<PAGE>
As filed with the Securities and Exchange Commission on January 20, 1998
Registration No.333-
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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. ___ [ ]
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 February 20, 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
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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 Meetings
(the "Meetings") for each series of the FMB Funds have been scheduled for
Tuesday, March 17, 1998. The purpose of the Meetings 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 Meetings. 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
MEETINGS, 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 Meetings, 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 their consolidation 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 NAV
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 market
value of your account as a result of the merger.
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 responsibilities of Monitor Funds include 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.As a rule, the expense ratios and sales loads of Monitor Funds are lower
than those of the corresponding FMB Funds. Additionally, 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 similar investment objectives. 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
<PAGE>
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 similar investment objectives. 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 investment
objectives substantially equivalent to the FMB Fund. 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 Monitor fund with investment
objectives substantially equivalent to the FMB Fund. MONITOR INTERMEDIATE
GOVERNMENT INCOME FUND invests primarily in shorter-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 may only be conducted if a quorum is present, either
in person or by proxy of each Portfolio of FMB Funds. For the purposes of this
meeting, a quorum represents 50% of the shares outstanding for each series of
FMB Funds as of February 12, 1998. If 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 MEETINGS OF SHAREHOLDERS
TO BE HELD ON MARCH 17, 1998
NOTICE IS HEREBY GIVEN THAT a 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 Meetings (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
Reorganization Agreement, and should be retained for future reference.
Additional information is set forth in the Combined Statement of Additional
Information relating to the Monitor Portfolios, dated April 30, 1997 (as
supplemented on November 20, 1997 and February 6, 1998), in the Statement of
Additional Information relating to this Combined Proxy Statement/Prospectus,
and in the Prospectuses (as supplemented on January , 1998) and Statement of
Additional Information, dated March 28, 1997, relating to FMB Funds. Each of
such Statements of Additional Information and Prospectuses are incorporated
herein by reference.
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 be
sent to Shareholders on or about February 20, 1998.
<PAGE>
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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
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
COMPARATIVE FEE AND EXPENSE TABLES........................................ 7
Monitor Growth Fund/FMB Diversified Equity Fund......................... 7
Monitor Intermediate Government Income Fund/FMB Intermediate Government
Income Fund............................................................ 8
Monitor Michigan Tax-Free Fund/FMB Michigan Tax-Free Bond Fund.......... 8
Monitor Money Market Fund/FMB Money Market Fund......................... 9
Expense Ratios--FMB Portfolios.......................................... 10
Expense Ratios--Monitor Portfolios...................................... 10
Voting Information...................................................... 10
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES, RESTRICTIONS AND RISK
FACTORS.................................................................. 11
Monitor Growth Fund/FMB Diversified Equity Fund......................... 11
Monitor Intermediate Government Income Fund/FMB Intermediate Government
Income Fund............................................................ 11
Monitor Michigan Tax-Free Fund/FMB Michigan Tax-free Bond Fund.......... 12
Monitor Money Market Fund/FMB Money Market Fund......................... 12
Investment Restrictions for All Portfolios.............................. 13
Risk Factors Affecting the Monitor Portfolios........................... 15
COMPARISON OF SHAREHOLDER TRANSACTIONS AND SERVICES....................... 18
Sales Charges and Exemptions............................................ 18
Purchase Policies....................................................... 19
Redemption Policies..................................................... 20
Share Exchanges......................................................... 20
Responsibility for Telephone Instructions............................... 21
Dividends and Distributions............................................. 21
INFORMATION RELATING TO THE PROPOSED REORGANIZATION....................... 21
Description of the Reorganization Agreement............................. 22
Capitalization.......................................................... 23
Federal Income Tax Consequences......................................... 24
Comparison of Shareholder Rights........................................ 25
INFORMATION RELATING TO VOTING MATTERS.................................... 27
General................................................................. 27
Shareholder and Board Approvals......................................... 27
Appraisal Rights........................................................ 29
Quorum.................................................................. 29
Annual Meetings......................................................... 30
ADDITIONAL INFORMATION ABOUT THE MONITOR FUNDS............................ 30
ADDITIONAL INFORMATION ABOUT FMB FUNDS.................................... 31
ADDITIONAL INFORMATION ABOUT THE INVESTMENT ADVISER....................... 33
FMB FUNDS FINANCIAL HIGHLIGHTS............................................ 34
FINANCIAL STATEMENTS...................................................... 36
OTHER BUSINESS............................................................ 36
SHAREHOLDER INQUIRIES..................................................... 36
APPENDIX I--Agreement and Plan of Reorganization.......................... I-1
</TABLE>
3
<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 attached to this Combined Proxy Statement/Prospectus as Appendix I.
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 and the Monitor Funds Semi-
Annual Report to Shareholders for the six month 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 Holding Company Merger 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 27, 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
Shareholders of the FMB Funds Portfolios will recognize no gain or loss for
federal income tax purposes on their receipt of shares of the Monitor Funds
Portfolios. Shareholders of the Monitor Funds Portfolios will have no tax
consequence from the Reorganization. The FMB Funds Portfolios will incur no
federal tax purposes on their issuance of shares in the Reorganization. See
"Information Relating to the Proposed Reorganization-- Federal Income Tax
Consequences."
OVERVIEW OF THE FMB PORTFOLIOS AND THE MONITOR PORTFOLIOS
There are no material differences between the investment objectives and
policies of the FMB Michigan Tax-Free Bond Fund and the Monitor Michigan Tax-
Free Fund, or between the FMB Intermediate Government Income Fund and The
Monitor Intermediate Government Income Fund. The investment objectives and
policies of the FMB Diversified Equity Fund and the FMB Money Market Fund are
similar to those of the corresponding Monitor Funds portfolios, but differ in
certain ways. See "Comparison of Investment Objectives, Policies, Restrictions
and Risk Factors" below and the FMB Funds and Monitor Funds Prospectuses,
which are incorporated by reference herein, for a description of the
similarities and differences between the investment objectives and policies of
the FMB Portfolios and the corresponding Monitor Portfolios.
4
<PAGE>
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>
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(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'
Prospectuses accompanying this Combined Proxy Statement/Prospectus which are
incorporated herein by reference, 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") also serves as
distributor of the Investment Shares 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 Class 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 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.
5
<PAGE>
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 the Consumer Service 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.
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.
6
<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 and of each class of shares of
the corresponding Monitor Portfolios as of their most recent respective fiscal
years, and (ii) estimated 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 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>
FMB DIVERSIFIED MONITOR GROWTH PRO FORMA
EQUITY FUND FUND 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 (after fee
waivers)............... 1.00% 1.00% 0.60% 0.60% 0.60% 0.60%
12b-1 fees (after fee
waivers)............... 0.25%(1) 0.00% 0.25% 0.00% 0.25% 0.00%
Other expenses (after
fee waivers and/or
expense
reimbursements)........ 0.37% 0.37% 0.23% 0.23% 0.23% 0.23%
Total operating expenses
(after fee waivers
and/or expense
reimbursements)........ 1.62%(1) 1.37% 1.08% 0.83% 1.08% 0.83%
</TABLE>
- --------
(1) Absent waivers, the 12b-1 fee would have been 0.35% and Total Operating
Expenses would have been 1.72%.
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 Trust 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>
7
<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 (after fee
waivers)................. 0.45% 0.45% 0.50% 0.50%
12b-1 fees (after fee
waivers)................. 0.25%(2) 0.00% 0.25% 0.00%
Other expenses (after fee
waivers and/or expense
reimbursements).......... 0.34% 0.34% 0.24% 0.24%
Total operating expenses
(after fee waivers and/or
expense reimbursements).. 1.04%(2) 0.79% 0.99% 0.74%
</TABLE>
- --------
(1) Amounts are estimates because this fund has not commenced operations.
(2) Absent waivers, 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 Trust 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) 0.50% 0.50%
12b-1 fees (after fee waivers)........ 0.25%(3) 0.00% 0.25% 0.00%
Other expenses (after fee waivers
and/or expense reimbursements)........ 0.38% 0.38% 0.30% 0.30%
Total operating expenses (after fee
waivers and/or expense
reimbursements)...................... 0.98%(4) 0.73%(4) 1.05% 0.80%
</TABLE>
- --------
(1) Amounts are estimates because this fund has not commenced operations.
(2) Absent waivers, Advisory fees would be 0.55% for each class.
(3) Absent waivers, 12b-1 fees would be 0.35%.
(4) Absent waivers, Total Operating Expenses would have been 1.28% for the
Consumer Service Shares and 0.93% for Institutional shares.
8
<PAGE>
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 Trust 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>
FMB MONEY MONITOR MONEY PRO FORMA
MARKET FUND MARKET FUND COMBINED
---------------------- ---------------- ----------------
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 (after fee
waivers)............... 0.35% 0.35% 0.30% 0.30% 0.30% 0.30%
12b-1 fees (after fee
waivers)............... 0.25% 0.00% 0.10% 0.00% 0.10% 0.00%
Other expenses (after
fee waivers and/or
expense
reimbursements)........ 0.34% 0.34% 0.23% 0.23% 0.23% 0.23%
Total operating expenses
(after fee waivers
and/or expense
reimbursements)........ 0.94% 0.69% 0.63% 0.53% 0.63% 0.53%
</TABLE>
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 Trust 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>
9
<PAGE>
EXPENSE RATIOS--FMB PORTFOLIOS
The following table sets forth (i) 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 tables set forth (i) 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.
