[FMB LOGO]
ANNUAL
REPORT
FMB MONEY MARKET FUND
FMB INTERMEDIATE
GOVERNMENT INCOME FUND
FMB MICHIGAN
TAX-FREE BOND FUND
FMB DIVERSIFIED
EQUITY FUND
NOVEMBER 30, 1996
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ......................1
1996 FISCAL YEAR IN REVIEW ..................3
FMB MONEY MARKET FUND .......................6
FMB INTERMEDIATE GOVERNMENT
INCOME FUND ..............................8
FMB MICHIGAN TAX-FREE
BOND FUND ...............................11
FMB DIVERSIFIED EQUITY
FUND ....................................16
STATEMENT OF OPERATIONS ....................19
STATEMENT OF CHANGES IN NET ASSETS .........20
FINANCIAL HIGHLIGHTS .......................22
NOTES TO FINANCIAL STATEMENTS ..............26
[FMB LOGO]
The FMB Funds, Inc.:
[BULLET] are not deposits, other obligations of, or guaranteed by First Michiga
Bank Corporation or any of its affiliates;
[BULLET] are not insured by the Federal Deposit Insurance Corporation (FDIC)
or any other agency;
[BULLET] involve investment risks, including the possible loss of the principal
amount invested.
SEI Financial Services Company, the distributor of FMB Funds, Inc., is not
affiliated with First Michigan Bank Corporation. FMB-Trust, a subsidiary of
First Michigan Bank Corporation, serves as investment adviser for FMB Funds,
Inc.
<PAGE>
NOVEMBER 30, 1996
[FMB LOGO]
Dear Shareholder:
On behalf of the Directors and Officers of the FMB Funds, Inc., I am pleased to
send you this audited annual report for the fiscal year ended November 30, 1996.
This report reflects the performance, financial position, and investment
composition of your funds.
As you will see in the pages ahead, our fund family continues to grow larger and
stronger, through a combination of investment performance and increasing
shareholder acceptance. We are gratified by these results, and look forward to
continued success in the future.
ECONOMIC REVIEW AND OUTLOOK
The calendar year 1996 began with the Federal Reserve Board lowering short-term
interest rates by 25 basis points (.25 percent) at its January meeting. Citing
reduced inflationary expectations and the need to extend the economic expansion,
the Fed gave additional momentum to the markets. Their decision, along with
economic growth rates of a relatively manageable two to three percent, led to
expectations of lower interest rates and improved corporate earnings throughout
the year.
As the year progressed, the Fed continued to hold rates steady, as economic
indicators sent conflicting signals about such inflationary factors as growth
and employment levels. By late summer, the data pointed to slower growth and
controlled inflation. The market reacted favorably to these reports, and to the
outcome of the November elections, leading the markets to a series of new highs.
As our fiscal year ends, the market sees a favorable combination of factors that
includes a balance of power in Washington, steady economic growth, and
controlled inflation. These factors, along with corporate earnings and low
interest rates, continue to push the stock market to historic levels.
Looking ahead, we anticipate further interest rate declines by mid-1997, and
relatively steady performance by the stock market provided there are no
significant earnings disappointments. In addition, improving world economies
should provide further support to our markets and to our domestic economy.
GENERAL OVERVIEW
As we celebrate our fifth full year of operations, the FMB Funds are proud to
report a number of significant advances for our fund family. These included the
appointment of SEI Fund Resources as our new fund administrator, and the
development of strategies to broaden the visibility of the Funds. These and
other factors contributed to a very successful year for the FMB Funds, as net
assets grew to $387.5 million by year-end, a 21.5% increase over the previous
year's total of $319.5 million.
The following is a brief summary of key achievements for the individual funds
within our family. For a more complete discussion of fund performance for the
year, please refer to the Manager's Discussion and Analysis section in the pages
ahead.
1
<PAGE>
NOVEMBER 30, 1996
FMB MONEY MARKET FUND
The FMB Money Market Fund had net assets of $172.5 million at November 30, 1996,
with a weighted average maturity of 52 days. This Fund invests primarily in high
quality, short-term investments such as commercial paper, certificates of
deposit, and repurchase agreements collateralized by government securities.
FMB INTERMEDIATE GOVERNMENT INCOME FUND
As of November 30, 1996, net assets of the FMB Intermediate Government Income
Fund totaled $113.3 million, while the average weighted maturity stood at 3.6
years. This Fund seeks high current income consistent with prudent risk of
capital, and invests primarily in high-quality government and agency securities.
The Adviser's investment strategy is to seek maximum income, while limiting the
potential for volatility during periods of interest rate fluctuation. As part of
this strategy, the Fund employs a "laddering" technique, investing in securities
at various points along the intermediate maturity spectrum.
FMB MICHIGAN TAX-FREE BOND FUND
As of November 30, 1996, the FMB Michigan Tax-Free Bond Fund had net assets of
$32.1 million and an average maturity of 7.6 years. This Fund invests primarily
in high quality debt obligations of the State of Michigan and its political
subdivisions. During the past year, the Fund's average maturity was lengthened
in order to take advantage of yield curve opportunities. This strategy resulted
in enhanced total returns.
FMB DIVERSIFIED EQUITY FUND
Net assets of the FMB Diversified Equity Fund as of November 30, 1996 totaled
$69.0 million. The primary objective of this fund is to seek long-term capital
appreciation through investments in growth-oriented stocks. The Fund's
investment strategy emphasizes companies that have exhibited a high degree of
stability, along with predictable growth in both earnings and dividends. In the
past year, this strategy has resulted in strong total returns.
The FMB Funds are managed locally by FMB-Trust and the subadviser, First
Michigan Bank Corporation, located at One Financial Plaza, Holland, Michigan. If
you would like additional information or assistance, please call us at (800)
453-4234.
We thank you for your continued confidence in the FMB Funds, and we look forward
to serving you in the months and years ahead.
/S/ SIGNATURE
Michael R. Mucciolo
Chairman of the Board
2
<PAGE>
[FMB LOGO]
1996 FISCAL YEAR IN REVIEW
FMB Intermediate Government Income Fund
A line graph depicting the Comparison of Change in the Value of a $10,000
Investment in the FMBIntermediate Gov't. Income Fund, Institutional and Consumer
Class, versus the Lehman Intermediate Government/Corporate Bond Index
Institutional Class Consumer Class Lehman
12/31/91 10000 9700 10000
11/92 10519 10190 10575
11/93 11507 11157 11604
11/94 11269 10914 11393
11/95 12693 12293 13046
11/96 13324 12883 13807
During the fiscal year ended November 30, 1996, the Intermediate Government
Income Fund continued to invest in a portfolio of U.S. Treasury, government
agency, and mortgage-related securities.In order to limit the chance of price
declines due to the rising rate environment of this period, the average maturity
of the Fund was kept near the short end of its target range of three to seven
years.
During the last quarter of the fiscal year, the Fund sold a number of issues
that were scheduled to mature in less than one year, and reinvested the proceeds
in securities that are further out on the yield curve. This action should help
the Fund take advantage of the recent decline in interest rates, and position it
well for the coming year.
During a very volatile year for intermediate term bonds, the total return of the
Fund (before deduction of the sales charge for the Consumer Service Class)
tracked the performance of the benchmark Lehman Intermediate Government/
Corporate Bond Index.
The Fund continues to feature a relatively low risk profile compared to its peer
group. This is attributable to the Fund's shorter duration, which reduces
interest rate risk, and to the lack of corporate issues in the portfolio, which
reduces credit and default risks.
