[PHOTO OF LIGHTHOUSE IN BACKGROUND]
[FMB LOGO]
FMB FUNDS, INC.
-------------------------
SEMI-ANNUAL
REPORT
-------------------------
FMB MONEY MARKET FUND
FMB INTERMEDIATE
GOVERNMENT INCOME FUND
FMB MICHIGAN
TAX-FREE BOND FUND
FMB DIVERSIFIED
EQUITY FUND
MAY 31, 1997
<PAGE>
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The FMB Funds, Inc.:
[BULLET] are not deposits, other obligations of, or guaranteed by First
Michigan 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 Investments Distribution Co., 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.
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TABLE OF CONTENTS
FMB MONEY MARKET FUND ...................... 2
FMB INTERMEDIATE GOVERNMENT
INCOME FUND ............................. 4
FMB MICHIGAN TAX-FREE
BOND FUND ............................... 7
FMB DIVERSIFIED EQUITY
FUND ....................................12
STATEMENT OF OPERATIONS ....................15
STATEMENT OF CHANGES IN NET ASSETS .........16
FINANCIAL HIGHLIGHTS .......................18
NOTES TO FINANCIAL STATEMENTS ..............22
[FMB LOGO]
FMB FUNDS, INC.
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MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB MONEY MARKET FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 5%
U.S. GOVERNMENT AGENCY OBLIGATIONS 12%
CERTIFICATES OF DEPOSIT 4%
COMMERCIAL PAPER 69%
CASH EQUIVALENTS 10%
% of Total Portfolio Investments (Unaudited)
- ------------------------------------------------------
Par Value
(000) (000)
- ------------------------------------------------------
COMMERCIAL PAPER -- 66.8%
- ------------------------------------------------------
BANKS -- 8.8%
Beneficial
5.530%, 06/16/97 $7,500 $7,483
Norwest
5.540%, 06/10/97 8,000 7,989
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15,472
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FINANCIAL SERVICES -- 22.3%
Ciesco
5.530%, 06/16/97 7,700 7,682
Cit Group Holdings
5.540%, 06/24/97 7,700 7,673
Commercial Credit
5.550%, 07/07/97 7,800 7,757
Merrill Lynch
5.590%, 06/30/97 8,000 7,964
Prudential Funding
5.550%, 06/06/97 8,200 8,194
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39,270
--------
- ------------------------------------------------------
Par Value
(000) (000)
- ------------------------------------------------------
INDUSTRIAL -- 35.7%
Cargill
5.510%, 06/02/97 $8,000 $7,999
Deere
5.540%, 06/20/97 7,800 7,777
E.I. du Pont de Nemours
5.520%, 07/10/97 7,500 7,455
Ford Motor Credit
5.600%, 07/02/97 8,000 7,961
General Electric Capital
5.550%, 07/09/97 8,000 7,953
John Deere Capital
5.540%, 06/09/97 8,400 8,390
Lucent Technologies
5.530%, 08/05/97 8,000 7,920
Philip Morris
5.530%, 06/18/97 7,500 7,480
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62,935
--------
Total Commercial Paper
(Cost $117,677) 117,677
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U.S. TREASURY OBLIGATION -- 4.5%
- ------------------------------------------------------
U.S. Treasury Bill (B)
5.160%, 10/16/97 8,000 7,843
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Total U.S. Treasury Obligation
(Cost $7,843) 7,843
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U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 11.9%
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FNMA (A)
5.360%, 08/22/97 10,000 9,999
FNMA MTN
5.710%, 03/18/98 6,000 5,994
SLMA (A)
5.360%, 06/12/97 5,000 5,000
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Total U.S. Government Agency Obligations
(Cost $20,993) 20,993
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
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FMB Funds, Inc.
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FMB MONEY MARKET FUND (CONCLUDED)
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Par Value
(000) (000)
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CERTIFICATE OF DEPOSIT -- 4.3%
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First Tennessee Bank
5.690%, 07/17/97 $7,500 $7,500
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Total Certificate of Deposit
(Cost $7,500) 7,500
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REPURCHASE AGREEMENT -- 9.2%
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First Union
5.53%, dated 05/30/97,
matures 06/02/97, repurchase
price $16,254,487 (collateralized
by U.S. Treasury Note, par
value $16,090,000, 7.25%,
matures 02/15/98, market
value $16,578,492) 16,247 16,247
--------
Total Repurchase Agreement
(Cost $16,247) 16,247
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Total Investments -- 96.7%
(Cost $170,260) 170,260
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OTHER ASSETS AND LIABILITIES -- 3.3%
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Total Other Assets and Liabilities, Net 5,887
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Value
(000)
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NET ASSETS:
- ------------------------------------------------------
Portfolio Shares of Institutional
Class ($.001 par value -- 10 billion
authorized for the company) based on
160,552,531
outstanding shares $160,552
Portfolio Shares of Consumer Service
Class ($.001 par value -- 10 billion
authorized for the company) based on
15,592,649
outstanding shares 15,593
Undistributed Net Investment Income 89
Accumulated Net Realized Loss
on Investments (87)
--------
Total Net Assets -- 100.0% $176,147
========
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 MAY 31, 1997. THE DATE SHOWN
IS THE RESET DATE.
(B) THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS REPRESENTS THE
SECURITY'S EFFECTIVE YIELD.
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SLMA -- STUDENT LOAN MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
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MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB INTERMEDIATE GOVERNMENT INCOME FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 42%
U.S. GOVERNMENT AGENCY OBLIGATIONS 38%
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS 18%
CASH EQUIVALENTS 2%
% of Total Portfolio Investments (Unaudited)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS -- 18.0%
- ------------------------------------------------------
FHLB
8.000%, 01/01/13 $1,192 $1,215
FHLMC
9.000%, 10/01/97 99 101
9.000%, 12/01/01 134 139
7.000%, 11/15/05 464 466
7.500%, 11/15/17 1,000 1,012
7.150%, 07/15/18 2,000 2,003
6.250%, 01/15/19 4,060 3,908
FHLMC REMIC
8.250%, 11/15/20 237 239
FNMA
9.500%, 10/01/97 118 121
9.000%, 11/01/97 29 29
9.500%, 11/01/97 112 115
8.000%, 07/01/98 138 141
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Market
Par Value
(000) (000)
- ------------------------------------------------------
8.500%, 10/01/98 $31 $32
8.500%, 11/01/98 67 69
7.338%, 01/15/99 1,000 1,009
7.750%, 10/25/00 847 848
7.500%, 07/25/02 1,232 1,247
7.500%, 12/25/05 1,318 1,332
7.500%, 05/01/07 1,728 1,746
5.500%, 08/25/16 1,000 976
6.950%, 05/25/17 306 306
8.500%, 11/25/17 28 28
6.350%, 07/25/18 1,000 983
6.750%, 09/25/18 548 547
7.000%, 10/25/18 1,751 1,751
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $20,535) 20,363
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U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 38.1%
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FHLB
6.460%, 02/01/00 1,000 992
6.125%, 09/20/00 2,000 1,979
6.020%, 09/06/01 2,000 1,949
6.480%, 01/08/02 1,000 990
FHLMC
6.600%, 11/12/99 1,000 1,010
6.550%, 01/04/00 1,000 1,003
7.140%, 07/31/02 1,500 1,500
6.800%, 09/18/02 1,000 989
6.120%, 01/21/03 2,500 2,427
6.550%, 04/02/03 1,000 979
8.335%, 03/14/05 2,000 2,022
6.830%, 06/15/05 2,000 1,959
7.000%, 07/06/05 2,000 1,973
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
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FMB Funds, Inc.