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".
10
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES,
RESTRICTIONS AND RISK FACTORS
The investment objectives, policies, restrictions and risk factors 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 risk factors of the FMB Portfolios
and corresponding Monitor Portfolios and is qualified in its entirety by the
discussion elsewhere herein, and in the Prospectuses and Statements of
Additional Information of the FMB Portfolios and the Monitor Portfolios
incorporated herein by reference.
MONITOR GROWTH FUND/FMB DIVERSIFIED EQUITY FUND
Investment Objectives. The investment objectives 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 considerations 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 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 also invest 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.
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
11
<PAGE>
Government Income Fund, the dollar-weighted average maturity of its entire
portfolio is not expected to exceed 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. 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.
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 Moody's or S&P,
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 objective of the Monitor Michigan Tax-Free Fund is 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 Huntington
pursuant to guidelines established by the Trustees; (c) negotiable
certificates of deposit and bankers' 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 Huntington pursuant to guidelines established by the Trustees;
and (e) repurchase agreements and master demand notes.
12
<PAGE>
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 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
13
<PAGE>
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 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 may purchase
securities which are secured by interests in real estate, (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 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 portfolio 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 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.
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<PAGE>
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, which is incorporated by reference herein, for
additional information about the investment restrictions applicable to the
Monitor Portfolios.
RISK FACTORS AFFECTING THE MONITOR PORTFOLIOS
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. For more detailed
information concerning these risk factors, see the Monitor Funds' Combined
Statement of Additional Information, which is incorporated by reference
herein.
15
<PAGE>
Foreign Securities. Except as otherwise limited by a Monitor Portfolio's
investment objective and policies, 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.
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-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.
Securities Lending. In order to generate additional income, the Monitor
Portfolios may lend its portfolio securities on a short-term basis to brokers,
dealers or other financial institutions. A fund will only enter into loan
arrangements with brokers, dealers or other financial institutions that the
Adviser has determined are creditworthy under guidelines established by the
Trustees of Monitor Funds, and must receive collateral equal to at least 102%
of the current market value of the securities loaned. The collateral received
when a fund lends portfolio securities 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 aggregate value of all securities loaned by a fund may not exceed 20% of
the fund's total assets. There is a risk that when lending portfolio
securities they may not be available to a fund on a timely basis and a fund
may, therefore, lose the opportunity to sell the 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 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 fund may also call such loans in order to sell the
securities.
When-Issued and Delayed Delivery Transactions. The Monitor Portfolios may
purchase securities on a when-issued or delayed delivery basis. 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
16
<PAGE>
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 Monitor Michigan Tax-
Free Fund is closely tied to conditions within the State of Michigan. The
economy of Michigan is principally dependent on three sectors--manufacturing
(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.
Repurchase Agreements. Certain securities in which a Monitor Portfolio
invests may be purchased pursuant to repurchase agreements. 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
may invest in mortgage-related securities issued by agencies of the U.S.
Government such as the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation,
or those issued by nongovernmental entities, and in collateralized mortgage
obligations. Mortgage-related securities represent pools of mortgage loans
assembled for sale to investors by such governmental agencies or by
nongovernment entities such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party
or otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market
value of the security whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other interest-
bearing securities, the prices of mortgage-related securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse
is not necessarily true, since in periods of declining interest rates the
mortgages underlying the security are prone to prepayment. For this and other
reasons, a mortgage-related security's effective maturity may be shortened by
unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to the fund. In addition,
regular payments received in respect of mortgage-related securities include
both interest and principal. No assurance can be given as to the return a fund
will receive when these amounts are reinvested.
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<PAGE>
Options and Futures Contracts. Each Monitor Portfolio other than the Monitor
Money Market Fund may seek to increase its current return by writing covered
call options and covered put options on its portfolio securities. 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 addition, 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 and 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.
COMPARISON OF SHAREHOLDER TRANSACTIONS AND SERVICES
Set forth below is a comparison of the shareholder transactions and services
that are available in connection with Investment Shares and Trust Shares of
the Monitor Portfolios, as compared to the Consumer Service Shares and
Institutional Shares of the FMB Portfolios.
SALES CHARGES AND EXEMPTIONS
Monitor Portfolios--
(a) Trust Shares of each Monitor Portfolio are sold without a sales charge.
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<PAGE>
(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.
PURCHASE POLICIES
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS-- FMB PORTFOLIOS--
INVESTMENT AND CONSUMER SERVICE AND
TRUST SHARES INSTITUTIONAL SHARES
-------------------- --------------------
<S> <C> <C>
Minimum Initial
Investment: Investment and Trust--$1,000, Consumer Service--$500, except that
except that minimum is waived for minimum is $250 for IRA accounts
shareholders using the automatic and minimum is waived for shareholders
investment plan. using the automatic investment plan.
Institutional--No minimum, except $50 for
automatic investment plan and $25 for
shareholders using the direct deposit plan.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MONITOR PORTFOLIOS-- FMB PORTFOLIOS--
INVESTMENT AND CONSUMER SERVICE AND
TRUST SHARES INSTITUTIONAL SHARES
-------------------- --------------------
<S> <C> <C>
Minimum Subsequent
Investment: Investment--$50 Consumer Service--$25. Institutional--
Trust--$500 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 telephone Consumer Service and Institutional--
By mail, through authorized brokers
or financial institutions.
Payment Methods: Investment and Trust--By check Consumer Service and Institutional.--
or wire transfer 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.
REDEMPTION POLICIES
<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 Institutional--
or wire transfer (wire transfers By check or wire transfer. Redemption
require fee payment for amounts in kind is optional for redemption requests
under $100,000) 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 Fund
only only
Trust--None Institutional--None.
Automatic Cash Investment--Yes Consumer Service--Yes
Withdrawal Plan:
Trust--No Institutional--No
</TABLE>
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.
SHARE EXCHANGES
<TABLE>
<CAPTION>
FMB
MONITOR PORTFOLIOS--
PORTFOLIOS-- CONSUMER
INVESTMENT SERVICE AND
AND INSTITUTIONAL
TRUST SHARES SHARES
------------ -------------
<S> <C> <C>
By Mail............................................. Yes Yes
By Telephone........................................ Yes Yes
Minimum............................................. Inapplicable $1,000 minimum
</TABLE>
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<PAGE>
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.
RESPONSIBILITY FOR TELEPHONE INSTRUCTIONS
Monitor Funds and FMB Funds, their administrators and their distributors are
not liable for any loss, liability, cost or expense for acting upon telephone
instructions that are reasonably believed to be genuine. In attempting to
confirm that telephone instructions are genuine, procedures are used that are
considered reasonable, which may include recording telephone instructions and
requesting information as to account registration such as the shareholder
account number and/or tax identification number or sending confirmations
within 72 hours of the exchange, verifying the name in which an account is
registered, the account number, and the account holder's Social Security
number, and sending proceeds only to the address of record or to a previously
authorized bank account.
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
Intermediate Government Income Fund None
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.
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.
21
<PAGE>
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, 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
22
<PAGE>
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 and/or 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 are lower
than those paid by the FMB Funds), 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 December 31, 1998, the
total operating expense ratios of the Monitor Portfolios (excluding interest,
taxes, brokerage commissions, litigation expenses and extraordinary expenses)
will not exceed the pro forma total operating expense ratios set forth in this
Combined Proxy Statement/Prospectus. These total operating expense ratios of
the Monitor Portfolios are lower than those currently applicable to the
corresponding FMB Portfolios. 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 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
23
<PAGE>
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 Huntington Bank 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 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
24
<PAGE>
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. per share. The Articles authorize FMB Funds to issue million
shares of stock. The FMB Funds Board of Directors may, without shareholder
approval, increase the number of authorized shares and 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 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
25
<PAGE>
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
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 requiries 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's 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,
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,
26
<PAGE>
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
actions are the result of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office
("Disabling Conduct"). In the event of any litigation against the directors of
officers of FMB Funds, FMB Funds's Bylaws require that FMB Funds indemnify a
director or officer for certain expenses and to advance money for such
expenses provided that (a) the court or other body before whom the proceeding
to which the director or officer is a party was brought (i) dismisses the
proceeding for insufficiency of evidence of any Disabling Conduct or (ii)
reaches a final decision on the merits that the director or officer was not
liable by reason of Disabling Conduct; or (b) in the absence of such a
decision, there is a reasonable determination, based upon a review of the
facts, that the director or officer was not liable by reason of Disabling
Conduct, which determination shall be made by (i) the vote of a majority of a
quorum of the directors who are neither "interested persons" of FMB Funds as
defined in the 1940 Act nor parties to the proceedings, or (ii) an independent
legal counsel in a written opinion.
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
27
<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.
28
<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
29
<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 about the Monitor Portfolios is included in the Prospectuses
accompanying this Combined Proxy Statement/Prospectus, which are incorporated
by reference herein. Additional information about the Monitor Portfolios is
included in their Statement of Additional Information dated April 30, 1997, as
supplemented on November 20, 1997, and February 6, 1998, which has been filed
with the SEC. A copy of the 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 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.