3
<PAGE>
NOVEMBER 30, 1996
1996 FISCAL YEAR IN REVIEW
FMB Michigan Tax-Free Bond Fund
A line graph depicting the Comparison of Change in the Value of a $10,000
Investment in the FMB Michigan Tax-Free Bond Fund, Institutional and Consumer
Class, versus the Lehman 5-Year Municipal Bond Index, and the Lehman 7-Year
Municipal Bond
FMB Michigan FMB Michigan Lehman 5-Year Lehman 7-Year
Tax-Free Tax-Free Municipal Municipal
Bond Fund, Bond Fund, Bond Bond
Institutional Class Consumer Class Index Index
12/31/91 $10,000 $ 9,700 $10,000 $10,000
11/92 $10,636 $10,304 $10,679 $10,718
11/93 $11,543 $11,183 $11,530 $11,717
11/94 $11,372 $11,018 $11,391 $11,427
11/95 $12,875 $12,473 $12,793 $13,175
11/96 $13,490 $13,408 $13,430 $13,866
During the fiscal year ended November 30, 1996, municipal bond rates began and
ended at roughly the same level. In between, municipal rates rose by as much as
0.65%, at their peak levels in June, before retreating to their starting point
by fiscal year-end.
The mid-year increase in rates was triggered by stronger than expected economic
growth in the second calendar quarter. This fueled expectations that the Federal
Reserve Board would aggressively raise interest rates. However, slower growth in
the third calendar quarter, combined with the "status quo" election results, led
rates to fall back once again.
To capitalize on these market fluctuations, the Fund employed a two-part
maturity strategy. Initially, a perceived rise in rates during the first half of
the fiscal year led the Fund to shorten its average maturity from 7.2 years to
6.9 years. Then, as interest rates peaked, the Fund began extending its average
maturity to 7.6 years in order to lock in higher yields.
This strategy helped protect the Fund's market value while interest rates were
rising, and provided incremental appreciation when rates fell.
At fiscal year-end, with interest rates low once again, the Fund adopted a more
defensive position, and will most likely move toward a slightly shorter average
maturity in the months ahead.
4
<PAGE>
[FMB LOGO]
FMB Diversified Equity Fund
A line graph depicting the Comparison of Change in the Value of a $10,000
Investment in the FMB Diversified Equity Fund, Institutional and Consumer Class,
versus the S&P 500 Composite Index
Inst Consu S&P Lipper
12/31/91 10000 9600 10000 10000
Nov-92 10396 9968 10633 10662
Nov-93 10251 9828 11706 11726
Nov-94 10388 9960 11827 11704
Nov-95 13353 12802 16033 15407
Nov-96 16368 15675 20459 18656
After the stock market's very strong performance in 1995, few imagined that S&P
500 stocks would produce another return of 20%+ in 1996. But that is indeed what
happened. With the exception of a modest correction in July, every month of
calendar 1996 saw positive returns in the overall market.
The fuel for this long-running rally has been the large flow of cash into equity
mutual funds. This, coupled with the widespread belief that equity portfolio
managers must remain fully invested at all times, has allowed the market to rise
to levels that many consider to be overvalued by almost any historical measure.
Our strategy during this period has been to increase our positions in defensive
issues, in anticipation of slower economic activity. In particular, we are
focusing on such sectors as food, health care, and household products, which may
offer more stable earnings in the event of an economic downturn.
In addition, we are taking a more quantitative approach to equity management,
and are focusing on those issues whose underlying strengths appear to support
their current valuations.
5
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB MONEY MARKET
[PIECHART]
U.S. TREASURY OBLIGATIONS 14%
U.S. GOVERNMENT AGENCY OBLIGATIONS 7%
CERTIFICATES OF DEPOSIT 5%
COMMERCIAL PAPER 67%
CASH EQUIVALENTS 7%
% of Total Portfolio Investments (Unaudited)
- -------------------------------------------------------
Par Value
(000) (000)
- -------------------------------------------------------
COMMERCIAL PAPER -- 67.3%
Beneficial
5.310%, 01/15/97 $8,000 $7,947
Cargill
5.220%, 12/12/96 8,000 7,987
Ciesco
5.290%, 01/13/97 7,800 7,751
Coca Cola
5.220%, 12/09/96 8,000 7,991
Commercial Credit
5.310%, 01/24/97 8,000 7,936
Deere
5.230%, 12/18/96 8,000 7,980
E.I. du Pont de Nemours
5.220%, 12/13/96 8,000 7,986
Ford Motor Credit
5.320%, 01/10/97 2,000 1,988
5.390%, 01/10/97 6,000 5,964
General Electric Capital
5.310%, 01/21/97 8,000 7,940
- -------------------------------------------------------
Par Value
(000) (000)
- -------------------------------------------------------
John Deere Capital
5.500%, 01/07/97 $6,500 $6,463
Lucent Technologies
5.240%, 12/20/96 8,000 7,978
Merrill Lynch
5.560%, 01/06/97 6,600 6,563
Norwest
5.250%, 12/02/96 7,800 7,799
Philip Morris
5.280%, 02/03/97 8,000 7,925
Walt Disney
5.280%, 01/14/97 8,000 7,949
--------
Total Commercial Paper
(Cost $116,147) 116,147
--------
U.S. TREASURY OBLIGATIONS -- 14.1%
U.S. Treasury Bills (B)
5.155%, 03/06/97 5,000 4,933
5.225%, 04/03/97 5,000 4,911
5.271%, 05/29/97 7,000 6,812
5.362%, 10/16/97 8,000 7,634
--------
Total U.S. Treasury Obligations
(Cost $24,290) 24,290
--------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 7.2%
FHLB
6.000%, 09/12/97 2,500 2,500
FNMA (A)
5.360%, 12/03/97 10,000 9,997
--------
Total U.S. Government Agency Obligations
(Cost $12,497) 12,497
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
[FMB LOGO]
FMB MONEY MARKET FUND (CONCLUDED)
- -------------------------------------------------------
Par Value
(000) (000)
- -------------------------------------------------------
CERTIFICATE OF DEPOSIT -- 4.4%
First Tennessee Bank
5.300%, 12/27/96 $7,500 $7,500
--------
Total Certificate of Deposit
(Cost $7,500) 7,500
--------
REPURCHASE AGREEMENT -- 7.3%
First Union
5.63%, dated 11/29/96,
matures 12/02/96, repurchase
price $12,662,938 (collateralized
by U.S Treasury Note, par
value $12,565,000, 7.50%,
matures 01/31/97, market
value $12,916,086) 12,657 12,657
--------
Total Repurchase Agreement
(Cost $12,657) 12,657
--------
Total Investments -- 100.3%
(Cost $173,091) 173,091
--------
OTHER ASSETS AND LIABILITIES -- (0.3%)
Total Other Assets and Liabilities, Net (554)
--------
- -------------------------------------------------------
Value
(000)
- -------------------------------------------------------
NET ASSETS:
Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company)
based on 152,547,875
outstanding shares $152,548
Shares of Consumer Service
Class ($0.001 par value -- 10
billion authorized for the
company) based on 19,987,067
outstanding shares 19,987
Undistributed Net Investment Income 90
Accumulated Net Realized Loss
on Investments (88)
--------
Total Net Assets -- 100.0% $172,537
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $1.00
========
Net Asset Value, Offering and
Redemption Price Per Share --
Consumer Service Class $1.00
========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1996. THE DATE SHOWN IS THE RESET
DATE.
(B) THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS REPRESENTS THE SECURITY'S
EFFECTIVE YIELD.