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FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONTINUED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
FNMA
6.330%, 11/03/00 $3,000 $2,983
7.000%, 05/10/01 2,000 2,009
6.630%, 06/05/01 1,000 998
7.550%, 04/22/02 2,000 2,074
7.000%, 08/12/02 1,000 996
6.950%, 09/10/02 3,000 2,984
6.720%, 02/25/03 2,400 2,367
7.090%, 10/13/05 2,000 1,966
FNMA MTN
5.790%, 01/22/01 2,000 1,948
6.500%, 12/27/01 1,000 989
6.880%, 11/20/06 4,000 3,916
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Total U.S. Government Agency Obligations
(Cost $43,475) 43,002
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U.S. TREASURY OBLIGATIONS -- 41.3%
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U.S. Treasury Notes
5.750%, 08/15/03 2,000 1,919
7.375%, 11/15/97 5,000 5,039
7.875%, 01/15/98 3,000 3,040
9.000%, 05/15/98 5,000 5,144
8.250%, 07/15/98 4,000 4,100
6.375%, 01/15/99 2,000 2,010
6.875%, 08/31/99 2,000 2,026
7.875%, 11/15/99 1,000 1,035
6.250%, 05/31/00 2,000 1,994
8.000%, 05/15/01 2,000 2,106
7.875%, 08/15/01 2,000 2,102
6.250%, 10/31/01 1,000 991
7.500%, 11/15/01 1,000 1,038
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Market
Par Value
(000) (000)
- ------------------------------------------------------
6.250%, 02/28/02 $1,000 $ 989
7.250%, 05/15/04 2,000 2,074
7.875%, 11/15/04 2,000 2,146
7.500%, 02/15/05 2,000 2,102
5.875%, 11/15/05 2,000 1,898
6.875%, 05/15/06 2,000 2,026
6.500%, 10/15/06 1,000 987
6.250%, 02/15/07 2,000 1,945
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Total U.S. Treasury Obligations
(Cost $46,157) 46,711
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REPURCHASE AGREEMENT -- 2.1%
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First Union
5.53%, dated 05/30/97,
matures 06/02/97, repurchase
price $2,397,104 (collateralized
by U.S. Treasury Note, par
value $2,379,000, 6.875%,
matures 08/31/99, market
value $2,449,554) 2,396 2,396
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Total Repurchase Agreement
(Cost $2,396) 2,396
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Total Investments -- 99.5%
(Cost $112,563) 112,472
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OTHER ASSETS AND LIABILITIES -- 0.5%
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Total Other Assets and Liabilities, Net 560
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
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MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONCLUDED)
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Market
Value
(000)
- ------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------
Portfolio Shares of Institutional Class
($.001 par value -- 10 billion
authorized for the company) based on
10,831,456 outstanding shares $110,020
Portfolio Shares of Consumer Service
Class ($.001 par value -- 10 billion
authorized for the company) based on
460,621 outstanding shares 4,852
Distributions in excess of Net
Investment Income (55)
Accumulated Net Realized Loss
on Investments (1,694)
Net Unrealized Depreciation
on Investments (91)
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Total Net Assets -- 100.0% $113,032
========
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $10.01
========
Net Asset Value and Redemption Price
Per Share -- Consumer Service Class $10.01
========
Maximum Public Offering Price Per Share --
Consumer Service Class
($10.01/95.25%) $10.51
========
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.
6
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FMB Funds, Inc.
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FMB MICHIGAN TAX-FREE BOND FUND
[PIE CHART]
UTILITY BONDS 14%
TRANSPORTATION BONDS 1%
INDUSTRIAL REVENUE BONDS 4%
HOUSING BONDS 1%
HEALTH CARE BONDS 25%
GENERAL OBLIGATION BONDS 44%
CASH EQUIVALENTS 2%
EDUCATION BONDS 9%
% of Total Portfolio Investments (Unaudited)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
MUNICIPAL BONDS -- 96.3%
- ------------------------------------------------------
MICHIGAN -- 96.3%
Ann Arbor, Sewer Disposal
Project, Series 12, RB
6.950%, 07/01/03 $335 $370
Ann Arbor, Water Supply System,
Series T, MBIA, RB
7.375%, 02/01/03 710 801
Bay County, West Side Regional
Sewer Disposal System, GO
6.400%, 05/01/01 150 154
Cadillac, Public Schools, FGIC, GO
5.375%, 05/01/10 500 501
Chelsea, School District Authority,
FGIC, GO
5.500%, 05/01/08 500 514
Clio, School District Authority, RB
7.200%, 05/01/01 200 208
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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 $274
Dearborn, School District
Authority, GO
5.250%, 05/01/06 500 507
Detroit, School District Authority,
AMBAC, GO, Pre-refunded
at 102 (A)
7.100%, 05/01/01 250 277
Detroit, Sewer Disposal Project,
MBIA, RB, Pre-refunded
at 101.5 (A)
7.125%, 07/01/99 500 536
Farmington Hills, Hospital Finance
Authority, Botsford General
Hospital Project, Series A,
MBIA, RB
6.700%, 02/15/01 225 241
Fowlerville County, School
District Authority, MBIA, GO
5.350%, 05/01/10 500 495
Gaylord, Community School
Project, GO, Pre-refunded
at 102 (A)
6.600%, 05/01/02 500 551
Grand Rapids, Downtown
Development Authority, MBIA, TA
6.600%, 06/01/08 545 605
Grand Rapids, Sanitation and
Sewer Authority, Improvement
Project, RB
6.875%, 01/01/10 500 534
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
MICHIGAN (CONTINUED)
Grand Rapids, Water Supply
