<PAGE> 1
[ A R T ]
FMB MONEY MARKET FUND
-
FMB INTERMEDIATE
GOVERNMENT INCOME FUND
--
FMB MICHIGAN
TAX-FREE BOND FUND
--
FMB DIVERSIFIED
EQUITY FUND
---
ANNUAL REPORT
November 30, 1995
Macatawa Distributor, Inc.
Sponsor and Distributor
<PAGE> 2
FMB FUNDS, INC.
January 24, 1996
Dear Shareholder:
On behalf of the Directors and Officers of the FMB Funds, Inc., we are
pleased to send you this audited annual report for the fiscal year ended
November 30, 1995. This annual report reflects the financial position and
investment performance of your Funds. It is our desire to keep you informed of
economic factors and trends that may impact the performance of the FMB Funds. We
are very pleased with the results for the year and are excited about the new
opportunities and challenges we see ahead of us.
ECONOMIC REVIEW AND OUTLOOK
The year can best be summarized by the statement. "What a fabulous year for
both the stock and bond market!" The year began with the Federal Reserve
maintaining their "tight money" policy by increasing short-term interest rates
in February by 50 basis points. This proved to be the last increase in rates as
economic data supported the Fed's monetary policy by showing a general slowdown
in economic growth. The index of leading economic indicators, a key gauge of
future economic activity, showed declines in the summer months with slower
employment growth and reduced spending for autos, homes, and other goods.
As the year progressed, company earnings reports were generally robust
resulting in excellent stock market valuations. Technology stocks led the market
rise with new records being set almost on a daily basis. Anticipation of future
marketing potential through the INTERNET (information super-highway) continues
to push this market sector. Financial stocks showed a strong rally during the
year as both consolidations within the industry and analysts' expectations of
greater efficiency supported these valuations.
As we concluded the year, we found the Federal Reserve lowering short-term
interest rates and the stock market continuing to be strong. These events have
definitely translated into excellent performance for your Funds. Expectations
are for interest rates to continue their decline. The Federal Reserve will be
under a magnifying glass in an election year to support economic growth versus
falling back into a recessionary period. Expectations are for continued stable
earnings by most sectors yet maybe not quite as strong as experienced in the
past year.
1
<PAGE> 3
GENERAL OVERVIEW
The FMB Funds experienced net growth of $9.0 million with net assets of
$319.5 million at November 30, 1995 compared to the $310.5 million at November
30, 1994. The following information summarizes each of the Funds for your
review. In addition, following this letter you will find the Adviser's synopsis
of the 1995 fiscal year performance of the FMB Intermediate Government Income
Fund, FMB Michigan Tax-Free Bond Fund and the FMB Diversified Equity Fund.
FMB MONEY MARKET FUND
The FMB Money Market Fund had net assets of $104.7 million on November 30,
1995, with the weighted average maturity of the portfolio at 35 days. The Fund
invests in high quality securities including top quality commercial paper, bank
certificates of deposit, and repurchase agreements.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
Net assets of the FMB Intermediate Government Income Fund on November 30,
1995 totaled $122.3 million, with the weighted average maturity of the portfolio
at 3.2 years. Fund investments are made in U.S. Government and Government Agency
securities and Collateralized Mortgage Obligations in an attempt to achieve high
current income consistent with prudent risk of capital. Portfolio management
utilizes a laddered maturity approach to provide liquidity for repricing
opportunities and to maximize the total return objective of the Fund.
FMB MICHIGAN TAX-FREE BOND FUND
The FMB Michigan Tax-Free Bond Fund had net assets on November 30, 1995 of
$33.3 million with the weighted average maturity of the portfolio at 6.9 years.
Portfolio holdings consist of high quality debt obligations of the State of
Michigan and its political subdivisions. During the year, the portfolio's
average maturity was lengthened slightly to take advantage of the existing yield
curve which enhanced total return performance.
FMB DIVERSIFIED EQUITY FUND
Net assets of the FMB Diversified Equity Fund totaled $59.2 million at
November 30, 1995. The primary objective of the Fund is to provide long-term
capital appreciation. In pursuing this objective, the Adviser emphasizes
companies that have exhibited a high degree of stability and predictability in
earnings and dividend growth.
2
<PAGE> 4
The FMB Funds are managed locally by FMB-Trust located at One Financial
Plaza, Holland, Michigan. If you would like additional information or
assistance, please call (800) 453-4234. We are pleased that you have chosen the
FMB Funds as part of your financial plan, and we look forward to serving you.
<TABLE>
<S> <C>
Michael R. Mucciolo John J. Pileggi
Chairman of the Board President and Treasurer
</TABLE>
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, FMB-TRUST OR ITS AFFILIATES, NOR ARE THEY FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THERE IS NO ASSURANCE THAT THE MONEY
MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
3
<PAGE> 5
FMB INTERMEDIATE GOVERNMENT INCOME FUND
The following graph illustrates the total return based on a $10,000
investment in the FMB Intermediate Government Income Fund made at the inception
date of December 2, 1991 and held through November 30, 1995, as well as the
performance of the Lehman Intermediate Government/Corporate Bond Index over the
same period. Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
FMB Inter. FMB Inter.
Gov't Income Gov't Income Lehman Inter.
Measurement Period Fund (Inst. Fund (Cons. Gov't Corp.
(Fiscal Year Covered) Class)* Class)* Bond Index
<S> <C> <C> <C>
Dec. 2 1991 10000 9700 10000
Feb. 29 1992 10162 9857 10185
May 31 10341 10024 10395
Aug. 31 10732 10394 10770
Nov. 30 10710 10374 10733
Feb. 28 1993 11263 10909 11263
May 31 11361 11004 11374
Aug. 31 11722 11353 11764
Nov. 30 11738 11369 11778
Feb. 28 1994 11748 11378 11786
May 31 11475 11114 11521
Aug. 31 11652 11286 11725
Nov. 30 11472 11111 11562
Feb. 28 1995 11917 11541 12043
May 31 12457 12064 12632
Aug. 31 12609 12212 12834
Nov. 30 12923 12515 13244
</TABLE>
*Assumes payment of the maximum sales charge and reinvestment of all
dividends and distributions. Total returns are aggregate since
inception on December 2, 1991, have not been annualized and reflect
voluntary fee waivers.
The Lehman Intermediate Government/Corporate Bond Index is a widely accepted
unmanaged index of bond market performance which includes fixed rate debt issues
rated investment grade or higher; all returns are market value weighted
inclusive of accrued interest.
4
<PAGE> 6
1995 FISCAL YEAR IN REVIEW
FMB INTERMEDIATE GOVERNMENT INCOME FUND
The Fund continued to utilize a combination of U.S. Treasury, Government
Agency, and mortgage-related securities during the fiscal year of 1995. The
Adviser sold some of the Fund's longer duration mortgage-backed issues during
the month of October 1995, and moved the proceeds of these sales to repurchase
agreements to slightly reduce the duration of the portfolio. This was done in an
effort to reduce price sensitivity of the portfolio after the significant
decline in interest rates during the prior three quarters of 1995.
The total return of the Fund (before deduction of the sales charge for the
Consumer Service Class) for fiscal year 1995 tracked the performance of the
benchmark Lehman Government/Corporate Bond Index until near the end of the
fiscal year. The Fund began to maintain a shorter duration compared to the index
during this time to limit the price volatility of the Fund if rates were to
retrace some of their recent declines in the upcoming year. The Fund continues
to provide a lower risk profile compared to the index based on its shorter
duration which reduces interest rate risk, and the lack of corporate issues
which reduces credit and default risks.
AVERAGE ANNUAL TOTAL RETURNS*
Periods Ended November 30, 1995
<TABLE>
<CAPTION>
FROM INCEPTION FISCAL YEAR
---------------------- ----------------------
% RETURN % RETURN
WITHOUT % RETURN WITHOUT % RETURN
SALES WITH SALES SALES WITH SALES
CHARGE CHARGE CHARGE CHARGE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Institutional Class........... +6.62% N/A +12.64% N/A
Consumer Service Class........ +6.58% +5.77% +12.64% +9.24%
</TABLE>
*Assumes reinvestment of dividends and distributions, and reflects voluntary fee
waivers.
5
<PAGE> 7
FMB MICHIGAN TAX-FREE BOND FUND
The following graph illustrates the total return based on a $10,000
investment in the FMB Michigan Tax-Free Bond Fund made at the inception date of
December 2, 1991 and held through November 30, 1995, as well as the performance
of the Lehman 5-Year Municipal Bond Index and Lehman 7-Year Municipal Bond Index
over the same period. Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
FMB Michigan FMB Michigan
Tax-Free Bond Tax-Free Bond Lehman 5 yr. Lehman 7 yr.
Measurement Period Fund (Instit. Fund (Cons. Municipal Bond Municipal Bond
(Fiscal Year Covered) Class)* Serv. Class)* Index Index
<S> <C> <C> <C> <C>
Dec. 2 1991 10000 9700 10000 10000
Feb. 29 1992 10171 9866 10251 10241
May 31 10324 10008 10410 10402
Aug. 31 10591 10261 10754 10770
Nov. 30 10730 10396 10911 10946
Feb. 28 1993 11207 10858 11405 11540
May 31 11232 10882 11385 11493
Aug. 31 11579 11218 11723 11913
Nov. 30 11645 11282 11782 11967
Feb. 28 1994 11754 11387 11866 12050
May 31 11585 11224 11750 11874
Aug. 31 11763 11396 11938 12083
Nov. 30 11472 11114 11672 11674
Feb. 28 1995 12073 11697 12160 12345
May 31 12472 12083 12590 12839
Aug. 31 12675 12279 12882 13145
Nov. 30 12987 12581 13110 13456
</TABLE>
*Assumes payment of the maximum sales charge and reinvestment of all
dividends and distributions. Total returns are aggregate since
inception on December 2, 1991, have not been annualized, and reflect
voluntary fee waivers and reimbursements.
The Lehman 5-Year and 7-Year Municipal Bond Indices are widely accepted
unmanaged indices of municipal bond market performance which include fixed rate
debt issues rated investment grade or higher; all returns are market value
weighted inclusive of accrued interest.
6
<PAGE> 8
1995 FISCAL YEAR IN REVIEW
FMB MICHIGAN TAX FREE BOND FUND
What a difference a year makes. While in last year's annual report we
explained the negative performance the Fund experienced in its fiscal year, this
year is a very different story. The Fund has shown very strong performance for
the one-year period ended November 30, 1995. This performance was achieved due
to the dramatic decline in interest rates that occurred during this period. The
yield on the five- and ten-year maturity Treasuries declined 2.27% and 2.15%,
respectively, during the year ended November 30, 1995. Not quite as dramatic,
the yield on the five- and ten-year maturity municipals declined 1.22% and
1.29%, respectively. The talk of a flat tax that has come out of Washington has
kept municipal yields from declining as much as Treasuries. Strategy carried out
during the fiscal year was to invest the large cash position we had at fiscal
year end November 30, 1994. We also did many swaps out of lower yielding assets
and into higher yielding, longer-term assets. This strategy resulted in a
lengthening of the portfolio's average maturity from 6.7 years to 7.2 years.