FHLB --- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB INTERMEDIATE GOVERNMENT INCOME FUND
[PIE CHART]
CASH EQUIVALENTS 3%
U.S. TREASURY OBLIGATIONS 28%
U.S. GOVERNMENT AGENCY OBLIGATIONS 49%
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS 20%
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS -- 19.8%
FHLB
8.000%, 01/01/13 $1,290 $1,329
FHLMC
9.000%, 10/01/97 129 133
9.000%, 12/01/01 149 155
7.000%, 11/15/05 584 587
7.500%, 11/15/17 1,000 1,022
7.150%, 07/18/18 2,000 2,011
6.250%, 01/15/19 4,060 3,985
FHLMC REMIC
8.250%, 11/15/20 347 350
FNMA
9.500%, 10/01/97 132 136
9.000%, 11/01/97 37 38
9.500%, 11/01/97 129 133
8.000%, 07/01/98 146 150
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
8.500%, 10/01/98 $34 $35
8.500%, 11/01/98 78 80
7.338%, 01/15/99 1,000 1,013
7.750%, 10/25/00 1,000 1,006
7.500%, 07/25/02 1,232 1,266
8.250%, 01/25/05 64 64
7.500%, 03/25/05 27 27
7.500%, 12/25/05 1,500 1,515
7.500%, 05/01/07 1,871 1,912
5.500%, 08/25/16 1,000 982
6.950%, 05/25/17 537 537
8.500%, 11/25/17 186 186
6.350%, 07/25/18 1,000 1,004
6.750%, 09/25/18 799 798
7.000%, 10/25/18 2,000 2,004
--------
Total U.S. Agency Mortgage-
Backed Obligations
(Cost $22,460) 22,458
--------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 48.5%
FHLB
6.460%, 02/01/00 1,000 1,003
6.125%, 09/20/00 2,000 2,015
6.000%, 03/30/01 1,000 1,000
6.020%, 09/06/01 2,000 1,981
FHLMC
6.600%, 11/12/99 1,000 1,022
6.550%, 01/04/00 1,000 1,020
6.780%, 03/28/01 2,000 2,000
7.140%, 07/31/02 1,500 1,514
6.800%, 09/18/02 1,000 1,008
6.120%, 01/21/03 2,500 2,473
6.550%, 04/02/03 1,000 1,000
8.335%, 03/14/05 2,000 2,031
6.830%, 06/15/05 2,000 2,013
7.000%, 07/06/05 2,000 2,032
8
<PAGE>
[FMB LOGO]
FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONTINUED)
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
FNMA
7.600%, 01/10/97 $1,000 $1,002
6.810%, 04/23/99 2,000 2,019
7.240%, 09/02/99 2,000 2,019
6.330%, 11/03/00 3,000 3,021
7.000%, 05/10/01 2,000 2,049
6.630%, 06/05/01 1,000 1,017
7.550%, 04/22/02 2,000 2,143
7.000%, 08/12/02 1,000 1,011
6.950%, 09/10/02 3,000 3,044
6.720%, 02/25/03 2,400 2,403
7.090%, 10/13/05 2,000 2,034
FNMA MTN
7.360%, 09/29/99 2,000 2,021
7.650%, 10/20/99 2,000 2,027
5.790%, 01/22/01 2,000 1,978
6.880%, 11/20/06 4,000 4,043
Tennessee Valley Authority
6.000%, 01/15/97 1,000 1,001
Total U.S. Government Agency Obligations
(Cost $54,467) 54,944
--------
U.S. TREASURY OBLIGATIONS -- 28.5%
U.S. Treasury Notes
8.500%, 07/15/97 1,000 1,019
7.375%, 11/15/97 5,000 5,088
7.875%, 01/15/98 3,000 3,079
7.875%, 04/15/98 1,000 1,031
9.000%, 05/15/98 5,000 5,244
8.250%, 07/15/98 4,000 4,167
6.375%, 01/15/99 2,000 2,032
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
6.875%, 08/31/99 $2,000 $2,060
7.875%, 11/15/99 1,000 1,059
6.250%, 05/31/00 2,000 2,032
8.000%, 05/15/01 2,000 2,171
7.875%, 08/15/01 2,000 2,167
7.500%, 11/15/01 1,000 1,071
--------
Total U.S. Treasury Obligations
(Cost $31,307) 32,220
--------
REPURCHASE AGREEMENT -- 3.0%
First Union
5.63%, dated 11/29/96,
matures 12/02/96,
repurchase price $3,382,586
(collateralized by U.S. Treasury
Bill, par value $3,483,000,
matures 02/13/97, market
value $3,446,309) 3,381 3,381
--------
Total Repurchase Agreement
(Cost $3,381) 3,381
--------
Total Investments -- 99.8%
(Cost $111,615) 113,003
--------
OTHER ASSETS AND LIABILITIES -- 0.2%
Total Other Assets and Liabilities, Net 274
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONCLUDED)
- -------------------------------------------------------
Market
Value
(000)
- -------------------------------------------------------
NET ASSETS:
Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company) based
on 10,665,555 outstanding shares $108,366
Shares of Consumer Service Class
($0.001 par value -- 10 billion
authorized for the company) based
on 516,353 outstanding shares 5,409
Distributions in excess of net
investment income (128)
Accumulated net realized loss
on investments (1,758)
Net unrealized appreciation on
investments 1,388
--------
Total Net Assets -- 100.0% $113,277
========
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $10.13
========
Net Asset Value and Redemption Price
Per Share -- Consumer Service Class $10.13
========
Maximum Offering Price Per Share --
Consumer Service Class
($10.13/97.00%) $10.44
========
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
[FMB LOGO]
FMB MICHIGAN TAX-FREE BOND FUND
[PIE CHART]
UTILITY BONDS 14%
TRANSPORTATION BONDS 1%
INDUSTRIAL REVENUE BONDS 5%
HOUSING BONDS 1%
HEALTH CARE BONDS 25%
GENERAL OBLIGATION BONDS 45%
CASH EQUIVALENTS 1%
EDUCATION BONDS 8%
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 99.5%
Michigan -- 99.5%
Ann Arbor, Sewer Disposal
Project, Series 12, RB
6.950%, 07/01/03 $335 $375
Ann Arbor, Water Supply System,
Series T, MBIA, RB
7.375%, 02/01/03 710 813
Bay County, West Side Regional
Sewer Disposal System, GO
6.400%, 05/01/01 150 154
Chelsea, School District Authority,
FGIC, GO
5.500%, 05/01/08 500 519
Clio, School District Authority, RB
7.200%, 05/01/01 200 209
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Dearborn, Economic Development
Authority, Oakwood Group
Project, Series A, MBIA, RB,
Pre-refunded at 102 (A)
6.550%, 08/15/01 $250 $278
Dearborn, School District
Authority, GO
5.250%, 05/01/06 500 514
Detroit, School District Authority,
AMBAC, GO, Pre-refunded
at 102 (A)
7.100%, 05/01/01 250 282
Detroit, Sewer Disposal Project,
MBIA, RB, Pre-refunded at
101.5 (A)
7.125%, 07/01/99 500 544
Farmington Hills, Hospital Finance
Authority, Botsford General
Hospital Project, Series A,
MBIA, RB
6.700%, 02/15/01 225 245
Forest Hills, School District
Authority, GO
5.000%, 05/01/06 500 498
Fowlerville County, School
District Authority, MBIA, GO
5.350%, 05/01/10 500 501
Gaylord, Community School
Project, GO, Pre-refunded
at 102 (A)
6.600%, 05/01/02 500 559
Grand Rapids, Downtown
Development Authority, MBIA, TA
6.600%, 06/01/08 545 612
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Michigan (CONTINUED)
Grand Rapids, Sanitation and
Sewer Authority, Improvement
Project, RB
6.875%, 01/01/10 $500 $539
Grand Rapids, Water Supply
Authority, FGIC, RB
6.625%, 01/01/08 500 542
Grandville, Public School District
Authority, FGIC, GO
6.000%, 05/01/05 310 337
Grosse Ile Township, School
District Authority, FGIC, GO
5.600%, 05/01/10 500 514
Harrison, Community School
Project, AMBAC, GO
5.800%, 05/01/05 500 535
