[PHOTO OF LIGHTHOUSE OMITTED]
FMB
FMB FUNDS, INC.
ANNUAL
REPORT
FMB MONEY MARKET FUND
FMB INTERMEDIATE
GOVERNMENT INCOME FUND
FMB MICHIGAN
TAX-FREE BOND FUND
FMB DIVERSIFIED
EQUITY FUND
NOVEMBER 30, 1997
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The FMB Funds, Inc.:
[BULLET] are not deposits, other obligations of, or guaranteed by Huntington
Bancshares Incorporated 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 The Huntington National Bank. The Huntington National Bank, a
subsidiary of Huntington Bancshares Incorporated, serves as investment advisor
for FMB Funds, Inc.
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ..................... 2
1997 FISCAL YEAR IN REVIEW ................. 5
FMB MONEY MARKET FUND ...................... 8
FMB INTERMEDIATE GOVERNMENT
INCOME FUND .............................10
FMB MICHIGAN TAX-FREE
BOND FUND ...............................13
FMB DIVERSIFIED EQUITY
FUND ....................................18
STATEMENT OF OPERATIONS ....................21
STATEMENT OF CHANGES IN NET ASSETS .........22
FINANCIAL HIGHLIGHTS .......................24
NOTES TO FINANCIAL STATEMENTS ..............28
FMB
FMB FUNDS, INC.
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NOVEMBER 30, 1997
SHAREHOLDER LETTER
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Dear Shareholder:
On behalf of the Directors and Officers of the FMB Funds, Inc., I am pleased to
present to you the annual report for the fiscal year ended November 30, 1997.
This report includes the performance, financial activities, and investment
composition of your funds.
ECONOMIC REVIEW AND OUTLOOK
Stronger economic growth and the potential of higher inflation caused interest
rates to rise during the first quarter of 1997. The Federal Reserve Board
increased short term interest rates by 25 basis points (.25%) at their March
25th meeting. This rising rate scenario kept a lid on the U.S. equity markets as
well. After a brief rally in the first quarter, both the Dow Industrials and the
S&P 500 closed the month of March 1997 near the same levels that they had
established at the end of November 1996.
During the second and third quarters of the year, economic growth moderated and
inflation actually declined, bringing down longer term rates and flattening the
yield curve. Along with an increased level of productivity brought on by cost
cutting and technology improvements, this lower inflation environment produced
higher profits for U.S. companies, which sent the U.S. equity markets to record
highs for the third consecutive year.
The month of October brought chilling winds to the financial markets, as
problems in the Asian economies gained additional attention from investors and
brought increased volatility to the global marketplace. Concerns over how these
troubles will affect the U.S. economy has caused most economists to revise their
1998 growth projections downward.
Looking ahead to 1998, the question is whether or not U.S. companies will be
able to increase profits while battling an increased flow of cheaper imported
goods, caused by the current strength of the dollar. The answer will determine
the stock markets' ability to maintain prices at current, or even higher levels.
As you may be aware, First Michigan Bank Corporation was merged into Huntington
Bancshares Incorporated on October 1, 1997. As a result of the merger, the
Boards of the FMB Funds and Monitor Funds (also managed by Huntington National
Bank) approved a recommendation to consolidate the fund groups into one mutual
fund family, the Monitor Funds. Before recommending this significant step, the
FMB Funds' Directors evaluated a variety of factors including the expansion of
investment options for shareholders and the opportunities for increased
economies of scale. The Directors also took into consideration the similarity of
investment objectives between the FMB Funds and Monitor Funds, and approved the
creation of two "new" Monitor funds to accommodate existing FMB Funds'
portfolios. Every effort has been made to ensure continuity in investment
management and operation so that shareholders will continue to have access to
investment opportunities which can help them attain their financial goals.
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2
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In the next month, you will receive proxy materials which will outline in detail
the information relating to the merger and you will be asked to vote on the key
aspects of the merger process. Your vote will be very important to us as we move
forward with this challenging initiative.
GENERAL OVERVIEW
The funds had another successful year, as net assets grew to $392 million, an
increase of $4.5 million over the prior year. The following is a brief summary
of the 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.
FMB MONEY MARKET FUND
The FMB Money Market Fund had net assets of $157.2 million at November 30, 1997,
with a weighted average maturity of 45 days. The net assets were down $15.3
million from November 30, 1996, due to some large short-term deposits that were
included in the 1996 totals. The 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, 1997, net assets of the FMB Intermediate Government Income
Fund totaled $118.6 million, while the average weighted maturity stood at 4.5
years. The Fund seeks high current income consistent with prudent risk of
capital, and invests primarily in high-quality government and agency securities.
The Advisor's investment strategy is to seek maximum income, while limiting the
potential for volatility of the share price 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, 1997, the FMB Michigan Tax-Free Bond Fund had net assets of
$34.4 million and an average maturity of 7.3 years. The Fund invests primarily
in high quality debt obligations of the State of Michigan and its political
subdivisions. The Fund seeks to maintain diversification by investing in a
variety of individual issuers, such as counties, cities, townships, schools, and
hospitals, and by method of repayment, such as general obligation or revenue
funds.
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3
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NOVEMBER 30, 1997
SHAREHOLDER LETTER (CONCLUDED)
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FMB DIVERSIFIED EQUITY FUND
Net assets of the FMB Diversified Equity Fund as of November 30, 1997 totaled
$81.8 million. The primary objective of the 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. Once
again, this strategy has provided strong total returns over the past year.
The FMB Funds are managed locally by The Huntington National Bank, located at
One Financial Plaza, Holland, Michigan. If you would like additional information
or assistance, please call us at (800) 453-4234.
On behalf of the FMB Funds and the Board of Directors, I would like to thank you
for your investment and for your confidence in us over the past year.
/S/ SIGNATURE
Michael R. Mucciolo
Chairman of the Board
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1997 FISCAL YEAR IN REVIEW
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FMB INTERMEDIATE GOVERNMENT INCOME FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE FMB
INTERMEDIATE GOV'T. INCOME FUND, INSTITUTIONAL CLASS OR CONSUMER CLASS, VERSUS
THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
[LINE GRAPH OMITTED]
FMB FMB Intermediate Lehman
Intermediate Gov't. Gov't. Income Intermediate
Income Fund, Fund, Consumer Class Government/Corporate
Institutional Class without sales load Bond Index
10,000 9,525 10,000
10,519 10,006 10,575
11,507 10,955 11,604
11,269 10,718 11,393
12,693 12,071 13,046
13,324 12,651 13,807
14,160 13,408 14,681
Total One Year Annualized Annualized Annualized
Return* Return 3 Year Return 5 Year Return Inception to Date
Institutional 6.27% 7.91% 6.12% 6.29%
Consumer 5.99% 7.75% 6.03% 6.19%
Consumer, with load 0.91% 6.03% 5.01% 5.33%
*Reflects voluntary fee waivers for certain periods. Past performance is
not predictive of future performance.
During the fiscal year ended November 30, 1997, the Intermediate Government
Income Fund continued to invest in a portfolio of U.S. Treasury, government
agency, and mortgage-related securities. As interest rates rose during the first
few months of 1997, the average maturity of the portfolio was kept near the
short end of its target range of three to seven years. This action helped to
limit price declines in the net asset value, compared to holding longer maturity
assets.
In April of 1997, the Fund sold some assets with maturities or call provisions
within one year, and reinvested the proceeds out between seven and ten years.
This action extended the average maturity of the portfolio by approximately
one-half of a year. Additional purchases made during the remainder of the year
focused on the five to 10 year sector of the yield curve. These adjustments to
the portfolio structure were made to lock in some of the high interest rates
available at that time, based on our projection that interest rates would
decline somewhat for the remainder of the year.
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 relative to the benchmark index.