Authority, FGIC, RB
6.625%, 01/01/08 $500 $537
Grandville, Public School District
Authority, FGIC, GO
6.000%, 05/01/05 310 331
Grosse Ile Township, School
District Authority, FGIC, GO
5.600%, 05/01/10 500 509
Harrison, Community School
Project, AMBAC, GO
5.800%, 05/01/05 500 526
Holland, Electric Authority, RB,
Pre-refunded at 100 (A)
6.500%, 07/01/99 400 417
Huron Valley, School District
Authority, FGIC, GO
5.450%, 05/01/08 500 512
Jenison, Michigan Public School
Authority, FGIC, GO
5.400%, 05/01/08 500 517
Kalamazoo, Hospital Finance
Authority, Borgess Medical Center
Project, Series A, FGIC, RB
6.250%, 07/01/04 500 516
Kenowa Hills, Public Schools,
MBIA, GO
5.500%, 05/01/08 500 514
Kent County, Building Authority, GO
6.000%, 12/01/09 500 521
Kent County, Hospital Finance
Authority, Pine Rest Christian
Hospital Project, FGIC, RB
6.500%, 11/01/10 500 538
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
Kent, Hospital Finance Authority,
Blodgett Memorial Hospital
Project, MBIA, RB
5.750%, 07/01/09 $500 $502
Kent, Hospital Finance Authority,
Blodgett Memorial Medical Center
Project, Series A, RB
6.875%, 07/01/99 130 136
Kent, Hospital Finance Authority,
Mary Free Hospital Project,
Series A, RB
6.500%, 04/01/05 200 209
Lansing, Building Authority,
GO, Escrowed to Maturity
7.150%, 06/01/03 525 573
Lansing, Finance Tax Increment,
GO, Escrowed to Maturity
5.200%, 10/01/98 200 203
Lenawee County, Building
Authority, Human Services
Project, AMBAC, GO
6.000%, 05/01/09 350 369
Lincoln Park, School District
Authority, FGIC, GO
5.500%, 05/01/06 500 519
Macomb County, Waste Water
Disposal Project, GO
6.500%, 11/01/99 200 206
Mattawan, School District
Authority, GO
6.400%, 05/01/09 500 532
Michigan State Building Authority,
AMBAC, RB
6.750%, 10/01/07 500 546
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
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FMB Funds, Inc.
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FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
MICHIGAN (CONTINUED)
Michigan State Environmental
Protection Program, GO,
Pre-refunded at 102 (A)
6.250%, 11/01/02 $1,000 $1,092
Michigan State Higher Education
Authority, Hope College Project,
Series B, RB
5.900%, 04/01/09 350 356
Michigan State Higher Education
Authority, Student Loan,
Series 13, AMBAC, RB
5.700%, 04/01/02 500 516
Michigan State Hospital Finance
Authority, Central Michigan
Community Hospital,
Series A, RB
5.750%, 10/01/02 300 307
Michigan State Hospital Finance
Authority, Daughters Charity
Project, RB
5.500%, 11/01/05 500 518
Michigan State Hospital Finance
Authority, Detroit Medical Center
Project, Series A, RB
6.375%, 08/15/09 500 522
Michigan State Hospital Finance
Authority, Holland Community
Hospital Project, RB
5.250%, 01/01/08 750 733
Michigan State Hospital Finance
Authority, Mercy Health Services,
Series Q, AMBAC, RB
5.100%, 08/15/07 500 502
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
Michigan State Hospital Finance
Authority, Otsego Memorial
Hospital Project, RB (B)
6.000%, 01/01/09 $660 $671
Michigan State Hospital Finance
Authority, Saint John Hospital
Project, Series A, AMBAC, RB
5.750%, 05/15/04 200 210
Michigan State Hospital Finance
Authority, Sparrow Obligated
Group Project, MBIA, RB
6.300%, 11/15/03 615 664
Michigan State Hospital Finance
Authority Metropolitan Hospital
Project, Series A, RB
4.750%, 07/01/98 200 200
Michigan State Housing
Development Authority,
Walled Lake Villa Project,
FSA, RB
5.850%, 04/15/07 420 439
Michigan State Public Power
Agency, Campbell Project,
AMBAC, RB
6.400%, 01/01/04 235 240
Michigan State Strategic Fund,
Lutheran Social Services
Project, RB (B)
5.200%, 09/01/04 400 403
Northern Michigan University,
AMBAC, RB
5.500%, 12/01/09 435 432
Novi, School District Authority, GO
5.350%, 05/01/02 275 283
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
MICHIGAN (CONCLUDED)
Oakland County, Economic
Development Authority, Cranbrook
Elderly Community Project, RB
6.375%, 11/01/14 $500 $544
Oakland County, GO
6.250%, 11/01/06 500 521
Ottawa County, Holland
Township Extension, GO
6.800%, 08/01/05 500 531
Paw Paw, Public School District,
FGIC, GO
6.500%, 05/01/09 500 563
Rochester Hills, Series B, GO,
Pre-refunded at 102 (A)
6.600%, 11/01/98 465 489
Rochester Hills, Transportation
Fund, GO
6.250%, 08/01/05 200 207
Rochester, School District Authority,
GO, Pre-refunded at 100 (A)
6.500%, 05/01/02 150 162
Rockford, Public School
Authority, GO
5.600%, 05/01/05 500 518
Saginaw, Water Authority, RB
6.000%, 07/01/07 865 895
Saint Joseph, Mercy Memorial
Medical Center, AMBAC, RB
5.125%, 01/01/09 500 493
Saranac, School District
Authority, GO
5.700%, 05/01/07 230 234
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
Troy, Downtown Development
Authority, Series A, TA, RB
6.100%, 11/01/10 $400 $421
University of Michigan, Hospital
Revenue, Series A, RB
5.700%, 12/01/04 250 265
University of Michigan, Major
Capital Projects, RB
5.800%, 04/01/10 500 519
Utica, Community Schools
Project, GO
5.700%, 05/01/06 500 522
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%, 05/01/01 500 547
Warren, Transportation Fund, GO
5.000%, 06/01/07 405 396
West Ottawa, Public School
District, FGIC, GO
5.400%, 05/01/09 500 506
--------
Total Municipal Bonds
(Cost $31,393) 32,434
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
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[FMB LOGO]
FMB Funds, Inc.
