Income Fund
Michigan Tax-Free Fund
Dividends declared quarterly, paid quarterly
<CAPTION>
MONITOR PORTFOLIOS FMB PORTFOLIOS
------------------ --------------
<S> <C>
None Diversified Equity Fund
</TABLE>
The Monitor Portfolios and FMB Portfolios all offer dividend reinvestment
programs.
10
<PAGE>
VOTING INFORMATION
Only Shareholders of record at the close of business on January 23, 1998,
will be entitled to notice of and to vote at the Meeting. Each share or
fraction thereof is entitled to one vote or fraction thereof and all shares
will vote separately by FMB Portfolio. Shares represented by a properly
executed proxy will be voted in accordance with the instructions thereon, or
if no specification is made, the persons named as proxies will vote in favor
of each proposal set forth in the Notice of Meeting. Proxies may be revoked at
any time before they are exercised by submitting to FMB Funds a written notice
of revocation or a subsequently executed proxy or by attending the Meeting and
voting in person. For additional information, see "Information Relating to
Voting Matters".
RISK FACTORS
GENERAL
The market value of fixed-income securities, which constitute a major part
of the investments of the Monitor Intermediate Government Income Fund and the
Monitor Michigan Tax-Free Fund, may vary inversely in response to changes in
prevailing interest rates. These funds may make certain investments and employ
certain investment techniques that involve special risks, including the use of
repurchase agreements, lending portfolio securities, entering into futures
contracts and related options as hedges and purchasing securities on a when-
issued or delayed delivery basis. These investments and investment techniques
may increase the volatility of a fund's net asset value. The following
information summarizes these and other principal risk factors of investing in
the Monitor Portfolios, and compares those risks with the risks associated
with an investment in the FMB Portfolios.
FOREIGN SECURITIES
The Monitor Growth Fund may invest in securities principally traded in
foreign markets. Since foreign securities are normally denominated and traded
in foreign currencies, the value of such assets may be affected favorably or
unfavorably by currency exchange rates and exchange control regulation.
Exchange rates with respect to certain currencies may be particularly
volatile. There may be less information publicly available about a foreign
company than about a U.S. company, and foreign companies are not generally
subject to accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The securities of some
foreign companies are less liquid and at times more volatile than securities
of comparable U.S. companies. Foreign brokerage commissions and other fees are
also generally higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delays in payment or
delivery of securities or in the recovery of a fund's assets held abroad) and
expenses not present in the settlement of domestic investments. In addition,
with respect to certain foreign countries, there is a possibility of
nationalization or expropriation of assets, confiscatory taxation, political
or financial instability and diplomatic developments that could affect the
value of investments in those countries. In certain countries, legal remedies
available to investors may be more limited than those available with respect
to investments in the United States or other countries. The laws of some
foreign countries may limit a fund's ability to invest in securities of
certain issuers in those countries. Special tax considerations apply to
foreign securities. The Monitor Growth Fund may buy or sell foreign currencies
and forward foreign currency exchange contracts for hedging purposes in
connection with foreign investments.
The FMB Diversified Equity Fund and the FMB Money Market Fund limit their
investments in foreign securities to those which are denominated in U.S.
dollars or to ADRs, which do not have many of the risks associated with other
foreign securities that are described above.
SHARES OF OTHER MUTUAL FUNDS
The Monitor Growth Fund may invest up to 5% of its total assets in the
shares of money market mutual funds (other than any of the Monitor Money
Market Funds) for liquidity purposes. The Monitor Michigan Tax-
11
<PAGE>
Free Fund may also invest up to 5% of its total assets in the shares of one or
more tax-exempt money market mutual funds for liquidity purposes. When a fund
invests in the shares of other mutual funds, investment advisory and other
fees will apply, and the investment's yield will be reduced accordingly. Under
the 1940 Act, a fund may not invest more than 5% of its total assets in the
shares of any one mutual fund, nor may a fund own more than 3% of the shares
of any one fund; in addition, although each fund intends to limit its
investments in mutual funds to no more than 5% of total assets, under the 1940
Act, no more than 10% of a fund's total assets may be invested at any one time
in the shares of other funds. Any of the FMB Portfolios may also invest in
shares of other unaffiliated mutual funds, provided that any such investments
are limited to short-term investments and provided that the Adviser will waive
its advisory fee for that portion of an FMB Portfolio's assets so invested.
SECURITIES LENDING
In order to generate additional income, any of the Monitor Portfolios may
lend its portfolio securities on a short-term basis to brokers, dealers or
other financial institutions that the Adviser has determined are creditworthy
under guidelines established by the Trustees of Monitor Funds, provided that
the lending fund receives collateral consisting of marketable securities
having a current market value equal to at least 102% of the current market
value of the securities loaned. The collateral received must be valued daily
and, should the market value of the loaned securities increase, the borrower
must furnish additional collateral to the lending fund. As a matter of
fundamental policy, the total value of all securities loaned by a Monitor
Portfolio may not exceed 20% of its total assets. There is a risk that when
lending portfolio securities they may not be available to the lending fund on
a timely basis and therefore, the lending fund may lose an opportunity to sell
these securities at a desirable price. In addition, in the event that a
borrower of securities would file for bankruptcy or become insolvent,
disposition of the securities pledged as collateral may be delayed pending
court action. Although voting rights, or rights to consent, with respect to
the loaned securities pass to the borrower, a lending fund retains the right
to call the loans at any time on reasonable notice, and it will do so to
enable a fund to exercise voting rights on any matters materially affecting
the investment. A lending fund may also call such loans in order to sell the
securities.
All of the FMB Portfolios except the FMB Intermediate Government Income Fund
may also lend portfolio securities to other approved brokers, dealers and
financial institutions, but the total value of all securities loaned by an FMB
Portfolio cannot exceed 5% of the lending fund's total assets. In additions,
the investment policies of the FMB Portfolios require only that the collateral
received for loans of portfolio securities have a current market value of at
least 100% of the market value of the loaned securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Any of the Monitor Portfolios may purchase securities on a when-issued or
delayed delivery basis, whereas only the FMB Michigan Tax-Free Bond Fund may
engage in this investing technique. These transactions are arrangements in
which a fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, a fund may pay more or less than the market value of the
securities on the settlement date. A fund may dispose of a commitment prior to
settlement date if the Adviser deems it appropriate to do so. No fees or other
expenses, other than normal transaction costs, are incurred in these
transactions. However, liquid assets of a fund sufficient to make payment for
the securities to be purchased are segregated on the fund's records at the
trade date. These assets are marked to market daily and are maintained until
the transaction has been settled.
MICHIGAN TAX-EXEMPT SECURITIES
The performance of the both the Monitor Michigan Tax-Free Fund and the FMB
Michigan Tax-Free Bond Fund is closely tied to conditions within the State of
Michigan, and the risks associated with these investments are the same for
both funds. The economy of Michigan is principally dependent on three
sectors--manufacturing
12
<PAGE>
(particularly durable goods, automotive products and office), tourism and
agriculture. Michigan encountered financial difficulties during the late
1980's, largely as a result of poor conditions in the automotive industry, but
recovered from the prolonged downturn in production levels in this sector by
the early 1990's. Structural changes in the automotive industry have given the
Michigan economy greater financial stability. The state's finances continue to
be in excellent condition, and a Budget Stabilization Fund that exceeds $1
billion should help the state weather any potential economic recessions. At
the end of 1996, after several years of rapid growth, the Michigan economy was
evidencing continued growth and unemployment levels were lower than they had
been for the past several years. The market value and the marketability of
bonds issued by local units of government in the state may be affected
adversely by the same factors that affect Michigan's economy generally. The
ability of Michigan and its local units of government to pay the principal of
and interest on their bonds may also be affected by such factors and by
certain constitutional, statutory and charter limitations. For additional
information on the risks associated with these investments, see "Investment
Objectives and Policies of the Trust--Michigan Tax-Exempt Securities" in the
Monitor Funds' Combined Statement of Information.
NON-DIVERSIFICATION
The Monitor Michigan Tax-Free Fund and the FMB Michigan Tax-Free Bond Fund
are each a "non-diversified fund" under the 1940 Act, which means that they
may each invest their assets in obligations of fewer issuers than would be the
case if they were "diversified". Each Fund's ability to invest a relatively
high percentage of their assets in the securities of a limited number of
issuers involves an increased risk of loss to a fund if any one issuer is
unable to make interest or principal payments or if the market value of the
issuer's securities declines. Although non-diversified under the 1940 Act,
each of these funds intends to comply with Subchapter M of the Internal
Revenue Code. This undertaking requires, among other things, that at the end
of each quarter of the taxable year, with regard to at least 50% of each
fund's total assets, no more than 5% of its total assets are invested in the
assets of a single issuer; beyond that, no more than 25% of its total assets
are invested in the securities of a single issuer.
REPURCHASE AGREEMENTS
Certain securities in which any of the Monitor Portfolios or any of the FMB
Portfolios invests may be purchased pursuant to repurchase agreements, and the
risks associated with these investments are the same for all funds. Repurchase
agreements are arrangements in which banks, broker-dealers and other
recognized financial institutions sell U.S. Government securities or other
securities to a fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. A fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from a fund, a fund could receive
less than the repurchase price on any sale of such securities. In the event
that a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities might be delayed pending court action. The Trustees of the
Monitor Funds believe that under the regular procedures normally in effect for
custody of a fund's portfolio securities subject to repurchase agreements, a
court of competent jurisdiction would rule in favor of a fund and allow
retention or disposition of such securities. A fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as broker-dealers, that are found by the Adviser to be creditworthy pursuant
to guidelines established by the Monitor Funds' Board of Trustees.
MORTGAGE-RELATED SECURITIES
The Monitor Intermediate Government Income Fund and the FMB Intermediate
Government Income Fund may invest their assets in mortgage-related securities,
which are securities that, directly or indirectly, represent participations
in, or are secured by and payable from, loans secured by real property, and
the risks associated with these investments are the same for all funds.
Mortgage-related securities include mortgage pass-through securities,
adjustable rate mortgage securities, collateralized mortgage obligations,
stripped mortgage-backed securities, and derivative mortgage securities. The
mortgage-related securities in which the Monitor Intermediate
13
<PAGE>
Government Income Fund and the FMB Intermediate Government Income Fund invest
fall into two categories: (a) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"), and (b) those
issued by non-governmental issuers that represent interests in, or are
collateralized by, mortgage-related securities issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. Non-governmental
issuers referred to in (b) above include originators of and investors in
mortgage loans, including savings and loan associations, mortgage bankers,
commercial banks, investment banks and special purpose subsidiaries of the
foregoing. The risks associated with these types of investments are
substantially the same for both the Monitor Intermediate Government Income
Fund and the FMB Intermediate Government Income Fund.
Mortgage Pass-Through Securities. Mortgage pass-through securities provide
for the pass-through to investors of their pro-rata share of monthly payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans, net of any fees paid to the guarantor of such securities and
the servicer of the underlying mortgage loans. With respect to U.S. Government
pass-through securities issued by GNMA, FNMA and FHLMC, each of GNMA, FNMA and
FHLMC guarantee timely distributions of interest to certificate holders. GNMA
and FNMA guarantee timely distributions of scheduled principal. FHLMC
generally guarantees only ultimate collection of principal of the underlying
mortgage loans.
Adjustable Rate Mortgage Securities. Adjustable rate mortgage securities
("ARMS") are pass-through mortgage securities collateralized by mortgages with
interest rates that are adjusted from time to time. The adjustments usually
are determined in accordance with a predetermined interest ate index and may
be subject to certain limits. While the values of ARMS, like other debt
securities, generally vary inversely with changes in market interest rates
(increasing in value during periods of declining interest rates and decreasing
in value during periods of increasing interest rates), the values of ARMS
should generally be more resistant to price swings than other debt securities
because the interest rates of ARMS move with market interest rates. The
adjustable rate feature of ARMS will not, however, eliminate fluctuations in
the prices of ARMS, particularly during periods of extreme fluctuations in
interest rates. Also, since many adjustable rate mortgages only reset on an
annual basis, it can be expected that the prices of ARMS will fluctuate to the
extent that changes in prevailing interest rates are not immediately reflected
in the interest rates payable on the underlying adjustable rate mortgages.
ARMS typically have caps which limit the maximum amount by which the
interest rate may be increased or decreased at periodic intervals or over the
life of the loan. To the extent that interest rates increase in excess of the
caps, ARMS can be expected to behave more like traditional debt securities and
to decline in value to a greater extent than would be the case in the absence
of such caps. Also, since many adjustable rate mortgages only reset on an
annual basis, it can be expected that the prices of ARMS will fluctuate to the
extent that changes in prevailing interest rates are not immediately reflected
in the interest rates payable on the underlying adjustable rate mortgages. The
extent to which the prices of ARMs fluctuate with changes in interest rates
will also be affected by the indices underlying the ARMS. Some indices, such
as the one-year constant maturity Treasury note rate, closely mirror changes
in market interest rate levels. Others, such as the 11th District Federal
Reserve Cost of Funds Index (often related to ARMS issued by FNMA), tend to
lag changes in market levels and tend to be somewhat less volatile.
Collateralized Mortgage Obligations. Collateralized mortgage obligations
("CMOs") are debt instruments issued by special purpose entities, which are
secured by pools of mortgage loans or other mortgage-related securities.
Multi-class pass-through securities are equity interests in a trust composed
of mortgage loans or other mortgage-related securities. Payments of principal
and interest on underlying collateral provide the funds to pay debt service on
the collateralized mortgage obligation or make scheduled distributions on the
multi-class pass-through security. In a CMO, a series of bonds or certificates
is issued in multiple classes. Each class of CMO, often referred to as
"tranche," is issued at a specific coupon rate and has a stated maturity or
final distribution date. Principal prepayments on collateral underlying a CMO
may cause it to be retired substantially earlier than the stated maturities or
final distribution dates.
14
<PAGE>
The principal and interest on the underlying mortgages may be allocated
among the several tranches of a CMO in many ways. For example, certain
tranches may have variable or floating interest rates and others may be
stripped securities which provide only the principal or interest feature of
the underlying security, and these are known as "stripped mortgage-backed
securities" (discussed below). Generally, the purpose of the allocation of
cash flow of a CMO to the various tranches is to obtain a more predictable
cash flow to certain of the individual tranches than exists with the
underlying collateral of the CMO. As a general rule, the more predictable the
cash flow is on a CMO tranche, the lower the anticipated yield will be on that
tranche at the time of issuance relative to prevailing market yields on
mortgage-related securities. As part of the process of creating more
predictable cash flows on most of the tranches of a CMO, one or more tranches
generally must be created that absorb most of the volatility in the cash flows
on the underlying mortgage loans. The yields on these tranches, which may
include inverse floaters, IOs, POs, and Z tranches, discussed below, are
generally higher than prevailing market yields on mortgage-related securities
with similar maturities. As a result of the uncertainty of the cash flows of
these tranches, the market prices of and yield on these tranches generally are
more volatile.
CMO tranches include "inverse floaters" and "Z tranches." An inverse floater
is a CMO tranche with a coupon rate that moves inversely to a designated
index, such as LIBOR (London Inter-Bank Offered Rate) or COFI (Cost of Funds
Index). Like most other fixed-income securities, the value of inverse floaters
will decrease as interest rates increase. Inverse floaters, however, exhibit
greater price volatility than the majority of mortgage pass-through securities
or CMOs. Coupon rates on inverse floaters typically change at a multiple of
the changes in the relevant index rate. Thus, any rise in the index (as a
consequence of an increase in interest rates) causes a correspondingly greater
drop in the coupon rate of an inverse floater while any drop in the index rate
cases a correspondingly greater increase in the coupon of an inverse floater.
Some inverse floaters also exhibit extreme sensitivity to changes in
prepayments. Inverse floaters would be purchased to attempt to protect against
a reduction in the income earned on a fund's investments due to a decline in
interest rates.
Z tranches of CMOs defer interest and principal payments until one more
other classes of the CMO have been paid in full. Interest accretes on the Z
tranche, being added to principal, and is compounded through the accretion
period. After the other classes have been paid in full, interest payments
begin and continue through maturity. Z tranches have characteristics similar
to zero coupon bonds. Like a zero bond, during its accretion period a Z
tranche has the advantage of eliminating the risk of reinvesting interest
payments at lower rates during a period of declining market interest rates. At
the same time, however, and also like a zero coupon bond, the market value of
a Z tranche can be expected to fluctuate more widely with changes in market
interest rates than would the market value of a tranche which pays interest
currently. In addition, changes in prepayment rates on the underlying mortgage
loans will affect the accretion period of a Z tranche, and therefore also will
influence its market value.
Stripped Mortgage-Backed Securities. Some mortgage-related securities may
represent an interest solely in the principal repayments or solely in the
interest payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Although the Adviser does not presently intend to
invest the assets of the Monitor Intermediate Government Income Fund or the
FMB Intermediate Government Income Fund in SMBSs, it retains the power to do
so at any time. SMBSs are derivative multi-class securities. SMBSs are usually
structured with two classes and receive different proportions of the interest
and principal distributions on the pool of underlying mortgage-backed
securities. Due to the possibility of prepayments on the underlying mortgages,
SMBSs may be more interest-rate sensitive than other mortgage-backed
securities. If prevailing interest rates fall below the level at which SMBSs
were issued, there may be substantial prepayments on the underlying mortgages,
leading to the relatively early prepayments of principal-only SMBSs (the
principal-only or "PO" class) and a reduction in the amount of payments made
to holders of interest-only SMBSs (the "interest-only" or "IO" class).
Therefore, interest-only SMBSs generally increase in value as interest rates
rise and decreases in value as interest rates fall, counter to changes in
value experienced by most fixed income securities. If the underlying mortgages
experience slower than anticipated prepayments of principal, the yield on a PO
class will be affected more severely than would be the case with a traditional
mortgage-related security. Because the yield to maturity of an IO class is
extremely sensitive to the rate of principal payments (including
15
<PAGE>
prepayments) on the related underlying mortgage-backed securities, it is
possible that a fund might not recover its original investment on interest-
only SMBSs if there are substantial prepayments on the underlying mortgages.
In view of these considerations, the Adviser intends to use these
characteristics of interest-only SMBSs to reduce the effects of interest rate
changes on the value of a fund's portfolio, while continuing to pursue current
income.
OPTIONS AND FUTURES CONTRACTS
Each Monitor Portfolio other than the Monitor Money Market Fund, and both
the FMB Diversified Equity Fund and the FMB Intermediate Government Income
Fund may seek to increase current return by writing covered call options and
covered put options on its portfolio securities. The FMB Michigan Tax-Free
Bond Fund and the FMB Money Market Fund do not have the authority to engage in
options or futures investing. A fund receives a premium from writing such
options, which increases the fund's return if the option expires without being
exercised, or is closed out at a net profit. A fund may also buy or sell put
and call options for hedging purposes. When a fund writes a call option on a
portfolio security, it gives up the opportunity to profit from any increases
in the price of that security above the option exercise price. Conversely,
when a fund writes a put option, the fund takes the risk that it will be
required to purchase the security from the option holder at a price above the
then current market price of the security. A fund may terminate an option that
it has written prior to expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms as the
option written.
A fund may purchase and sell futures contracts and related options to hedge
against changes in the value of securities it owns or expects to purchase.
Futures contracts on a variety of stock and bond indices are currently
available. An index is intended to represent a numerical measure of market
performance by the securities making up the index. A fund may purchase and
sell futures contracts on any index approved for trading by the Commodity
Futures Trading Commission to hedge against general changes in market values
of securities that a fund owns or expects to purchase. A fund may also
purchase and sell options on index futures or directly on the underlying
indices for hedging purposes. In additions, a fund may purchase and sell
futures contracts and related options on individual debt securities that a
fund owns or expects to purchase, if and when such futures contracts and
options become available.
Options and futures involve various risks, including the risk that a fund
may be unable at times to close out its positions, that such transactions may
not accomplish their purposes because of imperfect market correlations, or
that the Adviser may not forecast market movements correctly. Options and
futures transactions involves costs and may result in losses. The effective
use of options and futures strategies by a fund is dependent upon, among other
things, a fund's ability to terminate options and futures positions at times
when the Adviser deems it desirable to do so. Although a Monitor Portfolio
will enter into an options or futures contract position only if the Adviser
believes that a liquid secondary market exists for such options or futures
contract, there is no assurance that a fund will be able to effect closing
transactions at a particular time or at an acceptable price.
The Monitor Portfolios generally expect that their options and futures
transactions will be conducted on recognized exchanges, in certain instances a
fund may purchase and sell options in the over-the-counter ("OTC") markets. A
fund's ability to terminate options in the OTC market may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to a fund. A Monitor Portfolio will, however, engage in OTC market
transactions only when appropriate exchange-traded transactions are
unavailable and when, in the opinion of the Adviser, the pricing mechanism and
liquidity of the OTS market is satisfactory and the participants are
responsible parties likely to meet their contractual obligations. The use of
options and futures strategies also involves the risk of imperfect correlation
between movements in the prices of options and futures contracts an movements
in the value of the underlying securities that are the subject of a hedge. The
successful use of these strategies further depends on the ability of the
Adviser to forecast market movements correctly.
16
<PAGE>
COMPARATIVE FEE AND EXPENSE TABLES
The tables below show (i) information regarding the fees and expenses paid
by each class of shares of each FMB Portfolio for the fiscal year ended
November 30, 1997, and of each class of shares of the corresponding Monitor
Portfolios for the year ended December 31, 1996, and (ii) pro forma fees and
expenses of the combined portfolios of those FMB Portfolios (the "Reorganizing
FMB Portfolios") that are reorganizing with existing Monitor Portfolios on a
pro forma basis, giving effect to the proposed Reorganization. The tables
indicate that the total operating expenses applicable to each class of the
Reorganizing FMB Portfolios are expected to decrease. Pro forma combined
information for the Monitor Intermediate Government Income Fund and the
Monitor Michigan Tax-Free Fund (the "New Monitor Portfolios") is not provided
because these funds have not conducted any operations and their pro forma
transactional and operating expenses, other than advisory fees, will be the
same as those of the corresponding FMB Portfolios.
MONITOR GROWTH FUND/FMB DIVERSIFIED EQUITY FUND
Comparative Annual Fund Transactional and Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MONITOR
FMB DIVERSIFIED MONITOR GROWTH GROWTH FUND PRO
EQUITY FUND FUND FORMA COMBINED
------------------------ ---------------- ----------------
CONSUMER INSTITUTIONAL INVESTMENT TRUST INVESTMENT TRUST
-------- ------------- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Maximum sales load...... 5.75% 0.00% 4.00% 0.00% 4.00% 0.00%
Advisory fees........... 1.00% 1.00% 0.60% 0.60% 0.60% 0.60%
12b-1 fees (after fee
waiver)................ 0.25%(1) 0.00% 0.25% 0.00% 0.25% 0.00%
Other expenses.......... 0.37% 0.37% 0.23% 0.23% 0.23% 0.23%
Total operating expenses
(after fee waiver)..... 1.62%(1) 1.37% 1.08% 0.83% 1.08% 0.83%
</TABLE>
- --------
(1) Absent waiver, the 12b-1 fee would have been 0.35% and Total Operating
Expenses would have been 1.72%.
(2) Huntington Bank has agreed to waive its advisory fee for two years
following the Reorganization by an amount sufficient to provide that Total
Operating Expenses of the combined Growth Fund will not exceed the amounts
shown. This voluntary waiver may be discontinued by Huntington Bank at any
time after such two-year period.
Comparative Example
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each time period
and (3) payment of the maximum sales load, in the case of Consumer Service
Class shares of the FMB Diversified Equity Fund and Investment Shares of the
Monitor Growth Fund and the Pro Forma combined portfolio:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMB Diversified Equity Fund
Consumer Service Shares................. $73 $106 $141 $239
Institutional Shares.................... $14 $ 43 $ 75 $165
Monitor Growth Fund
Investment Shares....................... $51 $ 73 $ 97 $166
Trust Shares............................ $ 8 $ 26 $ 46 $103
Pro Forma Combined
Investment Shares....................... $51 $73 $97 $166
Trust Shares............................ $ 8 $26 $46 $103
</TABLE>
17
<PAGE>
MONITOR INTERMEDIATE GOVERNMENT INCOME FUND/FMB INTERMEDIATE GOVERNMENT INCOME
FUND
Comparative Annual Fund Transactional and Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
FMB INTERMEDIATE MONITOR INTERMEDIATE
GOVERNMENT INCOME FUND GOVERNMENT INCOME FUND(1)
------------------------ -------------------------------
CONSUMER INSTITUTIONAL INVESTMENT TRUST
-------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Maximum sales load...... 4.75% 0.00% 2.00% 0.00%
Advisory fees........... 0.45% 0.45% 0.45%(2) 0.45%(2)
12b-1 fees (after fee
waiver)................ 0.25%(3) 0.00% 0.25% 0.00%
Other expenses.......... 0.34% 0.34% 0.24% 0.24%
Total operating expenses
(after fee waivers).... 1.04%(3) 0.79% 0.94%(2) 0.69%(2)
</TABLE>
- --------
(1) Amounts are estimates because this fund has not commenced operations.
(2) Absent waiver, the advisory fee would be 0.50% and Total Operating
Expenses would be 0.99% for Investment Shares and 0.69% for Trust Shares.
Huntington Bank has agreed to waive its advisory fee for two years
following the Reorganization by an amount sufficient to provide that Total
Operating Expenses of the combined Intermediate Government Income Fund
will not exceed the amounts shown. This voluntary waiver may be
discontinued by Huntington Bank at any time after such two-year period.
(3) Absent waiver, the 12b-1 fee would be 0.35% and Total Operating Expenses
would have been 1.14%.
Comparative Example
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each time period
and (3) payment of the maximum sales load, in the case of Consumer Service
Class shares of the FMB Intermediate Government Income Fund and Investment
Shares of the Monitor Intermediate Government Income Fund:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMB Intermediate Government Income Fund
Consumer Service Shares............... $58 $79 $102 $169
Institutional Shares.................. $ 8 $25 $ 44 $ 98
Monitor Intermediate Government Income
Fund
Investment Shares..................... $30 $51 $ 74 $139
Trust Shares.......................... $ 8 $24 $ 41 $ 92
</TABLE>
MONITOR MICHIGAN TAX-FREE FUND/FMB MICHIGAN TAX-FREE BOND FUND
Comparative Annual Fund Transactional and Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
FMB MICHIGAN TAX-FREE MONITOR MICHIGAN
BOND FUND TAX-FREE FUND(1)
------------------------ -----------------
CONSUMER INSTITUTIONAL INVESTMENT TRUST
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Maximum sales load................. 4.75% 0.00% 2.00% 0.00%
Advisory fees (after fee waivers).. 0.35%(2) 0.35%(2) 0.43%(3) 0.43%(3)
12b-1 fees......................... 0.25%(4) 0.00% 0.25% 0.00%
Other expenses (after fee waivers). 0.38% 0.38% 0.30% 0.30%
Total operating expenses (after fee
waivers).......................... 0.98%(5) 0.73%(5) 0.98%(3) 0.73%(3)
</TABLE>
- --------
(1) Amounts are estimates because this fund has not commenced operations.
(2) Absent waiver, the advisory fee would be 0.55%.
(3) Absent waiver, the advisory fee would be 0.50% and Total Operating
Expenses would be 1.05% for Investment Shares and 0.80% for Trust Shares.
Huntington Bank has agreed to waive its advisory fee for two years
following the Reorganization by an amount sufficient to provide that Total
Operating Expenses of the combined Monitor Michigan Tax-Free Fund will not
exceed the amounts shown. This voluntary waiver may be discontinued by
Huntington Bank at any time after such two-year period.
18
<PAGE>
(4) Absent waiver, 12b-1 fees would be 0.35%.
(5) Absent waivers, Total Operating Expenses would have been 1.28% for the
Consumer Service Shares and 0.93% for Institutional shares.
Comparative Example
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each time period
and (3) payment of the maximum sales load, in the case of Consumer Service
Class shares of the FMB Michigan Tax-Free Bond Fund and Investment Shares of
the Monitor Michigan Tax-Free Fund:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMB Michigan Tax-Free Bond Fund
Consumer Service Shares................. $57 $77 $99 $162
Institutional Shares.................... $ 7 $23 $41 $ 91
Monitor Michigan Tax-Free Fund
Investment Shares....................... $31 $53 $78 $148
Trust Shares............................ $ 8 $25 $43 $ 95
</TABLE>
MONITOR MONEY MARKET FUND/FMB MONEY MARKET FUND
Comparative Annual Fund Transactional and Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MONITOR MONEY
MARKET FUND
FMB MONEY MONITOR MONEY PRO FORMA
MARKET FUND MARKET FUND COMBINED (1)
---------------------- ---------------- ----------------
CONSUMER INSTITUTIONAL INVESTMENT TRUST INVESTMENT TRUST
-------- ------------- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Maximum sales load...... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Advisory fees........... 0.35% 0.35% 0.30% 0.30% 0.30% 0.30%
12b-1 fees.............. 0.25% 0.00% 0.10% 0.00% 0.10% 0.00%
Other expenses.......... 0.34% 0.34% 0.23% 0.23% 0.23% 0.23%
Total operating
expenses............... 0.94% 0.69% 0.63% 0.53% 0.63% 0.53%
</TABLE>
- --------
(1) Huntington Bank has agreed to waive its advisory fee for two years
following the Reorganization by an amount sufficient to provide that Total
Operating Expenses of the combined Monitor Money Market Fund will not
exceed the amounts shown. This voluntary waiver may be discontinued by
Huntington Bank at any time after such two-year period.
Comparative Example
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each time period
and (3) payment of the maximum sales load, in the case of Consumer Service
Class shares of the FMB Money Market Fund and Investment Shares of the Monitor
Money Market Fund and the Pro Forma combined portfolio:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FMB Money Market Fund
Consumer Service Shares................. $10 $30 $52 $115
Institutional Shares.................... $ 7 $22 $38 $ 86
Monitor Money Market Fund
Investment Shares....................... $ 6 $20 $35 $ 79
Trust Shares............................ $ 5 $17 $30 $ 66
Pro Forma Combined........................
Investment Shares....................... $ 6 $20 $35 $ 79
Trust Shares............................ $ 5 $17 $30 $ 66
</TABLE>
19
<PAGE>
EXPENSE RATIOS--FMB PORTFOLIOS
The following table summarizes certain of the expense information described
in the comparative tables shown above, and sets forth the ratios of operating
expenses to average net assets of the FMB Portfolios for the fiscal year ended
November 30, 1997, (a) after fee waivers and expense reimbursements, and (b)
absent fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
RATIO OF OPERATING EXPENSES TO AVERAGE NET
ASSETS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
---------------------------------------------
AFTER FEE WAIVERS AND ABSENT FEE WAIVERS AND
EXPENSE REIMBURSEMENTS EXPENSE REIMBURSEMENTS
---------------------- ----------------------
<S> <C> <C>
FMB PORTFOLIOS--
FMB Diversified Equity
Fund
Consumer Service
Shares............... 1.62% 1.72%
Institutional Shares.. 1.37% 1.37%
FMB Intermediate
Government Income Fund
Consumer Service
Shares............... 1.04% 1.14%
Institutional Shares.. 0.79% 0.79%
FMB Michigan Tax-Free
Bond Fund
Consumer Service
Shares............... 0.98% 1.35%
Institutional Shares.. 0.73% 1.00%
FMB Money Market Fund
Consumer Service
Shares............... 0.94% 0.94%
Institutional Shares.. 0.69% 0.69%
</TABLE>
EXPENSE RATIOS--MONITOR FUNDS PORTFOLIOS
The following table summarizes certain of the expense information described
in the comparative tables shown above, and set forth the ratios of operating
expenses to average net assets of the Monitor Funds Portfolios for the six
months ended June 30, 1997, annualized. During this period, there were no fee
waivers or expense reimbursements by the Advisor or other service providers.
<TABLE>
<CAPTION>
RATIO OF
OPERATING EXPENSES
TO AVERAGE NET
ASSETS FOR THE
SIX MONTHS ENDED
JUNE 30, 1997
(ANNUALIZED)
------------------
<S> <C>
MONITOR PORTFOLIOS(1)--
Monitor Growth Fund
Investment Shares.................................. 1.06%
Trust Shares....................................... 0.81%
Monitor Money Market Fund
Investment Shares.................................. 0.62%
Trust Shares....................................... 0.52%
</TABLE>
- --------
(1) The Monitor Michigan Tax-Free Fund and The Monitor Intermediate Government
Income Fund will not commence operations until the Reorganization is
completed.
20
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objectives, policies and restrictions of the FMB Portfolios
are, in many respects, similar to those of the corresponding Monitor
Portfolios. There are, however, certain differences. The following discussion
summarizes some of the more significant similarities and differences in the
investment policies and restrictions of the FMB Portfolios and corresponding
Monitor Portfolios and is qualified in its entirety by the discussion
elsewhere herein, in the Prospectus of Monitor Funds accompanying this
Combined Proxy Statement/Prospectus and in the Prospectuses of FMB Funds and
the Statements of Additional Information of FMB Funds and Monitor Funds which
have been incorporated herein by reference.
MONITOR GROWTH FUND/FMB DIVERSIFIED EQUITY FUND
Investment Objectives. The investment objective of the Monitor Growth Fund
is to achieve long-term capital appreciation primarily through investments in
equity securities. Current income will be only an incidental consideration in
the selection of investments. The primary investment objective of the FMB
Diversified Equity Fund is also long-term capital appreciation, with income
generation being a secondary objective.
Investment Policies. The Monitor Growth Fund will invest in common and
preferred stocks, securities convertible into or exchangeable for common
stocks and other securities that the Adviser believes have common stock
characteristics (such as rights and warrants). The Monitor Growth Fund may
invest in foreign securities and, subject to its investment restrictions,
securities restricted as to resale under federal securities laws. The Monitor
Growth Fund's selection of common stocks emphasizes those companies which the
Adviser believes have characteristics such as above average earnings and
dividend growth, superior balance sheets and potential for capital gains, but
its investment policies recognize that securities of other companies may also
be attractive for capital appreciation purposes by virtue of special
developments or depression in price believed to be temporary. The Monitor
Growth Fund will invest in large and medium-sized capitalization growth
companies that provide these financial and growth characteristics. In managing
the investments of the Monitor Growth Fund, the Adviser seeks to purchase
equity securities whose potential for capital gains is balanced by an ability
to better withstand overall downward market movements. As a matter of
fundamental policy, under normal market conditions, the Monitor Growth Fund
will invest at least 65% of its total assets in the equity securities
described in this paragraph. It may also, under normal market conditions,
invest a portion of its assets in cash equivalents, including repurchase
agreements and the shares of money market mutual funds, for liquidity
purposes.
The FMB Diversified Equity Fund may invest in a broad range of common stocks
of both domestic and foreign issuers, and also may invest in other securities
in addition to common stock, such as preferred stocks, debt securities
convertible into common stocks and warrants or other rights to acquire common
stocks. The FMB Diversified Equity Fund may invest in securities issued by
large, well-established companies as well as those issued by smaller
companies, subject to a minimum market capitalization of $50 million. The FMB
Diversified Equity Fund will not invest more than 5% of its net assets in
warrants, including no more than 2% of its net assets in warrants that are not
listed on the New York or American Stock Exchanges. Under normal market
conditions, the FMB Diversified Equity Fund will invest at least 65% of its
total assets in common stocks or securities convertible into common stocks.
The FMB Diversified Equity Fund may invest in foreign securities that are
denominated in and paying interest in U.S. dollars and in American Depositary
Receipts ("ADRs"). For temporary defensive purposes and to meet anticipated
liquidity needs, the FMB Diversified Equity Fund may invest in U.S. Government
securities, certificates of deposit, bankers' acceptances, commercial paper,
repurchase agreements fully collateralized by U.S. Government securities
(maturing in seven days or less) and debt obligations of corporations
(corporate bonds, debentures, notes and other similar corporate debt
instruments) which are rated investment-grade or better by Moody's Investors
Service, Inc. ("Moody's") or by Standard and Poor's Ratings Group ("S&P").
MONITOR INTERMEDIATE GOVERNMENT INCOME FUND/FMB INTERMEDIATE GOVERNMENT INCOME
FUND
Investment Objectives. The investment objective of both of these portfolios
is to provide a high level of current income.
21
<PAGE>
Investment Policies. Both portfolios pursue their objective by investing
primarily in debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities in the form of U.S. Treasury bills, notes and
bonds and mortgage-backed securities and collateralized mortgage obligations.
For the Monitor Intermediate Government Income Fund, the dollar-weighted
average maturity of its entire portfolio is expected to be not less than three
nor more than 10 years. For the FMB Intermediate Government Income Fund, the
dollar-weighted average maturity of its investments in U.S. Government
securities is not expected to exceed seven years and the dollar-weighted
average maturity of its investments in mortgage-backed securities and
collateralized mortgage obligations is not expected to exceed five years. As a
fundamental policy of these portfolios, under normal market conditions both
portfolios will invest 65% of their total assets in such securities. Both
portfolios may also engage in transactions in interest rate futures, and in
contracts and options thereon.
MONITOR MICHIGAN TAX-FREE FUND/FMB MICHIGAN TAX-FREE BOND FUND
Investment Objectives. Both portfolios have the investment objective of
providing current income exempt from both federal and Michigan personal income
taxes, while limiting the risk of potential capital loss. Both portfolios will
pursue this objective by investing primarily in debt obligations with short to
intermediate remaining maturities (less than 15 years) issued by or on behalf
of the State of Michigan and its political subdivisions, agencies and
instrumentalities, or by issuers outside of Michigan if such obligations pay
interest that is exempt from federal and Michigan personal income taxes, in
the opinion of counsel to the issuer ("Michigan Tax-Exempt Securities").
Investment Policies. The FMB Michigan Tax-Free Bond Fund is a non-
diversified portfolio that purchases Michigan Tax-Exempt Securities that are,
at the time of purchase, rated investment grade or better by a nationally
recognized statistical rating organization ("NSRSO"), or are unrated but are
determined by the Adviser to be of comparable quality and/or are fully
collateralized by U.S. government securities. Under normal market conditions,
this FMB Portfolio will have at least 80% of its net assets invested in
securities, the interest of which is exempt from both federal income tax and
the federal alternative minimum tax and will have at least 65% of its total
assets invested in Michigan consisting of bonds, as contrasted with notes or
bills. The remaining assets of this FMB Portfolio may be invested in bank
obligations, commercial paper, corporate debt securities, mortgage-related
securities and other asset-backed securities.
The investment policies of the Monitor Michigan Tax-Free Fund are identical
to that of this corresponding FMB Portfolio, with the exception that the
"remaining assets" of the Monitor Portfolio (i.e., those up to 20% of net
assets that do not have to be invested in Michigan Tax-Exempt Securities) may
be invested in bank obligations, commercial paper, U.S. government securities
and repurchase agreements fully collateralized by U.S. government securities.
The Monitor Portfolio will not invest in corporate debt securities, mortgage-
related securities or other asset-backed securities.
MONITOR MONEY MARKET FUND/FMB MONEY MARKET FUND
Investment Objectives. The investment objective of both of these portfolios
is the same: to provide a high level of current income while preserving
capital and maintaining liquidity.
Investment Policies. Both portfolios pursue this investment objective by
investing in U.S. dollar-denominated "eligible securities", as defined in Rule
2a-7 under the 1940 Act, which the Adviser determines present minimal credit
risk, which have remaining maturities not exceeding 13 months and which enable
each portfolio to maintain a dollar-weighted maturity of 90 days or less. Both
portfolios endeavor to maintain a net asset value of $1.00 per share; however,
there is no assurance that this goal will be achieved. The Monitor Money
Market Fund may invest in the following types of securities: (a) obligations,
such as notes, bills or bonds, issued by or guaranteed as to principal and
interest by the U.S. Government or its agencies or instrumentalities; (b)
commercial paper, including U.S. dollar denominated eurodollar commercial
paper, considered under Rule 2a-7 to be rated in the highest category by an
NRSRO(s) or, if not rated, of comparable quality as determined by the Adviser
pursuant to guidelines established by the Trustees; (c) negotiable
certificates of deposit and bankers'
22
<PAGE>
acceptances issued by domestic banks and U.S. branches of foreign banks which
are subject to the same regulation as U.S. banks and which, at the time of
purchase, have capital, surplus, and undivided profits in excess of
$100,000,000 (as of the bank's most recently published financial statements);
(d) corporate debt obligations, including bonds, notes and debentures
considered under Rule 2a-7 to be rated in the two highest categories by an
NRSRO(s) or, if not rated, of comparable quality as determined by the Adviser
pursuant to guidelines established by the Trustees; and (e) repurchase
agreements and master demand notes.
The FMB Money Market Fund may invest in the following types of securities:
(a) securities issued or guaranteed by the U.S. government, its agencies or
its instrumentalities; (b) commercial paper rated at the date of purchase P-2
or better by Moody's or A-2 or better by S&P, provided that investment in
commercial paper in the lowest of the rating categories described above does
not exceed five percent of total assets and that investment in any single
issuer of commercial paper rated P-2 or A-2 does not exceed one million
dollars or one percent of the total assets of the Money Market Fund at the
time of such investment; (c) negotiable certificates of deposit, fixed time
deposits, bankers' acceptances, interest bearing demand accounts or other
short-term obligations of U.S. or foreign banks which have more than $500
million in total assets at the time of investment and, in the case of U.S.
banks, are members of the Federal Reserve System or are examined by the
Comptroller of the Currency, or whose deposits are insured by the FDIC; (d)
negotiable certificates of deposit and time deposits of U.S. savings and loan
associations that have more than $1 billion in total assets at the time of
investment; and (e) repurchase agreements relating to any of the foregoing
instruments which are fully collateralized by the instruments described in (a)
above.
INVESTMENT RESTRICTIONS FOR ALL PORTFOLIOS
None of the Monitor Portfolios or the FMB Portfolios may change their
investment restrictions that have been designated as fundamental policies
without the affirmative vote of the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of the portfolio that is affected by the
restriction. The investment restrictions of the Monitor Portfolios and the
corresponding FMB Portfolios are similar, but not identical, and are
summarized below, and each restriction is a fundamental policy except as
otherwise noted.
Each Monitor Portfolio (other than the Monitor Michigan Tax-Free Fund) and
each corresponding FMB Portfolio (other than the FMB Michigan Tax-Free Bond
Fund) is a "diversified" investment portfolio and, therefore, may not invest
more than 5% of the portfolio's total assets in securities of any one issuer,
other than securities issued by the U.S. Government, its agencies and
instrumentalities and repurchase agreements collateralized by such securities.
For the Monitor Portfolios, this 5% limit applies as to 100% of a portfolio's
total assets, whereas for the FMB Portfolios this 5% limit applies only as to
75% of the portfolio's total assets. The Monitor Michigan Tax-Free Fund and
the FMB Michigan Tax-Free Bond Fund are each "non-diversified" funds, which
allows them to invest in securities of any one issuer without regard to this
5% limit. The Monitor Money Market Fund and the FMB Money Market Fund are also
subject to additional diversification requirements imposed by Rule 2a-7 under
the 1940 Act. None of the Monitor Portfolios or the FMB Portfolios may acquire
more than 10% of the outstanding voting securities of any one issuer, and in
addition the FMB Portfolios may not invest in securities of an issuer for the
purpose of exercising control or management over the issuer.
None of the Monitor Portfolios (other than the Monitor Michigan Tax-Free
Fund) and none of the FMB Portfolios (other than the FMB Michigan Tax-Free
Bond Fund and the FMB Money Market Fund) may invest more than 25% of its total
assets in securities of companies primarily engaged in any one industry, other
than securities of the U.S. Government, its agencies and instrumentalities.
The Monitor Michigan Tax-Free Fund may not invest more than 25% of its total
assets in Michigan Tax-Exempt Securities of any one issuer or of issuers which
are related in such a way that, in the Adviser's opinion, an economic,
business or political development (other than a state-wide, national or
international development) affecting one such security would also affect the
others in a similar manner. The FMB Michigan Tax-Free Bond Fund may invest in
Michigan Tax-Exempt Securities without regard to this restriction, provided
that if the securities are industrial development or private activity bonds or
notes where payment of principal and interest is the ultimate responsibility
of a non-governmental issuer, this restriction applies with respect to such
securities. The FMB Money Market Fund may
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<PAGE>
invest in domestic bank obligations (which do not include U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks) without regard
to this restriction.
Each Monitor Portfolio may loan up to 20% of the value of its total assets
to brokers, dealers or other financial organizations, provided that such loans
are collateralized by U.S. Government obligations having at all time a market
value of at least 102% of the current value of the loaned securities. Each FMB
Portfolio may loan up to 5% of its total assets to such types of borrowers,
provided that the loans are secured by collateral having a market value at
least equal to the market value of the loaned securities.
Each Monitor Portfolio must limit its investments in illiquid securities,
which include restricted securities, repurchase agreements of over seven days'
duration and OTC options, to 10% of its net assets, except that the Monitor
Money Market Fund may invest in commercial paper issued under Section 4(2) of
the Securities Act of 1933 and certain other restricted securities that meet
the criteria for liquidity established by the Monitor Board of Trustees. Each
FMB Portfolio is subject to the same 10% limit, but the applicable restriction
includes fixed time deposits subject to withdrawal penalties and having
maturities of more than seven days as "illiquid securities". With respect to
both the Monitor Portfolios and the FMB Portfolios, Rule 144A Securities
(which are restricted securities for which there may be a secondary market
among qualified institutional buyers, as contemplated by Rule 144A under the
Securities Act of 1933) may not be considered illiquid if the Adviser
determines that an adequate trading market exists with respect to such
securities.
The Monitor Growth Fund and the Monitor Money Market Fund may not issue
senior securities or borrow money directly, except that each portfolio may
borrow money from banks for temporary purposes, but only on an unsecured basis
and then only in amounts not in excess of 5% of the portfolio's total assets.
The Monitor Michigan Tax-Free Fund, the Monitor Intermediate Government Income
Fund and each of the FMB Portfolios may also not issue senior securities or
borrow money directly, except that each such portfolio may borrow money from
banks for temporary purposes only in order to meet redemptions in amounts up
to 10% of a portfolio's net assets and may secure such borrowings by pledging
up to 15% of its net assets (but new investments may not be purchased while
any such borrowing exists). In addition, the FMB Portfolios may acquire when-
issued securities, enter into forward commitments to acquire securities and
enter into or acquire financial futures contracts and options thereon when the
portfolio's obligation thereunder is "covered" (i.e., where the portfolio
maintains liquid assets in a segregated account that are equal to its future
obligations).
None of the Monitor Portfolios or the FMB Portfolios may purchase or sell
(a) real estate or real estate mortgage loans, except that a portfolio may
purchase securities that are secured by real estate and securities of
companies that invest in real estate or interests therein, (b) commodities or
commodities contracts, except that each Monitor Portfolio and the FMB
Diversified Equity Fund and the FMB Intermediate Government Income Fund may
invest up to 5% of net assets in certain futures contracts for bona fide
hedging transactions, or (c) securities on margin. In addition, none of the
Monitor Portfolios or the FMB Portfolios may make short sales of securities,
except that each portfolio may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities.
None of the Monitor Portfolios or the FMB Portfolios may underwrite
securities or engage in the business of underwriting securities, except to the
extent that the purchase of securities directly from an issuer and the
subsequent disposition thereof in accordance with the portfolio's investment
program may be deemed to be an underwriting.
None of the Monitor Portfolios or the FMB Portfolios may make loans, except
that any Monitor Portfolio may purchase or hold bonds, debentures, notes or
other evidence of indebtedness or any corporation or government which are
publicly distributed or of a type customarily purchased by institutional
investors and any Monitor Portfolio and any FMB Portfolio may make loans of
portfolio securities as described above and may enter into repurchase
agreements.
None of the FMB Portfolios or the Monitor Portfolios may act as an
underwriter of securities within the meaning of the Securities Act of 1933
except to the extent that the purchase of obligations directly from the
24
<PAGE>
issuer thereof, or the disposition of securities, in accordance with a Fund's
investment objective, policies and limitations may be deemed to be
underwriting. None of the FMB Portfolios nor the Monitor Portfolios may
purchase securities of companies for the purpose of exercising control.
The following fundamental investment limitations of the Monitor Portfolios
have no counterpart in the FMB Portfolios:
The Monitor Portfolios may not invest in interests in oil, gas or mineral
exploration or development programs (this restriction is applicable to the
FMB Portfolios, but in a "non-fundamental" restriction and may be changed
or eliminated by vote of the FMB Board of Directors without shareholder
approval).
The Monitor Portfolios may not invest more than 5% of their total assets
in securities of any issuer that has been in operation for less than three
years.
The Monitor Portfolios may not invest in securities of other investment
companies except by purchase in the open market where no commission or
profit to a sponsor or dealer results other than the customary broker's
commission or except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition and except as permitted by the
1940 Act.
The Monitor Portfolios may not purchase from or sell portfolio securities
to officers, trustees or other "interested persons" except as permitted by
the 1940 Act and exemptive rules or orders thereunder.
The Monitor Portfolios may not purchase or retain the securities of any
issuer if, to the knowledge of the Adviser, one or more of the officers,
directors or Trustees of Monitor Funds, of the Adviser or the
administrator, individually own beneficially more than one-half of one
percent of the securities of such issuer and together own beneficially more
than 5% of such securities.
The FMB Portfolios have the following non-fundamental investment
restrictions, which may be changed or eliminated by vote of the FMB Funds'
Board of Directors without approval by the shareholders of any FMB Portfolio
affected by such action:
None of the FMB Portfolios may purchase or hold securities of any issuer
if the officers or directors of FMB Funds or the Adviser owning
beneficially more than one-half of one percent of the securities of such
issuer together own beneficially more than 5% of such securities.
None of the FMB Portfolios may, with respect to more than 5% of its net
assets, invest in securities of issuers who, together with their
predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government, a state,
commonwealth, possession, territory, the District of Columbia or by an
entity in existence at least three years, or the securities are backed by
the contract obligation of any of the foregoing.