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5
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NOVEMBER 30, 1997
1997 FISCAL YEAR IN REVIEW
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FMB MICHIGAN TAX-FREE BOND FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE FMB MICHIGAN
TAX-FREE BOND FUND, INSTITUTIONAL CLASS OR CONSUMER CLASS, VERSUS THE LEHMAN
5-YEAR MUNICIPAL BOND INDEX, AND THE LEHMAN 7-YEAR MUNICIPAL BOND INDEX
[LINE GRAPH OMITTED]
FMB Michigan FMB Michigan Lehman Lehman
Tax-Free Tax-Free Bond Fund, 5-Year 7-Year
Bond Fund, Consumer Class Municipal Municipal
Institutional Class without sales load Bond Index Bond Index
10,000 9,525 10,000 10,000
10,636 10,118 10,679 10,718
11,543 10,892 11,530 11,717
11,372 10,819 11,391 11,427
12,875 12,248 12,793 13,175
13,490 12,813 13,430 13,866
14,263 13,514 14,138 14,706
Total One Year Annualized Annualized Annualized
Return* Return 3 Year Return 5 Year Return Inception to Date
Institutional 5.73% 7.84% 6.04% 6.25%
Consumer 5.47% 7.69% 5.96% 6.16%
Consumer, with load 0.45% 5.95% 4.93% 5.30%
*Reflects voluntary fee waivers for certain periods. Past performance is
not predictive of future performance.
During the fiscal year ended November 30, 1997, municipal bond yields rose
during the first few months of 1997, then declined steadily through the
remainder of the year to finish slightly below the levels of November 30, 1996.
The average maturity of the Fund declined during the first few months of 1997,
which helped to protect the market value of the Fund while rates were rising.
Later in the year, the average maturity of the Fund was extended somewhat with
purchases of new bonds maturing in fourteen to fifteen years, in order to lock
in higher yields.
The Fund's performance remained within our targeted objective, which is to
perform between the Lehman 5-Year and Lehman 7-Year Municipal Bond Indices
(before deduction of the sales charge for the Consumer Service Class).
The Fund features a unique strategy in the Michigan municipal market. The
average maturity of the Fund is significantly shorter than most of the funds in
its peer group. This reduces the volatility of the Fund's net asset value during
changes in interest rates, while still earning a competitive yield on the
portfolio when compared against the funds with longer maturities.
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6
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FMB DIVERSIFIED EQUITY FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE FMB DIVERSIFIED
EQUITY FUND, INSTITUTIONAL CLASS OR CONSUMER CLASS, VERSUS THE S&P 500
COMPOSITE INDEX, AND THE LIPPER GROWTH FUND'S AVERAGE
[LINE GRAPH OMITTED]
FMB FMB Diversified Lipper
Diversified Equity Fund, S&P 500 Growth
Equity Fund, Consumer Class Composite Funds
Institutional Class without sales load Index Average
10,000 9,425 10,000 10,000
10,396 9,786 10,630 10,647
10,251 9,649 11,700 11,705
10,388 9,778 11,822 11,721
13,353 12,569 16,187 15,449
16,368 15,390 20,694 18,752
20,000 18,751 26,594 22,878
Total One Year Annualized Annualized Annualized
Return* Return 3 Year Return 5 Year Return Inception to Date
Institutional 22.19% 24.40% 13.98% 14.54%
Consumer 21.84% 24.23% 13.89% 14.43%
Consumer, with load 14.84% 21.80% 12.54% 13.31%
*Reflects voluntary fee waivers for certain periods. Past performance is
not predictive of future performance.
The stock market continued to outperform even the most optimistic projections in
1997, especially when considering this year followed two exceptional years of
growth in 1996 and 1995.
There was significant volatility during the year, with the market moving higher
during the first few months, only to fall back to near even for the year during
the month of April. From May through August the market consistently set new
all-time highs, before dropping off in September, then rallying again to its
peak for the year in October. Since that time, the concern over the problems in
Asia has increased stock price volatility, and has kept the market below the
October highs.
For most of the year, this rally has been fueled by a persistent flow of cash
into equity mutual funds, and the need for these mutual funds to remain fully
invested in the stock market. This flow of cash has produced some stock prices
that are overvalued and unsustainable by most historical measures.
Our strategy has been to identify stocks that have good earnings predictability,
and that are priced more attractively than the overall market. In anticipation
of the impact of the problems in Asia on the earnings of U.S. corporations, we
have structured the portfolio with industry exposures similar to the composition
of the S&P 500 index.
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NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
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FMB MONEY MARKET FUND
[PIE CHART OMITTED]
U.S. GOVERNMENT AGENCY OBLIGATIONS 4%
COMMERCIAL PAPER 90%
CASH EQUIVALENTS 6%
% of Total Portfolio Investments (Unaudited)
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Par Value
(000) (000)
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COMMERCIAL PAPER -- 90.6%
Banks -- 4.8%
Norwest
5.590%, 01/05/98 $7,500 $7,459
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Financial Services -- 38.1%
American Express
5.510%, 01/26/98 7,500 7,436
American General Finance
5.540%, 01/07/98 7,000 6,960
Ciesco
5.470%, 12/10/97 7,700 7,689
Cit Group Holdings
5.680%, 02/13/98 7,500 7,412
Commercial Credit
5.490%, 12/04/97 7,600 7,597
Household Finance
5.680%, 01/23/98 7,600 7,536
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Par Value
(000) (000)
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Merrill Lynch
5.740%, 01/30/98 $7,700 $7,626
Prudential Funding
5.630%, 01/14/98 7,700 7,647
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59,903
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Industrial -- 47.7%
AT&T
5.530%, 01/02/98 7,500 7,463
Bell South
5.610%, 12/05/97 7,500 7,495
Cargill
5.570%, 01/07/98 7,400 7,358
Coca Cola
5.480%, 01/20/98 7,500 7,443
E.I. du Pont de Nemours
5.480%, 01/21/98 7,500 7,442
Ford Motor Credit
5.530%, 01/12/98 7,600 7,551
General Electric Capital
5.500%, 02/04/98 7,700 7,624
John Deere Capital
5.610%, 01/09/98 7,700 7,653
Lucent Technologies
5.550%, 02/09/98 7,600 7,518
Proctor & Gamble
5.480%, 01/16/98 7,500 7,448
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74,995
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Total Commercial Paper
(Cost $142,357) 142,357
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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FMB MONEY MARKET FUND (Concluded)
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Par Value
(000) (000)
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U.S. GOVERNMENT AGENCY OBLIGATION -- 3.8%
FNMA MTN
5.710%, 03/18/98 $6,000 $5,998
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Total U.S. Government Agency Obligation
(Cost $5,998) 5,998
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REPURCHASE AGREEMENT -- 6.0%
Donaldson, Lufkin, Jenrette
5.70%, dated 11/28/97, matures 12/01/97,
repurchase price $9,401,463 (collateralized
by U.S. Treasury Note, par Value
$9,360,000, 6.25%, matures 07/31/98,
market value $9,584,398) 9,397 9,397
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Total Repurchase Agreement
(Cost $9,397) 9,397
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Total Investments -- 100.4%
(Cost $157,752) 157,752
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OTHER ASSETS AND LIABILITIES -- 0.4%
Total Other Assets and Liabilities, Net (555)
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Value
(000)
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NET ASSETS:
Portfolio Shares of Institutional
Class ($0.001 par value -- 10 billion
authorized for the company)
based on 143,435,837
outstanding shares $143,436
Portfolio Shares of Consumer Service
Class ($0.001 par value -- 10 billion
authorized for the company)
based on 13,757,492
outstanding shares 13,757
Undistributed Net Investment Income 91
Accumulated Net Realized Loss
on Investments (87)
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Total Net Assets -- 100.0% $157,197
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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
=========
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
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FMB INTERMEDIATE GOVERNMENT INCOME FUND
[PIE CHART OMITTED]
U.S. GOVERNMENT AGENCY OBLIGATIONS 38%
CASH EQUIVALENTS 4%
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS 15%
U.S. TREASURY OBLIGATIONS 43%
% of Total Portfolio Investments (Unaudited)
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Market
Par Value
(000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS -- 15.0%
FHLMC
9.000%, 12/01/01 $ 102 $ 106
7.000%, 11/15/05 348 350
8.000%, 01/01/13 1,155 1,194
7.500%, 11/15/17 1,000 1,014
7.150%, 07/15/18 1,794 1,805
6.250%, 01/15/19 4,060 3,997
FHLMC REMIC
8.250%, 11/15/20 118 118
FNMA
8.000%, 07/01/98 119 123
8.500%, 10/01/98 26 27
8.500%, 11/01/98 57 59
7.338%, 01/15/99 1,000 1,004
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Market
Par Value
(000) (000)
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7.500%, 07/25/02 $1,134 $ 1,154
7.500%, 12/25/05 1,041 1,050
7.500%, 05/01/07 1,554 1,591
5.500%, 08/25/16 1,000 984
6.950%, 05/25/17 16 16
6.350%, 07/25/18 1,000 997
6.750%, 09/25/18 267 266
7.000%, 10/25/18 1,150 1,149
FNMA REMIC
6.750%, 06/25/18 750 748
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $17,762) 17,752
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U.S. GOVERNMENT AGENCY OBLIGATIONS -- 39.3%
FHLB
6.460%, 02/01/00 1,000 1,000
6.125%, 09/20/00 2,000 2,009
6.020%, 09/06/01 2,000 1,988
6.480%, 01/08/02 1,000 1,002
6.330%, 12/03/02 3,000 2,994
FHLMC
6.600%, 11/12/99 1,000 1,012
6.550%, 01/04/00 1,000 1,014
7.140%, 07/31/02 1,500 1,509
6.800%, 09/18/02 1,000 1,000
6.120%, 01/21/03 2,500 2,487
6.550%, 04/02/03 1,000 1,000
8.335%, 03/14/05 2,000 2,014
6.830%, 06/15/05 2,000 2,016
7.000%, 07/06/05 2,000 2,030
6.540%, 11/06/07 3,000 2,995
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONTINUED)
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Market
Par Value
(000) (000)
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FNMA
6.330%, 11/03/00 $3,000 $ 3,001
7.000%, 05/10/01 2,000 2,030
6.630%, 06/05/01 1,000 1,010
7.550%, 04/22/02 2,000 2,116
6.720%, 02/25/03 2,400 2,400
7.090%, 10/13/05 2,000 2,001
FNMA MTN
5.790%, 01/22/01 2,000 1,976
6.500%, 12/27/01 1,000 1,004
6.330%, 10/02/02 1,000 999
6.880%, 11/20/06 4,000 4,045
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Total U.S. Government Agency Obligations
(Cost $46,436) 46,652
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U.S. TREASURY OBLIGATIONS -- 43.5%
U.S. Treasury Notes
7.875%, 01/15/98 3,000 3,009
9.000%, 05/15/98 5,000 5,078
8.250%, 07/15/98 4,000 4,063
6.375%, 01/15/99 2,000 2,014
6.875%, 08/31/99 2,000 2,036
7.875%, 11/15/99 1,000 1,039
6.250%, 05/31/00 2,000 2,021
8.000%, 05/15/01 2,000 2,134
7.875%, 08/15/01 2,000 2,133
6.250%, 10/31/01 1,000 1,014
7.500%, 11/15/01 1,000 1,057
6.250%, 02/28/02 1,000 1,015
5.750%, 08/15/03 2,000 1,991
5.875%, 02/15/04 3,000 3,007
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Market
Par Value
(000) (000)
- --------------------------------------------------------
7.250%, 05/15/04 $2,000 $ 2,148
7.875%, 11/15/04 2,000 2,226
7.500%, 02/15/05 2,000 2,187
6.500%, 05/15/05 2,000 2,073
5.875%, 11/15/05 2,000 1,997
5.625%, 02/15/06 2,000 1,964
6.875%, 05/15/06 2,000 2,128
6.500%, 10/15/06 1,000 1,040
6.250%, 02/15/07 2,000 2,049
6.625%, 05/15/07 2,000 2,105
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Total U.S. Treasury Obligations
(Cost $50,088) 51,528
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REPURCHASE AGREEMENT -- 4.0%
Donaldson, Lufkin, Jenrette
5.70%, dated 11/28/97, matures 12/01/97,
repurchase price $4,805,281
(collateralized by U.S. Treasury
Note, par value $4,802,000,
7.125%, matures 10/15/98, market
value $4,902,632) 4,803 4,803
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Total Repurchase Agreement
(Cost $4,803) 4,803
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Total Investments -- 101.8%
(Cost $119,089) 120,735
---------
OTHER ASSETS AND LIABILITIES -- (1.8%)
Total Other Assets and Liabilities, Net (2,153)
---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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11
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NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
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FMB INTERMEDIATE GOVERNMENT INCOME FUND (CONCLUDED)
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Market
Value
(000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company)
based on 11,320,871
outstanding shares $114,950
Portfolio Shares of Consumer
Service Class ($0.001 par
value -- 10 billion
authorized for the company)
based on 346,179 outstanding shares 3,698
Overdistributed Net Investment Income (4)
Accumulated Net Realized
Loss on Investments (1,708)
Net Unrealized Appreciation
on Investments 1,646
---------
Total Net Assets -- 100.0% $118,582
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Institutional Class $10.16
=========
Net Asset Value, Offering and
Redemption Price Per Share --
Consumer Service Class $10.16
=========
Maximum Offering Price Per Share --
Consumer Service Class
($10.16/95.25%) $10.67
=========
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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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FMB MICHIGAN TAX-FREE BOND FUND
[PIE CHART OMITTED]
UTILITY BONDS 16%
TRANSPORTATION BONDS 1%
INDUSTRIAL REVENUE BONDS 4%
HOUSING BONDS 1%
HEALTH CARE BONDS 23%
GENERAL OBLIGATION BONDS 43%
CASH EQUIVALENTS 1%
EDUCATION BONDS 11%
% of Total Portfolio Investments (Unaudited)
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
MUNICIPAL BONDS -- 97.9%
Michigan -- 97.9%
Ann Arbor, Sewer Disposal
Project, Series 12, RB
6.950%, 07/01/03 $335 $371
Ann Arbor, Water Supply System,
Series T, MBIA, RB
7.375%, 02/01/03 710 809
Bay County, West Side Regional,
Sewer Disposal System, GO
6.400%, 05/01/01 150 154
Cadillac, Public Schools, FGIC, GO
5.375%, 05/01/10 500 515
Chelsea, School District Authority,
FGIC, GO
5.500%, 05/01/08 500 527
Clio, School District Authority, RB
7.200%, 05/01/01 200 207
- --------------------------------------------------------
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%, 05/01/06 500 522
Detroit, School District Authority,
AMBAC, GO, Pre-refunded at
102 (A)
7.100%, 05/01/01 250 277
Detroit, Sewer Disposal Project,
MBIA, RB, Pre-refunded
at 101.5 (A)
7.125%, 07/01/99 500 531
Detroit, Sewer Disposal, MBIA, RB
5.000%, 07/01/11 500 502
Fowlerville County, School District
Authority, MBIA, GO
5.350%, 05/01/10 500 511
Gaylord, Community School
Project, GO, Pre-refunded
at 102 (A)
6.600%, 05/01/02 500 553
Grand Rapids, Downtown
Development Authority, MBIA, TA
6.600%, 06/01/08 545 613
Grand Rapids, Sanitation and
Sewer Authority, Improvement
Project, RB
6.875%, 01/01/10 500 534
Grand Rapids, Water Supply
Authority, FGIC, RB
6.625%, 01/01/08 500 541
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
13
<PAGE>
NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
Michigan (CONTINUED)
Grandville, Public School District
Authority, FGIC, GO
6.000%, 05/01/05 $310 $338