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONCLUDED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
CASH EQUIVALENT -- 1.8%
- ------------------------------------------------------
Federated Michigan Municipal
Cash Trust $616 $616
--------
Total Cash Equivalent
(Cost $616) 616
--------
Total Investments -- 98.1%
(Cost $32,009) 33,050
--------
OTHER ASSETS AND LIABILITIES -- 1.9%
- ------------------------------------------------------
Total Other Assets and Liabilities, Net 629
--------
NET ASSETS:
- ------------------------------------------------------
Portfolio Shares of Institutional Class
($.001 par value -- 10 billion
authorized for the company) based on
2,288,712 outstanding shares 23,849
Portfolio Shares of Consumer Service
Class ($.001 par value -- 10 billion
authorized for the company) based on
857,934 outstanding shares 8,883
Undistributed Net Investment Income 1
Accumulated Net Realized Loss
on Investments (95)
Net Unrealized Appreciation
on Investments 1,041
--------
Total Net Assets -- 100.0% $33,679
========
- ------------------------------------------------------
Market
Value
(000)
- ------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $10.70
========
Net Asset Value and Redemption
Price Per Share -- Consumer
Service Class $10.70
========
Maximum Public Offering Price Per
Share -- Consumer Service Class
($10.70/95.25%) $11.23
========
(A) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(B) SECURITY IS BACKED BY A LETTER OF CREDIT.
AMBAC -- SECURITY INSURED BY AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- SECURITY INSURED BY FINANCIAL GUARANTY INSURANCE CORPORATION
FSA -- SECURITY INSURED BY FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- SECURITY INSURED BY MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
TA -- TAX ALLOCATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
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 -- 90.5%
- ------------------------------------------------------
AEROSPACE & DEFENSE -- 2.2%
Lockheed Martin 7,000 $655
Raytheon 20,000 955
--------
1,610
--------
AUTOMOTIVE -- 4.0%
Autoliv* 8,525 318
Ford Motor 10,000 375
Genuine Parts 22,500 754
TRW 28,000 1,498
--------
2,945
--------
BANKS -- 5.8%
Banc One 23,000 995
Citicorp 15,000 1,716
Norwest 30,000 1,605
--------
4,316
--------
- ------------------------------------------------------
Market
Value
Shares (000)
- ------------------------------------------------------
BEAUTY PRODUCTS -- 3.5%
Gillette 19,000 $1,689
International Flavors &
Fragrances 21,000 932
--------
2,621
--------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 0.6%
U.S. West Media Group* 21,000 417
--------
CHEMICALS -- 1.6%
Eastman Chemical 6,000 357
Morton International 25,000 806
--------
1,163
--------
COMPUTERS & SERVICES -- 7.5%
Diebold 7,500 281
Electronic Data Systems 8,000 299
Hewlett Packard 16,000 824
Microsoft* 13,000 1,612
Oracle* 31,500 1,469
Solectron* 18,000 1,125
--------
5,610
--------
DRUGS -- 8.3%
Abbott Laboratories 25,000 1,575
Johnson & Johnson 17,000 1,018
Merck 9,000 809
Pfizer 19,000 1,955
Schering Plough 8,800 799
--------
6,156
--------
ELECTRICAL EQUIPMENT -- 5.9%
AMP 26,000 1,069
General Electric 36,000 2,173
Molex 30,000 1,170
--------
4,412
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
[FMB LOGO]
FMB Funds, Inc.
================================================================================
FMB DIVERSIFIED EQUITY FUND (CONTINUED)
- ------------------------------------------------------
Market
Value
Shares (000)
- ------------------------------------------------------
ENTERTAINMENT -- 3.0%
Carnival 26,000 $988
Walt Disney 15,000 1,228
--------
2,216
--------
ENVIRONMENTAL SERVICES -- 1.3%
Waste Management 30,000 952
--------
FINANCIAL SERVICES -- 1.4%
FNMA 24,000 1,047
--------
FOOD, BEVERAGE & TOBACCO-- 9.2%
CPC International 20,000 1,720
H.J. Heinz 12,000 516
Hershey Foods 19,000 1,066
PepsiCo 40,000 1,470
Sara Lee 29,000 1,185
Sysco 25,000 872
--------
6,829
--------
GAS/NATURAL GAS -- 1.4%
Enron 26,000 1,059
--------
HOUSEHOLD PRODUCTS -- 2.8%
Procter & Gamble 15,000 2,068
--------
INSURANCE -- 1.8%
American International Group 10,000 1,354
--------
Leisure -- 3.5%
Callaway Golf 10,000 323
Mattel 35,000 1,046
McDonald's 25,000 1,256
--------
2,625
--------
MACHINERY -- 1.3%
Caterpillar 10,000 976
--------
- ------------------------------------------------------
Market
Value
Shares (000)
- ------------------------------------------------------
MANUFACTURING -- 1.1%
Illinois Tool Works 16,000 $794
--------
MISCELLANEOUS BUSINESS SERVICES -- 2.3%
Automatic Data Processing 35,000 1,719
--------
PETROLEUM REFINING -- 7.5%
Chevron 14,000 980
Exxon 20,000 1,185
Mobil 12,000 1,679
Royal Dutch Petroleum, ADR 9,000 1,757
--------
5,601
--------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.4%
Eastman Kodak 13,000 1,077
--------
RETAIL -- 5.9%
Albertson's 30,000 1,005
Autozone* 11,000 257
Home Depot 13,000 819
Kohl's* 15,000 808
Walgreen 32,400 1,515
--------
4,404
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.8%
Motorola 19,800 1,314
--------
TELEPHONES & TELECOMMUNICATION-- 5.4%
Alltel 29,000 953
Ameritech 8,000 524
Lucent Technologies 7,194 458
MCI Communications 31,300 1,201
SBC Communications 15,000 878
--------
4,014
--------
Total Common Stocks
(Cost $38,480) 67,299
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
MAY 31, 1997
STATEMENT OF NET ASSETS (UNAUDITED)
================================================================================
FMB DIVERSIFIED EQUITY FUND (CONCLUDED)
- ------------------------------------------------------
Market
Par Value
(000) (000)
- ------------------------------------------------------
REPURCHASE AGREEMENT -- 9.6%
- ------------------------------------------------------
First Union
5.53%, dated 05/30/97,
matures 06/02/97, repurchase
price $7,168,302 (collateralized
by U.S. Treasury Note, par
value $7,096,000, 7.25%,
matures 02/15/98, market
value $7,311,434) $7,165 $7,165
--------
Total Repurchase Agreement
(Cost $7,165) 7,165
--------
Total Investments -- 100.1%
(Cost $45,645) 74,464
--------
OTHER ASSETS AND LIABILITIES -- (0.1%)
- ------------------------------------------------------
Total Other Assets and Liabilities, Net (48)
--------
NET ASSETS:
- ------------------------------------------------------
Portfolio Shares of Institutional Class
($.001 par value -- 10 billion
authorized for the company) based on
3,539,566 outstanding shares 38,239
Portfolio Shares of Consumer Service
Class ($.001 par value -- 10 billion
authorized for the company) based
on 437,171 outstanding shares 4,939
Undistributed Net Investment Income 70
Accumulated Net Realized Gain
on Investments 2,349
Net Unrealized Appreciation
on Investments 28,819
--------
Total Net Assets -- 100.0% $74,416
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $18.71
========
Net Asset Value and Redemption
Price Per Share -- Consumer
Service Class $18.70
========
Maximum Public Offering Price Per
Share -- Consumer Service
Class ($18.70/94.25%) $19.84
========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
FOR THE SIX MONTH PERIOD ENDED MAY 31, 1997 (UNAUDITED) [FMB LOGO]
FMB Funds, Inc.