Each FMB Portfolio may invest in securities of other mutual funds,
subject to the limitations of the 1940 Act and subject to such investments
being consistent with the overall objective and policies of the FMB
Portfolio making the investment, and also provided that any such purchases
will be limited to short-term investments in unaffiliated mutual funds and
the Adviser will waive its advisory fees for that portion of the
portfolio's assets so invested (except when such purchase is part of a plan
of merger, consolidation, reorganization or acquisition).
See "Investment Restrictions" in the Monitor Funds' Combined Statement of
Additional Information, for additional information about the investment
restrictions applicable to the Monitor Portfolios.
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<PAGE>
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
FMB Funds has entered into an agreement whereby its investment portfolios
are to be acquired by certain portfolios of Monitor Funds. Significant
provisions of this Reorganization Agreement are summarized below. This summary
is qualified in its entirety by reference to the Reorganization Agreement, a
copy of which is attached as Appendix I to this Combined Proxy
Statement/Prospectus.
DESCRIPTION OF THE REORGANIZATION AGREEMENT
There are four separate FMB Funds investment portfolios. The assets of the
FMB Diversified Equity Fund and the FMB Money Market Fund (the "Reorganizing
FMB Portfolios") will be acquired by two similar investment portfolios
currently offered by Monitor Funds. The FMB Intermediate Government Income
Fund and the FMB Michigan Tax-Free Bond Fund will be acquired by two new
Monitor portfolios (the "New Monitor Portfolios") that have been organized to
continue the operations of these FMB portfolios. The Reorganization Agreement
provides that substantially all of the assets and liabilities of each FMB
Portfolio will be transferred to the corresponding Monitor Portfolio
identified in the table below. The holders of each class of shares of an FMB
Portfolio will receive the class of shares of the corresponding Monitor
Portfolio identified in the table. In the tables, (a) opposite the name of
each FMB Portfolio is the name of the Monitor Portfolio which will issue
shares to such FMB Portfolio, and (b) opposite the name of each class of
shares of the FMB Portfolio is the name of the class of shares of the Monitor
Portfolio to be distributed to the holders of such FMB Portfolio's class. The
number of each class of shares to be issued by the Monitor Portfolios will
have an aggregate net asset value equal to the aggregate net asset value of
the corresponding class or classes of shares of the particular FMB Portfolio
as of the regular close of the New York Stock Exchange, currently 4:00 p.m.
Eastern time, on the business day specified in the Reorganization Agreement.
The FMB Money Market Fund may have an insubstantial difference in market-based
net asset value per share from its counterpart, the Monitor Money Market Fund;
however, it is a condition of the Reorganization that the per-share amortized
cost value of the Monitor Money Market Fund be identical with that of the FMB
Money Market Fund and that both money market funds be in compliance with Rule
2a-7 under the 1940 Act.
<TABLE>
<CAPTION>
FMB PORTFOLIOS AND CLASSES MONITOR PORTFOLIOS AND CLASSES
-------------------------- ------------------------------
<S> <C>
Diversified Equity Fund Growth Fund
Institutional Shares................. Trust Shares
Consumer Service Shares.............. Investment Shares
Intermediate Government Income Fund Intermediate Government Income Fund
Institutional Shares................. Trust Shares
Consumer Service Shares.............. Investment Shares
Michigan Tax-Free Bond Fund Michigan Tax-Free Fund
Institutional Shares................. Trust Shares
Consumer Service Shares.............. Investment Shares
Money Market Fund Money Market Fund
Institutional Shares................. Trust Shares
Consumer Service Shares.............. Investment Shares
</TABLE>
The Reorganization Agreement provides that FMB Funds will declare a dividend
or dividends prior to the Reorganization which, together with all previous
dividends, will have the effect of distributing to the shareholders of each
FMB Portfolios all undistributed ordinary income earned and net capital gains
realized up to and including the effective time of the Reorganization.
Following the transfers of assets and liabilities from the FMB Portfolios to
the Monitor Portfolios, and the issuances of shares by the Monitor Portfolios
to the FMB Portfolios, each of the FMB Portfolios will distribute the class of
shares of the Monitor Portfolios pro rata to the holders of classes of shares
of the FMB Portfolios as described above in liquidation of the FMB Portfolios.
Each holder of a class of shares of an FMB Portfolio will receive an amount of
the corresponding class of shares of the corresponding Monitor Portfolio of
equal value,
26
<PAGE>
plus the right to receive any declared and unpaid dividends or distributions.
Following the Reorganization, the registration of FMB Funds as an investment
company under the 1940 Act will be terminated, and FMB Funds will be dissolved
under Maryland law. The stock transfer books of FMB Funds will be permanently
closed after the Reorganization.
The Reorganization is subject to a number of conditions, including approval
of the Reorganization Agreement and the transactions contemplated thereby
described in this Combined Proxy Statement/Prospectus by the Shareholders of
FMB Funds; the receipt of certain legal opinions described in the
Reorganization Agreement; the receipt of certain certificates from the parties
concerning the continuing accuracy of the representations and warranties in
the Reorganization Agreement and other matters; and the parties' performance
in all material respects of their agreements and undertakings in the
Reorganization Agreement. Assuming satisfaction of the conditions in the
Reorganization Agreement, the Reorganization is expected to occur on or about
March 31, 1998 for the Reorganizing FMB Portfolios and on or about April 2,
1998, for the New Monitor Portfolios.
The expenses of FMB Funds and of Monitor Funds incurred in connection with
the Reorganization will be borne by Huntington Bank, except that Monitor Funds
will bear any registration fees payable under the Securities Act of 1933 and
state "blue sky" laws.
The Reorganization may be abandoned prior to its consummation by the mutual
consent of the parties to the Reorganization Agreement. The Reorganization
Agreement provides further that at any time prior to or (to the fullest extent
permitted by law) after approval of the Reorganization Agreement by the
Shareholders of FMB Funds (a) the parties thereto may, by written agreement
approved by their respective Boards of Trustees or Directors, or authorized
officers and with or without the approval of their Shareholders, amend any of
the provisions of the Reorganization Agreement; and (b) either party may waive
any breach by the other party or the failure to satisfy any of the conditions
to its obligations with or without the approval of such party's shareholders.
In its consideration and approval of the Reorganization at a meeting on
December 9, 1997, the Board of Directors of FMB Funds considered (i) the
investment advisory and other fees paid by the Monitor Funds (which will be
equal to or lower than those paid by the FMB Funds, after waivers by
Huntington Bank), and the lower historical and projected expense ratios of the
Monitor Funds as compared to the historical expense ratios of the FMB Funds,
(ii) the potential economies of scale that may result from the Reorganization
and the potential related cost-savings, (iii) the historical investment
performance records of the Monitor Funds and the FMB Funds, (iv) the sales
load structure applicable to the Investment Shares of the Monitor Funds as
compared to the higher sales load structure of the Consumer Service Shares of
FMB Funds, and (v) the greater number of investment portfolio options that
would be available to shareholders of FMB Funds after the Reorganization due
to the exchange privileges available within the family of Monitor Funds. In
addition, the Board of Directors of FMB Funds considered the fact that the
Reorganization would constitute a tax-free reorganization and that the
interests of Shareholders would not be diluted as a result of the
Reorganization. The FMB's Board of Directors also took into account Huntington
Bank's offer to pay all expenses in connection with the Reorganization and its
commitment that it would waive fees and expense reimbursements to the extent
necessary so that after the Reorganization and until two years after the
Reorganization, the total operating expense ratios of the Monitor Portfolios
(excluding interest, taxes, brokerage commissions, litigation expenses and
extraordinary expenses) will not exceed the estimated projected total
operating expense ratios set forth in this Combined Proxy
Statement/Prospectus. At the meeting, in light of their fiduciary duties under
federal and state law, the Board of Directors of FMB Funds unanimously
determined that the proposed Reorganization was in the best interests of FMB
Funds and the Shareholders of each FMB Portfolio and that the interests of
existing Shareholders would not be diluted as a result of effecting the
transaction. FMB FUND'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE REORGANIZATION AGREEMENT.
The Board of Directors of FMB Funds has not determined what action it will
take in the event that the Shareholders of any one or more FMB Portfolio fail
to approve the Reorganization Agreement or for any reason the Reorganization
is not consummated with respect to one or more FMB Portfolios. In either such
event, the
27
<PAGE>
Directors may choose to continue the investment advisory contracts with the
Adviser, consider alternative dispositions of the FMB Portfolios' assets,
including the sales of such assets to, or merger with, another investment
company, or the possible liquidation of its Portfolios.
CAPITALIZATION
Because the FMB Portfolios will be combined in the Reorganization with the
Monitor Portfolios, the total capitalization of two FMB Portfolios (Monitor
Growth Fund and Monitor Money Market Fund) after the Reorganization will be
greater than the current capitalization of the corresponding FMB Portfolios.
The following table sets forth as of November 30, 1997, (i) the capitalization
of the Reorganizing FMB Portfolios and (ii) the pro forma capitalization of
each of the corresponding Monitor Portfolios, as adjusted to give effect to
the Reorganization. The capitalization of each Reorganizing FMB Portfolio will
be different at the time of the Reorganization as a result of daily share
purchase and redemption activity in the Reorganizing FMB Portfolios. The
Monitor Michigan Tax-Free Fund and The Monitor Intermediate Government Income
Fund will each have only a nominal amount of shares outstanding prior to the
Reorganization, all of which will be held by SEI and therefore there will be
no change in the capitalization of the FMB Michigan Tax-Free Bond Fund or the
FMB Intermediate Government Income Fund as a result of the Reorganization.
<TABLE>
<CAPTION>
FMB
DIVERSIFIED MONITOR PRO FORMA
EQUITY FUND GROWTH FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
Total Net Assets................... $ 81,850,481 $230,377,925 $312,228,406
Consumer/Investment Shares....... $ 8,755,965 $ 5,241,737 $ 13,997,702
Institutional/Trust Shares....... $ 73,094,516 $225,136,188 $298,230,704
Shares Outstanding.................
Consumer/Investment Shares....... 425,480 119,239 318,419
Institutional/Trust Shares....... 3,550,032 5,118,866 6,780,860
Net Asset Value Per Share..........
Consumer/Investment Shares....... $ 20.58 $ 43.96 $ 43.96
Institutional/Trust Shares....... $ 20.59 $ 43.98 $ 43.98
<CAPTION>
MONITOR
FMB MONEY MONEY MARKET PRO FORMA
MARKET FUND FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
Total Net Assets................... $157,196,797 $521,276,447 $678,473,244
Consumer/Investment Shares....... $ 13,721,260 $133,493,818 $147,215,078
Institutional/Trust Shares....... $143,475,537 $387,782,629 $531,258,166
Shares Outstanding.................
Consumer/Investment Shares....... 13,757,492 133,493,994 147,215,486
Institutional/Trust Shares....... 143,435,837 387,783,210 531,219,047
Net Asset Value Per Share..........
Consumer/Investment Shares....... $ 1.00 $ 1.00 $ 1.00
Institutional/Trust Shares....... $ 1.00 $ 1.00 $ 1.00
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that FMB
Funds and Monitor Funds receive an opinion from Ropes & Gray, counsel to
Monitor Funds, to the effect that for federal income tax purposes: (i) the
transfer of all of the assets and liabilities of each of the FMB Portfolios
(except in each case for a cash reserve in an amount necessary for the
discharge of all known and reasonably anticipated liabilities of each of the
FMB Portfolios) and to the corresponding Monitor Portfolio in exchange for
shares of the corresponding Monitor Portfolio and the liquidating
distributions to Shareholders of the FMB Portfolios of the shares of the
Monitor Portfolio so received, as described in the Reorganization Agreement,
will constitute reorganizations within the meaning of Section 368(a)(1)(C),
Section 368(a)(1)(D) or Section 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended, and with respect to the Reorganization, each FMB Portfolio
and Monitor Portfolio will be
28
<PAGE>
considered "party to a reorganization" within the meaning of Section 368(b) of
the Code; (ii) no gain or loss will be recognized by the FMB Portfolios as a
result of such transactions; (iii) no gain or loss will be recognized by the
Monitor Portfolios as a result of such transactions; (iv) no gain or loss will
be recognized by the Shareholders of any FMB Portfolio on the distribution to
them by FMB Funds of shares of any class of the corresponding Monitor
Portfolio in exchange for their shares of any class of the FMB Portfolio; (v)
the aggregate basis of the Monitor Portfolio shares received by a shareholder
of an FMB Portfolio will be the same as the aggregate basis of the
Shareholder's FMB Portfolio shares immediately prior to the Reorganization;
(vi) the basis of each Monitor Portfolio in the assets of the corresponding
FMB Portfolio received pursuant to the Reorganization will be the same as the
basis of the assets in the hands of the FMB Portfolio immediately before the
Reorganization; (vii) a shareholder's holding period for Monitor Portfolio
shares will be determined by including the period for which the shareholder
held the FMB Portfolio shares exchanged therefor, provided that the
shareholder held such FMB Portfolio shares as a capital asset; and (viii) each
Monitor Portfolio's holding period with respect to the assets received in the
Reorganization will include the period for which such assets were held by the
corresponding FMB Portfolio.
Monitor Funds and FMB Funds have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of
counsel discussed in the previous paragraph. That opinion is not binding on
the IRS and does not preclude the IRS from adopting a contrary position.
Shareholders should consult their own advisers concerning the potential tax
consequences to them, including state and Federal income taxes.
COMPARISON OF SHAREHOLDER RIGHTS
General. As a Massachusetts business trust, the operations of Monitor Funds
are governed by its Declaration of Trust (the "Declaration of Trust") and
Bylaws and applicable Massachusetts law rather than by the Articles of
Incorporation (the "Articles") and Bylaws of FMB Funds and applicable Maryland
law. Certain differences between the two forms of organization are summarized
below.
Shares of Portfolios. Monitor Funds has an unlimited number of authorized
shares of beneficial interest, par value $0.01 each, which may be divided into
series and classes thereof. Currently, all the authorized stock of Monitor
Funds is divided into eleven separate series (four of which are the four
Monitor Portfolios). The Monitor Funds Board of Trustees has authorized each
Monitor Portfolio to issue two classes of shares. Each share of a portfolio or
class of Monitor Funds represents an equal proportionate interest in that
portfolio or class with each other share of that portfolio or class. The
shares of each portfolio or class of Monitor Funds participate equally in the
earnings, dividends and assets of the particular portfolio or class.
Fractional shares have proportionate rights to full shares. Expenses of
Monitor Funds which are not attributable to a specific portfolio or class are
allocated to all the portfolios of Monitor Funds in a manner believed by
management of Monitor Funds to be fair and equitable. Generally, shares of
each portfolio or class will be voted separately, for example to approve an
investment advisory agreement or distribution plan, but shares of all series
and classes vote together to the extent required by the 1940 Act, including
the election or selection of trustees and independent accountants. Monitor
Funds is not required to hold regular annual meetings of shareholders, but may
hold special meetings from time to time. There are no conversion or preemptive
rights in connection with shares of Monitor Funds.
Interests in FMB Funds are represented by transferable shares of stock, par
value $0.001 per share. The Articles authorize FMB Funds to issue
10,000,000,000 shares of stock. The FMB Funds' Board of Directors may, without
shareholder approval, divide authorized but unissued stock into an unlimited
number of separate portfolios or series, and classes thereof. Currently, all
the authorized stock of FMB Funds is divided into four separate series (being
the four FMB Portfolios). The FMB Funds' Board of Directors has authorized
each FMB Portfolio to issue two classes of shares. Shares of each class of a
FMB Portfolio represent interests in such portfolio in proportion to each
share's net asset value. All shares of FMB Portfolios have equal voting rights
and will be voted in the aggregate, and not by series or class, except where
voting by series or class is required by law or where the matter involved
affects only one series or class. Each share of an FMB Portfolio is entitled
to dividends and distributions out of the assets of that FMB Portfolio, as
declared by the FMB Funds Board of Directors in its discretion. Maryland law
does not require a registered investment company to hold annual
29
<PAGE>
meetings of shareholders in any year in which the election of directors is not
required under the 1940 Act. There are no conversion or preemptive rights in
connection with shares of FMB Funds.
Shareholder Voting Rights. Monitor Funds is not required to hold annual
meetings of shareholders but will hold special meetings of shareholders of a
portfolio or class when the Trustees deem such a meeting to be necessary or
desirable. A vacancy in the Monitor Funds Board resulting from the resignation
of a Trustee or otherwise may be filled by a vote of a majority of the
remaining Trustees then in office. However, under the 1940 Act, no vacancy may
be filled by Trustees unless immediately thereafter at least two-thirds of the
Trustees holding office shall have been elected to such office by the
shareholders. In addition, Trustees may be removed from office by a vote of
holders of shares representing two-thirds of the outstanding shares of each
portfolio of Monitor Funds at a meeting duly called for the purpose. A meeting
of shareholders shall be held upon the written request of the holders of
shares representing not less than 10% of the outstanding shares entitled to
vote on the matters specified in the written request. Upon written request by
the holders of shares representing at least $25,000 or 10% of the outstanding
shares of Monitor Funds stating that such shareholders wish to communicate
with the other shareholders for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a Trustee, the Trustees
will within five business days after receipt of such request either provide a
list of shareholders or inform such applicants as to the approximate number of
shareholders and the approximate costs of mailing the request to them. If the
second option is chosen by the Trustees, then the Trustees are generally
obligated, upon written request of the applicants, to mail the requested
materials to all shareholders of record (at the expense of the requesting
shareholders). Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
Each director of FMB Funds holds office, unless sooner removed, until his or
her successor is elected and qualified. Any director may be removed, with or
without cause, by the affirmative vote of a majority of the shares entitled to
vote, at any meeting of the shareholders, and the vacancy caused by such
removal may be filled by the shareholders at any meeting called for that
purpose. A vacancy in the FMB Funds' Board of Directors resulting from the
resignation of a director or otherwise may be filled by a vote of a majority
of the remaining directors then in office. However, under the 1940 Act, no
vacancy may be filled by directors unless immediately thereafter at least two-
thirds of the directors holding office shall have been elected to such office
by the shareholders. Special meetings of shareholders for any purpose or
purposes may be called by FMB Funds' Chairman, President or a majority of the
FMB Funds Board, and upon the written request of the shareholders holding at
least 10% of the shares of FMB Funds outstanding and entitled to vote at such
meeting. Business transacted at any special meeting of shareholders shall be
limited to the purposes stated in the notice of such meeting sent to
shareholders.
Shareholder Liability. Under Massachusetts law, shareholders of Monitor
Funds could, under certain circumstances, be held personally liable as
partners for the obligations of Monitor Funds. However, the Declaration of
Trust disclaims shareholder liability for acts or obligations of Monitor Funds
and provides for indemnification and reimbursement of expenses out of Monitor
Funds property for any shareholder held personally liable for the obligations
of Monitor Funds. The Declaration of Trust also provides that Monitor Funds
shall maintain appropriate insurance (for example, fidelity bonding and errors
and omissions insurance) for the protection of Monitor Funds, its
shareholders, Trustees, officers, employees and agents, covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and Monitor Funds itself was unable to meet
its obligations.
Under Maryland law, FMB Funds shareholders have no personal liability for
FMB Funds' acts or obligations.
Liability of Directors and Trustees. Under the Declaration of Trust, the
Trustees of Monitor Funds are personally liable only for bad faith, willful
misfeasance, gross negligence or reckless disregard of their duties as
Trustees. Under the Declaration of Trust, a Trustee or officer of Monitor
Funds will generally be indemnified against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
30
<PAGE>
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof.
Under Maryland law and the Articles, directors and officers of FMB Funds are
not liable to the corporation or its stockholders for money damages, except to
the extent that (1) it is proved that such person actually received an
improper benefit or profit in money, property, or services for the amount of
the benefit or profit in money, property or services actually received, or (2)
a judgment or other final adjudication adverse to such person is entered in a
proceeding based on a finding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause
of action adjudicated. However, a director of officer of FMB Funds is liable
to the extent his or her actions are the result of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office ("Disabling Conduct"). In the event of any
litigation against the directors or officers of FMB Funds, FMB Funds' Articles
of Incorporation require that FMB Funds indemnify a director or officer for
certain expenses and to advance money for such expenses unless the claims
involving alleged Disabling Conduct by a director or officer.
The foregoing is only a summary of certain of the major differences between
Monitor Funds, its Declaration of Trust and Bylaws and Massachusetts law, and
FMB Funds, its Articles and Bylaws and Maryland law. Shareholders may wish to
refer directly to the provisions of Monitor Funds' Declaration of Trust,
Bylaws and Massachusetts law, and FMB Funds' Articles, Bylaws and Maryland law
for a more thorough comparison.
INFORMATION RELATING TO VOTING MATTERS
GENERAL
This Combined Proxy Statement/Prospectus is being furnished in connection
with the solicitation of proxies by the Board of Directors of FMB Funds in
connection with the Meeting. It is expected that the solicitation of proxies
will be primarily by mail. Officers and service contractors of FMB Funds may
also solicit proxies by telephone, telegraph, facsimile or personal interview.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to FMB Funds a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
Only shareholders of record at the close of business on January 23, 1998,
will be entitled to vote at the Meeting. On that date there were outstanding
and entitled to be voted shares of the FMB Money Market Fund,
shares of the FMB Michigan Tax-Free Bond Fund, shares
of the FMB Diversified Equity Fund, and shares of the FMB
Intermediate Government Income Fund. Each share or fraction thereof is
entitled to one vote or fraction thereof, and all shares will vote separately
by Fund.
FMB Funds has been advised by Huntington Bank that the shares of each FMB
Portfolio over which Huntington Bank or its affiliates has voting power will,
except as to accounts established for Huntington's employee benefit plan, be
voted in accordance with instructions received from beneficial owners or
fiduciaries of such accounts who are not related to Huntington Bank or its
affiliates. As to Huntington's own employee benefit plan, and as to accounts
for which no instructions are received from beneficial owners or fiduciaries,
Huntington will cast such votes in accordance with the recommendation of a
fiduciary that is independent of Huntington.
If the accompanying proxy is executed and returned in time for the Meeting,
the shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting or any adjournment thereof.
For information on adjournment of the meeting, see "Quorum" below.
SHAREHOLDER AND BOARD APPROVALS
The Reorganization Agreement is being submitted for approval at the Meeting
by the holders of a majority of the outstanding shares of both classes of
shares of each of the FMB Portfolios, with holders of both classes of each FMB
Portfolio voting as a separate group from the holders of each other FMB
Portfolio, in accordance
31
<PAGE>
with the provisions of the Articles of Incorporation of FMB Funds and the
requirements of the 1940 Act. A majority of the outstanding Shares of each FMB
Portfolio must approve the Reorganization in order for it to become effective
with respect to that FMB Portfolio. The term "majority of the outstanding
shares" of an FMB Portfolio is defined in the 1940 Act and means the lesser of
(a) 67% of the shares of the particular FMB Portfolio present at the Meeting
if the holders of more than 50% of the outstanding shares of the FMB Portfolio
are present in person or by proxy, or (b) more than 50% of the outstanding
shares of such FMB Portfolio.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum is
present for purposes of convening the meeting. Abstentions and broker non-
votes will be considered to be a vote against the Reorganization.
The approval by the shareholders of the corresponding Monitor Portfolios of
the Reorganization is not being solicited because their approval or consent is
not necessary for the Reorganization to be consummated.
At January 23, 1998, the name, address and percentage of ownership of the
persons who owned of record 5% or more of any class of shares of the FMB
Portfolios, and the percentage of the respective share classes of the
corresponding Monitor Portfolios that would be owned by those persons upon the
consummation of the Reorganization, based upon their holdings on such date are
as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE MONITOR
FMB PORTFOLIO AND CLASS OF PERCENTAGE OF TOTAL PORTFOLIO TO
SHAREHOLDER NAME AND SHARES OF CLASS SHARES BE OWNED AFTER
ADDRESS OWNED OWNED OWNED REORGANIZATION
-------------------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
FMB Diversified Equity
Fund--
FMB Income Fund--
FMB Money Market Fund--
FMB Michigan Tax-Free Bond
Fund--
</TABLE>
At January 23, 1998, the Directors and officers of FMB Funds, as a group,
owned less than 1% of the outstanding shares of each of the FMB Portfolios. At
that date, the directors and officers of Monitor Funds owned less than 1% of
the outstanding shares of each of the Monitor Portfolios.
32
<PAGE>
At January 23, 1998, the name, address and percentage of ownership of the
persons who owned of record 5% or more of any class of shares of the
Reorganizing Monitor Portfolios, and the percentage of the respective share
classes that would be owned by those persons upon consummation of the
Reorganization, based upon their holdings on such date, are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE MONITOR
MONITOR PORTFOLIO AND CLASS OF PERCENTAGE OF TOTAL PORTFOLIO TO
SHAREHOLDER NAME AND SHARES OF CLASS SHARES BE OWNED AFTER
ADDRESS OWNED OWNED OWNED REORGANIZATION
--------------------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Monitor Growth Fund--
Monitor Money Market
Fund--
</TABLE>
At January 23, 1998, the Monitor Michigan Tax-Free Fund and the Monitor
Intermediate Government Income Fund each had only one shareholder, SEI, who
owned 10 shares of each such portfolio, and these Portfolios each had only
nominal assets. Accordingly, the ownership interests of shareholders of the
FMB Michigan Tax-Free Bond Fund, and the ownership interests of shareholders
of the FMB Intermediate Government Income Fund, who own 5% or more of either
class of shares of these FMB Portfolios will not materially change upon
consummation of the Reorganization.
At January 23, 1998, the name, address and share ownership of the persons
who owned of record 5% or more of the Monitor Funds' other investment
portfolios not involved in the Reorganization were as follows:
<TABLE>
<CAPTION>
NAME PERCENTAGE
AND OF
ADDRESS FUND OWNERSHIP
------- ---- ----------
<S> <C> <C>
</TABLE>
APPRAISAL RIGHTS
Shareholders are not entitled to any rights of share appraisal under FMB
Fund's Articles of Incorporation or under the laws of the State of Maryland in
connection with the Reorganization. Shareholders have, however, the right to
redeem from FMB Funds their FMB Portfolio shares at net asset value until the
Effective Time of the Reorganization, and thereafter shareholders may redeem
from the Monitor Funds the shares of the Monitor Portfolios acquired by them
in the Reorganization at net asset value.
QUORUM
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present at the Meeting but sufficient votes to approve the
Reorganization Agreement and the transactions contemplated thereby are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares affected by
the adjournment that are represented at the Meeting in person or by proxy. If
a quorum is present, the persons named as proxies will vote those proxies
which they are entitled to vote FOR the Reorganization Agreement, in favor of
such adjournments, and will vote those proxies required to be voted AGAINST
such proposals against any adjournment. A shareholder vote may be taken with
respect to one or more FMB Portfolios prior to any such adjournment if
sufficient votes have been received for approval with
33
<PAGE>
respect to any such FMB Portfolio. A quorum is constituted with respect to an
FMB Portfolios by the presence in person or by proxy of the holders of more
than one-third ( 1/3) of the outstanding shares of the FMB Portfolio entitled
to vote at the Meeting. Proxies properly executed and marked with a negative
vote or an abstention will be considered to be present at the Meeting for the
purposes of determining the existence of a quorum for the transaction of
business.
ANNUAL MEETINGS
Monitor Funds does not presently intend to hold annual meetings of
shareholders for the election of Trustees and other business unless and until
such time as less than a majority of its Trustees holding office have been
elected by the shareholders, at which time the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Shareholders have
the right to call a meeting of shareholders to consider the removal of one or
more Trustees or for other matters and such meetings will be called when
requested in writing by the holders of record of 10% or more of Monitor Funds'
outstanding shares of common stock. To the extent required by law, Monitor
Funds will assist in shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT THE MONITOR FUNDS
Information concerning the operation and management of the Monitor
Portfolios is incorporated herein by reference from the Monitor Funds
Prospectus dated April 30, 1997, or the Monitor Michigan Tax-Free Fund
Prospectus dated November 20, 1997, or the Monitor Intermediate Government
Income Fund Prospectus dated February 9, 1998. A copy of the relevant
Prospectus relating to the shares of the Monitor Portfolio to be received in
the Reorganization by the FMB Funds' Shareholders receiving this Combined
Proxy Statement/Prospectus is enclosed. Additional information about the
Monitor Portfolios is included in the Combined Statement of Additional
Information dated April 30, 1997, as supplemented on November 20, 1997, and
February 9, 1998, which has been filed with the SEC and is also incorporated
herein by reference. A copy of such Combined Statement of Additional
Information may be obtained without charge by writing to Monitor Funds, c/o
SEI Fund Resources, One Freedom Valley Road, Oaks, PA 19456, or by calling
Monitor Funds toll-free at 1-800-253-0512.
The Monitor Funds are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act, as applicable, and, in
accordance with such requirements, files proxy materials, reports and other
information with the SEC. These materials can be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the offices of listed above and at the SEC's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates. In addition, these materials and
other information regarding companies that file electronically with the SEC
are available from the SEC's Internet Web Site, the address of which is
http//www.sec.gov.
The current trustees and officers of Monitor Funds will continue as trustees
and officers following the Reorganization. The name and address of the current
trustees and officers of Monitor Funds, as well as information concerning his
or her principal occupations during the past five years are set forth below.
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATIONS DURING
NAME, AGE AND ADDRESS MONITOR FUNDS PAST FIVE YEARS
--------------------- --------------------- -----------------------------
<C> <C> <S>
Trustee Chairman of the Board,
David S. Schoedinger, 55 Schoedinger Funeral Service;
229 East State Street President of Schoedinger
Columbus, Ohio Financial Services, Inc.
John M. Shary, 67 Trustee Former Member, Business
3097 Walden Ravine Advisory Board, DPEC-Data
Columbus, Ohio Processing Education Corp.;
Member, Business Advisory
Board, Hublink, Inc.; Former
Member, Business Advisory
Board, Miratel Corporation.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATIONS DURING
NAME, AGE AND ADDRESS MONITOR FUNDS PAST FIVE YEARS
--------------------- --------------------- -------------------------------
<C> <C> <S>
William R. Wise, 66 Trustee Former Corporate Director of
613 Valley Forge Court Financial Services and
Westerville, Ohio Treasurer, Childrens Hospital,
Columbus, Ohio.
President and Senior Vice President of SEI
Chief Executive and SEI Distribution since
David G. Lee, 45 Officer 1993. Vice President of SEI
One Freedom Valley Road and SEI Distribution (1991-
Oaks, Pennsylvania 1993).
Robert DellaCroce, 34 Treasurer, Controller Director, Funds Administration
One Freedom Valley Road and Chief Financial and Accounting of SEI since
Oaks, Pennsylvania Officer 1994. Senior audit manager,
Arthur Andersen LLP, from 1986
to 1994.
Kathryn L. Stanton, 39 Vice President Vice President and Assistant
One Freedom Valley Road and Secretary Secretary of SEI Investments
Oaks, Pennsylvania 19456 Company since 1994; Associate
attorney with Morgan, Lewis &
Bockius LLP (1989 to 1994).
Todd Cipperman, 31 Vice President Vice President and Assistant
One Freedom Valley Road and Secretary Secretary of SEI Investments
Oaks, Pennsylvania 19456 Company since 1995; Associate
attorney with Dewey Ballantine
(1994 to 1995); Associate
attorney with Winston & Strawn
(1991 to 1994).
Joseph M. Lydon, 38 Vice President Director of Business
One Freedom Valley Road and Secretary Administration of SEI since
Oaks, Pennsylvania 19456 1995; Vice President of Fund
Group, Vice President of the
Advisor--Dreman Value
Management, L.P., and
President of Dreman Financial
Services, Inc. (1989 to 1995).
Kevin P. Robins, 36 Vice President Senior Vice President, General
One Freedom Valley Road and Secretary Counsel and Secretary of SEI
Oaks, Pennsylvania Investments Company since
1994. Vice President Assistant
Secretary of SEI Investments
Company (1992 to 1994).
Bradley J. Schram, 47 Assistant President and shareholder,
1760 Telegraph Road Secretary Hertz, Schram & Saretsky, P.C.
Birmingham, Michigan (attorneys)
</TABLE>
ADDITIONAL INFORMATION ABOUT FMB FUNDS
Information about the operation and management of FMB Funds is incorporated
herein by reference from its Prospectuses dated March 28, 1997, as
supplemented on January 27, 1998, and its Statement of Additional Information,
dated March 28, 1997, copies of which may be obtained without charge by
writing or calling FMB Funds at the address and telephone number shown on the
cover page of this Combined Proxy Statement/Prospectus. Reports and other
information filed by FMB Funds can be inspected and copied at the Public
Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of such material can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates. In addition, these materials are also available from the SEC's Internet
Web Site, as described above.
35
<PAGE>
The name and address of each director and officer of FMB Funds as well as
information concerning his or her principal occupations during the past five
years are as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS DURING
NAME, AGE AND ADDRESS WITH FMB FUNDS PAST FIVE YEARS
--------------------- ------------------------ ----------------------------
<C> <C> <S>
Valerie T. Ambrose, 50 Director Corporate director, Holland
602 Michigan Avenue Community Hospital
Holland, Michigan
William K. Anderson, 57 Director Vice President for Business
Hope College and Finance and Treasurer,
Holland, Michigan Hope College
Timothy C. Morawski, 49 Director General Manager, Board of
625 Hastings Avenue Public Works of the City of
Holland, Michigan Holland, Michigan
Michael R. Mucciolo, 55 Director and Senior Vice President and
545 East 32nd Street Chairman Chief Financial Officer,
Holland, Michigan Beverage America, Inc.
David G. Lee, 45 President and Chief Senior Vice President of SEI
One Freedom Valley Road Executive Officer and SEI Distribution since
Oaks, Pennsylvania 1993. Vice President of SEI
and SEI Distribution (1991
to 1993).
Carol Rooney, 33 Controller, Treasurer Director of SEI since 1992.
One Freedom Valley Road and Chief Financial
Oaks, Pennsylvania Officer
Kathryn L. Stanton, 39 Vice President Vice President and Assistant
One Freedom Valley Road and Assistant Secretary Secretary of SEI
Oaks, Pennsylvania 19456 Investments Company since
1994; Associate attorney
with Morgan, Lewis &
Bockius LLP (1989 to 1994).
Sandra K. Orlow, 44 Vice President and Vice President and Assistant
One Freedom Valley Road Assistant Secretary Secretary of SEI
Oaks, Pennsylvania 19456 Investments Company since
1988.
Todd Cipperman, 31 Vice President Vice President and Assistant
One Freedom Valley Road and Secretary Secretary of SEI
Oaks, Pennsylvania 19456 Investments Company since
1995; Associate attorney
with Dewey Ballantine (1994
to 1995); Associate
attorney with Winston &
Strawn (1991 to 1994).
Kevin P. Robins, 36 Vice President Senior Vice President,
One Freedom Valley Road and Assistant Secretary General Counsel and
Oaks, Pennsylvania 19456 Secretary of SEI
Investments Company since
1994. Vice President
Assistant Secretary of SEI
Investments Company (1992
to 1994).
</TABLE>
36
<PAGE>
ADDITIONAL INFORMATION ABOUT THE INVESTMENT ADVISER
Huntington Bank's principal office is located at 41 South High Street,
Columbus, Ohio 43287. Huntington Bank is a wholly-owned subsidiary of
Huntington Bancshares Incorporated, a regional bank holding company, which is
located at this same address. The current advisory contracts for the Monitor
Portfolios were most recently approved by the Board of Trustees of Monitor
Funds on December 17, 1997, and January 21, 1998. Huntington Bank does not
serve as investment adviser to any other investment companies other than FMB
Funds and Monitor Funds.
At January 23, 1998, no persons beneficially owned 10% or more of any class
of issued and outstanding voting securities of Huntington Bancshares
Incorporated.
The name and principal occupation of the directors and principal executive
officers of Huntington Bank are as follows:
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
----------------- -------------------- ---
<C> <S> <C>
Managing Partner, NBBJ East Limited
Friedrich K.M. Bohm, Director..... Partnership
Douglas G. Borror, Director....... President, Dominion Corporation
William E. Conway, Director....... Chairman, Fairmount Minerals, Ltd.
Maurice A. Cox, Jr., Director..... Chief Executive Officer, The Ohio
Partners, LLC
Peter H. Edwards, Director........ Chairman, Edwards Companies
Douglas E. Fairbanks, Director.... Private investor
John B. Gerlach, Jr. ............. Chairman, President and Chief
Executive Officer, Lancaster Colony
Corporation
Elaine H. Hairston, Director...... Chancellor, Ohio Board of Regents
Edgar W. Ingram III, Director..... Chairman and Chief Executive Officer
of White Castle Systems, Inc.
Pete A. Klisares, Director........ Executive Vice President, Worthington
Industries, Inc.
William M. Osborne, Jr., Director. Private investor
Robert W. Rahal, Director......... President, Team Rahal, Inc.
John B. Schultz, Director......... Chairman, President and Chief
Executive Officers, The Lamson &
Sessions Co.
J. Richard Sisson, Director....... Senior Vice President and Provost,
The Ohio State University
Rodney Wasserstrom, Director...... President and Chief Executive
Officer, The Wasserstrom Company
William J. Williams, Director..... Private investor
William S. Williams, Director..... Vice Chairman, Chief Executive and
Chief Financial Officer, The W.W.
Williams Co., Inc.
Helen K. Wright, Director......... Private investor
</TABLE>
37
<PAGE>
FINANCIAL STATEMENTS
The financial statements for the Monitor Portfolios for the fiscal year
ended December 31, 1996, and the six-month period ended June 30, 1997, and the
financial highlights for the periods indicated therein, have been incorporated
by reference into this Combined Proxy Statement/Prospectus. The financial
statements of the Monitor Portfolios as of and for the year ended December 31,
1996, and the financial highlights for the periods indicated therein, have
been so incorporated by reference in reliance on the report of Price
Waterhouse LLP, independent auditors, given on the authority of that firm as
experts in accounting and auditing.
The financial statements of the FMB Funds as of and for the fiscal year
ended November 30, 1997, and the financial highlights for the periods
indicated therein, are included in the Statement of Additional Information
relating to this Combined Proxy Statement/Prospectus, which has been
incorporated herein by reference. The financial statements for the FMB
Portfolios as of and for the fiscal year ended November 30, 1997, and the
financial highlights for the periods indicated therein have been incorporated
herein in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
OTHER BUSINESS
The Board of Directors of FMB Funds knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it
is the intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to FMB Funds in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-453-4234.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
38
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
February 1, 1998, by and among THE MONITOR FUNDS, a Massachusetts business
trust ("Monitor"), and FMB FUNDS, INC., a Maryland corporation ("FMB"), and is
joined in by THE HUNTINGTON NATIONAL BANK, a national banking association (the
"Bank").
Monitor has entered into agreements with the Bank pursuant to which the Bank
is serving as the investment adviser for each of the separate investment
portfolios of Monitor. Prior to October 1, 1997, FMB-Trust, a wholly-owned
subsidiary of First Michigan Bank Corporation ("First Michigan"), was serving
as the investment adviser for each of the separate investment portfolios of
FMB. In connection with the recently-completed merger of First Michigan with
and into Huntington Bancshares Incorporated ("Huntington"), FMB-Trust has also
been merged with and into the Bank, and since October 1, 1997, the Bank has
been also serving as the investment adviser for each of the separate
portfolios of FMB. Huntington desires to combine the investment portfolios of
FMB with certain of the investment portfolios of Monitor, in order to reduce
administrative expenses and eliminate the existence of two separate mutual
fund complexes for the benefit of the shareholders of FMB and Monitor.
To carry out this combination, FMB will sell, assign, convey, transfer and
deliver to Monitor, and Monitor will acquire, on the Exchange Dates, all of
the properties and assets existing at the Valuation Time in the following
funds:
FMB Money Market Fund ("FMB Money Market")
FMB Diversified Equity Fund ("FMB Equity")
FMB Intermediate Government Income Fund ("FMB Income")
FMB Michigan Tax-Free Bond Fund ("FMB Tax-Free")
(such funds are each an "FMB Fund" and are collectively the "FMB Funds").
Such acquisitions are to be made, respectively, by the following funds:
The Monitor Money Market Fund ("Monitor Money Market")
The Monitor Growth Fund ("Monitor Growth")
The Monitor Intermediate Government Income Fund ("Monitor Income")
The Monitor Michigan Tax-Free Fund ("Monitor Tax-Free")
(such funds are each a "Monitor Fund" and are collectively the "Monitor
Funds").
It is intended that each reorganization described in this Agreement shall be
a tax-free reorganization under Section 368(a)(1)(C), Section 368(a)(1)(D) or
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the
"Code"). Upon consummation of such transactions, each FMB Fund shall
distribute in complete liquidation to its respective shareholders of record as
of the Exchange Dates, the Monitor Investment Shares and the Monitor Trust
Shares received by it, as provided hereafter. Each FMB Fund shareholder of
record who owns Consumer Service Class shares will receive Monitor Investment
Shares. All other FMB Fund shareholders will receive Monitor Trust Shares.
In consideration of the premises, Monitor, FMB and the Bank represent,
warrant and agree as follows:
1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF FMB. FMB represents and
warrants to, and agrees with, Monitor that:
(a) FMB is a corporation duly established, validly existing and in good
standing under the laws of the State of Maryland and has power to own all
of its properties and assets and to carry out its obligations under this
Agreement. FMB is duly qualified as a foreign corporation in all
jurisdictions where such qualification
A-1
<PAGE>
is required. FMB has all necessary federal, state and local authorizations
to carry on its business as now being conducted and to fulfill the terms of
this Agreement, except as set forth in Section 1(k).
(b) FMB is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company, and
such registration has not been revoked or rescinded and is in full force
and effect. Each FMB Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Code, as
of and since its first taxable year, and qualifies and intends to continue
to qualify as a regulated investment company for its taxable year ending
upon its liquidation. Each FMB Fund has been a regulated investment company
under such sections of the Code at all times since its inception.
(c) The statements of net assets at November 30, 1997 (including the
schedules of investments indicating their market values), and the
statements of operations and statements of changes in net assets for the
years ended November 30, 1996 and 1997, for each FMB Fund, such statements
and schedules having been audited by Price Waterhouse LLP, independent
accountants to FMB, have been furnished to Monitor. Such statements of
assets and liabilities and schedules fairly present the financial position
of each FMB Fund as of their respective dates and said statements of
operations and changes in net assets fairly reflect the results of
operations and changes in net assets for the periods covered thereby in
conformity with generally accepted accounting principles.
(d) The prospectuses of the FMB Funds dated March 28, 1997 (the "FMB
Prospectuses"), and the Statement of Additional Information for the FMB
Funds dated March 28, 1997, each as supplemented and as on file with the
Securities and Exchange Commission (the "SEC"), which have been previously
furnished to Monitor, did not as of their dates and do not as of the date
hereof contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of FMB or any FMB Fund, threatened against FMB
or any FMB Fund which assert liability on the part of FMB or any FMB Fund.
(f) There are no material contracts outstanding to which FMB or any FMB
Fund is a party, other than as disclosed in the FMB Prospectuses and the
corresponding Statement of Additional Information or in the Registration
Statement (as hereinafter defined) and the Proxy Statement (as hereinafter
defined).
(g) Neither FMB nor any FMB Fund has any known liabilities of a material
nature, contingent or otherwise, other than those shown as belonging to it
on its statement of assets and liabilities as of November 30, 1997, and
those incurred in the ordinary course of FMB's business as an investment
company since that date. Prior to the Exchange Dates, FMB will advise
Monitor of all known material liabilities, contingent or otherwise,
incurred by it and each FMB Fund subsequent to November 30, 1997, whether
or not incurred in the ordinary course of business.
(h) Each FMB Fund has filed or will file all federal and state tax
returns which, to the knowledge of FMB's officers, are required to be filed
by each FMB Fund and has paid or will pay all federal and state taxes shown
to be due on said returns or on any assessments received by each FMB Fund.
All tax liabilities of each FMB Fund have been adequately provided for on
its books, and no tax deficiency or liability of any FMB Fund has been
asserted, and no question with respect thereto has been raised, by the
Internal Revenue Service or by any state or local tax authority for taxes
in excess of those already paid.
(i) As used in this Agreement, the term "Investments" shall mean each FMB
Fund's investments shown on its statement of net assets as of November 30,
1997, referred to in Section 1(c) hereof, as supplemented with such changes
as such FMB Fund shall make after November 30, 1997, which have been
consistent with the investment objectives and policies of each FMB Fund,
and changes resulting from stock dividends, stock split-ups, mergers and
similar corporate actions. As of both the Valuation Time and the Exchange
Dates and except for shareholder approval and otherwise as described in
Section 1(k), FMB, on behalf of each FMB Fund, will have full right, power
and authority to sell, assign, transfer and deliver the Investments and any
other assets and liabilities of each FMB Fund to be transferred to the
corresponding
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<PAGE>
Monitor Fund pursuant to this Agreement. At the Exchange Dates, subject
only to the delivery of the Investments and any such other assets and
liabilities as contemplated by this Agreement, Monitor will, on behalf of
each Monitor Fund, acquire the Investments and any such other assets
subject to no encumbrances, liens or security interests in favor of any
third party creditor of FMB or a FMB Fund and, except as described in
Section 1(j), without any restrictions upon the transfer thereof.
(j) No registration under the Securities Act of 1933, as amended (the
"1933 Act"), of any of the Investments would be required if they were, as
of the time of such transfer, the subject of a public distribution by
either of FMB or Monitor, except as previously disclosed to Monitor by FMB.
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by FMB or any FMB
Fund of the transactions contemplated by this Agreement, except such as may
be required under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, state securities or blue sky laws
(which term as used herein shall include the laws of the District of
Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "H-S-R Act").
(l) The registration statement (the "Registration Statement") filed with
the SEC by Monitor on Form N-14 relating to the Monitor Trust Shares and
the Monitor Investment Shares issuable hereunder, and the proxy statement
of FMB included as a part of the Registration Statement (the "Proxy
Statement"), on the effective date of the Registration Statement and
insofar as they relate to FMB and the FMB Funds, (i) complies in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and (ii) does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting referred to in
Section 8(a) below and on the Exchange Dates, the prospectus contained in
the Registration Statement of which the Proxy Statement is a part (the
"Prospectus"), as amended or supplemented by any amendments or supplements
filed with the SEC by Monitor, insofar as it relates to FMB and the FMB
Funds, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the
representations, warranties and agreements in this Section 1(l) shall apply
only to statements of fact relating to FMB and any FMB Fund contained in
the Registration Statement, the Prospectus or the Proxy Statement, or
omissions to state in any thereof a material fact relating to FMB or any
FMB Fund, as such Registration Statement, Prospectus and Proxy Statement
shall be furnished to FMB in definitive form as soon as practicable
following effectiveness of the Registration Statement and before any public
distribution of the Prospectus or Proxy Statement.
(m) All of the issued and outstanding shares of beneficial interest of
each FMB Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
(n) Each of the FMB Funds is qualified, and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MONITOR. Monitor represents
and warrants to, and agrees with, FMB that:
(a) Monitor is a business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts and has power to carry
on its business as it is now being conducted and to carry out this
Agreement. Neither Monitor nor any Monitor Fund is required to qualify as a
foreign association in any jurisdiction. Monitor and each Monitor Fund has
all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted
and to fulfill the terms of this Agreement, except as set forth in Section
2(i).
(b) Monitor is registered under the 1940 Act as an open-end management
investment company, and such registration has not been revoked or rescinded
and is in full force and effect. Each Monitor Fund that has had active
operations prior to the Exchange Dates, has elected to qualify and has
qualified as a regulated investment company under Part I of Subchapter M of
the Code, as of and since its first taxable year, and qualifies and intends
to continue to qualify as a regulated investment company for its taxable
year ending
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<PAGE>
upon its liquidation. Each Monitor Fund that has had actual operations
prior to the Exchange Date has been a regulated investment company under
such sections of the Code at all times since its inception. Each of Monitor
Tax-Free and Monitor Income, neither of which will have had active
operations prior to the Exchange Dates, intend to qualify as regulated
investment companies under Part I of Subchapter M of the Code.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of investments
(indicating their market values) for each Monitor Fund for the year ended
December 31, 1996, such statements and schedules having been audited by
Price Waterhouse LLP, independent accountants to Monitor, have been
furnished to FMB. Unaudited statements of assets and liabilities,
statements of operations, statements of changes in net assets and schedules
of portfolio investments (indicating their market values) for each Monitor
Fund as of June 30, 1997, have also been furnished to FMB. Such statements
of assets and liabilities and schedules fairly present the financial
position of the Monitor Funds as of their respective dates, and said
statements of operations and changes in net assets fairly reflect the
results of its operations and changes in financial position for the periods
covered thereby in conformity with generally accepted accounting
principles.
(d) The prospectuses of The Monitor Funds relating to Monitor Growth and
Monitor Money Market, dated April 30, 1997 (collectively, the "Monitor
Prospectuses"), and the Combined Statement of Additional Information for
The Monitor Funds, dated April 30, 1997, each as supplemented and on file
with the SEC, which have been previously furnished to FMB, did not as of
their date and do not as of the date hereof contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
prospectuses of The Monitor Funds relating to Monitor Tax-Free, dated
November 20, 1997, on file with the SEC, which have been previously
furnished to FMB, did not as of their date and do not as of the date hereof
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading. The prospectuses of The Monitor Funds relating to
Monitor Income, filed on November 14, 1997, with the SEC, which have been
previously furnished to FMB, did not as of their date and do not as of the
date hereof contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Monitor or any Monitor Fund, threatened
against Monitor or any Monitor Fund which assert liability on the part of
Monitor or any Monitor Fund.
(f) There are no material contracts outstanding to which Monitor or any
Monitor Fund is a party, other than as disclosed in the Monitor
Prospectuses and the corresponding Statement of Additional Information or
in the Registration Statement.