Recent strategy for the Fund is to be a little more defensive due to the
low interest rate levels. However, we do not feel that rates are going to rise
dramatically in the near future.
AVERAGE ANNUAL TOTAL RETURNS*
Periods Ended November 30, 1995
<TABLE>
<CAPTION>
FROM INCEPTION FISCAL YEAR
---------------------- ----------------------
% RETURN % RETURN
WITHOUT % RETURN WITHOUT % RETURN
SALES WITH SALES SALES WITH SALES
CHARGE CHARGE CHARGE CHARGE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Institutional Class........... +6.75% N/A +13.21% N/A
Consumer Service Class........ +6.72% +5.91% +13.21% +9.80%
</TABLE>
*Assumes reinvestment of dividends and distributions, and reflects voluntary fee
waivers and reimbursements.
7
<PAGE> 9
FMB DIVERSIFIED EQUITY FUND
The following graph illustrates the total return based on a $10,000
investment in the FMB Diversified Equity Fund made at the inception date of
December 2, 1991 and held through November 30, 1995, as well as the performance
of the S&P 500 Total Return Index over the same period. Past performance is not
predictive of future performance.
<TABLE>
<CAPTION>
Diversified
Equity Fund Diversified
Measurement Period (Instit. Equity Fund
(Fiscal Year Covered) Class)* (Cons. Class)* S&P 500
<S> <C> <C> <C>
Dec. 2 1991 10000 9600 10000
Feb. 28 1992 11032 10590 11115
May 29 11409 10644 11271
Aug. 31 11049 10588 11319
Nov. 30 11731 11247 11866
Feb. 26 1993 11518 11043 12268
May 31 11515 11041 12539
Aug. 31 11560 11084 12978
Nov. 30 11567 11090 13018
Feb. 28 1994 11803 11313 13254
May 31 11684 11199 13049
Aug. 31 12146 11641 13686
Nov. 30 11722 11235 13155
Feb. 28 1995 12431 11914 14230
May 31 13350 12795 15684
Aug. 31 13977 13397 16622
Nov. 30 15067 14442 18020
</TABLE>
*Assumes payment of the maximum sales charge and reinvestment of all
dividends and distributions. Total returns are aggregate since
inception on December 2, 1991, have not been annualized, and reflect
voluntary fee waivers.
The S&P 500 Total Return Index is a widely accepted unmanaged index of stock
market performance which reflects the reinvestment of income dividends and,
where applicable, capital gain distributions.
8
<PAGE> 10
1995 FISCAL YEAR IN REVIEW
FMB DIVERSIFIED EQUITY FUND
In 1995, the stock market shook off 1994 and recorded its best performance
in the last twenty years. Even as the economy began slowing down in 1995,
company earnings continued to post strong gains. These earnings gains came as
the result of all the productivity enhancements that have been implemented in
corporate America over the last few years. The stock market was also fueled by
falling interest rates and a robust bond market.
The FMB Diversified Equity Fund has had good participation in this strong
market rally. However, it continues to be difficult to match the performance of
the S&P 500 Total Return Index. Fund performance has been hurt by
underperformance in some key issues such as AMP, Mobil, Motorola, and TRW. This
has been offset to some degree by superb performance from other key issues such
as General Electric, Capital Cities/ABC, Johnson & Johnson and Microsoft.
Strategies carried out in the Fund during the fiscal year were to increase our
exposure to the Energy sector as well as our defensive holdings, consisting of
mainly Foods, Beverages, and Pharmaceuticals. We lessened our exposure to the
Retail sector as well as the Automotives and we eliminated our holdings in
Electric Utilities.
Recent strategy has been to take advantage of a volatile market and also
position the Fund in anticipation of continued slow economic growth in 1996.
AVERAGE ANNUAL TOTAL RETURNS*
Periods Ended November 30, 1995
<TABLE>
<CAPTION>
FROM INCEPTION FISCAL YEAR
---------------------- ----------------------
% RETURN % RETURN
WITHOUT % RETURN WITHOUT % RETURN
SALES WITH SALES SALES WITH SALES
CHARGE CHARGE CHARGE CHARGE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Institutional Class.......... +10.79% N/A +28.54% N/A
Consumer Service Class....... +10.76% +9.62% +28.54% +23.36%
</TABLE>
*Assumes reinvestment of dividends and distributions, and reflects voluntary fee
waivers.
9
<PAGE> 11
FMB FUNDS, INC.
FMB MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
YIELD TO
CREDIT MATURITY
RATINGS* ON DATE OF MATURITY PRINCIPAL VALUE
(UNAUDITED) PURCHASE DATE AMOUNT (NOTE 2A)
- -------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER -- 74.3%
AGRICULTURE -- 4.6%
A1+/P1 Cargill Inc.................... 5.68% 02/06/96 $ 4,900,000 $ 4,848,931
------------
AUTOMOTIVE -- 4.9%
A1/P1 Ford Motor Credit
Corporation.................. 5.76 01/26/96 5,200,000 5,154,055
------------
BANKING -- 9.4%
A1+/P1 State Street Boston
Corporation.................. 5.74 01/08/96 4,800,000 4,771,323
A1+/P1 Norwest Corporation............ 5.80 01/23/96 5,100,000 5,057,052
------------
9,828,375
------------
BEVERAGES -- 7.6%
A1+/P1 Coca Cola Company.............. 5.78 12/12/95 4,900,000 4,891,496
A1/P1 PepsiCo Inc. .................. 5.76 01/19/96 3,110,000 3,085,998
------------
7,977,494
------------
BROKERAGE -- 4.7%
A1+/P1 Merrill Lynch & Co. ........... 5.80 01/03/96 5,000,000 4,973,783
------------
CHEMICALS -- 4.7%
A1/P1 E.I. Dupont de Nemours and
Company...................... 5.73 12/06/95 4,900,000 4,896,155
------------
ELECTRONICS -- 4.6%
A1+/P1 General Electric Capital
Corporation.................. 5.80 12/14/95 4,800,000 4,790,085
------------
FINANCIAL SERVICES -- 19.4%
A1/P1 Beneficial Corporation......... 5.79 12/22/95 5,100,000 5,083,013
A1+/P1 Ciesco......................... 5.76 12/18/95 5,100,000 5,086,321
A1/P1 Commercial Credit Corporation.. 5.73 01/12/96 5,100,000 5,066,382
A1/P1 CXC Incorporated............... 5.77 12/04/95 5,100,000 5,097,582
------------
20,333,298
------------
MACHINERY -- 4.8%
A1/P1 John Deere Capital
Corporation ................. 5.68 01/16/96 5,100,000 5,063,507
------------
TELECOMMUNICATIONS -- 4.9%
A1+/P1 AT&T Corporation............... 5.75 12/08/95 5,100,000 5,094,377
------------
TOBACCO -- 4.7%
A1/P1 Philip Morris Companies,
Inc. ........................ 5.73 12/20/95 4,900,000 4,885,389
------------
TOTAL COMMERCIAL PAPER......... 77,845,449
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 12
FMB FUNDS, INC.
FMB MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE OF MATURITY PRINCIPAL VALUE
PURCHASE DATE AMOUNT (NOTE 2A)
---------- -------- ----------- ------------
<S> <C> <C> <C>
CERTIFICATE OF DEPOSIT -- 4.8%
First Tennessee Bank.................... 5.84% 12/29/95 $ 5,000,000 $ 5,000,000
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.5%
Notes:
Federal Home Loan Mortgage
Corporation** (2 year CMT -- 99
basis
points).............................
4.55 07/15/96 5,000,000 5,000,000
Student Loan Mortgage Association**... 5.76 03/14/96 5,000,000 5,000,000
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS........................... 10,000,000
------------
TOTAL INVESTMENTS 88.6%
(COST $92,845,449)+................... 92,845,449
REPURCHASE AGREEMENT -- 11.7%
First Union Bank, dated 11/30/95,
5.89%................................. 5.97 12/01/95 12,256,000 12,256,000
------------
(Proceeds at maturity $12,258,005)
collateralized by:
$12,497,493 U.S. Treasury Bill, 5/9/1996
TOTAL INVESTMENTS AND REPURCHASE
AGREEMENT -- 100.3% (COST
$105,101,449)......................... 105,101,449
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.3%)...................... (364,563)
------------
NET ASSETS -- 100%...................... $104,736,886
===========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 13
FMB FUNDS, INC.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT COST (NOTE 2A)
----------- ------------ ------------
<S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES -- 20.3%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 10.4%
Pool#M90035, 8.50%, 2/1/96.......... $ 80,967 $ 80,967 $ 83,194
Pool#M90040, 8.50%, 3/1/96.......... 291,035 291,035 299,039
Pool#M90042, 8.00%, 4/1/96.......... 215,747 215,747 221,614
Pool#N90047, 9.00%, 10/1/97......... 144,262 144,262 149,042
1183-E Pac CMO, 7.34%, 1/15/99...... 1,000,000 1,016,001 1,027,160
Pool#214693, 9.00%, 12/1/01......... 204,986 204,986 213,954
1132-G Pac CMO, 8.00%, 1/15/05...... 42,846 42,846 42,849
1204-G Pac CMO, 7.00%, 11/15/05..... 937,197 937,934 945,313
1311-E Pac CMO, 7.50%, 8/15/16...... 945,487 945,487 945,392
FHG 23-HE Pac CMO, 5.50%, 8/25/16... 1,000,000 967,732 976,340
1290-F Pac CMO, 7.50%, 11/15/17..... 1,000,000 1,014,786 1,019,040
1199-D Pac CMO, 7.15%, 7/15/18...... 2,000,000 2,013,369 2,032,700
1502-PE Pac CMO, 6.25%, 1/15/19..... 4,060,000 4,063,510 3,995,243
98-E Pac CMO, 8.25%, 11/15/20....... 652,093 652,093 662,259
------------ -----------
12,590,755 12,613,139
------------ -----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 9.9%
1991-119-J CMO, 8.50%, 4/25/96...... 98,980 98,980 98,988
Pool#50372, 9.50%, 10/1/97.......... 195,316 195,316 202,275
Pool#50360, 9.00%, 11/1/97.......... 50,666 50,666 52,297
Pool#50375, 9.50%, 11/1/97.......... 172,692 172,692 178,845
Pool#50469, 8.00%, 7/1/98........... 191,459 191,459 196,724
Pool#50498, 8.50%, 10/1/98.......... 51,090 51,090 52,654
Pool#50509, 8.50%, 11/1/98.......... 114,127 114,127 117,623
1991-160-VC AD CMO, 7.75%,
10/25/00.......................... 1,000,000 1,004,472 1,021,960
1992-113-G Pac CMO, 7.50%,
7/25/02........................... 1,231,948 1,262,172 1,291,192
1992-9-E Pac CMO, 7.00%, 1/25/04.... 389,162 389,162 388,259
1991-36-E Pac CMO, 8.25%, 1/25/05... 594,279 594,400 597,935
1991-149-E Pac CMO, 7.50%,
3/25/05........................... 574,734 574,734 575,500
1992-78-G Pac CMO, 7.50%,
12/25/05.......................... 1,500,000 1,507,530 1,525,425
1991-173-PG Pac CMO, 6.95%,
5/25/17........................... 1,181,000 1,179,603 1,182,464