Grosse Ile Township, School
District Authority, FGIC, GO
5.600%, 05/01/10 500 524
Harrison, Community School
Project, AMBAC, GO
5.800%, 05/01/05 500 537
Holland, Electric Authority, RB,
Pre-refunded at 100 (A)
6.500%, 07/01/99 400 415
Holland, Water Supply System,
Series A, RB
5.250%, 07/01/12 655 664
Huron Valley, School District
Authority, FGIC, GO
5.450%, 05/01/08 500 527
Jenison, Michigan Public School
Authority, FGIC, GO
5.400%, 05/01/08 500 532
Kalamazoo, Hospital Finance
Authority, Borgess Medical Center
Project, Series A, FGIC, RB
6.250%, 07/01/04 500 516
Kenowa Hills, Public Schools,
MBIA, GO
5.500%, 05/01/08 500 527
Kent County, Building Authority, GO
6.000%, 12/01/09 500 519
Kent County, Hospital Finance
Authority, Pine Rest Christian
Hospital Project, FGIC, RB
6.500%, 11/01/10 500 544
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
Kent, Hospital Finance Authority,
Blodgett Memorial Hospital
Project, MBIA, RB
5.750%, 07/01/09 $500 $507
Kent, Hospital Finance Authority,
Blodgett Memorial Medical
Center Project, Series A, RB
6.875%, 07/01/99 90 94
Kent, Hospital Finance Authority,
Mary Free Hospital Project,
Series A, RB
6.500%, 04/01/05 200 211
Lake Shore, Public Schools,
Macomb County, GO
5.400%, 05/01/12 500 512
Lansing, Building Authority, GO,
Escrowed to Maturity
7.150%, 06/01/03 525 572
Lenawee County, Building
Authority, Human Services
Project, AMBAC, GO
6.000%, 05/01/09 350 378
Lincoln Park, School District
Authority, FGIC, GO
5.500%, 05/01/06 500 532
Macomb County, Waste Water
Disposal Project, GO
6.500%, 11/01/99 200 206
Mattawan, School District
Authority, GO
6.400%, 05/01/09 500 542
Michigan State Building Authority,
AMBAC, RB
6.750%, 10/01/07 500 552
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
14
<PAGE>
[FMB LOGO OMITTED]
================================================================================
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 $1,099
Michigan State Higher Education
Authority, Hope College Project,
Series B, RB
5.900%, 04/01/09 350 363
Michigan State Higher Education
Authority, Student Loan,
Series 13, AMBAC, RB
5.700%, 04/01/02 500 523
Michigan State, Hospital Finance
Authority, Holland Community
Hospital Project, RB
5.250%, 01/01/08 750 756
Michigan State Hospital Finance
Authority, Central Michigan
Community Hospital,
Series A, RB
5.750%, 10/01/02 300 312
Michigan State Hospital Finance
Authority, Daughters Charity
Project, RB
5.500%, 11/01/05 500 531
Michigan State Hospital Finance
Authority, Detroit Medical Center
Project, Series A, RB
6.375%, 08/15/09 500 534
Michigan State Hospital Finance
Authority, Mercy Health Services,
Series Q, AMBAC, RB
5.100%, 08/15/07 500 516
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
Michigan State Hospital Finance
Authority, Otsego Memorial
Hospital Project, RB (B)
6.000%, 01/01/09 $660 $691
Michigan State Hospital Finance
Authority, Saint John Hospital
Project, Series A, AMBAC, RB
5.750%, 05/15/04 200 214
Michigan State Hospital Finance
Authority, Sparrow Obligated
Group Project, MBIA, RB
6.300%, 11/15/03 615 668
Michigan State Housing
Development Authority,
Walled Lake Villa Project,
FSA, RB
5.850%, 04/15/07 420 455
Michigan State Public Power
Agency, Campbell Project,
AMBAC, RB, Pre-refunded
at 100 (A)
6.400%, 01/01/99 235 241
Michigan State Strategic Fund,
Lutheran Social Services
Project, RB (B)
5.200%, 09/01/04 400 414
Northern Michigan University,
AMBAC, RB
5.500%, 12/01/09 435 453
Oakland County, Economic
Development Authority,
Cranbrook Elderly Community
Project, RB
6.375%, 11/01/14 500 554
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
15
<PAGE>
NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONTINUED)
- -------------------------------------------------------
Market
Par Value
(000) (000)
- -------------------------------------------------------
Michigan (CONTINUED)
Oakland County, GO
6.250%, 11/01/06 $500 $521
Ottawa County, Holland
Township Extension, GO
6.800%, 08/01/05 500 536
Paw Paw, Public School
District, FGIC, GO
6.500%, 05/01/09 500 582
Rochester Hills, Series B, GO,
Pre-refunded at 102 (A)
6.600%, 11/01/98 465 485
Rochester Hills, Transportation
Fund, GO
6.250%, 08/01/05 200 206
Rochester, School District
Authority, GO, Pre-refunded
at 100 (A)
6.500%, 05/01/02 150 163
Rockford, Public School
Authority, GO
5.600%, 05/01/05 500 531
Saginaw, Water Authority, RB
6.000%, 07/01/07 865 900
Saint Joseph, Mercy Memorial
Medical Center, AMBAC, RB
5.125%, 01/01/09 500 509
Saranac, School District
Authority, GO
5.700%, 05/01/07 230 246
Troy, Downtown Development
Authority, Series A, TA, RB
6.100%, 11/01/10 400 432
- --------------------------------------------------------
Market
Par Value
(000) (000)
- --------------------------------------------------------
University of Michigan, Hospital
Revenue, Series A, RB
5.700%, 12/01/04 $250 $268
University of Michigan, Major
Capital Projects, RB
5.800%, 04/01/10 500 530
Utica, Community Schools
Project, GO
5.700%, 05/01/06 500 536
Walled Lake, School District
Authority, GO, Pre-refunded
at 102 (A)
6.500%, 05/01/99 200 211
Warren, School District Authority,
GO, Pre-refunded at 102 (A)
6.700%, 05/01/01 500 547
Warren, Transportation Fund, GO
5.000%, 06/01/07 405 412
West Ottawa, Public School
District, FGIC, GO
5.400%, 05/01/09 500 521
--------
33,650
--------
Total Municipal Bonds
(Cost $32,048) 33,650
--------
CASH EQUIVALENT -- 1.1%
Federated Michigan Municipal
Cash Trust 394 394
--------
Total Cash Equivalent
(Cost $394) 394
--------
Total Investments -- 99.0%
(Cost $32,442) 34,044
--------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
16
<PAGE>
[FMB LOGO OMITTED]
================================================================================
FMB MICHIGAN TAX-FREE BOND FUND (CONCLUDED)
- -------------------------------------------------------
Market
Value
(000)
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.0%
Total Other Assets and Liabilities, Net $ 336
--------
NET ASSETS:
Portfolio Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company) based
on 2,292,257 outstanding shares 23,879
Portfolio Shares of Consumer Service Class
($0.001 par value -- 10 billion
authorized for the company) based on
865,841 outstanding shares 8,970
Accumulated Net Realized Loss
on Investments (71)
Net Unrealized Appreciation
on Investments 1,602
--------
Total Net Assets -- 100.0% $34,380
========
- --------------------------------------------------------
Market
Value
- --------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $10.89
========
Net Asset Value, Offering and
Redemption Price Per Share --
Consumer Service Class $10.89
========
Maximum Offering Price Per
Share -- Consumer Service Class
($10.89/95.25%) $11.43
========
(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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
17
<PAGE>
NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
================================================================================
FMB DIVERSIFIED EQUITY FUND
CASH EQUIVALENTS 9%
BUILDING AND CONSTRUCTION 4%
CHEMICALS AND DRUGS 14%
CONSUMER PRODUCTS 11%
DURABLE GOODS 29%
FINANCIAL 11%
OIL AND ENERGY 8%
RETAIL 5%
UTILITIES 4%
MISCELLANEOUS 5%
% OF TOTAL PORTFOLIO INVESTMENTS (UNAUDITED)
- -------------------------------------------------------
Market
Value
Shares (000)
- -------------------------------------------------------
COMMON STOCKS -- 91.4%
Aerospace & Defense -- 2.2%
Lockheed Martin 7,000 $ 683
Raytheon 20,000 1,119
--------
1,802
--------
Automotive -- 3.7%
Ford Motor 33,500 1,440
TRW 28,000 1,589
--------
3,029
--------
Banks -- 7.7%
Banc One 43,500 2,235
Citicorp 15,000 1,799
Norwest 60,000 2,246
--------
6,280
--------
- --------------------------------------------------------
Market
Value
Shares (000)