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 ........................................ $4,499 $3,764 $891 $189
Dividend Income ........................................ -- -- -- 516
------ ------ ---- -----
Total Investment Income .............................. 4,499 3,764 891 705
------ ------ ---- -----
Expenses:
Investment Advisory Fees ............................... 288 250 90 343
Waiver of Investment Advisory Fees ..................... -- -- (54) --
Administrator Fees ..................................... 164 111 33 69
Professional Fees ...................................... 26 20 6 11
Transfer Agent Fees .................................... 29 24 19 22
Distribution Fees (1) .................................. 22 8 16 13
Waiver of Distribution Fees (1) ........................ -- (2) (5) (4)
Printing Expenses ...................................... 15 9 4 7
Custodian Fees ......................................... 8 5 6 7
Registration Fees ...................................... 17 10 3 6
Trustee Fees ........................................... 2 2 -- 1
Miscellaneous .......................................... 10 7 4 7
------ ------ ---- -----
Total Expenses ....................................... 581 444 122 482
------ ------ ---- -----
Net Investment Income ..................................... 3,918 3,320 769 223
------ ------ ---- -----
Net Realized Gain on Securities Sold ................... 1 64 7 2,349
Net Change in Unrealized Appreciation (Depreciation)
on Investments ....................................... -- (1,479) (264) 4,602
------ ------ ---- -----
Net Realized and Unrealized Gain (Loss)
on Investments ......................................... 1 (1,415) (257) 6,951
------ ------ ---- -----
Net Increase in Net Assets
Resulting From Operations .............................. $3,919 $1,905 $512 $7,174
====== ====== ==== ======
<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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
15
<PAGE>
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997 (UNAUDITED) AND FOR THE YEAR ENDED
NOVEMBER 30, 1996
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
<TABLE>
<CAPTION>
FMB Money
Market Fund
------------------------
12/1/96 12/1/95
to 5/31/97 to 11/30/96
---------- -----------
<S> <C> <C>
Investment Activities:
Net Investment Income .................................................................. $3,918 $6,064
Net Realized Gain on Securities Sold ................................................... 1 --
Net Unrealized Appreciation (Depreciation) of Investment Securities .................... -- --
-------- --------
Net Increase in Net Assets Resulting from Operations ................................... 3,919 6,064
-------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class .................................................................. (3,504) (5,129)
Consumer Service Class ............................................................... (415) (935)
Capital Gains
Institutional Class .................................................................. -- --
Consumer Service Class ............................................................... -- --
-------- --------
Total Distributions ............................................................... (3,919) (6,064)
-------- --------
Capital Share Transactions:
Institutional Class
Proceeds from Shares Issued .......................................................... 166,449 289,946
Reinvestment of Cash Distributions ................................................... -- --
Cost of Shares Redeemed .............................................................. (158,445) (224,594)
-------- --------
Increase (Decrease) in Net Assets from Institutional Class Transactions .............. 8,004 65,352
-------- --------
Consumer Service Class
Proceeds from Shares Issued .......................................................... 16,794 52,312
Reinvestment of Cash Distributions ................................................... 401 906
Cost of Shares Redeemed .............................................................. (21,589) (50,760)
-------- --------
Increase (Decrease) in Net Assets Derived from Consumer Service Class Transactions ... (4,394) 2,458
-------- --------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions ................. 3,610 67,810
-------- --------
Net Increase (Decrease) in Net Assets ................................................ 3,610 67,810
-------- --------
Net Assets:
Beginning of Period .................................................................... 172,537 104,727
-------- --------
End of Period .......................................................................... $176,147 $172,537
======== ========
Shares Issued and Redeemed:
Institutional Class Shares:
Shares Issued ........................................................................ 166,449 289,946
Shares Issued in Lieu of Cash Distributions .......................................... -- --
Shares Redeemed ...................................................................... (158,445) (224,594)
-------- --------
Net Increase (Decrease) Institutional Class Shares ................................... 8,004 65,352
-------- --------
Consumer Service Class Shares:
Shares Issued ........................................................................ 16,794 52,312
Shares Issued in Lieu of Cash Distributions .......................................... 401 906
Shares Redeemed ...................................................................... (21,589) (50,760)
-------- --------
Net Increase (Decrease) Consumer Service Class Shares ................................ (4,394) 2,458
-------- --------
Net Increase (Decrease) in Shares ...................................................... 3,610 67,810
======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
16
<PAGE>
[FMB LOGO]
FMB FUNDS, INC.