William R. Wise, 66 Trustee Former Corporate Director of
613 Valley Forge Court Financial Services and
Westerville, Ohio Treasurer, Childrens
Hospital, Columbus, Ohio.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATIONS DURING
NAME, AGE AND ADDRESS MONITOR FUNDS PAST FIVE YEARS
--------------------- --------------------- -------------------------------
<C> <C> <S>
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).
Marc H. Cahn, 40 Vice President Vice President and Assistant
One Freedom Valley Road and Secretary Secretary of SEI Investments
Oaks, Pennsylvania 19456 Company since 1996; Associate
General Counsel, Barclays Bank
PLC (1995 to 1996); ERISA
Counsel, First Fidelity
Bancorporation (1994 to 1995);
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).
Barbara A. Nugent, 41 Vice President Vice President and Assistant
One Freedom Valley Road and Secretary Secretary of SEI Investments
Oaks, Pennsylvania 19456 Company since 1996. Associate
attorney with Drinker, Biddle
& Reath (1994 to 1996);
Assistant Vice
President/Administration of
Delaware Service Company, Inc.
(1992 to 1993).
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 FMB Funds is incorporated herein by reference from its
Prospectuses dated March 28, 1997, as supplemented on January , 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.
31
<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.
Marc H. Cahn, 40 Vice President Vice President and Assistant
One Freedom Valley Road and Assistant Secretary Secretary of SEI
Oaks, Pennsylvania 19456 Investments Company since
1996; Associate General
Counsel, Barclays Bank PLC
(1995 to 1996); ERISA
Counsel, First Fidelity
Bancorporation (1994 to
1995); 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
Oaks, Pennsylvania 19456 Investments Company since
1995; Associate attorney
with Dewey Ballantine (1994
to 1995); Associate
attorney with Winston &
Strawn (1991 to 1994).
Barbara A. Nugent, 41 Vice President Vice President and Assistant
One Freedom Valley Road and Assistant Secretary Secretary of SEI
Oaks, Pennsylvania 19456 Investments Company since
1996. Associate attorney
with Drinker, Biddle &
Reath (1994 to 1996);
Assistant Vice
President/Administration of
Delaware Service Company,
Inc. (1992 to 1993).
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>
32
<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>
33
<PAGE>
FMB FUNDS FINANCIAL HIGHLIGHTS
The tables set forth below present financial information for the
Institutional Shares and Consumer Service Shares of the FMB Portfolios. This
information is derived from the FMB Portfolios' audited financial statements
for the fiscal year ended November 30, 1997, which are included in the
Statement of Additional Information related to this Combined Proxy
Statement/Prospectus. Financial highlights for the FMB Portfolios for the five
years ended November 30, 1997 are contained in the Prospectuses of FMB Funds,
dated March 28, 1997, as supplemented on January , 1998, and the financial
statements for the FMB Portfolios for prior fiscal years are contained in the
FMB Funds' 1996 Annual Report to Shareholders and are incorporated by
reference into FMB Funds' Statement of Additional Information dated March 28,
1997, which Prospectuses and Statement of Additional Information are
incorporated herein by reference.
34
<PAGE>
SELECTED DATA FOR AN FMB FUND SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE
PERIOD INDICATED:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
NOVEMBER 30, 1997
------------------------------
INSTITUTIONAL CONSUMER SERVICE
SHARES SHARES
------------- ----------------
<S> <C> <C>
FMB DIVERSIFIED EQUITY FUND
Net Asset Value, beginning of period.......... $ 17.73 $ 17.73
Net Investment Income......................... $ 0.10 $ 0.06
Net Realized and Unrealized Gains/(Losses) on
Securities................................... $ 3.63 $ 3.62
Dividends from Net Investment Income.......... $ (0.11) $ (0.07)
Distributions from Capital Gains.............. $ (0.76) $ (0.76)
Net Asset Value, end of period................ $ 20.59 $ 20.58
Total Return(1)............................... 22.19% 21.84%
Net Assets, end of period (000's omitted)..... $ 73,097 $ 8,753
Ratio of Expenses to Average Net Assets....... 1.37% 1.62%
Ratio of Net Income to Average Net Assets..... 0.56% 0.31%
Ratio of Expenses to Average Net Assets
(excluding waivers).......................... 1.37% 1.72%
Ratio of Net Income to Average Net Assets
(excluding waivers).......................... 0.56% 0.21%
Portfolio Turnover............................ 28.0% 28.0%
Average Commissions Paid...................... $ 0.0733 $0.0733
FMB INTERMEDIATE GOVERNMENT INCOME FUND
Net Asset Value, beginning of period.......... $ 10.13 $ 10.13
Net Investment Income......................... $ 0.59 $ 0.57
Net Realized and Unrealized Gains/(Losses) on
Securities................................... $ (0.02) $ (0.02)
Dividends from Net Investment Income.......... $ (0.58) $ (0.56)
Distributions from Capital Gains.............. -- --
Net Asset Value, end of period................ $ 10.16 $ 10.16
Total Return(1)............................... 6.27% 5.99%
Net Assets, end of period (000's omitted)..... $115,064 $ 3,518
Ratio of Expenses to Average Net Assets....... 0.79% 1.04%
Ratio of Net Income to Average Net Assets..... 5.91% 5.66%
Ratio of Expenses to Average Net Assets
(excluding waivers).......................... 0.79% 1.14%
Ratio of Net Income to Average Net Assets
(excluding waivers).......................... 5.91% 5.56%
Portfolio Turnover............................ 28.0% 28.0%
Average Commissions Paid...................... n/a n/a
FMB MICHIGAN TAX-FREE BOND FUND
Net Asset Value, beginning of period.......... $ 10.79 $ 10.79
Net Investment Income......................... $ 0.50 $ 0.47
Net Realized and Unrealized Gains/(Losses) on
Securities................................... 0.10 0.10
Dividends from Net Investment Income.......... $ (0.50) $ (0.47)
Distributions from Capital Gains.............. -- --
Net Asset Value, end of period................ $ 10.89 $ 10.89
Total Return(1)............................... 5.73% 5.47%
Net Assets, end of period (000's omitted)..... $ 24,954 $ 9,426
Ratio of Expenses to Average Net Assets....... 0.73% 0.98%
Ratio of Net Income to Average Net Assets..... 4.66% 4.41%
Ratio of Expenses to Average Net Assets
(excluding waivers).......................... 1.00% 1.35%
Ratio of Net Income to Average Net Assets
(excluding waivers).......................... 4.39% 4.04%
Portfolio Turnover............................ 7.0% 7.0%
Average Commissions Paid...................... n/a n/a
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
NOVEMBER 30, 1997
------------------------------
INSTITUTIONAL CONSUMER SERVICE
SHARES SHARES
------------- ----------------
<S> <C> <C>
FMB MONEY MARKET FUND
Net Asset Value, beginning of period.......... $ 1.00 $ 1.00
Net Investment Income......................... $ 0.05 $ 0.05
Net Realized and Unrealized Gains/(Losses) on
Securities................................... -- --
Dividends from Net Investment Income.......... $ (0.05) $ (0.05)
Distributions from Capital Gains.............. -- --
Net Asset Value, end of period................ $ 1.00 $ 1.00
Total Return(1)............................... 4.96% 4.70%
Net Assets, end of period (000's omitted)..... $143,439 $13,758
Ratio of Expenses to Average Net Assets....... 0.69% 0.94%
Ratio of Net Income to Average Net Assets..... 4.85% 4.60%
Ratio of Expenses to Average Net Assets
(excluding waivers).......................... 0.69% 0.94%
Ratio of Net Income to Average Net Assets
(excluding waivers).......................... 4.85% 4.60%
</TABLE>
- --------
(1) Total Return figures do not reflect applicable sales loads.
FINANCIAL STATEMENTS
The financial statements for the FMB Portfolios for the fiscal year ended
November 30, 1997, are included in the Statement of Additional Information
related to this Combined Proxy Statement/Prospectus. The financial highlights
and the financial statements for Investment and Trust Shares of the Monitor
Portfolios for the fiscal year ended December 31, 1996, and the six-month
period ended June 30, 1997, are incorporated by referenced into the Monitor
Funds' Prospectuses, dated April 30, 1997, and its Combined Statement of
Additional Information, dated April 30, 1997, each of which is incorporated by
reference in this Combined Proxy Statement/Prospectus.
The financial statements for the FMB Portfolios as of and for the year ended
November 30, 1997, 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.
The financial statements of the Monitor Portfolios as of and for the year
ended December 31, 1996, which are incorporated by reference into the Monitor
Funds' Prospectuses and contained in the Monitor Funds' Combined Statement of
Additional Information, and are also incorporated by reference in this
Combined Proxy/Prospectus, have been so incorporated by reference in reliance
on the reports of Price Waterhouse LLP, independent auditors, 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.
36
<PAGE>
ANNEX I
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
I-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
I-2
<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
I-3
<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.
I-6
<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.
I-7
<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.
I-8
<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.
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<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:
I-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.
I-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
I-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.