- --------------------------------------------------------
Beauty Products -- 2.7%
Gillette 13,000 $1,200
International Flavors &
Fragrances 21,000 1,012
--------
2,212
--------
Chemicals -- 1.8%
Morton International 44,000 1,499
--------
Computer Software/Services -- 8.7%
Diebold 7,500 346
Hewlett Packard 24,000 1,465
Microsoft* 13,000 1,839
Oracle* 58,750 1,957
Solectron* 41,000 1,494
--------
7,101
--------
Drugs -- 11.3%
Abbott Laboratories 32,800 2,132
Johnson & Johnson 26,000 1,636
Merck 22,500 2,128
Pfizer 30,500 2,219
Schering Plough 17,600 1,103
--------
9,218
--------
Electrical Equipment -- 5.8%
AMP 26,000 1,129
General Electric 33,000 2,434
Molex 30,000 1,142
--------
4,705
--------
Entertainment -- 3.1%
Carnival 26,000 1,406
Walt Disney 12,000 1,139
--------
2,545
--------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
18
<PAGE>
[FMB LOGO OMITTED]
================================================================================
FMB DIVERSIFIED EQUITY FUND (CONTINUED)
- -------------------------------------------------------
Market
Value
Shares (000)
- -------------------------------------------------------
Financial Services -- 1.5%
Fannie Mae 24,000 $1,268
--------
Food, Beverage & Tobacco -- 6.3%
CPC International 14,000 1,447
PepsiCo 40,000 1,475
Sara Lee 21,500 1,137
Sysco 25,000 1,114
--------
5,173
--------
Household Products -- 1.8%
Procter & Gamble 19,000 1,450
--------
Insurance -- 2.1%
American International Group 17,000 1,714
--------
Leisure -- 1.7%
Mattel 35,000 1,402
--------
Machinery -- 1.9%
Caterpillar 33,300 1,596
--------
Manufacturing -- 1.1%
Illinois Tool Works 16,000 877
--------
Miscellaneous Business Services -- 2.1%
Automatic Data Processing 30,000 1,688
--------
Petroleum & Fuel Products -- 2.4%
Schlumberger 24,000 1,976
--------
Petroleum Refining -- 7.6%
Chevron 14,000 1,123
Exxon 20,000 1,220
Mobil 27,500 1,978
Royal Dutch Petroleum, ADR 36,000 1,897
--------
6,218
--------
- --------------------------------------------------------
Market
Shares/ Value
Par (000) (000)
- --------------------------------------------------------
Retail -- 6.6%
Home Depot 35,100 $ 1,963
Kohl's* 19,000 1,375
Walgreen 64,800 2,086
--------
5,424
--------
Semi-Conductors/Instruments -- 3.7%
Intel 21,000 1,630
Motorola 21,800 1,371
--------
3,001
--------
Telephones & Telecommunication -- 5.6%
Alltel 29,000 1,153
Ameritech 12,000 925
Lucent Technologies 18,194 1,458
SBC Communications 15,000 1,092
--------
4,628
--------
Total Common Stocks
(Cost $42,943) 74,806
--------
REPURCHASE AGREEMENT -- 8.7%
Donaldson, Lufkin, Jenrette
5.70%, dated 11/28/97,
matures 12/01/97, repurchase
price $7,103,373 (collateralized
by U.S. Treasury Note, par
value $6,989,000, 7.50%,
matures 10/31/99,
market value $7,237,030) $7,100 7,100
--------
Total Repurchase Agreement
(Cost $7,100) 7,100
--------
Total Investments -- 100.1%
(Cost $50,043) 81,906
--------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
19
<PAGE>
NOVEMBER 30, 1997
STATEMENT OF NET ASSETS
================================================================================
FMB DIVERSIFIED EQUITY FUND (CONCLUDED)
- -------------------------------------------------------
Market
Value
(000)
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities, Net $ (56)
--------
NET ASSETS:
Portfolio Shares of Institutional Class
($0.001 par value -- 10 billion
authorized for the company) based
on 3,550,032 outstanding shares 38,303
Portfolio Shares of Consumer Service
Class ($0.001 par value -- 10 billion
authorized for the company) based
on 425,480 outstanding shares 4,703
Undistributed Net Investment Income 28
Accumulated Net Realized Gain
on Investments 6,953
Net Unrealized Appreciation
on Investments 31,863
--------
Total Net Assets -- 100.0% $81,850
========
- --------------------------------------------------------
Market
Value
- --------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class $20.59
========
Net Asset Value, Offering and
Redemption Price Per Share --
Consumer Service Class $20.58
========
Maximum Offering Price Per Share --
Consumer Service Class
($20.58/94.25%) $21.84
========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
20
<PAGE>
[FMB LOGO OMITTED]
FOR THE YEAR ENDED NOVEMBER 30, 1997
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 .......................................... $9,013 $7,646 $1,825 $ 397
Dividend Income .......................................... -- -- -- 1,048
------ ------ ------ -------
Total Investment Income ................................ 9,013 7,646 1,825 1,445
------ ------ ------ -------
Expenses:
Investment Advisory Fees ................................. 569 514 186 749
Waiver of Investment Advisory Fees ....................... -- -- (89) --
Administrator Fees ....................................... 325 228 68 150
Professional Fees ........................................ 58 41 12 24
Transfer Agent Fees ...................................... 100 77 38 54
Distribution Fees (1) .................................... 40 15 32 28
Waiver of Distribution Fees (1) .......................... -- (4) (9) (8)
Printing Expenses ........................................ 27 14 7 11
Custodian Fees ........................................... 14 8 10 11
Registration Fees ........................................ 17 5 5 10
Trustee Fees ............................................. 11 6 2 5
Miscellaneous ............................................ 5 5 10 13
------ ------ ------ -------
Total Expenses ......................................... 1,166 909 272 1,047
------ ------ ------ -------
Net Investment Income ....................................... 7,847 6,737 1,553 398
------ ------ ------ -------
Net Realized Gain on Securities Sold ..................... 1 51 31 7,247
Net Change in Unrealized Appreciation
on Investments ......................................... -- 258 297 7,353
------ ------ ------ -------
Net Realized and Unrealized Gain
on Investments ........................................... 1 309 328 14,600
------ ------ ------ -------
Net Increase in Net Assets From Operations .................. $7,848 $7,046 $1,881 $14,998
====== ====== ====== =======
<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>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
21
<PAGE>
FOR THE YEAR ENDED NOVEMBER 30,
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
<TABLE>
<CAPTION>
FMB Money
Market Fund
------------------------
12/1/96 12/1/95
to 11/30/97 to 11/30/96
----------- -----------
<S> <C> <C>
Investment Activities:
Net Investment Income ................................................................ $7,847 $6,064
Net Realized Gain on Securities Sold ................................................. 1 --
Net Unrealized Appreciation (Depreciation) of Investment Securities .................. -- --
-------- --------
Net Increase in Net Assets Resulting from Operations ................................. 7,848 6,064
-------- --------
Distributions to Shareholders:
Net Investment Income
Institutional Class ................................................................ (7,071) (5,129)
Consumer Service Class ............................................................. (776) (935)
-------- --------
Realized Capital Gains
Institutional Class ................................................................ -- --
Consumer Service Class ............................................................. -- --
-------- --------
Total Distributions ............................................................. (7,847) (6,064)
-------- --------
Capital Share Transactions:
Institutional Class
Proceeds from Shares Issued ........................................................ 268,719 289,946
Reinvestment of Cash Distributions ................................................. -- --