(g) Neither Monitor nor any Monitor Fund has any known liabilities of a
material nature, contingent or otherwise, other than those shown on its
statement of assets and liabilities as of June 30, 1997, referred to above
and those incurred in the ordinary course of the business of Monitor as an
investment company or any Monitor Fund since such date. Prior to the
Exchange Dates, Monitor will advise FMB of all known material liabilities,
contingent or otherwise, incurred by it and each Monitor Fund subsequent to
June 30, 1997, whether or not incurred in the ordinary course of business.
(h) Each Monitor Fund has filed or will file all federal and state tax
returns which, to the knowledge of Monitor's officers, are required to be
filed by each Monitor Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by
each Monitor Fund. All tax liabilities of each Monitor Fund have been
adequately provided for on its books, and no tax deficiency or liability of
any Monitor Fund has been asserted, and no question with respect thereto
has been raised, by the Internal Revenue Service or by any state or local
tax authority for taxes in excess of those already paid.
(i) No consent, approval, authorization or order of any governmental
authority is required for the consummation by Monitor or any Monitor Fund
of the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act, state securities
or Blue Sky laws or the H-S-R Act.
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<PAGE>
(j) As of both the Valuation Time and the Exchange Dates and otherwise as
described in Section 2(h), Monitor on behalf of each Monitor Fund will have
full right, power and authority to purchase the Investments and any other
assets and assume the liabilities of each FMB Fund to be transferred to the
corresponding Monitor Fund pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy Statement,
on the effective date of the Registration Statement and insofar as they
relate to Monitor and the Monitor Funds: (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act
and the rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders meeting referred to in
Section 8(a) and at the Exchange Dates, the Prospectus, as amended or
supplemented by any amendments or supplements filed with the SEC by Monitor
or any Monitor Fund, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that none of the representations, warranties and agreements in this Section
2(k) shall apply to statements in or omissions from the Registration
Statement, the Prospectus or the Proxy Statement made in reliance upon and
in conformity with information furnished by FMB or any FMB Fund for use in
the Registration Statement, the Prospectus or the Proxy Statement.
(l) The Monitor Trust Shares and the Monitor Investment Shares to be
issued to each FMB Fund have been duly authorized and, when issued and
delivered pursuant to this Agreement and the Prospectus, will be legally
and validly issued and will be fully paid and nonassessable by Monitor and
no shareholder of Monitor will have any preemptive right of subscription or
purchase in respect thereof.
(m) The issuance of Monitor Trust Shares and Monitor Investment Shares
pursuant to this Agreement will be in compliance with all applicable
federal and state securities laws.
(n) Each of the Monitor Funds other than Monitor Tax-Free and Monitor
Income is qualified, and at all times through the Exchange Date, will
qualify for taxation as a "regulated investment company" under Sections 851
and 852 of the Code. Each of Monitor Tax-Free and Monitor Income, upon
filing of their respective first income tax returns at the completion of
their first taxable year, will elect to be a regulated investment company
and until such time will take all steps necessary to ensure qualification
as a regulated investment company under Sections 851 and 852 of the Code.
(o) Monitor through its administrator, transfer agent, custodian or
otherwise, will cooperate fully and in a timely manner with FMB and each
FMB Fund in completing each of the actions required of it and its agents
and necessary for consummation of the transactions described in Sections 3
(a) and (b) of this Agreement, and in connection therewith has and will
from time to time thereafter provide to FMB in writing reasonably detailed
descriptions of each such action, a reasonable time projection for the
accomplishment thereof, and the Monitor person primarily responsible
therefor. Upon presentation to FMB of the above-described time projections,
FMB may promptly notify Monitor in writing that the time projections are
not reasonable. Monitor and FMB shall then in good faith attempt to
establish mutually acceptable time projections.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of each FMB Fund
and to the other terms and conditions contained herein (including each FMB
Fund's obligation to distribute to its respective shareholders all of its
investment company taxable income and net capital gain as described in Section
9(k) hereof), on the Exchange Dates FMB and each FMB Fund agree to sell,
assign, convey, transfer and deliver to the Corresponding Monitor Fund (as
described in this Section 3), and Monitor and each Corresponding Monitor Fund
agree to acquire from FMB and each FMB Fund, all of the Investments and all of
the cash and other assets of each class of shares of each FMB Fund in exchange
for that number of shares of the corresponding class of shares of the
Corresponding Monitor Fund provided for in Section 4 and the assumption by the
corresponding class of shares of the Corresponding Monitor Fund of all of the
liabilities of each class of shares of each FMB
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<PAGE>
Fund. Pursuant to this Agreement, each FMB Fund will, as soon as practicable
after the Exchange Dates, distribute in liquidation all of the shares of the
corresponding class of shares of the Corresponding Monitor Fund received by it
to its shareholders in exchange for their shares of beneficial interest of
such class of shares of each FMB Fund.
(b) FMB, on behalf of each class of shares of each FMB Fund, will pay or
cause to be paid to the corresponding class of shares of the Corresponding
Monitor Fund any interest and cash dividends received by it on or after the
Exchange Date with respect to the Investments transferred to the Monitor Funds
hereunder. FMB, on behalf of each class of shares of each FMB Fund, will
transfer to the corresponding class of shares of the Corresponding Monitor
Fund any rights, stock dividends or other securities received by FMB or any
FMB Fund after the Exchange Dates as stock dividends or other distributions on
or with respect to the Investments transferred, which rights, stock dividends
and other securities shall be deemed included in the assets transferred to
each corresponding class of shares of the Corresponding Monitor Fund at the
Exchange Dates and shall not be separately valued, in which case any such
distribution that remains unpaid as of the Exchange Dates shall be included in
the determination of the value of the assets of the class of shares of each
FMB Fund acquired by the corresponding class of shares of the Corresponding
Monitor Fund.
(c) For purposes of this Agreement each class of shares of each FMB Fund
corresponds to the class of shares of each Monitor Funds as follows:
<TABLE>
<CAPTION>
FMB FUND CORRESPONDING MONITOR FUND
- -------- --------------------------
<S> <C>
FMB Money Market Fund,
Consumer Service Class.............. The Monitor Money Market Fund, Investment
Class
FMB Money Market Fund,
Institutional Class................. The Monitor Money Market Fund, Trust Class
FMB Diversified Equity Fund,
Consumer Service Class.............. The Monitor Growth Fund, Investment Class
FMB Diversified Equity Fund,
Institutional Class................. The Monitor Growth Fund, Trust Class
FMB Intermediate Government Income
Fund, Consumer Service Class........ The Monitor Intermediate Government
Income Fund, Investment Class
FMB Intermediate Government Income
Fund, Institutional Class........... The Monitor Intermediate Government
Income Fund, Trust Class
FMB Michigan Tax-Free Bond Fund,
Consumer Service Class.............. The Monitor Michigan Tax-Free
Fund, Investment Class
FMB Michigan Tax-Free Bond Fund,
Institutional Class................. The Monitor Michigan Tax-Free Fund, Trust
Class
</TABLE>
4. EXCHANGE DATES; VALUATION TIMES. On the Exchange Dates, Monitor will
deliver to FMB a number of Monitor Trust Shares and Monitor Investment Shares
having an aggregate net asset value equal to the value of the assets of the
corresponding class of shares of the Corresponding FMB Fund acquired by each
class of shares of each Monitor Fund, less the value of the liabilities of
such class of shares of the Corresponding FMB Fund assumed, determined as
hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of each class of shares of
each FMB Fund's net assets will be computed as of the times (the "Valuation
Times") using the valuation procedures for the particular class of shares of
each FMB Fund set forth in the FMB Prospectuses.
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<PAGE>
(b) Subject to Section 4(d) hereof, the net asset value of a share of each
corresponding class of shares of each Monitor Fund will be determined to the
nearest one-hundredth of a cent as of the relevant Valuation Time, using the
valuation procedures set forth in the Monitor Prospectuses for the particular
class of shares of each Corresponding Monitor Fund.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m., Eastern
Time, on March 27, 1998, for each of FMB Money Market and FMB Equity and each
of the corresponding Monitor Funds and the Valuation Time shall be 4:00 p.m.,
Eastern Time, on March 31, 1998, for each of FMB Income and FMB Tax-Free and
each of the corresponding Monitor Funds, or such other dates as may be
mutually agreed upon in writing by the parties hereto.
(d) No formula will be used to adjust the net asset value of any FMB Fund or
Monitor Fund to take into account differences in realized and unrealized gains
and losses.
(e) Each Corresponding Monitor Fund shall issue its Trust or Investment
Shares to the FMB Fund whose assets are being acquired on one share deposit
receipt registered in the name of the FMB Fund. Each FMB Fund shall distribute
in liquidation the Trust Shares or the Investment Shares received by it
hereunder, as the case may be, pro rata to its shareholders of the
corresponding class of shares by redelivering such share deposit receipt to
Monitor's transfer agent which will as soon as practicable set up open
accounts for each FMB Fund shareholder in accordance with written instructions
furnished by FMB.
(f) Each class of shares of each Corresponding Monitor Fund shall assume all
liabilities of the corresponding class of shares of FMB Fund whose assets are
being acquired, whether accrued or contingent, in connection with the
acquisition of assets and subsequent dissolution of the FMB Fund or otherwise,
except that recourse for assumed liabilities relating to a particular FMB Fund
will be limited to the Corresponding Monitor Fund.
5. EXPENSES AND FEES; EXPENSE LIMITATION.
(a) Subject to subsections 5(b) through 5(e), all fees and expenses,
including accounting expenses, portfolio transfer taxes (if any) or other
similar expenses incurred directly in connection with the consummation by
Monitor and FMB of the transactions contemplated by this Agreement will be
paid by the Bank, including the costs of proxy materials, proxy solicitation,
and legal expenses; except that Monitor shall pay all registration or filing
fees payable under the 1933 Act or any state "Blue Sky" laws.
(b) Following consummation of the transactions contemplated by this
Agreement, for the year ending December 31, 1998, the Bank agrees to waive
such portion of its fees to which it is otherwise entitled as the investment
adviser and administrator of the Monitor Funds so that the total operating
expenses of the Monitor Funds for the year ended December 31, 1998 shall not
exceed the pro forma total operating expenses for such Monitor Funds which are
set forth in the Proxy Statement.
(c) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as specifically set
forth above.
6. PERMITTED ASSETS. Monitor agrees to advise FMB promptly if at any time
prior to the Exchange Dates the assets of any FMB Fund include any assets that
the Corresponding Monitor Fund is not permitted, or reasonably believes to be
unsuitable for it, to acquire, including without limitation any security that,
prior to its acquisition by any FMB Fund, Monitor has informed FMB is
unsuitable for the Corresponding Monitor Fund to acquire.
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<PAGE>
7. EXCHANGE DATES. Delivery of the assets of FMB Money Market and FMB Equity
to be transferred, assumption of the liabilities of such FMB Funds to be
assumed, and the delivery of shares of Monitor Money Market and Monitor Growth
to be issued in exchange therefor shall be made at the offices of SEI Fund
Resources, Oaks, PA 19456 at [9:00 a.m.] on March 30, 1998, or at such other
time and date agreed to by FMB and Monitor. Delivery of the assets of FMB
Income and FMB Tax-Free to be transferred, assumption of the liabilities of
such FMB Funds to be assumed, and the delivery of shares of Monitor Income and
Monitor Tax-Free in exchange therefor shall be made at the offices of SEI Fund
Resources, Oaks, Pennsylvania 19456 at 9:00 a.m. on April 1, 1998, or at such
other time and date as is agreed to by FMB and Monitor. The dates and time
upon which such deliveries are to take place are referred to herein as the
"Exchange Dates."
8. SPECIAL MEETING OF SHAREHOLDERS; DISSOLUTION; DEREGISTRATION.
(a) FMB agrees to call a special meeting of the shareholders of each FMB
Fund (which meetings may be held jointly on the same date and at the same
time) as soon as is practicable after the effective date of the Registration
Statement for the purpose of considering the sale of all of the assets of each
FMB Fund to and the assumption of all of the liabilities of each FMB Fund by
the Corresponding Monitor Fund as herein provided, adopting this Agreement,
and authorizing the liquidation and dissolution of each FMB Fund, and, except
as set forth in Section 13, it shall be a condition to the obligations of each
of the parties hereto that the holders of the shares of beneficial interest of
each FMB Fund shall have approved this Agreement and the transactions
contemplated herein in the manner required by law and FMB's Articles of
Incorporation at such a meeting on or before the Valuation Time.
(b) FMB and each FMB Fund agree that the liquidation and dissolution of each
FMB Fund will be effected in the manner provided in FMB's Articles of
Incorporation and in accordance with applicable Maryland law, and that it will
not make any distributions of any Shares to the shareholders of a FMB Fund
without first paying or adequately providing for the payment of all of such
FMB Fund's known debts, obligations and liabilities.
(c) Each of Monitor and FMB will cooperate with the other, and each will
furnish to the other the information relating to itself required by the 1933
Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder to
be set forth in the Registration Statement, including the Prospectus and the
Proxy Statement.
9. CONDITIONS TO MONITOR'S OBLIGATIONS. The obligations of Monitor and each
Monitor Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the FMB
Funds, shall have been approved by the shareholders of each FMB Fund in the
manner required by law.
(b) FMB shall have furnished to Monitor a statement of each FMB Fund's
assets and liabilities, with values determined as provided in Section 4 of
this Agreement, together with a list of Investments with their respective tax
costs, all as of the Valuation Time, certified on FMB's behalf by its
President (or any Vice President) and Treasurer, and a certificate of both
such officers, dated the date of the earliest Exchange Date, to the effect
that as of the Valuation Time and as of the earliest Exchange Date there has
been no material adverse change in the financial position of any FMB Fund
since November 30, 1997, other than changes in the Investments since that date
or changes in the market value of the Investments, or changes due to net
redemptions of shares of the FMB Funds, dividends paid or losses from
operations.
(c) As of the Valuation Time and as of the earliest Exchange Date, all
representations and warranties of FMB and each FMB Fund made in this Agreement
are true and correct in all material respects as if made at and as of such
dates, FMB and each FMB Fund has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to each of such dates, and FMB shall have furnished to Monitor a
statement, dated the date of the earliest Exchange Date, signed by FMB's
President (or any Vice President) and Treasurer certifying those facts as of
such dates.
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<PAGE>
(d) There shall not be any material litigation pending with respect to the
matters contemplated by this Agreement.
(e) Monitor shall have received an opinion of Simpson Thacher & Bartlett, in
form reasonably satisfactory to Monitor and dated the date of the earliest
Exchange Date, to the effect that (i) FMB is a corporation duly established,
validly existing and in good standing under the laws of the State of Maryland,
and FMB is not required to qualify to do business as a foreign corporation in
any jurisdiction, (ii) this Agreement has been duly authorized, executed, and
delivered by FMB and, assuming due authorization, execution and delivery of
this Agreement by Monitor, is a valid and binding obligation of FMB, (iii)
FMB, on behalf of each FMB Fund, has power to sell, assign, convey, transfer
and deliver the Investments and other assets contemplated hereby and, upon
consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement, FMB, on behalf of each FMB Fund, will have duly sold,
assigned, conveyed, transferred and delivered such Investments and other
assets to Monitor, (iv) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not, violate
FMB's Articles of Incorporation or Bylaws or any provision of any agreement
known to such counsel to which FMB or any FMB Fund is a party or by which it
is bound, it being understood that with respect to investment restrictions as
contained in FMB's Articles of Incorporation or Bylaws, or then current
prospectus or statement of additional information, such counsel may rely upon
a certificate of an officer of FMB whose responsibility it is to advise FMB
with respect to such matters and (v) no consent, approval, authorization or
order of any court or governmental authority is required for the consummation
by FMB or any FMB Fund of the transactions contemplated hereby, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such
as may be required under state securities or blue sky laws and the H-S-R Act,
and it being understood that such opinion shall not be deemed to apply to
Monitor's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state
securities or blue sky laws and H-S-R Act. For purposes of analysis regarding
the 1940 Act, such counsel may assume, as fact, solely for purposes of this
plan, that the FMB Funds and the Monitor Funds may be considered "affiliated
persons" or "affiliated persons of an affiliated person", within the meaning
of the 1940 Act, solely by reason of having the Bank as their common
investment adviser. In providing the opinions described in clauses (i), (ii),
(iii) and (iv) of this Section 9(f), such counsel may rely on the opinion of
Maryland counsel acceptable to Monitor and its counsel.
(f) Monitor shall have received an opinion of Ropes & Gray, counsel to
Monitor, addressed to Monitor and in form reasonably satisfactory to Monitor
and dated the date of the earliest Exchange Date (which opinion may be based
upon certain factual representations and subject to certain qualifications),
to the effect that, on the basis of the existing provisions of the Code,
current administrative rules and court decisions, for federal income tax
purposes: (i) the transactions between each FMB Fund and each Corresponding
Monitor Fund contemplated hereby will constitute reorganizations within the
meaning of Section 368(a)(1) of the Code, (ii) no gain or loss will be
recognized by any FMB Fund or any shareholders of any FMB Fund upon the
transfer of the assets to the Corresponding Monitor Fund in exchange for
Monitor Trust Shares or Monitor Investment Shares and the assumption by such
Monitor Fund of the liabilities of the FMB Fund or upon the distribution of
such Shares by the FMB Fund to its shareholders in liquidation pursuant to
this Agreement; (iii) the basis of the Monitor Trust Shares or Monitor
Investment Shares a FMB shareholder receives in connection with the
transaction will be the same as the basis of his or her FMB Fund shares
exchanged therefor; (iv) a FMB shareholder's holding period with respect to
his or her Monitor Trust Shares or Monitor Investment Shares will be
determined by including the period for which he or she held the FMB Fund
shares exchanged therefor, provided that he or she held such FMB Fund shares
as capital assets; (v) no gain or loss will be recognized by any Monitor Fund
upon the receipt of the assets of the corresponding FMB Fund in exchange for
Monitor Trust Shares or Monitor Investment Shares and the assumption by the
Corresponding Monitor Fund of the liabilities of the FMB Fund whose assets are
being acquired; (vi) the basis in the hands of the Monitor Fund of the assets
of the FMB Fund transferred to the Corresponding Monitor Fund will be the same
as the basis of the assets in the hands of the FMB Fund immediately prior to
the transfer; and (vii) each Corresponding Monitor Fund's holding periods with
respect to the assets of the FMB Fund whose assets are being acquired will
include the periods for which such assets were held by such FMB Fund.
A-9
<PAGE>
(g) The assets of each FMB Fund to be acquired by the Corresponding Monitor
Fund will include no assets which the Corresponding Monitor Fund, by reason of
limitations contained in its Declaration of Trust or of investment
restrictions disclosed in the Monitor Prospectuses in effect on the Exchange
Dates, may not properly acquire. Monitor shall not change the Monitor
Declaration of Trust and the Monitor Prospectuses so as to restrict permitted
investments for each Monitor Fund except as required by the SEC or any state
regulatory authority.
(h) The Registration Statement shall have become effective under the 1933
Act and applicable Blue Sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of Monitor
contemplated by the SEC and or any state regulatory authority.
(i) All proceedings taken by FMB in connection with the transactions
contemplated by this Agreement and all documents incidental thereto reasonably
shall be satisfactory in form and substance to Monitor and counsel to Monitor.
(j) Prior to the earliest Exchange Date, each FMB Fund shall have declared a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its shareholders all of the excess of (i)
the FMB Fund's investment income excludable from gross income under Section
103(a) of the Code (if any) over (ii) its deductions disallowed under Sections
265 and 171(a)(2) of the Code, all of the FMB Fund's investment company
taxable income (computed without regard to any deduction for dividends paid),
and all of the FMB Fund's net realized capital gain (after reduction for any
capital loss carryover) in each case for both the taxable year ended November
30, 1997, and the short taxable period beginning on December 1, 1997, and
ending on the relevant Exchange Date.
(k) FMB shall have furnished to Monitor a certificate, signed by the
President (or any Vice President) and the Treasurer of FMB, as to the tax cost
to Monitor of the securities delivered to Monitor pursuant to this Agreement,
together with any such other evidence as to such tax cost as Monitor may
reasonably request.
(l) FMB Funds' custodian shall have delivered to Monitor a certificate
identifying all of the assets of each FMB Fund held by such custodian as of
the Valuation Time.
(m) FMB Funds' transfer agent shall have provided to Monitor (i) the
originals or true copies of all of the records of each FMB Fund in the
possession of such transfer agent as of the relevant Exchange Date, (ii) a
certificate setting forth the number of shares of each FMB Fund outstanding as
of the Valuation Time and (iii) the name and address of each holder of record
of any such shares of each FMB Fund and the number of shares held of record by
each such shareholder.
(n) All of the issued and outstanding shares of beneficial interest of each
FMB Fund shall have been offered for sale and sold in conformity with all
applicable federal or state securities or blue sky laws and, to the extent
that any audit of the records of FMB or any FMB Fund or its transfer agent by
Monitor or its agents shall have revealed otherwise, either (i) FMB and each
FMB Fund shall have taken all actions that in the reasonable opinion of
Monitor or counsel to Monitor are necessary to remedy any prior failure on the
part of FMB to have offered for sale and sold such shares in conformity with
such laws or (ii) FMB shall have furnished (or caused to be furnished) surety,
or deposited (or caused to be deposited) assets in escrow, for the benefit of
Monitor in amounts sufficient and upon terms satisfactory, in the opinion of
Monitor or its counsel, to indemnify Monitor against any expense, loss, claim,
damage or liability whatsoever that may be asserted or threatened by reason of
such failure on the part of FMB to have offered and sold such shares in
conformity with such laws.
(o) FMB shall have duly executed and delivered to Monitor bills of sale,
assignments, certificates and other instruments of transfer ("Transfer
Documents") as Monitor may deem necessary or desirable to transfer all of
FMB's and each FMB Fund's entire right, title and interest in and to the
Investments and all other assets of each FMB Fund.
10. CONDITIONS TO FMB'S OBLIGATIONS. The obligations of FMB and each FMB
Fund hereunder shall be subject to the following conditions:
A-10
<PAGE>
(a) This Agreement shall have been adopted and the transactions contemplated
hereby, including the liquidation and dissolution of the FMB Funds, shall have
been approved by the shareholders of each FMB Fund in the manner required by
law.
(b) Monitor shall have furnished to FMB a statement of each Monitor Fund's
net assets, together with a list of portfolio holdings with values determined
as provided in Section 4, all as of the Valuation Time, certified on Monitor's
behalf by its President (or any Vice President) and Treasurer (or any
Assistant Treasurer), and a certificate of both such officers, dated the date
of the earliest Exchange Date, to the effect that as of the Valuation Time and
as of the earliest Exchange Date there has been no material adverse change in
the financial position of any Monitor Fund since June 30, 1997, other than
changes in its portfolio securities since that date, changes in the market
value of its portfolio securities, changes due to net redemptions, dividends
paid or losses from operations.
(c) Monitor shall have executed and delivered to FMB an Assumption of
Liabilities dated the date of the earliest Exchange Date pursuant to which
each Monitor Fund will assume all of the liabilities of the corresponding FMB
Fund existing at the Valuation Time in connection with the transactions
contemplated by this Agreement.
(d) As of the Valuation Time and as of the earliest Exchange Date, all
representations and warranties of Monitor and each Monitor Fund made in this
Agreement are true and correct in all material respects as if made at and as
of such dates, Monitor and each Monitor Fund has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates, and Monitor shall have furnished
to FMB a statement, dated the date of the earliest Exchange Date, signed by
Monitor's President (or any Vice President) and Treasurer certifying those
facts as of such dates.
(e) There shall not be any material litigation pending with respect to the
matters contemplated by this Agreement.
(f) FMB shall have received an opinion of Ropes & Gray, in form reasonably
satisfactory to FMB and dated the date of the earliest Exchange Date, to the
effect that (i) Monitor is a business trust and validly existing in conformity
with the laws of The Commonwealth of Massachusetts, and, to the knowledge of
such counsel, Monitor is not required to qualify to do business as a foreign
association in any jurisdiction, (ii) the Monitor Trust Shares and Monitor
Investment Shares to be delivered to FMB as provided for by this Agreement are
duly authorized and upon such delivery will be validly issued and will be
fully paid and nonassessable by Monitor and no shareholder of Monitor has any
preemptive right to subscription or purchase in respect thereof, (iii) this
Agreement has been duly authorized, executed and delivered by Monitor and,
assuming due authorization, execution and delivery of this Agreement by FMB,
and that the Prospectus, the Registration Statement and the Proxy Statement
comply with the 1933 Act, the 1934 Act and the 1940 Act, is a valid and
binding obligation of Monitor, (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated
hereby will not, violate Monitor's Declaration of Trust, as amended, or
Bylaws, or any provision of any agreement known to such counsel to which
Monitor or any Monitor Fund is a party or by which it is bound, it being
understood that with respect to investment restrictions as contained in
Monitor's Declaration of Trust, as amended, Bylaws or then-current prospectus
or statement of additional information of each Monitor Fund, such counsel may
rely upon a certificate of an officer of Monitor whose responsibility it is to
advise Monitor with respect to such matters, (v) no consent, approval,
authorization or order of any court or governmental authority is required for
the consummation by Monitor or any Monitor Fund of the transactions
contemplated herein, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state securities
or blue sky laws and the H-S-R Act and it being understood that such opinion
shall not be deemed to apply to FMB's compliance obligations under the 1933
Act, 1934 Act, 1940 Act, state securities or blue sky laws and the H-S-R Act;
and (vi) the Registration Statement has become effective under the 1933 Act,
and to the best of the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
1933 Act.
A-11
<PAGE>
(g) FMB shall have received an opinion of counsel to Monitor addressed to
FMB, in a form reasonably satisfactory to FMB and counsel to FMB and dated the
date of the earliest Exchange Date (which opinion may be based upon certain
factual representations and subject to certain qualifications), with respect
to the matters specified in clauses (i), (ii) and (iii) of Section 9(g) of
this Agreement.
(h) All proceedings taken by Monitor in connection with the transactions
contemplated by this Agreement and all documents incidental thereto reasonably
shall be satisfactory in form and substance to FMB and counsel to FMB.
(i) The Registration Statement shall have become effective under the 1933
Act and applicable Blue Sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of FMB,
contemplated by the SEC or any state regulatory authority.
11. INDEMNIFICATION.
(a) FMB will indemnify and hold harmless Monitor, its trustees and its
officers (for purposes of this subsection, the "Indemnified Parties") against
any and all expenses, losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or more of the Indemnified
Parties in connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the Indemnified Parties
may be involved or with which any one or more of the Indemnified Parties may
be threatened by reason of any untrue statement or alleged untrue statement of
a material fact relating to FMB or any FMB Fund contained in the Registration
Statement, the Prospectus or the Proxy Statement or any amendment or
supplement to any of the foregoing, or arising out of or based upon the
omission or alleged omission to state in any of the foregoing a material fact
relating to FMB or any FMB Fund required to be stated therein or necessary to
make the statements relating to FMB or any FMB Fund therein not misleading,
including, without limitation, any amounts paid by any one or more of the
Indemnified Parties in a reasonable compromise or settlement of any such
claim, action, suit or proceeding, or threatened claim, action, suit or
proceeding made with the prior consent of FMB. The Indemnified Parties will
notify FMB in writing within ten days after the receipt by any one or more of
the Indemnified Parties of any notice of legal process or any suit brought
against or claim made against such Indemnified Party as to any matters covered
by this Section 11(a). FMB shall be entitled to participate at its own expense
in the defense of any claim, action, suit or proceeding covered by this
Section 11(a), or, if it so elects, to assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any such claim, action,
suit or proceeding, and if FMB elects to assume such defense, the Indemnified
Parties shall be entitled to participate in the defense of any such claim,
action, suit or proceeding at their expense. FMB Funds' obligation under this
Section 11(a) to indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the FMB Funds will pay in the first
instance any expenses, losses, claims, damages and liabilities required to be
paid by them under this Section 11(a) without the necessity of the Indemnified
Parties' first paying the same.
(b) Monitor will indemnify and hold harmless FMB, its trustees and its
officers (for purposes of this subparagraph, the "Indemnified Parties")
against any and all expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of the Indemnified
Parties in connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the Indemnified Parties
may be involved or with which any one or more of the Indemnified Parties may
be threatened by reason of any untrue statement or alleged untrue statement of
a material fact relating to Monitor or any Monitor Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement, or any
amendment or supplement to any of the foregoing, or arising out of or based
upon the omission or alleged omission to state in any of the foregoing a
material fact relating to Monitor or any Monitor Fund required to be stated
therein or necessary to make the statements relating to Monitor or any Monitor
Fund therein not misleading, including, without limitation, any amounts paid
by any one or more of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding, or threatened claim,
action, suit or proceeding made with the prior consent of Monitor. The
Indemnified Parties will notify Monitor in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any notice of legal
process or any suit brought
A-12
<PAGE>
against or claim made against such Indemnified Party as to any matters covered
by this Section 11(b). Monitor shall be entitled to participate at its own
expense in the defense of any claim, action, suit or proceeding covered by
this Section 11(b), or, if it so elects, to assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any such claim, action,
suit or proceeding, and, if Monitor elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the defense of any
such claim, action, suit or proceeding at their own expense. The Monitor
Funds' obligation under this Section 11(b) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment so that the
Monitor Funds will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by them under this Section 11(b)
without the necessity of the Indemnified Parties' first paying the same.
12. NO BROKER. Each of Monitor and FMB represents that there is no person
who has dealt with it who by reason of such dealings is entitled to any
broker's or finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
13. TERMINATION. Monitor and FMB may, by mutual consent of their respective
trustees, terminate this Agreement, and Monitor or FMB, after consultation
with counsel and by consent of their respective trustees or an officer
authorized by such trustees, may waive any condition to their respective
obligations hereunder. If the transactions contemplated by this Agreement have
not been substantially completed by June 30, 1998, this Agreement shall
automatically terminate on that date unless a later date is agreed to by
Monitor and FMB.
Notwithstanding any other provision in this Agreement, in the event
shareholder approval of this Agreement and the transactions contemplated by
this Agreement is obtained with respect to only one or more FMB Funds but not
all of the FMB Funds, Monitor and FMB agree to consummate those transactions
with respect to those FMB Funds that have approved this Agreement and those
transactions.
14. COVENANTS, ETC., DEEMED MATERIAL. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
15. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the
subject matter hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement signed by
each party hereto, and shall be construed in accordance with and governed by
the laws of The Commonwealth of Massachusetts. This Agreement may be executed
in any number of counterparts, each of which, when executed and delivered,
shall be deemed to be an original.
16. AGREEMENT AND DECLARATION OF TRUST. The names "Monitor Funds" and
"Trustees of Monitor Funds" refer respectively to Monitor and the Trustees, as
trustees but not individually or personally, acting from time to time under an
Amended and Restated Declaration of Trust dated as of April 29, 1991, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of The Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "Monitor Funds" entered into in the name or on behalf thereof
by any of the Trustees, representatives or agents are made not individually,
but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of Monitor personally, but bind only
the assets of Monitor and all persons dealing with any series of shares of
Monitor such as the Monitor Funds, must look solely to the assets of Monitor
belonging to such series for the enforcement of any claims against Monitor.
A-13
<PAGE>
FMB Funds, Inc.
By: _________________________________
The Monitor Funds
By: _________________________________
The Bank has joined in this Agreement solely to affirm its agreements set
forth in Section 5 hereof.
The Huntington National Bank
By: _________________________________
A-14
<PAGE>
APPENDIX B
(Art)
The Monitor Funds
Annual Report
to Shareholders
Money Market Funds
---------------------------------------------
Trust Shares and Investment Shares
^ The Monitor Money Market Fund
^ The Monitor Ohio Municipal Money
Market Fund
^ The Monitor U.S. Treasury Money Market
Fund
Equity Funds
---------------------------------------------
Trust Shares and Investment Shares
^ The Monitor Growth Fund
Trust Shares
^ The Monitor Income Equity Fund
Income Funds
---------------------------------------------
Trust Shares and Investment Shares
^ The Monitor Ohio Tax-Free Fund
^ The Monitor Fixed Income Securities
Fund
^ The Monitor Mortgage Securities Fund
Trust Shares
^ The Monitor Short/Intermediate Fixed
Income Securities Fund
December 31, 1996
(ART)
<PAGE>
Message from the Investment Manager
Dear Shareholder,
I am pleased to present the December 31, 1996 Annual Report to Shareholders of
The Monitor Funds. It is important for us to share this financial information
as well as commentary which we believe is interesting and topical.
While the Dow Jones Industrial Average climbed 26% during 1996, it proved to be
only a mediocre year for bonds. The 30 year Treasury started the year yielding
5.95%. A cycle of easings was expected, but only one actually arrived in
January. The yield then rose to 7.2% by the middle of the year as surging
employment statistics and growth unnerved the market. Rising yields did,
however, cause the consumer pullback that stemmed growth in the third quarter.
Recent comments by Federal Reserve officials indicate that they believe the
economy will grow 2.0% to 2.5% this year and that inflation will remain
contained at 3%. Risks to these trends include the wealth impact on consumer
spending caused by recent stock market gains and strength in the housing
sector. High consumer debt burdens are cited as posing the greatest risk to the
continuation of the economy's expansion. The tight labor market and higher
energy prices also pose a risk to the favorable inflation outlook.
We urge you to take a moment and review the Management Discussion and Analysis
section of this report. We have included on these pages information concerning
each Fund's activity and performance. We have also reformatted the Management
Discussion and Analysis section so that all of the pertinent information
concerning a particular fund appears on one page. In implementing this change,
it is our hope that we are providing you with useful information in a more
concise format. Our continuing goal is to more effectively communicate with our
shareholders. It is important for us to provide you with the information that
you need to take control of your money and make those investment decisions
which can contribute to your personal financial goals. You will find the
complete financial statements for each of The Monitor Funds, including their
portfolios of investments, on the succeeding pages.
We are pleased to welcome our new shareholders. We strive to provide you with
solid investment management services. Thank you for your confidence in our
organization.
LOGO
Norman A. Jacobs
President and C.E.O.
The Huntington Trust Company, N.A.
Investment Manager
Columbus, Ohio
2
<PAGE>
Growth Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
The Monitor Growth Fund is managed by a team of experienced investment
professionals. Each manager brings a unique perspective to the management of
this Fund. Phil Farrington, Vice President, is a graduate of Harvard University
and has over thirty years of investment management experience. He is part of
our equity management team. Jim Gibboney, Jr., Vice President, is a Chartered
Financial Analyst, and a graduate of The Ohio State University with an MBA from
Xavier University. Jim's primary equity concentrations are in the electric
utilities and chemical industries. Here are the managers' comments on The
Monitor Growth Fund:
"The total return of the Fund in 1996 was 16.72% versus 23% for the Standard
& Poor's Composite Price 500 Index ("S&P 500"). In an exuberant market
environment like that of 1996, our pragmatic approach towards individual stock
valuations led us to forgo commitments to certain momentum driven stocks which
went higher as the year played out. The five leaders in the S&P 500 return
(IBM, Microsoft, Coca Cola, GE and Intel) accounted for almost one quarter of
the price appreciation in the index. It is important to note that the S&P 500
is a market capitalization (or size) weighted index, and that those five stocks
accounted for a larger than average share of the total return of the Index.
Equally weighted, the S&P 500 returned about 13% for 1996--returns which were
more in line with the performance of the Fund. The market action last year was
enormously positive, but quite narrow when one looks at the composition of
those returns.
The Monitor Growth Fund has invested in stocks of U.S. companies which are
growing rapidly abroad. One advantage of this approach is that the product
being touted has, in many cases, proven its efficacy in the United States.
Management simply has to apply what has already been learned here to overseas
markets. McDonald's, Wrigley, Colgate Palmolive, Pepsi and Mattel are shining
examples of this strategy.
As we look forward, The Monitor Growth Fund will continue to emphasize those
companies with superior earnings and dividend records. If the 1997 market
environment remains favorable, there may be an opportunity for the Fund to
branch out from existing sectors of over-concentration into more growth-
oriented sectors including medical technology and communications."
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST INVESTMENT
SHARES SHARES
<S> <C> <C>
QTR 5.11% 5.06%
1-Year Annualized 16.72% 16.43%
3-Year Annualized 16.00% 15.73%
5-Year Annualized 11.76% 11.48%
Annualized Since Incep. 7/3/89 5/1/91
11.82% 11.78%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil)............. $180.0
Net Asset Value (Trust Shares). $33.97
Number of Issues............... 51
Cash Reserves (%).............. 1%
</TABLE>
FIVE LARGEST EQUITY HOLDINGS
<TABLE>
<S> <C>
Schlumberger 3.6%
Colgate-Palmolive 3.6%
Pfizer 3.5%
Sigma-Aldrich 3.5%
Anadarko Petroleum 3.4%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITORGROWTH FUND--INVESTMENT AND TRUST
SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund--Investment Shares from May 1, 1991 (commencement of operations) to
December 31, 1996, compared to the Standard & Poor's Composite Price 500 Index
("S&P 500")+, and The Fund--Trust Shares from July 3, 1989 (commencement of
operations) to December 31, 1996, compared to the S&P 500+.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
**Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales load of 4.00% ($10,000 investment minus $400 sales load =
$9,600). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The S&P 500 is not adjusted to reflect sales loads, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
3
<PAGE>
Income Equity Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
Jim Buskirk, portfolio manager of The Monitor Income Equity Fund, is the
Chief Investment Officer of the Huntington Trust Company and is responsible for
all of the Trust Company's investment activities. With over 18 years of
investment management experience, Jim has managed both personal and
institutional balanced portfolios and holds the Chartered Financial Analyst
designation. Jim received his bachelor's degree in finance from The Ohio State
University, and his M.B.A. from the University Of Oregon.
"The Monitor Income Equity Fund's total return of 16.9% in 1996 was in line
with its Lipper Equity Income peer group, but lagged behind the 23% gain of the
S&P 500. The reasons for this trailing of that broad index become clear when
one considers that only five stocks (Intel, General Electric, Microsoft, Coca
Cola and IBM) in that 500 stock benchmark accounted for an incredible one
quarter of the price appreciation in the index. The Fund, because it remains
true to its charter of providing a relatively high current yield, holds only
one of those five stocks, General Electric, a position that was initiated in
1990 when General Electric's dividend yield was much higher. The other four
stocks, because of their very low yields, are not appropriate holdings in this
income-oriented stock fund.
Nevertheless, the Fund's 1996 return was buoyed by good results from its
holdings in bank stocks, a sector that has appreciated steadily in price to the
point where it now accounts for nearly 15% of total Fund assets. Chase
Manhattan, Fleet Financial, CoreStates Financial and National City were all
good performers last year. Energy stocks, which comprise about 11% of the total
assets, also posted above average price gains, with much of their advance
coming in the year's fourth quarter.
After two consecutive strong years for stock prices, history would suggest
that the odds favor a correction to develop in 1997. This could, indeed, take
place but it would seem to need a combination of weak corporate profits, higher
inflation and interest rates, or some political shock to the system in order to
unfold. While such a scenario is possible, the current backdrop appears benign.
What we do expect (but cannot promise) in 1997 is a continuation of the steady
dividend increases that have benefitted the Fund's shareholders through the
years. Last year, total annual dividends of $1.00 per share were earned in the
Fund, up from the 96 cents per share of 1995; the 86 cents in 1994 and the 72
cents per share in 1991. In fact, dividend growth has averaged 7% per year over
the past five years. We will continue to manage the Fund with the intent of
continuing that trend."
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST SHARES
<S> <C>
QTR 6.06%
1-Year Annualized 16.88%
3-Year Annualized 14.04%
5-Year Annualized 12.06%
Annualized Since Incep. (7/3/89) 10.06%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil)............. $172.8
Net Asset Value (Trust Shares). $30.26
30-Day SEC Yield (%)........... 3.80%
Number of Issues............... 43
Cash Reserves (%).............. 7.4%
</TABLE>
FIVE LARGEST EQUITY HOLDINGS
<TABLE>
<S> <C>
Monsanto 3.8%
Corestates Financial 3.6%
Texaco 3.4%
Chase Manhattan 3.4%
General Electric 3.1%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITOR INCOME EQUITY FUND--TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund--Trust Shares from July 3, 1989 (commencement of operations) to December
31, 1996, compared to the Standard & Poor's Composite Stock Price 500 Index
("S&P 500")+.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The S&P 500 is not adjusted to reflect sales loads, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
4
<PAGE>
Ohio Tax-Free Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
Bill Doughty, Vice President, has over twenty-four years of investment
management experience. Bill heads our fixed income trading area and is
responsible for fixed income portfolio management. He is a graduate of Franklin
University, and holds an MBA from The University of Dayton. As manager of The
Monitor Ohio Tax Free Fund since its inception in 1988, Bill has a number of
insights on the performance of the Fund and its particular investment niche:
"For the fiscal year ended December 31, 1996, the total return of the Lehman
Brothers State General Obligation Index was 4.59% while the total return of The
Monitor Ohio Tax Free Fund was 3.48% for the trust share class and 3.2% for the
investment share class. It should be mentioned, however, that this particular
Lehman index is not subject to the portfolio maturity, geographic or credit
quality restrictions of the Fund.
The Ohio Tax Free Fund must have an average portfolio maturity of four to
seven years, and may not purchase any security with a maturity of greater than
15 years. Furthermore, under normal market conditions, at least 80% of the
Fund's net assets will be invested in Ohio tax-exempt securities which are
rated in the top four categories or are of comparable quality.
The Ohio Tax Free Fund has continued to be 100% invested in Ohio securities
with no issue representing more than 5% of the portfolio. The overall credit
quality of the Fund is AA. In 1997, we will seek to extend the average life out
past six years by purchasing securities in the twelve to fifteen year range.
This will be accomplished by selling securities maturing over the next two
years and investing the excess cash position."
- --------------------------------------------------------------------------------
Tax Note: Income distributions from this Fund will, under normal circumstances,
be exempt from federal regular income taxation. However, these distributions
may not be exempt from state and local income taxation, or from the federal
Alternative Minimum Tax. Consult the prospectus and your tax advisor for more
complete information regarding the income tax attributes of distributions from
this Fund (as they relate to your specific financial circumstances).
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST INVESTMENT
SHARES SHARES
<S> <C> <C>
QTR 1.86% 1.81%
1-Year Annualized 3.48% 3.20%
3-Year Annualized 3.93% 3.67%
5-Year Annualized 5.17% 4.90%
Annualized Since Incep. 10/18/88 5/1/91
5.98% 5.35%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil)............. $ 66.7
Net Asset Value (Trust Shares). $21.49
30-Day SEC Yield (%)........... 3.98%
Number of Issues............... 190
Average Maturity (Yrs.)........ 6.6
Cash Reserves (%).............. 3%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITOR OHIOTAX-FREE FUND--INVESTMENT AND
TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund -- Investment Shares from May 1, 1991 (commencement of operations) to
December 31, 1996, compared to the Lehman Brothers State General Obligation
Index ("LBSGO")+, Lehman Brothers 5 Year General Obligation Index ("LB5GO")+,
Lipper Short Municipal Debt Fund Average ("LSMD")++, and the Lipper
Intermediate Municipal Debt Fund Average ("LIMD")++ and The Fund--Trust Shares
from October 18, 1988 (commencement of operations) to December 31, 1996,
compared to the Lehman Brothers State General Obligation Index ("LBSGO")+,
Lehman Brothers 5 Year General Obligation Index ("LB5GO")+, Lipper Short
Municipal Debt Fund Average ("LSMD")++, and the Lipper Intermediate Municipal
Debt Fund Average ("LIMD")++.
For explanation of indices, please refer to page 37.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
5
<PAGE>
Fixed Income Securities Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
Steve Geis, Vice President, joined the Huntington in 1988, and has served as
our firm's senior fixed income manager. He is the manager of the Monitor Short
Intermediate Fixed Income Securities Fund and the Monitor Fixed Income
Securities Fund. Steve is a graduate of the College of Wooster, received his
MBA from the University of Dayton, and his J.D. from Capital University. Here's
what Steve has to say about the activity in the Fixed Income Securities Fund in
1996:
"For the fiscal year ended 12/31/96, the Monitor Fixed Income Securities Fund
(trust shares) had a total return of 2.56% compared with 2.9% for the Lehman
Brothers Government Corporate Bond Index and 3.12% for the Lipper Intermediate
Investment Grade Debt Fund Average. These comparisons are very close
considering the fees of the Monitor Funds and the absence of those in an index.
The year 1996 was certainly not a particularly good one for bond investors.
However, interest rates did fall modestly during the fourth quarter and that
was enough to erase the prior unrealized losses from nine months of rate
increases. The Fund posted a small positive total return for the year. A more
stable interest rate environment in 1997 would be a welcome relief from four
straight years of dramatic "see-saw' volatility.
As in the past, we continue to maintain a steady maturity posture and will
add corporate bonds when yield spreads relative to Treasuries become
attractive."
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST INVESTMENT
SHARES SHARES
<S> <C> <C>
QTR 2.90% 2.88%
1-Year Annualized 2.56% 2.32%
3-Year Annualized 4.88% 4.61%
5-Year Annualized 6.28% 6.01%
Annualized Since Incep. 7/3/89 5/1/91
7.72% 7.43%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil)............. $145.9
Net Asset Value (Trust Shares). $20.94
30-Day SEC Yield (%)........... 5.72%
Number of Issues............... 119
Average Maturity (Yrs.)........ 7.9
Cash Reserves (%).............. 3%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITOR FIXED INCOME SECURITIES FUND --
INVESTMENT AND TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund--Investment Shares from May 1, 1991 (commencement of operations) to
December 31, 1996, compared to the Lehman Brothers Government/Corporate Bond
Index ("LBGCB")+ and the Lipper Intermediate Investment Grade Debt Fund Average
("LIIGDF")++ and The Fund--Trust Shares from July 3, 1989 (commencement of
operations) to December 31, 1996, compared to the Lehman Brothers
Government/Corporate Bond Index ("LBGCB")+ and the Lipper Intermediate
Investment Grade Debt Fund Average ("LIIGDF")++
For explanation of indices, please refer to page 37.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
LOGO
6
<PAGE>
Mortgage Securities Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
The Monitor Mortgage Securities Fund is sub-advised by Piper Capital
Management of Minneapolis, Minnesota. Worth Bruntjen and Bruce Salvog actively
manage the Fund on behalf of Huntington Trust. Worth joined Piper Capital
Management in 1988 and has managed the Fund since its inception. Bruce is a
graduate of Harvard University, and heads up the Piper Capital Management Core
Fixed Income Team.
"The Monitor Mortgage Securities Fund (trust shares) had a total return of
6.6% for the year ended 12/31/96 as included in the Financial Statements. This
compares with the Lehman Mortgage Securities Index return of 5.35% for the full
year. High volatility continued to characterize the fixed income market in
1996, as long Treasuries made a near round-trip from 5.90% in January, to 7.20%
in July and back to 6.30% in November, then higher in December to close at
6.6%. While volatility has been with us for several years, its sources appear
to have shifted. The bond market seems to lack sponsorship and bond mutual
funds have not, in the aggregate, received positive investment flows since
1993.
The duration, structure and sector strategies of the Fund performed
reasonably well during the year. Our defensive duration strategy, adopted early
in the year, aided the relative performance, but has had a modest impact since
we adopted a neutral posture in the spring.
Over a twelve month horizon, bonds appear to represent reasonable value given
the economic backdrop. However, the near term risk to the market is an
unexpected bounce in economic growth that may rekindle inflationary
expectations in an economy which is operating near full employment. We are
maintaining a neutral to slightly defensive duration strategy. As we go
forward, we look to add to the Treasury component of the Fund (currently 6% of
the portfolio) in order to protect against the tendency for mortgage securities
to underperform when interest rates decline as a result of heightened
prepayment risks."
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST INVESTMENT
SHARES SHARES
<S> <C> <C>
QTR 2.76% 2.58%
1-Year Annualized 6.56% 6.25%
3-Year Annualized 1.75% 1.60%
Annualized Since Incep. 6/2/92 6/2/92
5.88% 5.69%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil).............. $41.2
Net Asset Value (Trust Shares).. $8.06
30-Day SEC Yield (%)............ 6.59%
Number of Issues................ 33
Cash Reserves (%)............... 5.6%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITOR MORTGAGE SECURITIES FUND --INVESTMENT
AND TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund--Trust and Investment Shares from June 2, 1992 (commencement of
operations) to December 31, 1996, compared to the Merrill Lynch 3-5 Year U.S.
Treasury Index ("ML3-5YUST")+, Lipper U.S. Mortgage Fund Average ("LUSMF")++
and the Lehman Mortgage-Backed Index ("LMI")+.
For explanation of indices, please refer to page 37.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
7
<PAGE>
Short/Intermediate Fixed Income Securities Fund As of 12/31/96
MANAGEMENT DISCUSSION & ANALYSIS
Steve Geis, Vice President, joined the Huntington in 1988, and has served as
our firm's senior fixed income manager. He is the manager of the Monitor Short
Intermediate Fixed Income Securities Fund and the Monitor Fixed Income
Securities Fund. Steve is a graduate of the College of Wooster, received his
MBA from the University of Dayton, and his J.D. from Capital University. Here's
what Steve has to say about the activity in the Short/Intermediate Fixed Income
Securities Fund in 1996:
"For the fiscal year ended 12/31/96, the Monitor Short/Intermediate Fixed
Income Securities Fund's total return was 4.08%. This compares with 4.64% for
the Lipper Short Term Investment Grade Debt Fund Index; 4.47% for the Merrill
Lynch 1-5 Year Composite Treasury Index, and 4.05% for the Lehman Intermediate
Government/Corporate Index. Given the fees applicable to the Monitor Fund,
these are very close comparisons.
Investors in shorter term bonds and bond mutual funds had a better 1996 than
those in longer maturity bonds because interest rates rose fairly dramatically
during the first nine months of the year and only fell modestly over the fourth
quarter. Looking forward, we propose to move the average maturity of the Fund
out to the 3.5 year area. We will do that by trading short-term corporates for
five year maturities. Obviously, we are hoping for a more stable rate
environment in 1997 and we plan to increase the overall corporate exposure to
enhance yields should the opportunities present themselves."