I-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: _________________________________
I-14
<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
Notes to Financial Statements........................................... B-16
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-19
Pro Forma Combined Statement of Operations for the 12 months ended June
30, 1997............................................................... B-20
Pro Forma Combined Schedule of Investments as of June 30, 1997.......... B-21
Notes to Pro Forma Combined Financial Statements........................ B-25
FMB Diversified Equity and Monitor Growth Funds
Pro Forma Combined Statement of Assets and Liabilities as of June 30,
1997................................................................... B-26
Pro Forma Combined Statement of Operations for the 12 months ended June
30, 1997............................................................... B-27
Pro Forma Combined Schedule of Investments.............................. B-28
Notes to Pro Forma Combined Financial Statements........................ B-32
</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)
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. Agency Mortgage-Backed Obligations--15.0%
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)
- -----------------------------------------
<S> <C> <C>
U.S. Government Agency Obligations--39.3%
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>
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-16
<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-17
<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-18
<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-19
<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-20
<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-21
<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-22
<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-23
<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-24
<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-25
<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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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 may be permitted to directors, 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 director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, 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 1933 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 I 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 (filed herewith)
(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 (filed
herewith)
(ii) Administration Agreement, dated as of January 12, 1998, between the
Registrant and The Huntington National Bank (filed herewith)
(iii) Sub-Administration Agreement, dated as of January 12, 1998, between
The Huntington National Bank and SEI Fund Resources (filed herewith)
(14) Consent of Price Waterhouse LLP, independent accountants (filed herewith)
(15) Not applicable
(16) Powers of Attorney (appears on page C-4 hereof)
(17) (i) Form of proxy for each FMB Portfolio (filed herewith)
(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) Proposed Prospectuses for Investment and Trust Shares of The Monitor
Intermediate Government Income Fund, to be dated February 6, 1998
(previously filed as a part of Post-Effective Amendment No. 24 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) Proposed Supplement, to be dated February 6, 1998, to the Combined
Statement of Additional Information of The Monitor Funds (previously filed
as a part of Post-Effective Amendment No. 24 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) Supplements to the Prospectuses for Institutional and Consumer
Service Shares of FMB Funds, Inc., dated January __, 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, 1997 (previously filed pursuant to Rule 30b2-1 and
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.
C-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant in the City of Oaks,
Commonwealth of Pennsylvania, on the 20th day of January, 1998.
THE MONITOR FUNDS
By: /s/ David G. Lee
-------------------------------
David G. Lee, President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints David G. Lee and
Stephen G. Meyer, and each of them singly, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, for him or her
and in his or her name, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement on Form
N-14 filed by The Monitor Funds, a Massachusetts business trust, and to file the
same with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on January 20, 1998:
<TABLE>
<CAPTION>
NAME TITLE
<S> <C>
/s/ David G. Lee President and Chief Executive Officer
- ------------------------
David G. Lee
/s/ Robert DellaCroce Controller, Treasurer and Chief Financial Officer
- ------------------------
Robert DellaCroce
/s/ David S. Schoedinger Trustee
- ------------------------
David S. Schoedinger
/s/ William R. Wise Trustee
- ------------------------
William R. Wise
/s/ John M. Shary Trustee
- ------------------------
John M. Shary
</TABLE>
C-4
<PAGE>
EXHIBIT INDEX
(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 I
to the Combined Proxy Statement/Prospectus)
(11) Opinion and Consent of Ropes & Gray as to legality of shares being
registered
(13)(i) Transfer Agency and Service Agreement, dated as of January 12, 1998,
between the Registrant and State Street Bank and Trust Company
(13)(ii) Administration Agreement, dated as of January 12, 1998, between the
Registrant and The Huntington National Bank
(13)(iii) Sub-Administration Agreement, as of January 12, 1998, between The
Huntington National Bank and SEI Fund Resources
(14) Consent of Price Waterhouse LLP, independent auditors
(17)(i) Form of proxy for each FMB Portfolio
<PAGE>
Exhibit 11
ROPES & GRAY
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005-3333
January 20, 1998
The Monitor Funds
The Huntington Trust Company, N.A.
41 South High Street
Columbus, Ohio 43215
Gentlemen:
You have registered under the Securities Act of 1933, as amended (the "1933
Act") an indefinite number of shares of beneficial interest ("Shares") of the
Monitor Funds ("Trust"), as permitted by Rule 24f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). You propose to file a registration
statement under the 1933 Act on Form N-14 (the "Registration Statement") in
order to register under the 1933 Act Investment and Trust Shares of 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
Trust (the "Series").
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale of
the authorized but unissued Investment and Trust Shares of each Series have been
duly authorized under Massachusetts law. Upon the original issue and sale of
your authorized but unissued Investment and Trust Shares of each Series and upon
receipt of the authorized consideration therefor in an amount not less than the
net asset value of the Investment and Trust Shares established and in force at
the time of their sale, the Investment and Trust Shares of each Series issued
will be validly issued, fully paid and non-assessable.
The Monitor Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular Series of shares for all
loss and expenses of any shareholder of that Series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that Series of shares
itself would be unable to meet its obligations.
<PAGE>
We understand that this opinion is to be used in connection with the filing
of the Registration Statement. We consent to the filing of this opinion with
and as part of your Registration Statement.
Sincerely,
/S/ ROPES & GRAY
Ropes & Gray
<PAGE>
Exhibit 13(i)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
MONITOR FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Terms of Appointment; Duties of the Bank............................................. 1
Fees and Expenses.................................................................... 3
Representations and Warranties of the Bank........................................... 4
Representations and Warranties of the Fund........................................... 4
Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code........ 5
Data Access and Proprietary Information.............................................. 6
Indemnification...................................................................... 8
Standard of Care..................................................................... 9
Covenants of the Fund and the Bank................................................... 9
Termination of Agreement.............................................................10
Additional Funds.....................................................................11
Assignment...........................................................................11
Amendment............................................................................11
Massachusetts Law to Apply...........................................................11
Force Majeure........................................................................11
Consequential Damages................................................................12
Merger of Agreement..................................................................12
Limitations of Liability of the Trustees and Shareholders............................12
Counterparts.........................................................................12
Reproduction of Documents............................................................12
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 12th day of January, 1998, by and between MONITOR
FUNDS, a Massachusetts business trust, having its principal office and place of
business at 41 South High Street, Columbus, Ohio 43287 (the "Fund"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, such series
shall be named in the attached Schedule A which may be amended by the parties
from time to time (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 11, being herein referred to as a "Portfolio", and collectively as the
"Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its beneficial interest, $0.01 par value
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
<PAGE>
(ii) pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to the
Custodian;
(iv) in respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with broker-dealers
authorized by the Fund;
(v) at the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(vi) effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vii) prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and protecting the Bank and the
Fund, and the Bank at its option, may issue replacement certificates in
place of mutilated stock certificates upon presentation thereof and
without such indemnity;
(ix) maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) record the issuance of shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Bank shall also provide the Fund on a regular
basis with the total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the issuance of
shares, to monitor the issuance of such shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts,
2
<PAGE>
preparing Shareholder meeting lists, mailing Shareholder proxies,
Shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts,
preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(e.g., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. In addition, any other expenses
incurred by the Bank at the request or with the consent of the Fund, will
be reimbursed by the Fund on behalf of the applicable Portfolio.
3
<PAGE>
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within thirty (30) days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust and By-
Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state
4
<PAGE>
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
5. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
Code
5.1 The Bank is authorized to promptly debit the appropriate Fund account(s)
upon the receipt of a payment order in compliance with the selected
security procedure (the "Security Procedure") chosen for funds transfer
and in the amount of money that the Bank has been instructed to transfer.
The Bank shall execute payment orders in compliance with the Security
Procedure and with the Fund instructions on the execution date provided
that such payment order is received by the customary deadline for
processing such a request, unless the payment order specifies a later
time. All payment orders and communications received after this the
customary deadline will be deemed to have been received the next business
day.
5.2 The Fund acknowledges that the Security Procedure it has designated on the
Fund Selection Form was selected by the Fund from security procedures
offered by the Bank. The Fund shall restrict access to confidential
information relating to the Security Procedure to authorized persons as
communicated to the Bank in writing. The Fund must notify the Bank
immediately if it has reason to believe unauthorized persons may have
obtained access to such information or of any change in the Fund's
authorized personnel. The Bank shall verify the authenticity of all Fund
instructions according to the Security Procedure.
5.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number,
the account number shall take precedence and govern.
5.4 The Bank reserves the right to decline to process or delay the processing
of a payment order which (a) is in excess of the collected balance in the
account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the
Bank's sole judgement, to exceed any volume, aggregate dollar, network,
time, credit or similar limits which are applicable to the Bank; or (c) if
the Bank, in good faith, is unable to satisfy itself that the transaction
has been properly authorized.
5.5 The Bank shall use reasonable efforts to act on all authorized requests to
cancel or amend payment orders received in compliance with the Security
Procedure provided that such requests are received in a timely manner
affording the Bank reasonable opportunity to act. However, the Bank
assumes no liability if the request for amendment or cancellation cannot
be satisfied.
5.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the payment
order instructions as received and the
5
<PAGE>
Bank complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and not
for the detection of errors in payment orders.
5.7 The Bank shall assume no responsibility for lost interest with respect to
the refundable amount of any unauthorized payment order, unless the Bank
is notified of the unauthorized payment order within thirty (30) days of
notification by the Bank of the acceptance of such payment order. In no
event (including failure to execute a payment order) shall the Bank be
liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
5.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Bank will act as an Originating Depository Financial
Institution and/or receiving depository Financial Institution, as the case
may be, with respect to such entries. Credits given by the Bank with
respect to an ACH credit entry are provisional until the Bank receives
final settlement for such entry from the Federal Reserve Bank. If the
Bank does not receive such final settlement, the Fund agrees that the Bank
shall receive a refund of the amount credited to the Fund in connection
with such entry, and the party making payment to the Fund via such entry
shall not be deemed to have paid the amount of the entry.