Holland, Electric Authority, RB,
Pre-refunded at 100 (A)
6.500%, 07/01/99 400 423
Huron Valley, School District
Authority, FGIC, GO
5.450%, 05/01/08 500 518
Jenison, Michigan Public School
Authority, FGIC, GO
5.400%, 05/01/08 500 523
Kalamazoo, Hospital Finance
Authority, Borgess Medical Center
Project, Series A, FGIC, RB
6.250%, 07/01/04 500 523
Kent County, Building Authority, GO
6.000%, 12/01/09 500 517
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Kent County, Hospital Finance
Authority, Pine Rest Christian
Hospital Project, FGIC, RB
6.500%, 11/01/10 $500 $542
Kent, Hospital Finance Authority,
Blodgett Memorial Hospital
Project, MBIA, RB
5.750%, 07/01/09 500 503
Kent, Hospital Finance Authority,
Blodgett Memorial Medical Center
Project, Series A, RB
6.875%, 07/01/99 128 136
Kent, Hospital Finance Authority,
Mary Free Hospital Project,
Series A, RB
6.500%, 04/01/05 200 211
Lansing, Building Authority, GO,
Escrowed to Maturity
7.150%, 06/01/03 525 580
Lansing, Finance Tax Increment,
GO, Escrowed to Maturity
5.200%, 10/01/98 200 204
Lenawee County, Building
Authority, Human Services
Project, AMBAC, GO
6.000%, 05/01/09 350 372
Lincoln Park, School District
Authority, FGIC, GO
5.500%, 05/01/06 500 523
Macomb County, Waste Water
Disposal Project, GO
6.500%, 11/01/99 200 206
Mattawan, School District
Authority, GO
6.400%, 05/01/09 500 536
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
[FMB LOGO]
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Michigan (CONTINUED)
Michigan State Building Authority,
AMBAC, RB
6.750%, 10/01/07 $500 $549
Michigan State Building Authority,
University of Michigan General
Hospital, AMBAC, RB,
Pre-refunded at 102 (A)
7.375%, 12/01/96 250 255
Michigan State Environmental
Protection Program, GO,
Pre-refunded at 102 (A)
6.250%, 11/01/02 1,000 1,105
Michigan State Higher Education
Authority, Hope College Project,
Series B, RB
5.900%, 04/01/09 350 357
Michigan State Higher Education
Authority, Student Loan, Series 13,
AMBAC, RB
5.700%, 04/01/02 500 521
Michigan State Hospital Finance
Authority, Central Michigan
Community Hospital, Series A, RB
5.750%, 10/01/02 300 309
Michigan State Hospital Finance
Authority, Daughters Charity
Project, RB
5.500%, 11/01/05 500 523
Michigan State Hospital Finance
Authority, Detroit Medical Center
Project, Series A, RB
6.375%, 08/15/09 500 522
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Michigan State Hospital Finance
Authority, Holland Community
Hospital Project, RB
5.250%, 01/01/08 $750 $738
Michigan State Hospital Finance
Authority, Mercy Health Services,
Series Q, AMBAC, RB
5.100%, 08/15/07 500 511
Michigan State Hospital Finance
Metropolitan Hospital Project,
Series A, RB
4.750%, 07/01/98 200 200
Michigan State Hospital Finance
Authority, Otsego Memorial
Hospital Project, RB (B)
6.000%, 01/01/09 660 677
Michigan State Hospital Finance
Authority, Saint John Hospital
Project, Series A, AMBAC, RB
5.750%, 05/15/04 200 213
Michigan State Hospital Finance
Authority, Sparrow Obligated
Group Project, MBIA, RB
6.300%, 11/15/03 615 673
Michigan State Housing
Development Authority, Walled
Lake Villa Project, FSA, RB
5.850%, 04/15/07 420 443
Michigan State Public Power
Agency, Campbell Project,
AMBAC, RB
6.400%, 01/01/04 235 242
Michigan State Strategic Fund,
Lutheran Social Services
Project, RB (B)
5.200%, 09/01/04 400 406
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Michigan (CONTINUED)
Northern Michigan University,
AMBAC, RB
5.500%, 12/01/09 $435 $434
Novi, School District
Authority, GO
5.350%, 05/01/02 275 287
Oakland County, Economic
Development Authority, Cranbrook
Elderly Community Project, RB
6.375%, 11/01/14 500 553
Oakland County, GO
6.250%, 11/01/06 500 525
Otttawa County, Holland
Township Extension, GO
6.800%, 08/01/05 500 539
Paw Paw, Public School District,
FGIC, GO
6.500%, 05/01/09 500 567
Rochester Hills, Series B, GO,
Pre-refunded at 102 (A)
6.600%, 11/01/98 465 496
Rochester Hills, Transportation
Fund, GO
6.250%, 08/01/05 200 209
Rochester, School District
Authority, GO, Pre-refunded
at 100 (A)
6.500%, 05/01/02 150 165
Rockford, Public School
Authority, GO
5.600%, 05/01/05 500 525
Saginaw, Water Authority, RB
6.000%, 07/01/07 865 902
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Saranac, School District
Authority, GO
5.700%, 05/01/07 $230 $237
Troy, Downtown Development
Authority, Series A, TA, RB
6.100%, 11/01/10 400 424
University of Michigan, Hospital
Revenue, Series A, RB
5.700%, 12/01/04 250 268
University of Michigan, Major
Capital Projects, RB
5.800%, 04/01/10 500 522
Utica, Community Schools
Project, GO
5.700%, 05/01/06 500 530
Walled Lake, School District
Authority, GO, Pre-refunded
at 102 (A)
6.500%, 05/01/99 200 212
Warren, School District Authority,
GO, Pre-refunded at 102 (A)
6.700%, 05/01/01 500 555
Warren, Transportation Fund, GO
5.000%, 06/01/07 405 401
West Ottawa, Public School
District, FGIC, GO
5.400%, 05/01/09 500 508
--------
31,990
--------
Total Municipal Bonds
(Cost $30,685) 31,990
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
[FMB LOGO]
FMB MICHIGAN TAX-FREE BOND FUND (CONCLUDED)
- --------------------------------------------------------
Market
Shares Value
(000) (000)
- --------------------------------------------------------
CASH EQUIVALENT -- 1.1%
Federated Michigan Municipal
Cash Trust 345 $345
--------
Total Cash Equivalent
(Cost $345) 345
--------
Total Investments -- 100.6%
(Cost $31,030) 32,335
--------
OTHER ASSETS AND LIABILITIES -- (0.6%)
Total Other Assets and Liabilities, Net (203)
--------
NET ASSETS:
Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company) based
on 2,139,553 outstanding shares 22,248
Shares of Consumer Service Class
($0.001 par value -- 10 billion
authorized for the company) based
on 838,971 outstanding shares 8,678
Undistributed net investment income 3
Accumulated net realized loss
on investments (102)
Net unrealized appreciation on
investments 1,305
--------
Total Net Assets -- 100.0% $ 32,132
========
- --------------------------------------------------------
Market
Value
(000)
- --------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $10.79
========
Net Asset Value and Redemption
Price Per Share -- Consumer
Service Class $10.79
========
Maximum Offering Price Per
Share -- Consumer Service
Class ($10.79/97.00%) $11.12
========
(A) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(B) SECURITY IS BACKED BY A LETTER OF CREDIT.
