<PAGE>
McM Funds
Semi-Annual Report
December 31, 1996
Principal Preservation Fund
Intermediate Fixed Income Fund
Fixed Income Fund
Balanced Fund
Equity Investment Fund
<PAGE>
Dear Shareholder:
Take one look at our 1996 year-end performance numbers and you will know it was
a great year for shareholders of the McM Funds. Of course, a number of funds can
say that - after all, the S&P 500 advanced 23.1% during the year!
Our performance beat or kept pace with all the relevant indices in 1996. (The
details are in this report.) We are proud to have accomplished that for you. But
the McM Funds are not designed for people who think one-year performance wins
the day.
We created the McM Funds to fill a void - even though it might be hard to
imagine any gaps in a market filled with so many alternatives! We thought there
was a place for a family of mutual funds managed under the same disciplined
style that McMorgan & Company uses to manage approximately $17 billion in
pension fund and other benefit plan assets. That philosophy of investment
management - and a no-load fee structure that averages half of the Morningstar
comparable funds - serves investors seeking to achieve steady, consistent
progress toward financial goals.
This nation's unparalleled period of economic growth is going on six years now.
Whether the bulls continue their run for another six years or the bears
ultimately make their presence known, the investment philosophy shaping your McM
Funds will remain constant. It's a strategy designed for the long-term. For
some, investment styles change. For our shareholders, substance survives.
Thank you for your continuing trust. We appreciate the opportunity to serve your
investment needs.
Sincerely,
/s/ Terry A. O'Toole
- ---------------------
Terry A. O'Toole
Chairman
<PAGE>
Review
1996 was another strong year for stocks, but somewhat disappointing for bonds.
The Standard & Poor's 500 Stock Index rose a robust 23.1% while the Lehman
Brothers Aggregate Bond Index was up a lackluster 3.6%. Stocks responded well to
favorable earnings growth and lower interest rates while the bond market
struggled with fears of an overheated economy.
Economic growth in 1996 was positive, but volatile. The Gross Domestic Product
(GDP) rose at an annual rate of 2.0% in the first and third quarters and at a
torrid 4.7% in the second and fourth (estimate) quarters. Although the economy
was strong, inflation was remarkably low with both the Consumer Price Index
(CPI) up 3.3% and the Producer Price Index (PPI) up 2.8%.
While the stock market made sizable advances, we do not view it as overvalued.
However, it seems that the bond market may have overreacted to the strong
economic news given the subdued inflation numbers.
Outlook
In 1997, we expect a slower rate of growth in the GDP. Therefore, there should
be less pressure on capacity utilization and inflation should remain under
control, allowing interest rates to remain stable or even decline. We do not
expect the slower growth to approach recessionary levels.
We see this economic environment as favorable for both the stock and bond
markets. Corporate earnings for quality companies should continue to grow,
however, probably not at the rates experienced in 1995 or 1996. Slower growth
coupled with stable or lower interest rates should also produce positive bond
market returns.
Adhering to our disciplined investment approach, the McM Funds are positioned to
take advantage of the expected economic environment. Only stocks of well managed
and growing companies will be purchased. Likewise, only investment grade bonds,
with slightly longer maturities, will comprise our bond portfolios.
<PAGE>
Principal Preservation Fund
The Principal Preservation Fund emphasizes high quality, liquid securities. The
Fund seeks to realize maximum current income, consistent with preservation of
capital. To meet this objective, U.S. Government issues represent 89% of the
portfolio. The 7-day and 30-day average yields as of December 31, 1996 were
5.20% and 5.08%, respectively.