1990-39-G CMO, 8.50%, 11/25/17...... 626,726 628,659 633,376
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 14
FMB FUNDS, INC.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT COST (NOTE 2A)
----------- ------------ ------------
<S> <C> <C> <C>
MORTGAGE-BACKED
SECURITIES -- (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION --
(CONTINUED)
1993-56-PN Pac CMO, 6.35%,
7/25/18........................... $ 1,000,000 $ 1,013,625 $ 1,005,160
1992-150-G Pac CMO, 6.75%,
9/25/18........................... 1,000,000 996,762 1,001,320
1992-79-G Pac CMO, 7.00%,
10/25/18.......................... 2,000,000 2,004,562 2,011,240
------------ ------------
12,030,011 12,133,237
------------ ------------
TOTAL MORTGAGE-BACKED SECURITIES...... 24,620,766 24,746,376
------------ ------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 39.0%
FEDERAL HOME LOAN BANK -- 4.2%
8.25%, 9/25/96...................... 1,000,000 1,007,522 1,022,020
6.46%, 2/1/00....................... 1,000,000 1,000,000 1,015,160
6.125%, 9/20/00..................... 2,000,000 2,000,000 2,032,540
5.75%, 3/30/01...................... 1,000,000 1,000,000 1,002,520
------------ ------------
5,007,522 5,072,240
------------ ------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 12.1%
8.13%, 9/30/96...................... 1,000,000 1,009,305 1,022,050
6.60%, 11/12/99..................... 1,000,000 1,000,000 1,030,300
6.55%, 1/4/00....................... 1,000,000 1,000,000 1,029,090
6.78%, 3/28/01...................... 2,000,000 2,000,000 2,005,360
7.14%, 7/31/02...................... 1,500,000 1,500,000 1,544,550
6.80%, 9/18/02...................... 1,000,000 1,000,000 1,010,130
6.55%, 4/2/03....................... 1,000,000 1,003,152 1,007,390
8.34%, 3/14/05...................... 2,000,000 2,000,000 2,098,960
6.83%, 6/15/05...................... 2,000,000 2,000,000 2,050,580
7.00%, 7/6/05....................... 2,000,000 2,000,000 2,046,040
------------ ------------
14,512,457 14,844,450
------------ ------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 20.4%
7.60%, 1/10/97...................... 1,000,000 1,007,766 1,023,060
6.81%, 4/23/99...................... 2,000,000 2,000,000 2,042,160
7.64%, 5/6/99....................... 2,000,000 2,001,848 2,013,660
7.24%, 9/2/99....................... 2,000,000 2,000,000 2,045,420
7.36%, 9/29/99...................... 2,000,000 1,975,031 2,067,420
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 15
FMB FUNDS, INC.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT COST (NOTE 2A)
----------- ------------ ------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS --
(CONTINUED)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- (CONTINUED)
7.65%, 10/20/99..................... $ 2,000,000 $ 1,995,953 $ 2,085,300
6.33%, 11/3/00...................... 3,000,000 3,000,000 3,030,030
6.69%, 1/19/00...................... 1,000,000 1,000,000 1,016,430
7.55%, 4/22/02...................... 2,000,000 2,044,036 2,171,200
7.00%, 8/12/02...................... 1,000,000 1,001,898 1,010,650
6.93%, 8/23/02...................... 1,000,000 999,748 1,010,530
6.95%, 9/10/02...................... 3,000,000 3,019,294 3,026,340
6.72%, 2/25/03...................... 2,400,000 2,400,000 2,438,040
------------ ------------
24,445,574 24,980,240
------------ ------------
TENNESSEE VALLEY AUTHORITY -- 2.3%
8.25%, 11/15/96..................... 1,800,000 1,822,394 1,845,000
6.00%, 1/15/97...................... 1,000,000 1,000,000 1,005,000
------------ ------------
2,822,394 2,850,000
------------ ------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS......................... 46,787,947 47,746,930
------------ ------------
U.S. TREASURY NOTES -- 30.3%
7.63%, 4/30/96...................... 1,000,000 1,004,544 1,008,740
6.875%, 3/31/97..................... 3,000,000 3,002,030 3,057,030
8.50%, 5/15/97...................... 2,000,000 2,038,435 2,086,160
8.50%, 7/15/97...................... 1,000,000 1,022,901 1,047,430
7.375%, 11/15/97.................... 5,000,000 4,973,107 5,181,650
7.875%, 1/15/98..................... 3,000,000 3,024,739 3,147,930
7.875%, 4/15/98..................... 1,000,000 1,024,530 1,054,770
9.00%, 5/15/98...................... 5,000,000 5,138,668 5,409,750
8.25%, 7/15/98...................... 4,000,000 4,096,483 4,273,840
6.375%, 1/15/99..................... 2,000,000 1,957,040 2,052,300
6.875%, 8/31/99..................... 2,000,000 1,983,065 2,091,800
7.875%, 11/15/99.................... 1,000,000 1,025,269 1,082,990
8.00%, 5/15/01...................... 2,000,000 2,089,888 2,225,860
7.875%, 8/15/01..................... 2,000,000 2,082,069 2,220,380
7.50%, 11/15/01..................... 1,000,000 1,033,620 1,095,060
------------ ------------
TOTAL U.S. TREASURY NOTES............. 35,496,388 37,035,690
------------ ------------
TOTAL INVESTMENTS -- 89.6%............ 106,905,101+ 109,528,996
------------ ------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 16
FMB FUNDS, INC.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT COST (NOTE 2A)
----------- ------------ ------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 9.7%
First Union Bank, 5.89%, due
12/1/95............................. $11,899,000 $ 11,899,000 $ 11,899,000
------------ ------------
(Proceeds at maturity $11,900,920)
collateralized by:
$12,133,608 U.S. Treasury Bill
10/17/96
TOTAL INVESTMENTS AND REPURCHASE
AGREEMENT -- 99.3%.................. $118,804,101 121,427,996
============ ============
OTHER ASSETS LESS
LIABILITIES -- 0.7%................. 828,062
------------
NET ASSETS -- 100%.................... $122,256,058
============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 17
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS -- 96.5%
Aaa/AAA Ann Arbor Water Supply System
(MBIA) 7.375%, 2/1/2003...... $ 710,000 $ 790,361 $ 824,487
A1/AA Ann Arbor Sewer Disposal
Revenue Series XII, 6.95%,
7/1/2001***.................. 335,000 355,226 378,550
A/A+ Battle Creek Building Authority
8.00%, 4/1/2000.............. 400,000 447,970 454,000
Baa/BBB Bay City UTGO 5.40%, 1/1/1997.. 150,000 153,000 151,619
Baa1/BBB+ Bay County West Side Regional
Sewer Disposal System, 6.40%,
5/1/1996***.................. 150,000 153,207 154,206
Aaa/AAA Chelsea School District, (FGIC)
5.50%, 5/1/2008.............. 500,000 497,109 518,125
A1/AA Clio Area School District,
7.20%, 5/1/1997***........... 200,000 205,680 208,470
Aaa/AAA Dearborn EDC Oakwood Hospital
Revenue Bonds (MBIA) 6.55%,
8/15/2001***................. 250,000 268,416 281,250
A1/AA Dearborn City School District
UTGO, 5.25%, 5/1/2006........ 500,000 490,763 516,875
Aaa/AAA Detroit City School District
UTGO (MBIA) 7.10%,
5/1/2001***.................. 250,000 257,487 286,250
Aaa/AAA Detroit Sewer Disposal (MBIA)
7.125%, 7/1/1999***.......... 500,000 536,667 555,625
Aaa/AAA Detroit Sewer Disposal Revenue
(FGIC) 5.50%, 7/1/1996....... 200,000 200,413 202,070
Aaa/AAA Farmington Hills HFA, Botsford
Hospital (MBIA) Series A
6.70%, 2/15/2001............. 225,000 230,813 248,344
Aaa/AAA Forest Hills Public Schools
5.00%, 5/1/2006.............. 500,000 497,985 500,625
A1/AA Gaylord Schools 6.60%,
5/1/2002***.................. 500,000 545,518 565,625
Aaa/AAA Grand Rapids DDA 6.60%,
6/1/2008..................... 545,000 546,899 607,675
Aa/AAA Grand Rapids & Kent County
Joint Building Authority
7.10%, 10/1/1998***.......... 240,000 255,577 259,200
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 18
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS --
(CONTINUED)
A1/AA- Grand Rapids Sanitation Sewer
System 6.875%, 1/1/2000***... $ 500,000 $ 540,077 $ 545,000
Aaa/AAA Grand Rapids Water Supply
6.625%, 1/1/2001***.......... 500,000 532,986 545,625
Aaa/AAA Grandville Public Schools
District (FGIC) 6.00%,
5/1/2005..................... 310,000 299,919 338,288
Aaa/AAA Greenville Public Schools
6.50%, 5/1/2003.............. 315,000 348,025 355,950
Aaa/AAA Harrison Community Schools
(AMBAC) 5.80%, 5/1/2005...... 500,000 500,000 536,250
NR/AA- Holland Electric Revenue Bonds
Refunding 6.50%,
7/1/1999***.................. 400,000 413,105 430,000
Aaa/AAA Hudsonville Public Schools
(FGIC) 5.00%, 5/1/2002....... 500,000 500,000 515,625
Aaa/AAA Kalamazoo HFA Borges Medical
(FGIC) 6.25%, 7/1/1999***.... 500,000 520,353 523,750
Aa/AAA Kent County Building Authority
6.00%, 12/1/2002***.......... 500,000 505,653 520,625
Kent County HFA Michigan
Hospital Revenue Bonds:
A/A Blodgett Memorial Medical
Center, Series A 6.875%,
7/1/1999***.............. 165,000 166,490 177,581
Aaa/AAA Blodgett Memorial Medical
Center Refunded (MBIA)
Series A 5.75%,
7/1/2009................. 500,000 482,114 505,000
A/A Mary Free Bed Hospital
Series A Refunded 6.50%,
4/1/2005................. 200,000 199,165 212,250
Aaa/AAA Pine Rest Christian
Hospital
Refunded (FGIC) 6.50%,
11/1/2003***............. 500,000 526,780 536,875
A1/AA+ Lansing Building Authority
7.15%, 6/1/2002***........... 525,000 554,395 593,250
A1/AA+ Lansing Tax Increment Finance
Authority, 5.20%,
10/1/1998.................... 200,000 200,000 205,750
Aaa/AAA Lenawee County Building 6.00%,
5/1/2004***.................. 350,000 351,096 363,563
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 19
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS --
(CONTINUED)
A1/NR Macomb County Southeast Waste
Water Disposal System UTGO,
6.50%, 11/1/1999***.......... $ 200,000 $ 203,179 $ 206,002
A1/AA Mattawan School District 6.40%,
5/1/2004***.................. 500,000 520,271 540,000
Aaa/AAA Michigan Higher Education
Student Loan Series XX-I
(AMBAC) 5.70%, 4/1/2002...... 500,000 500,000 523,125
Aaa/AAA Michigan Public Power Agency
Campbell Project (AMBAC)
6.40%, 1/1/1999***........... 235,000 238,302 245,575
Aaa/AAA Michigan State Building
Authority Revenue Bond, Adult
General Hospital (AMBAC)