AMBAC -- SECURITY INSURED BY AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- SECURITY INSURED BY FEDERAL GUARANTY INSURANCE CORPORATION
FSA -- SECURITY INSURED BY FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- SECURITY INSURED BY MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
TA -- TAX ALLOCATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB DIVERSIFIED EQUITY FUND
[PIE CHART]
BUILDING AND CONSTRUCTION 2%
CHEMICALS AND DRUGS 13%
CONSUMER PRODUCTS 19%
DURABLE GOODS 21%
FINANCIAL 10%
OIL AND ENERGY 8%
RETAIL 5%
UTILITIES 6%
MISCELLANEOUS 5%
CASH EQUIVALENTS 11%
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------
Market
Value
Shares (000)
- --------------------------------------------------------
COMMON STOCKS -- 89.3%
AEROSPACE & DEFENSE -- 2.4%
Lockheed Martin 7,000 $634
Raytheon 20,000 1,023
-------
1,657
-------
AUTOMOTIVE -- 3.4%
Ford Motor 10,000 327
Genuine Parts 15,000 675
TRW 14,000 1,363
-------
2,365
-------
BANKS -- 5.6%
Banc One 18,000 857
Citicorp 15,000 1,639
Norwest 30,000 1,403
-------
3,899
-------
- --------------------------------------------------------
Market
Value
Shares (000)
- --------------------------------------------------------
BEAUTY PRODUCTS -- 2.6%
Gillette 13,000 $959
International Flavors &
Fragrances 18,000 819
-------
1,778
-------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 0.6%
U.S. West Media Group* 21,000 402
-------
CHEMICALS -- 1.5%
Morton International 25,000 1,009
-------
COMPUTER SOFTWARE & SERVICES-- 7.0%
Hewlett Packard 7,000 377
Microsoft* 12,000 1,883
Oracle* 31,500 1,544
Solectron* 18,000 1,053
-------
4,857
-------
DRUGS -- 9.3%
Abbott Laboratories 25,000 1,394
Johnson & Johnson 20,000 1,062
Merck 9,000 747
Pfizer 20,000 1,793
Schering Plough 20,000 1,425
-----------
6,421
-----------
ELECTRICAL EQUIPMENT -- 6.8%
AMP 26,000 994
Duracell International 10,000 666
General Electric 18,000 1,872
Molex 30,037 1,171
-----------
4,703
-----------
ENTERTAINMENT -- 3.2%
Carnival 23,500 743
Walt Disney 20,000 1,475
-----------
2,218
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
[FMB LOGO]
FMB DIVERSIFIED EQUITY FUND (CONTINUED)
[PIECHART]
% of Total Portfolio Investments (Unaudited)
- --------------------------------------------------------
Market
Value
Shares (000)
- --------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.4%
WMX Technologies 26,000 $936
-------
FINANCIAL SERVICES -- 1.4%
FNMA 24,000 990
-------
FOOD, BEVERAGE & TOBACCO-- 9.0%
CPC International 20,000 1,665
H.J. Heinz 12,000 454
Hershey Foods 22,000 1,097
PepsiCo 40,000 1,195
Sara Lee 29,000 1,138
Sysco 20,000 682
-------
6,231
-------
GAS/NATURAL GAS -- 1.4%
Enron 21,000 961
-------
HOUSEHOLD PRODUCTS -- 2.6%
Procter & Gamble 16,500 1,794
-------
INSURANCE -- 2.9%
AMBAC 12,000 822
American International Group 10,000 1,150
-------
1,972
-------
LEISURE -- 3.3%
Mattel 35,000 1,081
McDonald's 25,000 1,169
-------
2,250
-------
MACHINERY -- 1.1%
Caterpillar 10,000 791
-------
Miscellaneous Business Services -- 2.2%
Automatic Data Processing 35,000 1,501
-------
- --------------------------------------------------------
Market
Value
Shares (000)
- --------------------------------------------------------
PETROLEUM REFINING -- 7.0%
Chevron 14,000 $938
Exxon 10,000 946
Mobil 12,000 1,452
Royal Dutch Petroleum, ADR 9,000 1,529
-------
4,865
-------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.1%
Eastman Kodak 9,000 729
-------
PRINTING & PUBLISHING -- 1.2%
R.R. Donnelley & Sons 24,500 821
-------
RETAIL -- 5.4%
Albertsons' 17,000 593
Autozone* 21,000 517
Home Depot 13,000 678
Kohl's* 15,000 598
Walgreen 32,400 1,353
-------
3,739
-------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.6%
Motorola 19,800 1,096
-------
SPECIALTY CONSTRUCTION -- 0.2%
Oakwood Homes 5,000 111
-------
TELEPHONES & TELECOMMUNICATION-- 5.1%
Alltel 29,000 924
Ameritech 8,000 471
Lucent Technologies 7,194 369
MCI Communications 31,300 955
SBC Communications 15,000 789
-------
3,508
-------
Total Common Stocks
(Cost $37,093) 61,604
-------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
NOVEMBER 30, 1996
STATEMENT OF NET ASSETS
FMB DIVERSIFIED EQUITY FUND (CONCLUDED)
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT -- 10.6%
========================================================
First Union
5.63%, dated 11/29/96,
matures 12/02/96, repurchase
price $7,325,435 (collateralized
by U.S. Treasury Bill, par value
$7,759,000, matures 08/21/97,
market value $7,471,141) $7,322 $ 7,322
-------
Total Repurchase Agreement
(Cost $7,322) 7,322
-------
Total Investments -- 99.9%
(Cost $44,415) 68,926
-------
OTHER ASSETS AND LIABILITIES -- 0.1%
Total Other Assets and Liabilities, Net 77
-------
Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company) based
on 3,488,093 outstanding shares 37,448
Shares of Consumer Service Class
($0.001 par value -- 10 billion
authorized for the company) based
on 403,085 outstanding shares 4,368
Undistributed net investment income 64
Accumulated net realized gain
on investments 2,611
Net unrealized appreciation
on investments 24,511
-------
Total Net Assets-- 100.0% $69,002
=======
- --------------------------------------------------------
Market
Value
(000)
- --------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $17.73
=======
Net Asset Value and Redemption
Price Per Share -- Consumer
Service Class $17.73
=======
Maximum Offering Price Per
Share -- Consumer Service
Class ($17.73/96.00%) $18.47
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
FOR THE YEAR ENDED NOVEMBER 30, 1996
[FMB LOGO]
STATEMENT OF OPERATIONS (000)
<TABLE>
<CAPTION>
FMB FMB
FMB Intermediate Michigan FMB
Money Government Tax-Free Diversified
Market Income Bond Equity
Fund Fund Fund Fund
------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $6,967 $ 7,800 $1,731 $304
Dividend Income -- -- -- 1,050
------ ------- ------ -----
Total Investment Income 6,967 7,800 1,731 1,354
------ ------- ------ -----
Expenses:
Investment Advisory Fees 448 531 167 632
Waiver of Investment Advisory Fees -- -- (119) --
Administrator Fees 248 232 75 129
Professional Fees 54 49 15 26
Transfer Agent Fees 48 38 35 39
Distribution Fees (1) 51 21 36 22
Waiver of Distribution Fees (1) (16) (11) (20) (11)
Printing Expenses 17 18 7 12
Custodian Fees 13 10 14 15
Registration Fees 19 19 8 14
Amortization of Deferred Organizational Costs 7 6 7 6
Trustee Fees 3 4 2 2
Miscellaneous 11 15 8 12
------ ------- ------ -----
Total Expenses 903 932 235 898
------ ------- ------ -----
Net Investment Income 6,064 6,868 1,496 456
------ ------- ------ -----
Net Realized Gain on Securities Sold -- 43 13 2,842
Net Change in Unrealized Appreciation (Depreciation)
on Investments -- (1,236) (28) 9,761
------ ------- ------ -----
Net Realized and Unrealized Gain (Loss)
on Investments -- (1,193) (15) 12,603
------ ------- ------ -----
Net Increase in Net Assets From Operations 6,064 5,675 1,481 13,059
====== ======= ====== ======
<FN>
(1) DISTRIBUTION FEES ARE APPLICABLE TO THE CONSUMER SERVICE CLASS OF SHARES
ONLY AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
FOR THE YEAR ENDED NOVEMBER 30,
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
FMB MONEY
MARKET FUND
------------------------
12/1/95 12/1/94
to 11/30/96 to 11/30/95
----------- -----------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $6,064 $5,938
Net Realized Gain (Loss) on Securities Sold -- (88)
Net Unrealized Appreciation (Depreciation) of Investment Securities -- --
-------- --------
Net Increase in Net Assets Resulting from Operations 6,064 5,850
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class (5,129) (5,293)
Consumer Service Class (935) (555)
-------- --------
Total Distributions (6,064) (5,848)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Institutional Class
Proceeds from Shares Issued 289,946 269,856