5.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be delivered
through the Bank's proprietary information systems, or by facsimile or
call-back. Fund must report any objections to the execution of an order
within thirty (30) days.
6. Data Access and Proprietary Information
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to
treat all Proprietary Information as proprietary to the Bank and further
agrees that it shall not divulge any Proprietary Information to any person
or organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
6
<PAGE>
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties; and
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.
6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
6.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to
time.
7. Indemnification
7
<PAGE>
7.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) all actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) the reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar;
(d) the reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio;
(e) the offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination
or ruling by any federal or any state agency with respect to the
offer or sale of such Shares;
(f) the negotiations and processing of checks made payable to
prospective or existing Shareholders tendered to the Bank for the
purchase of Shares, such checks are commonly known as "third party
checks"; and
(g) upon the Fund's request entering into any agreements required by the
National Securities Clearing Corporation (the "NSCC") required by
the NSCC for the transmission of Fund or Shareholder data through
the NSCC clearing systems.
7.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
8
<PAGE>
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also
be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of
the officers of the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or co-
registrar.
7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
8. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
9. Covenants of the Fund and the Bank
9.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
9.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
9.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the
9
<PAGE>
Investment Fund Act of 1940, as amended, and the Rules thereunder, the
Bank agrees that all such records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are the
property of the Fund and will be preserved, maintained and made available
in accordance with such Section and Rules, and will be surrendered
promptly to the Fund on and in accordance with its request.
9.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
9.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
10. Termination of Agreement
10.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
10.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination and a charge equivalent to the average of
three (3) months' fees.
10.3 Should the Bank exercise its right to terminate, all out-of-pocket
expenses associated with the movement of physical documents and materials
will be borne by the Bank on behalf of the applicable Portfolio(s).
11. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the series named in the attached Schedule A with respect to
which it desires to have the Bank render services as transfer and service
agent under the terms hereof, it shall so notify the Bank in writing, and
if the Bank agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
12. Assignment
10
<PAGE>
12.1 Except as provided in Section 12.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary
duly registered as a transfer agent pursuant to Section 17A(c)(2) or (iii)
a BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
13. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
14. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of
Massachusetts.
15. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
16. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
17. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
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<PAGE>
18. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
19. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
20. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
MONITOR FUNDS
BY:___________________________________________
ATTEST:
______________________________
STATE STREET BANK AND TRUST
COMPANY
BY:___________________________________________
Executive Vice President
ATTEST:
______________________________
12
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES/*/
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<C> <S> <C> <C>
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker-dealers. X
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control book
for each issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and
non-resident alien accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation
statements for Shareholders. X
18. Provide Shareholder account information. X
19. Blue sky reporting X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.
</TABLE>
MONITOR FUNDS
BY:________________________
ATTEST:
______________________________
STATE STREET BANK & TRUST COMPANY
BY:___________________________
Executive Vice President
ATTEST:
______________________________
13
<PAGE>
SCHEDULE A
Fixed Income Securities Fund
Growth Fund
Income Equity Fund
Intermediate Government Income Fund
Michigan Tax-Free Fund
Money Market Fund
Mortgage Securities Fund
Ohio Municipal Money Market Fund
Ohio Tax-Free Fund
Short Intermediate Fixed Income Securities Fund
U.S. Treasury Money Market Fund
14
<PAGE>
Exhibit 13(ii)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 12th day of January, 1998, by and between
The Monitor Funds, a Massachusetts business trust (the "Trust"), and The
Huntington National Bank (the "Administrator"), a national banking association.
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares of Common Stock; and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such portfolios of the Trust as the Trust and the Administrator may agree on
("Portfolios") and as listed on the schedules attached hereto ("Schedules") and
made a part of this Agreement, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Trust hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. Administrative and Accounting Services. The Administrator
shall perform or supervise the performance by others of other administrative
services in connection with the operations of the Portfolios, and, on behalf of
the Trust, will investigate, assist in the selection of and conduct relations
with custodians, depositories, accountants, legal counsel, underwriters, brokers
and dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations.
The Administrator shall provide the Trustees of the Trust with such reports
regarding investment performance and compliance with investment policies and
applicable laws, rules and regulations as they may reasonably request but shall
have no responsibility for supervising the performance by any investment adviser
or sub-adviser of its responsibilities. The Administrator may appoint a sub-
administrator to perform certain of the services to be performed by the
Administrator hereunder, provided, however, that the Administrator is not
relieved of its obligations to the Trust as set forth hereunder.
The Administrator shall provide the Trust with administrative services,
regulatory reporting, fund accounting and related portfolio accounting services,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings
<PAGE>
but not Trustees' meetings that are not held at offices of the Administrator)
for handling the affairs of the Portfolios and such other services as the
Trustees may, from time to time, reasonably request and the Administrator shall,
from time to time, reasonably determine to be necessary to perform its
obligations under this Agreement. In addition, at the request of the Trust's
Board of Trustees (the "Trustees"), the Administrator shall make reports to the
Trustees concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Trust expenses and control all disbursements for
the Trust, and as appropriate compute the Trust's yields, total
return, expense ratios, portfolio turnover rate and, if required,
portfolio average dollar-weighed maturity;
(b) assist Trust counsel with the preparation of prospectuses, statements
of additional information, registration statements, and proxy
materials;
(c) develop and prepare communications to shareholders, including the
annual report to shareholders, coordinate mailing prospectuses,
notices, proxy statements, proxies and other reports to Trust
shareholders, and supervise and facilitate the solicitation of proxies
solicited by the Trust for all shareholder meetings, including
tabulation process for shareholder meetings;
(d) coordinate with Trust counsel the preparation and negotiation of, and
administer, contracts on behalf of the Trust with, among others, the
Trust's investment adviser, distributor, custodian, and transfer
agent;
(e) maintain the Trust's general ledger and prepare the Trust's financial
statements, including expense accruals and payments, determine the net
asset value of the Trust's assets and of the Trust's shares, and
supervise the Trust's transfer agent with respect to the payment of
dividends and other distributions to shareholders;
(f) examine and review the operations and performance of the various
organizations providing services to the Trust or any Portfolio of the
Trust, including, without limitation, the Trust's investment adviser,
distributor, custodian, transfer agent, outside legal Trust counsel
and independent public accountants, and at the request of the
Trustees, report to the Trustees on the performance of organizations;
(g) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of the
Trust's semi-annual and annual reports to shareholders;
(h) provide administrative services as requested by the Trust from time to
time;
2
<PAGE>
(i) assist with the design, development, and operation of the Trust,
including new portfolio and class investment objectives, policies and
structure;
(j) provide (directly or through a sub-administrator) individuals
acceptable to the Trustees for nomination, appointment, or election as
officers of the Trust, who will be responsible for the management of
certain of the Trust's affairs as determined by the Trustees;
(k) advise the Trust and its Trustees on matters concerning the Trust and
its affairs;
(l) obtain (directly or through a sub-administrator) and keep in effect
fidelity bonds and directors and officers/errors and omissions
insurance policies for the Trust in accordance with the requirements
of Rules 17g-1 and 17d-1(7) under the 1940 Act as such bonds and
policies are approved by the Trust's Board of Trustees;
(m) monitor and advise the Trust and its Portfolios on their registered
investment company status under the Internal Revenue Code of 1986, as
amended;
(n) perform all administrative services and functions of the Trust and
each Portfolio to the extent administrative services and functions are
not provided to the Trust or such Portfolio pursuant to the Trust's or
such Portfolio's investment advisory agreement, distribution
agreement, custodian agreement and transfer agent agreement;
(o) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Trust and the
Administrator shall determine desirable; and
(p) prepare the semi-annual report for the Trust on Form N-SAR;
(q) monitor each Fund's compliance with the 1940 Act and the applicable
investment policies set forth in the Trust's prospectuses and SAI; and
(r) assist in the training and oversight of third parties used to perform
any of the services described herein.
The Administrator will perform other services for the Trust as agreed from
time to time, including, but not limited to:performing internal audit
examinations; mailing the annual reports of the Portfolios; preparing an annual
list of shareholders; and mailing notices of shareholders' meetings, proxies and
proxy statements, for all of which the Trust will pay the Administrator's out-
of-pocket expenses.
In the performance of its duties hereunder, the Administrator will comply
with the provisions of the Declaration of Trust and the Bylaws of the Trust,
will safeguard and promote the welfare of
3
<PAGE>
the Trust, and will comply with the policies that the Trustees may from time to
time reasonably determine; provided that such policies are not in conflict with
this Agreement, the Trust's governing documents, or any applicable statutes or
regulations.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organizational costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of the Administrator or the investment adviser to
the Trust or any affiliated corporation of the Administrator or the Investment
Adviser, the costs of Trustee's meetings, insurance, interest, brokerage costs,
litigation and other extraordinary or nonrecurring expenses, and all fees and
charges of investment advisers to the Trust.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Trust shall pay to the Administrator compensation at an annual
rate specified in the Schedules. Such compensation shall be calculated and
accrued daily, and paid to the Administrator monthly.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, the Administrator's compensation
for that part of the month in which this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Compensation from Transactions. The Trust hereby authorizes any entity
or person associated with the Administrator which is a member of a national
securities exchange to effect any transaction on the exchange for the account of
the Trust which is permitted by Section 11 (a) of the
4
<PAGE>
Securities Exchange Act of 1934, as amended (the "1934 Act") and Rule 11a2-2(T)
thereunder, and the Trust hereby consents to the retention of compensation for
such transactions in accordance with Rule 11a2-2(T) (a) (2) (iv).