7.375%, 12/1/1996***......... 250,000 259,375 263,785
Aaa/AAA Michigan State Building
Authority Revenue Bond 6.75%,
10/1/2000***................. 500,000 545,521 560,000
Aaa/AAA Michigan State Building
Authority Revenue Bond Series
II (AMBAC) 6.75%,
10/1/2003***................. 500,000 512,849 553,750
A1/AA Michigan State Environmental
Protection Program UTGO
6.25%, 11/1/2002***.......... 1,000,000 1,058,592 1,115,000
NR/A+ Michigan State HDA Rental
Housing Revenue 5.80%,
4/1/2000..................... 150,000 150,000 157,687
Aaa/AA Michigan State HDA Walled Lake
Villa Project Revenue Bonds
(FSA) 5.85%, 4/15/2007....... 420,000 420,000 442,050
Michigan State HFA Revenue
Bonds:
A/A Holland Community Hospital
4.50%, 1/1/2000.......... 555,000 552,863 556,388
NR/A- Refunded Central Michigan
Community Hospital Series
A 5.75%, 10/1/2002....... 300,000 297,667 311,625
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 20
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS --
(CONTINUED)
Michigan State HFA Revenue
Bonds -- (continued)
Aa/AA Refunded Detroit Center
Group A 6.375%,
8/15/2005***............. $ 500,000 $ 504,474 $ 523,125
NR/AA Refunded Otsego Memorial
Hospital Gaylord
(National Bank Detroit)
6.00%, 1/1/2009.......... 660,000 657,006 683,100
Aaa/AAA Refunded Sparrow Obligated
Group (MBIA) 6.30%,
11/15/2003............... 615,000 620,527 676,500
Aaa/AAA Refunded St. John Hospital
Series A (AMBAC) 5.75%,
5/15/2004................ 200,000 198,162 214,000
NR/BBB+ Series A 4.75%, 7/1/1998... 200,000 200,000 199,750
Aaa/AAA Michigan State South Central
Power Agency Supply System
Revenue Bonds Prerefunded
(AMBAC) 7.25%,
11/1/1996***................. 200,000 206,003 210,216
NR/NR Michigan Strategic Fund 5.20%,
9/1/2004..................... 400,000 400,000 409,500
Aaa/AAA Northern University Revenue
Bond (AMBAC) 5.50%,
12/1/2009.................... 435,000 401,736 437,719
A1/AA Novi CSD UTGO 5.35%,
5/1/2002..................... 275,000 274,294 286,000
A1/AA Oakland County LTGO 6.25%,
11/1/1999***................. 500,000 514,010 527,500
A1/AA Oakland County Segment I&II
6.50%, 11/1/2005............. 500,000 535,045 535,625
Aa/NR Oakland County EDC 6.375%,
11/1/2004***................. 500,000 500,000 570,000
A1/AA- Ottawa County Refunding Bond
Series A 6.80%,
8/1/2001***.................. 500,000 533,705 545,000
NR/NR Oxford Area CSD UTGO 6.70%,
5/1/1996***.................. 340,000 352,182 354,161
A1/AA Paw Paw Public Schools 6.50%,
5/1/2007***.................. 500,000 559,449 565,625
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 21
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS --
(CONTINUED)
A1/AA Plymouth-Canton CSD UTGO 6.35%,
5/1/2001***.................. $ 300,000 $ 323,877 $ 329,250
NR/AA Rochester CSD UTGO 6.50%,
5/1/2002***.................. 150,000 150,693 166,500
A1/AA- Rochester Hills LTGO 6.25%,
8/1/1998***.................. 200,000 205,030 212,250
A1/AA- Rochester Hills UTGO
Prerefunded 6.60%,
11/1/1998***................. 465,000 486,935 504,525
A1/AA Rockford Public Schools 5.60%,
5/1/2005..................... 500,000 499,467 528,750
A1/NR Saginaw County Tittabawasse
Water System Extension 2
6.50%, 7/1/1997***........... 145,000 146,471 146,718
A1/NR Saginaw Water Revenue Bonds
Refunding 6.00%,
7/1/2000***.................. 865,000 885,280 905,006
NR/AAA St. Joseph HFA, Hospital
Revenue Mercy Memorial
Medical Center 7.30%,
10/1/1996***................. 155,000 158,836 162,473
A1/AA Saranac CSD UTGO 5.70%,
5/1/2007..................... 230,000 228,216 237,762
A1/NR Thornapple-Kellogg CSD UTGO
7.00%, 5/1/1997***........... 200,000 210,083 211,750
NR/AA Troy Downtown Development
6.10%, 11/1/2010............. 400,000 400,000 425,500
A1/AA Utica Community Schools UTGO
5.70%, 5/1/2006.............. 500,000 494,868 530,000
University of Michigan Revenue
Bonds:
Aa/AA Refunding Series A 5.70%,
12/1/2004................ 250,000 248,371 269,063
Aa1/AA+ Series B 5.80%, 4/1/2010... 500,000 499,401 526,875
A1/AA Walled Lake Consolidated School
District Series I UTGO 6.50%,
5/1/1999***.................. 200,000 205,328 215,250
NR/AA- Warren LTGO 5.00%, 6/1/2007.... 405,000 381,705 400,950
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 22
FMB FUNDS, INC.
FMB MICHIGAN TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT COST (NOTE 2A)
- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS --
(CONTINUED)
A1/NR Warren School District Prere-
funded 6.70%, 5/1/2001***.... $ 500,000 $ 520,551 $ 562,500
----------- -----------
TOTAL MUNICIPAL OBLIGATIONS.... 30,833,573 32,166,308
----------- -----------
FLOATING RATE DEMAND NOTES --
1.6%**
NR/MIG1 Calhoun County EDC 3.75%,
12/1/1995.................... 430,000 430,000 430,000
A/A City of Farmington Hills EDC
Refunding Bonds 3.90%,
12/1/1995.................... 90,000 90,000 90,000
----------- -----------
TOTAL FLOATING RATE DEMAND
NOTES........................ 520,000 520,000
----------- -----------
TAX FREE MONEY MARKET FUND --
0.1%
Dreyfus Michigan Municipal
Money Market Fund............ 46,714 46,714 46,714
----------- -----------
TOTAL INVESTMENTS -- 98.2%..... $31,400,287+ 32,733,022
===========
OTHER ASSETS LESS
LIABILITIES -- 1.8%.......... 586,270
-----------
NET ASSETS -- 100.0%........... $33,319,292
===========
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 23
FMB FUNDS, INC.
FMB DIVERSIFIED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2A)
- ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- 91.8%
ADVERTISING -- 0.5%
8,000 Interpublic Group of Companies.......... $ 264,470 $ 307,000
---------- ----------
AUTOMOTIVE -- 1.5%
10,000 Ford Motor Company...................... 246,963 282,500
15,000 Genuine Parts, Inc. .................... 555,230 605,625
---------- ----------
802,193 888,125
---------- ----------
BANKING -- 4.4%
13,000 Bank One Corp. ......................... 439,915 495,625
16,000 Citicorp................................ 682,850 1,132,000
30,000 Norwest Corporation..................... 762,125 990,000
---------- ----------
1,884,890 2,617,625
---------- ----------
BEVERAGES -- 1.9%
20,000 PepsiCo Inc. ........................... 784,366 1,105,000
---------- ----------
CHEMICALS -- 2.2%
23,000 Morton International, Inc. ............. 709,650 796,375
13,000 Norsk Hydro A.S., ADR................... 439,722 528,125
---------- ----------
1,149,372 1,324,500
---------- ----------
COMMERCIAL SERVICES -- 1.1%
16,000 Olsten Corp. ........................... 541,400 640,000
---------- ----------
ELECTRONIC PRODUCTS -- 9.4%
27,000 AMP, Inc. .............................. 842,805 1,083,375
5,000 Duracell International Inc. ............ 222,350 265,000
22,600 General Electric Co. ................... 987,274 1,519,850
25,937 Molex, Inc. ............................ 584,739 868,890
19,800 Motorola, Inc. ......................... 704,200 1,212,750
14,000 Solectron Corp.(a)...................... 372,860 595,000
---------- ----------
3,714,228 5,544,865
---------- ----------
ENERGY -- 9.1%
14,000 Chevron Corporation..................... 627,168 691,250
21,000 Enron Corporation....................... 638,555 787,500
10,000 Exxon Corporation....................... 644,013 773,750
13,000 Mobil Corporation....................... 906,668 1,356,875
11,000 Royal Dutch Petroleum ADR............... 975,496 1,412,125
11,000 Sonat, Inc. ............................ 326,600 354,750
---------- ----------
4,118,500 5,376,250
---------- ----------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 24
FMB FUNDS, INC.
FMB DIVERSIFIED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2A)
- ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- (CONTINUED)
ENTERTAINMENT -- 4.3%
10,000 Capital Cities/ABC, Inc. ............... $ 527,910 $ 1,236,250
18,000 Carnival Corp. ......................... 426,150 468,000
13,500 The Walt Disney Co. .................... 588,236 811,688
---------- ----------
1,542,296 2,515,938
---------- ----------
FINANCIAL SERVICES -- 2.5%
6,000 Federal National Mortgage Association... 526,705 657,000
20,000 MBNA Corporation........................ 296,533 807,500
---------- ----------
823,238 1,464,500
---------- ----------
FOOD AND KINDRED PRODUCTS -- 6.3%
17,500 CPC International, Inc. ................ 777,351 1,203,125
9,750 Heinz (H.J.) Co. ....................... 243,025 310,781
15,700 Hershey Foods Corp. .................... 746,154 969,475
24,000 Sara Lee Corp. ......................... 593,275 774,000
15,000 Sysco Corp. ............................ 400,315 459,375
---------- ----------
2,760,120 3,716,756
---------- ----------
HEALTH CARE -- 4.0%
21,000 Abbott Laboratories..................... 643,784 853,125
13,000 Johnson & Johnson....................... 627,247 1,126,125
6,000 Merck & Co., Inc. ...................... 303,855 371,250
---------- ----------
1,574,886 2,350,500
---------- ----------
HOUSEHOLD PRODUCTS -- 3.3%
16,500 Proctor & Gamble Co. ................... 803,459 1,425,188
20,000 Rubbermaid, Inc. ....................... 638,328 550,000
---------- ----------
1,441,787 1,975,188
---------- ----------
INSURANCE -- 2.1%
12,000 AMBAC, Inc. ............................ 506,600 529,500
8,250 American International Group............ 478,278 740,438
---------- ----------
984,878 1,269,938
---------- ----------
MACHINERY -- 1.3%
13,000 Caterpillar Inc. ....................... 691,510 797,875
---------- ----------
MISCELLANEOUS MANUFACTURING -- 1.5%
8,000 Eastman Kodak Co. ...................... 473,405 544,000
7,000 Stanley Works........................... 297,045 354,375
---------- ----------
770,450 898,375
---------- ----------
MULTI-INDUSTRY -- 1.6%
12,500 TRW, Inc. .............................. 798,218 935,938
---------- ----------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 25
FMB FUNDS, INC.