================================================================================
<TABLE>
<CAPTION>
FMB Intermediate FMB Michigan
Government Income Fund Tax-Free Bond Fund
----------------------- -----------------------
12/1/96 12/1/95 12/1/96 12/1/95
to 5/31/97 to 11/30/96 to 5/31/97 to 11/30/96
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income ....................................................... $3,320 $6,868 $769 $1,496
Net Realized Gain on Securities Sold ........................................ 64 43 7 13
Net Unrealized Appreciation (Depreciation) of Investment Securities ......... (1,479) (1,236) (264) (28)
-------- -------- ------- -------
Net Increase in Net Assets Resulting from Operations ........................ 1,905 5,675 512 1,481
-------- -------- ------- -------
Distributions to Shareholders:
Net Investment Income
Institutional Class ....................................................... (3,109) (6,645) (564) (1,010)
Consumer Service Class .................................................... (138) (351) (207) (484)
Capital Gains
Institutional Class ....................................................... -- -- -- --
Consumer Service Class .................................................... -- -- -- --
-------- -------- ------- -------
Total Distributions .................................................... (3,247) (6,996) (771) (1,494)
-------- -------- ------- -------
Capital Share Transactions:
Institutional Class
Proceeds from Shares Issued ............................................... 11,798 22,554 2,803 4,811
Reinvestment of Cash Distributions ........................................ 4 -- -- --
Cost of Shares Redeemed ................................................... (10,148) (27,917) (1,202) (2,469)
-------- -------- ------- -------
Increase (Decrease) in Net Assets from Institutional Class Transactions ... 1,654 (5,363) 1,601 2,342
-------- -------- ------- -------
Consumer Service Class
Proceeds from Shares Issued ............................................... 68 203 960 1,348
Reinvestment of Cash Distributions ........................................ 109 276 152 373
Cost of Shares Redeemed ................................................... (734) (2,774) (907) (5,237)
-------- -------- ------- -------
Increase (Decrease) in Net Assets Derived from Consumer
Service Class Transactions ... (557) (2,295) 205 (3,516)
-------- -------- ------- -------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions ...... 1,097 (7,658) 1,806 (1,174)
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets ..................................... (245) (8,979) 1,547 (1,187)
-------- -------- ------- -------
Net Assets:
Beginning of Period ......................................................... 113,277 122,256 32,132 33,319
-------- -------- ------- -------
End of Period ............................................................... $113,032 $113,277 $33,679 $32,132
======== ======== ======= =======
Shares Issued and Redeemed:
Institutional Class Shares:
Shares Issued ............................................................. 1,179 2,234 262 453
Shares Issued in Lieu of Cash Distributions ............................... -- -- -- --
Shares Redeemed ........................................................... (1,013) (2,767) (113) (232)
-------- -------- ------- -------
Net Increase (Decrease) Institutional Class Shares ........................ 166 (533) 149 221
-------- -------- ------- -------
Consumer Service Class Shares:
Shares Issued ............................................................. 7 22 90 126
Shares Issued in Lieu of Cash Distributions ............................... 11 27 14 37
Shares Redeemed ........................................................... (73) (275) (85) (493)
-------- -------- ------- -------
Net Increase (Decrease) Consumer Service Class Shares ..................... (55) (226) 19 (330)
-------- -------- ------- -------
Net Increase (Decrease) in Shares ........................................... 111 (759) 168 (109)
======== ======== ======= =======
FMB Diversified
Equity Fund
------------------------
12/1/96 12/1/95
to 5/31/97 to 11/30/96
---------- -----------
<S> <C> <C>
Investment Activities:
Net Investment Income ....................................................... $223 $456
Net Realized Gain on Securities Sold ........................................ 2,349 2,842
Net Unrealized Appreciation (Depreciation) of Investment Securities ......... 4,602 9,761
------- -------
Net Increase in Net Assets Resulting from Operations ........................ 7,174 13,059
------- -------
Distributions to Shareholders:
Net Investment Income
Institutional Class ....................................................... (202) (448)
Consumer Service Class .................................................... (15) (44)
Capital Gains
Institutional Class ....................................................... (2,599) --
Consumer Service Class .................................................... (306) --
------- -------
Total Distributions .................................................... (3,122) (492)
------- -------
Capital Share Transactions:
Institutional Class
Proceeds from Shares Issued ............................................... 7,497 12,641
Reinvestment of Cash Distributions ........................................ 1 --
Cost of Shares Redeemed ................................................... (6,707) (15,397)
------- -------
Increase (Decrease) in Net Assets from Institutional Class Transactions ... 791 (2,756)
------- -------
Consumer Service Class
Proceeds from Shares Issued ............................................... 806 1,547
Reinvestment of Cash Distributions ........................................ 321 33
Cost of Shares Redeemed ................................................... (556) (1,548)
------- -------
Increase (Decrease) in Net Assets Derived from Consumer
Service Class Transactions ........................................... 571 32
------- -------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions ...... 1,362 (2,724)
------- -------
Net Increase (Decrease) in Net Assets ..................................... 5,414 9,843
------- -------
Net Assets:
Beginning of Period ......................................................... 69,002 59,159
------- -------
End of Period ............................................................... $74,416 $69,002
======= =======
Shares Issued and Redeemed:
Institutional Class Shares:
Shares Issued ............................................................. 438 796
Shares Issued in Lieu of Cash Distributions ............................... -- --
Shares Redeemed ........................................................... (386) (965)
------- -------
Net Increase (Decrease) Institutional Class Shares ........................ 52 (169)
------- -------
Consumer Service Class Shares:
Shares Issued ............................................................. 46 98
Shares Issued in Lieu of Cash Distributions ............................... 19 2
Shares Redeemed ........................................................... (32) (97)
------- -------
Net Increase (Decrease) Consumer Service Class Shares ..................... 33 3
------- -------
Net Increase (Decrease) in Shares ........................................... 85 (166)
======= =======
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
17
<PAGE>