(C) Survival of Compensation Rates. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. Standard of Care Limitation of Liability of the Administrator;
Indemnification. The duties of the Administrator shall be confined to those
expressly set forth herein, and no implied duties are assumed by or may be
asserted against the Administrator hereunder. The Administrator shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in carrying out its duties
hereunder, except a loss resulting from willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder, except as may otherwise be provided
under provisions of applicable law which cannot be waived or modified hereby.
(As used in this Article 7, the term "Administrator" shall include directors,
officers, employees and other corporate agents of the Administrator as well as
that corporation itself.)
So long as the Administrator or its agents acts in good faith and with due
diligence and without negligence, the Trust assumes full responsibility and
shall indemnify the Administrator and hold it harmless from and against any and
all actions, suits and claims, whether groundless or otherwise, and from and
against any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of said
administration, transfer agency, and dividend disbursing relationships to the
Trust or any other service rendered to the Trust hereunder. The indemnity and
defense provisions set forth herein shall indefinitely survive the termination
of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but good faith failure to do so in good faith shall not affect the
rights hereunder.
The Trust shall be entitled to participate at its own expense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity provision. If the Trust elects to assume the defense of any
such claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Trust
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does not elect to assume the defense of a suit, it will reimburse the
Administrator for the reasonable fees and expenses of any counsel retained by
the Administrator.
The Administrator may apply to the Trust at any time for instructions and
may consult counsel or the independent accountants for the Trust or its own
counsel and with accountants and other experts with respect to any matter
arising in connection with the Administrator's duties, and the Administrator
shall not be liable or accountable for any action taken or omitted by it in good
faith in accordance with such instruction or with the opinion of such counsel,
or accountants, or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that directors, officers, employees and shareholders of the Administrator
and its counsel are or may be or become similarly interested in the Trust, and
that the Administrator may be or become interested in the Trust as a Shareholder
or otherwise.
ARTICLE 7. Confidentiality. The Administrator agrees on behalf of itself
and its employees to treat confidentially all records and other information
relative to the Trust and its prior, present or potential Shareholders and
relative to the Adviser and its prior, present or potential customers, except,
after prior notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
ARTICLE 8. Equipment Failures. In the event of equipment failures beyond
the Administrator's control, the Administrator shall, at no additional expense
to the Trust, take reasonable steps to minimize service interruptions but shall
have no liability with respect to such service interruptions if such reasonable
steps are taken thereto. The Administrator shall develop and maintain a plan for
recovery from equipment failures which may include contractual arrangements with
appropriate parties making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
ARTICLE 9. Compliance With Governmental Rules and Regulations. The
Administrator undertakes to comply with all applicable requirements of the
Securities Act of 1933, as amended,
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the 1934 Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
the Administrator hereunder.
ARTICLE 10. Compliance With Year 2000. The Administrator warrants that
all software code owned by or under the Administrator's control, used in the
performance of the Administrator's obligations under this contract, will be Year
2000 compliant. For purposes of this Article, "Year 2000 Compliant" means that
the software will continue to operate beyond December 31, 1999 without creating
any logical or mathematical inconsistencies concerning any date after December
31, 1999 and without decreasing the functionality of the system applicable to
dates prior to January 1, 2000 including, but not limited to, making changes to
[a] date and data century recognition; [b] calculations which accommodate same-
and multi- century formulas and date values; and [c] input/output of date values
which reflect century dates. All changes described in this Article will be made
at no additional cost to the Trust.
ARTICLE 11. Duration of this Agreement. The Term of this Agreement shall
be as specified in the Schedules.
This Agreement shall not be assignable by either party without the written
consent of the other party. As used in this paragraph, the term "assignment"
shall be construed by reference to the term as defined and interpreted under the
1940 Act.
The Administrator shall be entitled to collect from the Trust, in addition
to any other compensation owing to the Administrator, the amount of all the
Administrator's cash disbursements for services in connection with the
Administrator's activities in effecting termination as discussed in the Schedule
to this Agreement, including without limitation, the delivery to the Trust
and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination for a
reasonable fee to be paid by the Trust, the Administrator will provide the Trust
with reasonable access to any Trust documents or records remaining in its
possession.
ARTICLE 12. Amendments. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
ARTICLE 13. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing
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<PAGE>
such inspection; provided that the Administrator may exhibit such records to
any person in any case where it is advised by its counsel that it may be held
liable for failure to do so, unless (in cases involving potential exposure only
to civil liability) the Trust has agreed to indemnify the Administrator against
such liability.
ARTICLE 14. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 15. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Trust, at c/o Richard Stenberg, Senior Vice President, The
Huntington National Bank, 41 S. High Street, 11th Floor, Columbus, Ohio
43287Kevin P. Robins, General Counsel, SEI Financial Management Corporation, 680
East Swedesford Road, Wayne, PA 19087; and if to the Administrator at c/o
Richard Stenberg, Senior Vice President, The Huntington National Bank, 41 S.
High Street, 11th Floor, Columbus, Ohio 43287.
ARTICLE 16. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the
Commonwealth of Massachusetts, or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the latter shall control.
ARTICLE 17. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 18. Limitation of Liability. The Administrator is hereby
expressly put on notice of the limitation of liability as set forth in Article
IV of the Trust's Declaration of Trust and agrees that the obligations pursuant
to this Agreement of a particular Portfolio and of the Trust with respect to
that Portfolio shall be limited solely to the assets of that Portfolio, and the
Administrator shall not seek satisfaction of any such obligation from any other
Portfolio, the shareholders of any Portfolio, the Trustees, officers, employees
or agents of the Trust, or any of them.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE MONITOR FUNDS
[NAME OF TRUST]
By: _______________________ Attest: _________________
8
<PAGE>
Name:
Title:
THE HUNTINGTON NATIONAL BANK
By: _______________________ Attest: _________________
Name:
Title:
9
<PAGE>
SCHEDULE
TO THE ADMINISTRATION AGREEMENT
DATED AS OF JANUARY 12, 1998
BETWEEN
THE MONITOR FUNDS
AND
THE HUNTINGTON NATIONAL BANK
Portfolios: This Agreement shall apply to all Portfolios of the Trust, either
now in the future created. The following is a listing of the
current portfolios of the Trust: Money Market Fund, Ohio
Municipal Money Market Fund, U.S. Treasury Securities Money
Market Fund, Fixed Income Securities Fund, Growth Fund, Income
Equity Fund, Mortgage Securities Fund, Short/Intermediate
TermFixed Income Securities Fund, Ohio Tax Free Fund, Michigan
Tax-Free Fund and Intermediate Government Income Fund
(collectively, the "Portfolios").
Fees: Pursuant to Article 46, Section A, the Trust shall pay the
Administrator compensation for services rendered to the
Portfolios at an annual rate, which is calculated daily and paid
monthly, at a maximum administrative fee equal to 0.11% of each
Portfolios' average daily net assets.
Term: Pursuant to Article 10, the term of this Agreement shall commence
on January 12, 1998 December and shall remain in effect through
January 12, 2000 ("Initial Term"). This Agreement shall continue
in effect for successive periods of one years after the Initial
Term, unless terminated by either party, with or without cause,
on not less than 60 days prior written notice to the other party.
In the event of a material breach of this Agreement by either
party, the non-breaching party shall notify the breaching party
in writing of such breach and upon receipt of such notice, the
breaching party shall have 45 days to remedy the breach or the
non-breaching party may immediately terminate this Agreement.
In addition, the Trust may terminate this Agreement immediately upon:
(i) the issuance of a final judgment by a court of competent jurisdiction
or of a final order by the Securities and Exchange Commission, which
judgment or order holds that the Administrator has committed a felony
or a misdemeanor involving the purchase or sale of any security, or
arising out of its conduct as an administrator, a distributor, or an
affiliate of an investment company;
(ii) the dissolution or liquidation of the Administrator or other cessation
of its business other than a reorganization or recapitalization of the
Administrator as an ongoing business; or
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(iii) [a] the authorization of commencement of a voluntary case regarding
the Administrator under Title 11 of the United States Code, as from
time to time amended, or any other applicable law of any jurisdiction
relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors; [b] consent to
or acquiescence in any involuntary case under such Title 11 or other
such law; or [c] the commencement of any involuntary case under such
Title 11 or other such law, which case is not dismissed within 30
days after the filing thereof.
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<PAGE>
Exhibit 13(iii)
SUB-ADMINISTRATION AGREEMENT
AGREEMENT, made as of this 12th day of January, 1998, between The
Huntington National Bank, a national banking association, ("Huntington") and SEI
Fund Resources, a Delaware corporation, (the "Sub-Administrator").