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE PROFILE
TOTAL RETURNS (%)
Period Ending 12/31/96
<TABLE>
<CAPTION>
TRUST SHARES
<S> <C>
QTR 2.10%
1-Year Annualized 4.08%
3-Year Annualized 5.15%
5-Year Annualized 5.82%
Annualized Since Incep. (7/3/89) 7.31%
</TABLE>
PORTFOLIO PROFILE
<TABLE>
<S> <C>
Net Assets ($ mil)............. $125.5
Net Asset Value (Trust Shares). $19.96
30-Day SEC Yield (%)........... 5.26%
Number of Issues............... 84
Average Maturity (Yrs.)........ 2.8
Cash Reserves (%).............. 3%
</TABLE>
GROWTH OF $10,000 INVESTED IN THE MONITOR SHORT/INTERMEDIATE FIXED INCOME
SECURITIES FUND--TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Fund--Trust Shares from July 3, 1989 (commencement of operations) to December
31, 1996, compared to the Lehman Intermediate Government/Corporate Index
("LIGC")+ and the Merrill Lynch 1-5 Year Composite Treasury Index ("ML1-5YCT")+
and the Merrill Lynch 1-5 Year Government/Corporate Index (MLI-5YGC)+ and the
Lipper Short-Term Investment Grade Debt Fund Average ("LSTIGDF")++.
For explanation of indices, please refer to page 37.
LOGO
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
LOGO
8
<PAGE>
Portfolios of Investments
------------------------------------
THE MONITOR MONEY MARKET FUND December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------
<C> <S> <C>
(A) COMMERCIAL PAPER - 88.4%
- -----------------------------------------------
AGRICULTURE - 2.3%
$10,000,000 Cargill Inc.,
5.25-5.28%,
01/23/97-
02/10/97 $9,954,700
- -----------------------------------------------
AUTOMOTIVE - 2.3%
10,000,000 Daimler Benz
North America
Corp., 5.30-
5.32%,
02/06/97-
03/03/97 9,928,428
- -----------------------------------------------
BANKING - 5.7%
10,000,000 National City
Credit Corp.,
5.35-5.39%,
03/21/97-
03/31/97 9,874,728
10,000,000 Toronto Dominion
Holdings, 5.24-
5.34%,
02/11/97-
03/19/97 9,913,053
5,000,000 U S Central
Credit Union,
5.29%, 01/21/97 4,985,306
- -----------------------------------------------
24,773,087
- -----------------------------------------------
BANKING & FINANCE - 6.9%
10,000,000 American Express
Credit Corp.,
5.36-5.42%,
01/14/97-
3/26/97 10,000,000
15,000,000 Ford Motor
Credit Corp.,
5.28-5.36%,
01/27/97-
02/04/97 14,975,067
5,000,000 Xerox Credit
Corp., 5.42%,
02/07/97 4,972,147
- -----------------------------------------------
29,947,214
- -----------------------------------------------
CHEMICALS - 3.4%
5,000,000 Akzo Nobel Inc.,
5.35%, 03/06/97 4,952,444
10,000,000 du Pont (E. I.)
de Nemours &
Co., 5.25-
5.29%, 02/13/97 9,937,053
- -----------------------------------------------
14,889,497
- -----------------------------------------------
CONSUMER PRODUCTS - 2.3%
5,000,000 Pacific Dunlop
Ltd., 5.32%,
02/21/97 4,962,317
5,000,000 Proctor & Gamble
Corp., 5.25%,
02/03/97 4,975,938
- -----------------------------------------------
9,938,255
- -----------------------------------------------
ELECTRONICS - 9.8%
5,000,000 Electronic Data
System, 5.43%,
03/21/97 4,940,421
10,500,000 Lucent
Technologies,
5.23%,
02/04/97-
02/19/97 10,437,240
13,000,000 Sharp
Electronics,
5.31-5.40%,
01/10/97-
03/14/97 12,935,380
5,000,000 Siemens Corp.,
5.28%, 01/06/97 4,996,333
5,000,000 Sony Capital
Corp., 5.32%,
01/13/97 4,991,133
5,000,000 Xerox Corp.,
5.30%, 01/07/97 4,995,583
- -----------------------------------------------
43,296,090
- -----------------------------------------------
ENTERTAINMENT - 2.3%
10,000,000 Walt Disney
Inc., 5.25-
5.28%,
02/14/97-
02/26/97 9,926,900
- -----------------------------------------------
FINANCIAL - 4.6%
10,000,000 Daiwa America,
5.70%, 01/22/97 9,966,750
5,000,000 Goldman Sachs
Co., 5.28%,
02/05/97 4,974,333
5,000,000 Morgan Stanley
Group Inc.,
5.32%, 01/17/97 4,988,178
- -----------------------------------------------
19,929,261
- -----------------------------------------------
FOOD & BEVERAGE - 5.0%
12,000,000 Anheuser Busch
Co., 5.22-
6.25%,
01/02/97-
01/13/97 11,990,085
10,000,000 Coca Cola Co.,
5.23-5.25%,
02/14/97-
02/21/97 9,930,852
- -----------------------------------------------
21,920,937
- -----------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------
<C> <S> <C>
FOOD PRODUCTS - 5.7%
$10,000,000 Golden Peanut
Co., 5.32%,
01/02/97 $9,998,522
10,000,000 Nestle Capital
Corp., 5.23-
5.25%,
01/16/97-
04/07/97 9,919,104
5,000,000 Sara Lee Corp.,
5.35%, 03/27/97 4,936,840
- ---------------------------------------------------
24,854,466
- ---------------------------------------------------
FUNDING CORP - 2.3%
10,000,000 Corporate Asset
Funding Corp.,
5.28%, 01/23/97 9,967,733
- ---------------------------------------------------
INSURANCE - 5.7%
10,000,000 A.I. Credit
Corp., 5.27%,
01/06/97-
01/15/97 9,986,093
5,000,000 Met Life Funding
Corp., 5.26%,
02/24/97 4,960,550
10,000,000 USAA Capital
Corp., 5.28-
5.29%,
01/08/97-
03/06/97 9,947,924
- ---------------------------------------------------
24,894,567
- ---------------------------------------------------
LUMBER & WOOD PRODUCTS - 2.3%
10,000,000 Weyerhauser Co.,
5.27-5.30%,
01/24/97-
02/07/97 9,955,929
- ---------------------------------------------------
OIL & OIL FINANCE - 2.3%
10,000,000 Shell Oil Co.,
6.40%, 01/02/97 9,998,222
- ---------------------------------------------------
PHARMACEUTICALS - 5.1%
10,000,000 Eli Lilly Co.,
5.25-5.28%,
02/07/97-
02/24/97 9,933,492
6,548,000 Schering Corp.,
5.28%, 02/11/97 6,508,625
6,000,000 Unilever Capital
Corp., 5.31%,
03/18/97 5,932,740
- ---------------------------------------------------
22,374,857
- ---------------------------------------------------
PRINTING & PUBLISHING - 2.7%
6,925,000 McGraw Hill,
5.31%, 01/07/97 6,918,871
5,000,000 R.R. Donnelly &
Sons, 5.28%,
02/18/97 4,964,800
- ---------------------------------------------------
11,883,671
- ---------------------------------------------------
(H) SOVEREIGN GOVERNMENT - 2.3%
10,000,000 Wool
International,
5.25-5.28%,
01/13/97-
02/12/97 9,947,375
- ---------------------------------------------------
TECHNOLOGY - 4.6%
10,000,000 IBM Corp., 5.28-
5.30%,
01/21/97-
01/24/97 9,968,402
10,000,000 Motorola Inc.,
5.23%,
02/11/97-
02/20/97 9,933,899
- ---------------------------------------------------
19,902,301
- ---------------------------------------------------
TELECOMMUNICATIONS - 9.6%
5,000,000 A T & T Corp.,
5.30%, 04/08/97 4,928,597
10,000,000 Ameritech Corp.,
5.27%,
02/24/97-
03/20/97 9,903,383
10,000,000 Bellsouth
Telecommunications,
5.32-5.45%,
02/12/97-
03/13/97 9,915,747
7,000,000 Bellsouth
Capital
Funding, 5.29%,
01/22/97 6,978,399
5,000,000 SBC
Communication
Capital, 5.54%,
01/30/97 4,977,686
5,000,000 Southwestern
Bell Telephone,
5.30%, 01/28/97 4,980,125
- ---------------------------------------------------
41,683,937
- ---------------------------------------------------
</TABLE>
9
<PAGE>
------------------------------------
THE MONITOR MONEY MARKET FUND (Continued)
----------------
THE MONITOR OHIO MUNICIPAL MONEY MARKET FUND December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------
<C> <S> <C>
TOBACCO - 1.2%
$5,105,000 Philip Morris
Companies,
Inc., 5.28%,
01/15/97 $5,094,518
- ------------------------------------------------
TOTAL COMMERCIAL PAPER (AT AMOR-
TIZED COST) 385,061,945
- ------------------------------------------------
GOVERNMENT AGENCIES - 1.1%
5,000,000 Student Loan
Marketing
Association,
Weekly VRDNs 5,000,000
- ------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------
<C> <S> <C>
(B) REPURCHASE AGREEMENTS - 10.8%
- ----------------------------------------------------
$46,902,300 Morgan Stanley &
Co., dated
12/31/96,
6.25%, due
01/02/97,
repurchase
price
$46,910,443
(collateralized
by US T-Note
obligations,
total par value
$39,930,000,
8.125%,
08/15/21; total
market value
$47,585,330) $46,902,300
- ----------------------------------------------------
TOTAL INVESTMENTS (AT AMORTIZED
COST) $436,964,245(C)
- ----------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
OHIO - 96.7%
$760,000 Berea City, OH, BANs, 4.09%, 07/10/1997 $760,285
- -------------------------------------------------------------------------------
465,000 Berea, OH, BANs, 4.10%, 10/23/1997 465,871
- -------------------------------------------------------------------------------
1,535,000 Brecksville, OH, BANs, 4.05%, 07/30/1997 1,536,306
- -------------------------------------------------------------------------------
1,100,000 Butler County, OH, BANs, 4.25%, 10/23/1997 1,103,321
- -------------------------------------------------------------------------------
1,965,000 Centerville, OH, Weekly VRDNs, (Bethany Village)/(PNC
Bank OH LOC) 1,965,000
- -------------------------------------------------------------------------------
1,300,000 Cincinnati Hamilton, OH, Student Loan Funding Corp.,
Weekly VRDNs, (Series 1983A)/(Bank of America LOC) 1,300,000
- -------------------------------------------------------------------------------
2,000,000 Cincinnati, OH, City School District, (Series C) /(Fifth
Third Bank LOC), 5.41%, 07/10/1997 2,018,503
- -------------------------------------------------------------------------------
3,302,000 Cleremont County, OH, Hospital Facilities, Daily VRDNs,
(Mercy Health Care System)/(MBIA Insured) 3,302,000
- -------------------------------------------------------------------------------
4,000,000 Columbus, OH, Weekly VRDNs, (West Deutsche Landesbank
LOC) 4,000,000
- -------------------------------------------------------------------------------
4,900,000 Columbus, OH, Electric System Revenue, Weekly VRDNs,
(Union Bank Of Switzerland LOC) 4,900,000
- -------------------------------------------------------------------------------
6,200,000 Columbus, OH, Sewer System Revenue Bonds, Weekly VRDNs,
(Series 1994) 6,200,000
- -------------------------------------------------------------------------------
805,000 Cuyahoga County, OH, (Cleveland Neighborhood), 3.90%,
06/01/1997 805,000
- -------------------------------------------------------------------------------
2,000,000 Cuyahoga County, OH, HRB, Weekly VRDNs, (Cleveland
Clinic)/(Series B) 2,000,000
- -------------------------------------------------------------------------------
600,000 Cuyahoga County, OH, HRB, Daily VRDNs, (University
Hospital Cleveland)/(Dai-Ichi Kangyo Bank Ltd. LOC) 600,000
- -------------------------------------------------------------------------------
2,000,000 Cuyahoga County, OH, HRB, Weekly VRDNs,(Cleveland
Clinic)/(Series 1996A)/(Morgan Guaranty LOC) 2,000,000
- -------------------------------------------------------------------------------
1,400,000 Cuyahoga County, OH, IDA, Weekly VRDNs, (Allen Group
Inc.)/(Dresdner Bank AG, NY LOC) 1,400,000
- -------------------------------------------------------------------------------
700,000 Cuyahoga County, OH, IDR, (Fogg Centax, 11
Project)/(Equitable Federal LOC), 3.90%, 01/01/1997 700,000
- -------------------------------------------------------------------------------
320,000 Cuyahoga County, OH, IDR, (Fogg Centax, 11
Project)/(Equitable Federal LOC), 3.75%, 07/01/1997 320,000
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
OHIO (CONTINUED)
$4,650,000 Cuyahoga County, OH, IDR, Weekly VRDNs, (Edgecomb
Metals)/(Banque Nationale De Paris LOC) $4,650,000
- -------------------------------------------------------------------------------
800,000 Delaware County, OH, IDR Weekly VRDNs, (Radiation
Sterilizers)/(Well Fargo LOC) 800,000
- -------------------------------------------------------------------------------
1,775,000 Dover, OH, BANs, 4.35%, 09/11/1997 1,778,113
- -------------------------------------------------------------------------------
1,500,000 Dublin, OH, City School District, 4.00%, 06/10/1997 1,503,242
- -------------------------------------------------------------------------------
1,000,000 Elyria, OH, BANs, 4.20%, 09/25/1997 1,001,380
- -------------------------------------------------------------------------------
1,600,000 Evendale, OH, IDR, Weekly VRDNs, (Shaver Real
Estate)/(ABN AMRO Bank LOC) 1,600,000
- -------------------------------------------------------------------------------
1,000,000 Forest Hills, OH, Local School District, BANs, 4.21%,
06/17/1997 1,002,980
- -------------------------------------------------------------------------------
2,000,000 Franklin County, OH, HRB, Weekly VRDNs, (Series
1996)/(Morgan Guaranty Trust New York LOC) 2,000,000
- -------------------------------------------------------------------------------
2,400,000 Franklin County, OH, HRB, Weekly VRDNs, (Fransiscan
Sisters)/(Chase Manhattan Bank LOC) 2,400,000
- -------------------------------------------------------------------------------
2,500,000 Franklin County, OH, HRB, Weekly VRDNs, (Holy Cross
Hlth Systems)/(J.P. Morgan LOC) 2,500,000
- -------------------------------------------------------------------------------
1,200,000 Franklin County, OH, HRB, Weekly VRDNs, (Childrens
Hospital)/(Banc One SPA) 1,200,000
- -------------------------------------------------------------------------------
750,000 Franklin County, OH, IDR, Daily VRDNs, (Columbus
College Art Design)/(Bank One LOC) 750,000
- -------------------------------------------------------------------------------
1,500,000 Franklin County, OH, Weekly VRDNs, (Dominican
Sisters)/(Fifth Third Bank LOC) 1,500,000
- -------------------------------------------------------------------------------
700,000 Hamilton County, OH, Health Care System, Weekly VRDNs,
(West Park) 700,000
- -------------------------------------------------------------------------------
1,000,000 Hamilton County, OH, BANs, (Series A), 4.00%,
04/10/1997 1,001,271
- -------------------------------------------------------------------------------
1,100,000 Hamilton County, OH, Daily VRDNs, (Automated Data
Processing Co.) 1,100,000
- -------------------------------------------------------------------------------
4,700,000 Hamilton County, OH, Health Systems, Daily VRDNs,
(Franciscan Sisters)/(Sumitomo Bank LOC) 4,700,000
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Portfolio of Investments
----------------
THE MONITOR OHIO MUNICIPAL MONEY MARKET FUND (Continued)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
OHIO (CONTINUED)
$1,000,000 Highland Heights, OH, BANs, 3.97%, 12/18/1997 $1,002,040
- ------------------------------------------------------------------------------
1,000,000 Hilliard, OH, BANs, 4.40%, 09/18/1997 1,002,758
- ------------------------------------------------------------------------------
400,000 Hilliard, OH, BANs, 4.00%, 04/10/1997 400,312
- ------------------------------------------------------------------------------
1,490,000 Lakota, OH, Local School District, 4.10%, 06/12/1997 1,492,343
- ------------------------------------------------------------------------------
1,000,000 Lorain County, OH, Public Improvement, 4.40%,
09/19/1997 1,002,697
- ------------------------------------------------------------------------------
1,885,000 Lorain County, OH, Hospital, Weekly VRDNs, (Elyria
United Methodist)/(Key Bank LOC) 1,885,000
- ------------------------------------------------------------------------------
965,000 Mahoning County, OH, Daily VRDNs, (Series
1992)/(Copland Oaks)/(Bank One LOC) 965,000
- ------------------------------------------------------------------------------
1,000,000 Marion County, OH, Daily VRDNs, (Bank One LOC) 1,000,000
- ------------------------------------------------------------------------------
1,000,000 Montgomery County, OH, Miami Valley Hospital, (Series
B)/(Northern Trust LOC), 3.60%, 01/22/1997 1,000,000
- ------------------------------------------------------------------------------
500,000 Moreland Hills, OH, BANs, 3.95%, 12/17/1997 501,157
- ------------------------------------------------------------------------------
1,000,000 Morrow County, OH, Daily VRDNs, (Field
Container)/(American National Bank LOC) 1,000,000
- ------------------------------------------------------------------------------
1,000,000 Ohio School District, Cash Flow Borrowing Program,
BANs, (Series B), 4.53%, 06/30/1997 1,002,591
- ------------------------------------------------------------------------------
1,000,000 Ohio State Air Quality, 3.55%, 02/06/1997 1,000,000
- ------------------------------------------------------------------------------
3,200,000 Ohio State Air Quality, Development Authority, Daily,
VRDNs, (Mead Corp.)/(Deutsche Bank LOC) 3,200,000
- ------------------------------------------------------------------------------
2,500,000 Ohio State Air Quality, Cleveland Electric, (FGIC
Insured), 3.45%, 02/04/1997 2,500,000
- ------------------------------------------------------------------------------
3,400,000 Ohio State Development Authority, Daily VRDNs, (Mead
Corp.)/(Swiss bank LOC) 3,400,000
- ------------------------------------------------------------------------------
3,200,000 Ohio State Environmental Improvement, Weekly VRDNs,
(USX Corp.)/(Sanwa Bank LOC) 3,200,000
- ------------------------------------------------------------------------------
3,200,000 Ohio State Higher Ed. Facility, Daily VRDNs, (Oberlin
College)/(Morgan Guaranty Trust LOC) 3,200,000
- ------------------------------------------------------------------------------
1,000,000 Ohio State Higher Ed. Facility, Weekly VRDNs, (Mt.
Vernon Nazarene College)/(National City Bank LOC) 1,000,000
- ------------------------------------------------------------------------------
3,515,000 Ohio State University, Daily VRDNs, (Series 1986B)/
(National Westminster Bank PLC LOC) 3,515,000
- ------------------------------------------------------------------------------
2,040,000 Ohio State University, Weekly VRDNs, (Series
1985B)/(National Westminster Bank PLC LOC) 2,040,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
OHIO (CONTINUED)
$2,775,000 Ohio State University, Weekly VRDNs, (Series
1992B) $2,775,000
- -------------------------------------------------------------------------------
2,300,000 Ohio State Water Dev. Authority, Daily VRDNs,
(American Honda)/(Industrial Bank of Japan Ltd.
LOC) 2,300,000
- -------------------------------------------------------------------------------
1,000,000 Ottawa County, OH, BANs, 3.98%, 04/09/1997 1,000,590
- -------------------------------------------------------------------------------
4,610,000 Sharonville, OH, IDR, Weekly VRDNs, (Edgecomb
Metals)/(Banque Nationale De Paris LOC) 4,610,000
- -------------------------------------------------------------------------------
1,000,000 Solon, OH, School District, BANs, (Series 2),
4.00%, 04/15/1997 1,001,508
- -------------------------------------------------------------------------------
1,000,000 Stark County, OH, BANs, (Series 96), 4.10%,
10/16/1997 1,001,707
- -------------------------------------------------------------------------------
1,000,000 Stark County, OH, BANs, 4.12%, 06/19/1997 1,001,005
- -------------------------------------------------------------------------------
1,000,000 Strongsville City, OH, BANs, 3.90%, 12/18/1997 1,002,321
- -------------------------------------------------------------------------------
2,100,000 Summit County, OH, IDR, Monthly VRDNs,
(Petrarca/Cedarwood)/(Firemans Newark Insured) 2,100,000
- -------------------------------------------------------------------------------
400,000 Talawanda, OH, Local School District, BANs, 4.70%,
04/03/1997 400,905
- -------------------------------------------------------------------------------
1,800,000 Toledo-Lucas County, OH, (CSX Corp.)/(Bank of Nova
Scotia LOC), 3.50%, 02/10/1997 1,800,000
- -------------------------------------------------------------------------------
1,000,000 University of Cincinnati, OH, BANs, (Series AA),
3.89%, 03/20/1997 1,000,643
- -------------------------------------------------------------------------------
1,000,000 University of Cincinnati, OH, BANs, 3.75%,
03/20/1997 1,000,924
- -------------------------------------------------------------------------------
1,500,000 University of Cincinnati, OH, BANs, 4.25%,
08/28/1997 1,503,854
- -------------------------------------------------------------------------------
1,000,000 Warren County, OH, IDR, Weekly VRDNs, (Pioneer
Industrial)/(Bank of Tokyo-Mitsubishi Bank LOC) 1,000,000
- -------------------------------------------------------------------------------
1,400,000 Willoughby, OH, GO, BANs, 3.75%, 01/30/1997 1,400,264
- -------------------------------------------------------------------------------
700,000 Wooster, OH, IDR, Weekly VRDNs, (Allen
Group)/(Dresdner Bank LOC) 700,000
- -------------------------------------------------------------------------------
TOTAL OHIO (AT AMORTIZED COST) 126,470,891
- -------------------------------------------------------------------------------
PUERTO RICO - 2.6%
3,340,000 Puerto Rico Government Development Bank, 3.40%,
01/14/1997 3,340,000
- -------------------------------------------------------------------------------
OTHER - .7%
856,000 Nuveen Tax-Exempt Money Market Fund, Inc. 856,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (AT AMORTIZED COST) 130,666,891(C)
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
11
<PAGE>
------------------
THE MONITOR U.S. TREASURY MONEY MARKET FUND December 31, 1996
<TABLE>
- ---------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------
<C> <S> <C>
U.S. TREASURY BILLS - 48.3%
- ---------------------------------------
$15,000,000 05/01/1997 $14,748,500
- ---------------------------------------
10,000,000 05/15/1997 9,812,772
- ---------------------------------------
20,000,000 03/20/1997 19,781,817
- ---------------------------------------
10,000,000 05/01/1997 9,832,000
- ---------------------------------------
20,000,000 02/27/1997 19,840,242
- ---------------------------------------
10,000,000 04/24/1997 9,841,486
- ---------------------------------------
10,000,000 01/23/1997 9,969,108
- ---------------------------------------
10,000,000 03/06/1997 9,909,867
- ---------------------------------------
20,000,000 04/10/1997 19,721,150
- ---------------------------------------
10,000,000 04/03/1997 9,870,178
- ---------------------------------------
20,000,000 04/17/1997 19,701,139
- ---------------------------------------
20,000,000 01/09/1997 19,977,333
- ---------------------------------------
20,000,000 01/16/1997 19,957,417
- ---------------------------------------
10,000,000 02/06/1997 9,948,200
- ---------------------------------------
20,000,000 02/20/1997 19,855,556
- ---------------------------------------
20,000,000 03/13/1997 19,793,706
- ---------------------------------------
10,000,000 02/13/1997 9,936,454
- ---------------------------------------
TOTAL U.S. TREASURY BILLS 252,496,925
- ---------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
(D) REPURCHASE AGREEMENTS - 52.1%
- --------------------------------------------
25,000,000 A.G. Lanston &
Co. Inc., dated
12/30/96,
5.90%, due
01/06/1997
repurchase
price
$25,028,681
(collateralized
by U.S.
Treasury
obligations,
total par value
$25,791,000,
5.125%-7.25%,
12/31/98-
5/15/16; total
market value
$25,492,735) 25,000,000
17,033,000 Daiwa Securities
of America,
Inc., dated
12/31/96,
6.73%, due
01/02/1997
repurchase
price
$17,039,368
(collateralized
by U.S.
Treasury
obligations,
total par value
$17,148,000,
5.125%,
04/30/98; total
market value
$17,408,177) 17,033,000
60,000,000 Daiwa Securities
of America,
Inc., dated
12/31/96,
6.75%, due
01/02/1997
repurchase
price
$60,022,500
(collateralized
by U.S.
Treasury
obligations,
total par value
$61,116,000,
6.125%-6.255%,
04/30/01-
03/31/98; total
market value
$61,112,690) 60,000,000
20,000,000 Dean Witter
Reynolds, Inc.,
dated 12/31/96,
5.35%, due
01/07/1997
repurchase
price
$20,020,806
(collateralized
by U.S.
Treasury
obligations,
total par value
$20,353,000,
5.625%,
06/30/97; total
market value
$20,384,802) 20,000,000
</TABLE>
<TABLE>
- ------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------
<C> <S> <C>
(D) REPURCHASE AGREEMENTS (CONTINUED)
- ------------------------------------------------
$25,000,000 First Boston
Corp., dated
12/27/96,
5.72%, due
01/03/1997
repurchase
price
$25,027,806
(collateralized
by U.S.
Treasury
obligations,
total par value
$26,282,000,
6.25%,
08/15/23; total
market value
$25,255,359) $25,000,000
15,000,000 Morgan Stanley &
Co. Inc., dated
12/31/96,
5.65%, due
01/07/1997
repurchase
price
$15,016,479
(collateralized
by U.S.
Treasury
obligations,
total par value
$14,570,000,
7.5%, 10/31/99;
total market
value
$15,305,066) 15,000,000
20,000,000 Nikko
Securities,
Inc., dated
12/31/96,
5.65%, due
01/07/1997
repurchase
price
$20,021,972
(collateralized
by U.S.
Treasury
obligations,
total par value
$18,630,000,
7.25%,
08/15/22; total
market value
$20,207,728) 20,000,000
25,000,000 Nomura Bank
Limited, dated
12/26/96,
5.60%, due
01/02/1997
repurchase
price
$25,027,222
(collateralized
by U.S.
Treasury
obligations,
total par value
$24,345,000,
7.5%-7.75%,
12/31/99-
11/15/16; total
market value
$25,510,199) 25,000,000
25,000,000 Sanwa Securities
(USA) Co.,
dated 12/30/96,
5.70%, due
01/06/1997
repurchase
price
$20,027,708
(collateralized
by U.S.
Treasury
obligations,
total par value
$25,424,000,
5.375%,
11/30/97; total
market value
$25,492,711) 25,000,000
20,000,000 Sanwa Securities
(USA) Co.,
dated 12/26/96,
5.60%, due
01/02/1997
repurchase
price
$20,021,778
(collateralized
by U.S.
Treasury
obligations,
total par value
$21,296,000,
5.43%,
10/16/97; total
market value
$20,409,731) 20,000,000
20,000,000 Smith Barney,
Inc., dated
12/27/96,
5.65%, due
01/03/1997
repurchase
price
$20,021,972
(collateralized
by U.S.
Treasury
obligations,
total par value
$19,730,000,
6.25%,
07/31/98; total
market value
$20,372,163) 20,000,000
- ------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 272,033,000
- ------------------------------------------------
TOTAL INVESTMENTS (AT AMORTIZED
COST) 524,529,925(C)
- ------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
12
<PAGE>
---------------------------------------------
THE MONITOR GROWTH FUND December 31, 1996
------------------------------------
THE MONITOR INCOME EQUITY FUND December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCK - 99.0%
- ---------------------------------------------------------
BASIC INDUSTRY - .5%
50,000 Worthington Industries, Inc. $906,250
- ---------------------------------------------------------
CAPITAL GOODS - 3.2%
55,000 Boeing Co. 5,850,625
- ---------------------------------------------------------
CHEMICALS - 7.4%
260,000 Hanna (M.A.) Co. 5,687,500
5,000 Millennium Chemicals, Inc.* 88,750
16,600 Potash Corp. 1,411,000
100,000 Sigma Aldrich Corp. 6,243,750
- ---------------------------------------------------------
13,431,000
- ---------------------------------------------------------
CONSUMER NON-DURABLES - 6.6%
100,000 American Brands 4,962,500
70,000 Colgate-Palmolive Co. 6,457,500
70,000 Hanson PLC 472,500
- ---------------------------------------------------------
11,892,500
- ---------------------------------------------------------
CONSUMER PRODUCTS - 15.3%
170,000 American Greetings Corp. 4,823,750
100,000 International Flavors & Fragrances 4,500,000
168,750 Mattel, Inc. 4,682,813
106,300 Media General Cl. A 3,215,575
115,000 Newell Co. 3,622,500
94,000 Tambrands, Inc. 3,842,250
50,000 Wrigley Wm Jr Co. 2,812,500
- ---------------------------------------------------------
27,499,388
- ---------------------------------------------------------
CONTAINERS & PACKAGING - 2.0%
100,000 Avery Dennison Corp. 3,537,500
- ---------------------------------------------------------
ELECTRICAL EQUIPMENT - 6.1%
40,000 Emerson Electric Co. 3,870,000
36,800 General Electric Co. 3,638,600
79,164 Hubbell, Inc. 3,423,843
- ---------------------------------------------------------
10,932,443
- ---------------------------------------------------------
ENERGY - 7.0%
95,000 Anadarko Petroleum 6,151,250
65,000 Schlumberger 6,491,875
- ---------------------------------------------------------
12,643,125
- ---------------------------------------------------------
FINANCIAL - 3.3%
105,000 American Express 5,932,500
- ---------------------------------------------------------
FOOD & BEVERAGE - 4.6%
70,000 McDonald's Corp. 3,167,500
177,000 Pepsico, Inc. 5,177,250
- ---------------------------------------------------------
8,344,750
- ---------------------------------------------------------
FOOD DISTRIBUTOR/SER. SYSTEM- 2.1%
115,000 Sysco Corp. 3,751,875
- ---------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES/PAR VALUE
- ------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE - 2.3%
90,000 Columbia/HCA Healthcare Corp. $3,667,500
6,000 Medtronic, Inc. 408,000
- ------------------------------------------------------------------------
4,075,500
- ------------------------------------------------------------------------
INDUSTRIAL PRODUCTS - 5.6%
15,000 Illinois Tool Works, Inc. 1,198,125
75,000 Nordson Corp. 4,781,250
240,000 RPM, Inc. 4,080,000
- ------------------------------------------------------------------------
10,059,375
- ------------------------------------------------------------------------
INSURANCE - 5.3%
33,500 American International Group 3,626,375
73,500 Cincinnati Financial Corp. 4,768,313
7,000 General Re Corp. 1,104,250
- ------------------------------------------------------------------------
9,498,938
- ------------------------------------------------------------------------
PHARMACEUTICALS - 12.5%
100,000 Abbott Laboratories 5,075,000
19,000 American Home Products Corp. 1,113,875
60,000 Merck & Co. 4,755,000
75,000 Pfizer, Inc. 6,215,625
31,000 Pharmacia & Upjohn, Inc. 1,228,375
65,000 Schering Plough Corp. 4,208,750
- ------------------------------------------------------------------------
22,596,625
- ------------------------------------------------------------------------
RETAIL - 6.0%
115,000 Home Depot 5,764,375
30,000 Kohl's Corp.* 1,177,500
95,000 Walgreen 3,800,000
- ------------------------------------------------------------------------
10,741,875
- ------------------------------------------------------------------------
TECHNOLOGY - 8.6%
140,000 Automatic Data Processing, Inc. 6,002,500
13,000 Computer Sciences Corp.* 1,067,625
110,000 Electronics Data Systems Corp. 4,757,500
30,000 Hewlett-Packard Co. 1,507,500
35,000 Motorola, Inc. 2,148,125
- ------------------------------------------------------------------------
15,483,250
- ------------------------------------------------------------------------
TELECOMMUNICATIONS - .5%
33,000 Airtouch Communications, Inc.* 833,250
- ------------------------------------------------------------------------
TOBACCO - .1%
17,500 Imperial Tobacco Group PLC* 225,749
- ------------------------------------------------------------------------
TOTAL COMMON STOCK - (IDENTIFIED COST,$127,342,144) 178,236,518
- ------------------------------------------------------------------------
(E) COMMERCIAL PAPER - .9%
- ------------------------------------------------------------------------
1,696,613 Prudential Funding Corp., 5.50%, 01/02/97 (at
amortized cost) 1,696,613
- ------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $129,038,757) $179,933,131
- ------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------------------------------------------------
<C> <S> <C>
COMMON STOCK - 79.0%
- ---------------------------------------------------
BANKING & FINANCE - 14.7%
65,000 Chase Manhattan Corp. $5,801,250
120,000 CoreStates Financial Corp. 6,225,000
100,000 Fleet Financial Group, Inc. 4,987,500
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- --------------------------------------------
<C> <S> <C>
BANKING & FINANCE (CONTINUED)
100,000 National City Corp. $4,487,500
110,000 Ohio Casualty Corp. 3,905,000
- --------------------------------------------
25,406,250
- --------------------------------------------
</TABLE>
13
<PAGE>
------------------------------------
THE MONITOR INCOME EQUITY FUND (Continued)
-------------------------------------
THE MONITOR OHIO TAX-FREE FUND December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- --------------------------------------------------------
<C> <S> <C>
BASIC INDUSTRY - 8.9%
40,000 duPont (E.I.) de Nemours & Co. $3,775,000
170,000 Monsanto Co. 6,608,750
90,000 PPG Industries, Inc. 5,051,250
- --------------------------------------------------------
15,435,000
- --------------------------------------------------------
BUSINESS SERVICES - 2.1%
108,900 John H. Harland Co. 3,593,700
- --------------------------------------------------------
CAPITAL GOODS - 3.1%
105,000 Worthington Industries, Inc. 1,903,125
172,400 Zero Corp. 3,448,000
- --------------------------------------------------------
5,351,125
- --------------------------------------------------------
CONSUMER DURABLES - 1.8%
100,000 Ford Motor Co. 3,187,500
- --------------------------------------------------------
CONSUMER NON-DURABLES - 14.5%
70,000 American Brands, Inc. 3,473,750
80,000 American Home Products Corp. 4,690,000
35,000 Bristol Myers Squibb Co. 3,806,250
40,000 Clorox Co. 4,015,000
116,000 Pharmacia Upjohn, Inc. 4,596,500
300,000 RJR Nabisco (Series C) 2,025,000
60,000 Tambrands, Inc. 2,452,500
- --------------------------------------------------------
25,059,000
- --------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.1%
54,000 General Electric Co. 5,339,250
- --------------------------------------------------------
ENERGY - 10.6%
30,000 Atlantic Richfield Co. 3,975,000
42,000 Exxon Corp. 4,116,000
25,000 Royal Dutch Petroleum Co. ADR 4,268,750
60,000 Texaco, Inc. 5,887,500
- --------------------------------------------------------
18,247,250
- --------------------------------------------------------
FINANCE-RETAIL - .8%
50,000 Security Capital Industrial Pf B 1,362,500
- --------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.3%
40,000 Cali Realty Corp. 1,235,000
100,000 National Health Properties, Inc. 2,425,000
65,500 Simon DeBartolo Group, Inc. 2,030,500
- --------------------------------------------------------
5,690,500
- --------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES/PAR VALUE
- ----------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY - 2.7%
90,000 Xerox Corp. $4,736,250
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.2%
30,000 Bell Atlantic Corp. 1,942,500
100,000 GTE Corp. 4,550,000
30,000 Telecom of New Zealand Ltd. ADR 2,430,000
- ----------------------------------------------------------------------------
8,922,500
- ----------------------------------------------------------------------------
UTILITIES - 8.2%
200,000 DPL Inc. 4,900,000
120,000 Ipalco Enterprises, Inc. 3,270,000
90,000 Peoples Energy Corp. 3,048,750
110,000 Wisconsin Energy Corp. 2,956,250
- ----------------------------------------------------------------------------
14,175,000
- ----------------------------------------------------------------------------
TOTAL COMMON STOCK - (IDENTIFIED COST, $83,768,620) 136,505,825
- ----------------------------------------------------------------------------
CORPORATE BONDS - 1.1%
2,000,000 KeyCorp Institutional Capital
(Series 144-A), 7.83%, 12/01/2026
(identified cost $1,973,691) 1,970,000
- ----------------------------------------------------------------------------
U.S. TREASURIES - 12.0%
4,000,000 United States Treasury Note, 6.75%, 06/30/1999 4,070,360
8,000,000 United States Treasury Note, 7.75%, 02/15/2001 8,453,679
6,700,000 United States Treasury Note, 8.88%, 08/15/2017 8,276,242
- ----------------------------------------------------------------------------
TOTAL U.S. TREASURIES - (IDENTIFIED COST $20,312,355) 20,800,281
- ----------------------------------------------------------------------------
(E) COMMERCIAL PAPER - 7.4%
5,000,000 Commercial Credit Corp., 5.49%, 01/08/1997 5,000,000
3,000,000 General Motors Acceptance Corp., 5.64%, 01/14/1997 3,000,000
4,773,527 Prudential Funding Corp., 5.50%, 01/02/1997 4,773,527
- ----------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER - (AT AMORTIZED COST) 12,773,527
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $118,828,193) 172,049,633
- ----------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES - 90.9%
- ---------------------------------------------------------------------------
OHIO - 90.9%
$500,000 Akron, OH, GO Bonds, 5.30%, 12/01/2011 $490,625
- ---------------------------------------------------------------------------
215,000 Alliance, OH, City School District, (AMBAC Insured),
6.20%, 12/01/2001 232,200
- ---------------------------------------------------------------------------
250,000 Archbold, OH, Local School District, (Prerefunded),
12/1/98 (@102), 6.80% (g) 267,813
- ---------------------------------------------------------------------------
300,000 Aurora, OH, GO, City School District, (FGIC Insured),
5.50%, 12/01/2007 313,500
- ---------------------------------------------------------------------------
290,000 Aurora, OH, (Prerefunded), 12/1/99, (@102), 7.35% (g) 319,725
- ---------------------------------------------------------------------------
280,000 Avon Lake, OH, Water System, (AMBAC Insured), 5.10%,
10/01/2005 285,600
- ---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -----------------------------------------------------------------------------
$250,000 Beachwood, OH, City School District, 6.60%, 12/01/2004 $273,438
- -----------------------------------------------------------------------------
215,000 Bedford, OH, City School District, (Energy Conservation
Improvement), 5.35%, 06/15/2002 220,644
- -----------------------------------------------------------------------------
200,000 Bedford, OH, City School District, (Energy Conservation
Improvement), 5.40%, 06/15/2003 205,250
- -----------------------------------------------------------------------------
205,000 Berea, OH, GO, 6.95%, 12/01/1998 216,019
- -----------------------------------------------------------------------------
250,000 Blue Ash, OH, GO, 6.50%, 11/01/1999 265,313
- -----------------------------------------------------------------------------
230,000 Bowling Green, OH, City School District, (ETM), 6.90%,
12/01/1998 242,075
- -----------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Portfolio of Investments
-------------------------------------
THE MONITOR OHIO TAX-FREE FUND Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$250,000 Butler County, OH, Hospital Facility, (Middletown
Hospital)/(FGIC Insured), 5.25%, 11/15/2000 $258,750
- -------------------------------------------------------------------------------
500,000 Butler County, OH, Sewer System Revenue Bonds, (AMBAC
Insured), 4.80%, 12/01/1998 507,500
- -------------------------------------------------------------------------------
250,000 Centerville, OH, City School District, 6.63%, 12/01/1999 265,625
- -------------------------------------------------------------------------------
250,000 Cincinnati, OH, 6.75%, 12/01/2001 276,250
- -------------------------------------------------------------------------------
250,000 Cincinnati, OH, Street Improvement, 7.00%, 12/01/1999 269,688
- -------------------------------------------------------------------------------
500,000 Cleveland Heights, OH, (Series B), 5.60%, 12/01/2002 528,750
- -------------------------------------------------------------------------------
200,000 Cleveland, OH, GO, (Series B)/(AMBAC Insured), 6.40%,
10/01/2002 219,250
- -------------------------------------------------------------------------------
500,000 Cleveland, OH, Public Power System, (Series B)/(MBIA
Insured), 5.90%, 11/15/2001 532,500
- -------------------------------------------------------------------------------
200,000 Cleveland, OH, Regional Transit Authority, 4.85%,
12/01/1998 202,250
- -------------------------------------------------------------------------------
268,000 Columbus ,OH, GO, 5.70%, 07/15/2006 274,365
- -------------------------------------------------------------------------------
250,000 Columbus, OH, (Prerefunded), 03/01/99 (@102), 7.00% (g) 269,375
- -------------------------------------------------------------------------------
270,000 Columbus, OH, (Series 2), 5.35%, 05/15/2003 282,825
- -------------------------------------------------------------------------------
500,000 Columbus, OH, (Series B), 6.30%, 01/01/2005 542,500
- -------------------------------------------------------------------------------
750,000 Columbus, OH, (Series C), 4.35%, 09/15/1998 755,625
- -------------------------------------------------------------------------------
250,000 Columbus, OH, City School District, (FGIC Insured),
5.05%, 12/01/2002 255,938
- -------------------------------------------------------------------------------
250,000 Columbus, OH, GO, 6.30%, 04/15/2003 267,500
- -------------------------------------------------------------------------------
250,000 Copley/Fairlawn, OH, City School District, 5.15%,
12/01/2001 259,063
- -------------------------------------------------------------------------------
500,000 Cuyahoga County, OH, (Prerefunded), 1/1/99 (@102), 6.90%
(g) 543,125
- -------------------------------------------------------------------------------
250,000 Cuyahoga County, OH, (Prerefunded), 10/1/98 (@102), 7.00%
(g) 267,188
- -------------------------------------------------------------------------------
500,000 Cuyahoga County, OH, (Series B), 4.50%, 10/01/2000 503,125
- -------------------------------------------------------------------------------
500,000 Cuyahoga County, OH, GO, 5.20%, 11/15/2009 500,000
- -------------------------------------------------------------------------------
200,000 Cuyahoga Falls, OH, GO, (MBIA Insured), 5.40%, 12/01/2006 208,500
- -------------------------------------------------------------------------------
400,000 Delaware, OH, GO, 5.40%, 11/01/2002 410,500
- -------------------------------------------------------------------------------
250,000 Dover, OH, Electric System, (FGIC Insured), 5.50%,
12/01/2007 258,125
- -------------------------------------------------------------------------------
250,000 Dublin, OH, City School District, (FGIC Insured), 6.05%,
12/01/2003 271,875
- -------------------------------------------------------------------------------
250,000 Dublin, OH, City School District, (FGIC Insured), 6.15%,
12/01/2004 274,375
- -------------------------------------------------------------------------------
250,000 Eastlake, OH, GO, 5.00%, 12/01/2004 248,750
- -------------------------------------------------------------------------------
420,000 Euclid, OH, GO, (Prerefunded), 12/1/99 (@102), 7.00% (g) 458,850
- -------------------------------------------------------------------------------
500,000 Euclid, OH, GO, 5.30%, 12/01/2007 513,750
- -------------------------------------------------------------------------------
500,000 Euclid, OH, GO, 5.45%, 12/01/2008 515,625
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$250,000 Euclid, OH, GO, 6.40%, 12/01/2004 $272,813
- -------------------------------------------------------------------------------
245,000 Fairfield, OH, City School District, (FGIC Insured),
5.65%, 12/01/2006 259,088
- -------------------------------------------------------------------------------
500,000 Findlay, OH, GO, 5.50%, 07/01/2008 514,375
- -------------------------------------------------------------------------------
250,000 Findlay, OH, Sewer System Revenue Bonds, 5.20%,
07/01/2006 253,750
- -------------------------------------------------------------------------------
500,000 Franklin County, OH, (Children's Hospital)/(Series A),
5.80%, 11/01/2010 514,375
- -------------------------------------------------------------------------------
500,000 Franklin County, OH, (Children's
Hospital)/(Series A)/(Prerefunded), 11/1/01 (@102),
6.40% (g) 550,000
- -------------------------------------------------------------------------------
250,000 Franklin County, OH, (Children's Hospital)/(Series A),
6.50%, 05/01/2007 272,188
- -------------------------------------------------------------------------------
285,000 Franklin County, OH, (Convention Authority)/(MBIA
Insured), 5.50%, 12/01/2003 299,250
- -------------------------------------------------------------------------------
500,000 Franklin County, OH, 5.05%, 12/01/2005 513,125
- -------------------------------------------------------------------------------
305,000 Franklin County, OH, GO, (MBIA Insured), 6.00%,
09/01/2006 332,450
- -------------------------------------------------------------------------------
500,000 Franklin County, OH, HRB, (Doctor's Hospital), 5.05%,
12/01/1999 505,000
- -------------------------------------------------------------------------------
550,000 Franklin County, OH, HRB, (Holy Cross Hospital)/(Series
A), 7.20%, 06/01/2000 594,000
- -------------------------------------------------------------------------------
515,000 Gahanna, OH, GO, 5.25%, 06/01/2002 532,381
- -------------------------------------------------------------------------------
580,000 Gahanna, OH, GO, 5.55%, 06/01/2005 607,550
- -------------------------------------------------------------------------------
250,000 Gahanna, OH, (Series A)/(Prerefunded), 06/01/01 (@102),
6.40% (g) 273,438
- -------------------------------------------------------------------------------
250,000 Grandview Heights, OH, 7.10%, 12/01/2006 275,938
- -------------------------------------------------------------------------------
250,000 Grandview Heights, OH, City School District, 5.40%,
12/01/2005 259,063
- -------------------------------------------------------------------------------
300,000 Greene County, OH, Water System, (Series A)/(FGIC
Insured), 5.75%, 12/01/2009 317,250
- -------------------------------------------------------------------------------
300,000 Hamilton County, OH, (Museum Center), 5.95%, 12/01/2002 322,500
- -------------------------------------------------------------------------------
1,000,000 Hamilton County, OH, (Museum Center)/(Prerefunded),
12/1/97
(@103), 7.13% (g) 1,061,430
- -------------------------------------------------------------------------------
500,000 Hamilton County, OH, Children's Hospital, (BIG Insured),
6.75%, 05/15/2002 515,935
- -------------------------------------------------------------------------------
500,000 Hamilton County, OH, Children's Hospital, (Series
D)/(FGIC Insured), 4.90%, 05/15/2003 506,250
- -------------------------------------------------------------------------------
250,000 Hamilton County, OH, Children's Hospital, (Series
E)/(MBIA Insured), 4.60%, 05/15/2000 252,813
- -------------------------------------------------------------------------------
500,000 Hamilton County, OH, Christ Hospital, (Series A)/(FGIC
Insured), 6.50%, 01/01/2002 533,750
- -------------------------------------------------------------------------------
500,000 Hamilton County, OH, Hospital Facilities, (Episcopal
Retirement)/(Fifth Third Bank LOC), 5.90%, 01/01/1999 516,875
- -------------------------------------------------------------------------------
95,000 Hamilton County, OH, Sewer System,
(Series A)/(Prerefunded), 6/1/01 (@102), 6.30% (g) 102,838
- -------------------------------------------------------------------------------
195,000 Hamilton County, OH, Sewer System,
(Series A)/(Prerefunded), 6/1/01 (@102), 6.40% (g) 213,281
- -------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Portfolio of Investments
-------------------------------------
THE MONITOR OHIO TAX-FREE FUND (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$155,000 Hamilton County, OH, Sewer System, (Series A), 6.30%,
12/01/2001 $166,431
- -------------------------------------------------------------------------------
305,000 Hamilton County, OH, Sewer System, (Series A), 6.40%,
12/01/2003 330,925
- -------------------------------------------------------------------------------
500,000 Hamilton County, OH, GO, 4.70%, 12/01/2004 494,375
- -------------------------------------------------------------------------------
390,000 Hamilton, OH, Electric System Revenue Bonds, (Series
A)/(FGIC Insured), 5.10%, 10/15/1999 398,288
- -------------------------------------------------------------------------------
250,000 Hamilton, OH, Gas System, (Series A)/(MBIA Insured),
4.40%, 10/15/2003 245,938
- -------------------------------------------------------------------------------
315,000 Hancock County, OH, GO, 5.20%, 12/01/2008 316,181
- -------------------------------------------------------------------------------
250,000 Hilliard, OH, City School District, (AMBAC Insured),
5.00%, 12/01/2003 256,563
- -------------------------------------------------------------------------------
500,000 Hilliard, OH, City School District, (Series A), 5.35%,
12/01/2004 516,250
- -------------------------------------------------------------------------------
170,000 Hilliard, OH, GO, 5.35%, 12/01/2006 172,975
- -------------------------------------------------------------------------------
180,000 Hilliard, OH, GO, 5.50%, 12/01/2007 187,200
- -------------------------------------------------------------------------------
230,000 Hilliard, OH, GO, 6.75%, 12/01/1998 241,500