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997 (UNAUDITED) AND FOR THE PERIODS
ENDED NOVEMBER 30,
FINANCIAL HIGHLIGHTS
================================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Net
Net Realized and
Asset Unrealized Dividends Distributions Net
Value Net Gains or from Net from Asset Value
Beginning Investment (Losses) Investment Capital End Total
of Period Income on Securities Income Gains of Period Return(2)
--------- ---------- ------------- ---------- ------------- ----------- ---------
- ---------------------
FMB MONEY MARKET FUND
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997** $1.00 $0.02 $-- $(0.02) $-- $1.00 2.41%*
1996 1.00 0.05 -- (0.05) -- 1.00 4.87%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.78%
CONSUMER SERVICE CLASS
1997** $1.00 $0.02 $-- $(0.02) $-- $1.00 2.29%*
1996 1.00 0.05 -- (0.05) -- 1.00 4.70%
1995 1.00 0.05 -- (0.05) -- 1.00 5.28%
1994 1.00 0.04 -- (0.04) -- 1.00 3.51%
1993 1.00 0.03 -- (0.03) -- 1.00 2.97%
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.67%
- ---------------------------------------
FMB INTERMEDIATE GOVERNMENT INCOME FUND
- ---------------------------------------
INSTITUTIONAL CLASS
1997** $10.13 $0.30 $(0.13) $(0.29) $-- $10.01 1.74%*
1996 10.24 0.59 (0.10) (0.60) -- 10.13 4.97%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%)
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60%
1992(1) 10.00 0.60 0.10 (0.60) -- 10.10 7.10%
CONSUMER SERVICE CLASS
1997** $10.13 $0.28 $(0.12) $(0.28) $-- $10.01 1.61%*
1996 10.24 0.57 (0.10) (0.58) -- 10.13 4.80%
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64%
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%)
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60%
1992(1) 10.00 0.58 0.10 (0.58) -- 10.10 6.95%
Ratio of
Ratio Ratio Net Investment
Net of Net of Expenses Income
Assets Ratio Investment to Average to Average
End of Expenses Income Net Assets Net Assets Average
of Period to Average to Average (Excluding (Excluding Portfolio Commissions
(000) Net Assets Net Assets Waivers) Waivers) Turnover Rate+
--------- ----------- -------------- ------------ --------------- --------- -----------
- ---------------------
FMB MONEY MARKET FUND
- ---------------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997** $160,571 0.68% 4.79% 0.68% 4.79% n/a n/a
1996 152,549 0.68% 4.79% 0.68% 4.79% n/a n/a
1995 87,238 0.65% 5.16% 0.65% 5.16% n/a n/a
1994 103,301 0.68% 3.46% 0.70% 3.44% n/a n/a
1993 65,448 0.32% 2.91% 0.68% 2.55% n/a n/a
1992(1) 58,596 0.27% 3.59% 0.91% 2.95% n/a n/a
CONSUMER SERVICE CLASS
1997** $15,576 0.93% 4.53% 0.93% 4.53% n/a n/a
1996 19,988 0.86% 4.61% 0.93% 4.54% n/a n/a
1995 17,489 0.65% 5.16% 0.65% 5.16% n/a n/a
1994 7,154 0.68% 3.46% 0.70% 3.44% n/a n/a
1993 1,485 0.32% 2.91% 0.68% 2.55% n/a n/a
1992(1) 208 0.39% 3.46% 1.03% 2.82% n/a n/a
- ---------------------------------------
FMB INTERMEDIATE GOVERNMENT INCOME FUND
- ---------------------------------------
INSTITUTIONAL CLASS
1997** $108,423 0.79% 5.99% 0.79% 5.99% 17% n/a
1996 108,047 0.79% 5.89% 0.79% 5.89% 16% n/a
1995 114,646 0.78% 6.09% 0.78% 6.09% 27% n/a
1994 115,449 0.83% 6.45% 0.85% 6.43% 20% n/a
1993 105,820 0.50% 5.66% 0.78% 5.38% 17% n/a
1992(1) 81,371 0.43% 5.85% 0.90% 5.38% 29% n/a
CONSUMER SERVICE CLASS
1997** $4,609 1.04% 5.74% 1.14% 5.64% 17% n/a
1996 5,230 0.95% 5.73% 1.14% 5.54% 16% n/a
1995 7,610 0.78% 6.09% 0.78% 6.09% 27% n/a
1994 9,718 0.83% 6.45% 0.85% 6.43% 20% n/a
1993 10,872 0.50% 5.66% 0.78% 5.38% 17% n/a
1992(1) 5,440 0.61% 5.67% 1.08% 5.20% 29% n/a
<FN>
* RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997 HAVE BEEN ANNUALIZED.
+ 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
18 & 19
<PAGE>
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997 (UNAUDITED) AND FOR THE PERIODS
ENDED NOVEMBER 30,
FINANCIAL HIGHLIGHTS
================================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
</TABLE>
<TABLE>
<CAPTION>
Net
Net Realized and
Asset Unrealized Dividends Distributions Net
Value Net Gains or from Net from Asset Value
Beginning Investment (Losses) Investment Capital End Total
of Period Income on Securities Income Gains of Period Return(2)
--------- ---------- ------------- ---------- ------------- ----------- ---------
- -------------------------------
FMB MICHIGAN TAX-FREE BOND FUND
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997** $10.79 $0.25 $(0.09) $(0.25) $-- $10.70 1.55%*
1996 10.79 0.50 -- (0.50) -- 10.79 4.78%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%)
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53%
1992(1) 10.00 0.48 0.24 (0.48) -- 10.24 7.29%
CONSUMER SERVICE CLASS
1997** $10.79 $0.24 $(0.09) $(0.24) $-- $10.70 1.43%*
1996 10.79 0.48 -- (0.48) -- 10.79 4.61%
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21%
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%)
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53%
1992(1) 10.00 0.46 0.24 (0.46) -- 10.24 7.17%
- ---------------------------
FMB DIVERSIFIED EQUITY FUND
- ---------------------------
INSTITUTIONAL CLASS
1997** $17.73 $0.06 $1.74 $(0.06) $(0.76) $18.71 10.72%*
1996 14.58 0.12 3.16 (0.13) -- 17.73 22.58%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%)
1992(1) 10.00 0.12 1.60 (0.11) -- 11.61 17.31%
CONSUMER SERVICE CLASS
1997** $17.73 $0.04 $1.73 $(0.04) $(0.76) $18.70 10.53%*
1996 14.58 0.09 3.17 (0.11) -- 17.73 22.44%
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54%
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34%
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%)
1992(1) 10.00 0.10 1.60 (0.09) -- 11.61 17.16%
Ratio of
Ratio Ratio Net Investment
Net of Net of Expenses Income
Assets Ratio Investment to Average to Average
End of Expenses Income Net Assets Net Assets Average
of Period to Average to Average (Excluding (Excluding Portfolio Commissions
(000) Net Assets Net Assets Waivers) Waivers) Turnover Rate+
--------- ----------- -------------- ------------ --------------- --------- -----------
- -------------------------------
FMB MICHIGAN TAX-FREE BOND FUND
- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
1997** $24,496 0.68% 4.77% 1.01% 4.44% 5% n/a
1996 23,082 0.68% 4.72% 1.05% 4.35% 16% n/a
1995 20,700 0.70% 4.62% 1.18% 4.14% 35% n/a
1994 15,495 0.51% 4.50% 1.19% 3.82% 22% n/a
1993 11,779 0.35% 4.59% 1.38% 3.56% 13% n/a
1992(1) 6,043 0.29% 4.68% 2.55% 2.42% 30% n/a
CONSUMER SERVICE CLASS
1997** $9,183 0.93% 4.52% 1.36% 4.09% 5% n/a
1996 9,050 0.84% 4.55% 1.40% 4.00% 16% n/a
1995 12,619 0.70% 4.62% 1.18% 4.14% 35% n/a
1994 12,249 0.51% 4.50% 1.19% 3.82% 22% n/a
1993 14,771 0.35% 4.59% 1.38% 3.56% 13% n/a
1992(1) 4,572 0.46% 4.50% 2.72% 2.24% 30% n/a
- ---------------------------
FMB DIVERSIFIED EQUITY FUND
- ---------------------------
INSTITUTIONAL CLASS
1997** $66,239 1.38% 0.68% 1.38% 0.68% 7% $0.0779
1996 61,857 1.41% 0.74% 1.41% 0.74% 9% 0.0800
1995 53,325 1.50% 0.92% 1.50% 0.92% 20% n/a
1994 42,229 1.61% 0.69% 1.61% 0.69% 49% n/a
1993 38,979 1.50% 0.82% 1.53% 0.79% 22% n/a
1992(1) 29,596 1.42% 1.12% 2.05% 0.49% 5% n/a
CONSUMER SERVICE CLASS
1997** $8,177 1.63% 0.43% 1.73% 0.33% 7% $0.0779
1996 7,145 1.58% 0.57% 1.76% 0.39% 9% 0.0800
1995 5,833 1.50% 0.92% 1.50% 0.92% 20% n/a
1994 4,985 1.61% 0.69% 1.61% 0.69% 49% n/a
1993 5,634 1.50% 0.82% 1.53% 0.79% 22% n/a
1992(1) 3,377 1.64% 0.97% 2.29% 0.32% 5% n/a
<FN>
* RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997 HAVE BEEN ANNUALIZED.