Cost of Shares Redeemed ............................................................ (277,831) (224,594)
-------- --------
Increase (Decrease) in Net Assets from Institutional Class Transactions ............ (9,112) 65,352
-------- --------
Consumer Service Class
Proceeds from Shares Issued ........................................................ 28,917 52,312
Reinvestment of Cash Distributions ................................................. 745 906
Cost of Shares Redeemed ............................................................ (35,891) (50,760)
-------- --------
Increase (Decrease) in Net Assets Derived from Consumer Service Class Transactions . (6,229) 2,458
-------- --------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions ............... (15,341) 67,810
-------- --------
Net Increase (Decrease) in Net Assets .............................................. (15,340) 67,810
-------- --------
Net Assets:
Beginning of Period .................................................................. 172,537 104,727
-------- --------
End of Period ........................................................................ $157,197 $172,537
======== ========
Shares Issued and Redeemed:
Institutional Class Shares:
Shares Issued ...................................................................... 268,719 289,946
Shares Issued in Lieu of Cash Distributions ........................................ -- --
Shares Redeemed .................................................................... (277,831) (224,594)
-------- --------
Net Increase (Decrease) Institutional Class Shares ................................. (9,112) 65,352
-------- --------
Consumer Service Class Shares:
Shares Issued ...................................................................... 28,917 52,312
Shares Issued in Lieu of Cash Distributions ........................................ 745 906
Shares Redeemed .................................................................... (35,891) (50,760)
-------- --------
Net Increase (Decrease) Consumer Service Class Shares .............................. (6,229) 2,458
-------- --------
Net Increase (Decrease) in Shares .................................................... (15,341) 67,810
======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
22
<PAGE>
[FMB LOGO OMITTED]
================================================================================
<TABLE>
<CAPTION>
FMB Intermediate FMB Michigan FMB Diversified
Government Income Fund Tax-Free Bond Fund Equity Fund
- ----------------------- ----------------------- ------------------------
12/1/96 12/1/95 12/1/96 12/1/95 12/1/96 12/1/95
to 11/30/97 to 11/30/96 to 11/30/97 to 11/30/96 to 11/30/97 to 11/30/96
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 6,737 $ 6,868 $ 1,553 $ 1,496 $ 398 $ 456
51 43 31 13 7,247 2,842
258 (1,236) 297 (28) 7,353 9,761
-------- -------- ------- ------- ------- -------
7,046 5,675 1,881 1,481 14,998 13,059
-------- -------- ------- ------- ------- -------
(6,370) (6,645) (1,147) (1,010) (405) (448)
(244) (351) (408) (484) (29) (44)
-------- -------- ------- ------- ------- -------
-- -- -- -- (2,600) --
-- -- -- -- (306) --
-------- -------- ------- ------- ------- -------
(6,614) (6,996) (1,555) (1,494) (3,340) (492)
-------- -------- ------- ------- ------- -------
24,530 22,554 4,758 4,811 14,338 12,641
4 -- -- -- 1 --
(17,950) (27,917) (3,128) (2,469) (13,484) (15,397)
-------- -------- ------- ------- ------- -------
6,584 (5,363) 1,630 2,342 855 (2,756)
-------- -------- ------- ------- ------- -------
104 203 1,729 1,348 1,239 1,547
193 276 301 373 334 33
(2,008) (2,774) (1,738) (5,237) (1,238) (1,548)
-------- -------- ------- ------- ------- -------
(1,711) (2,295) 292 (3,516) 335 32
-------- -------- ------- ------- ------- -------
4,873 (7,658) 1,922 (1,174) 1,190 (2,724)
-------- -------- ------- ------- ------- -------
5,305 (8,979) 2,248 (1,187) 12,848 9,843
-------- -------- ------- ------- ------- -------
113,277 122,256 32,132 33,319 69,002 59,159
-------- -------- ------- ------- ------- -------
$118,582 $113,277 $34,380 $32,132 $81,850 $69,002
======== ======== ======= ======= ======= =======
2,439 2,234 443 453 784 796
-- -- -- -- -- --
(1,784) (2,767) (290) (232) (722) (965)
-------- -------- ------- ------- ------- -------
655 (533) 153 221 62 (169)
-------- -------- ------- ------- ------- -------
10 22 161 126 68 98
19 27 28 37 20 2
(200) (275) (162) (493) (66) (97)
-------- -------- ------- ------- ------- -------
(171) (226) 27 (330) 22 3
-------- -------- ------- ------- ------- -------
484 (759) 180 (109) 84 (166)
======== ======== ======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
23
<PAGE>
FOR THE PERIOD ENDED NOVEMBER 30, [FMB LOGO OMITTED]
FINANCIAL HIGHLIGHTS
================================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Net
Net Realized and Net
Asset Unrealized Dividends Distributions Net Assets
Value Net Gains or from Net from Asset Value End
Beginning Investment (Losses) Investment Capital End Total of Period
of Period Income on Securities Income Gains of Period Return(2) (000)
--------- ---------- ------------- ---------- ------------- ----------- --------- ---------
- -----------------------
FMB Money Market Fund
- -----------------------
Institutional Class
<S> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 -- $(0.05) -- $1.00 4.96% $143,439
1996 1.00 0.05 -- (0.05) -- 1.00 4.87% 152,549
1995 1.00 0.05 -- (0.05) -- 1.00 5.28% 87,238
1994 1.00 0.04 -- (0.04) -- 1.00 3.51% 103,301
1993 1.00 0.03 -- (0.03) -- 1.00 2.97% 65,448
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.78% 58,596
Consumer Class
1997 $1.00 $0.05 -- $(0.05) -- $1.00 4.70% $13,758
1996 1.00 0.05 -- (0.05) -- 1.00 4.70% 19,988
1995 1.00 0.05 -- (0.05) -- 1.00 5.28% 17,489
1994 1.00 0.04 -- (0.04) -- 1.00 3.51% 7,154
1993 1.00 0.03 -- (0.03) -- 1.00 2.97% 1,485
1992(1) 1.00 0.04 -- (0.04) -- 1.00 3.67% 208
- -----------------------------------------
FMB Intermediate Government Income Fund
- -----------------------------------------
Institutional Class
1997 $10.13 $0.59 $0.02 $(0.58) -- $10.16 6.27% $115,064
1996 10.24 0.59 (0.10) (0.60) -- 10.13 4.97% 108,047
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64% 114,646
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%) 115,449
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60% 105,820
1992(1) 10.00 0.60 0.10 (0.60) -- 10.10 7.10% 81,371
Consumer Class
1997 $10.13 $0.57 $0.02 $(0.56) -- $10.16 5.99% $3,518
1996 10.24 0.57 (0.10) (0.58) -- 10.13 4.80% 5,230
1995 9.66 0.61 0.58 (0.61) -- 10.24 12.64% 7,610
1994 10.46 0.57 (0.80) (0.57) -- 9.66 (2.23%) 9,718
1993 10.10 0.59 0.36 (0.59) -- 10.46 9.60% 10,872
1992(1) 10.00 0.58 0.10 (0.58) -- 10.10 6.95% 5,440
</TABLE>
<TABLE>
<CAPTION>
Ratio Ratio of
Ratio of Expenses Net Income
Ratio of Net to Average to Average
of Expenses Income Net Assets Net Assets Average
to Average to Average (Excluding (Excluding Portfolio Commissions
Net Assets Net Assets Waivers) Waivers) Turnover Rate+
----------- ---------- ----------- ---------- --------- -----------
- -----------------------
FMB Money Market Fund
- -----------------------
Institutional Class
<S> <C> <C> <C> <C>
1997 0.69% 4.85% 0.69% 4.85% n/a n/a
1996 0.68% 4.79% 0.68% 4.79% n/a n/a
1995 0.65% 5.16% 0.65% 5.16% n/a n/a
1994 0.68% 3.46% 0.70% 3.44% n/a n/a
1993 0.32% 2.91% 0.68% 2.55% n/a n/a
1992(1) 0.27% 3.59% 0.91% 2.95% n/a n/a
Consumer Class
1997 0.94% 4.60% 0.94% 4.60% n/a n/a
1996 0.86% 4.61% 0.93% 4.54% n/a n/a
1995 0.65% 5.16% 0.65% 5.16% n/a n/a
1994 0.68% 3.46% 0.70% 3.44% n/a n/a
1993 0.32% 2.91% 0.68% 2.55% n/a n/a
1992(1) 0.39% 3.46% 1.03% 2.82% n/a n/a
- ---------------------------------------
FMB Intermediate Government Income Fund