- -------------------------------------------------------------------------------
245,000 Indian Hill, OH, Water Works Revenue Bonds, 4.90%,
06/01/2005 247,756
- -------------------------------------------------------------------------------
500,000 Kent State University, OH, (MBIA Insured), 5.30%,
05/01/2010 498,125
- -------------------------------------------------------------------------------
585,000 Kettering, OH, GO, 5.05%, 12/01/2004 592,313
- -------------------------------------------------------------------------------
255,000 Lakewood, OH, City School District, 5.05%, 12/01/2005 259,144
- -------------------------------------------------------------------------------
535,000 Lakewood, OH, GO, 5.85%, 12/01/2002 573,788
- -------------------------------------------------------------------------------
250,000 Lakuta, OH, Local School District, (AMBAC Insured),
6.40%, 12/01/2000 270,000
- -------------------------------------------------------------------------------
500,000 Lorain County, OH, Water Authority, (AMBAC Insured),
4.95%, 10/01/2004 506,875
- -------------------------------------------------------------------------------
275,000 Lyndhurst, OH, (Prerefunded), 12/1/97 (@102), 7.40% (g) 289,765
- -------------------------------------------------------------------------------
200,000 Marysville, OH, Village School, (AMBAC Insured), 6.90%,
12/01/2000 218,500
- -------------------------------------------------------------------------------
300,000 Massillon, OH, City School District, (AMBAC Insured),
4.80%, 12/01/2006 295,875
- -------------------------------------------------------------------------------
265,000 Mentor, OH, (Series A1), 6.80%, 12/01/1998 278,250
- -------------------------------------------------------------------------------
250,000 Mentor, OH, Street Improvement, (Series 1991-A), 6.70%,
12/01/2003 270,000
- -------------------------------------------------------------------------------
500,000 Miami University, OH, 5.40%, 12/01/2005 516,875
- -------------------------------------------------------------------------------
200,000 Miami Valley, OH, Regional Transit Authority, 5.10%,
12/01/2001 204,000
- -------------------------------------------------------------------------------
500,000 Montgomery County, OH, (Series A)/ (Prerefunded), 9/1/01,
(@ 100), 6.45% (g) 541,875
- -------------------------------------------------------------------------------
500,000 Montgomery County, OH, (Series A)/ (Prerefunded), 9/1/01,
(@ 100), 6.50% (g) 542,500
- -------------------------------------------------------------------------------
500,000 Montgomery County, OH, GO, 5.40%, 12/01/2011 504,375
- -------------------------------------------------------------------------------
285,000 Montgomery County, OH, GO, 5.75%, 12/01/2006 296,044
- -------------------------------------------------------------------------------
500,000 Montgomery County, OH, Miami Valley Hospital, (Series
A)/(AMBAC Insured), 6.10%, 11/15/2002 540,625
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$270,000 Montgomery, OH, GO, 5.60%, 12/01/2005 $279,788
- -------------------------------------------------------------------------------
250,000 Muskingum County, OH, Bethesda Hospital Facility, (Connie
Lee Insured), 5.35%, 12/01/2007 255,938
- -------------------------------------------------------------------------------
500,000 Northeast, OH, Regional Sewer District, (AMBAC Insured),
6.40%, 11/15/2003 548,750
- -------------------------------------------------------------------------------
250,000 Norwalk, OH, Water Work Systems, (Series 1996), 5.60%,
04/01/2010 256,563
- -------------------------------------------------------------------------------
235,000 Norwalk, OH, Water Works Systems, (Series 1996), 5.55%,
04/01/2009 242,050
- -------------------------------------------------------------------------------
500,000 Ohio Municipal Electric Generation Agency, (AMBAC
Insured), 4.75%, 02/15/2000 506,875
- -------------------------------------------------------------------------------
500,000 Ohio State Building Authority, (Correction
Facility)/(Series A), 6.50%, 10/01/2004 540,625
- -------------------------------------------------------------------------------
250,000 Ohio State Building Authority, (Data Center)/(Series
A)/(Prerefunded), 10/1/97 (@102), 7.10% (g) 261,433
- -------------------------------------------------------------------------------
500,000 Ohio State Building Authority, (James Rhodes
Center)/(Series A), 6.20%, 06/01/2004 534,375
- -------------------------------------------------------------------------------
125,000 Ohio State Building Authority, (Series A)/ (Prerefunded),
3/1/99 (@102), 7.25%(g) 135,469
- -------------------------------------------------------------------------------
125,000 Ohio State Building Authority, (Series H)/ (Prerefunded),
8/1/99 (@102), 7.25%(g) 136,719
- -------------------------------------------------------------------------------
250,000 Ohio State Capital Facilities, (Series 95A)/ (AMBAC
Insured), 5.80%, 06/01/2003 267,188
- -------------------------------------------------------------------------------
300,000 Ohio State Economic Development, (Sysco Food Service),
6.60%, 12/01/2003 332,625
- -------------------------------------------------------------------------------
445,000 Ohio State Higher Education Facility, (Denison
University), 5.40%, 11/01/2011 442,775
- -------------------------------------------------------------------------------
250,000 Ohio State Higher Education Facility, (John Carroll
University), 5.35%, 10/01/2005 257,500
- -------------------------------------------------------------------------------
250,000 Ohio State Higher Education Facility, (Oberlin College),
4.50%, 10/01/1999 252,188
- -------------------------------------------------------------------------------
250,000 Ohio State Higher Education Facility, (Oberlin College),
5.00%, 10/01/2002 256,563
- -------------------------------------------------------------------------------
555,000 Ohio State Higher Education Facility, (Ohio Northern
University)/(Connie Lee Insured), 4.90%, 05/01/2003 559,163
- -------------------------------------------------------------------------------
200,000 Ohio State Higher Education Facility, (Pooled
Borrowing)/(Banc One LOC), 6.05%, 12/01/1998 207,250
- -------------------------------------------------------------------------------
250,000 Ohio State Higher Education Facility, (University of
Dayton)/(FGIC Insured), 6.10%, 12/01/2001 269,688
- -------------------------------------------------------------------------------
250,000 Ohio State Higher Education Facility, (Xavier
University)/(ETM), 7.10%, 11/01/1998 263,750
- -------------------------------------------------------------------------------
250,000 Ohio State Public Facilities, (Mental Health)/(Series A),
7.20%, 12/01/1999 257,755
- -------------------------------------------------------------------------------
500,000 Ohio State Public Facilities, (Mental Health)/(Series
A)/(MBIA Insured), 6.75%, 12/01/2001 542,500
- -------------------------------------------------------------------------------
250,000 Ohio State Public Facilities, (Mental Health)/(Series
A)/(Prerefunded), 06/01/98 (@102), 7.30% (g) 266,250
- -------------------------------------------------------------------------------
250,000 Ohio State Public Facilities, (Series A)/(MBIA Insured),
6.50%, 06/01/2000 268,125
- -------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Portfolio of Investments
-------------------------------------
THE MONITOR OHIO TAX-FREE FUND (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$250,000 Ohio State Public Facilities, (Series B), 6.90%,
06/01/1998 $259,063
- -------------------------------------------------------------------------------
250,000 Ohio State Public Facilities, (Series B)/ (Prerefunded),
5/1/97 (@102), 7.13% (g) 257,895
- -------------------------------------------------------------------------------
250,000 Ohio State Public Facilities, (Series IIB)/ (AMBAC
Insured), 5.70%, 11/01/1999 260,313
- -------------------------------------------------------------------------------
500,000 Ohio State University, (Series A2), 4.85%, 12/01/1998 508,750
- -------------------------------------------------------------------------------
500,000 Ohio State University, (Series A2), 5.30%, 12/01/2001 520,625
- -------------------------------------------------------------------------------
500,000 Ohio State University, (Series A2), 5.75%, 12/01/2009 518,750
- -------------------------------------------------------------------------------
500,000 Ohio State Water Development Authority, (Clean Water
Project)/(MBIA Insured), 5.65%, 06/01/2005 530,625
- -------------------------------------------------------------------------------
650,000 Ohio State Water Development Authority, (Pure Water
Project)/(MBIA Insured), 5.00%, 12/01/1998 663,000
- -------------------------------------------------------------------------------
250,000 Ohio State Water Development Authority,
(Series I)/(Prerefunded), 6/1/98 (@102), 7.10% (g) 265,625
- -------------------------------------------------------------------------------
250,000 Olmstead Falls, OH, Local Scool District, (FGIC Insured),
6.30%, 12/15/2001 272,188
- -------------------------------------------------------------------------------
175,000 Pickerington, OH, Local School District, (FGIC Insured),
4.70%, 12/04/2004 175,438
- -------------------------------------------------------------------------------
250,000 Pickerington, OH, Local School District, (AMBAC Insured),
5.55%, 12/01/2007 260,625
- -------------------------------------------------------------------------------
200,000 Portage County, OH, (AMBAC Insured), 5.20%, 12/01/2001 207,250
- -------------------------------------------------------------------------------
500,000 Rocky River, OH, City Schools District, GO, 5.15%,
12/01/2008 508,750
- -------------------------------------------------------------------------------
200,000 Salem, OH, Sewer System Revenue Bonds, (AMBAC Insured),
6.00%, 02/01/2001 200,228
- -------------------------------------------------------------------------------
250,000 Sandusky County, OH, (AMBAC Insured), 6.65%, 12/01/1998 261,875
- -------------------------------------------------------------------------------
500,000 Solon, OH, GO, 5.25%, 12/01/2007 510,625
- -------------------------------------------------------------------------------
150,000 Solon, OH, GO, 5.65%, 12/01/2005 157,500
- -------------------------------------------------------------------------------
250,000 Solon, OH, GO, 6.55%, 12/01/2000 270,313
- -------------------------------------------------------------------------------
250,000 Solon, OH, GO, 6.65%, 12/01/2001 270,938
- -------------------------------------------------------------------------------
250,000 Solon, OH, Local School District, (ETM), 6.85%,
12/01/2000 272,813
- -------------------------------------------------------------------------------
245,000 South Euclid, OH, Recreational Facilities, 6.15%,
12/01/2000 260,313
- -------------------------------------------------------------------------------
250,000 South Western City School District, (ETM), 6.10%,
12/01/1999 262,813
- -------------------------------------------------------------------------------
250,000 South Western City School District, (Series A)/ (AMBAC
Insured), 6.00%, 12/01/2004 271,563
- -------------------------------------------------------------------------------
250,000 Springfield, OH, Local School District, 6.00%, 12/01/2002 268,750
- -------------------------------------------------------------------------------
400,000 State of Ohio, GO, 4.50%, 08/01/2001 404,000
- -------------------------------------------------------------------------------
250,000 State of Ohio, Highway Revenue Bonds, (Series S), 4.50%,
05/15/2000 252,813
- -------------------------------------------------------------------------------
500,000 State Of Ohio, Highway Revenue Bonds, (Series T), 4.80%,
05/15/2001 509,375
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
LONG TERM MUNICIPAL SECURITIES (CONTINUED)
- ------------------------------------------------------------------------------
$500,000 Strongsville, OH, GO, 6.70%, 12/01/2011 $552,500
- ------------------------------------------------------------------------------
250,000 Summit County, OH, GO, (MBIA Insured), 5.65%,
12/01/2007 262,500
- ------------------------------------------------------------------------------
500,000 Toledo, OH, Sewer System Revenue Bonds, (Series
A)/(MBIA Insured), 7.25%, 11/15/2000 537,500
- ------------------------------------------------------------------------------
500,000 Troy, OH, GO, 6.25%, 12/01/2011 544,375
- ------------------------------------------------------------------------------
500,000 University of Cincinnati, OH, (MBIA Insured), 5.10%,
06/01/2011 496,250
- ------------------------------------------------------------------------------
250,000 University of Cincinnati, OH, (MBIA Insured), 6.40%,
12/01/2003 273,750
- ------------------------------------------------------------------------------
250,000 University of Cincinnati, OH, (Series R5), 5.15%,
06/01/2005 252,813
- ------------------------------------------------------------------------------
250,000 University of Cincinnati, OH, (Series R9), 5.60%,
06/01/2009 252,500
- ------------------------------------------------------------------------------
250,000 University of Cincinnati, OH, (Series V), 5.25%,
06/01/2008 250,313
- ------------------------------------------------------------------------------
265,000 University of Cincinnati, OH, (Series V), 5.35%,
06/01/2009 264,669
- ------------------------------------------------------------------------------
200,000 Upper Arlington, OH, City School District,
(Prerefunded), 12/1/98 (@102), 6.80% (g) 213,750
- ------------------------------------------------------------------------------
500,000 Vandalia, OH, GO, 5.45%, 12/01/2010 503,750
- ------------------------------------------------------------------------------
175,000 Warren County, OH, Sewer Improvement, (Lower Miami
Valley), 5.25%, 12/01/2008 176,531
- ------------------------------------------------------------------------------
185,000 Warren County, OH, Sewer Improvement, (Lower Miami
Valley), 5.35%, 12/01/2009 186,619
- ------------------------------------------------------------------------------
170,000 Warren County, OH, Sewer System Revenue Bonds, (Series
A)/(Prerefunded), 12/01/2000 (@102), 6.95% (g) 189,125
- ------------------------------------------------------------------------------
400,000 Warren County, OH, Water System Improvement, (P&G
Project), 5.25%, 12/01/2007 406,000
- ------------------------------------------------------------------------------
235,000 Warren County, OH, Water Works, (FGIC Insured), 6.10%,
12/01/2002 253,800
- ------------------------------------------------------------------------------
470,000 Westerville, OH, Water System, 5.90%, 12/01/2004 505,250
- ------------------------------------------------------------------------------
250,000 Worthington, OH, City School District, (FGIC Insured),
5.85%, 06/01/2002 265,938
- ------------------------------------------------------------------------------
250,000 Worthington, OH, City School District, (MBIA Insured),
7.15%, 12/01/2000 273,414
- ------------------------------------------------------------------------------
250,000 Wright State University, (AMBAC Insured), 5.00%,
05/01/2006 251,250
- ------------------------------------------------------------------------------
TOTAL LONG TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $58,053,177) 60,656,079
- ------------------------------------------------------------------------------
SHORT TERM MUNICIPAL SECURITIES - 8.1%
- ------------------------------------------------------------------------------
300,000 Cincinnati Hamilton County, OH, Daily VRDNs, (Kenwood
Office Assoc.)/ (Fuji Bank Ltd. LOC) 300,000
- ------------------------------------------------------------------------------
250,000 Cincinnati, OH, 7.00%, 10/01/1997 256,180
- ------------------------------------------------------------------------------
500,000 Cleveland Heights, OH, GO, (FGIC Insured), 6.75%,
12/01/1997 514,520
- ------------------------------------------------------------------------------
500,000 Clyde, OH, Water Works Revenue Bond, 5.60%, 05/01/1997 502,650
- ------------------------------------------------------------------------------
500,000 Columbus, OH, Weekly VRDNs, (West Deutsche Landesbank
LOC) 500,000
- ------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Portfolio of Investments
-------------------------------------
THE MONITOR OHIO TAX-FREE FUND (Continued)
------------------------
THE MONITOR FIXED INCOME SECURITIES FUND December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM MUNICIPAL SECURITIES (CONTINUED)
- -------------------------------------------------------------------------------
$200,000 Dublin, OH, Local School District, (AMBAC Insured)/(ETM),
6.80%, 12/01/1997 $205,896
- -------------------------------------------------------------------------------
270,000 Findlay, OH, GO, 6.70%, 08/01/1997 274,736
- -------------------------------------------------------------------------------
100,000 Franklin County, OH, HRB, Daily VRDNs, (Franciscan
Sister)/(Chase Manhatten LOC) 100,000
- -------------------------------------------------------------------------------
400,000 Hamilton County, OH, Health System, Daily VRDNs,
(Franciscan Health)/(Sumitomo Bank LOC) 400,000
- -------------------------------------------------------------------------------
345,000 Kettering, OH, GO, (ETM), 6.70%, 12/01/1997 354,708
- -------------------------------------------------------------------------------
200,000 Ohio State Air Quality Authority, Daily VRDNs, (Mead
Corp.)/(Deutsche Bank LOC) 200,000
- -------------------------------------------------------------------------------
250,000 Ohio State Building Authority, (Data Center)/(Series
A)/(ETM), 7.00%, 10/01/1997 256,378
- -------------------------------------------------------------------------------
275,000 Ohio State Highway, (Series O), 6.70%, 05/15/1997 278,372
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM MUNICIPAL SECURITIES (CONTINUED)
- ------------------------------------------------------------------------------
$250,000 Ohio State Public Facilities, (Mental Health)/(Series
A)/(MBIA Insured), 6.50%, 06/01/1997 $253,108
- ------------------------------------------------------------------------------
695,000 Ohio State Public Facilities, (Series IIA)/(FSA
Insured), 5.30%, 12/01/1997 705,745
- ------------------------------------------------------------------------------
100,000 Ohio State University, Weekly VRDNs, (Series
85b)/(National Westminster Bank LOC) 100,000
- ------------------------------------------------------------------------------
200,000 Ohio State Water Development Authority, Daily VRDNs
(Mead Corp.)/(Swiss Bank LOC) 200,000
- ------------------------------------------------------------------------------
TOTAL SHORT TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $5,345,308) 5,402,293
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $63,398,485) $66,058,372
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS - 54.4%
- ------------------------------------------------------------------------------
BANKS & SAVINGS AND LOANS - 5.4%
$1,000,000 ABN AMRO Bank Notes, 7.25%, 05/31/2005 $1,016,250
1,000,000 Banc One, 7.00%, 07/15/2005 1,002,500
250,000 BankAmerica Corp., 7.75%, 07/15/2002 261,563
250,000 Citicorp, 9.75%, 08/01/1999 269,688
1,000,000 Citicorp, 7.25%, 09/01/2008 1,007,500
500,000 Comerica Bank Notes, 9.75%, 05/01/1999 535,000
500,000 Comerica Bank, Detroit, 5.95%, 09/15/1997 500,920
1,000,000 Keycorp, 6.75%, 03/15/2006 976,250
1,000,000 Mellon Bank, N.A., 6.50%, 08/01/2005 966,250
250,000 Security Pacific Corp., 9.75%, 05/15/1999 268,438
1,000,000 Swiss Bank Corp.--New York, 7.25%, 09/01/2006 1,021,250
- ------------------------------------------------------------------------------
7,825,609
- ------------------------------------------------------------------------------
BASIC INDUSTRY - 1.4%
500,000 Air Products & Chemicals, 8.88%, 08/01/2001 544,375
250,000 Arco Chemical Co., 9.90%, 11/01/2000 277,500
250,000 Weyerhaeuser Co., 9.05%, 02/01/2003 279,375
1,000,000 Worthington Industries, 7.13%, 05/15/2006 1,013,750
- ------------------------------------------------------------------------------
2,115,000
- ------------------------------------------------------------------------------
CAPITAL GOODS - .2%
250,000 Caterpillar, Inc., 9.38%, 07/15/2000 272,500
- ------------------------------------------------------------------------------
CONSUMER GOODS & SERVICES - 13.0%
1,500,000 American Home Products, 6.50%, 10/15/2002 1,492,500
1,000,000 Bergen Brunswig Corp., 7.25%, 06/01/2005 1,012,500
1,000,000 Cardinal Health, 6.00%, 01/15/2006 937,500
1,000,000 Carnival Corp., 6.15%, 10/01/2003 963,750
1,000,000 Columbia/HCA Healthcare, 8.85%, 01/01/2007 1,127,500
1,000,000 Darden Restaurants Inc., 6.38%, 02/01/2006 935,000
250,000 Dayton Hudson Corp., 10.00%, 12/01/2000 278,125
750,000 Grand Met Investment Corp., 7.13%, 09/15/2004 761,250
250,000 Great Atlantic & Pacific Tea, Inc., 9.13%, 01/15/1998 253,750
1,000,000 Harvard University, 8.13%, 04/15/2007 1,100,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------
CONSUMER GOODS & SERVICES (CONTINUED)
$1,000,000 Hertz Corp., 7.00%, 07/15/2003 $1,005,000
1,000,000 J.C. Penney & Co. Notes, 6.88%, 10/15/2015 935,000
250,000 Limited, Inc., 9.13%, 02/01/2001 267,188
1,000,000 Limited, Inc., 7.80%, 05/15/2002 1,027,500
750,000 May Dept. Stores Co., 9.88%, 06/15/2000 825,938
250,000 Nordstrom, Inc., 8.88%, 02/15/1998 257,500
500,000 Philip Morris Co. Inc., 7.50%, 03/15/1997 501,590
500,000 Philip Morris Co. Inc., 7.63%, 05/15/2002 515,625
1,000,000 Ralston Purina Notes, 9.25%, 10/15/2009 1,158,750
500,000 Scripps Howard, Inc., 7.38%, 12/15/1998 510,000
1,000,000 Service Corp. Int'l., 8.38%, 12/15/2004 1,075,000
250,000 Super Value Stores, Inc., 8.88%, 06/15/1999 263,750
250,000 Universal Corp., 9.25%, 02/15/2001 271,563
1,500,000 V.F. Corp., 7.60%, 04/01/2004 1,526,250
- -------------------------------------------------------------------------
19,002,529
- -------------------------------------------------------------------------
DIVERSIFIED INDUSTRIAL - .9%
500,000 Joseph E. Seagram & Sons Inc., 7.00%, 04/15/2008 496,875
500,000 Watts Industries, 8.38%, 12/01/2003 540,625
250,000 Whirlpool Corp., 9.50%, 06/15/2000 272,500
- -------------------------------------------------------------------------
1,310,000
- -------------------------------------------------------------------------
ENERGY- OIL & GAS - .5%
500,000 Consolidated Natural Gas Co., 5.88%, 10/01/1998 497,500
250,000 Pennzoil Co., 9.63%, 11/15/1999 267,813
- -------------------------------------------------------------------------
765,313
- -------------------------------------------------------------------------
FINANCE COMPANIES - 8.3%
1,000,000 Abbey National PLC, 6.69%, 10/17/2005 981,250
750,000 BHP U.S. Finance Corp., 7.00%, 12/01/1997 756,563
1,000,000 Bear Stearns, 6.63%, 01/15/2004 978,750
750,000 Bell Atlantic Financial, 6.63%, 11/30/1997 755,092
1,000,000 CSW Investments, 7.45%, 08/01/2006 1,011,250
1,000,000 Countrywide Funding Corp., 8.25%, 07/15/2002 1,062,500
</TABLE>
18
<PAGE>
Portfolio of Investments
------------------------
THE MONITOR FIXED INCOME SECURITIES FUND (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
FINANCE COMPANIES (CONTINUED)
$1,000,000 Dean Witter Discover, 6.00%, 03/01/1998 $1,000,000
500,000 Eaton Off Shore Ltd., 9.00%, 02/15/2001 540,625
1,000,000 Ford Motor Credit Corp., 7.75%, 03/15/2005 1,042,500
250,000 International Lease Finance Co., 6.50%, 07/15/1997 251,180
500,000 Kimco Realty, 6.50%, 10/01/2003 489,375
1,000,000 MBNA Corp. Notes, 6.88%, 06/01/2005 981,250
1,000,000 Salomon Brothers, 6.75%, 01/15/2006 945,000
1,300,000 Smurfit Capital, 6.75%, 11/20/2005 1,259,375
- -----------------------------------------------------------------------------
12,054,710
- -----------------------------------------------------------------------------
(H) FOREIGN INDUSTRIAL - 3.5%
1,000,000 Canadian National Railroad, 7.00%, 03/15/2004 996,250
1,000,000 Hydro-Quebec, Canada, 9.75%, 01/15/2018 1,122,500
750,000 Hydro-Quebec, Canada, 7.38%, 02/01/2003 776,250
500,000 Northern Telecom, Ltd., 8.75%, 06/12/2001 540,625
1,000,000 Philips Electronics, 8.38%, 09/15/2006 1,077,500
615,000 Rhone-Poulenc, 7.75%, 01/15/2002 638,831
- -----------------------------------------------------------------------------
5,151,956
- -----------------------------------------------------------------------------
(H) FOREIGN SOVEREIGN - 5.4%
1,000,000 Barcelona City, Spain, 8.13%, 02/15/2005 1,067,500
1,000,000 Gen De Catalunya, 6.38%, 12/15/2007 947,500
500,000 Province of Ontario, Canada, 6.13%, 06/28/2000 496,875
500,000 Province of Ontario, Canada, 5.70%, 10/01/1997 500,000
1,000,000 Province of Ontario, Canada, 6.00%, 02/21/2006 943,750
250,000 Province of Quebec, Canada, 8.80%, 04/15/2003 275,000
1,000,000 Province of Quebec, Canada, 8.63%, 01/19/2005 1,098,750
1,000,000 Republic of Finland, 7.88%, 07/28/2004 1,075,000
1,550,000 Republic of Iceland, 6.13%, 02/01/2004 1,495,750
- -----------------------------------------------------------------------------
7,900,125
- -----------------------------------------------------------------------------
GAS & ELECTRIC UTILITIES - 8.8%
500,000 Baltimore Gas & Electric Co., 6.63%, 03/15/2008 485,625
1,000,000 Big Rivers Electric, 9.50%, 02/15/2017 1,072,500
1,000,000 Cajun Electric Power, 9.52%, 03/15/2019 1,080,000
500,000 Commonwealth Edison, 9.38%, 02/15/2000 536,875
1,100,000 Duke Power Co., 6.38%, 03/01/2008 1,050,500
200,000 Houston Lighting & Power Co., 6.75%, 11/01/1997 200,000
815,000 Iowa Electric Power & Light, 8.63%, 05/15/2001 873,069
1,300,000 Jersey Central Power & Light, 7.13%, 10/01/2004 1,298,375
1,000,000 Minnesota Power & Light, 7.75%, 06/01/2007 1,032,500
1,000,000 Northwestern Public Services, 7.10%, 08/01/2005 1,012,500
750,000 Orange & Rockland Utilities, Inc., 6.50%, 10/15/1997 752,813
1,000,000 Pennsylvania Power & Light, 6.88%, 02/01/2003 1,007,500
1,000,000 Public Service Electric & Gas, 6.25%, 01/01/2007 938,750
1,000,000 Soyland Power Co-Op, Inc., 9.63%, 09/30/2011 1,055,000
500,000 Western Resources Inc., 7.25%, 07/01/1999 509,375
- -----------------------------------------------------------------------------
12,905,382
- -----------------------------------------------------------------------------
INSURANCE - 3.2%
1,000,000 Lincoln National Corp., 7.25%, 05/15/2005 1,007,500
1,000,000 London Insurance Grp., 6.88%, 09/15/2005 987,500
1,500,000 MBIA, Inc., 9.00%, 02/15/2001 1,621,875
1,000,000 U.S. Life Notes, 6.38%, 06/15/2000 982,500
- -----------------------------------------------------------------------------
4,599,375
- -----------------------------------------------------------------------------
TECHNOLOGY - 1.1%
500,000 International Business Machines, 6.38%, 06/15/2000 498,750
1,000,000 Texas Instruments Notes, 9.25%, 05/15/2003 1,130,000
- -----------------------------------------------------------------------------
1,628,750
- -----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
TELEPHONE UTIL. & COMMUNICATION CO. - 2.5%
$1,000,000 Comsat Corp., 8.95%, 05/15/2001 $1,082,500
900,000 GTE Corp., 9.10%, 06/01/2003 1,004,625
1,000,000 General Telephone of the Southeast, 7.63%,
07/01/2002 1,013,750
500,000 Southwestern Bell Telephone Co., 6.63%, 04/01/2005 492,500
- -----------------------------------------------------------------------------
3,593,375
- -----------------------------------------------------------------------------
TRANSPORTATION - .2%
250,000 Union Pacific Corp., 9.63%, 12/15/2002 284,375
- -----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $78,106,224) 79,408,999
- -----------------------------------------------------------------------------
GOVERNMENT AGENCIES - 7.6%
4,000,000 Federal National Mortgage Association, 7.93%,
09/20/2006 4,099,800
1,803,231 GNMA Pool Number 345128, 6.50%, 01/15/2024 1,719,268
875,629 GNMA Pool Number 352982, 7.50%, 05/15/2024 875,903
1,799,834 GNMA Pool Number 372962, 7.00%, 03/15/2024 1,759,900
992,660 GNMA Pool Number 373015, 8.00%, 06/15/2024 1,012,823
1,595,707 GNMA Pool Number 391615, 8.50%, 09/15/2024 1,653,053
- -----------------------------------------------------------------------------
TOTAL GOVERNMENT AGENCIES
(IDENTIFIED COST $11,032,706) 11,120,747
- -----------------------------------------------------------------------------
U.S. TREASURIES - 34.1%
1,000,000 United States Treasury Bond, 9.38%, 02/15/2006 1,203,910
1,000,000 United States Treasury Bond, 8.75%, 08/15/2020 1,232,380
8,000,000 United States Treasury Note, 7.25%, 05/15/2004 8,417,439
8,000,000 United States Treasury Note, 8.00%, 05/15/2001 8,547,279
2,500,000 United States Treasury Note, 7.88%, 08/15/2001 2,665,200
10,000,000 United States Treasury Note, 7.50%, 11/15/2001 10,527,600
1,000,000 United States Treasury Note, 7.50%, 05/15/2002 1,057,400
2,000,000 United States Treasury Note, 6.88%, 03/31/2000 2,044,780
2,500,000 United States Treasury Note, 6.88%, 05/15/2006 2,575,550
6,000,000 United States Treasury Note, 7.13%, 02/28/2000 6,175,254
3,000,000 United States Treasury Note, 7.50%, 02/15/2005 3,206,190
2,000,000 United States Treasury Note, 6.50%, 10/15/2006 2,010,000
- -----------------------------------------------------------------------------
TOTAL U.S. TREASURIES
(IDENTIFIED COST $47,160,212) 49,662,982
- -----------------------------------------------------------------------------
(E) COMMERCIAL PAPER - 3.2%
- -----------------------------------------------------------------------------
4,709,484 Prudential Funding Corp., 5.50%, 01/02/1997 (at
amortized cost) 4,709,484
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $141,008,626) $144,902,212
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
19
<PAGE>
Portfolio of Investments
-----------------------------
THE MONITOR MORTGAGE SECURITIES FUND December 31, 1996
---------------------
THE MONITOR SHORT/INTERMEDIATE FIXED INCOME December 31, 1996
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
LONG TERM OBLIGATIONS - 98.7%
- --------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. - 22.1%
$ 161,473 Pool # 220007, 8.75%, 08/01/2001 $166,747
145,096 Pool # 380059, 9.50%, 10/01/2004 151,353
2,477,958 Pool # C80391, 7.00%, 03/01/2026 2,433,503
2,358,174 Pool # D69575, 7.50%, 03/01/2026 2,364,801
1,944,129 Pool # E65142, 6.50%, 07/01/2011 1,910,107
105,816 Pool # N90034, 9.00%, 11/01/1998 107,563
2,000,000 TBA, 7.00%, 12/01/2026 1,962,480(f)
- --------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORP.
(IDENTIFIED COST $9,077,052) 9,096,554
- --------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 46.5%
248,893 Pool # 050279, 8.50%, 02/01/2005 259,471
2,514,458 Pool # 250551, 7.00%, 05/01/2026 2,462,283
1,461,428 Pool # 250554, 6.50%, 05/01/2011 1,435,400
1,075,081 Pool # 303161, 7.50%, 01/01/2002 1,096,916
350,793 Pool # 303459, 8.00%, 07/01/2002 360,331
1,419,252 Pool # 303653, 7.00%, 12/01/2025 1,389,803
1,455,952 Pool # 338449, 6.00%, 05/01/2011 1,400,451
1,958,535 Pool # 339112, 6.50%, 03/01/2026 1,869,187
1,850,997 Pool # 339836, 7.00%, 03/01/2026 1,812,589
1,491,786 Pool # 343212, 7.50%, 05/01/2026 1,493,651
2,926,856 Pool # 350237, 7.00%, 08/01/2011 2,924,105
396,631 Pool # 250128, 7.50%, 09/01/2009 403,449
2,252,007 REMIC, FLT, Series 1994-76FA, 6.24%, 04/25/2024 2,253,403
- --------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $18,893,951) 19,161,039
- --------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 24.3%
1,904,651 Pool # 200023, 9.50%, 05/15/2018 2,065,956
61,517 Pool # 305936, 8.50%, 04/15/2006 64,381
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 414,388 Pool # 306058, 8.50%, 06/15/2006 $433,553
85,484 Pool # 328651, 8.50%, 05/15/2007 89,438
665,243 Pool # 344961, 7.00%, 06/15/2008 672,933
699,308 Pool # 348112, 7.00%, 06/15/2008 706,084
620,381 Pool # 349379, 7.00%, 05/15/2008 626,393
1,391,825 Pool # 780398, 9.00%, 04/15/2021 1,490,561
945,098 Pool # 780408, 9.00%, 10/15/2022 1,005,640
2,731,982 GNMA II Pool # 2040, 9.00%, 07/20/2025 2,860,905
- ------------------------------------------------------------------------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $9,995,991) 10,015,844
- ------------------------------------------------------------------------------
U.S. TREASURY NOTES - 5.8%
1,250,000 U.S. Treasury Notes, 8.00%, 08/15/1999 1,310,250
1,000,000 U.S. Treasury Notes, 7.88%, 11/15/2004 1,090,580
- ------------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES
(IDENTIFIED COST $2,339,661) 2,400,830
- ------------------------------------------------------------------------------
TOTAL LONG TERM OBLIGATIONS
(IDENTIFIED COST $40,306,655) 40,674,267
- ------------------------------------------------------------------------------
(B) REPURCHASE AGREEMENT - 5.6%
- ------------------------------------------------------------------------------
2,317,000 Goldman Sachs Co., Inc., dated 12/31/96, 6.75%, due
01/02/97 repurchase price $2,317,869 (collateralized
by FNMA obligations, total par value $2,533,000,
6.09%, 04/01/35; total market value $2,381,105) 2,317,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $42,623,655) $42,991,267
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS - 63.9%
- ---------------------------------------------------------------------------
BANKS & SAVINGS AND LOANS - 11.0%
$1,000,000 Bank of Montreal, 10.00%, 09/01/1998 $1,060,000
1,000,000 Bankers Trust, 9.20%, 07/15/1999 1,063,750
1,000,000 Barnett Banks, 8.50%, 03/01/1999 1,043,750
1,100,000 Chase Manhattan Corp., 10.00%, 06/15/1999 1,189,375
1,000,000 Chemical NY Corp., 9.75%, 06/15/1999 1,076,250
1,000,000 Citicorp, 9.00%, 04/15/1999 1,056,250
500,000 Comerica Bank Notes, 9.75%, 05/01/1999 535,000
1,000,000 Dominion Bankshares, 9.63%, 06/15/1999 1,070,000
1,000,000 First Chicago, 9.88%, 07/01/1999 1,080,000
500,000 First Fidelity Bancorp, 9.63%, 08/15/1999 538,125
1,000,000 First Security Bank of Utah, 7.88%, 10/15/1999 1,035,000
1,000,000 Golden West Financial, 9.15%, 05/23/1998 1,040,000
500,000 Key Corp., 8.40%, 04/01/1999 520,625
1,000,000 Mellon Corp., 6.30%, 06/01/2000 993,750
500,000 Sovran Financial, 9.75%, 06/15/1999 537,500
- ---------------------------------------------------------------------------
13,839,375
- ---------------------------------------------------------------------------
BASIC INDUSTRY - 1.2%
500,000 duPont (E.I.) de Nemours & Co., 8.65%, 12/01/1997 512,620
1,000,000 WMX Technologies, Inc., 8.25%, 11/15/1999 1,048,750
- ---------------------------------------------------------------------------
1,561,370
- ---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- ---------------------------------------------------------------------
CAPITAL GOODS - .4%
$500,000 Baker Hughes, Inc., 7.63%, 02/15/1999 $510,625
- ---------------------------------------------------------------------
CONSUMER GOODS & SERVICES - 9.6%
1,000,000 American Brands, 9.00%, 06/15/1999 1,060,000
1,000,000 American Home Products, 7.70%, 02/15/2000 1,035,000
1,000,000 Columbia Healthcare, 6.50%, 03/15/1999 1,005,000
1,400,000 Columbia Pictures Ent., 9.88%, 02/01/1998 1,445,500
1,000,000 Cox Communications Inc., 6.38%, 06/15/2000 992,500
1,000,000 Dayton Hudson, 7.50%, 03/01/1999 1,020,000
1,120,000 Dillard Dept. Stores Inc., 8.75%, 06/15/1998 1,159,200
250,000 Dillard Dept. Stores Inc., 9.50%, 01/15/1998 258,125
1,000,000 Pepsico Inc., 6.80%, 05/15/2000 1,012,500
500,000 Philip Morris Inc., 6.38%, 01/15/1998 501,875
1,000,000 Philip Morris, Inc., 7.38%, 02/15/1999 1,017,500
500,000 Scripps Howard Inc., 7.38%, 12/15/1998 510,000
1,000,000 Super Value Stores Inc., 8.88%, 06/15/1999 1,055,000
- ---------------------------------------------------------------------
12,072,200
- ---------------------------------------------------------------------
DIVERSIFIED INDUSTRIAL - 1.0%
1,250,000 Loews Corp., 8.50%, 04/15/1998 1,284,375
- ---------------------------------------------------------------------
</TABLE>
20
<PAGE>
---------------------
THE MONITOR SHORT/INTERMEDIATE FIXED INCOME (Continued)
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
ENERGY-OIL & GAS - 2.9%
$1,000,000 Burlington Resources, 7.15%, 05/01/1999 $1,018,750
1,000,000 Elf Aquitaine, 7.75%, 05/01/1999 1,031,250
1,500,000 Texaco Inc., 9.00%, 11/15/1997 1,537,410
- ------------------------------------------------------------------------------
3,587,410
- ------------------------------------------------------------------------------
FINANCE COMPANIES - 16.1%
1,000,000 American Express Credit, 7.38%, 02/01/1999 1,022,500
1,000,000 American General Finance, 6.88%, 07/01/1999 1,012,500
1,050,000 Aristar Inc., 7.88%, 02/15/1999 1,081,500
1,000,000 Associates Corp. N.A., 8.70%, 01/01/1997 1,000,000
1,200,000 Bear Stearns Co., 7.63%, 09/15/1999 1,234,500
1,250,000 Bell Atlantic Financial, 6.63%, 11/30/1997 1,258,487
1,250,000 BHP U.S. Finance Corp., 7.00%, 12/01/1997 1,260,938
1,000,000 Chrysler Financial Corp., 13.25%, 10/15/1999 1,172,500
500,000 CNA Financial, 8.88%, 03/01/1998 515,000
500,000 CSW Investments, 6.95%, 08/01/2001 501,875
1,000,000 Dean Witter Discover, 6.00%, 03/01/1998 1,000,000
1,000,000 Ford Motor Credit Co., 7.75%, 10/01/1999 1,032,500
1,000,000 General Motors Acceptance Corp., 7.00%, 03/01/2000 1,012,500
1,000,000 Goldman Sachs, 6.88%, 09/15/1999 1,011,250
1,000,000 Household International, 6.00%, 03/15/1999 992,500
1,250,000 IBM Credit Corp., 6.38%, 11/01/1997 1,255,437
1,000,000 International Lease Finance Corp., 5.75%, 07/01/1998 995,000
1,000,000 Lehman Bros. Inc., 7.63%, 08/01/1998 1,018,750
500,000 Morgan Stanley Group, 7.88%, 12/15/1998 515,000
1,000,000 Salomon Inc., 9.38%, 04/15/1998 1,037,500
250,000 Transamerica Finance Corp., 6.75%, 01/15/1998 251,250
- ------------------------------------------------------------------------------
20,181,487
- ------------------------------------------------------------------------------
(H) FOREIGN INDUSTRIAL - 2.2%
1,600,000 Pacific Dunlap Notes, 9.75%, 12/15/2000 1,770,000
1,000,000 Rhone-Poulenc, 6.75%, 10/15/1999 1,006,250
- ------------------------------------------------------------------------------
2,776,250
- ------------------------------------------------------------------------------
(H) FOREIGN SOVEREIGN - 4.8%
1,000,000 Korea Development Bank, 9.25%, 06/15/1998 1,042,500
1,000,000 Montreal Urban Commission, 9.13%, 03/15/2001 1,083,750
1,000,000 Province of Ontario Canada, 5.70%, 10/01/1997 1,000,000
1,500,000 Province of Quebec, 9.38%, 04/01/1999 1,595,625
1,250,000 Republic of Finland, 6.75%, 11/24/1997 1,260,938
- ------------------------------------------------------------------------------
5,982,813
- ------------------------------------------------------------------------------
GAS & ELECTRIC UTILITIES - 5.2%
500,000 Empire District Electric Co., 5.70%, 05/01/1998 497,500
500,000 Houston Lighting & Power Co., 6.75%, 11/01/1997 500,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
GAS & ELECTRIC UTILITIES (CONTINUED)
$1,000,000 Iowa Electric Light & Power, 7.60%, 03/01/1999 $1,026,250
1,000,000 National Rural Utilities, 8.50%, 02/15/1998 1,026,250
1,250,000 Orange & Rockland Utilities Inc., 6.50%, 10/15/1997 1,254,688
1,000,000 Southern California Edison, 7.50%, 04/15/1999 1,026,250
1,250,000 Southern California Gas Co., 6.50%, 12/15/1997 1,257,813
- -------------------------------------------------------------------------------
6,588,751
- -------------------------------------------------------------------------------
INSURANCE - 4.1%
1,000,000 Allstate Corp., 5.88%, 06/15/1998 996,250
1,000,000 Continential Corp., 8.25%, 04/15/1999 1,036,250
1,000,000 Torchmark Corp., 9.63%, 05/01/1998 1,041,250
1,000,000 Travelers Inc., 7.75%, 06/15/1999 1,032,500
1,000,000 U.S. Life Notes, 6.38%, 06/15/2000 982,500
- -------------------------------------------------------------------------------
5,088,750
- -------------------------------------------------------------------------------
TELEPHONE UTILITIES & COMMUNICATION COMPANIES - 2.6%
1,250,000 Cincinnati Bell Inc., 6.70%, 12/15/1997 1,254,688
1,000,000 GTE Corp., 8.85%, 03/01/1998 1,031,250
1,000,000 MCI Communications Corp., 6.25%, 03/23/1999 1,000,000
- -------------------------------------------------------------------------------
3,285,938
- -------------------------------------------------------------------------------
TRANSPORTATION - 2.8%
765,000 Conrail Inc., 9.75%, 06/01/2000 839,588
1,500,000 CSX Corp., 9.50%, 08/01/2000 1,636,872
1,000,000 Union Pacific Corp., 6.25%, 03/15/1999 997,500
- -------------------------------------------------------------------------------
3,473,960
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $79,268,830) 80,233,304
- -------------------------------------------------------------------------------
GOVERNMENT BONDS - 31.9%
- -------------------------------------------------------------------------------
GOVERNMENT AGENCIES - 2.4%
3,000,000 Federal National Mortgage Association, 6.70%,
08/10/2001 (identified cost $2,999,124) 3,000,660
- -------------------------------------------------------------------------------
U.S. TREASURIES - 29.5%
36,500,000 United States Treasury Note, 6.63%, 06/30/2001
(identified cost $36,451,919) 37,077,430
- -------------------------------------------------------------------------------
TOTAL GOVERNMENT BONDS 40,078,090
- -------------------------------------------------------------------------------
(E) COMMERCIAL PAPER - 3.1%
- -------------------------------------------------------------------------------
3,840,617 Prudential Funding Corp., 5.50%, 01/02/1997 (at
amortized cost) 3,840,617
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $122,560,490) $124,152,011
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Portfolios of Investments.
21
<PAGE>
Notes to Portfolios of Investments
* Non-income producing securities.
(a) Each issue shows the rate of discount at the time of purchase.
(b) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices at the date of the
portfolio.
(c) Also represents cost for federal tax purposes.
(d) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(e) Each issue shows the coupon rate.
(f) Indicates securities subject to dollar roll transactions.
(g) Pre-Refunded Security--The maturity date shown represents the pre-refunded
date.
(h) U.S. Dollar denominated.
The following abbreviations are used in these Portfolios of Investments:
ADR--American Depository Receipt HRB--Hospital Revenue Bonds
AMBAC--American Municipal Bond Assurance Corporation
IDA--Industrial Development Authority
BANs--Bond Anticipation Notes IDR--Industrial Development Revenue
BIG--Bond Investors Guaranty LOC--Letter of Credit
ETM--Escrowed to Maturity MBIA--Municipal Bond Investors
Assurance
FGIC--Financial Guaranty Insurance Company
PLC--Public Limited Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance REMIC--Real Estate Mortgage
Investment Conduit
GNMA--Government National Mortgage Association
GO--General Obligation SPA--Standby Purchase Agreement
VRDNs--Variable Rate Demand Notes
The categories of investments are shown as a percentage of net assets.
The following is a summary of the financial investment activity for the period
ended December 31, 1996.
<TABLE>
<CAPTION>
COST OF
INVESTMENTS NET UNREALIZED GROSS GROSS
FOR FEDERAL TAX APPRECIATION/ UNREALIZED UNREALIZED TOTAL
MONITOR FUNDS PURPOSES DEPRECIATION APPRECIATION DEPRECIATION NET ASSETS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Fund $436,964,245** -- -- -- $435,518,716
Ohio Municipal Money
Market Fund 130,666,891** -- -- -- 130,756,498
U.S. Treasury Money
Market Fund 524,529,925** -- -- -- 522,476,800
Growth Fund 129,038,757 $50,894,374 $52,123,429 $(1,229,055) 180,048,874
Income Equity Fund 118,828,193 53,221,440 53,225,131 (3,691) 172,766,777
Ohio Tax-Free Fund 63,398,485 2,659,887 2,674,309 (14,422) 66,699,499
Fixed Income Securities
Fund 141,008,627 3,893,585 4,713,952 (820,367) 145,889,195
Mortgage Securities Fund 42,623,655 367,612 459,444 (91,832) 41,231,543
Short/Intermediate Fixed
Income Securities Fund 122,560,490 1,591,522 1,710,459 (118,937) 125,514,375
- -------------------------------------------------------------------------------------------------
</TABLE>
**At amortized cost.
(See Notes which are an integral part of the Financial Statements)
22
<PAGE>
Statements of Assets & Liabilities
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONITOR MONITOR
MONITOR OHIO MUNICIPAL U.S. TREASURY
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments at value $390,062 $130,667 $252,497
Investments in repurchase 46,902 -- 272,033
agreements
Cash -- -- --
Dividends and interest receivable 148 800 117
Receivable for investments sold -- -- --
Receivable for Fund shares sold 322 37 99
Deferred expenses -- -- --
- ------------------------------------------------------------------------------
Total assets 437,434 131,504 524,746
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased -- 320 --
Payable for Fund shares redeemed 9 -- 1
Payable for dollar roll -- -- --
transactions
Distributions Payable 1,720 354 2,097
Accrued expenses 186 74 171
- ------------------------------------------------------------------------------
Total liabilities 1,915 748 2,269
- ------------------------------------------------------------------------------
NET ASSETS:
Paid-in-capital 435,519 130,756 522,477
Net unrealized appreciation -- -- --
(depreciation) of investments
Accumulated net realized gain -- -- --
(loss) on investments
Undistributed net investment -- -- --
income
- ------------------------------------------------------------------------------
Total Net Assets $435,519 $130,756 $522,477
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NET ASSETS:
Trust Shares $337,962 $ 56,654 $474,593
Investment Shares $ 97,557 $ 74,102 $ 47,884
- ------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PROCEEDS PER SHARE:
Trust Shares $1.00 $1.00 $1.00
Investment Shares $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
OFFERING PRICE PER SHARE:
Trust Shares $1.00 $1.00 $1.00
Investment Shares $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
SHARES OUTSTANDING:
Trust Shares 337,962 56,654 474,593
Investment Shares 97,557 74,102 47,884
- ------------------------------------------------------------------------------
Total shares outstanding ($0.001 435,519 130,756 522,477
par value, unlimited shares
authorized)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Investments, at identified cost $436,964 $130,667 $524,530
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(All numbers in thousands except net asset values)
Statements of Operations
YEAR ENDED DECEMBER 31, 1996
(All numbers in thousands)
<TABLE>
<CAPTION>
MONITOR MONITOR
MONITOR OHIO MUNICIPAL U.S. TREASURY
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $22,875 $4,165 $23,912
Dividend income -- -- --
- ---------------------------------------------------------------------------------
Total income 22,875 4,165 23,912
- ---------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,268 355 905
Trustees' fees 17 4 15
Administrative personnel and 465 130 495
services fee
Custodian and recordkeeping fees and 237 66 253
expenses
Transfer and dividend disbursing 40 31 35
agent fees and expenses
Fund share registration costs 54 14 73
Auditing fees 48 12 42
Legal fees 20 6 17
Printing and postage 46 11 40
Insurance premiums 29 8 27
Distribution services fees+ 95 65 110
Miscellaneous -- -- --
- ---------------------------------------------------------------------------------
Total expenses 2,319 702 2,012
- ---------------------------------------------------------------------------------
Deduct-
Waiver of investment advisory fees -- (142) --
Waiver of distribution services -- -- (66)
fees+
- ---------------------------------------------------------------------------------
NET EXPENSES 2,319 560 1,946
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,556 3,605 21,966
- ---------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) on -- -- --
investments (identified cost basis)
Net change in unrealized -- -- --
appreciation (depreciation) on
investments
- ---------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN -- -- --
(LOSS) ON INVESTMENTS
- ---------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM $20,556 $3,605 $21,966
OPERATIONS
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
*Computation of Offering price: 100/96 of net asset value.
**Computation of Offering price: 100/98 of net asset value.
+Applicable to Investor shares only.