Reinvestment of Cash Distributions -- 144
Cost of Shares Redeemed (224,594) (286,105)
-------- --------
Increase (Decrease) in Net Assets from Institutional Class Transactions 65,352 (16,105)
-------- --------
Consumer Service Class
Proceeds from Shares Issued 52,312 32,067
Reinvestment of Cash Distributions 906 544
Cost of Shares Redeemed (50,760) (22,236)
-------- --------
Increase (Decrease) in Net Assets Derived from Consumer Service Class Transactions 2,458 10,375
-------- --------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions 67,810 (5,730)
-------- --------
Net Increase (Decrease) in Net Assets 67,810 (5,728)
-------- --------
NET ASSETS:
Beginning of Period 104,727 110,455
-------- --------
End of Period $172,537 $104,727
======== ========
SHARES ISSUED AND REDEEMED:
Institutional Class Shares:
Shares Issued 289,946 269,856
Shares Issued in Lieu of Cash Distributions -- 144
Shares Redeemed (224,594) (286,105)
-------- --------
Net Increase (Decrease) Institutional Class Shares 65,352 (16,105)
-------- --------
Consumer Service Class Shares:
Shares Issued 52,312 32,067
Shares Issued in Lieu of Cash Distributions 906 544
Shares Redeemed (50,760) (22,236)
-------- --------
Net Increase (Decrease) Consumer Service Class Shares 2,458 10,375
-------- --------
Net Increase (Decrease) in Shares 67,810 (5,730)
======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE
</FN>
</TABLE>
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
[FMB LOGO]
<TABLE>
<CAPTION>
FMB INTERMEDIATE FMB MICHIGAN FMB DIVERSIFIED
GOVERNMENT INCOME FUND TAX-FREE BOND FUND EQUITY FUND
------------------------ ------------------------ ------------------------
12/1/95 12/1/94 12/1/95 12/1/94 12/1/95 12/1/94
to 11/30/96 to 11/30/95 to 11/30/96 to 11/30/95 to 11/30/96 to 11/30/95
----------- ----------- ----------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C>
$6,868 $7,442 $1,496 $1,414 $456 $487
43 (1,372) 13 (12) 2,842 539
(1,236) 8,393 (28) 2,368 9,761 12,413
- ---------- -------- ------- ------- --------- ---------
5,675 14,463 1,481 3,770 13,059 13,439
- ---------- -------- ------- ------- --------- ---------
(6,645) (6,917) (1,010) (814) (448) (406)
(351) (525) (484) (600) (44) (44)
- ---------- -------- ------- ------- --------- ---------
(6,996) (7,442) (1,494) (1,414) (492) (450)
- ---------- -------- ------- ------- --------- ---------
22,554 35,702 4,811 7,804 12,641 11,272
-- 1 -- 2 -- --
(27,917) (43,010) (2,469) (3,942) (15,397) (11,896)
- ---------- -------- ------- ------- --------- ---------
(5,363) (7,307) 2,342 3,864 (2,756) (624)
- ---------- -------- ------- ------- --------- ---------
203 337 1,348 1,787 1,547 811
276 431 373 508 33 43
(2,774) (3,393) (5,237) (2,940) (1,548) (1,274)
- ---------- -------- ------- ------- --------- ---------
(2,295) (2,625) (3,516) (645) 32 (420)
- ---------- -------- ------- ------- --------- ---------
(7,658) (9,932) (1,174) 3,219 (2,724) (1,044)
- ---------- -------- ------- ------- --------- ---------
(8,979) (2,911) (1,187) 5,575 9,843 11,945
- ---------- -------- ------- ------- --------- ---------
122,256 125,167 33,319 27,744 59,159 47,214
- ---------- -------- ------- ------- --------- ---------
$113,277 $122,256 $32,132 $33,319 $69,002 $ 59,159
========== ======== ======= ======= ========= =========
2,234 3,547 453 742 796 879
-- -- -- -- -- --
(2,767) (4,297) (232) (377) (965) (914)
- ---------- -------- ------- ------- --------- ---------
(533) (750) 221 365 (169) (35)
- ---------- -------- ------- ------- --------- ---------
22 34 126 174 98 62
27 43 37 48 2 4
(275) (339) (493) (281) (97) (102)
- ---------- -------- ------- ------- --------- ---------
(226) (262) (330) (59) 3 (36)
- ---------- -------- ------- ------- --------- ---------
(759) (1,012) (109) 306 (166) (71)
========== ======== ======= ======= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
FOR THE PERIOD ENDED NOVEMBER 30,
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
[FMB LOGO]
<TABLE>
<CAPTION>
NET
NET REALIZED AND NET
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET GAINS OR FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN(2) (000) NET ASSETS
--------- ---------- ------------- ---------- ------------- ----------- --------- --------- -----------
- ---------------------
FMB MONEY MARKET FUND
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1996 $1.00 $0.05 -- $(0.05) -- $1.00 4.87% $152,549 0.68%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28% 87,238 0.65%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51% 103,301 0.68%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97% 65,448 0.32%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.78% 58,596 0.27%
CONSUMER CLASS
1996 $1.00 $0.05 -- $(0.05) -- $1.00 4.70% $19,988 0.86%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28% 17,489 0.65%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51% 7,154 0.68%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97% 1,485 0.32%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.67% 208 0.39%
- ---------------------------------------
FMB INTERMEDIATE GOVERNMENT INCOME FUND
- ---------------------------------------
INSTITUTIONAL CLASS
1996 $10.24 $0.59 $(0.10) $(0.60) -- $10.13 4.97% $108,047 0.79%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64% 114,646 0.78%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%) 115,449 0.83%
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60% 105,820 0.50%
1992(1) 10.00 0.60 0.10 (0.60) -- 10.10 7.10% 81,371 0.43%
CONSUMER CLASS
1996 $10.24 $0.57 $(0.10) $(0.58) -- $10.13 4.80% $5,230 0.95%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64% 7,610 0.78%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%) 9,718 0.83%
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60% 10,872 0.50%
1992(1) 10.00 0.58 0.10 (0.58) -- 10.10 6.95% 5,440 0.61%
</TABLE>
<TABLE>
<CAPTION>
NET RATIO OF
RATIO OF EXPENSES NET INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS AVERAGE
TO AVERAGE (EXCLUDING (EXCLUDING PORTFOLIO COMMISSIONS
NET ASSETS WAIVERS) WAIVERS) TURNOVER RATE+
---------- ----------- ---------- --------- -----------
- ---------------------
FMB MONEY MARKET FUND
- ---------------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1996 4.79% 0.68% 4.79% N/A N/A
1995 5.16% 0.65% 5.16% N/A N/A
1994 3.46% 0.70% 3.44% N/A N/A
1993 2.91% 0.68% 2.55% N/A N/A
1992(1) 3.59% 0.91% 2.95% N/A N/A
CONSUMER CLASS
1996 4.61% 0.93% 4.54% N/A N/A
1995 5.16% 0.65% 5.16% N/A N/A
1994 3.46% 0.70% 3.44% N/A N/A
1993 2.91% 0.68% 2.55% N/A N/A
1992(1) 3.46% 1.03% 2.82% N/A N/A
- ---------------------------------------
FMB INTERMEDIATE GOVERNMENT INCOME FUND
- ---------------------------------------
INSTITUTIONAL CLASS
1996 5.89% 0.79% 5.89% 16% N/A
1995 6.09% 0.78% 6.09% 27% N/A
1994 6.45% 0.85% 6.43% 20% N/A
1993 5.66% 0.78% 5.38% 17% N/A
1992(1) 5.85% 0.90% 5.38% 29% N/A
CONSUMER CLASS
1996 5.73% 1.14% 5.54% 16% N/A
1995 6.09% 0.78% 6.09% 27% n/a
1994 6.45% 0.85% 6.43% 20% n/a
1993 5.66% 0.78% 5.38% 17% n/a
1992(1) 5.67% 1.08% 5.20% 29% n/a
<FN>
+ AVERAGE COMMISSION RATE PAID PER SHARE OF EQUITY SECURITY PURCHASES AND
SALES DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR
FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
(1) THE FMB MONEY MARKET, FMB INTERMEDIATE GOVERNMENT INCOME, FMB MICHIGAN
TAX-FREE BOND AND FMB DIVERSIFIED EQUITY FUNDS COMMENCED OPERATIONS
DECEMBER 2, 1991. RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES CHARGE.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 & 23
<PAGE>
FOR THE PERIOD ENDED NOVEMBER 30,
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET
NET REALIZED AND NET
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET GAINS OR FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN(2) (000) NET ASSETS
--------- ---------- ------------- ---------- ------------- ----------- --------- --------- -----------