+ 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
20 & 21
<PAGE>
MAY 31, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
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 Funds' prospectus provides a
description of each Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Funds:
SECURITY VALUATION -- Investment securities held by the FMB Money Market Fund
are stated at amortized cost which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income. Investment securities
of the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond Fund
and FMB Diversified Equity Fund which are listed on a securities exchange for
which market quotations are readily available, are valued at the last quoted
sales price on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recently quoted mean between bid and ask price
as provided by a pricing service. Debt obligations with sixty days or less
remaining until maturity may be valued at their amortized cost. Securities for
which current market quotations are not readily available are valued at fair
value as determined in good faith by the 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
22
<PAGE>
[FMB LOGO]
FMB Funds, Inc.
================================================================================
those dividends monthly. The FMB Diversified Equity Fund declares and pays as a
dividend substantially all of its net investment income quarterly. Each Fund
will distribute, at least annually, substantially all net capital gains, if any,
earned by such Fund. Distributions are recorded on ex-date for shareholders.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day separately for each class within each Fund. The
maximum offering price per share for the Consumer Services Class shares of the
FMB Intermediate Government Income and FMB Michigan Tax-Free Bond Funds is equal
to the net assets per share plus a sales load of 4.75%. The maximum offering
price per share for the FMB Diversified Equity Fund is equal to the net assets
per share plus a sales load of 5.75%.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Company 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 Agreements, 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 Agreements
provide for annual fees at the following percentages of average daily net
assets.
For the FMB Money Market Fund:
0.35% of first $500 million in average net assets; 0.30% of next $500 million
in average net assets; and 0.25% of average net assets over $1 billion.
For the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond
Fund, and FMB Diversified Equity Fund: 0.45%, 0.55%, and 1.00% of average daily
net assets, respectively.
23
<PAGE>
MAY 31, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
Banker's Trust Co. serves as custodian (the "Custodian") for the Funds.
Fees of the Custodian are paid on the basis of the net assets of the Funds. The
Custodian plays no role in determining the investment policies of the Company or
which securities are to be purchased or sold in the Funds.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Company and SEI Fund Resources ("SFR") are parties to an administration
agreement (the "Administrative Agreement") dated March 23, 1996. Under the terms
of the Administrative Agreement SFR is entitled to receive an annual fee of
0.20% on the daily average net assets of the Funds. Such fee is computed daily
and paid monthly.
The Company and SEI Investments Distribution Co. (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 May 31, 1997.
Certain officers of the Company are also officers of SFR and/or the Distributor.
Such officers are paid no fees by the Funds.
5. OTHER TRANSACTIONS WITH AFFILIATES
The Company and SFR are parties to a transfer agency and service agreement dated
March 23, 1996 under which SFR provides transfer agency services to the Company.
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.
24
<PAGE>
[FMB LOGO]
FMB FUNDS, INC.
================================================================================
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 six-month period ended May 31, 1997, the cost of security purchases
and proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows:
PURCHASES (000)
U.S.
Government Other Total
---------- ----- ---------
FMB Intermediate
Government Income Fund $17,931 $1,000 $18,931
FMB Michigan Tax-Free
Bond Fund -- 2,187 2,187
FMB Diversified Equity Fund -- 4,464 4,464
SALES (000)
U.S.
Government Other Total
---------- ----- ---------
FMB Intermediate
Government Income Fund $16,954 $ -- $16,954
FMB Michigan Tax-Free
Bond Fund -- 1,445 1,445
FMB Diversified Equity Fund -- 6,116 6,116
At May 31, 1997 the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial purposes. The aggregate gross
unrealized appreciation and depreciation for securities held at May 31, 1997 for
each Fund were as follows:
Aggregate Aggregate
Gross Gross
Appreciation Depreciation Net
------------ ------------ ------
AGGREGATE GROSS UNREALIZED
GAIN (LOSS) (000)
FMB Intermediate
Government Income Fund $ 702 $793 $ (91)
FMB Michigan Tax-Free
Bond Fund 1,044 2 1,041
FMB Diversified Equity Fund 29,076 257 28,819
9. SUBSEQUENT EVENT
Huntington Bancshares Incorporated and First Michigan Bank Corp. announced a
proposed merger. Consummation of the merger is subject to approval by both
Huntington and First Michigan shareholders as well as approval by bank
regulatory authorities.
25
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
[FMB LOGO]
FMB FUNDS, INC.
================================================================================
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
Carol Rooney
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
<PAGE>
[FMB LOGO]
FMB FUNDS, INC.
================================================================================
SEMI-ANNUAL REPORT (Unaudited)
MAY 31, 1997
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 Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
ADMINISTRATOR
SEI Fund Resources
Oaks, PA 19456
CUSTODIAN
Banker's Trust Co.
One Banker's Trust Plaza
New York, NY 10006
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.