- ---------------------------------------
Institutional Class
1997 0.79% 5.91% 0.79% 5.91% 28% n/a
1996 0.79% 5.89% 0.79% 5.89% 16% n/a
1995 0.78% 6.09% 0.78% 6.09% 27% n/a
1994 0.83% 6.45% 0.85% 6.43% 20% n/a
1993 0.50% 5.66% 0.78% 5.38% 17% n/a
1992(1) 0.43% 5.85% 0.90% 5.38% 29% n/a
Consumer Class
1997 1.04% 5.66% 1.14% 5.56% 28% n/a
1996 0.95% 5.73% 1.14% 5.54% 16% n/a
1995 0.78% 6.09% 0.78% 6.09% 27% n/a
1994 0.83% 6.45% 0.85% 6.43% 20% n/a
1993 0.50% 5.66% 0.78% 5.38% 17% n/a
1992(1) 0.61% 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>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
24 & 25
<PAGE>
FOR THE PERIOD ENDED NOVEMBER 30, [FMB LOGO OMITTED]
FINANCIAL HIGHLIGHTS
================================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Net
Net Realized and Net
Asset Unrealized Dividends Distributions Net Assets
Value Net Gains from Net from Asset Value End
Beginning Investment (Losses) Investment Capital End Total of Period
of Period Income on Securities Income Gains of Period Return(2) (000)
--------- ---------- ------------- ---------- ------------- ----------- --------- ---------
- ---------------------------------
FMB Michigan Tax-Free Bond Fund
- ---------------------------------
Institutional Class
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.79 $0.50 $0.10 $(0.50) $ -- $10.89 5.73% $24,954
1996 10.79 0.50 -- (0.50) -- 10.79 4.78% 23,082
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21% 20,700
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%) 15,495
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53% 11,779
1992(1) 10.00 0.48 0.24 (0.48) -- 10.24 7.29% 6,043
Consumer Class
1997 $10.79 $0.47 $0.10 $(0.47) $ -- $10.89 5.47% $9,426
1996 10.79 0.48 -- (0.48) -- 10.79 4.61% 9,050
1995 9.97 0.49 0.82 (0.49) -- 10.79 13.21% 12,619
1994 10.61 0.47 (0.63) (0.47) (0.01) 9.97 (1.49%) 12,249
1993 10.24 0.49 0.37 (0.49) -- 10.61 8.53% 14,771
1992(1) 10.00 0.46 0.24 (0.46) -- 10.24 7.17% 4,572
- -----------------------------
FMB Diversified Equity Fund
- -----------------------------
Institutional Class
1997 $17.73 $0.10 $3.63 $(0.11) $(0.76) $20.59 22.19% $73,097
1996 14.58 0.12 3.16 (0.13) -- 17.73 22.58% 61,857
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54% 53,325
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34% 42,229
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%) 38,979
1992(1) 10.00 0.12 1.60 (0.11) -- 11.61 17.31% 29,596
Consumer Class
1997 $17.73 $0.06 $3.62 $(0.07) $(0.76) $20.58 21.84% $8,753
1996 14.58 0.09 3.17 (0.11) -- 17.73 22.44% 7,145
1995 11.44 0.12 3.13 (0.11) -- 14.58 28.54% 5,833
1994 11.37 0.07 0.08 (0.08) -- 11.44 1.34% 4,985
1993 11.61 0.09 (0.25) (0.08) -- 11.37 (1.40%) 5,634
1992(1) 10.00 0.10 1.60 (0.09) -- 11.61 17.16% 3,377
</TABLE>
<TABLE>
<CAPTION>
Ratio Ratio of
Ratio of Expenses Net Income
Ratio of Net to Average to Average
of Expenses Income Net Assets Net Assets Average
to Average to Average (Excluding (Excluding Portfolio Commissions
Net Assets Net Assets Waivers) Waivers) Turnover Rate+
---------- ---------- ---------- ---------- --------- -----------
- --------------------------------
FMB Michigan Tax-Free Bond Fund
- --------------------------------
Institutional Class
<S> <C> <C> <C> <C> <C>
1997 0.73% 4.66% 1.00% 4.39% 7% n/a
1996 0.68% 4.72% 1.05% 4.35% 16% n/a
1995 0.70% 4.62% 1.18% 4.14% 35% n/a
1994 0.51% 4.50% 1.19% 3.82% 22% n/a
1993 0.35% 4.59% 1.38% 3.56% 13% n/a
1992(1) 0.29% 4.68% 2.55% 2.42% 30% n/a
Consumer Class
1997 0.98% 4.41% 1.35% 4.04% 7% n/a
1996 0.84% 4.55% 1.40% 4.00% 16% n/a
1995 0.70% 4.62% 1.18% 4.14% 35% n/a
1994 0.51% 4.50% 1.19% 3.82% 22% n/a
1993 0.35% 4.59% 1.38% 3.56% 13% n/a
1992(1) 0.46% 4.50% 2.72% 2.24% 30% n/a
- ----------------------------
FMB Diversified Equity Fund
- ----------------------------
Institutional Class
1997 1.37% 0.56% 1.37% 0.56% 28% $0.0733
1996 1.41% 0.74% 1.41% 0.74% 9% 0.0800
1995 1.50% 0.92% 1.50% 0.92% 20% n/a
1994 1.61% 0.69% 1.61% 0.69% 49% n/a
1993 1.50% 0.82% 1.53% 0.79% 22% n/a
1992(1) 1.42% 1.12% 2.05% 0.49% 5% n/a
Consumer Class
1997 1.62% 0.31% 1.72% 0.21% 28% $0.0733
1996 1.58% 0.57% 1.76% 0.39% 9% 0.0800
1995 1.50% 0.92% 1.50% 0.92% 20% n/a
1994 1.61% 0.69% 1.61% 0.69% 49% n/a
1993 1.50% 0.82% 1.53% 0.79% 22% n/a
1992(1) 1.64% 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>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
================================================================================
26 & 27
<PAGE>
NOVEMBER 30, 1997
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 Funds' prospectus provides a
description of each Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Funds:
SECURITY VALUATION -- Investment securities held by the FMB Money Market Fund
are stated at amortized cost which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income. Investment securities
of the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond Fund
and FMB Diversified Equity Fund which are listed on a securities exchange for
which market quotations are readily available, are valued at the last quoted
sales price on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recently quoted mean between bid and ask price
as provided by a pricing service. Debt obligations with sixty days or less
remaining until maturity are valued at their amortized cost. Securities for
which current market quotations are not readily available are valued at fair
value as determined in good faith by the 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
================================================================================
28
<PAGE>
[FMB LOGO OMITTED]
================================================================================
those dividends monthly. The FMB Diversified Equity Fund declares and pays as a
dividend substantially all of its net investment income quarterly. Each Fund
will distribute, at least annually, substantially all net capital gains, if any,
earned by such Fund. Distributions are recorded on ex-date for shareholders.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day separately for each class within each Fund. The
maximum offering price per share for the Consumer Services Class shares of the
FMB Intermediate Government Income and FMB Michigan Tax-Free Bond Funds is equal
to the net assets per share plus a sales load of 4.75%. The maximum offering
price per share for the FMB Diversified Equity Fund is equal to the net assets
per share plus a sales load of 5.75%.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Company require that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Company are prorated to
the Funds on the basis of relative net assets. The Consumer Service Class bears
a class specific 12b-1 fee. Income, other expenses and accumulated realized and
unrealized gains and losses of a Fund are allocated to the respective class on
the basis of relative net asset value each day.
3. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS
On September 26, 1997 shareholders of the FMB Funds approved investment advisory
contracts with The Huntington National Bank (the Advisor), a subsidiary of
Huntington Bancshares Incorporated. Prior to this date FMB-Trust, a wholly-owned
subsidiary of First Michigan Bank Corporation, acted as the Funds' Investment
Advisor.
Pursuant to the Investment Advisory Agreements, the Advisor manages the
investments of the Funds and continuously reviews, supervises and administers
each Fund's investments. The Advisor is responsible for placing orders for the
purchase and sale of investment securities directly with brokers and dealers
selected at its discretion. The terms of the Investment Advisory Agreements
provide for annual fees at the following percentages of average daily net
assets.