(See Notes which are an integral part of the Financial Statements)
23
<PAGE>
<TABLE>
<CAPTION>
MONITOR MONITOR MONITOR MONITOR
MONITOR MONITOR OHIO FIXED INCOME MORTGAGE SHORT/INTERMEDIATE
GROWTH INCOME TAX-FREE SECURITIES SECURITIES FIXED INCOME
FUND EQUITY FUND FUND FUND FUND SECURITIES FUND
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$179,933 $172,050 $66,058 $144,902 $40,674 $124,152
-- -- -- -- 2,317 --
-- -- 3 -- -- --
284 -- 522 2,416 264 1,467
-- 796 -- -- 3 --
29 56 200 50 -- --
-- -- -- -- 6 --
- ------------------------------------------------------------------------------------
180,246 172,902 66,783 147,368 43,264 125,619
- ------------------------------------------------------------------------------------
-- -- -- 1,335 -- --
11 -- -- 4 -- 9
-- -- -- -- 1,971 --
-- -- -- -- -- --
186 135 84 140 61 96
- ------------------------------------------------------------------------------------
197 135 84 1,479 2,032 105
- ------------------------------------------------------------------------------------
129,151 119,485 64,014 143,203 64,878 124,277
50,894 53,221 2,660 3,893 368 1,592
-- -- (6) (1,225) (24,014) (378)
4 61 31 18 -- 23
- ------------------------------------------------------------------------------------
$180,049 $172,767 $66,699 $145,889 $41,232 $125,514
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
$175,764 $172,767 $64,799 $144,038 $39,566 $125,514
$ 4,285 -- $ 1,900 $ 1,851 $ 1,666 --
- ------------------------------------------------------------------------------------
$33.97 $30.26 $21.49 $20.94 $8.06 $19.96
$33.96 -- $21.48 $20.95 $8.08 --
- ------------------------------------------------------------------------------------
$33.97 $30.26 $21.49 $20.94 $8.06 $19.96
$35.38* -- $21.92** $21.38** $8.24** --
- ------------------------------------------------------------------------------------
5,175 5,710 3,016 6,879 4,907 6,287
126 88 88 206
- ------------------------------------------------------------------------------------
5,301 5,710 3,104 6,967 5,113 6,287
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
$129,039 $118,828 $63,398 $141,009 $42,624 $122,560
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MONITOR MONITOR MONITOR MONITOR
MONITOR MONITOR OHIO FIXED INCOME MORTGAGE SHORT/INTERMEDIATE
GROWTH INCOME TAX-FREE SECURITIES SECURITIES FIXED INCOME
FUND EQUITY FUND FUND FUND FUND SECURITIES FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 461 $ 1,943 $3,435 $9,922 $3,562 $8,203
3,018 4,938 -- -- -- --
- -------------------------------------------------------------------------------
3,479 6,881 3,435 9,922 3,562 8,203
- -------------------------------------------------------------------------------
1,028 959 314 697 236 627
6 5 2 5 2 5
189 176 69 153 52 138
96 89 35 78 92 70
36 18 31 40 28 21
28 21 14 15 11 13
14 12 5 12 3 11
7 5 2 7 2 5
12 10 4 11 -- 10
10 7 3 9 2 7
10 -- 5 5 10 --
-- -- -- -- 23 --
- -------------------------------------------------------------------------------
1,436 1,302 484 1,032 461 907
- -------------------------------------------------------------------------------
-- -- -- -- (135) --
-- -- -- -- (5) --
- -------------------------------------------------------------------------------
1,436 1,302 484 1,032 321 907
- -------------------------------------------------------------------------------
2,043 5,579 2,951 8,890 3,241 7,296
- -------------------------------------------------------------------------------
8,154 2,817 4 996 (1,934) 80
15,748 16,650 (769) (6,268) 1,547 (2,269)
- -------------------------------------------------------------------------------
23,902 19,467 (765) (5,272) (387) (2,189)
- -------------------------------------------------------------------------------
$25,945 $25,046 $2,186 $3,618 $2,854 $5,107
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Statements of Changes In Net Assets
(All numbers in thousands)
<TABLE>
<CAPTION>
MONITOR
MONITOR OHIO U.S. TREASURY
MONITOR MONEY MUNICIPAL MONEY MONEY MARKET MONITOR GROWTH
MARKET FUND MARKET FUND FUND FUND
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1996 1995 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS OPERATIONS--
Net investment income $ 20,556 $ 19,508 $ 3,605 $ 3,288 $ 21,966 $ 17,495 $ 2,043 $ 1,757
Net realized gain
(loss) on investment
transactions -- -- -- -- -- -- 8,154 13,943
Change in net
unrealized
appreciation
(depreciation) of
investments -- -- -- -- -- -- 15,748 19,016
- ----------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 20,556 19,508 3,605 3,288 21,966 17,495 25,945 34,716
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM--
Net investment income:
Trust Shares (15,979) (15,778) (1,654) (1,796) (19,879) (15,870) (2,017) (1,727)
Investment Shares (4,577) (3,730) (1,951) (1,492) (2,087) (1,625) (40) (39)
Net realized gain on
investments:
Trust Shares -- -- -- -- -- -- (7,963) (13,595)
Investment Shares -- -- -- -- -- -- (192) (348)
DISTRIBUTIONS IN EXCESS
OF--
Net investment income:
Trust Shares -- -- -- -- -- -- -- --
Investment Shares -- -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Change in net assets
from distributions to
shareholders (20,556) (19,508) (3,605) (3,288) (21,966) (17,495) (10,212) (15,709)
- ----------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS--
Trust Shares:
Proceeds from Shares
Issued 771,826 570,950 93,400 113,680 1,116,651 837,829 29,335 25,209
Reinvestment of
Distributions 37 33 1 2 23 21 3,323 9,679
Cost of Shares Redeemed (730,666) (562,024) (93,303) (96,755) (919,223) (817,246) (15,669) (13,402)
- ----------------------------------------------------------------------------------------------------------
Total Trust Share
Transactions 41,197 8,959 98 16,927 197,451 20,604 16,989 21,486
- ----------------------------------------------------------------------------------------------------------
Investment Shares:
Proceeds from Shares
Issued 135,440 197,369 118,303 91,978 114,039 70,271 483 365
Reinvestment of
Distributions 3,935 2,711 412 389 1,284 1,023 230 379
Cost of Shares Redeemed (133,105) (150,421) (100,077) (74,032) (106,412) (52,711) (584) (714)
- ----------------------------------------------------------------------------------------------------------
Total Investment Share
Transactions 6,270 49,659 18,638 18,335 8,911 18,583 129 30
- ----------------------------------------------------------------------------------------------------------
Change in net assets
from capital share
transactions 47,467 58,618 18,736 35,262 206,362 39,187 17,118 21,516
- ----------------------------------------------------------------------------------------------------------
Change in net assets 47,467 58,618 18,736 35,262 206,362 39,187 32,851 40,523
NET ASSETS:
Beginning of period 388,052 329,434 112,020 76,758 316,115 276,928 147,198 106,675
- ----------------------------------------------------------------------------------------------------------
End of period $435,519 $388,052 $130,756 $112,020 $ 522,477 $316,115 $180,049 $147,198
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period -- -- -- -- -- -- $ 4 $ 19
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
SHARES ISSUED AND
REDEEMED
Trust Shares:
Shares issued 771,826 570,950 93,400 113,680 1,116,651 837,829 897 843
Reinvestment of
distributions 37 33 1 2 23 21 98 316
Shares redeemed (730,666) (562,024) (93,303) (96,755) (919,223) (817,246) (475) (438)
- ----------------------------------------------------------------------------------------------------------
Total Trust Share
Transactions 41,197 8,959 98 16,927 197,451 20,604 520 721
- ----------------------------------------------------------------------------------------------------------
Investment Shares:
Shares issued 135,440 197,369 118,303 91,978 114,039 70,271 15 12
Reinvestment of
distributions 3,935 2,711 412 389 1,284 1,023 7 13
Shares redeemed (133,105) (150,421) (100,077) (74,032) (106,412) (52,711) (18) (24)
- ----------------------------------------------------------------------------------------------------------
Total Investment Share
Transactions 6,270 49,659 18,638 18,335 8,911 18,583 4 1
- ----------------------------------------------------------------------------------------------------------
Net change in Fund share
transactions 47,467 58,618 18,736 35,262 206,362 39,187 524 722
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
25
<PAGE>
<TABLE>
<CAPTION>
MONITOR
MONITOR FIXED SHORT/INTERMEDIATE
MONITOR INCOME MONITOR OHIO INCOME SECURITIES MONITOR MORTGAGE FIXED INCOME
EQUITY FUND TAX-FREE FUND FUND SECURITIES FUND SECURITIES FUND
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5,579 $ 4,900 $ 2,951 $ 2,905 $ 8,890 $ 8,610 $ 3,241 $ 4,224 $ 7,296 $ 7,822
2,817 323 4 (10) 996 (420) (1,934) (10,894) 80 (257)
16,650 27,588 (769) 3,665 (6,268) 13,787 1,547 22,343 (2,269) 8,241
- -------------------------------------------------------------------------------------------------------------
25,046 32,811 2,186 6,560 3,618 21,977 2,854 15,673 5,107 15,806
- -------------------------------------------------------------------------------------------------------------
(5,542) (5,021) (2,861) (2,802) (8,840) (8,491) (3,067) (4,153) (7,408) (7,803)
-- -- (92) (101) (124) (126) (120) (157) -- --
(2,850) -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- (348) -- --
-- -- -- -- -- -- -- (14) -- --
- -------------------------------------------------------------------------------------------------------------
(8,392) (5,021) (2,953) (2,.903) (8,964) (8,617) (3,187) (4,672) (7,408) (7,803)
- -------------------------------------------------------------------------------------------------------------
26,867 11,621 13,886 10,044 22,286 21,053 2,565 1,008 15,023 20,923
2,760 1,669 168 122 3,424 3,324 228 428 3,221 3,294
(15,406) (14,587) (8,388) (10,285) (17,837) (15,230) (15,572) (13,532) (24,380) (23,381)
- -------------------------------------------------------------------------------------------------------------
14,221 (1,297) 5,666 (119) 7,873 9,147 (12,779) (12,096) (6,136) 836
- -------------------------------------------------------------------------------------------------------------
N/A N/A 261 219 186 283 61 78 N/A N/A
N/A N/A 72 82 93 102 84 124 N/A N/A
N/A N/A (565) (583) (516) (368) (476) (2,855) N/A N/A
- -------------------------------------------------------------------------------------------------------------
N/A N/A (232) (282) (237) 17 (331) (2,653) 0 N/A
- -------------------------------------------------------------------------------------------------------------
14,221 (1,297) 5,434 (401) 7,636 9,164 (13,110) (14,749) (6,136) 836
- -------------------------------------------------------------------------------------------------------------
30,875 26,493 4,667 3,256 2,290 22,524 (13,443) (3,748) (8,437) 8,839
141,892 115,399 62,032 58,776 143,599 121,075 54,675 58,423 133,951 125,112
- -------------------------------------------------------------------------------------------------------------
$172,767 $141,892 $66,699 $62,032 $145,889 $143,599 $41,232 $54,675 $ 125,514 $ 133,951
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
$ 61 $ 24 $ 31 $ 34 $ 17 $ 92 -- $ (362) $ 23 $ 135
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
940 477 648 470 1,065 1,011 320 137 752 1057
95 68 8 6 164 159 28 59 162 166
(532) (601) (390) (481) (845) (726) (1,951) (1,786) (1,210) (1,176)
- -------------------------------------------------------------------------------------------------------------
503 (56) 266 (5) 384 444 (1,603) (1,590) (296) 47
- -------------------------------------------------------------------------------------------------------------
N/A N/A 12 10 9 13 8 11 N/A N/A
N/A N/A 3 4 4 5 10 17 N/A N/A
N/A N/A (26) (27) (25) (17) (59) (416) N/A N/A
- -------------------------------------------------------------------------------------------------------------
N/A N/A (11) (13) (12) 1 (41) (388) -- --
- -------------------------------------------------------------------------------------------------------------
503 (56) 255 (18) 372 445 (1,644) (1,978) (296) 47
- -------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
Statement of Cash Flows
YEAR ENDED DECEMBER 31, 1996
(All numbers in thousands)
<TABLE>
<CAPTION>
THE
MONITOR
MORTGAGE
SECURITIES
FUND
- -----------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 3,822
Payment of operating expenses (312)
Proceeds from sales and maturities of investments 68,098
Purchases of investments (46,266)
Net purchases of short-term investments (719)
- -----------------------------------------------------------------
Cash provided by operating activities 24,623
- -----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds used in Fund share activity (13,470)
Decrease on payable for dollar roll transactions (8,279)
Distributions paid (2,875)
- -----------------------------------------------------------------
Cash used by financing activities (24,624)
- -----------------------------------------------------------------
Net change in cash (1)
Cash at beginning of period 1
- -----------------------------------------------------------------
Cash at end of period 0
- -----------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations 2,854
Net decrease in investments 21,455
Decrease in interest receivable 260
Decrease in receivable for investments sold 41
Decrease in deferred expenses 4
Increase in accrued expenses 9
- -----------------------------------------------------------------
Cash provided by operating activities $24,623
- -----------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
27
<PAGE>
[This Page Intentionally Left Blank]
28
<PAGE>
Financial Highlights
MONEY MARKET FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET ASSET SHAREHOLDERS NET ASSET
VALUE, NET FROM NET VALUE,
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL
DECEMBER 31, OF PERIOD INCOME INCOME PERIOD RETURN(B)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRUST SHARES
THE MONITOR MONEY
MARKET FUND
1992 $1.00 0.03 (0.03) $1.00 3.44%
1993 $1.00 0.03 (0.03) $1.00 2.74%
1994 $1.00 0.04 (0.04) $1.00 3.86%
1995 $1.00 0.05 (0.05) $1.00 5.58%
1996 $1.00 0.05 (0.05) $1.00 5.01%
THE MONITOR OHIO MUNICIPAL MONEY
MARKET FUND
1992 $1.00 0.03 (0.03) $1.00 2.61%
1993 $1.00 0.02 (0.02) $1.00 2.08%
1994 $1.00 0.02 (0.02) $1.00 2.41%
1995 $1.00 0.04 (0.04) $1.00 3.57%
1996 $1.00 0.03 (0.03) $1.00 3.14%
THE MONITOR U.S. TREASURY MONEY
MARKET FUND
1992 $1.00 0.03 (0.03) $1.00 3.43%
1993 $1.00 0.03 (0.03) $1.00 2.77%
1994 $1.00 0.04 (0.04) $1.00 3.79%
1995 $1.00 0.05 (0.05) $1.00 5.53%
1996 $1.00 0.05 (0.05) $1.00 4.98%
INVESTMENT SHARES
THE MONITOR MONEY
MARKET FUND
1992 $1.00 0.03 (0.03) $1.00 3.34%
1993 $1.00 0.03 (0.03) $1.00 2.63%
1994 $1.00 0.04 (0.04) $1.00 3.76%
1995 $1.00 0.05 (0.05) $1.00 5.48%
1996 $1.00 0.05 (0.05) $1.00 4.90%
THE MONITOR OHIO MUNICIPAL MONEY
MARKET FUND
1992 $1.00 0.03 (0.03) $1.00 2.51%
1993 $1.00 0.02 (0.02) $1.00 1.98%
1994 $1.00 0.02 (0.02) $1.00 2.31%
1995 $1.00 0.03 (0.03) $1.00 3.47%
1996 $1.00 0.03 (0.03) $1.00 3.04%
THE MONITOR U.S. TREASURY MONEY
MARKET FUND
1993(a) $1.00 0.01 (0.01) $1.00 0.54%
1994 $1.00 0.04 (0.04) $1.00 3.68%
1995 $1.00 0.05 (0.05) $1.00 5.43%
1996 $1.00 0.05 (0.05) $1.00 4.87%
------------------------------------------------------------------------
</TABLE>
(a)Reflects operations for the period from October 19, 1993 (date of initial
public investment) to December 31, 1993.
(b)Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c)Computed on an annualized basis.
(d)This voluntary expense decrease is reflected in both the expense and net
investment income ratios.
(See Notes which are an integral part of the Financial Statements)
29
<PAGE>
<TABLE>
<CAPTION>
RATIO TO AVERAGE NET ASSETS
--------------------------------------------------------------
NET EXPENSE NET ASSETS,
INVESTMENT WAIVER/REDUCTION/ END OF PERIOD
EXPENSES INCOME REIMBURSEMENT(D) (000 OMITTED)
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.50% 3.38% -- $291,818
0.51% 2.70% 0.02% $337,276
0.51% 3.75% 0.02% $287,805
0.53% 5.44% 0.03% $296,764
0.53% 4.90% -- $337,962
0.49% 2.60% 0.14% $ 48,893
0.45% 2.07% 0.20% $ 40,141
0.45% 2.40% 0.19% $ 39,624
0.42% 3.52% 0.20% $ 56,551
0.42% 3.10% 0.12% $ 56,654
0.41% 3.34% -- $146,453
0.40% 2.74% 0.01% $231,123
0.42% 3.76% 0.02% $256,538
0.43% 5.40% 0.03% $277,142
0.42% 4.87% -- $474,593
0.60% 3.26% -- $ 19,962
0.61% 2.60% 0.02% $ 21,583
0.61% 3.85% 0.02% $ 41,629
0.63% 5.30% 0.03% $ 91,288
0.63% 4.80% -- $ 97,557
0.59% 2.35% 0.14% $ 2,452
0.55% 1.88% 0.20% $ 20,312
0.55% 2.30% 0.19% $ 37,134
0.52% 3.42% 0.20% $ 55,469
0.52% 3.00% 0.12% $ 74,102
0.50%(c) 2.65%(c) 0.16%(c) $ 948
0.52% 3.66% 0.17% $ 20,390
0.53% 5.28% 0.18% $ 38,973
0.52% 4.77% 0.15% $ 47,884
-------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
Financial Highlights
EQUITY FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRUST SHARES
THE MONITOR GROWTH FUND
1992 $24.78 0.56 1.36 1.92 (0.55) (0.39) --
1993 $25.76 0.46 0.44 0.90 (0.47) (0.02) --
1994 $26.17 0.39 0.21 0.60 (0.40) (0.07) --
1995 $26.30 0.43 7.62 8.05 (0.43) (3.11) --
1996 $30.81 0.40 4.72 5.12 (0.40) (1.56) --
THE MONITOR INCOME EQUITY FUND
1992 $20.90 0.75 0.79 1.54 (0.74) -- --
1993 $21.70 0.74 1.57 2.31 (0.74) (0.06) --
1994 $23.21 0.88 (1.29) (0.41) (0.87) -- --
1995 $21.93 0.94 5.34 6.28 (0.96) -- --
1996 $27.25 1.00 3.51 4.51 (1.00) (0.50) --
INVESTMENT SHARES
THE MONITOR GROWTH FUND
1992 $24.78 0.49 1.36 1.85 (0.48) (0.39) --
1993 $25.76 0.40 0.43 0.83 (0.41) (0.02) --
1994 $26.16 0.33 0.22 0.55 (0.33) (0.07) --
1995 $26.31 0.35 7.61 7.96 (0.35) (3.11) --
1996 $30.81 0.31 4.73 5.04 (0.33) (1.56) --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(b)Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c)This voluntary expense decrease is reflected in both the expense and net
investment income ratios.
(d) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required beginning in
fiscal 1996.
(See Notes which are an integral part of the Financial Statements)
31
<PAGE>
<TABLE>
<CAPTION>
RATIO TO AVERAGE NET ASSETS
NET ASSET -------------------------------------
VALUE, NET EXPENSE NET ASSETS, PORTFOLIO AVERAGE
TOTAL END OF TOTAL INVESTMENT WAIVER/REDUCTION/ END OF PERIOD TURNOVER COMMISSION
DISTRIBUTIONS PERIOD RETURN(B) EXPENSES INCOME REIMBURSEMENT(C) (000 OMITTED) RATE RATE(D)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.94) $25.76 7.88% 0.91% 2.25% 0.01% $ 90,096 36% n/a
(0.49) $26.17 3.53% 0.84% 1.79% 0.04% $109,576 29% n/a
(0.47) $26.30 2.28% 0.88% 1.52% 0.04% $103,463 42% n/a
(3.54) $30.81 30.75% 0.86% 1.34% 0.05% $143,421 37% n/a
(1.96) $33.97 16.72% 0.83% 1.20% -- $175,764 21% $0.0452
(0.74) $21.70 7.49% 0.85% 3.53% 0.01% $ 95,182 22% n/a
(0.80) $23.21 10.85% 0.82% 3.29% -- $135,618 10% n/a
(0.87) $21.93 (1.82%) 0.84% 3.91% -- $115,399 50% n/a
(0.96) $27.25 29.26% 0.82% 3.85% -- $141,892 17% n/a
(1.50) $30.26 16.88% 0.82% 3.50% -- $172,767 25% $0.0352
(0.87) $25.76 7.57% 1.16% 2.03% 0.01% $ 3,637 36% n/a
(0.43) $26.16 3.25% 1.10% 1.54% 0.04% $ 3,961 29% n/a
(0.40) $26.31 2.08% 1.13% 1.27% 0.04% $ 3,212 42% n/a
(3.46) $30.81 30.40% 1.11% 1.08% 0.05% $ 3,777 37% n/a
(1.89) $33.96 16.43% 1.08% 0.93% -- $ 4,285 21% $0.0452
- -----------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Financial Highlights
INCOME FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME(B)
- ------------------------------------------------------------------------------------------------------------
TRUST SHARES
THE MONITOR OHIO TAX-FREE FUND
<S> <C> <C> <C> <C> <C> <C> <C>
1992 $21.05 0.98 0.26 1.24 (0.98) -- --
1993 $21.31 0.96 0.73 1.69 (0.96) -- --
1994 $22.04 0.99 (1.55) (0.56) (0.98) -- --
1995 $20.50 1.01 1.27 2.28 (1.01) -- --
1996 $21.77 1.01 (0.28) 0.73 (1.01) -- --
THE MONITOR FIXED INCOME
SECURITIES FUND
1992 $21.58 1.37 (0.02) 1.35 (1.47) (0.12) (0.02)
1993 $21.32 1.28 0.88 2.16 (1.39) (0.06) --
1994 $22.03 1.28 (2.28) (1.00) (1.34) -- --
1995 $19.69 1.34 2.09 3.43 (1.34) -- --
1996 $21.78 1.34 (0.83) 0.51 (1.35) -- --
THE MONITOR MORTGAGE SECURITIES
FUND
1992(a)(f) $10.00 0.63 0.29 0.92 (0.61) (0.04) --
1993(f) $10.27 1.50 (0.28) 1.22 (1.46) (0.10) --
1994(f) $ 9.93 0.89 (3.19) (2.30) (0.93) -- (0.01)
1995(f) $ 6.69 0.55 1.46 2.01 (0.55) -- (0.06)
1996(f) $ 8.09 0.55 (0.04) 0.51 (0.54) -- --
THE MONITOR SHORT/INTERMEDIATE FIXED INCOME
SECURITIES FUND
1992 $21.15 1.36 (0.09) 1.27 (1.36) (0.32) (0.11)
1993 $20.63 1.19 0.31 1.50 (1.31) (0.25) --
1994 $20.57 1.13 (1.33) (0.20) (1.23) -- --
1995 $19.14 1.18 1.21 2.39 (1.18) -- --
1996 $20.35 1.17 (0.37) 0.80 (1.19) -- --
INVESTMENT SHARES
THE MONITOR OHIO TAX-FREE FUND
1992 $21.05 0.93 0.26 1.19 (0.93) -- --
1993 $21.31 0.90 0.73 1.63 (0.90) -- --
1994 $22.04 0.94 (1.56) (0.62) (0.92) -- --
1995 $20.50 0.96 1.27 2.23 (0.96) -- --
1996 $21.77 0.96 (0.29) 0.67 (0.96) -- --
THE MONITOR FIXED INCOME
SECURITIES FUND
1992 $21.58 1.33 (0.04) 1.29 (1.37) (0.12) (0.06)
1993 $21.32 1.19 0.92 2.11 (1.33) (0.06) --
1994 $22.04 1.23 (2.29) (1.06) (1.28) -- --
1995 $19.70 1.29 2.09 3.38 (1.30) -- --
1996 $21.78 1.29 (0.83) 0.46 (1.29) -- --
THE MONITOR MORTGAGE SECURITIES
FUND
1992(a)(f) $10.00 0.62 0.28 0.90 (0.60) (0.03) --
1993(f) $10.27 1.47 (0.27) 1.20 (1.43) (0.10) --
1994(f) $ 9.94 0.87 (3.19) (2.32) (0.91) -- (0.01)
1995(f) $ 6.70 0.55 1.46 2.01 (0.55) -- (0.04)
1996(f) $ 8.12 0.53 (0.04) 0.49 (0.53) -- --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a)Reflects operations for the period from June 2, 1992 (date of initial
public investment) to December 31, 1992.
(b) Distributions in excess of net investment income were the result of
certain book and tax timing differences. These distributions did not
represent a return of capital for federal income tax purposes.
(c)Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(d)This voluntary expense decrease is reflected in both the expense and net
investment income ratios.
(e)Computed on an annualized basis.
(f) Per share information presented is based upon the monthly average number
of shares outstanding due to large fluctuations in the number of shares
outstanding during the period.
(See Notes which are an integral part of the Financial Statements)
33
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
----------------------------------------
NET ASSET NET ASSETS,
VALUE, NET EXPENSE WAIVER/ END OF PORTFOLIO
TOTAL END OF TOTAL INVESTMENT REDUCTION/ PERIOD (000 TURNOVER
DISTRIBUTIONS PERIOD RETURN(C) EXPENSES INCOME REIMBURSEMENT(D) OMITTED) RATE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.98) $21.31 6.04% 0.91% 4.62% -- $ 47,557 3%
(0.96) $22.04 8.08% 0.82% 4.39% 0.04% $ 59,541 2%
(0.98) $20.50 (2.57%) 0.77% 4.68% 0.04% $ 56,469 12%
(1.01) $21.77 11.35% 0.78% 4.74% 0.08% $ 59,869 13%
(1.01) $21.49 3.48% 0.76% 3.49% -- $ 64,799 6%
(1.61) $21.32 6.54% 0.83% 6.49% -- $ 87,107 15%
(1.45) $22.03 10.32% 0.74% 5.87% 0.04% $112,103 7%
(1.34) $19.69 (4.62%) 0.75% 6.26% 0.04% $119,117 23%
(1.34) $21.78 17.95% 0.77% 6.41% 0.05% $141,423 20%
(1.35) $20.94 2.56% 0.74% 6.39% -- $144,038 16%
(0.65) $10.27 9.12% 0.58%(e) 10.60%(e) 0.19%(e) $ 90,677 50%
(1.56) $ 9.93 12.10% 0.78% 14.20% 0.04% $ 90,461 154%
(0.94) $ 6.69 (24.59%) 0.88% 11.16% 0.12% $ 54,164 91%
(0.61) $ 8.09 31.10% 0.49% 7.29% 0.63% $ 52,667 194%
(0.54) $ 8.06 6.56% 0.67% 6.86% 0.29% $ 39,566 90%
(1.79) $20.63 6.25% 0.74% 6.44% -- $123,400 41%
(1.56) $20.57 7.43% 0.71% 5.70% -- $123,897 24%
(1.23) $19.14 (0.98%) 0.72% 5.76% -- $125,112 38%
(1.18) $20.35 12.81% 0.74% 5.93% -- $133,951 40%
(1.19) $19.96 4.08% 0.72% 5.83% -- $125,514 39%
(0.93) $21.31 5.76% 1.16% 4.36% -- $ 1,339 3%
(0.90) $22.04 7.78% 1.07% 4.13% 0.04% $ 2,838 2%
(0.92) $20.50 (2.83%) 1.02% 4.43% 0.04% $ 2,307 12%
(0.96) $21.77 11.10% 1.03% 4.49% 0.08% $ 2,163 13%
(0.96) $21.48 3.20% 1.01% 3.24% -- $ 1,900 6%
(1.55) $21.32 6.25% 1.08% 6.16% -- $ 845 15%
(1.39) $22.04 10.07% 0.99% 5.61% 0.04% $ 2,563 7%
(1.28) $19.70 (4.88%) 1.00% 6.01% 0.04% $ 1,958 23%
(1.30) $21.78 17.63% 1.02% 6.17% 0.05% $ 2,176 20%
(1.29) $20.95 2.32% 0.99% 6.12% -- $ 1,851 16%
(0.63) $10.27 8.97% 0.83%(e) 10.35%(e) 0.44%(e) $ 4,742 50%
(1.53) $ 9.94 11.94% 1.03% 13.95% 0.29% $ 8,533 154%
(0.92) $ 6.70 (24.72%) 1.13% 10.91% 0.37% $ 4,259 91%
(0.59) $ 8.12 31.13% 0.76% 7.40% 0.73% $ 2,008 194%
(0.53) $ 8.08 6.25% 0.92% 6.57% 0.53% $ 1,666 90%
- -----------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
Combined Notes to Financial Statements
DECEMBER 31, 1996
(1) ORGANIZATION
The Monitor Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The Trust consists of seven diversified and two non-diversified portfolios
(individually referred to as the "Fund", or collectively as the "Funds"). The
following Funds comprise the Trust:
The Monitor Money Market Fund ("Money Market") The Monitor Ohio Municipal
Money Market Fund ("Ohio Municipal Money Market")* The Monitor U.S.
Treasury Money Market Fund ("U.S. Treasury Money Market") The Monitor
Growth Fund ("Growth") The Monitor Income Equity Fund ("Income Equity") The
Monitor Ohio Tax-Free Fund ("Ohio Tax-Free")* The Monitor Fixed Income
Securities Fund ("Fixed Income") The Monitor Mortgage Securities Fund
("Mortgage Securities") The Monitor Short/Intermediate Fixed Income
Securities Fund ("Short/Intermediate Fixed Income") *non-diversified
portfolio
Money Market, Ohio Municipal Money Market, U.S. Treasury Money Market, Growth,
Ohio Tax-Free, Fixed Income, and Mortgage Securities each offer two classes of
shares ("Trust Shares" and "Investment Shares"). Investment Shares are
identical in all respects to Trust Shares, except that Investment Shares are
sold pursuant to distribution plans (the "Plans") adopted in accordance with
Rule 12b-1 under the Act. The objectives of the Funds can be found in the
current prospectus.
The assets of each Fund are segregated, and a shareholder's interest is limited
to the Fund and to the class in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the Financial Statements.
The actual results could differ from those estimates.
A. INVESTMENT VALUATIONS
Securities of the money market funds (Money Market, Ohio Municipal Money Market
and U.S. Treasury Money Market) are valued using amortized cost, which
approximates market value. The Trust's use of the amortized cost method to
value the money market funds' portfolio securities is conditioned on their
compliance with Rule 2a-7 under the Act.
Equity securities held by the Growth and Income Equity which are listed on the
New York Stock Exchange or other national securities exchanges are valued at
the last sale price or, if there has been no sale on that day, at the mean
between bid and asked prices. Unlisted equity securities are valued at the
latest bid prices. Bonds and other fixed income securities held by all the
Funds (other than the Mortgage Securities) which may trade on a national
securities exchange and/or over the counter are valued at the last sale price
on that day, if available; otherwise, they are valued by an independent pricing
service that takes into consideration yield, stability, risk, credit quality,
coupon, maturity, type of issue, trading characteristics, special circumstances
of security or trading market, and any other factors or market data the
independent pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities, and does not rely
exclusively on quoted prices.
U.S. Government obligations held by the Mortgage Securities are valued at the
mean between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Portfolio securities for which market quotations
are not readily available are valued on the basis of quotations provided by
dealers in such securities.
Short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Investments in other open-end investment companies are valued at
net asset value.
B. REPURCHASE AGREEMENTS
It is the policy of the Funds to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, it's the policy of the
Trust to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of these agreements.
Accordingly, the Funds could receive less than the repurchase price on the sale
of collateral securities.
35
<PAGE>
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). For stripped mortgage backed securities,
Mortgage Securities uses the constant yield method for income recognition
purposes.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to the tax nature of
distributions. As of December 31, 1996, $87,528 and $24,087 of undistributed
net investment income and accumulated net realized gain (loss) on investments,
respectively, have been reclassified from paid-in-capital in the Mortgage
Securities Fund. In addition, $220,472 has been reclassified from accumulated
net realized gain (loss) on investments to undistributed net investment income.
Net investment income, net realized loss, and net assets were not affected by
this change.
D. FEDERAL TAXES
It is the Funds' policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of their income. Accordingly, no provisions for federal tax
are necessary.
At December 31, 1996, Ohio Tax-Free, Income Equity, Fixed Income, Mortgage
Securities, and Short/Intermediate Fixed Income, for federal tax purposes, had
capital loss carryforwards, which will reduce each Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve each Fund of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforwards will expire as listed below:
<TABLE>
<CAPTION>
1994 1995 1996
CARRYFORWARDS CARRYFORWARDS CARRYFORWARDS
TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN
2002 2003 2004
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio Tax-Free $ -- $ 5,772 $ --
Fixed Income 805,002 420,034 --
Mortgage Securities 10,747,726 10,945,577 2,321,082
Short/Intermediate Fixed Income 120,517 256,995 --
- --------------------------------------------------------------------------
</TABLE>
E. DOLLAR ROLL TRANSACTIONS
Mortgage Securities may enter into mortgage "dollar rolls" in which it sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The Fund would benefit
to the extent of any difference between the price received for the securities
sold and the lower forward price for the future purchase plus any fee income
received. These amounts are included in interest income. The Fund maintains a
segregated account, the dollar value of which meets or exceeds its obligations
with respect to dollar rolls.
F. OTHER
Investment transactions are accounted for on the trade date.
G. STATEMENT OF CASH FLOWS
A Statement of Cash Flows is presented for Mortgage Securities due to its
participation in dollar roll transactions, which are considered to be financing
transactions. This statement presents information on financial transactions
which have been settled through the receipt or disbursement of cash. The cash
amount shown in the Statement of Cash Flows is the amount reported as cash in
the Fund's Statement of Assets and Liabilities and represents cash on hand in
its custodian bank account and does not include any short-term investments at
December 31, 1996.
(3) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--The Huntington Trust Company, N.A., the Funds'
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee for each of the Funds at the following annual rates:
Money Market and Ohio Municipal Money Market: 0.30% of the first $500 million
of average daily net assets of each Fund, 0.25% of the next $500 million, and
0.20% of any amount over $1 billion; U.S. Treasury Money Market: 0.20% of the
Fund's average daily net assets; Growth and Income Equity: 0.60% of each Fund's
average daily net assets; and Ohio Tax-Free, Fixed Income, Mortgage Securities
and Short/Intermediate Fixed Income: 0.50% of each Fund's average daily net
assets. The Adviser may voluntarily choose to waive a portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
SUB-ADVISORY FEE--The Adviser has entered into a sub-advisory agreement with
Piper Capital Management, Inc. (the "Sub-adviser"), pursuant to which the Sub-
adviser assists the Adviser in the purchase, sale and exchange of the portfolio
investments for the Mortgage Securities. The Sub-adviser receives from the
Adviser an annual fee equal to 0.15% of the Fund's average daily net assets.
ADMINISTRATION FEE--Commencing January 11, 1996, SEI Financial Management
Corporation ("SFM") serves as administrator to each Fund under an
Administration Agreement. SFM is entitled to receive an annual fee of .11% of
each Fund's average net assets, paid monthly, for services performed under the
Administration Agreement. SFM has entered into an agreement with The Huntington
Trust Company ("Huntington") pursuant to which Huntington provides certain
administrative services to the Funds. Effective January 11, 1996, SEI Financial
Services Company ("SFS") acts as the Fund's Distributor pursuant to a
distribution agreement.
36
<PAGE>
DISTRIBUTION PLAN--Each Fund offering Investment Shares has adopted a
distribution plan (the "Plan") pursuant to Rule 12b-1 under the Act. Growth,
Ohio Tax-Free, Fixed Income, Money Market, and Ohio Municipal Money Market
reimbursed SFS, the Funds' principal distributor, from the net assets of the
respective Fund for fees SFS paid which relate to distribution and
administrative services with regard to the respective Fund's Investment Shares,
if any. Mortgage Securities and U.S. Treasury Money Market, have adopted a
separate Plan, which provides that Mortgage Securities and U.S. Treasury Money
Market pay SFS to finance any activity which is principally intended to result
in the sale of their Investment Shares subject to their Plan. The Plans provide
that all of the Funds may incur distribution expenses of up to 0.25% (except
for Mortgage Securities, which may incur up to 0.50%) of average daily net
assets of each Fund's Investment Shares, on an annual basis, to reimburse or
compensate, as the case may be, SFS. Money Market, Ohio Municipal Money Market,
and U.S. Treasury Money Market incurred fees of 0.10%.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES-- Commencing January 11, 1996, SFM serves as transfer and
dividend disbursing agent for the Funds for which it received a fee. The fee
was based on the size, type and number of accounts and transactions made by
shareholders.
Huntington provides certain accounting and recordkeeping services with respect
to the Funds' portfolios of investments, with the exception of Mortgage
Securities, for which American Data Services, Inc. ("ADS") provided these
services. Huntington receives an annual fee based on the level of each Fund's
average daily net assets, with the exception of the Mortgage Securities Fund.
Huntington is the custodian of the Funds' investments and other assets for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets.
For the fiscal year ended December 31, 1996, certain Officers of the Trust were
Officers of SFM and SFS. Such Officers receive no compensation from the Trust.
(4) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
---------------------
INCOME OHIO
GROWTH EQUITY TAX-FREE
- -----------------------------------------------
<S> <C> <C> <C>
Purchases $44,547,668 $31,448,859 $8,133,215
Sales $33,547,822 $26,830,145 $3,643,972
- -----------------------------------------------
<CAPTION>
SHORT/
INTERMEDIATE
FIXED MORTGAGE FIXED
INCOME SECURITIES INCOME
- -----------------------------------------------
<S> <C> <C> <C>
Purchases $24,828,179 -- $4,422,875
Sales $ 6,933,540 -- $10,497,870
- -----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS
---------------------------
INCOME OHIO
GROWTH EQUITY TAX-FREE
- -----------------------------------------------
<S> <C> <C> <C>
Purchases -- $14,545,625 --
Sales -- $10,118,750 --
- -----------------------------------------------
<CAPTION>
SHORT/
INTERMEDIATE
FIXED MORTGAGE FIXED
INCOME SECURITIES INCOME
- -----------------------------------------------
<S> <C> <C> <C>
Purchases $ 2,471,934 $46,265,930 $43,437,930
Sales $13,973,388 $67,431,369 $43,244,414
- -----------------------------------------------
</TABLE>
(5) INVESTMENT CONCENTRATION
Ohio Tax-Free and Ohio Municipal Money Market invest a substantial portion of
their assets in obligations and notes issued by the State of Ohio, political
subdivisions thereof, and agencies, instrumentalities, authorities of districts
of both the State and its political subdivisions. It is the Fund's policy that
such issues must have been rated A or better by Moody's Investors Service, Inc.
or by Standard & Poor's Ratings Group, for Ohio Tax-Free, or A-2, P-2 for Ohio
Municipal Money Market or, if not rated, of equivalent quality as determined by
the Funds' investment adviser.
If there should be a default or other financial crisis relating to the State of
Ohio, an Ohio municipality or an agency or instrumentally of the State or the
municipality, the market value and marketability of the Ohio municipal bonds in
Ohio Municipal Money Market and Ohio Tax-Free's portfolios and the interest
income to the two Funds could be adversely affected.
37
<PAGE>
Explanation of the Indices in the Management Discussion & Analysis
Ohio Tax-Free Fund
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSGO and the LB5GO have been adjusted to reflect
reinvestment of dividends on securities in the index.
**Represents a hypothetical investment of $10,000 in the Fund after deducting
the current sales load of 2.00% effective 2/1/93 ($10,000 investment minus
$200 sales load = $9,800). The Fund's performance assumes the reinvestment of
all dividends and distributions. The LBSGO and the LB5GO have been adjusted
to reflect reinvestment of dividends on securities in the index.
+The LBSGO and the LB5GO are not adjusted to reflect sales loads, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. These indices are unmanaged.
++The LSMD and LIMD each represent the average of the total returns reported
by all of the mutual funds that Lipper Analytical Services, Inc. has
determined belong in the respective categories, and are not adjusted to
reflect any sales loads. However, these total returns are reported net of
expenses or other fees that the Securities and Exchange Commission requires
to be reflected in a fund's performance.
Fixed Income Securities Fund
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBGCB has been adjusted to reflect reinvestment of
dividends on securities in the index.
**Represents a hypothetical investment of $10,000 in the Fund after deducting
the current sales load of 2.00% effective 2/1/93 ($10,000 investment minus
$200 sales load = $9,800). The Fund's performance assumes the reinvestment of
all dividends and distributions. The LBGCB has been adjusted to reflect
reinvestment of dividends on securities in the index.
+The LBGCB is not adjusted to reflect sales loads, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
++The LIIGDF represents the average of the total returns reported by all of
the mutual funds that Lipper Analytical Services, Inc. has determined belong
in that category, and is not adjusted to reflect any sales loads. However,
these total returns are reported net of expenses or other fees that the
Securities and Exchange Commission requires to be reflected in a fund's
performance.
Mortgage Securities Fund
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The ML3-5YUST has been adjusted to reflect reinvestment of
dividends on securities in the index.
**Represents a hypothetical investment of $10,000 in the Fund after deducting
the current sales load of 2.00% ($10,000 investment minus $200 sales load =
$9,800). The Fund's performance assumes the reinvestment of all dividends and
distributions. The ML3-5YUST has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The ML3-5YUST and LMI are not adjusted to reflect sales loads, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
++The LUSMF represents the average of the total returns reported by all of
the mutual funds that Lipper Analytical Services, Inc. has determined belong
in that category, and is not adjusted to reflect any sales loads. However,
these total returns are reported net of expenses or other fees that the
Securities and Exchange Commission requires to be reflected in a fund's
performance.
Short/Intermediate Fixed Income Securities Fund
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LIGC and the ML1-5YCT have been adjusted to reflect
reinvestment of dividends on securities in the indices.
+The LIGC, ML1-5YCT and MLI-5YGC are not adjusted to reflect sales loads,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. These indices are unmanaged.
++The LSTIGDF represents the average of the total returns reported by all the
mutual funds that Lipper Analytical Services, Inc. has determined belong in
that category, and is not adjusted to reflect any sales loads. However, the
total returns are reported net of expenses or other fees that the Securities
and Exchange Commission requires to be reflected in a fund's performance.
38
<PAGE>
Report of Independent Accountants
To the Shareholders and Trustees of The Monitor Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations, of cash flows (for The Monitor Mortgage Securities Fund) and of
changes in net assets and the financial highlights, present fairly, in all
material respects, the financial position of The Monitor Money Market Fund, The
Monitor Ohio Municipal Money Market Fund, The Monitor U.S. Treasury Money
Market Fund, The Monitor Growth Fund, The Monitor Income Equity Fund, The
Monitor Ohio Tax-Free Fund, The Monitor Fixed Income Securities Fund, The
Monitor Mortgage Securities Fund and The Monitor Short/Intermediate Fixed
Income Securities Fund (constituting The Monitor Funds, hereafter referred to
as the "Trust") at December 31, 1996, and the results of each of their
operations, the cash flows of The Monitor Mortgage Securities Fund, the changes
in each of their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1996 by correspondence with the custodian and, with
respect to unsettled security transactions, the application of alternative
auditing procedures, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP Columbus, OH February 14, 1997
39
<PAGE>
[This Page Intentionally Left Blank]
40
<PAGE>
[This Page Intentionally Left Blank]
41
<PAGE>
Trustees
Officers
David S. Schoedinger
John M. Shary
Richard Sisson, Ph.D
William R. Wise
David G. Lee
President and Chief Executive Officer
Robert DellaCroce
Controller, Treasurer and Chief Financial Officer
Kathryn L. Stanton
Vice President and Secretary
Marc H. Cahn
Vice President and Assistant Secretary
Todd Cipperman
Vice President and Assistant Secretary
Joseph M. Lydon
Vice President and Assistant Secretary
Barbara A. Nugent
Vice President and Assistant Secretary
Kevin P. Robins
Vice President and Assistant Secretary
Bradley J. Schram
Assistant Secretary
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. ALTHOUGH MONEY MARKET FUNDS SEEK TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE
THAT THEY WILL BE ABLE TO DO SO.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus, which contains facts
concerning the Funds' objectives and policies, management fees, expenses and
other information.
42
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE MONITOR FUNDS
41 South High Street
Columbus, Ohio 43287
FMB FUNDS, INC.
One Freedom Valley Road
Oaks, Pennsylvania 19456
in connection with the
JOINT SPECIAL MEETINGS OF SHAREHOLDERS
of each Series of
FMB FUNDS, INC.
To be held on March 17, 1998
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated
February 20, 1998 for the Joint Special Meetings (the "Meeting") of
Shareholders of the FMB Diversified Equity Fund, the FMB Intermediate
Government Income Fund, the FMB Michigan Tax-Free Bond Fund and the FMB Money
Market Fund (collectively, the "FMB Portfolios"), each a series of FMB Funds,
Inc. ("FMB Funds"), a Maryland corporation, to be held on March 17, 1998.
Copies of the Combined Proxy Statement Prospectus may be obtained at no charge
by calling FMB Funds at 1-800-453-4324.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement/Prospectus.
Further information about Investment Shares and Trust Shares of The Monitor
Funds is contained in and incorporated by reference to the Combined Statement
of Additional Information of The Monitor Funds, dated April 30, 1997 (as
supplemented on November 20, 1997 and February 6, 1998), a copy of which is
included herewith. The audited financial statements and related independent
auditor's report for The Monitor Funds contained in the Annual Report to
Shareholders of Monitor Funds for the fiscal year ended December 31, 1996, and
the unaudited financial statements for The Monitor Funds contained in the
Semi-Annual Report to Shareholders of Monitor Funds for the six month period
ended June 30, 1997 are incorporated herein by reference. No other parts of
such Annual or Semi-Annual Reports are incorporated by reference herein.
Further information about shares of the FMB Funds is contained in and
incorporated by reference to Statement of Additional Information of FMB Funds
dated March 27, 1997, a copy of which is included herewith. The audited
financial statements and related independent auditor's report for FMB Funds
for the fiscal year ended November 30, 1997, are included herein.
The date of this Statement of Additional Information is February 20, 1998.
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information....................................................... B-3
Financial Statements of FMB Funds, Inc.:
Report of Independent Accountants....................................... B-4
Statements of Net Assets as of November 30, 1997........................ B-5
Statements of Operations for the year ended November 30, 1997........... B-14
Statements of Changes in Net Assets for the year ended November 30,
1997................................................................... B-15
Financial Highlights.................................................... B-16
Notes to Financial Statements........................................... B-20
Pro Forma Financial Statements (Unaudited):
FMB Money Market and Monitor Money Market Funds
Pro Forma Combined Statement of Assets and Liabilities as of June 30,
1997................................................................... B-23
Pro Forma Combined Statement of Operations for the 12 months ended June
30, 1997............................................................... B-24
Pro Forma Combined Schedule of Investments as of June 30, 1997.......... B-25
Notes to Pro Forma Combined Financial Statements........................ B-29
FMB Diversified Equity and Monitor Growth Funds
Pro Forma Combined Statement of Assets and Liabilities as of June 30,
1997................................................................... B-30
Pro Forma Combined Statement of Operations for the 12 months ended June
30, 1997............................................................... B-31
Pro Forma Combined Schedule of Investments.............................. B-32
Notes to Pro Forma Combined Financial Statements........................ B-36
</TABLE>
B-2
<PAGE>
GENERAL INFORMATION
The shareholders of the FMB Diversified Equity Fund, the FMB Intermediate
Government Income Fund, the FMB Michigan Tax-Free Bond Fund and the FMB Money
Market Fund (collectively, the "FMB Portfolios") of FMB Funds, Inc. ("FMB
Funds") are being asked to approve or disapprove an Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated as of February 1, 1998
between FMB Funds and The Monitor Funds ("Monitor"), and the transactions
contemplated thereby. The Reorganization Agreement contemplates the transfer
of substantially all of the assets and liabilities of the FMB Portfolios to
corresponding portfolios of Monitor (collectively, the "Monitor Portfolios")
in exchange for full and fractional shares representing interests in such
corresponding Monitor Portfolios. Each class of shares to be issued by Monitor
will have an aggregate net asset value equal to the aggregate net asset value
of the corresponding class of shares of the corresponding FMB Portfolio that
are outstanding immediately before the effective time of the Reorganization
with respect to such FMB Portfolio.
Following the exchange, the FMB Portfolios will make a liquidating
distribution of the corresponding Monitor Portfolio's shares to their
shareholders. Each shareholder owning shares of a particular FMB Portfolio at
the effective time of the Reorganization with respect to that Portfolio will
receive shares of the corresponding Monitor Portfolio of equal value, plus the
right to receive any unpaid dividends and distributions that were declared
before the effective time of the Reorganization on FMB Portfolio shares. Upon
completion of the Reorganization, FMB Funds will be terminated under state law
and deregistered as an investment company under the Investment Company Act of
1940, as amended.
The joint special meeting of shareholders of the FMB Portfolios to consider
the Reorganization Agreement and the related transactions will be held on
March 17, 1998 at 10:00 a.m., Eastern Time, at the offices of SEI Fund
Resources, One Freedom Valley Road, Oaks, Pennsylvania 19456. For further
information about the transaction, see the Combined Proxy
Statement/Prospectus.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Monitor Portfolios, but do not prohibit such a bank holding
company or its affiliates or banks generally from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of
customers. Huntington National Bank and financial intermediaries which agree
to provide shareholder support services that are banks or bank affiliates are
subject to such banking laws and regulations. Should legislative, judicial, or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Monitor Portfolios, Monitor Funds might
be required to alter materially or discontinue its arrangement with such
companies and change its method of operation. It is anticipated, however, that
any resulting change in Monitor Funds' method of operation would not affect
Monitor Portfolio's net asset value per share or result in financial loss to
any shareholder.
INTRODUCTION TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma combined financial statement
(consisting of Pro Forma Combined Statements of Assets and Liabilities, Pro
Forma Combined Statements of Operations and Pro Forma Combined Schedules of
Investments) reflect the accounts of the FMB Money Market Fund and the Monitor
Money Market Fund and also the accounts of the FMB Diversified Equity Fund and
the Monitor Growth Fund. These pro forma statements have been derived from the
underlying accounting records for these fund used in calculating net asset
values for the twelve-month period ended June 30, 1997. The pro forma combined
statements of operations have been prepared based on the fee and expense
structure of the Monitor Money Market Fund and the Monitor Growth Fund.
Pro forma combined financial statements are not presented for the FMB
Intermediate Government Income Fund and the Monitor Intermediate Government
Income Fund or for the FMB Michigan Tax-Free Bond Fund and the Monitor
Michigan Tax-Free Fund because neither of these new Monitor funds has had, and
neither will have, any operations or assets (other than a nominal amount of
assets in connection with the organization of each such Monitor fund) prior to
the completion of the proposed reorganizations with their respective FMB Fund
counterparts.