FMB DIVERSIFIED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2A)
- ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- (CONTINUED)
OIL & GAS EXPLORATION -- 0.5%
14,000 Enron Oil & Gas Co. .................... $ 311,635 $ 294,000
---------- ----------
PERSONAL CARE -- 2.4%
15,600 International Flavors and Fragrances.... 613,196 797,550
12,000 Gillette Company........................ 439,205 622,500
---------- ----------
1,052,401 1,420,050
---------- ----------
PHARMACEUTICALS -- 4.5%
24,000 Pfizer, Inc. ........................... 897,181 1,392,000
22,000 Schering-Plough......................... 744,725 1,262,250
---------- ----------
1,641,906 2,654,250
---------- ----------
POLLUTION CONTROL -- 1.3%
26,000 WMX Technologies, Inc. ................. 885,072 767,000
---------- ----------
PUBLISHING/PRINTING -- 1.6%
24,500 RR Donnelley & Sons Company............. 679,049 940,188
---------- ----------
RESTAURANTS -- 1.9%
25,000 McDonald's Corporation.................. 611,076 1,115,625
---------- ----------
RETAIL-DEPARTMENT STORES -- 1.8%
11,000 Albertson's Inc. ....................... 355,380 338,250
9,700 Dayton-Hudson Corp. .................... 711,775 704,463
---------- ----------
1,067,155 1,042,713
---------- ----------
RETAIL-DRUG STORES -- 1.5%
30,400 Walgreen Company........................ 578,220 885,400
---------- ----------
RETAIL-SPECIALTY LINE -- 2.4%
19,000 Autozone(a)............................. 532,975 553,375
13,000 Home Depot, Inc. ....................... 562,790 576,875
6,000 Kohls Corp.(a).......................... 286,690 324,000
---------- ----------
1,382,455 1,454,250
---------- ----------
SOFTWARE/COMPUTER SERVICES -- 7.3%
16,600 Automatic Data Processing............... 821,023 1,321,775
14,000 Microsoft Corp.(a)...................... 591,460 1,219,750
21,000 Oracle Systems Corporation(a)........... 469,475 952,875
18,000 Raytheon Co. ........................... 607,755 801,000
---------- ----------
2,489,713 4,295,400
---------- ----------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 26
FMB FUNDS, INC.
FMB DIVERSIFIED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
AMOUNT COST (NOTE 2A)
- ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- (CONTINUED)
TELECOMMUNICATIONS -- 8.4%
29,000 Alltel Corporation...................... $ 691,426 $ 855,500
6,000 Ameritech Corporation/Del............... 267,645 330,000
20,200 AT&T Corp. ............................. 935,326 1,333,200
31,300 MCI Communications Corp. ............... 555,893 837,271
15,000 SBC Communications, Inc. ............... 601,500 810,000
16,800 U.S. West Communications Group ......... 371,888 525,000
16,800 U.S. West Media Group(a)................ 253,932 302,400
---------- ----------
3,677,610 4,993,371
---------- ----------
TOYS -- 1.2%
26,000 Mattel Inc.............................. 545,660 728,000
---------- ----------
TOTAL INVESTMENTS -- 91.8%.............. 39,568,754+ 54,318,620
---------- ----------
REPURCHASE AGREEMENT -- 8.3%
$4,922,000 First Union Bank, 5.89%, 12/01/95....... 4,922,000 4,922,000
----------- -----------
(Proceeds at maturity $4,922,805)
collateralized by:
$5,018,901 U.S. Treasury Bill,
5/09/1996
TOTAL INVESTMENTS AND REPURCHASE
AGREEMENT -- 100.1%................... $44,490,754 59,240,620
==========
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.1%)...................... (82,045)
----------
NET ASSETS -- 100.0%.................... $59,158,575
===========
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 27
FMB FUNDS, INC.
FOOTNOTES TO PORTFOLIOS
*Credit Ratings given by Moody's Investors Services, Inc. & Standard and
Poor's Corporation (unaudited)
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
------------------- ------------------
<S> <C> <C>
Short Term Ratings
P1 A1 Instrument of the highest quality.
Long Term Ratings
Aaa AAA Instrument judged to be of the best
quality and carrying the smallest
amount of investment risk.
Aa AA Instrument judged to be of high
quality by all standards.
A A Instrument judged to be adequate by
all standards.
Baa BBB Instrument judged to be of moderate
quality by all standards.
NR NR Not Rated. In the opinion of the
Investment Adviser, instrument
judged to be of comparable
investment quality to rated
securities which may be purchased by
the Funds.
</TABLE>
Items which possess the strongest investment attributes of their category
are given that letter rating followed by a number. The Standard & Poor's
ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Government issues have assumed rating of Aaa/AAA.
** Floating Rate Demand Notes. The maturity date shown is the next interest
reset date and rate shown is rate in effect at November 30, 1995.
*** Maturity date shown is the next callable date.
+ The cost of securities for Federal income tax purposes is substantially the
same as that shown.
(a) Non-income producing security.
See accompanying notes to financial statements.
26
<PAGE> 28
FMB FUNDS, INC.
FOOTNOTES TO PORTFOLIOS (CONTINUED)
INVESTMENT PERCENTAGES SHOWN ARE CALCULATED AS A PERCENTAGE OF NET ASSETS.
ABBREVIATIONS USED IN THE PORTFOLIOS:
<TABLE>
<S> <C>
AD Accretion Directed
ADR American Depository Receipt
AMBAC American Municipal Bond Assurance Corporation
CMO Collateralized Mortgage Obligation
CMT Constant Maturity Treasury
CSD Community School District
DDA Downtown Development Authority
EDC Economic Development Corporation
FGIC Financial Guaranty Insurance Corporation
FSA Financial Security Assurance
HDA Housing Development Authority
HFA Hospital Finance Authority
IDA Industrial Development Authority
LTGO Limited Tax General Obligation
MBIA Municipal Bond Insurance Association
Pac Planned Amortized Class
UTGO Unlimited Tax General Obligation
</TABLE>
See accompanying notes to financial statements.
27
<PAGE> 29
FMB FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FMB FMB
FMB INTERMEDIATE MICHIGAN FMB
MONEY GOVERNMENT TAX-FREE DIVERSIFIED
MARKET FUND INCOME FUND BOND FUND EQUITY FUND
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at value
(identified cost: $92,845,449;
$106,905,101; $31,400,287; and
$39,568,754; respectively)........... $ 92,845,449 $109,528,996 $32,733,022 $54,318,620
Repurchase Agreements, at value
(identified cost: $12,256,000;
$11,899,000; $0 and $4,922,000;
respectively)........................ 12,256,000 11,899,000 -- 4,922,000
Cash................................... 852 111 223 300
Dividends and interest receivable...... 116,700 1,516,733 433,622 116,713
Receivable for investment sold......... -- -- 250,000 --
Receivable for Fund shares sold........ -- 3,278 485 1,359
Unamortized organizational cost........ 6,605 6,605 6,605 6,605
------------ ------------ ----------- -----------
Total Assets....................... 105,225,606 122,954,723 33,423,957 59,365,597
------------ ------------ ----------- -----------
LIABILITIES:
Dividends payable...................... 362,113 564,069 84,893 --
Payable for Fund shares redeemed....... 84,547 10,375 -- 1,589
Advisory fee payable................... 29,768 45,150 4,110 47,916
Administrative services fee payable.... 12,756 15,050 4,110 7,187
Fund accounting fees payable........... 2,500 2,500 2,500 2,500
Shareholder servicing fee payable...... 1,371 518 487 865
Payable for securities purchased....... -- -- -- 92,490
Accrued expenses....................... 5,665 61,003 8,565 54,475
------------ ------------ ----------- -----------
Total Liabilities.................. 498,720 698,665 104,665 207,022
------------ ------------ ----------- -----------
NET ASSETS:............................ $104,726,886 $122,256,058 $33,319,092 $59,158,575
------------ ------------ ----------- -----------
COMPOSITION OF NET ASSETS:
Shares of capital stock outstanding
(par value of $.001 per share); 10
billion shares authorized............ 104,725 11,941 3,089 4,057
Additional paid-in capital............. 104,620,016 121,421,613 32,098,785 44,535,886
Accumulated undistributed
(distributions in excess of) net
investment income.................... 90,145 -- -- 99,463
Accumulated net realized losses on
investment transactions.............. (88,000) (1,801,391) (115,317) (230,697 )
Unrealized appreciation on
investments.......................... -- 2,623,895 1,332,735 14,749,866
------------ ------------ ----------- -----------
$104,726,886 $122,256,058 $33,319,292 $59,158,575
============ ============ =========== ===========
NET ASSETS:
INSTITUTIONAL CLASS:
Shares of capital stock
outstanding........................ 87,195,506 11,198,087 1,919,291 3,656,968
============ ============ =========== ===========
Net asset value, maximum offering
price and redemption price per
share outstanding.................. $1.00 $10.24 $10.79 $14.58
==== ===== ===== ======
CONSUMER SERVICE CLASS:
Shares of capital stock
outstanding........................ 17,529,236 743,337 1,169,923 399,960
============ ============ =========== ===========
Net asset value and redemption price
per share outstanding.............. $1.00 $10.24 $10.79 $14.58
==== ===== ===== ======
Maximum offering price per share
($1.00/$1.00, $10.24/.97,
$10.79/.97 and $14.58/.96,
respectively)...................... $1.00 $10.56 $11.12 $15.19
==== ===== ===== ======
</TABLE>
See accompanying notes to financial statements.