Diversification Credit Quality Maturity
A-1/P-1 11% 91+ days
Certificates of 32%
Deposit 5% 1-15 days
Repurchase 18%
Agreements 6% 16-30
days 9%
Government 89% Government 89% 31-90 days 41%
Average Annual Return (%) One Since
Year Inception
---- ---------
McM Principal Preservation Fund 5.15 5.30
Principal Preservation Fund
January 1, 1996 - December 31, 1996
1/2/96 2/26/96 4/22/96 6/17/96 8/12/96 10/7/96 12/2/96
5.32 5.01 4.9 4.96 5 5.03 5.04
1/8/96 3/4/96 4/29/96 6/24/96 8/19/96 10/14/96 12/9/96
5.22 4.98 4.92 4.99 5.01 5.01 5
1/15/96 3/11/96 5/6/96 7/1/96 8/26/96 10/21/96 12/16/96
5.24 4.93 4.91 5.02 5.01 5.02 5.02
1/22/96 3/18/96 5/13/96 7/8/96 9/3/96 10/28/96 12/23/96
5.27 4.95 4.93 5.07 5.04 5.01 5.09
1/29/96 3/25/96 5/20/96 7/15/96 9/11/96 11/4/96 12/31/96
5.24 4.93 4.97 5.01 5.03 5.07 5.2
2/5/96 4/1/96 5/27/96 7/22/96 9/16/96 11/11/96
5.13 4.93 4.98 5.02 5.03 5.06
2/12/96 4/8/96 6/3/96 7/29/96 9/23/96 11/18/96
5.11 4.94 5.01 5.01 5.03 5.08
2/19/96 4/15/96 6/10/96 8/5/96 9/30/96 11/25/96
5.04 4.91 4.96 5.03 5.04 5.03
Past performance does not guarantee future results.
<PAGE>
Intermediate Fixed Income Fund
This Fund emphasizes high quality and diversification. Government bonds and
AAA-rated bonds represent 72% of the Fund. Mortgage securities, backed by the
U.S. Government, provide yield advantages compared to U.S. Government bonds with
equivalent maturities. The Fund's weighted average maturity of 3.9 years seeks
to limit sensitivity to interest rate changes.
NASDAQ Symbol
MCMNX
Diversification Bond Quality Maturity
BAA 1% 10+ years 3%
Corporate 27% A 24% 5-10 years 42%
Asset Backed/ AA 3% 1-5 years 49%
Other 1% AAA 36% Short-term 6%
Government Government
36% 36%
Mortgage 36%
Average Annual Returns (%) One Since
Year Inception
---- ---------
McM Intermediate Fixed Income Fund 4.1 7.4
Lehman Brothers Intermediate Govt./Corp. Index 4.7 7.1
Intermediate Fixed Income Fund
July 14, 1994 Inception Date
7/31/94 8/31/94 9/30/94 10/31/94 11/30/94 12/31/94
$10,050 $10,046 $9,969 $9,965 $9,921 $9,957
$10,074 $10,105 $10,012 $10,011 $9,966 $10,001
1/31/95 2/28/95 3/31/95 4/30/95 5/31/95 6/30/95
$10,122 $10,350 $10,398 $10,518 $10,849 $10,918
$10,170 $10,381 $10.440 $10,569 $10,888 $10,961
7/31/95 8/31/95 9/30/95 10/31/95 11/30/95 12/31/95
$10,914 $11,003 $11,078 $11,210 $11,344 $11,445
$10,962 $11,062 $11,142 $11,266 $11,413 $11,533
1/31/96 2/29/96 3/31/96 4/30/96 5/31/96 6/30/96
$11,540 $11,401 $11,340 $11,320 $11,302 $11,420
$11,632 $11,496 $11,437 $11,397 $11,388 $11,509
7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96
$11,461 $11,463 $11,617 $11,828 $11,983 $11,918
$11,544 $11,553 $11,713 $11,921 $12,078 $12,001
Past performance does not guarantee future results.
<PAGE>
Fixed Income Fund
The Fixed Income Fund is structured similarly to the Intermediate Fixed Income
Fund. It invests primarily in investment grade and U.S. Government bonds.
However, it has a weighted average maturity of 7.0 years, 3.1 years longer than
the Intermediate Fixed Income Fund.