- --------------------------------
FMB Michigan Tax-Free Bond Fund
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1996 $10.79 $0.50 $ -- $(0.50) $ -- $10.79 4.78% $23,082 0.68%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21% 20,700 0.70%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%) 15,495 0.51%
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53% 11,779 0.35%
1992(1) 10.00 0.48 0.24 (0.48) -- 10.24 7.29% 6,043 0.29%
CONSUMER CLASS
1996 $10.79 $0.48 $ -- $(0.48) $ -- $10.79 4.61% $9,050 0.84%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21% 12,619 0.70%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%) 12,249 0.51%
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53% 14,771 0.35%
1992(1) 10.00 0.46 0.24 (0.46) -- 10.24 7.17% 4,572 0.46%
- ----------------------------
FMB Diversified Equity Fund
- ----------------------------
INSTITUTIONAL CLASS
1996 $14.58 $0.12 $ 3.16 $(0.13) $ -- $17.73 22.58% $61,857 1.41%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54% 53,325 1.50%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34% 42,229 1.61%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%) 38,979 1.50%
1992(1) 10.00 0.12 1.60 (0.11) -- 11.61 17.31% 29,596 1.42%
CONSUMER CLASS
1996 $14.58 $0.09 $ 3.17 $(0.11) $ -- $17.73 22.44% $7,145 1.58%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54% 5,833 1.50%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34% 4,985 1.61%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%) 5,634 1.50%
1992(1) 10.00 0.10 1.60 (0.09) -- 11.61 17.16% 3,377 1.64%
</TABLE>
<TABLE>
<CAPTION>
NET RATIO OF
RATIO OF EXPENSES NET INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS AVERAGE
TO AVERAGE (EXCLUDING (EXCLUDING PORTFOLIO COMMISSIONS
NET ASSETS WAIVERS) WAIVERS) TURNOVER RATE+
---------- ----------- ---------- --------- -----------
- --------------------------------
FMB Michigan Tax-Free Bond Fund
- --------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1996 4.72% 1.05% 4.35% 16% n/a
1995 4.62% 1.18% 4.14% 35% n/a
1994 4.50% 1.19% 3.82% 22% n/a
1993 4.59% 1.38% 3.56% 13% n/a
1992(1) 4.68% 2.55% 2.42% 30% n/a
CONSUMER CLASS
1996 4.55% 1.40% 4.00% 16% n/a
1995 4.62% 1.18% 4.14% 35% n/a
1994 4.50% 1.19% 3.82% 22% n/a
1993 4.59% 1.38% 3.56% 13% n/a
1992(1) 4.50% 2.72% 2.24% 30% n/a
- ----------------------------
FMB Diversified Equity Fund
- ----------------------------
INSTITUTIONAL CLASS
1996 0.74% 1.41% 0.74% 9% $0.0800
1995 0.92% 1.50% 0.92% 20% n/a
1994 0.69% 1.61% 0.69% 49% n/a
1993 0.82% 1.53% 0.79% 22% n/a
1992(1) 1.12% 2.05% 0.49% 5% n/a
CONSUMER CLASS
1996 0.57% 1.76% 0.39% 9% $0.0800
1995 0.92% 1.50% 0.92% 20% n/a
1994 0.69% 1.61% 0.69% 49% n/a
1993 0.82% 1.53% 0.79% 22% n/a
1992(1) 0.97% 2.29% 0.32% 5% n/a
<FN>
+ AVERAGE COMMISSION RATE PAID PER SHARE OF EQUITY SECURITY PURCHASES AND
SALES DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR
FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
(1) THE FMB MONEY MARKET, FMB INTERMEDIATE GOVERNMENT INCOME, FMB MICHIGAN
TAX-FREE BOND AND FMB DIVERSIFIED EQUITY FUNDS COMMENCED OPERATIONS
DECEMBER 2, 1991. RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES CHARGE.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 & 25
<PAGE>
NOVEMBER 30, 1996
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
FMB Funds, Inc. (the "Company"), established as a Maryland corporation on
September 20, 1991, is registered under the Investment Company Act of 1940, as
an open-end management company. The Company currently consists of four separate
investment portfolios: FMB Money Market Fund, FMB Intermediate Government Income
Fund, FMB Michigan Tax-Free Bond Fund and FMB Diversified Equity Fund
(collectively, the "Funds"), each with two classes of shares known as the
Institutional Class and the Consumer Service Class. Each class of shares bears
the same voting, dividend, liquidation and other rights and conditions. The
assets of each portfolio are segregated, and a shareholder's interest is limited
to the portfolio in which shares are held. The Fund's prospectus provides a
description of each Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Funds:
SECURITY VALUATION -- Investment securities held by the FMB Money Market Fund
are stated at amortized cost which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income. Investment securities
of the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond Fund
and FMB Diversified Equity Fund which are listed on a securities exchange for
which market quotations are readily available, are valued at the last quoted
sales price on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recently quoted mean between bid and ask price
as provided by a pricing service. Debt obligations with sixty days or less
remaining until maturity may be valued at their amortized costs. Securities for
which current market quotations are not readily available are valued at fair
value as determined in good faith by the Company's Board of Directors and in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period, which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date.
FEDERAL INCOME TAXES -- It is each Fund's
intention to qualify as a regulated investment company and distribute all of its
taxable income. Accordingly, no provisions for Federal income taxes are
required.
DIVIDENDS TO SHAREHOLDERS -- The FMB Money Market Fund, FMB Intermediate
Government Income Fund, and FMB Michigan Tax-Free Bond Fund each declares
dividends of substantially all of their net investment income daily and pays
26
<PAGE>
[FMB LOGO]
those dividends monthly. The FMB Diversified Equity Fund declares and pays as a
dividend substantially all of its net investment income quarterly. Each Fund
will distribute, at least annually, substantially all net capital gains, if any,
earned by such Fund. Distributions are recorded on ex-date for shareholders.
ORGANIZATIONAL COSTS -- Organizational costs have been capitalized by the Funds
and are being amortized over sixty months commencing with operations.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day separately for each class within each Fund. The
maximum offering price per share for the Consumer Services Class shares of the
FMB Intermediate Government Income and FMB Michigan Tax-Free Bond Funds is equal
to the net assets per share plus a sales load of 3.00%. The maximum offering
price per share for the FMB Diversified Equity Fund is equal to the net assets
per share plus a sales load of 4.00%.
REPURCHASE AGREEMENTS -- Securities pledged
as collateral for Repurchase Agreements are held by each Fund's custodian bank
until maturity of the Repurchase Agreements. Provisions of the Agreements and
procedures adopted by the Company state that the market value of the collateral,
including accrued interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters into insolvency proceedings, realization
of collateral by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Company are prorated to
the Funds on the basis of relative net assets. The Consumer Service Class bears
a class specific 12b-1 fee. Income, other expenses and accumulated realized and
unrealized gains and losses of a Fund are allocated to the respective class on
the basis of relative net asset value each day.
3. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS
FMB-Trust, 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 Investment Advisory Agreement, the Adviser manages the
investments of the Funds and continuously reviews, supervises and administers
each Fund's investments. The Adviser is responsible for placing orders for the
purchase and sale of investment securities directly with brokers and dealers
selected at its discretion. The terms of the Investment Advisory Agreement
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.