28
<PAGE> 30
FMB FUNDS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FMB FMB
FMB INTERMEDIATE MICHIGAN FMB
MONEY GOVERNMENT TAX-FREE DIVERSIFIED
MARKET FUND INCOME FUND BOND FUND EQUITY FUND
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME:
Dividends.................. -- -- -- $ 1,025,266
Interest................... $6,688,746 $ 8,395,968 $1,627,470 255,195
----------- ----------- ---------- -----------
6,688,746 8,395,968 1,627,470 1,280,461
----------- ----------- ---------- -----------
EXPENSES:
Advisory................... 396,490 549,684 168,511 532,024
Administrative services.... 169,923 183,228 45,958 79,804
Shareholder services....... 40,500 38,000 28,500 42,000
Audit...................... 30,750 41,800 11,500 27,000
Fund accounting............ 30,200 55,000 50,500 37,500
Legal...................... 20,000 22,400 3,521 11,000
Reports to shareholders.... 13,800 11,000 12,000 16,500
Custodian.................. 13,000 10,300 12,500 14,500
Registration............... 9,500 11,987 9,300 10,500
Insurance.................. 7,346 7,620 1,775 3,103
Amortization of
organization expenses.... 6,625 6,625 6,625 6,625
Directors.................. 3,250 3,250 3,250 3,250
Miscellaneous.............. 9,002 13,000 7,000 9,393
----------- ----------- ---------- -----------
Total expenses before
waivers/reimbursements... 750,386 953,894 360,940 793,199
Less: Expenses waived by
Adviser.................. -- -- (147,376) --
----------- ----------- ---------- -----------
Net expenses................. 750,386 953,894 213,564 793,199
----------- ----------- ---------- -----------
Net investment income........ 5,938,360 7,442,074 1,413,906 487,262
----------- ----------- ---------- -----------
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss) on
investment
transactions............. (88,000 ) (1,371,748) (12,047) 538,806
Change in unrealized
appreciation on
investments.............. -- 8,393,069 2,368,037 12,412,467
----------- ----------- ---------- -----------
Net realized and unrealized
gain (loss) on
investments................ (88,000 ) 7,021,321 2,355,990 12,951,273
----------- ----------- ---------- -----------
Increase in net assets
resulting from
operations................. $5,850,360 $14,463,395 $3,769,896 $13,438,535
=========== ============ ========== ============
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 31
FMB FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FMB MONEY FMB INTERMEDIATE
MARKET FUND GOVERNMENT INCOME FUND
------------------------------ ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) In Net Assets:
Operations:
Net investment income............... $ 5,938,360 $ 2,791,214 $ 7,442,074 $ 6,975,894
Net realized loss on investment
transactions...................... (88,000) -- (1,371,748) (429,677)
Change in unrealized appreciation
(depreciation) on investments..... -- -- 8,393,069 (9,700,213)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations........... 5,850,360 2,791,214 14,463,395 (3,153,996)
------------- ------------- ------------ ------------
Dividends from net investment income:
Institutional Class............... (5,293,269) (2,692,245) (6,916,568) (6,369,040)
Consumer Service Class............ (554,946) (98,969) (525,506) (606,854)
------------- ------------- ------------ ------------
(5,848,215) (2,791,214) (7,442,074) (6,975,894)
------------- ------------- ------------ ------------
Capital Share Transactions:
Proceeds from sale of shares:
Institutional Class............... 269,856,183 194,419,964 35,701,843 42,282,533
Consumer Service Class............ 32,067,014 9,129,509 336,892 1,774,179
------------- ------------- ------------ ------------
301,923,197 203,549,473 36,038,735 44,056,712
------------- ------------- ------------ ------------
Net asset value of shares issued in
reinvestment of dividends:
Institutional Class............. 143,737 406,142 744 3,536
Consumer Service Class.......... 544,025 96,793 430,705 479,805
------------- ------------- ------------ ------------
687,762 502,935 431,449 483,341
------------- ------------- ------------ ------------
Cost of shares redeemed:
Institutional Class............... (286,105,170) (156,972,964) (43,009,557) (23,384,736)
Consumer Service Class............ (22,236,404) (3,556,407) (3,393,284) (2,550,788)
------------- ------------- ------------ ------------
(308,341,574) (160,529,371) (46,402,841) (25,935,524)
------------- ------------- ------------ ------------
Increase (decrease) in net assets
derived from capital share
transactions........................ (5,730,615) 43,523,037 (9,932,657) 18,604,529
------------- ------------- ------------ ------------
Net increase (decrease) in net
assets.............................. (5,728,470) 43,523,037 (2,911,336) 8,474,639
Net Assets:
Beginning of period................. 110,455,356 66,932,319 125,167,394 116,692,755
------------- ------------- ------------ ------------
End of period....................... $ 104,726,886 $ 110,455,356 $122,256,058 $125,167,394
=============== =============== ============== ==============
Undistributed (distributions in
excess of) net investment income.... $90,145 -- -- ($100,533)
====== =======
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 32
FMB FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FMB MICHIGAN FMB DIVERSIFIED
TAX-FREE BOND FUND EQUITY FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase In Net Assets:
Operations:
Net investment income................. $ 1,413,906 $ 1,266,937 $ 487,262 $ 293,792
Net realized gain (loss) on investment
transactions........................ (12,047 ) (102,663 ) 538,806 488,363
Change in unrealized appreciation
(depreciation) on investments....... 2,368,037 (1,612,544 ) 12,412,467 (180,192)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 3,769,896 (448,270 ) 13,438,535 601,963
------------ ------------ ------------ ------------
Dividends from net investment income:
Institutional Class................. (813,846 ) (624,462 ) (406,415) (286,212)
Consumer Service Class.............. (600,060 ) (642,475 ) (44,078) (38,615)
------------ ------------ ------------ ------------
(1,413,906 ) (1,266,937 ) (450,493) (324,827)
------------ ------------ ------------ ------------
Distributions from realized capital
gains:
Institutional Class................. -- (15,918 ) -- --
Consumer Service Class.............. -- (19,997 ) -- --
------------ ------------ ------------ ------------
-- (35,915 ) -- --
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from sale of shares:
Institutional Class................. 7,803,836 7,761,135 11,272,214 11,563,862
Consumer Service Class.............. 1,786,833 3,947,524 810,929 988,695
------------ ------------ ------------ ------------
9,590,669 11,708,659 12,083,143 12,552,557
------------ ------------ ------------ ------------
Net asset value of shares issued in
reinvestment of dividends and
capital gains:
Institutional Class............... 1,786 1,300 393 148
Consumer Service Class............ 508,352 535,770 43,375 38,252
------------ ------------ ------------ ------------
510,138 537,070 43,768 38,400
------------ ------------ ------------ ------------
Cost of shares redeemed:
Institutional Class................. (3,941,630 ) (3,166,280 ) (11,896,251) (8,566,229)
Consumer Service Class.............. (2,940,354 ) (6,133,525 ) (1,273,831) (1,700,725)
------------ ------------ ------------ ------------
(6,881,984 ) (9,299,805 ) (13,170,082) (10,266,954)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
derived from capital share
transactions.......................... 3,218,823 2,945,924 (1,043,171) 2,324,003
------------ ------------ ------------ ------------
Net increase in net assets............. 5,574,813 1,194,802 11,944,871 2,601,139
Net Assets:
Beginning of period................... 27,744,479 26,549,677 47,213,704 44,612,565
------------ ------------ ------------ ------------
End of period......................... $33,319,292 $27,744,479 $ 59,158,575 $ 47,213,704
============== ============== ============== ==============
Undistributed net investment income.... -- -- $99,463 $62,694
====== ======
</TABLE>
See accompanying notes to financial statements.
31
<PAGE> 33
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- NOVEMBER 30, 1995
1. DESCRIPTION -- FMB Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company, established as a Maryland corporation on September 20, 1991. The
Corporation 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. These Funds commenced operations on December 2, 1991 and prior to that
date had no operations other than organization matters and the sale to Furman
Selz LLC, formerly known as Furman Selz Incorporated ("Furman Selz"), the Funds'
Administrator, of 10,000, 1,000, 1,000 and 1,000 shares, respectively, of each
of the Institutional Class Shares and the Consumer Service Class Shares of the
FMB Money Market Fund, FMB Intermediate Government Income Fund, FMB Michigan
Tax-Free Bond Fund, and FMB Diversified Equity Fund, on November 26, 1991.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions, except that the Consumer Service Class Shares may bear a
distribution charge not borne by the Institutional Class, and can bear different
shareholder servicing, legal and printing expenses. In addition, the Consumer
Service Class Shares are subject to a sales load. During the fiscal year ended
November 30, 1995, the Consumer Service Class Shares paid no distribution
charges and there were no other expenses different from the Institutional Class
Shares.
2. SIGNIFICANT ACCOUNTING POLICIES -- The following is a summary of the
significant accounting policies followed by the Funds:
a. Security Valuation The FMB Money Market Fund uses the amortized cost
method for valuing securities, which approximates market value. This method
involves valuing the security at cost and then amortizing any discount or
premium to par at maturity. There is no assurance that the FMB Money Market
Fund will be able to maintain a stable net asset value of $1.00 per share.
Securities of the FMB Intermediate Government Income Fund, the FMB Michigan
Tax-Free Bond Fund and the FMB Diversified Equity Fund for which market
quotations are readily available are valued at the price quoted on the
security's primary exchange as of the close of regular trading on the New
York Stock Exchange. In the absence of market quotations, investments are
32
<PAGE> 34
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
valued at the latest quoted bid price. Fixed income securities may be
valued on the basis of bids provided by an independent pricing service.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Short-term securities which mature
in 60 days or less are valued at amortized cost, if their term to maturity
at purchase was 60 days or less or by amortizing to par at maturity their
value on the 61st day prior to maturity, if their original term to maturity
at purchase exceeded 60 days. Any other securities and other assets of the
Funds for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Corporation's Board
of Directors and in accordance with procedures adopted by the Board of
Directors.
b. Investment Transactions Transactions are recorded on the trade date.
Identified cost of investments sold is used for both financial statement
and Federal income tax purposes. Interest income, including the
amortization of discount or premium, is recorded as earned. Dividends are
recorded on the ex-dividend date.
c. Federal Income Taxes Each Fund's policy is to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of
1986, as amended. By so qualifying, the Funds will not be subject to
Federal income taxes to the extent that they distribute taxable and
tax-exempt income for their fiscal year. The Funds also intend to meet the
distribution requirements to avoid the payment of an excise tax.
d. 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 its 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. Dividends and distributions are
recorded on the ex-dividend date.
33
<PAGE> 35
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary
or permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their Federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized gains for financial reporting purposes but not for
tax purposes are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent
dividends and distributions exceed net investment income and net realized
capital gains for tax purposes, they are reported as distributions of
paid-in capital.
e. Organization Expenses Costs incurred in connection with the organization
and initial registration of the Corporation have been deferred and are
being amortized over a sixty month period, beginning with each Fund's
commencement of operations.
f. Determination of Net Asset Value and Allocation of Expenses Expenses
directly attributable to a Fund are charged to that Fund; other expenses
are allocated proportionately among each Fund within the Corporation in
relation to the net assets of each Fund, equally among the Funds, or in
relation to the number of shareholder accounts. In calculating net asset
value per share of each class, investment income, realized and unrealized
gains and losses and expenses other than class specific expenses are
allocated daily to each class of shares based upon the proportion of net
assets attributable to each class at the beginning of each day.
3. ADVISER -- FMB-Trust, formerly FMB-Financial Group, a wholly-owned
subsidiary of First Michigan Bank Corporation, is the Funds' Adviser. First
Michigan Bank Corporation is the Funds' Sub-Adviser. The Sub-Adviser is paid by
the Adviser.