B-3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of FMB 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
highlights present fairly, in all material respects, the financial position of
FMB Money Market Fund, FMB Intermediate Government Income Fund, FMB Michigan
Tax Free Bond Fund and FMB Diversified Equity Fund, separately managed
portfolios of FMB Funds, Inc. (the "Company"), at November 30, 1997, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management, our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at November 30, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
30 South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 13, 1998
B-4
<PAGE>
FMB MONEY MARKET FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
LOGO
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
(000) (000)
- --------------------------------------------
Commercial Paper--90.6%
<S> <C> <C>
BANKS--4.8%
Norwest
5.590%, 01/05/98 $ 7,500 $ 7,459
--------
FINANCIAL SERVICES--38.1%
American Express
5.510%, 01/26/98 7,500 7,436
American General Finance
5.540%, 01/07/98 7,000 6,960
Ciesco
5.470%, 12/10/97 7,700 7,689
Cit Group Holdings
5.680%, 02/13/98 7,500 7,412
Commercial Credit
5.490%, 12/04/97 7,600 7,597
Household Finance
5.680%, 01/23/98 7,600 7,536
Merrill Lynch
5.740%, 01/30/98 7,700 7,626
Prudential Funding
5.630%, 01/14/98 7,700 7,647
--------
59,903
--------
INDUSTRIAL--47.7%
AT&T
5.530%, 01/02/98 7,500 7,463
Bell South
5.610%, 12/05/97 7,500 7,495
Cargill
5.570%, 01/07/98 7,400 7,358
Coca Cola
5.480%, 01/20/98 7,500 7,443
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
(000) (000)
- -------------------------------------------
<S> <C> <C>
E.I. du Pont de Nemours
5.480%, 01/21/98 $ 7,500 $ 7,442
Ford Motor Credit
5.530%, 01/12/98 7,600 7,551
General Electric Capital
5.500%, 02/04/98 7,700 7,624
John Deere Capital
5.610%, 01/09/98 7,700 7,653
Lucent Technologies
5.550%, 02/09/98 7,600 7,518
Proctor & Gamble
5.480%, 01/16/98 7,500 7,448
--------
74,995
--------
Total Commercial Paper
(Cost $142,357) 142,357
--------
</TABLE>
U.S. Government Agency Obligation--3.8%
<TABLE>
<S> <C> <C>
FNMA MTN
5.710%, 03/18/98 $6,000 $5,998
------
Total U.S. Government Agency Obligation
(Cost $5,998) 5,998
------
</TABLE>
Repurchase Agreement--6.0%
<TABLE>
<S> <C> <C>
Donaldson, Lufkin, Jenrette
5.70%, dated 11/28/97, matures 12/01/97, repurchase price
$9,401,463 (collateralized by U.S. Treasury Note, par value
$9,360,000, 6.25%, matures 07/31/98, market value
$9,584,398) 9,397 9,397
-------
Total Repurchase Agreement
(Cost $9,397) 9,397
-------
Total Investments -- 100.4%
(Cost $157,752) 157,752
-------
</TABLE>
Other Assets and Liabilities--(0.4%)
<TABLE>
<S> <C> <C>
Total Other Assets and Liabilities, Net (555)
----
</TABLE>
B-5
<PAGE>
FMB MONEY MARKET FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(000)
--------
Net Assets:
<S> <C>
Portfolio Shares of Institutional Class ($0.001 par value -- 10
billion authorized for the company) based on 143,435,837 outstanding
shares $143,436
Portfolio Shares of Consumer Service Class ($0.001 par value-- 10
billion authorized for the company) based on 13,757,492 outstanding
shares 13,757
Undistributed Net Investment Income 91
Accumulated Net Realized Loss on Investments (87)
--------
Total Net Assets -- 100.0% $157,197
========
Net Asset Value, Offering and Redemption Price Per Share --
Institutional Class $ 1.00
========
Net Asset Value, Offering and Redemption Price Per Share -- Consumer
Service Class $ 1.00
========
</TABLE>
FNMA -- Federal National Mortgage Association
MTN -- Medium Term Note
B-6
<PAGE>
FMB INTERMEDIATE GOVERNMENT INCOME FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
LOGO
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- ------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Obligations--15.0%
<S> <C> <C>
FHLMC
9.000%, 12/01/01 $ 102 $ 106
7.000%, 11/15/05 348 350
8.000%, 01/01/13 1,155 1,194
7.500%, 11/15/17 1,000 1,014
7.150%, 07/15/18 1,794 1,805
6.250%, 01/15/19 4,060 3,997
FHLMC REMIC
8.250%, 11/15/20 118 118
FNMA
8.000%, 07/01/98 119 123
8.500%, 10/01/98 26 27
8.500%, 11/01/98 57 59
7.338%, 01/15/99 1,000 1,004
7.500%, 07/25/02 1,134 1,154
7.500%, 12/25/05 1,041 1,050
7.500%, 05/01/07 1,554 1,591
5.500%, 08/25/16 1,000 984
6.950%, 05/25/17 16 16
6.350%, 07/25/18 1,000 997
6.750%, 09/25/18 267 266
7.000%, 10/25/18 1,150 1,149
FNMA REMIC
6.750%, 06/25/18 750 748
--------
Total U.S. Agency Mortgage-Backed Obligations (Cost $17,762) 17,752
--------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- -----------------------------------------
U.S. Government Agency Obligations--39.3%
<S> <C> <C>
FHLB
6.460%, 02/01/00 $1,000 $ 1,000
6.125%, 09/20/00 2,000 2,009
6.020%, 09/06/01 2,000 1,988
6.480%, 01/08/02 1,000 1,002
6.330%, 12/03/02 3,000 2,994
FHLMC
6.600%, 11/12/99 1,000 1,012
6.550%, 01/04/00 1,000 1,014
7.140%, 07/31/02 1,500 1,509
6.800%, 09/18/02 1,000 1,000
6.120%, 01/21/03 2,500 2,487
6.550%, 04/02/03 1,000 1,000
8.335%, 03/14/05 2,000 2,014
6.830%, 06/15/05 2,000 2,016
7.000%, 07/06/05 2,000 2,030
6.540%, 11/06/07 3,000 2,995
FNMA
6.330%, 11/03/00 3,000 3,001
7.000%, 05/10/01 2,000 2,030
6.630%, 06/05/01 1,000 1,010
7.550%, 04/22/02 2,000 2,116
6.720%, 02/25/03 2,400 2,400
7.090%, 10/13/05 2,000 2,001
FNMA MTN
5.790%, 01/22/01 2,000 1,976
6.500%, 12/27/01 1,000 1,004
6.330%, 10/02/02 1,000 999
6.880%, 11/20/06 4,000 4,045
--------
Total U.S. Government
Agency Obligations (Cost
$46,436) 46,652
--------
U.S. Treasury Obligations--43.5%
U.S. Treasury Notes
7.875%, 01/15/98 3,000 3,009
9.000%, 05/15/98 5,000 5,078
8.250%, 07/15/98 4,000 4,063
6.375%, 01/15/99 2,000 2,014
6.875%, 08/31/99 2,000 2,036
7.875%, 11/15/99 1,000 1,039
6.250%, 05/31/00 2,000 2,021
8.000%, 05/15/01 2,000 2,134
7.875%, 08/15/01 2,000 2,133
6.250%, 10/31/01 1,000 1,014
7.500%, 11/15/01 1,000 1,057
6.250%, 02/28/02 1,000 1,015
5.750%, 08/15/03 2,000 1,991
5.875%, 02/15/04 3,000 3,007
</TABLE>
B-7
<PAGE>
FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONCLUDED)
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
7.250%, 05/15/04 $2,000 $ 2,148
7.875%, 11/15/04 2,000 2,226
7.500%, 02/15/05 2,000 2,187
6.500%, 05/15/05 2,000 2,073
5.875%, 11/15/05 2,000 1,997
5.625%, 02/15/06 2,000 1,964
6.875%, 05/15/06 2,000 2,128
6.500%, 10/15/06 1,000 1,040
6.250%, 02/15/07 2,000 2,049
6.625%, 05/15/07 2,000 2,105
Total U.S. Treasury Obligations
(Cost $50,088) 51,528
--------
Repurchase Agreement--4.0%
Donaldson, Lufkin, Jenrette 5.70%, dated 11/28/97, matures
12/01/97, repurchase price $4,805,281 (collateralized by
U.S. Treasury Note, par value $4,802,000, 7.125%, matures
10/15/98, market value $4,902,632) 4,803 4,803
--------
Total Repurchase Agreement
(Cost $4,803) 4,803
--------
Total Investments--101.8%
(Cost $119,089) 120,735
--------
Other Assets and Liabilities--(1.8%)
Total Other Assets and Liabilities, Net (2,153)
--------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
---------
<S> <C>
Net Assets:
Portfolio Shares of Institutional Class ($0.001 par value--10
billion authorized for the company) based on 11,320,871 outstanding
shares $114,950
Portfolio Shares of Consumer Service Class ($0.001 par value--10
billion authorized for the company) based on 346,179 outstanding
shares 3,698
Overdistributed Net Investment Income (4)
Accumulated Net Realized Loss on Investments (1,708)
Net Unrealized Appreciation on Investments 1,646
--------
Total Net Assets--100.0% $118,582
========
Net Asset Value, Offering and Redemption Price Per Share--
Institutional Class $ 10.16
========
Net Asset Value, Offering and Redemption Price Per Share--Consumer
Service Class $ 10.16
========
Maximum Offering Price Per Share--Consumer Service Class
($10.16/95.25%) $ 10.67
========
</TABLE>
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
MTN--Medium Term Note
REMIC--Real Estate Mortgage Investment Conduit
B-8
<PAGE>
FMB MICHIGAN TAX-FREE BOND FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
LOGO
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- ------------------------------------------------------------------------------
Municipal Bonds--97.9%
<S> <C> <C>
MICHIGAN--97.9%
Ann Arbor, Sewer Disposal Project, Series 12, RB
6.950%, 07/01/03 $ 335 $ 371
Ann Arbor, Water Supply System, Series T, MBIA, RB
7.375%, 02/01/03 710 809
Bay County, West Side Regional, Sewer Disposal System, GO
6.400%, 05/01/01 150 154
Cadillac, Public Schools, FGIC, GO 5.375%, 05/01/10 500 515
Chelsea, School District Authority, FGIC, GO
5.500%, 05/01/08 500 527
Clio, School District Authority, RB
7.200%, 05/01/01 200 207
Dearborn, Economic Development Authority, Oakwood Group
Project, Series A, MBIA, RB, Pre-refunded at 102 (A)
6.550%, 08/15/01 250 274
Dearborn, School District Authority, GO
5.250%, 05/01/06 500 522
Detroit, School District Authority, AMBAC, GO, Pre-refunded at
102 (A)
7.100%, 05/01/01 250 277
Detroit, Sewer Disposal Project, MBIA, RB, Pre-refunded at
101.5 (A)
7.125%, 07/01/99 500 531
Detroit, Sewer Disposal, MBIA, RB
5.000%, 07/01/11 500 502
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Fowlerville County, School District Authority, MBIA, GO
5.350%, 05/01/10 $ 500 $ 511
Gaylord, Community School Project, GO, Pre-refunded at 102 (A)
6.600%, 05/01/02 500 553
Grand Rapids, Downtown Development Authority, MBIA, TA
6.600%, 06/01/08 545 613
Grand Rapids, Sanitation and Sewer Authority, Improvement
Project, RB
6.875%, 01/01/10 500 534
Grand Rapids, Water Supply Authority, FGIC, RB
6.625%, 01/01/08 500 541
Grandville, Public School District Authority, FGIC, GO
6.000%, 05/01/05 310 338
Grosse Ile Township, School District Authority, FGIC, GO
5.600%, 05/01/10 500 524
Harrison, Community School Project, AMBAC, GO
5.800%, 05/01/05 500 537
Holland, Electric Authority, RB, Pre-refunded at 100 (A)
6.500%, 07/01/99 400 415
Holland, Water Supply System, Series A, RB
5.250%, 07/01/12 655 664
Huron Valley, School District Authority, FGIC, GO
5.450%, 05/01/08 500 527
Jenison, Michigan Public School Authority, FGIC, GO
5.400%, 05/01/08 500 532
Kalamazoo, Hospital Finance Authority, Borgess Medical Center
Project, Series A, FGIC, RB
6.250%, 07/01/04 500 516
Kenowa Hills, Public Schools, MBIA, GO
5.500%, 05/01/08 500 527
Kent County, Building Authority, GO
6.000%, 12/01/09 500 519
Kent County, Hospital Finance Authority, Pine Rest Christian
Hospital Project,
FGIC, RB
6.500%, 11/01/10 500 544
Kent, Hospital Finance Authority, Blodgett Memorial Hospital
Project, MBIA, RB
5.750%, 07/01/09 500 507
</TABLE>
B-9
<PAGE>
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Kent, Hospital Finance Authority, Blodgett Memorial Medical
Center Project,
Series A, RB
6.875%, 07/01/99 $ 90 $ 94
Kent, Hospital Finance Authority, Mary Free Hospital Project,
Series A, RB
6.500%, 04/01/05 200 211
Lake Shore, Public Schools,
Macomb County, GO
5.400%, 05/01/12 500 512
Lansing, Building Authority, GO,
Escrowed to Maturity
7.150%, 06/01/03 525 572
Lenawee County, Building Authority, Human Services Project,
AMBAC, GO
6.000%, 05/01/09 350 378
Lincoln Park, School District Authority,
FGIC, GO
5.500%, 05/01/06 500 532
Macomb County,
Waste Water Disposal Project, GO
6.500%, 11/01/99 200 206
Mattawan, School District Authority, GO
6.400%, 05/01/09 500 542
Michigan State Building Authority,
AMBAC, RB
6.750%, 10/01/07 500 552
Michigan State Environmental Protection Program, GO, Pre-
refunded at 102 (A)
6.250%, 11/01/02 1,000 1,099
Michigan State Higher Education Authority, Hope College
Project, Series B, RB
5.900%, 04/01/09 350 363
Michigan State Higher Education Authority, Student Loan, Series
13, AMBAC, RB
5.700%, 04/01/02 500 523
Michigan State, Hospital Finance Authority, Holland Community
Hospital Project, RB
5.250%, 01/01/08 750 756
Michigan State Hospital Finance Authority, Central Michigan
Community Hospital,
Series A, RB
5.750%, 10/01/02 300 312
Michigan State Hospital Finance Authority, Daughters Charity
Project, RB
5.500%, 11/01/05 500 531
Michigan State Hospital Finance Authority, Detroit Medical
Center Project, Series A, RB
6.375%, 08/15/09 500 534
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Michigan State Hospital Finance Authority, Mercy Health
Services, Series Q,
AMBAC, RB
5.100%, 08/15/07 $ 500 $ 516
Michigan State Hospital Finance Authority, Otsego Memorial
Hospital Project, RB (B)
6.000%, 01/01/09 660 691
Michigan State Hospital Finance Authority, Saint John Hospital
Project, Series A, AMBAC, RB
5.750%, 05/15/04 200 214
Michigan State Hospital Finance Authority, Sparrow Obligated
Group Project, MBIA, RB
6.300%, 11/15/03 615 668
Michigan State Housing Development Authority, Walled Lake Villa
Project, FSA, RB
5.850%, 04/15/07 420 455
Michigan State Public Power Agency, Campbell Project, AMBAC,
RB,
Pre-refunded at 100 (A)
6.400%, 01/01/99 235 241
Michigan State Strategic Fund, Lutheran Social Services
Project, RB (B)
5.200%, 09/01/04 400 414
Northern Michigan University, AMBAC, RB
5.500%, 12/01/09 435 453
Oakland County, Economic Development Authority, Cranbrook
Elderly Community Project, RB
6.375%, 11/01/14 500 554
Oakland County, GO
6.250%, 11/01/06 500 521
Ottawa County, Holland Township Extension, GO
6.800%, 08/01/05 500 536
Paw Paw, Public School District, FGIC, GO
6.500%, 05/01/09 500 582
Rochester Hills, Series B, GO, Pre-refunded at 102 (A)
6.600%, 11/01/98 465 485
Rochester Hills, Transportation Fund, GO
6.250%, 08/01/05 200 206
Rochester, School District Authority, GO, Pre-refunded at 100
(A)
6.500%, 05/01/02 150 163
Rockford, Public School Authority, GO
5.600%, 05/01/05 500 531
Saginaw, Water Authority, RB
6.000%, 07/01/07 865 900
</TABLE>
B-10
<PAGE>
FMB MICHIGAN TAX-FREE BOND FUND (CONCLUDED)
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
PAR VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Saint Joseph, Mercy Memorial Medical Center, AMBAC, RB
5.125%, 01/01/09 $ 500 $ 509
Saranac, School District Authority, GO
5.700%, 05/01/07 230 246
Troy, Downtown Development Authority, Series A, TA, RB
6.100%, 11/01/10 400 432
University of Michigan, Hospital Revenue, Series A, RB
5.700%, 12/01/04 250 268
University of Michigan, Major Capital Projects, RB
5.800%, 04/01/10 500 530
Utica, Community Schools Project, GO
5.700%, 05/01/06 500 536
Walled Lake, School District Authority, GO, Pre-refunded at
102 (A)
6.500%, 05/01/99 200 211
Warren, School District Authority, GO, Pre-refunded at 102 (A)
6.700%, 05/01/01 500 547
Warren, Transportation Fund, GO
5.000%, 06/01/07 405 412
West Ottawa, Public School District, FGIC, GO
5.400%, 05/01/09 500 521
-------
33,650
-------
Total Municipal Bonds
(Cost $32,048) 33,650
-------
Cash Equivalent--1.1%
Federated Michigan Municipal
Cash Trust 394 394
-------
Total Cash Equivalent
(Cost $394) 394
-------
Total Investments--99.0%
(Cost $32,442) 34,044
-------
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
- -------------------------------------------------------------------------------
Other Assets and Liabilities--1.0%
<S> <C>
Total Other Assets and Liabilities, Net $ 336
-------
Net Assets:
Portfolio Shares of Institutional Class ($0.001 par value--10 billion
authorized for the company) based on 2,292,257 outstanding shares 23,879
Portfolio Shares of Consumer Service Class ($0.001 par value--10
billion authorized for the company) based on 865,841 outstanding
shares 8,970
Accumulated Net Realized Loss on Investments (71)
Net Unrealized Appreciation on Investments 1,602
-------
Total Net Assets--100.0% $34,380
=======
Net Asset Value, Offering and Redemption Price Per Share--
Institutional Class $ 10.89
=======
Net Asset Value, Offering and Redemption Price Per Share--Consumer
Service Class $ 10.89
=======
Maximum Offering Price Per Share--Consumer Service Class
($10.89/95.25%) $ 11.43
=======
</TABLE>
(A) Pre-refunded Security--The maturity date shown is the pre-refunded date.
(B) Security is backed by a letter of credit.
AMBAC--Security insured by American Municipal Bond Assurance Company
FGIC--Security insured by Financial Guaranty Insurance Corporation
FSA--Security insured by Financial Security Assurance
GO--General Obligation
MBIA--Security insured by Municipal Bond Investors Assurance
RB--Revenue Bond
TA--Tax Allocation
B-11
<PAGE>
FMB DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
The accompanying notes are an integral part of the financial statements.
LOGO
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (000)
- --------------------------------------------------
Common Stocks--91.4%
<S> <C> <C>
AEROSPACE & DEFENSE--2.2%
Lockheed Martin 7,000 $ 683
Raytheon 20,000 1,119
-------
1,802
-------
AUTOMOTIVE--3.7%
Ford Motor 33,500 1,440
TRW 28,000 1,589
-------
3,029
-------
BANKS--7.7%
Banc One 43,500 2,235
Citicorp 15,000 1,799
Norwest 60,000 2,246
-------
6,280
-------
BEAUTY PRODUCTS--2.7%
Gillette 13,000 1,200
International Flavors & Fragrances 21,000 1,012
-------
2,212
-------
CHEMICALS--1.8%
Morton International 44,000 1,499
-------
COMPUTER SOFTWARE/SERVICE--8.7%
Diebold 7,500 346
Hewlett Packard 24,000 1,465
Microsoft* 13,000 1,839
Oracle* 58,750 1,957
Solectron* 41,000 1,494
-------
7,101
-------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (000)
- ---------------------------------------------
<S> <C> <C>
DRUGS--11.3%
Abbott Laboratories 32,800 $ 2,132
Johnson & Johnson 26,000 1,636
Merck 22,500 2,128
Pfizer 30,500 2,219
Schering Plough 17,600 1,103
--------
9,218
--------
ELECTRICAL EQUIPMENT--5.8%
AMP 26,000 1,129
General Electric 33,000 2,434
Molex 30,000 1,142
--------
4,705
--------
ENTERTAINMENT--3.1%
Carnival 26,000 1,406
Walt Disney 12,000 1,139
--------
2,545
--------
FINANCIAL SERVICES--1.5%
Fannie Mae 24,000 1,268
--------
FOOD, BEVERAGE & TOBACCO--6.3%
CPC International 14,000 1,447
PepsiCo 40,000 1,475
Sara Lee 21,500 1,137
Sysco 25,000 1,114
--------
5,173
--------
HOUSEHOLD PRODUCTS--1.8%
Procter & Gamble 19,000 1,450
--------
INSURANCE--2.1%
American International Group 17,000 1,714
--------
LEISURE--1.7%
Mattel 35,000 1,402
--------
MACHINERY--1.9%
Caterpillar 33,300 1,596
--------
MANUFACTURING--1.1%
Illinois Tool Works 16,000 877
--------
MISCELLANEOUS BUSINESS SERVICES--
2.1%
Automatic Data Processing 30,000 1,688
--------
PETROLEUM & FUEL PRODUCTS--2.4%
Schlumberger 24,000 1,976
--------
PETROLEUM REFINING--7.6%
Chevron 14,000 1,123
Exxon 20,000 1,220
Mobil 27,500 1,978
Royal Dutch Petroleum, ADR 36,000 1,897
--------
6,218
--------
</TABLE>
B-12
<PAGE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES/PAR VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
RETAIL--6.6%
Home Depot 35,100 $ 1,963
Kohl's* 19,000 1,375
Walgreen 64,800 2,086
-------
5,424
-------
SEMI-CONDUCTORS/INSTRUMENTS--3.7%
Intel 21,000 1,630
Motorola 21,800 1,371
-------
3,001
-------
TELEPHONES & TELECOMMUNICATION--5.6%
Alltel 29,000 1,153
Ameritech 12,000 925
Lucent Technologies 18,194 1,458
SBC Communications 15,000 1,092
-------
4,628
-------
Total Common Stocks (Cost $42,943) 74,806
-------
Repurchase Agreement--8.7%
Donaldson, Lufkin, Jenrette 5.70%, dated 11/28/97, matures
12/01/97, repurchase price $7,103,373 (collateralized by
U.S. Treasury Note, par value $6,989,000, 7.50%, matures
10/31/99, market value $7,237,030) $7,100 7,100
-------
Total Repurchase Agreement
(Cost $7,100) 7,100
-------
Total Investments--100.1%
(Cost $50,043) 81,906
-------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
- -------------------------------------------------------------------------------
Other Assets and Liabilities--(0.1%)
<S> <C>
Other Assets and Liabilities, Net $ (56)
-------
Net Assets:
Portfolio Shares of Institutional Class ($0.001 par value--10 billion
authorized for the company) based on 3,550,032 outstanding shares 38,303
Portfolio Shares of Consumer Service Class ($0.001 par value--10
billion authorized for the company) based on 425,480 outstanding
shares 4,703
Undistributed Net Investment Income 28
Accumulated Net Realized Gain on Investments 6,953
Net Unrealized Appreciation on Investments 31,863
-------
Total Net Assets--100.0% $81,850
=======
Net Asset Value, Offering and Redemption Price Per Share--
Institutional Class $ 20.59
=======
Net Asset Value, Offering and Redemption Price Per Share--Consumer
Service Class $ 20.58
=======
Maximum Offering Price Per Share--Consumer Service Class
($20.58/94.25%) $ 21.84
=======
</TABLE>
*Non-income producing security
ADR--American Depository Receipt
B-13
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
FMB
FMB FMB MICHIGAN
MONEY INTERMEDIATE TAX-FREE FMB
MARKET GOVERNMENT BOND DIVERSIFIED
FUND INCOME FUND FUND EQUITY FUND
------ ------------ -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income...................... $9,013 $7,646 $1,825 $ 397
Dividend Income...................... -- -- -- 1,048
------ ------ ------ -------
Total Investment Income............. 9,013 7,646 1,825 1,445
------ ------ ------ -------
EXPENSES:
Investment Advisory Fees............. 569 514 186 749
Waiver of Investment Advisory Fees... -- -- (89) --
Administrator Fees................... 325 228 68 150
Professional Fees.................... 58 41 12 24
Transfer Agent Fees.................. 100 77 38 54
Distribution Fees (1)................ 40 15 32 28
Waiver of Distribution Fees (1)...... -- (4) (9) (8)
Printing Expenses.................... 27 14 7 11
Custodian Fees....................... 14 8 10 11
Registration Fees.................... 17 5 5 10
Trustee Fees......................... 11 6 2 5
Miscellaneous........................ 5 5 10 13
------ ------ ------ -------
Total Expenses...................... 1,166 909 272 1,047
------ ------ ------ -------
Net Investment Income................. 7,847 6,737 1,553 398
------ ------ ------ -------
Net Realized Gain on Securities Sold. 1 51 31 7,247
Net Change in Unrealized Appreciation
on Investments...................... -- 258 297 7,353
------ ------ ------ -------
Net Realized and Unrealized Gain on
Investments.......................... 1 309 328 14,600
------ ------ ------ -------
Net Increase in Net Assets From
Operations........................... $7,848 $7,046 $1,881 $14,998
====== ====== ====== =======
</TABLE>
(1) Distribution Fees are applicable to the Consumer Service Class of shares
only
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
B-14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
FMB INTERMEDIATE
FMB MONEY MARKET GOVERNMENT INCOME FMB MICHIGAN TAX- FMB DIVERSIFIED
FUND FUND FREE BOND FUND EQUITY FUND
------------------ ------------------ ------------------ ------------------
12/1/96 12/1/95 12/1/96 12/1/95 12/1/96 12/1/95 12/1/96 12/1/95
TO TO TO TO TO TO TO TO
11/30/97 11/30/96 11/30/97 11/30/96 11/30/97 11/30/96 11/30/97 11/30/96
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income.. $ 7,847 $ 6,064 $ 6,737 $ 6,868 $ 1,553 $ 1,496 $ 398 $ 456
Net Realized Gain on
Securities Sold....... 1 -- 51 43 31 13 7,247 2,842
Net Unrealized
Appreciation
(Depreciation) of
Investment Securities. -- -- 258 (1,236) 297 (28) 7,353 9,761
-------- -------- -------- -------- ------- ------- ------- -------
Net Increase in Net
Assets Resulting from
Operations............ 7,848 6,064 7,046 5,675 1,881 1,481 14,998 13,059
-------- -------- -------- -------- ------- ------- ------- -------
DISTRIBUTIONS TO
SHAREHOLDERS:
Net Investment Income
Institutional Class... (7,071) (5,129) (6,370) (6,645) (1,147) (1,010) (405) (448)
Consumer Service
Class................. (776) (935) (244) (351) (408) (484) (29) (44)
-------- -------- -------- -------- ------- ------- ------- -------
Realized Capital Gains
Institutional Class... -- -- -- -- -- -- (2,600) --
Consumer Service
Class................. -- -- -- -- -- -- (306) --
-------- -------- -------- -------- ------- ------- ------- -------
Total Distributions.. (7,847) (6,064) (6,614) (6,996) (1,555) (1,494) (3,340) (492)
-------- -------- -------- -------- ------- ------- ------- -------
CAPITAL SHARE
TRANSACTIONS:
Institutional Class
Proceeds from Shares
Issued................ 268,719 289,946 24,530 22,554 4,758 4,811 14,338 12,641
Reinvestment of Cash
Distributions......... -- -- 4 -- -- -- 1 --
Cost of Shares
Redeemed.............. (277,831) (224,594) (17,950) (27,917) (3,128) (2,469) (13,484) (15,397)
-------- -------- -------- -------- ------- ------- ------- -------
Increase (Decrease) in
Net Assets from
Institutional Class
Transactions.......... (9,112) 65,352 6,584 (5,363) 1,630 2,342 855 (2,756)
-------- -------- -------- -------- ------- ------- ------- -------
Consumer Service Class
Proceeds from Shares
Issued................ 28,917 52,312 104 203 1,729 1,348 1,239 1,547
Reinvestment of Cash
Distributions......... 745 906 193 276 301 373 334 33
Cost of Shares
Redeemed.............. (35,891) (50,760) (2,008) (2,774) (1,738) (5,237) (1,238) (1,548)
-------- -------- -------- -------- ------- ------- ------- -------
Increase (Decrease) in
Net Assets Derived
from Consumer Service
Class Transactions.... (6,229) 2,458 (1,711) (2,295) 292 (3,516) 335 32
-------- -------- -------- -------- ------- ------- ------- -------
Increase (Decrease) in
Net Assets Derived from
Capital Share
Transactions........... (15,341) 67,810 4,873 (7,658) 1,922 (1,174) 1,190 (2,724)
-------- -------- -------- -------- ------- ------- ------- -------
Net Increase
(Decrease) in Net
Assets................ (15,340) 67,810 5,305 (8,979) 2,248 (1,187) 12,848 9,843
-------- -------- -------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of Period.... 172,537 104,727 113,277 122,256 32,132 33,319 69,002 59,159
-------- -------- -------- -------- ------- ------- ------- -------
End of Period.......... $157,197 $172,537 $118,582 $113,277 $34,380 $32,132 $81,850 $69,002
======== ======== ======== ======== ======= ======= ======= =======
SHARES ISSUED AND
REDEEMED:
Institutional Class
Shares:
Shares Issued.......... 268,719 289,946 2,439 2,234 443 453 784 796
Shares Issued in Lieu
of Cash
Distributions......... -- -- -- -- -- -- -- --
Shares Redeemed........ (277,831) (224,594) (1,784) (2,767) (290) (232) (722) (965)
-------- -------- -------- -------- ------- ------- ------- -------
Net Increase
(Decrease)
Institutional Class
Shares................ (9,112) 65,352 655 (533) 153 221 62 (169)
-------- -------- -------- -------- ------- ------- ------- -------
Consumer Service Class
Shares:
Shares Issued.......... 28,917 52,312 10 22 161 126 68 98
Shares Issued in Lieu
of Cash
Distributions......... 745 906 19 27 28 37 20 2
Shares Redeemed........ (35,891) (50,760) (200) (275) (162) (493) (66) (97)
-------- -------- -------- -------- ------- ------- ------- -------
Net Increase
(Decrease) Consumer
Service Class Shares.. (6,229) 2,458 (171) (226) 27 (330) 22 3
-------- -------- -------- -------- ------- ------- ------- -------
Net Increase (Decrease)
in Shares............. (15,341) 67,810 484 (759) 180 (109) 84 (166)
======== ======== ======== ======== ======= ======= ======= =======
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
B-15
<PAGE>
For the Period Ended November 30,
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
REALIZED
AND
NET UNREALIZED NET
ASSET GAINS OR DIVIDENDS ASSET
VALUE NET (LOSSES) FROM NET DISTRIBUTIONS VALUE
BEGINNING INVESTMENT ON INVESTMENT FROM END OF TOTAL
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS PERIOD RETURN(2)
--------- ---------- ---------- ---------- ------------- ------ ---------
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FMB Money Market Fund
- ---------------------
Institutional Class
1997 $ 1.00 $0.05 -- $(0.05) -- $ 1.00 4.96%
1996 1.00 0.05 -- (0.05) -- 1.00 4.87%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.78%
Consumer Class
1997 $ 1.00 $0.05 -- $(0.05) -- $ 1.00 4.70%
1996 1.00 0.05 -- (0.05) -- 1.00 4.70%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.67%
- -----------------------------------------------------
FMB Intermediate Government Income Fund
- ---------------------------------------
Institutional Class
1997 $10.13 $0.59 $0.02 $(0.58) -- $10.16 6.27%
1996 10.24 0.59 (0.10) (0.60) -- 10.13 4.97%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.33%)
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60%
1992(1) 10.00 0.60 0.10 (0.60) -- 10.10 7.10%
Consumer Class
1997 $10.13 $0.57 $0.02 $(0.56) -- $10.16 5.99%
1996 10.24 0.57 (0.10) (0.58) -- 10.13 4.80%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%)
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60%
1992(1) 10.00 0.58 0.10 (0.58) -- 10.10 6.95%
</TABLE>
+ Average commission rate paid per share of equity security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
(1) The FMB Money Market, FMB Intermediate Government Income, FMB Michigan Tax-
Free Bond and FMB Diversified Equity Funds commenced operations December 2,
1991. Ratios for this period have been anualized.
(2) Total return does not reflect applicable sales charge.
Amounts designated as "-- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
B-16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF RATIO OF
NET RATIO EXPENSES NET INCOME
ASSETS RATIO OF OF NET TO AVERAGE TO AVERAGE
END OF EXPENSES INCOME NET ASSETS NET ASSETS AVERAGE
PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING PORTFOLIO COMMISSIONS
(000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) TURNOVER RATE+
------ ---------- ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$143,439 0.69% 4.85% 0.69% 4.85% n/a n/a
152,549 0.68% 4.79% 0.68% 4.79% n/a n/a
87,238 0.65% 5.16% 0.65% 5.16% n/a n/a
103,301 0.68% 3.46% 0.70% 3.44% n/a n/a
65,448 0.32% 2.91% 0.68% 2.55% n/a n/a
58,596 0.27% 3.59% 0.91% 2.95% n/a n/a
$13,758 0.94% 4.60% 0.94% 4.60% n/a n/a
19,988 0.86% 4.61% 0.93% 4.54% n/a n/a
17,489 0.65% 5.16% 0.65% 5.16% n/a n/a
7,154 0.68% 3.46% 0.70% 3.44% n/a n/a
1,485 0.32% 2.91% 0.68% 2.55% n/a n/a
208 0.39% 3.46% 1.03% 2.82% n/a n/a
$115,064 0.79% 5.91% 0.79% 5.91% 28% n/a
108,047 0.79% 5.89% 0.79% 5.89% 16% n/a
114,646 0.78% 6.09% 0.78% 6.09% 27% n/a
115,449 0.83% 6.45% 0.85% 6.43% 20% n/a
105,820 0.50% 5.66% 0.78% 5.38% 17% n/a
81,371 0.43% 5.85% 0.90% 5.38% 29% n/a
$ 3,518 1.04% 5.66% 1.14% 5.56% 28% n/a
5,320 0.95% 5.73% 1.14% 5.54% 16% n/a
7,610 0.78% 6.09% 0.78% 6.09% 27% n/a
9,718 0.83% 6.45% 0.85% 6.43% 20% n/a
10,872 0.50% 5.66% 0.78% 5.38% 17% n/a
5,440 0.61% 5.67% 1.08% 5.20% 29% n/a
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
B-17
<PAGE>
For the Period Ended November 30,
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET REALIZED AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS NET
VALUE NET GAINS FROM NET FROM ASSET VALUE
BEGINNING INVESTMENT (LOSSES) INVESTMENT CAPITAL END TOTAL
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN(2)
--------- ---------- ------------- ---------- ------------- ----------- ---------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FMB Michigan Tax-Free Bond Fund
- -------------------------------------------------------------------------------------------------------
Institutional Class
1997 $10.79 $0.50 $0.10 $(0.50) $ -- $10.89 5.73%
1996 10.79 0.50 -- (0.50) -- 10.79 4.78%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%)
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53%
1992(1) 10.00 0.48 0.24 (0.48) -- 10.24 7.29%
Consumer Class
1997 $10.79 $0.47 $0.10 $(0.47) $ -- $10.89 5.47%
1996 10.79 0.48 -- (0.48) -- 10.79 4.61%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%)
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53%
1992(1) 10.00 0.46 0.24 (0.46) -- 10.24 7.17%
- -------------------------------------------------------------------------------------------------------
FMB Diversified Equity Fund
- -------------------------------------------------------------------------------------------------------
Institutional Class
1997 $17.73 $0.10 $3.63 $(0.11) $(0.76) $20.59 22.19%
1996 14.58 0.12 3.16 (0.13) -- 17.73 22.58%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%)
1992(1) 10.00 0.12 1.60 (0.11) -- 11.61 17.31%
Consumer Class
1997 $17.73 $0.06 $3.62 $(0.07) $(0.76) $20.58 21.84%
1996 14.58 0.09 3.17 (0.11) -- 17.73 22.44%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%)
1992(1) 10.00 0.10 1.60 (0.09) -- 11.61 17.16%
</TABLE>
+ Average commission rate paid per share of equity security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
(1) The FMB Money Market, FMB Intermediate Government Income, FMB Michigan Tax-
Free Bond and FMB Diversified Equity Funds commenced operations December 2,
1991. Ratios for this period have been annualized.
(2) Total return does not reflect applicable sales charge.
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
B-18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO RATIO OF
NET RATIO RATIO OF EXPENSES NET INCOME
ASSETS OF OF NET TO AVERAGE TO AVERAGE
END EXPENSES INCOME NET ASSETS NET ASSETS AVERAGE
OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING PORTFOLIO COMMISSIONS
(000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) TURNOVER RATE+
- --------- ---------- ---------- ----------- ---------- --------- -----------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
$24,954 0.73% 4.66% 1.00% 4.39% 7% n/a
23,082 0.68% 4.72% 1.05% 4.35% 16% n/a
20,700 0.70% 4.62% 1.18% 4.14% 35% n/a
15,495 0.51% 4.50% 1.19% 3.82% 22% n/a
11,779 0.35% 4.59% 1.38% 3.56% 13% n/a
6,043 0.29% 4.68% 2.55% 2.42% 30% n/a
$ 9,426 0.98% 4.41% 1.35% 4.04% 7% n/a
9,050 0.84% 4.55% 1.40% 4.00% 16% n/a
12,619 0.70% 4.62% 1.18% 4.14% 35% n/a
12,249 0.51% 4.50% 1.19% 3.82% 22% n/a
14,771 0.35% 4.59% 1.38% 3.56% 13% n/a
4,572 0.46% 4.50% 2.72% 2.24% 30% n/a
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
$73,097 1.37% 0.56% 1.37% 0.56% 28% $0.0733
61,857 1.41% 0.74% 1.41% 0.74% 9% 0.0800
53,325 1.50% 0.92% 1.50% 0.92% 20% n/a
42,229 1.61% 0.69% 1.61% 0.69% 49% n/a
38,979 1.50% 0.82% 1.53% 0.79% 22% n/a
29,596 1.42% 1.12% 2.05% 0.49% 5% n/a
$ 8,753 1.62% 0.31% 1.72% 0.21% 28% $0.0733
7,145 1.58% 0.57% 1.76% 0.39% 9% 0.0800
5,833 1.50% 0.92% 1.50% 0.92% 20% n/a
4,985 1.61% 0.69% 1.61% 0.69% 49% n/a
5,634 1.50% 0.82% 1.53% 0.79% 22% n/a
3,377 1.64% 0.97% 2.29% 0.32% 5% n/a
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
B-19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
FMB Funds, Inc. (the "Company"), established as a Maryland corporation on
September 20, 1991, is registered under the Investment Company Act of 1940 as
an open-end management company. The Company currently consists of four
separate investment portfolios: FMB Money Market Fund, FMB Intermediate
Government Income Fund, FMB Michigan Tax-Free Bond Fund and FMB Diversified
Equity Fund (collectively, the "Funds"), each with two classes of shares known
as the Institutional Class and the Consumer Service Class. Each class of
shares bears the same voting, dividend, liquidation and other rights and
conditions. The assets of each portfolio are segregated, and a shareholders
interest is limited to the portfolio in which shares are held. The Funds'
prospectus provides a description of each Fund's investment objectives,
policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Funds:
Security Valuation--Investment securities held by the FMB Money Market Fund
are stated at amortized cost which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income. Investment securities
of the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond
Fund and FMB Diversified Equity Fund which are listed on a securities exchange
for which market quotations are readily available, are valued at the last
quoted sales price on each business day. If there is no such reported sale,
these securities and unlisted securities for which market quotations are
readily available are valued at the most recently quoted mean between bid and
ask price as provided by a pricing service. Debt obligations with sixty days
or less remaining until maturity are valued at their amortized cost.
Securities for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Companys Board of
Directors and in accordance with procedures adopted by the Board of Directors.
Security Transactions and Investment Income--Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used
in determining net realized capital gains and losses on the sale of securities
are those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest
income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
Federal Income Taxes--It is each Fund's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provisions for Federal income taxes are required.
Dividends to Shareholders--The FMB Money Market Fund, FMB Intermediate
Government Income Fund, and FMB Michigan Tax-Free Bond Fund each declares
dividends of substantially all of their net investment income daily and pays
those dividends monthly. The FMB Diversified Equity Fund declares and pays as
a dividend substantially all of its net investment income quarterly. Each Fund
will distribute, at least annually, substantially all net capital gains, if
any, earned by such Fund. Distributions are recorded on ex-date for
shareholders.
Net Asset Value Per Share--The net asset value per share of each Fund is
calculated on each business day separately for each class within each Fund.
The maximum offering price per share for the Consumer Services Class shares of
the FMB Intermediate Government Income and FMB Michigan Tax-Free Bond Funds is
equal to the net assets per share plus a sales load of 4.75%. The maximum
offering price per share for the FMB Diversified Equity Fund is equal to the
net assets per share plus a sales load of 5.75%.
Repurchase Agreements--Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Company require that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty.
If the counterparty defaults and the value of the
B-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
collateral declines or if the counterparty enters into insolvency proceedings,
realization of collateral by the Fund may be delayed or limited.
Expenses--Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Company are prorated to
the Funds on the basis of relative net assets. The Consumer Service Class
bears a class specific 12b-1 fee. Income, other expenses and accumulated
realized and unrealized gains and losses of a Fund are allocated to the
respective class on the basis of relative net asset value each day.
3. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS
On September 26, 1997 shareholders of the FMB Funds approved investment
advisory contracts with The Huntington National Bank (the Advisor), a
subsidiary of Huntington Bancshares Incorporated. Prior to this date FMB-
Trust, a wholly-owned subsidiary of First Michigan Bank Corporation, acted as
the Funds' Advisor.
Pursuant to the Investment Advisory Agreements, the Advisor manages the
investments of the Funds and continuously reviews, supervises and administers
each Fund's investments. The Advisor is responsible for placing orders for the
purchase and sale of investment securities directly with brokers and dealers
selected at its discretion. The terms of the Investment Advisory Agreements
provide for annual fees at the following percentages of average daily net
assets.
For the FMB Money Market Fund:
0.35% of first $500 million in average net assets; 0.30% of next $500
million in average net assets; and 0.25% of average net assets over $1
billion.
For the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond
Fund, and FMB Diversified Equity Fund: 0.45%, 0.55%, and 1.00% of average
daily net assets, respectively.
Bankers Trust Company serves as custodian (the "Custodian") for the Funds.
Fees of the Custodian are paid on the basis of the net assets of the Funds.
The Custodian plays no role in determining the investment policies of the
Company or which securities are to be purchased or sold in the Funds.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Company and SEI Fund Resources ("SFR") are parties to an administration
agreement (the "Administrative Agreement") dated March 23, 1996. Under the
terms of the Administrative Agreement SFR is entitled to receive an annual fee
of 0.20% on the daily average net assets of the Funds. Such fee is computed
daily and paid monthly.
The Company and SEI Investments Distribution Company (the "Distributor") are
parties to a Distribution Agreement dated March 23, 1996. The Company has
adopted a Distribution Plan (the "Plan") for those Funds offering Consumer
Service shares. The Plan provides for the payment by the Company to the
Distributor of up to 0.25% for the FMB Money Market and up to 0.35% for the
FMB Intermediate Government Income, FMB Michigan Tax-Free Bond and FMB
Diversified Equity Funds per annum of each Fund's Consumer Service Class
average daily net assets for costs and expenses of the Distributor in
connection with the distribution of Fund shares of the Consumer Service
Classes. The Distributor voluntarily waived 0.10% of the distribution fee for
the year ended November 30, 1997 for the FMB Intermediate Government Income,
FMB Michigan Tax-Free Bond and FMB Diversified Equity Funds.
Certain officers of the Company are also officers of SFR and/or the
Distributor. Such officers are paid no fees by the Funds.
5. OTHER TRANSACTIONS WITH AFFILIATES
The Company and SFR are parties to a transfer agency and service agreement
dated March 23, 1996 under which SFR provides transfer agency services to the
Company.
B-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997
6. CONCENTRATION OF CREDIT RISK
The FMB Michigan Tax-Free Bond Fund invests substantially all of its assets
in a portfolio of debt obligations issued by the state of Michigan and its
authorities and agencies. The issuers' abilities to meet their obligations may
be affected by economic or political developments in the State of Michigan.
7. FEDERAL INCOME TAX STATUS
During the fiscal year ended November 30, 1997, the FMB Money Market Fund
utilized $1,045 of capital loss carryforwards. The Fund has remaining capital
loss carryforwards of $86,955 available through the year 2003 to offset future
realized capital gains.
During the fiscal year ended November 30, 1997, the FMB Intermediate
Government Income Fund utilized $50,654 of capital loss carryforwards. The
Fund has remaining capital loss carryforwards of $341,004 available through
the year 2002 and $1,366,912 available through the year 2003 to offset future
realized capital gains.
During the fiscal year ended November 30, 1997, the FMB Michigan Tax-Free
Bond Fund utilized $30,641 of capital loss carryforwards. The Fund has
remaining capital loss carryforwards of $70,561 available through the year
2003 to offset future realized capital gains.
8. INVESTMENT TRANSACTIONS
During the year ended November 30, 1997, the cost of security purchases and
proceeds from sales of securities, other than temporary investments in short-
term securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES (000)
--------------------------
U.S.
GOVERNMENT OTHER TOTAL
---------- ------- -------
<S> <C> <C> <C>
FMB Intermediate Government Income Fund............. $35,650 $ -- $35,650
FMB Michigan Tax-Free Bond Fund..................... -- 4,325 4,325
FMB Diversified Equity Fund......................... -- 18,513 18,513
<CAPTION>
SALES (000)
--------------------------
U.S.
GOVERNMENT OTHER TOTAL
---------- ------- -------
<S> <C> <C> <C>
FMB Intermediate Government Income Fund............. $14,061 $ -- $14,061
FMB Michigan Tax-Free Bond Fund..................... -- 2,373 2,373
FMB Diversified Equity Fund......................... -- 21,101 21,101
</TABLE>
At November 30, 1997 the total cost of securities and the net realized gains
or losses on securities sold for Federal income tax purposes was not
materially different from amounts reported for financial purposes. The
aggregate gross unrealized appreciation and depreciation for securities held
at November 30, 1997 for each Fund were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
GROSS GROSS
APPRECIATION DEPRECIATION NET
------------ ------------ -------
<S> <C> <C> <C>
Aggregate Gross Unrealized Gain (Loss) (000)
FMB Intermediate Government Income Fund...... $ 1,798 $152 $ 1,646
FMB Michigan Tax-Free Bond Fund.............. 1,602 -- 1,602
FMB Diversified Equity Fund.................. 32,173 310 31,863
</TABLE>
9. PROPOSED REORGANIZATION
Huntington Bancshares Incorporated (Huntington) parent company of the
Advisor acquired First Michigan Bank Corporation on October 1, 1997. A special
meeting of shareholders is scheduled to be held on March 17, 1998 in order to
consider and approve an agreement and plan of reorganization for the FMB Funds
and Monitor Funds, another mutual fund family sponsored by Huntington, under
which the FMB Funds will become part of Monitor Funds.
B-22
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FMB MONITOR
MONEY MARKET MONEY MARKET PRO FORMA
FUND FUND COMBINED
------------ ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
ASSETS:
Investments at value..................... $152,779 $418,190 $570,969
Investments in repurchase agreements..... 8,336 52,770 61,106
Dividends and interest receivable........ 242 124 366
Receivable for Fund shares sold.......... 44 -- 44
Other assets............................. 56 -- 56
-------- -------- --------
Total assets........................... 161,457 471,084 632,541
-------- -------- --------
LIABILITIES:
Dividend payable......................... 683 1,978 2,661
Accrued expenses......................... 102 233 335
-------- -------- --------
Total liabilities...................... 785 2,211 2,996
-------- -------- --------
NET ASSETS:
Paid-in-capital.......................... 160,669 468,873 629,542
Accumulated net realized gain (loss) on
investments............................. (87) -- (87)
Distributions in excess of net investment
income.................................. 90 -- 90
-------- -------- --------
Total net assets....................... $160,672 $468,873 $629,545
======== ======== ========
NET ASSETS:
Trust Shares............................. $146,022 $358,019 $504,041
Investment Shares........................ $ 14,650 $110,854 $125,504
-------- -------- --------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER
SHARE:
Trust Shares............................. $ 1.00 $ 1.00 $ 1.00
Investment Shares........................ $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
OFFERING PRICE PER SHARE:
Trust Shares............................. $ 1.00 $ 1.00 $ 1.00
Investment Shares........................ $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
SHARES OUTSTANDING:
Trust Shares............................. 146,002 358,019 504,021
Investment Shares........................ 14,667 110,854 125,521
-------- -------- --------
Total shares outstanding ($0.001 par
value)................................ 160,669 468,873 629,542
======== ======== ========
Investments, at identified cost............ $161,115 $470,960 $632,075
======== ======== ========
</TABLE>
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-23
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED STATEMENT OF OPERATIONS
12 MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FMB MONITOR PRO FORMA PRO FORMA
MONEY MARKET MONEY MARKET ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............. $8,589 $23,763 $ -- $32,352
------ ------- ----- -------
Total income.............. 8,589 23,763 -- 32,352
------ ------- ----- -------
EXPENSES:
Investment advisory fees.... 549 1,308 (124)(1) 1,733
Trustee fees................ 4 13 (4)(2) 13
Administrative personnel and
services................... 314 494 (156)(3) 652
Custodian and recordkeeping
fees and expenses.......... 17 244 71 (4) 332
Transfer and dividend
disbursing agent fees and
expenses................... 55 32 (42) 45
Fund share registration
costs...................... 30 43 -- 73
Legal and auditing fees..... 47 56 (43)(5) 60
Printing and postage........ 26 48 -- 74
Organization costs.......... 3 -- -- 3
Insurance premiums.......... -- 24 -- 24
Distribution services fees.. 46 101 (27)(6) 120
Other....................... 14 -- -- 14
------ ------- ----- -------
Total expenses............ 1,105 2,363 (325) 3,143
------ ------- ----- -------
Net investment income..... 7,484 21,400 325 29,209
------ ------- ----- -------
Change in net assets resulting
from operations.............. $7,484 $21,400 $ 325 $29,209
====== ======= ===== =======
</TABLE>
- --------
(1) To adjust Advisory fees to adopt the Monitor Fund's fee structure for the
combined assets.