WHEREAS, Huntington has entered into an Administration Agreement, dated as
of January 12, 1998 (the "Administration Agreement") with The Monitor Funds (the
"Trust"), a Massachusetts business trust, concerning the provision of management
and administrative services for the investment portfolios of the Trust
identified on Schedule A hereto, as such Schedule shall be amended from time to
time (individually referred to herein as the "Fund" and collectively as the
"Funds"); and
WHEREAS, Huntington desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the Sub-
Administrator is willing to perform such services on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Sub-Administrator:
a. review, and where necessary, file with the National Association of
Securities Dealers marketing materials relating to the Trust;
b. register the Trust with each state pursuant to Blue Sky regulations;
monitor shareholders' transactions by state to maintain current
registration limits;
c. provide consultation services with respect to the Trust's fund
accounting issues;
d. assist Huntington in the preparation of the Trust's budget and
accruals, analysis and payment of the expenses and accruals;
e. maintain feeds to third party reporting agencies;
f. prepare and file the Trust's tax returns;
g. provide consultation services with respect to dividend calculation
process, including amount paid by Fund and tax ramifications;
h. perform internal audit examinations not less frequently that once
annually at the request of the Trustees;
<PAGE>
i. provide consultation services and review with respect to the Trust's
financial statement process, including reporting requirements and
procedures;
j. complete monthly and quarterly total return performance reporting;
k. prepare and file with the SEC all required notices pursuant to Rule
24f-2; Edgarize and file with SEC the semi-annual report for the
Trust on Form N-SAR;
l. perform secondary compliance functions with guidelines set forth for
the Trust pursuant to the Trust's prospectus, the Investment Company
Act of 1940, as amended (the "1940 Act") and the registered investment
company status under the Internal Revenue Code of 1986, as amended;
m. provide individuals acceptable to the Trustees for nomination,
appointment, or election as officers of the Trust, who will be
responsible for the management of certain of the Trust's affairs as
determined by the Trustees; and
n. obtain and keep in effect fidelity bond and directors and officers/
errors and omissions insurance policies for the Trust in accordance
with the requirements of Rules 17g-1 and 17d-1(7) under the 1940 Act
as such bonds and policies are approved by the Trust's Board of
Trustees.
Huntington will keep and maintain all books and records relating to its
services in accordance with Rule 31a-1 under the 1940 Act.
In the performance of its duties hereunder, the Sub-Administrator will
comply with the provisions of the Declaration of Trust and Bylaws of the Trust,
will safeguard and promote the welfare of the Trust and will comply with the
policies that the Trustees may from time to time reasonably determine; provided
that such policies are not in conflict with this Agreement, the Trust's
governing documents, or any applicable statutes or regulations.
2. Compensation; Reimbursement of Expenses. Huntington shall pay the
Sub-Administrator for the services to be provided by the Sub-Administrator under
this Agreement in accordance with, and in the manner set forth in, Schedule B
hereto. In addition, Huntington agrees to reimburse the Sub-Administrator for
the Sub-Administrator's reasonable out-of-pocket expenses in providing services
hereunder.
3. Effective Date. This Agreement shall become effective with respect to
a Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date specified in the amendment to Schedule A to
this Agreement relating to such Fund or, if no date is specified, the date on
which such amendment is executed)(the "Effective Date").
4. Term. This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
January 12, 2000; and thereafter shall
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<PAGE>
be renewed automatically for successive one-year terms unless written notice not
to renew is given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term; provided, however, that after
such termination for so long as the Sub-Administrator in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Notwithstanding anything to the contrary herein, this
Agreement shall terminate automatically upon termination of the Administration
Agreement. Either party to this Agreement may terminate such Agreement prior to
the expiration of the initial term set forth above by providing the other party
with written notice of such termination at least 60 days prior the date upon
which such termination shall become effective. Compensation due the Sub-
Administrator and unpaid by Huntington upon such termination shall be
immediately due and payable upon and notwithstanding such termination. The Sub-
Administrator shall be entitled to collect from Huntington, in addition to the
compensation described under paragraph 2 hereof, the amount of all the Sub-
Administrator's cash disbursements for services in connection with the Sub-
Administrator's activities in effecting such termination, including without
limitation, the delivery to Huntington, the Trust, and/or their respective
designees of the Trust's property, records, instruments and documents, or any
copies thereof. Subsequent to such termination, the Sub-Administrator will
provide Huntington and/or the Trust with reasonable access to any Trust
documents or records remaining in its possession, and Huntington shall pay the
Sub-Administrator the actual cost incurred in providing such information.
5. Standard of Care of the Sub-Administrator; Indemnification. The
duties of the Sub-Administrator shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against the Sub-
Administrator hereunder. The Sub-Administrator shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in carrying out its duties hereunder,
except a loss resulting from willful misfeasance, bad faith or negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder, except as may otherwise be provided under provisions of
applicable law which cannot be waived or modified hereby. (As used in this
Article 5, the term "Sub-Administrator" shall include directors, officers,
employees and other agents of the Sub-Administrator as well as that corporation
itself.)
So long as the Sub-Administrator or its agents act in good faith and with
due diligence and without negligence, the Trust assumes full responsibility and
shall indemnify the Sub-Administrator and hold it harmless from and against any
and all actions, suits and claims, whether groundless or otherwise, and from and
against any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of said sub-
administration relationship to the Trust or any other service rendered to the
Trust hereunder. The indemnify and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder
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<PAGE>
may ultimately be merited. In order that the indemnification provision
contained herein shall apply, however, it is understood that if in any case the
Trust may be asked to indemnify or hold the Sub-Administrator harmless, the
Trust shall be fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the Sub-Administrator
will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Trust, but good
faith failure to do shall not affect the rights hereunder.
The Trust shall be entitled to participate at its own expense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity provision. If the Trust elects to assume the defense of any
such claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to the Sub-Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Sub-Administrator shall bear the fees and expenses of
any additional counsel retained by it. If the Trust does not elect to assume
the defense of a suit, it will reimburse the Sub-Administrator for the
reasonable fees and expenses of any counsel retained by the Sub-Administrator.
The Sub-Administrator may apply to the Trust at any time for instructions
or may consult counsel or independent accountants with respect to any matter
arising in connection with the Sub-Administrator's duties, and the Sub-
Administrator shall not be liable or accountable for any action taken or omitted
by it in good faith in accordance with such instruction or with the opinion of
such counsel or accountants.
Also, the Sub-Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Sub-Administrator be held to
have notice of any change of authority of any officers, employee or agent of the
Trust until receipt of written notice thereof from the Trust.
6. Record Retention and Confidentiality. Huntington shall keep and
maintain on behalf of the Trust all books and records which the Trust and
Huntington are, or may be, required to keep and maintain in connection with the
services to be provided hereunder pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2 under the 1940
Act. Huntington further agrees that all such books and records shall be the
property of the Trust and to make such books and records available for
inspection by the Trust, the Sub-Administrator or by the Securities and Exchange
Commission at reasonable times and otherwise to keep confidential all books and
records and other information relative to the Trust and its shareholders; except
when requested to divulge such information by duly-constituted authorities or
court process.
7. Uncontrollable Events. The Sub-Administrator assumes no
responsibility hereunder, and shall not be liable, for any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control.
4
<PAGE>
8. Rights of Ownership. All computer programs and procedures developed
to perform the services to be provided by the Sub-Administrator under this
Agreement are the property of the Sub-Administrator. All records and other data
except such computer programs and procedures are the exclusive property of the
Trust and all such other records and data will be furnished to Huntington and/or
the Trust in appropriate form as soon as practicable after termination of this
Agreement for any reason.
9. Return of Records. The Sub-Administrator at its option at any time,
and shall promptly upon the demand of Huntington and/or the Trust, turn over to
Huntington and/or the Trust and cease to retain the Sub-Administrator's files,
records and documents created and maintained by the Sub-Administrator pursuant
to this Agreement which are no longer needed by the Sub-Administrator in the
performance of its services or for its legal protection. If no so turned over
to Huntington and/or the Trust, such documents and records will be retained by
the Sub-Administrator for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to
Huntington and/or the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
10. Representations of Huntington. Huntington certifies to the Sub-
Administrator that this Agreement has been duly authorized by Huntington and,
when executed and delivered by Huntington, will constitute a legal, valid and
binding obligation of Huntington, enforceable against Huntington in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
11. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems which the
Sub-Administrator has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause of the records and other
data of the Trust and the Sub-Administrator's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of its obligations hereunder,
and (2) this Agreement has been duly authorized by the Sub-Administrator and,
when executed and delivered by the Sub-Administrator, will constitute a legal,
valid and binding obligation of the Sub-Administrator, enforceable against the
Sub-Administrator in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
The Sub-Administrator warrants that all software code owned by or under the
Sub-Administrator's control, used in the performance of the Sub-Administrator's
obligations under this contract, will be Year 2000 compliant. For purposes of
this paragraph, "Year 2000 Compliant" means that the software will continue to
operate beyond December 31, 1999 without creating any logical or mathematical
inconsistencies concerning any date after December 31, 1999 and without
decreasing the functionality of the system applicable to dates prior to January
1, 2000 including, but not limited to, making changes to [a] date and data
century recognition; [b] calculations which
5
<PAGE>
accommodate same- and multi- century formulas and date values; and [c] input/
output of date values which reflect century dates. All changes described in
this paragraph will be made at no additional cost to the Trust.