For the FMB Money Market Fund:
0.35% of first $500 million in average net assets; 0.30% of next $500 million in
average net assets; and 0.25% of average net assets over $1 billion.
For the FMB Intermediate Government Income Fund, FMB Michigan Tax-Free Bond
Fund, and FMB Diversified Equity Fund: 0.45%, 0.55%, and 1.00% of average daily
net assets, respectively.
================================================================================
29
<PAGE>
NOVEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
================================================================================
Bankers Trust Company serves as custodian (the "Custodian") for the Funds. Fees
of the Custodian are paid on the basis of the net assets of the Funds. The
Custodian plays no role in determining the investment policies of the Company or
which securities are to be purchased or sold in the Funds.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Company and SEI Fund Resources ("SFR") are parties to an administration
agreement (the "Administrative Agreement") dated March 23, 1996. Under the terms
of the Administrative Agreement SFR is entitled to receive an annual fee of
0.20% on the daily average net assets of the Funds. Such fee is computed daily
and paid monthly.
The Company and SEI Investments Distribution Company (the "Distributor") are
parties to a Distribution Agreement dated March 23, 1996. The Company has
adopted a Distribution Plan (the "Plan") for those Funds offering Consumer
Service shares. The Plan provides for the payment by the Company to the
Distributor of up to 0.25% for the FMB Money Market and up to 0.35% for the FMB
Intermediate Government Income, FMB Michigan Tax-Free Bond and FMB Diversified
Equity Funds per annum of each Fund's Consumer Service Class average daily net
assets for costs and expenses of the Distributor in connection with the
distribution of Fund shares of the Consumer Service Classes. The Distributor
voluntarily waived 0.10% of the distribution fee for the year ended November 30,
1997 for the FMB Intermediate Government Income, FMB Michigan Tax-Free Bond and
FMB Diversified Equity Funds.
Certain officers of the Company are also officers of SFR and/or the Distributor.
Such officers are paid no fees by the Funds.
5. OTHER TRANSACTIONS WITH AFFILIATES
The Company and SFR are parties to a transfer agency and service agreement dated
March 23, 1996 under which SFR provides transfer agency services to the Company.
6. CONCENTRATION OF CREDIT RISK
The FMB Michigan Tax-Free Bond Fund invests substantially all of its assets in a
portfolio of debt obligations issued by the State of Michigan and its
authorities and agencies. The issuers' abilities to meet their obligations may
be affected by economic or political developments in the State of Michigan.
7. FEDERAL INCOME TAX STATUS
During the fiscal year ended November 30, 1997, the FMB Money Market Fund
utilized $1,045 of capital loss carryforwards. The Fund has remaining capital
loss carryforwards of $86,955 available through the year 2003 to offset future
realized capital gains.
During the fiscal year ended November 30, 1997, the FMB Intermediate Government
Income Fund utilized $50,654 of capital loss carryforwards. The Fund has
remaining capital loss carryforwards of $341,004 available through the year 2002
and $1,366,912 available through the year 2003 to offset future realized capital
gains.
================================================================================
30
<PAGE>
[FMB LOGO OMITTED]
During the fiscal year ended November 30, 1997, the FMB Michigan Tax-Free Bond
Fund utilized $30,641 of capital loss carryforwards. The Fund has remaining
capital loss carryforwards of $70,561 available through the year 2003 to offset
future realized capital gains.
8. INVESTMENT TRANSACTIONS
During the year ended November 30, 1997, the cost of security purchases and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows:
PURCHASES (000)
U.S.
Government Other Total
---------- ----- -----
FMB Intermediate
Government Income Fund $35,650 $ -- $35,650
FMB Michigan Tax-Free
Bond Fund -- 4,325 4,325
FMB Diversified Equity Fund -- 18,513 18,513
SALES (000)
U.S.
Government Other Total
---------- ----- -----
FMB Intermediate
Government Income Fund $14,061 $ -- $14,061
FMB Michigan Tax-Free
Bond Fund -- 2,373 2,373
FMB Diversified Equity Fund -- 21,101 21,101
At November 30, 1997 the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial purposes. The aggregate gross
unrealized appreciation and depreciation for securities held at November 30,
1997 for each Fund were as follows:
Aggregate Aggregate
Gross Gross
Appreciation Depreciation Net
------------ ------------ ---------
AGGREGATE GROSS UNREALIZED
GAIN (LOSS) (000)
FMB Intermediate
Government Income Fund $ 1,798 $152 $ 1,646
FMB Michigan Tax-Free
Bond Fund 1,602 -- 1,602
FMB Diversified Equity Fund 32,173 310 31,863
9. PROPOSED REORGANIZATION
Huntington Bancshares Incorporated (Huntington), parent company of the Advisor
acquired First Michigan Bank Corporation on October 1, 1997. A special meeting
of shareholders is scheduled to be held on March 17, 1998 in order to consider
and approve an agreement and plan of reorganization for the FMB Funds and
Monitor Funds, another mutual fund family sponsored by Huntington, under which
the FMB Funds will become part of Monitor Funds.
================================================================================
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Shareholders and Board of Directors of FMB Funds, Inc.
In our opinion, the accompanying statements of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
FMB Money Market Fund, FMB Intermediate Government Income Fund, FMB Michigan Tax
Free Bond Fund and FMB Diversified Equity Fund, separately managed portfolios of
FMB Funds, Inc. (the "Company"), at November 30, 1997, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
30 South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 13, 1998
================================================================================
32
<PAGE>
[FMB LOGO OMITTED]
NOVEMBER 30, 1997
(UNAUDITED)
================================================================================
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, 1997, 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% 99%
FMB Diversified Equity Fund 100% 100% 100% 95% 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.
================================================================================
33
<PAGE>
NOVEMBER 30, 1997
SHAREHOLDER VOTING RESULTS (UNAUDITED)
================================================================================
There was a special meeting held on September 26, 1997 at which the shareholders
of the following Funds voted on a proposal to approve or disapprove a new
investment advisory contract with The Huntington National Bank, Trust Division
on the same terms as the current advisory contract with FMB-Trust. The following
were the results of the vote.
FMB MONEY MARKET FUND
<TABLE>
Shares Voted % of Voted % of Total
------------ ---------- ----------
<S> <C> <C> <C>
For 137,070,290 99.82% 85.04%
Against 127,664 0.09% 0.08%
Abstain 127,845 0.09% 0.08%
------------ ---------- ----------
Total 137,325,799 100% 85.20%
FMB INTERMEDIATE GOVERNMENT INCOME FUND
Shares Voted % of Voted % of Total
------------ ---------- ----------
For 11,128,187 99.60% 95.53%
Against 4,683 0.04% 0.04%
Abstain 40,188 0.36% 0.34%
------------ ---------- ----------
Total 11,173,058 100% 95.91%
FMB MICHIGAN TAX-FREE BOND FUND
Shares Voted % of Voted % of Total
------------ ---------- ----------
For 2,752,920 99.32% 84.28%
Against 8,634 0.31% 0.26%
Abstain 10,138 0.37% 0.31%
------------ ---------- ----------
Total 2,771,692 100% 84.85%
FMB DIVERSIFIED EQUITY FUND
Shares Voted % of Voted % of Total
------------ ---------- ----------
For 3,606,595 99.80% 90.02%
Against 3,155 0.09% 0.08%
Abstain 4,200 0.11% 0.10%
------------ ---------- ----------
Total 3,613,950 100% 90.20%
</TABLE>
================================================================================
34
<PAGE>
[FMB LOGO OMITTED]
NOTES
================================================================================
================================================================================
35
<PAGE>
NOTES
================================================================================
================================================================================
36
<PAGE>
[FMB LOGO OMITTED]
================================================================================
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 OMITTED]
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ANNUAL REPORT
NOVEMBER 30, 1997
FMB FUNDS, INC.
P.O. Box 8526
Boston, MA 02266-8526
(800) 453-4234
INVESTMENT ADVISER
The Huntington National Bank
One Financial Plaza
Holland, MI 49423
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
ADMINISTRATOR
SEI Fund Resources
One Freedom Valley Drive
Oaks, PA 19456
CUSTODIAN
Bankers 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.
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