27
<PAGE>
NOVEMBER 30, 1996
NOTES TO FINANCIAL STATEMENTS
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.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Company and SEI Fund Resources ("SFR") are parties to an administration
agreement (the "Administrative Agreement") dated March 23, 1996. Under the terms
of the Administrative Agreement SFR is entitled to receive an annual fee of
0.20% on the daily average net assets of the Funds. Such fee is computed daily
and paid monthly.
Prior to March 23, 1996, Furman Selz LLP ("Furman Selz") acted as the Company's
administrator for which it received an annual fee of 0.15% of average daily net
assets of each Fund. Furman Selz also provided fund accounting services to the
Funds. Each Fund paid $2,500 per month to Furman Selz for performing fund
accounting services.
The Company and SEI Financial Services Company (the "Distributor") are parties
to a Distribution Agreement dated March 23, 1996. The Company has adopted a
Distribution Plan (the "Plan") for those Funds offering Consumer Service shares.
The Plan provides for the payment by the Company to the Distributor of up to
0.25% for the FMB Money Market and up to 0.35% for the FMB Intermediate
Government Income, FMB Michigan Tax-Free Bond and FMB Diversified Equity Funds
per annum of each Fund's Consumer Service Class average daily net assets for
costs and expenses of the Distributor in connection with the distribution of
Fund shares of the Consumer Service Classes. The Distributor voluntarily waived
0.10% of the distribution fee for the period ended November 30, 1996. Prior to
March 23, 1996, Macatawa Distributor, Inc., a wholly-owned subsidiary of Furman
Selz, served as the Funds' distributor under a separate Distribution Plan which
provided for reimbursement of 0.35% of average daily net assets of the Consumer
Service Class for the FMB Intermediate Government Income, FMB Michigan Tax Free
Bond and FMB Diversified Equity Funds and 0.25% of the average daily net assets
of the Consumer Service Class for the FMB Money Market Fund. During the period
Macatawa Distributor, Inc. served as Distributor, no distribution expenses were
incurred by the Funds. The Fund's paid approximately $24,000 to affiliated
brokers for commissions earned on the sales of the shares of the Funds for the
fiscal year ended November 30, 1996.
Certain officers of the Company are also officers of the Administrator and/or
the Distributor. Such officers are paid no fees by the Funds.
5. OTHER TRANSACTIONS WITH AFFILIATES
The Company and SFR are parties to a transfer agency and service agreement dated
March 23, 1996 under which SFR provides transfer agency services to the Company.
Prior to March 23, 1996, Furman Selz acted as the Transfer Agent of the Company.
28
<PAGE>
[FMB LOGO]
6. CONCENTRATION OF CREDIT RISK
The FMB Michigan Tax-Free Bond Fund invests substantially all of its assets in a
portfolio of debt obligations issued by the State of Michigan and its
authorities and agencies. The issuers' abilities to meet their obligations may
be affected by economic or political developments in the State of Michigan.
7. FEDERAL INCOME TAX STATUS
At November 30, 1996, the FMB Money Market Fund had capital loss carryforwards
of $88,000 available through the year 2003 to offset future realized capital
gains.
During the fiscal year ended November 30, 1996, the FMB Intermediate Government
Income Fund utilized $38,019 of capital loss carryforwards. The Fund has
remaining capital loss carryforwards of $391,658 available through the year 2002
and $1,366,912 available through the year 2003 to offset future realized capital
gains.
During the fiscal year ended November 30, 1996, the FMB Michigan Tax-Free Bond
Fund utilized $13,753 of capital loss carryforwards. The Fund has remaining
capital loss carryforwards of $19,764 available through the year 2002 and
$81,193 available through the year 2003 to offset future realized capital gains.
During the fiscal year ended November 30, 1996, the FMB Diversified Equity Fund
utilized $230,697 of capital loss carryforwards.
8. INVESTMENT TRANSACTIONS
During the year ended November 30, 1996, the cost of security purchases and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows:
PURCHASES
U.S.
Government Other Total
---------- ---------- ----------
FMB Intermediate
Government Income Fund $21,152 $ -- $21,152
FMB Michigan Tax-Free
Bond Fund -- 5,061 5,061
FMB Diversified Equity Fund -- 5,151 5,151
SALES
U.S.
Government Other Total
---------- ---------- ----------
FMB Intermediate
Government Income Fund $16,313 $ -- $16,313
FMB Michigan Tax-Free
Bond Fund -- 5,358 5,358
FMB Diversified Equity Fund -- 9,983 9,983
At November 30, 1996, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial purposes. The aggregate gross
unrealized appreciation and depreciation for securities held at November 30,
1996, for each Fund were as follows :
Aggregate Aggregate
Gross Gross
Appreciation Depreciation Net
------------ ------------ ----------
AGGREGATE GROSS UNREALIZED
GAIN (LOSS) (000)
FMB Intermediate
Government Income Fund $ 1,562 $(174) $ 1,388
FMB Michigan Tax-Free
Bond Fund 1,305 -- 1,305
FMB Diversified Equity Fund 24,681 (170) 24,511
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of FMB Funds, Inc.
In our opinion, the accompanying statements of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
FMB Money Market Fund, FMB Intermediate Government Income Fund, FMB Michigan Tax
Free Bond Fund and FMB Diversified Equity Fund, separately managed portfolios of
FMB Funds, Inc. (the "Company"), at November 30, 1996, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
30 South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 20, 1997
30
<PAGE>
NOVEMBER 30, 1996
(UNAUDITED)
[FMB LOGO]
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
Dear FMB Shareholders:
For the fiscal year ended November 30, 1996, each portfolio is designating
long-term capital gains, qualifying dividends and exempt income with regard to
distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS1 INTEREST
- --------- ------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
FMB Money Market Fund 0% 100% 100% 0% 0%
FMB Intermediate Government Income Fund 0% 100% 100% 0% 0%
FMB Michigan Tax-Free Bond Fund 0% 100% 100% 0% 98%
FMB Diversified Equity Fund 0% 100% 100% 100% 0%
</TABLE>
Please consult your tax adviser for proper treatment of this information.
- ------------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE PORTFOLIO'S TOTAL
DISTRIBUTIONS.
** ITEMS (D) AND (E) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS
OF THE PORTFOLIO.
31
<PAGE>
[FMB LOGO]
BOARD OF DIRECTORS
Michael R. Mucciolo*
Chairman of the Board
Senior Vice President and Chief Financial Officer,
Beverage America, Inc.
Valerie T. Ambrose
Corporate Director of Community Out Reach,
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, Michigan
*Member of Audit Committee
OFFICERS
David G. Lee
President & Chief Executive Officer
Stephen G. Meyer
Controller, Treasurer & Chief Financial Officer
Todd Cipperman
Vice President & Secretary
Kathryn L. Stanton
Vice President & Assistant Secretary
Kevin P. Robins
Vice President & Assistant Secretary
Sandra K. Orlow
Vice President & Assistant Secretary
Barbara Nugent
Vice President & Assistant Secretary
Marc Cahn
Vice President & Assistant Secretary
Joseph M. Lydon
Vice President & Assistant Secretary
James Burns, Esq.
Assistant Secretary
<PAGE>
[FMB LOGO]
ANNUAL REPORT
NOVEMBER 30, 1996
FMB FUNDS, INC.
P.O. Box 8526
Boston, MA 02266-8526
(800) 453-4234
INVESTMENT ADVISER
FMB--Trust
One Financial Plaza
Holland, MI 49423
INVESTMENT SUB-ADVISER
First Michigan Bank Corporation
One Financial Plaza
Holland, MI 49423
DISTRIBUTOR
SEI Financial Services Company
Oaks, PA 19456
ADMINISTRATOR
SEI Fund Resources
Oaks, PA 19456
CUSTODIAN
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
30 South Seventeenth Street
Philadelphia, PA 19103
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
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.