Pursuant to the Advisory Contracts, the Adviser manages the investments of the
Funds and continuously reviews, supervises and administers the Funds'
investments. The Adviser is responsible for placing orders for the purchase and
sale of investment securities directly with brokers and dealers selected
34
<PAGE> 36
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
at its discretion. The terms of the Advisory Contracts 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.
Certain of the states in which shares of the Funds are qualified for sale impose
limitations on the expenses of the Funds. If, in any fiscal year, the total
expenses of a Fund (excluding taxes, interest, distribution expenses, brokerage
commissions, certain portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, but including the advisory and administrative services
fees) exceed the expense limitations applicable to that Fund imposed by the
securities regulations of any state, the Adviser will pay or reimburse the Funds
for expenses to meet these limitations to the extent of advisory fees earned for
the fiscal year. In the most restrictive state, aggregate annual expenses shall
not exceed two and one-half percent (2 1/2%) of the first $30 million of average
net assets, two percent (2%) of the next $70 million of average net assets and
one and one-half percent (1 1/2%) of the remaining average net assets of the
Fund. For the year ended November 30, 1995, no reimbursement of expenses was
required to meet these limitations.
4. ADMINISTRATOR -- During the fiscal year ended November 30, 1995, pursuant to
Administrative Services Contracts, Furman Selz provided management and
administrative services necessary for the operations of the Funds, furnished
office space and facilities required to conduct the business of the Funds and
paid the compensation of the Corporation's officers affiliated with Furman Selz.
The terms of the Administrative Services Contracts provided for annual fees of
0.15% of average daily net assets of each Fund.
5. OTHER TRANSACTIONS WITH AFFILIATES -- During the fiscal year ended November
30, 1995, Furman Selz was the transfer agent for the Funds.
35
<PAGE> 37
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
Under a Service Agreement, Furman Selz provided personnel and facilities to
perform shareholder servicing and transfer agency related services. Furman Selz
received a per account fee and reimbursement for out of pocket expenses in
connection with shareholder servicing. For the year ended November 30, 1995,
Furman Selz received per account shareholder servicing fees of $11,421, $6,773,
$6,315, and $10,083, respectively, from the FMB Money Market Fund, FMB
Intermediate Government Income Fund, FMB Michigan Tax-Free Bond Fund, and FMB
Diversified Equity Fund, respectively.
Furman Selz also provided fund accounting services to the Funds. The Funds each
paid $2,500 per month to Furman Selz for performing fund accounting. Furman Selz
was also reimbursed for out of pocket expenses relating to fund accounting.
During the fiscal year ended November 30, 1995, the Funds were distributed by
Macatawa Distributor, Inc. (the "Distributor"), which is a wholly-owned
subsidiary of Furman Selz. Under a Distribution Plan adopted by the Funds under
Rule 12b-1 of the Investment Company Act of 1940, each Fund is permitted, with
respect to the Consumer Service Class, to reimburse the Distributor monthly for
costs and expenses in connection with the distribution of shares. This
reimbursement is limited to 0.35% of the average daily net assets of the
Consumer Service Class for the FMB Intermediate Government Income Fund, FMB
Michigan Tax-Free Bond Fund and FMB Diversified Equity Fund. In the case of the
FMB Money Market Fund, the limit is 0.25% of the average daily net assets of the
Consumer Service Class. For the year ended November 30, 1995, no distribution
expenses were incurred or reimbursed by the Funds to the Distributor.
6. REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other brokers or dealers
that meet the credit guidelines established by the Board of Directors. The
Funds' policy is to receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to the dollar amount
invested by that Fund in each agreement, and the Fund will make payment on the
repurchase agreement only upon physical delivery or upon evidence of book entry
transfer to the account of the custodian of such securities as collateral. To
the extent that
36
<PAGE> 38
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
any repurchase agreement transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to ensure the adequacy of the
collateral. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Funds may be delayed or limited.
7. CONCENTRATION OF CREDIT RISK -- The FMB Michigan Tax-Free Bond Fund invests
substantially all of its assets in a varied 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.
8. SECURITY TRANSACTIONS -- The cost of securities purchased and proceeds from
securities sold (excluding short-term securities) for the year ended November
30, 1995 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
COMMON STOCKS AND BONDS OBLIGATIONS
-------------------------- --------------------------
COST OF PROCEEDS FROM COST OF PROCEEDS FROM
SECURITIES SECURITIES SECURITIES SECURITIES
PURCHASED SOLD PURCHASED SOLD
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
FMB Intermediate
Government Income
Fund.................. -- -- $32,204,078 $51,041,651
FMB Michigan Tax-Free
Bond Fund............. $12,800,962 $10,044,932 -- --
FMB Diversified Equity
Fund.................. 9,574,093 11,384,127 -- --
</TABLE>
Unrealized appreciation and depreciation at November 30, 1995 based on cost of
securities for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ --------------
<S> <C> <C> <C>
FMB Intermediate Government
Income Fund................. $2,701,625 $ 77,730 $2,623,895
FMB Michigan Tax-Free
Bond Fund................... 1,334,366 1,631 1,332,735
FMB Diversified Equity Fund... 14,998,343 248,477 14,749,866
</TABLE>
37
<PAGE> 39
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
9. FEDERAL INCOME TAX STATUS -- At November 30, 1995, the FMB Money Market Fund
had capital loss carryforwards of $88,000 available through the year 2003 to
offset future realized capital gains.
At November 30, 1995, FMB Intermediate Government Income Fund had capital loss
carryforwards of $1,796,589 available through the year 2003 to offset future
realized capital gains. To reflect reclassifications arising from permanent
book/tax differences for the year ended November 30, 1995, distributions in
excess of net investment income was credited $100,533 and additional paid-in
capital was charged $100,533.
Capital losses incurred after October 31, 1995 within the fiscal year ended
November 30, 1995 are deemed to arise on the first business day of the following
fiscal year. The FMB Intermediate Government Income Fund incurred and will elect
to defer post October capital losses of $4,836.
At November 30, 1995, the FMB Michigan Tax-Free Bond Fund had capital loss
carryforwards of $114,710, available through the year 2003 to offset realized
capital gains.
During the fiscal year ended November 30, 1995, the FMB Diversified Equity Fund
utilized $538,807 of capital loss carryforwards. The Fund has remaining capital
loss carryforwards of $230,696 available through the year 2003 to offset future
realized capital gains.
38
<PAGE> 40
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
10. CAPITAL SHARE TRANSACTIONS -- The Corporation is authorized to issue 10
billion shares of capital stock with a par value of $.001. Transactions in
shares of the Funds for the years ended November 30, 1994 and November 30, 1995
were as follows:
<TABLE>
<CAPTION>
FMB MONEY FMB INTERMEDIATE
MARKET FUND GOVERNMENT INCOME FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS
Shares sold............ 269,856,183 194,419,964 3,546,780 4,156,835
Shares issued in
reinvestment of
dividends from net
investment income.... 143,737 406,142 66 347
------------ ------------ ------------ ------------
269,999,920 194,826,106 3,546,846 4,157,182
Shares redeemed........ (286,105,170) (156,972,964) (4,297,423) (2,321,846)
------------ ------------ ------------ ------------
Net increase (decrease)
in shares............ (16,105,250) 37,853,142 (750,577) 1,835,336
============= ============= =========== ===========
CONSUMER SERVICE CLASS
Shares sold............ 32,067,014 9,129,509 33,551 173,721
Shares issued in
reinvestment of
dividends from net
investment income.... 544,025 96,793 43,087 47,859
------------ ------------ ------------ ------------
32,611,039 9,226,302 76,638 221,580
Shares redeemed........ (22,236,403) (3,556,407) (339,113) (254,854)
------------ ------------ ------------ ------------
Net increase (decrease)
in shares............ 10,374,636 5,669,895 (262,475) (33,274)
============= ============= =========== ===========
</TABLE>
39
<PAGE> 41
FMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) -- NOVEMBER 30, 1995
10. CAPITAL SHARE TRANSACTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
FMB MICHIGAN TAX-FREE FMB DIVERSIFIED
BOND FUND EQUITY FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS
Shares sold............... 742,385 751,102 878,764 1,009,176
Shares issued in
reinvestment of
dividends from net
investment income....... 172 126 31 13
------------ ------------ ------------ ------------
742,557 751,228 878,795 1,009,189
Shares redeemed........... (377,678) (306,890) (914,223) (744,382)
------------ ------------ ------------ ------------
Net increase in shares.... 364,879 444,338 (35,428) 264,807
=========== =========== =========== ===========
CONSUMER SERVICE CLASS
Shares sold............... 173,587 378,579 62,281 86,281
Shares issued in
reinvestment of
dividends from net
investment income and
realized capital
gains................... 48,416 51,640 3,387 3,366
------------ ------------ ------------ ------------
222,003 430,219 65,668 89,647
Shares redeemed........... (280,866) (593,492) (101,728) (148,968)
------------ ------------ ------------ ------------
Net decrease in shares.... (58,863) (163,273) (36,060) (59,321)
=========== =========== =========== ===========
</TABLE>
40
<PAGE> 42
FMB FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FMB MONEY MARKET FUND
---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1992*
------------------------ ------------------------ ------------------------ ------------------------
FOR A SHARE CONSUMER CONSUMER CONSUMER CONSUMER
OUTSTANDING INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
THROUGHOUT EACH PERIOD CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ---------------------- ------------- -------- ------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value,
Beginning of
Period.............. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------ ------- ------ -------- ------ -------- ------
Income from Investment
Operations:
Net investment
income............ 0.051 0.051 0.035 0.035 0.029 0.029 0.036 0.035
------- ------ ------- ------ -------- ------ -------- ------
Less dividends from
net investment
income.............. (0.051) (0.051 ) (0.035) (0.035) (0.029) (0.029) (0.036) (0.035 )
------- ------ ------- ------ -------- ------ -------- ------
Net Asset Value, End
of Period........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======= ====== ======= ====== ======== ====== ======== ======
Total Return (not
reflecting sales
load)............... 5.28% 5.28% 3.51% 3.51% 2.97% 2.97% 3.78% 3.67%
Ratios/Supplemental
Data:
Net Assets, End of
Period (000's).... $87,238 $17,489 $103,301 $7,154 $65,448 $1,485 $58,596 $208
Ratios of Net
Expenses to
Average Net
Assets............ 0.65% 0.65% 0.68% 0.68% 0.32% 0.32% 0.27% 0.39%
Ratios of Expenses
before
effect of
waivers........... 0.65% 0.65% 0.70% 0.70% 0.68% 0.68% 0.91% 1.03%
Ratios of Net
Investment Income
to Average Net
Assets............ 5.16% 5.16% 3.46% 3.46% 2.91% 2.91% 3.59% 3.46%
</TABLE>
- ---------------
* Fund Commenced Operations on December 2, 1991.