(2) To eliminate duplicative Trustee fees.
(3) To adjust Administration fees to adopt the Monitor Fund's fee structure
for the combined assets.
(4) To adjust Custodian and Recordkeeping fees to adopt the Monitor Fund's fee
structure for the combined assets.
(5) To eliminate duplicative Professional fees.
(6) To adjust Distribution services fees to adopt the Monitor Fund's fee
structure for combined assets.
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-24
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- --------------------------------------------------------------------------------------------------------------------------------
FMB MONITOR MONEY SECURITY DESCRIPTION FMB MONITOR MONEY
MONEY MARKET MARKET PRO FORMA MONEY MARKET MARKET PRO FORMA
COMBINED COMBINED
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
ASSET BACKED--2.2%
- --------------------------------------------------------------------------------------------------------------------------------
$8,000 $ -- $8,000 Ciesco, 5.52%, 8/4/97........................ $ 7,940 $ -- $ 7,940
-- 6,000 6,000 New Center Assets Trust, 5.53%, 9/22/97...... -- 5,924 5,924
- --------------------------------------------------------------------------------------------------------------------------------
Total Asset Backed........................... 7,940 5,924 13,864
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--83.9%
- --------------------------------------------------------------------------------------------------------------------------------
AGRICULTURE--3.6%
-- 5,000 5,000 Cargill Financial Services, 6.53%, 8/21/97... -- 4,961 4,961
-- 5,000 5,000 Cargill Inc., 5.52%, 8/6/97.................. -- 4,945 4,945
-- 5,000 5,000 Cargill Inc., 5.51%, 9/11/98................. -- 4,972 4,972
8,000 -- 8,000 Deere & Co., 5.54%, 7/25/97.................. 7,971 -- 7,971
- --------------------------------------------------------------------------------------------------------------------------------
7,971 14,878 22,849
- --------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--1.6%
-- 5,000 5,000 Daimler Benz N.A., 5.62%, 7/22/97............ -- 4,984 4,984
-- 5,000 5,000 Daimler Benz N.A., 5.56%, 9/11/97............ -- 4,944 4,944
- --------------------------------------------------------------------------------------------------------------------------------
-- 9,928 9,928
- --------------------------------------------------------------------------------------------------------------------------------
BANKING--7.4%
-- 5,000 5,000 JP Morgan & Co., 5.54%, 10/01/97............. 4,929 4,929
7,500 -- 7,500 First Tennessee Bank, 5.69%, 7/17/97......... 7,500 -- 7,500
-- 5,000 5,000 National City Credit Corp., 5.59%, 9/11/97... -- 4,946 4,946
-- 5,000 5,000 National City Credit Corp., 5.58%, 9/17/97... -- 4,940 4,940
8,700 -- 8,700 Norwest, 5.54%, 8/13/97...................... 8,643 -- 8,643
-- 5,000 5,000 Royal Bank of Canada, 5.58%, 7/15/97......... -- 4,989 4,989
-- 6,000 6,000 Toronto Dominion Holdings, 5.58%, 8/11/97.... -- 5,962 5,962
-- 5,000 5,000 Toronto Dominion Holdings, 5.59%, 8/18/98.... -- 4,963 4,963
- --------------------------------------------------------------------------------------------------------------------------------
16,143 30,729 46,872
- --------------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES--0.8%
-- 5,000 5,000 Electronic Data Services, 5.52%, 8/29/97..... -- 4,955 4,955
- --------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--3.9%
-- 5,000 5,000 Akzo Nobel, 5.58%, 7/10/97................... -- 4,993 4,993
-- 5,000 5,000 du Pont (E.I.) de Nemours & Co., 5.53%, 7/9/97. -- 4,994 4,994
7,500 -- 7,500 du Pont (E.I.) de Nemours & Co., 5.52%, 7/10/97. 7,490 -- 7,490
-- 7,000 7,000 du Pont (E.I.) de Nemours & Co., 5.50%, 9/04/97. -- 6,930 6,930
- --------------------------------------------------------------------------------------------------------------------------------
7,490 16,917 24,407
- --------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--1.9%
-- 5,000 5,000 Proctor & Gamble, 5.50%, 7/10/97............. -- 5,000 5,000
-- 7,000 7,000 Proctor & Gamble, 5.55%, 8/4/97.............. -- 6,963 6,963
- --------------------------------------------------------------------------------------------------------------------------------
-- 11,963 11,963
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED--2.9%
-- 5,000 5,000 General Electric Co., 5.54%, 7/7/97.......... -- 4,995 4,995
8,500 -- 8,500 John Deere Capital Corp., 5.54%, 8/11/97..... 8,445 -- 8,445
-- 5,000 5,000 Minnesota Mining & Manufacturing, 5.50%, 8/22/97. -- 4,960 4,960
- --------------------------------------------------------------------------------------------------------------------------------
8,445 9,955 18,400
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
continued
B-25
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- -------------------------------------------------------------------------------------------------------
FMB MONITOR MONEY SECURITY DESCRIPTION FMB MONITOR MONEY
MONEY MARKET MARKET PRO FORMA MONEY MARKET MARKET PRO FORMA
COMBINED COMBINED
- -------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
ELECTRONICS--3.1%
Motorola Inc., 5.50%,
$ -- $ 5,000 $ 5,000 9/3/97.................. $ -- $ 4,951 $ 4,951
Sharp Electronics Corp.,
-- 5,000 5,000 5.54%, 8/1/97........... -- 4,976 4,976
Sharp Electronics Corp.,
-- 5,000 5,000 5.59%, 8/1/97........... -- 4,976 4,976
Siemens Capital Corp.,
-- 5,000 5,000 5.54%, 8/13/97.......... -- 4,967 4,967
- -------------------------------------------------------------------------------------------------------
-- 19,870 19,870
- -------------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.6%
Walt Disney Inc., 5.51%,
-- 5,000 5,000 9/3/97.................. -- 4,951 4,951
Walt Disney Inc., 5.48%,
-- 5,000 5,000 9/15/97................. -- 4,942 4,942
- -------------------------------------------------------------------------------------------------------
-- 9,893 9,893
- -------------------------------------------------------------------------------------------------------
FINANCE--COMMERCIAL--
4.7%
Commercial Credit Corp.,
7,800 -- 7,800 5.55%, 7/7/97........... 7,793 -- 7,793
IBM Credit Corp., 5.58%,
-- 5,000 5,000 7/15/97................. -- 4,989 4,989
IBM Credit Corp., 5.53%,
-- 5,000 5,000 8/20/97................. -- 4,962 4,962
Pitney Bowes Credit
-- 7,000 7,000 Corp., 5.52%, 7/23/97... -- 6,976 6,976
Xerox Credit Corp.,
-- 5,000 5,000 5.58%, 7/17/97.......... -- 4,988 4,988
- -------------------------------------------------------------------------------------------------------
7,793 21,915 29,708
- -------------------------------------------------------------------------------------------------------
FINANCIAL--11.8%
American Express Credit
8,500 -- 8,500 Corp., 5.52%7/24/97..... 8,470 -- 8,470
Beneficial Corp., 5.55%,
8,300 -- 8,300 8/15/97................. 8,242 -- 8,242
CIT Group Holdings,
8,200 -- 8,200 5.54%, 9/22/97.......... 8,095 -- 8,095
Ford Motor Credit Corp.,
8,000 -- 8,000 5.60%, 7/2/97........... 7,999 -- 7,999
Ford Motor Credit Corp.,
-- 5,000 5,000 5.61%, 7/8/97........... -- 5,000 5,000
General Electric Capital
8,000 -- 8,000 Corp., 5.55%, 7/9/97.... 7,990 -- 7,990
General Motors
Acceptance Corp., 5.58%,
10,000 10,000 7/11/97................. -- 10,000 10,000
Prudential Funding
-- 10,000 10,000 Corp., 5.30%, 7/1/97.... -- 10,000 10,000
Prudential Funding
8,500 -- 8,500 Corp., 5.55%, 8/7/97.... 8,452 -- 8,452
- -------------------------------------------------------------------------------------------------------
49,248 25,000 74,248
- -------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--6.8%
Anheuser Busch Co.,
-- 5,000 5,000 5.45%, 7/3/97........... -- 4,998 4,998
Anheuser Busch Co.,
-- 5,000 5,000 5.50%, 8/1/97........... -- 4,976 4,976
Coca Cola Co., 5.52%,
-- 5,000 5,000 7/29/97................. -- 4,979 4,979
Coca Cola Co., 5.51%,
-- 5,000 5,000 8/7/97.................. -- 4,972 4,972
Coca Cola Co., 5.50%,
-- 5,000 5,000 9/18/97................. -- 4,940 4,940
PepsiCo Inc., 5.52%,
8,000 -- 8,000 7/14/97................. 7,984 -- 7,984
PepsiCo Inc., 5.53%,
-- 5,000 5,000 7/18/97................. -- 4,987 4,987
PepsiCo Inc., 5.50%,
-- 5,000 5,000 8/29/97................. -- 4,955 4,955
- -------------------------------------------------------------------------------------------------------
7,984 34,807 42,791
- -------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--3.5%
Golden Peanut Co.,
-- 7,000 7,000 5.55%, 8/12/97.......... -- 6,955 6,955
Hershey Foods, 5.57%,
-- 5,000 5,000 7/22/97................. -- 4,984 4,984
Nestle Capital Corp.,
-- 5,000 5,000 5.51%, 7/3/97........... -- 4,998 4,998
Nestle Capital Corp.,
-- 5,000 5,000 5.53%, 7/17/97.......... -- 4,988 4,988
- -------------------------------------------------------------------------------------------------------
-- 21,925 21,925
</TABLE>
continued
B-26
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- -------------------------------------------------------------------------------------------------------
FMB MONITOR MONEY SECURITY DESCRIPTION FMB MONITOR MONEY
MONEY MARKET MARKET PRO FORMA MONEY MARKET MARKET PRO FORMA
COMBINED COMBINED
- -------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
INSURANCE--3.9%
A I Credit Corp., 5.55%,
$-- $ 5,000 $ 5,000 7/7/97.................. $-- $ 4,995 $ 4,995
A I Credit Corp., 5.56%,
-- 5,000 5,000 7/21/97................. -- 4,985 4,985
Met Life Funding Corp.,
-- 5,051 5,051 5.54%, 8/12/97.......... -- 5,018 5,018
USAA Capital Corp.,
-- 5,000 5,000 5.62%, 7/25/97.......... -- 4,981 4,981
USAA Capital Corp.,
-- 5,000 5,000 5.60%, 8/5/97........... -- 4,973 4,973
- -------------------------------------------------------------------------------------------------------
-- 24,952 24,952
- -------------------------------------------------------------------------------------------------------
LUMBER & WOOD PRODUCTS--
0.8%
Weyerhauser Co., 5.56%,
-- 5,000 5,000 7/8/97.................. -- 4,995 4,995
- -------------------------------------------------------------------------------------------------------
METALS & MINING--0.8%
RTZ American Inc.,
-- 5,000 5,000 5.62%, 8/1/97........... -- 4,976 4,976
- -------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT--1.2%
Xerox Corp., 5.53%,
-- 7,600 7,600 9/5/97.................. -- 7,523 7,523
- -------------------------------------------------------------------------------------------------------
OIL & GAS--1.6%
Amoco Co., 5.52%,
-- 5,000 5,000 9/2/97.................. -- 4,952 4,952
Amoco Co., 5.51%,
-- 5,000 5,000 10/2/97................. -- 4,929 4,929
- -------------------------------------------------------------------------------------------------------
-- 9,881 9,881
- -------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--2.4%
Schering Plough Corp.,
-- 10,000 10,000 5.55%, 7/7/97........... -- 9,991 9,991
Unilever Capital Corp.,
-- 5,000 5,000 5.52%, 7/29/97.......... -- 4,979 4,979
- -------------------------------------------------------------------------------------------------------
-- 14,970 14,970
- -------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--
5.1%
Gannett Co., 5.50%,
-- 7,700 7,700 8/15/97................. -- 7,647 7,647
Gannett Co., 5.50%,
-- 5,000 5,000 8/18/97................. -- 4,963 4,963
McGraw Hill Inc., 5.62%,
-- 5,000 5,000 8/5/97.................. -- 4,973 4,973
McGraw Hill Inc., 5.54%,
-- 7,000 7,000 9/30/97................. -- 6,902 6,902
R R Donnelly & Sons,
-- 7,500 7,500 5.54%, 7/21/97.......... -- 7,477 7,477
- -------------------------------------------------------------------------------------------------------
-- 31,962 31,962
- -------------------------------------------------------------------------------------------------------
RETAIL--1.6
May Department Stores,
-- 5,000 5,000 5.55%, 7/7/97........... -- 4,995 4,995
May Department Stores,
-- 5,000 5,000 5.56%, 7/11/97.......... -- 4,992 4,992
- -------------------------------------------------------------------------------------------------------
-- 9,987 9,987
- -------------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT--
3.2%
Canadian Wheat Board,
-- 5,500 5,500 5.57%, 7/10/97.......... -- 5,492 5,492
Canadian Wheat Board,
-- 5,000 5,000 5.53%, 8/28/97.......... -- 4,955 4,955
Wool International,
-- 5,000 5,000 5.56%, 7/28/97.......... -- 4,979 4,979
Wool International,
-- 5,000 5,000 5.52%, 8/14/97.......... -- 4,966 4,966
- -------------------------------------------------------------------------------------------------------
-- 20,392 20,392
- -------------------------------------------------------------------------------------------------------
</TABLE>
continued
B-27
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONCLUDED)
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997
- -----------------------------------------------------------------------------------------------
FMB MONITOR MONEY SECURITY DESCRIPTION
MONEY MARKET MARKET PRO FORMA
COMBINED
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
TELECOMMUNICATIONS--8.4%
$ -- $10,000 $10,000 AT&T Corp., 5.54%, 7/02/97...................
-- 5,000 5,000 AT&T Corp., 5.50%, 8/15/97...................
-- 5,000 5,000 Ameritech Corp., 5.54%, 7/18/97..............
-- 5,000 5,000 Ameritech Corp., 5.55%, 9/8/97...............
-- 10,000 10,000 Bell South Capital Funding, 5.53%, 7/2/97....
-- 10,000 10,000 Bell South Telecommunications, 5.50%, 7/3/97.
8,000 -- 8,000 Lucent Technologies, 5.53%, 8/5/97...........
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
TOBACCO--1.3%
8,000 -- 8,000 Phillip Morris, 5.53%, 8/21/97...............
- -----------------------------------------------------------------------------------------------
Total Commercial Paper.......................
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
US TREASURY SECURITIES--1.3%
- -----------------------------------------------------------------------------------------------
8,000 -- 8,000 Treasury Bill, 10/16/97......................
- -----------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES--3.3%
10,000 -- 10,000 Federal National Mortgage Association Floater, 5.27%
8/22/97*.....................................
6,000 -- 6,000 Federal National Mortgage Association, 5.71%, 3/18/98.
-- 5,000 5,000 Student Loan Marketing Association, 5.42%, 10/30/97.
- -----------------------------------------------------------------------------------------------
Total Government Agencies....................
- -----------------------------------------------------------------------------------------------
-- 52,770 52,770 REPURCHASE AGREEMENTS--9.7%
Morgan Stanley & Co., Inc. dated 6/30/97
5.90%, due 7/1/97 repurchase price
$52,778,648 (collateralized by FHLB, FNMA
obligations, total par value of $53,700,000,
6.04%-6.09%, 6/16/97-6/14/99, total market
value $53,820,602............................
First Union Bank, dated 6/30/97 5.92%, due
8,336 -- 8,336 7/1/97
repurchase price $8,337,371 (collateralized
by US Treasury Note, total par value of
$8,471,000, 6.25%, 6/30/98, total market
value $8,502,766)............................
- -----------------------------------------------------------------------------------------------
Total Repurchase Agreements..................
- -----------------------------------------------------------------------------------------------
Total Investments (cost $161,115; $470,960
and $632,075, respectively)..................
- -----------------------------------------------------------------------------------------------
<CAPTION>
MARKET VALUE (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997
- -----------------------------------------------------------------------------------------------
FMB MONITOR MONEY
MONEY MARKET MARKET PRO FORMA
COMBINED
- -----------------------------------------------------------------------------------------------
<C> <C> <C>
$ -- $ 9,998 $ 9,998
-- 4,966 4,966
-- 4,987 4,987
-- 4,947 4,947
-- 9,998 9,998
-- 9,997 9,997
7,957 -- 7,957
- -----------------------------------------------------------------------------------------------
7,957 44,893 52,850
- -----------------------------------------------------------------------------------------------
7,937 -- 7,937
- -----------------------------------------------------------------------------------------------
120,968 407,266 528,234
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
7,877 -- 7,877
- -----------------------------------------------------------------------------------------------
9,999 -- 9,999
5,995 -- 5,995
-- 5,000 5,000
- -----------------------------------------------------------------------------------------------
15,994 5,000 20,994
- -----------------------------------------------------------------------------------------------
-- 52,770 52,770
8,336 -- 8,336
- -----------------------------------------------------------------------------------------------
8,336 52,770 61,106
- -----------------------------------------------------------------------------------------------
$161,115 $470,960 $632,075
- -----------------------------------------------------------------------------------------------
</TABLE>
* Floating Rate Certificates are securities with interest rates that change
whenever a specific interest rate changes. The interest rate is based on
an index of market interest rates or other index. The rate on the Pro
Forma Combined Schedule of Investments is the rate in effect on June 30,
1997.
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-28
<PAGE>
FMB MONEY MARKET AND MONITOR MONEY MARKET FUNDS
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF COMBINATION
The pro forma combined statement of assets and liabilities, including the
pro forma combined schedule of investments, reflect the accounts of First
Michigan Bank (FMB) Money Market Fund and the accounts of the Monitor Money
Market Fund (collectively, the Funds) as of June 30, 1997 and the related pro
forma combined statement of operations for the 12 month period ended June 30,
1997.
The pro forma combined financial statements give effect to the proposed
transfer of the assets and liabilities of the FMB Money Market Fund in
exchange for shares of the Monitor Money Market Fund. Under the terms of the
Agreement and Plan of Reorganization between the FMB Money Market Fund and the
Monitor Money Market Fund (the "Plan"), the combination of the FMB Money
Market Fund and Monitor Money Market Fund will be accounted for by the method
of accounting for tax free mergers of investments companies (sometimes
referred to as the pooling without restatement method). The acquisition will
be accomplished by an exchange of all outstanding shares of each class for the
FMB Money Market Fund for shares of specified classes of the Monitor Money
Market Fund. Accordingly, the historical cost of investment securities will be
carried forward to the surviving portfolio and the results of operations of
the surviving portfolio for the pre-combining periods will not be restated.
The pro forma combined financial statements do not reflect the expenses of the
FMB Money Market Fund and Monitor Money Market Fund in carrying out their
obligations under the Plan as these expenses are immaterial to the financial
statements.
Each Fund has similar investment objectives which remain unchanged as a
result of the combination.
The pro forma financial statements should be read in conjunction with the
historical financial statements of each Fund incorporated by reference to the
respective prospectuses or statements of additional information. The pro forma
combined statement of assets and liabilities has been prepared as if the
combination had taken place at June 30, 1997. Certain amounts have been
reclassified to conform to current presentation.
2. PRO FORMA OPERATIONS
The pro forma combined statement of operations assumes similar rates of
gross investment income from the investments of each Fund. Accordingly, the
combined gross investment income is equal to the sum of the gross investment
income of each Fund.
Pro forma operating expenses reflect the expected expenses of the Monitor
Money Market Fund assuming combination of the Funds for the 12 month period
ended June 30, 1997. As such, pro forma fees for investment advisory,
trustee's, administrative personnel and services, custodian and recordkeeping,
legal and audit and distribution service fees were calculated based on the fee
schedules in effect at June 30, 1997 for the Monitor Money Market Fund.
3. PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Assuming normal market conditions, the investment adviser does not currently
expect to divest significant amounts of combined portfolio holdings.
4. SURVIVING ENTITY
The Monitor Money Market Fund will be the surviving entity for accounting
purposes. This determination was based upon the relative size of each Fund and
that the surviving Fund will be managed by the Monitor Money Market Fund's
current adviser employing current investment objectives, policies and
restrictions.
B-29
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FMB MONITOR PRO
DIVERSIFIED GROWTH FORMA
EQUITY FUND FUND COMBINED
----------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
ASSETS:
Investments at value......................... $71,035 $214,738 $285,773
Investments in repurchase agreements......... 7,692 -- 7,692
Dividends and interest receivable............ 76 173 249
Receivable for investments sold.............. -- 1,881 1,881
Receivable for Fund shares sold.............. 31 -- 31
------- -------- --------
Total assets............................... 78,834 216,792 295,626
------- -------- --------
LIABILITIES:
Accrued expenses............................. 170 190 360
------- -------- --------
Total liabilities.......................... 170 190 360
------- -------- --------
NET ASSETS:
Paid-in-capital.............................. 43,945 129,129 173,074
Net unrealized appreciation (depreciation) of
investments................................. 32,366 82,673 115,039
Accumulated net realized gain (loss) on
investments................................. 2,349 4,866 7,215
Undistributed net investment income.......... 4 (66) (62)
------- -------- --------
Total net assets........................... $78,664 $216,602 $295,266
======= ======== ========
NET ASSETS:
Trust Shares................................. $70,239 $211,505 $281,744
Investment Shares............................ $ 8,425 $ 5,097 $ 13,522
------- -------- --------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER
SHARE:
Trust Shares................................. $ 19.57 $ 40.85 $ 40.85
Investment Shares............................ $ 19.57 $ 40.83 $ 40.83
------- -------- --------
OFFERING PRICE PER SHARE:
Trust Shares................................. $ 19.57 $ 40.85 $ 40.85
Investment Shares *.......................... $ 20.76 $ 42.53 $ 42.53
------- -------- --------
SHARES OUTSTANDING:
Trust Shares................................. 3,589 5,178 6,897
Investment Shares............................ 431 125 332
------- -------- --------
Total shares outstanding ($0.001 par
value).................................... 4,020 5,303 7,229
======= ======== ========
Investments, at identified cost................ $46,361 $132,065 $178,426
======= ======== ========
</TABLE>
*Computation of offering price: 100/94.25 of net assets value for the FMB Fund
and 100/96 of net asset value for the Monitor Fund and combined Fund.
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-30
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED STATEMENT OF OPERATIONS
12 MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FMB
DIVERSIFIED MONITOR PRO FORMA PRO FORMA
EQUITY GROWTH ADJUSTMENTS COMBINED
----------- ------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $ 368 $ 205 $ -- $ 573
Dividend income................... 1,059 3,057 -- 4,116
------- ------- ----- -------
Total income.................... 1,427 3,262 -- 4,689
------- ------- ----- -------
EXPENSES:
Investment advisory fees.......... 677 1,103 (268)(1) 1,512
Trustee's fees.................... 2 4 (2)(2) 4
Administrative personnel and
services......................... 135 202 (60)(3) 277
Custodian and recordkeeping fees
and expenses..................... 21 103 17 (4) 141
Transfer and dividend disbursing
agent fees and expenses.......... 41 29 (27) 43
Fund share registration costs..... 12 22 -- 34
Legal and auditing fees........... 22 11 (18)(5) 15
Printing and postage.............. 12 7 -- 19
Organization costs................ 3 -- -- 3
Insurance premiums................ -- 8 -- 8
Distribution services fees........ 25 11 (7)(6) 29
Other............................. 6 -- -- 6
------- ------- ----- -------
Total expenses.................. 956 1,500 (365) 2,091
------- ------- ----- -------
Deduct --
Waiver of distribution services
fees............................. 7 -- (7)(7) --
------- ------- ----- -------
NET EXPENSES:....................... 949 1,500 (358) 2,091
------- ------- ----- -------
Net investment income........... 478 1,762 358 2,598
------- ------- ----- -------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments
(identified cost basis).......... 3,285 6,829 -- 10,114
Net change in unrealized
appreciation on investments...... 13,907 40,890 -- 54,797
------- ------- ----- -------
Net realized and unrealized gain
on investments................. 17,192 47,719 -- 64,911
------- ------- ----- -------
Change in net assets resulting from
operations......................... $17,670 $49,481 $ 358 $67,509
======= ======= ===== =======
</TABLE>
- --------
(1) To adjust Advisory fees to adopt the Monitor Fund's fee structure for the
combined assets.
(2) To eliminate duplicative Trustee's fees.
(3) To adjust Administration fees to adopt the Monitor Fund's fee structure
for the combined assets.
(4) To adjust Custodian and Recordkeeping fees to adopt the Monitor Fund's fee
structure for the combined assets.
(5) To eliminate duplicative Professional fees.
(6) To adjust Distribution services fees to adopt the Monitor Fund's fee
structure for combined assets.
(7) To adjust expenses voluntarily reduced for Distribution fees to the
Monitor Fund's fee structure for the combined assets.
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-31
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- -----------------------------------------------------------------------------------------------------
FMB FMB PRO
DIVERSIFIED MONITOR PRO FORMA DIVERSIFIED MONITOR FORMA
EQUITY GROWTH COMBINED SECURITY DESCRIPTION EQUITY GROWTH COMBINED
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCK--95.6%
- -----------------------------------------------------------------------------------------------------
ADVERTISING--1.5%
Interpublic Group of
-- 50 50 Companies, Inc.......... $ -- $ 3,066 $ 3,066
- -----------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--
0.6%
7 -- 7 Lockheed Martin......... 725 -- 725
20 -- 20 Raytheon Co............. 1,020 -- 1,020
- -----------------------------------------------------------------------------------------------------
1,745 -- 1,745
- -----------------------------------------------------------------------------------------------------
AUTOMOTIVE--1.1%
9 -- 9 Autoliv, Inc.*.......... 333 -- 333
11 -- 11 Autozone, Inc.*......... 259 -- 259
10 -- 10 Ford Motor Co........... 378 -- 378
23 -- 23 Genuine Parts Co........ 762 -- 762
28 -- 28 TRW Inc................. 1,591 -- 1,591
- -----------------------------------------------------------------------------------------------------
3,323 -- 3,323
- -----------------------------------------------------------------------------------------------------
BANKING--1.6%
23 -- 23 Banc One Corp........... 1,114 -- 1,114
15 -- 15 Citicorp................ 1,808 -- 1,808
30 -- 30 Norwest Corp............ 1,688 -- 1,688
- -----------------------------------------------------------------------------------------------------
4,610 -- 4,610
- -----------------------------------------------------------------------------------------------------
BASIC INDUSTRY--0.4%
Worthington Industries,
-- 64 64 Inc..................... -- 1,172 1,172
- -----------------------------------------------------------------------------------------------------
BUSINESS SERVICES--1.8%
-- 19 19 Cintas Corp............. -- 1,306 1,306
-- 100 100 Cognizant Corp.......... -- 4,050 4,050
- -----------------------------------------------------------------------------------------------------
-- 5,356 5,356
- -----------------------------------------------------------------------------------------------------
CAPITAL GOODS--2.0%
-- 110 110 Boeing Co............... -- 5,837 5,837
- -----------------------------------------------------------------------------------------------------
CHEMICALS--5.8%
6 -- 6 Eastman Chemical Co..... 381 -- 381
-- 260 260 Hanna (M.A.) Co......... -- 7,491 7,491
Millennium Chemicals
-- 5 5 Inc..................... -- 114 114
Morton International
25 -- 25 Inc..................... 755 -- 755
-- 17 17 Potash Corp............. -- 1,246 1,246
-- 200 200 Sigma Aldrich Corp...... -- 7,012 7,012
- -----------------------------------------------------------------------------------------------------
1,136 15,863 16,999
- -----------------------------------------------------------------------------------------------------
COMPUTERS--1.9%
8 -- 8 Diebold................. 293 -- 293
16 -- 16 Hewlett Packard Co...... 896 -- 896
13 -- 13 Microsoft Inc.*......... 1,643 -- 1,643
32 -- 32 Oracle Corp.*........... 1,587 -- 1,587
18 -- 18 Solectron Corp.*........ 1,260 -- 1,260
- -----------------------------------------------------------------------------------------------------
5,679 -- 5,679
- -----------------------------------------------------------------------------------------------------
</TABLE>
continued
B-32
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- ------------------------------------------------------------------------------------------------------
FMB FMB PRO
DIVERSIFIED MONITOR PRO FORMA DIVERSIFIED MONITOR FORMA
EQUITY GROWTH COMBINED SECURITY DESCRIPTION EQUITY GROWTH COMBINED
- ------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
CONSUMER NON-DURABLES--
4.6%
-- 120 120 Colgate-Palmolive....... $ -- $ 7,830 $ 7,830
19 -- 19 Gillette Co............. 1,800 -- 1,800
-- 100 100 Fortunes Brands, Inc.... -- 3,731 3,731
-- 9 9 Hanson PLC-ADR.......... -- 219 219
- ------------------------------------------------------------------------------------------------------
1,800 11,780 13,580
- ------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--11.7%
-- 170 170 American Greeting Corp.. -- 6,311 6,311
International Flavors &
21 87 108 Fragrances.............. 1,060 4,407 5,467
-- 106 106 Media General, Class A.. -- 4,000 4,000
-- 115 115 Newell Co............... -- 4,557 4,557
15 -- 15 Proctor & Gamble........ 2,119 -- 2,119
-- 63 63 Tambrands, Inc.......... -- 3,124 3,124
-- 50 50 Wrigley Wm Jr. Co....... -- 3,350 3,350
- ------------------------------------------------------------------------------------------------------
3,179 25,749 28,928
- ------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--
1.4%
-- 100 100 Avery Dennison Corp..... -- 4,012 4,012
- ------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--
5.6%
26 30 56 AMP, Inc................ 1,085 1,232 2,317
-- 71 71 Emmerson Electric Co.... -- 3,898 3,898
36 59 95 General Electric Co..... 2,353 3,844 6,197
-- 67 67 Hubbell, Inc............ -- 2,960 2,960
30 -- 30 Molex................... 1,095 -- 1,095
- ------------------------------------------------------------------------------------------------------
4,533 11,934 16,467
- ------------------------------------------------------------------------------------------------------
ENERGY--4.8%
-- 95 95 Anadarko Petroleum...... -- 5,700 5,700
-- 9 9 Energy Group PLC-ADR.... -- 371 371
-- 65 65 Schlumberger............ -- 8,125 8,125
- ------------------------------------------------------------------------------------------------------
-- 14,196 14,196
- ------------------------------------------------------------------------------------------------------
ENTERTAINMENT &
LEISURE--1.3%
10 -- 10 Callaway Golf........... 355 -- 355
26 -- 26 Carnival Corp., Class A. 1,072 -- 1,072
35 169 204 Mattel Inc.............. 1,186 5,716 6,902
15 -- 15 Walt Disney............. 1,204 -- 1,204
- ------------------------------------------------------------------------------------------------------
3,817 5,716 9,533
- ------------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES--
0.3%
30 -- 30 Waste Management, Inc... 964 -- 964
- ------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--2.7%
-- 95 95 American Express........ -- 7,077 7,077
24 -- 24 FNMA.................... 1,047 -- 1,047
- ------------------------------------------------------------------------------------------------------
1,047 7,077 8,124
- ------------------------------------------------------------------------------------------------------
</TABLE>
continued
B-33
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- ------------------------------------------------------------------------------------------------------
FMB FMB PRO
DIVERSIFIED MONITOR PRO FORMA DIVERSIFIED MONITOR FORMA
EQUITY GROWTH COMBINED SECURITY DESCRIPTION EQUITY GROWTH COMBINED
- ------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCK, CONTINUED
- ------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--5.6%
20 -- 20 CPC International....... $ 1,846 $ -- $ 1,846
12 -- 12 H. J. Heinz Co.......... 553 -- 553
19 -- 19 Hershey Foods, Inc...... 1,051 -- 1,051
25 50 75 McDonald's Corp......... 1,209 2,416 3,625
40 177 217 PepsiCo................. 1,503 6,649 8,152
29 -- 29 Sara Lee Corp........... 1,207 -- 1,207
- ------------------------------------------------------------------------------------------------------
7,369 9,065 16,434
- ------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTOR/SERVICE
SYSTEM--1.5%
25 98 123 Sysco Corp.............. 912 3,588 4,500
- ------------------------------------------------------------------------------------------------------
HEALTH CARE--1.4%
Columbia/HCA Healthcare
-- 70 70 Corp.................... -- 2,752 2,752
-- 18 18 Medtronics, Inc......... -- 1,482 1,482
- ------------------------------------------------------------------------------------------------------
-- 4,234 4,234
- ------------------------------------------------------------------------------------------------------
INDUSTRIAL MACHINERY--
0.4%
10 -- 10 Caterpillar, Inc........ 1,074 -- 1,074
- ------------------------------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS--
3.8%
Illinois Tool Works,
16 30 46 Inc..................... 799 1,498 2,297
-- 75 75 Nordson Corp............ -- 4,819 4,819
-- 222 222 RPM, Inc................ -- 4,075 4,075
- ------------------------------------------------------------------------------------------------------
799 10,392 11,191
- ------------------------------------------------------------------------------------------------------
INSURANCE--4.6%
American International
10 34 44 Group................... 1,494 5,004 6,498
Cincinnati Financial
-- 74 74 Corp.................... -- 5,807 5,807
-- 7 7 General RE Corp......... -- 1,274 1,274
- ------------------------------------------------------------------------------------------------------
1,494 12,085 13,579
- ------------------------------------------------------------------------------------------------------
OIL & GAS--2.3%
14 -- 14 Chevron Corp............ 1,035 -- 1,035
26 -- 26 Enron Corp.............. 1,061 -- 1,061
20 -- 20 Exxon Corp.............. 1,230 -- 1,230
24 -- 24 Mobil Corp.............. 1,677 -- 1,677
Royal Dutch Pertroleum-
36 -- 36 ADR..................... 1,958 -- 1,958
- ------------------------------------------------------------------------------------------------------
6,961 -- 6,961
- ------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--12.3%
25 100 125 Abbott Laboratories..... 1,669 6,675 8,344
American Home Products
-- 19 19 Corp.................... -- 1,454 1,454
17 -- 17 Johnson & Johnson....... 1,094 -- 1,094
9 55 64 Merck & Co.............. 932 5,693 6,625
19 70 89 Pfizer, Inc............. 2,271 8,365 10,636
Pharmacia & Upjohn,
-- 31 31 Inc..................... -- 1,077 1,077
18 130 148 Schering Plough Corp.... 843 6,224 7,067
- ------------------------------------------------------------------------------------------------------
6,809 29,488 36,297
- ------------------------------------------------------------------------------------------------------
</TABLE>
continued
B-34
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (CONCLUDED)
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES (IN THOUSANDS) MARKET VALUE (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
- ------------------------------------------------------------------------------------------------------
FMB FMB PRO
DIVERSIFIED MONITOR PRO FORMA DIVERSIFIED MONITOR FORMA
EQUITY GROWTH COMBINED SECURITY DESCRIPTION EQUITY GROWTH COMBINED
- ------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCK, CONTINUED
- ------------------------------------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES--0.3%
13 -- 13 Eastman Kodak Co........ $ 998 $ -- $ 998
- ------------------------------------------------------------------------------------------------------
RETAIL--6.5%
30 -- 30 Alberton's, Inc......... 1,095 -- 1,095
13 115 128 Home Depot.............. 896 7,928 8,824
15 30 45 Kohl's Corp.*........... 794 1,588 2,382
32 95 127 Walgreen................ 1,737 5,094 6,831
- ------------------------------------------------------------------------------------------------------
4,522 14,610 19,132
- ------------------------------------------------------------------------------------------------------
TECHNOLOGY--5.8%
Automatic Data
35 140 175 Processing, Inc......... 1,645 6,580 8,225
-- 16 16 Computer Sciences Corp.. -- 1,163 1,163
Electronic Data Systems
13 75 88 Corp.*.................. 533 3,075 3,608
20 35 55 Motorola, Inc........... 1,505 2,660 4,165
-- 53 53 Zero Corp............... -- 1,391 1,391
- ------------------------------------------------------------------------------------------------------
3,683 14,869 18,552
- ------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.8%
Airtouch Communications,
-- 33 33 Inc.*................... -- 903 903
29 -- 29 Alltel Corp............. 969 -- 969
8 -- 8 Ameritech Corp.......... 543 -- 543
7 -- 7 Lucent Technologies..... 518 -- 518
31 -- 31 MCI Communications Co... 1,198 -- 1,198
15 -- 15 SBC Communications Inc.. 928 -- 928
21 -- 21 US West Media Group*.... 425 -- 425
- ------------------------------------------------------------------------------------------------------
4,581 903 5,484
- ------------------------------------------------------------------------------------------------------
TOBACCO--0.1%
Imperial Tobacco Group
-- 18 18 PLC..................... -- 223 223
- ------------------------------------------------------------------------------------------------------
Total Common Stock...... 71,035 211,215 282,250
- ------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--1.2%
- ------------------------------------------------------------------------------------------------------
Prudential Funding
$ -- $3,523 $3,523 Corp., 5.55%, 7/1/97.... -- 3,523 3,523
- ------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--
7,692 -- 7,692 2.6%
- ------------------------------------------------------------------------------------------------------
First Union Bank, dated
6/30/97 5.92% due 7/1/97
repurchase price
$7,693,265
(collateralized by US
Treasury Note, total par
value $7,896,000, 8.25%,
6/30/02, total market
value $7,846,650)....... 7,692 -- 7,692
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost
$46,361; $132,065; and
$178,426, respectively). $78,727 $214,738 $293,465
- ------------------------------------------------------------------------------------------------------
</TABLE>
*represents a non-income producing security. ADR--American Depository Receipt
(See Notes which are an integral part of the Pro Forma Combined Financial
Statements)
B-35
<PAGE>
FMB DIVERSIFIED EQUITY AND MONITOR GROWTH FUNDS
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF COMBINATION
The pro forma combined statement of assets and liabilities, including the
pro forma combined schedule of investments, reflect the accounts of First
Michigan Bank (FMB) Diversified Equity Fund and the accounts of the Monitor
Growth Fund (collectively, the Funds) as of June 30, 1997 and the related pro
forma combined statement of operations for the 12 month period ended June 30,
1997.
The pro forma combined financial statements give effect to the proposed
transfer of the assets and liabilities of the FMB Diversified Equity Fund in
exchange for shares of the Monitor Growth Fund. Under the terms of the
Agreement and Plan of Reorganization between the FMB Diversified Equity Fund
and the Monitor Growth Fund (the "Plan"), the combination of the FMB
Diversified Equity Fund and Monitor Growth Fund will be accounted for by the
method of accounting for tax free mergers of investments companies (sometimes
referred to as the pooling without restatement method). The acquisition will
be accomplished by an exchange of all outstanding shares of each class for the
FMB Diversified Equity Fund for shares of specified classes of the Monitor
Growth Fund. Accordingly, the historical cost of investment securities will be
carried forward to the surviving Fund and the results of operations of the
surviving Fund for the pre-combining periods will not be restated. The pro
forma combined financial statements do not reflect the expenses of FMB
Diversified Equity Fund and Monitor Growth Fund in carrying out their
obligations under the Plan as these expenses are immaterial to the financial
statements.
Each Fund has similar investment objectives which remain unchanged as a
result of the combination.
The pro forma financial statements should be read in conjunction with the
historical financial statements of each Fund incorporated by reference to the
respective prospectuses or statements of additional information. The pro forma
combined statement of assets and liabilities has been prepared as if the
combination had taken place at June 30, 1997. Certain amounts have been
reclassified to conform to current presentation.
2. PRO FORMA OPERATIONS
The pro forma combined statement of operation assumes similar rates of gross
investment income from the investments of each Fund. Accordingly, the combined
gross investment income is equal to the sum of the gross investment income of
each Fund.
Pro forma operating expenses reflect the expected expenses of the Monitor
Growth Fund assuming combination of the Funds for the 12 month period ended
June 30, 1997. As such, pro forma fees for investment advisory, trustee's,
administrative personnel and services, custodian and recordkeeping, legal and
audit and distribution service fees were calculated based on the fee schedules
in effect at June 30, 1997 for the Monitor Growth Fund.
3. PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Assuming normal market conditions, the investment adviser does not currently
expect to divest significant amounts of combined portfolio holdings.
4. SURVIVING ENTITY
The Monitor Growth Fund will be the surviving entity for accounting
purposes. This determination was based upon the relative size of each Fund and
that the surviving Fund will be managed by the Monitor Growth Fund's current
adviser employing current investment objectives, policies and restrictions.
B-36
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification of Registrant's Trustees and officers is provided by
Section 4.3 of Registrant's Declaration of Trust, which is incorporated by
reference as Exhibit (1), to the fullest extent permitted by law, against all
liability and against all expenses reasonably incurred or paid in connection
with any claim, action, suit or proceeding in which any Trustee or officer
became involved as a party or otherwise by virtue of his or her being or having
been a Trustee or officer and against amounts paid or incurred in the settlement
thereof. Indemnification of Registrant's distributor, custodian and transfer
agent against certain losses is provided for, respectively, in Article 6 of the
Distribution Agreement, incorporated herein by reference as Exhibit (7), Section
8 of the Custodian Contract, incorporated herein by reference as Exhibit (9) and
Article 6 of the Transfer Agency Agreement incorporated herein by reference as
Exhibit (13)(i). The Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types of errors and
omissions. In no event will the Registrant indemnify any of its directors,
officers, employees or agents against any liability to which such person would
otherwise be subject by reason of his willful misfeasance, bad faith or gross
negligence in the performance of his duties, or by reason of his reckless
disregard of the duties involved in the conduct of his office or under his
agreement with the Registrant. Registrant will comply with Rule 484 under the
Securities Act of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "act") may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Declaration of Trust of the Registrant (previously
filed as Exhibit 1 to Post-Effective Amendment No. 19 on Form N-1A (Reg.
No. 33-11905) and incorporated herein by reference)
(2) By-Laws of the Registrant (previously filed as Exhibit 2 to Post-Effective
Amendment No. 19 on Form N-1A (Reg. No. 33-11905) and incorporated herein
by reference)
(3) Not applicable
(4) Agreement and Plan of Reorganization, dated as of February 1, 1998, by and
between FMB Funds, Inc. and The Monitor Funds (filed as Appendix A to the
Combined Proxy Statement/Prospectus)
(5) Not applicable
(6) (i) Investment Advisory Agreement between the Registrant and The Huntington
National Bank, as successor to Huntington Trust Company, N.A. (previously
filed as Exhibit 5(i) to Post-Effective Amendment No. 19 on Form N-1A (Reg.
No. 33-11905) and incorporated herein by reference)
C-1
<PAGE>
(ii) Sub-Advisory Agreement of the Registrant with respect to The Monitor
Mortgage Securities Fund (previously filed as Exhibit 5(ii) to
Post-Effective Amendment No. 19 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(iii) Advisory Contract between the Registrant and The Huntington National
Bank, dated as of September 5, 1997, relating to The Monitor Michigan
Tax-Free Fund (previously filed as Exhibit 5(iii) to Post-Effective
Amendment No. 23 on Form N-1A (Reg. No. 33-11905) and incorporated herein
by reference)
(iv) Advisory Contract between the Registrant and The Huntington National
Bank, dated as of November 21, 1997, relating to The Monitor Intermediate
Government Income Fund (previously filed as Exhibit 5(iv) to Post-Effective
Amendment No. 24 on Form N-1A (Reg. No. 33-11905) and incorporated herein
by reference)
(7) Distribution Agreement, dated January 11, 1996, between the Registrant and
SEI Financial Services Company (previously filed as Exhibit 6 to
Post-Effective Amendment No. 20 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(8) Not applicable
(9) Custodian Contract of the Registrant (previously filed as Exhibit 8 to
Post-Effective Amendment No. 19 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(10) (i) Distribution and Shareholder Services Plan, as amended to date
(previously filed as Exhibit 15 to Post-Effective Amendment No. 24 on Form
N-1A (Reg. No. 33-11905) and incorporated herein by reference)
(ii) Multiple Class Plan, as amended to date (previously filed as Exhibit
18 to Post-Effective Amendment No. 24 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(11) Opinion and Consent of Ropes & Gray as to legality of shares being
registered (previously filed with this Registration Statement on Form
N-14)
(12) Opinion and Consent of Ropes & Gray as to the tax matters and consequences
to shareholders of the proposed reorganization (to be filed by amendment)
(13) (i) Transfer Agency and Service Agreement, dated as of January 12, 1998,
between the Registrant and State Street Bank and Trust Company (previously
filed with this Registration Statement on Form N-14)
(ii) Administration Agreement, dated as of January 12, 1998, between the
Registrant and The Huntington National Bank (previously filed with this
Registration Statement on Form N-14)
(iii) Sub-Administration Agreement, dated as of January 12, 1998, between
The Huntington National Bank and SEI Fund Resources (previously filed with
this Registration Statement on Form N-14)
(14) Consent of Price Waterhouse LLP, independent accountants (previously filed
with this Registration Statement on Form N-14)
(15) Not applicable
(16) Powers of Attorney (previously filed with this Registration Statement on
Form N-14)
(17) (i) Form of proxy for each FMB Portfolio (previously filed with this
Registration Statement on Form N-14)
(ii) Prospectuses for Investment and Trust Shares of The Monitor Money
Market Fund and The Monitor Growth Fund, dated April 30, 1997 (previously
filed as a part of Post-Effective Amendment No. 22 on Form N-1A (Reg. No.
33-11905) and incorporated herein by reference)
(iii) Prospectuses for Investment and Trust Shares of The Monitor Michigan
Tax-Free Fund, dated November 20, 1997 (previously filed as a part of Post-
Effective Amendment No. 23 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(iv) Prospectuses for Investment and Trust Shares of The Monitor
Intermediate Government Income Fund, to be dated February 9, 1998
(previously filed as a part of Post-Effective Amendment No. 25 on Form N-1A
(Reg. No. 33-11905) and incorporated herein by reference)
(v) Combined Statement of Additional Information of The Monitor Funds,
dated April 30, 1997 (previously filed as a part of Post-Effective
Amendment No. 22 on Form N-1A (Reg. No. 33-11905)
C-2
<PAGE>
and incorporated herein by reference)
(vi) Supplement, dated November 20, 1997, to the Combined Statement of
Additional Information of The Monitor Funds (previously filed as a part of
Post-Effective Amendment No. 23 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(vii) Supplement, to be dated February 9, 1998, to the Combined Statement
of Additional Information of The Monitor Funds (previously filed as a part
of Post-Effective Amendment No. 25 on Form N-1A (Reg. No. 33-11905) and
incorporated herein by reference)
(viii) Prospectuses for Institutional and Consumer Service Shares of FMB
Funds, Inc., dated March 27, 1997 (previously filed as a part of
Post-Effective Amendment No. 6 on Form N-1A (Reg. No. 33-42939) and
incorporated herein by reference)
(ix) Supplement to the Prospectuses for Institutional and Consumer
Service Shares of FMB Funds, Inc., dated January 27, 1998 (previously filed
pursuant to Rule 497 as a part of Registration No. 33-42939) and
incorporated herein by reference)
(x) Statement of Additional Information for Institutional and Consumer
Service Shares of FMB Funds, Inc., dated March 27, 1997 (previously filed
as a part of Post-Effective Amendment No. 6 on Form N-1A (Reg. No.
33-42939) and incorporated herein by reference)
(xi) Annual Report to Shareholders of The Monitor Funds for the fiscal
year ended December 31, 1996 (filed on Appendix B to the Combined Proxy
Statement/Prospectus incorporated herein by reference)
(xii) Semi-Annual Report to Shareholders of The Monitor Funds for the six
months ended June 30, 1997 (previously filed pursuant to Rule 30b2-1 and
incorporated herein by reference)
(xiii) Annual Report to Shareholders of FMB Funds for the year ended
November 30, 1997 (previously filed pursuant to Rule 30b2-1 and
incorporated herein by reference)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public offering of the
securities registered through the use of a prospectus which is a part of this
registration statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
(3) The Registrant agrees to file, by post-effective amendment, an opinion of
counsel or a copy of an Internal Revenue Service ruling supporting the tax
consequences of the proposed reorganization described on the Combined Proxy
Statement/Prospectus included as a part of this Registration Statement within a
reasonable time after receipt of such opinion or ruling.
C-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this Amendment to
the Registration Statement has been signed on behalf of the Registrant in the
City of Oaks, Commonwealth of Pennsylvania, on the 3rd day of February,
1998.
THE MONITOR FUNDS
By: /s/ David G. Lee
-------------------------------
David G. Lee, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on February 3, 1998:
<TABLE>
<CAPTION>
NAME TITLE
<S> <C>
/s/ David G. Lee President and Chief Executive Officer
- ------------------------
David G. Lee
** Controller, Treasurer and Chief Financial Officer
- ------------------------
Robert DellaCroce
** Trustee
- ------------------------
David S. Schoedinger
** Trustee
- ------------------------
William R. Wise
** Trustee
- ------------------------
John M. Shary
</TABLE>
**Executed on behalf of the indicated person by the undersigned, pursuant to
power of attorney previously filed with this Registration Statement.
By: /s/ David G. Lee
-----------------------------
David G. Lee, Attorney-at-law
C-4