12. Insurance. The Sub-Administrator shall notify Huntington should any
of its insurance coverage be canceled or reduced. Such notification shall
include the date of change and the reasons therefor. The Sub-Administrator
shall notify Huntington of any material claims against it with respect to
services performed under this Agreement, whether or not they may be covered by
insurance, and shall notify Huntington from time to time as may be appropriate
of the total outstanding claims made by the Sub-Administrator under its
insurance coverage.
13. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to Huntington at the following
address: 41 S. High Street, 11th Floor, Columbus, Ohio 43287, and to the Sub-
Administrator at the following address: One Freedom Valley Road, Oaks, PA
19456, Attn: Legal Department or at such other address as either party may from
time to time specify in writing to the other party pursuant to this Section.
14. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
15. Assignment. This Agreement and the rights and duties hereunder shall
not be assignable with respect to a Fund by either of the parties hereto except
by the specific written consent of the other party and with the specific written
consent of the Trust.
16. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE HUNTINGTON NATIONAL BANK
By: _____________________________
Title: ___________________________
Date: ___________________________
SEI FUND RESOURCES
By: ____________________________
Title: ___________________________
6
<PAGE>
Date: ___________________________
7
<PAGE>
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
DATED AS OF JANUARY 12, 1998 BETWEEN
SEI FUND RESOURCES
AND
THE HUNTINGTON NATIONAL BANK
NAME OF FUND
- ------------
The Monitor Money Market Fund
The Monitor U.S. Treasury Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor Growth Fund
The Monitor Income Fund
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate Fixed Income Securities Fund
The Monitor Michigan Tax-Free Fund
The Monitor Intermediate Government Income Fund
THE HUNTINGTON NATIONAL BANK
By: ______________________________
Title: ____________________________
SEI FUND RESOURCES
By: ______________________________
Title: ____________________________
8
<PAGE>
SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
SEI FUND RESOURCES
AND
THE HUNTINGTON NATIONAL BANK
NAME OF FUND
- ------------
The Monitor Money Market Fund
The Monitor U.S. Treasury Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor Growth Fund
The Monitor Income Fund
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate Fixed Income Securities Fund
The Monitor Michigan Tax-Free Fund
The Monitor Intermediate Government Income Fund
COMPENSATION*
- -------------
Annual Rate of five one-hundredths of one percent (.05%) of each such Fund's
average daily net assets for the period January 12, 1998 through January 11,
1999 and the annual rate of four and a half one-hundredths of one percent
(.0450%) of each such Fund's average daily net assets for the period January 12,
1999 through January 11, 2000.
THE HUNTINGTON NATIONAL BANK
By: ______________________________
Title: ____________________________
SEI FUND RESOURCES
By: ______________________________
Title: ____________________________
* All fees are computed daily and paid periodically.
9
<PAGE>
Exhibit 14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Combined Proxy Statement/Prospectus on Form N-14 (the
"Registration Statement") of our report dated January 13, 1998, relating to the
financial statements and financial highlights appearing in the November 30, 1997
Annual Report to Shareholders of FMB Funds, Inc., which appears in such
Statement of Additional Information. We also consent to the incorporation by
reference in the Prospectuses and Statement of Additional Information of FMB
Funds, Inc. dated March 28, 1997 of our report dated January 20, 1997, relating
to the financial statements and financial highlights appearing in the November
30, 1996 Annual Report to Shareholders of FMB Funds, Inc., which Prospectuses
and Statement of Additional Information are incorporated by reference into the
Registration Statement. We also consent to the incorporation by reference in the
Prospectuses and Statement of Additional Information of The Monitor Funds dated
April 30, 1997 of our report dated February 14, 1997, relating to the financial
statements and financial highlights appearing in December 31, 1996 Annual Report
to Shareholders of The Monitor Funds, which Prospectuses and Statement of
Additional Information are incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading "Financial
Statements" in the Prospectus dated March 28, 1997 for the FMB Funds, Inc., the
Prospectus dated April 30, 1997 for The Monitor Funds and in the Combined Proxy
Statement/Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, PA
January 13, 1998
<PAGE>
Exhibit 17(i)
PROXY PROXY
FMB DIVERSIFIED EQUITY FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of FMB FUNDS, INC. (the
"Company"), for use at a Meeting of Shareholders of FMB Diversified Equity Fund
to be held at One Freedom Valley Road, Oaks, Pennsylvania 19456 on March 17,
1998, at 10:00 a.m., Eastern Time.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the FMB
Diversified Equity Fund (the "Fund"), held of record by the undersigned on
January 23, 1998, the record date for the meeting, upon the following matters
and upon any other matter which may come before the meeting, in their
discretion:
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. Proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby,
including the transfer of substantially all of the assets
of the Company's FMB Diversified Equity Fund (the "FMB
Portfolio") to The Monitor Growth Fund (the "Monitor
Portfolio") in exchange for shares of the Monitor
Portfolio, the distribution of the Monitor Portfolio's
shares so received to shareholders of the FMB Portfolio,
and the termination of the Company's existence under state
law and the Investment Company Act of 1940, as amended,
all as described in the Company's Combined Proxy
Statement/Prospectus dated February 17, 1998, receipt of
which is hereby acknowledged.
[ ] [ ] [ ] 2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as granting authority to vote FOR
Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated:______________ ________________________________________
Signature
________________________________________
Signature, if held jointly
<PAGE>
PROXY PROXY
FMB INTERMEDIATE GOVERNMENT INCOME FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of FMB FUNDS, INC. (the
"Company"), for use at a Meeting of Shareholders of FMB Intermediate Government
Income Fund to be held at One Freedom Valley Road, Oaks, Pennsylvania 19456 on
March 17, 1998, at 10:00 a.m., Eastern Time.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the FMB
Intermediate Government Income Fund (the "Fund"), held of record by the
undersigned on January 23, 1998, the record date for the meeting, upon the
following matters and upon any other matter which may come before the meeting,
in their discretion:
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. Proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby,
including the transfer of substantially all of the assets
of the Company's FMB Intermediate Government Income Fund
(the "FMB Portfolio") to The Monitor Growth Fund (the
"Monitor Portfolio") in exchange for shares of the Monitor
Portfolio, the distribution of the Monitor Portfolio's
shares so received to shareholders of the FMB Portfolio,
and the termination of the Company's existence under state
law and the Investment Company Act of 1940, as amended,
all as described in the Company's Combined Proxy
Statement/Prospectus dated February 17, 1998, receipt of
which is hereby acknowledged.
[ ] [ ] [ ] 2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as granting authority to vote FOR
Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated:______________ ________________________________________
Signature
________________________________________
Signature, if held jointly
2
<PAGE>
PROXY PROXY
FMB MICHIGAN TAX-FREE BOND FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of FMB FUNDS, INC. (the
"Company"), for use at a Meeting of Shareholders of FMB Michigan Tax-Free Bond
Fund to be held at One Freedom Valley Road, Oaks, Pennsylvania 19456 on March
17, 1998, at 10:00 a.m., Eastern Time.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the FMB
Michigan Tax-Free Bond Fund (the "Fund"), held of record by the undersigned on
January 23, 1998, the record date for the meeting, upon the following matters
and upon any other matter which may come before the meeting, in their
discretion:
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. Proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby,
including the transfer of substantially all of the assets
of the Company's FMB Michigan Tax-Free Bond Fund (the "FMB
Portfolio") to The Monitor Growth Fund (the "Monitor
Portfolio") in exchange for shares of the Monitor
Portfolio, the distribution of the Monitor Portfolio's
shares so received to shareholders of the FMB Portfolio,
and the termination of the Company's existence under state
law and the Investment Company Act of 1940, as amended,
all as described in the Company's Combined Proxy
Statement/Prospectus dated February 17, 1998, receipt of
which is hereby acknowledged.
[ ] [ ] [ ] 2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as granting authority to vote FOR
Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated:______________ ________________________________________
Signature
________________________________________
Signature, if held jointly
3
<PAGE>
PROXY PROXY
FMB MONEY MARKET FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of FMB FUNDS, INC. (the
"Company"), for use at a Meeting of Shareholders of FMB Money Market Fund to be
held at One Freedom Valley Road, Oaks, Pennsylvania 19456 on March 17, 1998, at
10:00 a.m., Eastern Time.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the FMB
Money Market Fund (the "Fund"), held of record by the undersigned on January 23,
1998, the record date for the meeting, upon the following matters and upon any
other matter which may come before the meeting, in their discretion:
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. Proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby,
including the transfer of substantially all of the assets
of the Company's FMB Money Market Fund (the "FMB
Portfolio") to The Monitor Growth Fund (the "Monitor
Portfolio") in exchange for shares of the Monitor
Portfolio, the distribution of the Monitor Portfolio's
shares so received to shareholders of the FMB Portfolio,
and the termination of the Company's existence under state
law and the Investment Company Act of 1940, as amended,
all as described in the Company's Combined Proxy
Statement/Prospectus dated February 17, 1998, receipt of
which is hereby acknowledged.
[ ] [ ] [ ] 2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as granting authority to vote FOR
Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated:______________ ________________________________________
Signature
________________________________________
Signature, if held jointly
4