41
<PAGE> 43
FMB FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FMB INTERMEDIATE GOVERNMENT INCOME FUND
---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1992*
------------------------ ------------------------ ------------------------ ------------------------
FOR A SHARE CONSUMER CONSUMER CONSUMER CONSUMER
OUTSTANDING INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
THROUGHOUT EACH PERIOD CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ---------------------- ------------- -------- ------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value,
Beginning of
Period.............. $9.66 $9.66 $10.46 $10.46 $10.10 $10.10 $10.00 $10.00
------- ------ ------- ------ ------- ------ -------- ------
Income from Investment
Operations:
Net investment
income............ 0.61 0.61 0.57 0.57 0.59 0.59 0.60 0.58
Net gain (loss) on
securities (both
realized and
unrealized)....... 0.58 0.58 (0.80) (0.80 ) 0.36 0.36 0.10 0.10
------- ------ ------- ------ ------- ------ -------- ------
Total from
Investment
Operations........ 1.19 1.19 (0.23) (0.23 ) 0.95 0.95 0.70 0.68
------- ------ ------- ------ ------- ------ -------- ------
Less Distributions:
Dividends from net
investment
income............ (0.61) (0.61 ) (0.57) (0.57 ) (0.59) (0.59 ) (0.60) (0.58)
------- ------ ------- ------ ------- ------ -------- ------
Net Asset Value, End
of Period........... $10.24 $10.24 $9.66 $9.66 $10.46 $10.46 $10.10 $10.10
======= ====== ======= ====== ======= ====== ======== ======
Total Return (not
reflecting sales
load)............... 12.64% 12.64% (2.23%) (2.23% ) 9.60% 9.60% 7.10% 6.95%
Ratios/Supplemental
Data:
Net Assets, End of
Period (000's).... $114,646 $7,610 $115,449 $9,718 $105,820 $10,872 $81,371 $5,440
Ratios of Net
Expenses to
Average Net
Assets............ 0.78% 0.78% 0.83% 0.83% 0.50% 0.50% 0.43% 0.61%
Ratios of Expenses
before effect of
waivers........... 0.78% 0.78% 0.85% 0.85% 0.78% 0.78% 0.90% 1.08%
Ratios of Net
Investment Income
to Average Net
Assets............ 6.09% 6.09% 6.45% 6.45% 5.66% 5.66% 5.85% 5.67%
Portfolio Turnover
Rate.............. 27% 27% 20% 20% 17% 17% 29% 29%
</TABLE>
- ---------------
* Fund Commenced Operations on December 2, 1991.
42
<PAGE> 44
FMB FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FMB MICHIGAN TAX-FREE BOND FUND
---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1992*
------------------------ ------------------------ ------------------------ ------------------------
FOR A SHARE CONSUMER CONSUMER CONSUMER CONSUMER
OUTSTANDING INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
THROUGHOUT EACH PERIOD CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ---------------------- ------------- -------- ------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value,
Beginning of
Period.............. $9.97 $9.97 $10.61 $10.61 $10.24 $10.24 $10.00 $10.00
-------- ------ -------- ------ -------- ------ -------- ------
Income from Investment
Operations:
Net investment
income............ 0.49 0.49 0.47 0.47 0.49 0.49 0.48 0.46
Net gain (loss) on
securities (both
realized and
unrealized)....... 0.82 0.82 (0.63) (0.63 ) 0.37 0.37 0.24 0.24
-------- ------ -------- ------ -------- ------ -------- ------
Total from
Investment
Operations........ 1.31 1.31 (0.16) (0.16 ) 0.86 0.86 0.72 0.70
-------- ------ -------- ------ -------- ------ -------- ------
Less Distributions:
Dividends from net
investment
income............ (0.49) (0.49 ) (0.47) (0.47 ) (0.49) (0.49 ) (0.48) (0.46 )
Realized capital
gains............. -- -- (0.01) (0.01 ) -- -- -- --
-------- ------ -------- ------ -------- ------ -------- ------
Net Asset Value, End
of Period........... $10.79 $10.79 $9.97 $9.97 $10.61 $10.61 $10.24 $10.24
======== ====== ======== ====== ======== ====== ======== ======
Total Return (not
reflecting sales
load)............... 13.21% 13.21% (1.49%) (1.49% ) 8.53% 8.53% 7.29% 7.17%
Ratios/Supplemental
Data:
Net Assets, End
of Period (000's)... $20,700 $12,619 $15,495 $12,249 $11,779 $14,771 $6,043 $4,572
Ratios of Net
Expenses to
Average Net
Assets............ 0.70% 0.70% 0.51% 0.51% 0.35% 0.35% 0.29% 0.46%
Ratios of Expenses
before effect of
waivers/
reimbursements.... 1.18% 1.18% 1.19% 1.19% 1.38% 1.38% 2.55% 2.72%
Ratios of Net
Investment Income
to Average Net
Assets............ 4.62% 4.62% 4.50% 4.50% 4.59% 4.59% 4.68% 4.50%
Portfolio Turnover
Rate.............. 35% 35% 22% 22% 13% 13% 30% 30%
</TABLE>
- ---------------
* Fund Commenced Operations on December 2, 1991.
43
<PAGE> 45
FMB FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FMB DIVERSIFIED EQUITY FUND
---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1992*
------------------------ ------------------------ ------------------------ ------------------------
FOR A SHARE CONSUMER CONSUMER CONSUMER CONSUMER
OUTSTANDING INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
THROUGHOUT EACH PERIOD CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ---------------------- ------------- -------- ------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value,
Beginning of
Period.............. $11.44 $11.44 $11.37 $11.37 $11.61 $11.61 $10.00 $10.00
-------- ------ -------- ------ -------- ------ -------- ------
Income from Investment
Operations:
Net investment
income............ 0.12 0.12 0.07 0.07 0.09 0.09 0.12 0.10
Net gain (loss) on
securities (both
realized and
unrealized)....... 3.13 3.13 0.08 0.08 (0.25) (0.25 ) 1.60 1.60
-------- ------ -------- ------ -------- ------ -------- ------
Total from
Investment
Operations........ 3.25 3.25 0.15 0.15 (0.16) (0.16 ) 1.72 1.70
-------- ------ -------- ------ -------- ------ -------- ------
Less Distributions:
Dividends from net
investment
income............ (0.11) (0.11 ) (0.08) (0.08) (.08) (.08 ) (0.11) (0.09 )
-------- ------ -------- ------ -------- ------ -------- ------
Net Asset Value, End
of Period........... $14.58 $14.58 $11.44 $11.44 $11.37 $11.37 $11.61 $11.61
======== ====== ======== ====== ======== ====== ======== ======
Total Return (not
reflecting sales
load)............... 28.54% 28.54% 1.34% 1.34% (1.40%) (1.40% ) 17.31% 17.16%
Ratios/Supplemental
Data:
Net Assets, End of
Period (000's)..... $53,325 $5,833 $42,229 $4,985 $38,979 $5,634 $29,596 $3,377
Ratios of Net
Expenses to
Average Net
Assets............ 1.50% 1.50% 1.61% 1.61% 1.50% 1.50% 1.42% 1.64%
Ratios of Expenses
before effect of
waivers/
reimbursements:... 1.50% 1.50% 1.61% 1.61% 1.53% 1.53% 2.05% 2.29%
Ratios of Net
Investment Income
to Average Net
Assets............ 0.92% 0.92% 0.69% 0.69% 0.82% 0.82% 1.12% 0.97%
Portfolio Turnover
Rate.............. 20% 20% 49% 49% 22% 22% 5% 5%
</TABLE>
- ---------------
* Fund Commenced Operations on December 2, 1991.
44
<PAGE> 46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
FMB Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, 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
"Corporation"), at November 30, 1995, 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 Corporation'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, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, New York 10036
January 18, 1996
45
<PAGE> 47
TAX STATUS OF DIVIDENDS PAID (UNAUDITED)
The following table presents the tax status of dividends and distributions
paid by the Funds during the fiscal year ended November 30, 1995. Certain
portions of this information were previously reported to you on Form 1099 at the
close of calendar 1994. This information is presented in order to comply with
regulatory requirements and requires no current action on your part.
<TABLE>
<CAPTION>
% OF INCOME
% OF DERIVED FROM
INCOME GOVERNMENT % OF INCOME
DERIVED FROM SECURITIES DERIVED FROM
INCOME ELIGIBLE HELD SUBJECT MICHIGAN
DIVIDENDS PAID GOVERNMENT TO REPURCHASE MUNICIPAL
PER SHARE SECURITIES AGREEMENTS OBLIGATIONS
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS
FMB Money Market Fund....................... $0.051 9.7% 14.2% N/A
FMB Intermediate Government Income Fund..... 0.610 41.5% 2.4% N/A
FMB Michigan Tax-Free Bond Fund............. 0.485 N/A N/A 100.0%
FMB Diversified Equity Fund................. 0.110 N/A 19.9% N/A
CONSUMER SERVICE CLASS
FMB Money Market Fund....................... $0.051 9.7% 14.2% N/A
FMB Intermediate Government Income Fund..... 0.610 41.5% 2.4% N/A
FMB Michigan Tax-Free Bond Fund............. 0.485 N/A N/A 100.0%
FMB Diversified Equity Fund................. 0.110 N/A 19.9% N/A
</TABLE>
Additionally, 100% of the dividends paid by the Diversified Equity Fund qualify
for the dividends received deductions available to corporations.
46
<PAGE> 48
(This page intentionally left blank).
47
<PAGE> 49
(This page intentionally left blank).
48
<PAGE> 50
FMB FUNDS, INC.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
MICHAEL R. MUCCIOLO* Senior Vice President and Chief
CHAIRMAN OF THE BOARD Financial Officer, Beverage America
VALERIE T. AMBROSE Corporate Director Holland Community Hospital
WILLIAM K. ANDERSON* Vice President for Business & Finance
and Treasurer, Hope College
TIMOTHY C. MORAWSKI General Manager, Board of Public
Works, City of Holland, MI
*MEMBER OF AUDIT COMMITTEE.
</TABLE>
- --------------------------------------------------------------------------------
OFFICERS
<TABLE>
<S> <C>
JOHN J. PILEGGI President and Treasurer
JOAN V. FIORE Secretary
DONALD E. BROSTROM Assistant Treasurer
SHERYL HIRSCHFELD Assistant Secretary
</TABLE>
<PAGE> 51
FMB FUNDS, INC.
ADDRESS AND TELEPHONE
237 Park Avenue
New York, NY 10017
(800) 453-4234
INVESTMENT ADVISER
FMB-TRUST
One Financial Plaza
Holland, MI 49423
SUB-ADVISER
FIRST MICHIGAN BANK CORPORATION
One Financial Plaza
Holland, MI 49423
SPONSOR AND DISTRIBUTOR
MACATAWA DISTRIBUTOR, INC.
230 Park Avenue
New York, NY 10169
ADMINISTRATOR
FURMAN SELZ LLC
230 Park Avenue
New York, NY 10169
CUSTODIAN
FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Chicago, IL 60670
LEGAL COUNSEL
SIMPSON THACHER AND BARTLETT
425 Lexington Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, NY 10036
This report is for the
information of the shareholders
of the FMB Funds, Inc. Its use in
connection with any offering of
the Funds' shares is authorized
only in case of a concurrent or
prior delivery of the Funds'
current prospectus.