Diversification Bond Quality Maturity
BAA 4% Short-term 3%
Corporate Government Government 10+ years 1-5 years
28% 28% 28% 10% 17%
A 22%
AA 2%
Mortgage 44% AAA 44% 5-10 years 70%
Average Annual Returns (%) One Since
Year Inception
---- ---------
McM Fixed Income Fund 3.0 8.4
Lehman Brothers Aggregate Index 5.0 8.1
Fixed Income Fund
July 14, 1994 Inception Date
7/31/94 8/31/94 9/30/94 10/31/94 11/30/94 12/31/94
$10,070 $10,097 $9,937 $9,911 $9,855 $9,926
$10,114 $10,126 $9,977 $9,968 $9,946 $10,015
1/31/95 2/28/95 3/31/95 4/30/95 5/31/95 6/30/95
$10,114 $10,384 $10,460 $10,604 $11,060 $11,155
$10,213 $10,456 $10,520 $10,667 $11,080 $11,161
7/31/95 8/31/95 9/30/95 10/30/95 11/30/95 12/31/95
$11,112 $11,257 $11,364 $11,533 $11,716 $11,841
$11,137 $11,271 $11,381 $11,529 $11,702 $11,865
1/31/96 2/29/96 3/31/96 4/30/96 5/31/96 6/30/96
$11,929 $11,688 $11,587 $11,485 $11,460 $11,618
$11,944 $11,736 $11,654 $11,588 $11,565 $11,720
7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96
$11,629 $11,605 $11,820 $12,104 $12,335 $12,203
$11,752 $11,732 $11,936 $12,201 $12,410 $12,294
Past performance does not guarantee future results.
<PAGE>
Balanced Fund
The Balanced Fund invests in common stocks and bonds. Common stocks represent
59% of the Fund and bonds represent 40%. The common stock portion is well
diversified among 105 companies that represent all economic sectors. The Fund's
bond portion is 77% U.S. Government and AAA-rated securities with a weighted
average maturity of 6.4 years.
NASDAQ Symbol
MCMBX
Asset Allocation Ten Largest Equity Holdings
Cash 1% Intel 2.6%
General Electric 2.0%
Bonds 40% Stocks 59%
FNMA 1.8%
Fixed Income Quality
Government 34% Philip Morris 1.8%
AAA 33%
AA 2% Chase Manhattan 1.7%
BAA 2%
A 29% Compaq 1.3%
Average Annual Returns (%) One Since Merck 1.3%
Year Inception
---- --------- Citicorp 1.2%
GTE 1.2%
McM Balanced Fund 16.3 18.1
PepsiCo 1.1%
Standard & Poor's 500 23.1 25.1 ---
16.0%
Lehman Brothers Aggregate Index 3.0 8.7
Balanced Fund
July 14, 1994 Inception Date
7/31/94 8/31/94 9/30/94 10/31/94 11/30/94 12/31/94
$10,070 $10,300 $10,081 $10,152 $9,961 $10,078
$10,114 $10,126 $9,977 $9,968 $9,946 $10,015
$10,112 $10,524 $10,270 $10,505 $10,120 $10,267
1/31/95 2/28/95 3/31/95 4/30/95 5/31/95 6/30/95
$10,282 $10,608 $10,767 $11,054 $11,514 $11,731
$10,213 $10,456 $10,520 $10,667 $11,080 $11,161
$10,534 $10,943 $11,267 $11,597 $12,056 $12,340
7/31/95 8/31/95 9/30/95 10/31/95 11/30/95 12/31/95
$11,937 $12,020 $12,389 $12,410 $12,806 $12,971
$11,137 $11,271 $11,381 $11,529 $11,702 $11,865
$12,752 $12,786 $13,323 $13,277 $13,861 $14,124
1/31/96 2/29/96 3/31/96 4/30/96 5/31/96 6/30/96
$13,311 $13,311 $13,315 $13,411 $13,592 $13,709
$11,944 $11,736 $11,654 $11,588 $11,565 $11,720
$14,610 $14,750 $14,892 $15,111 $15,501 $15,564
7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96
$13,407 $13,525 $14,075 $14,509 $15,343 $15,081
$11,752 $11,732 $11,936 $12,201 $12,410 $12,294
$14,870 $15,185 $16,040 $16,481 $17,732 $17,390
Past performance does not guarantee future results.
<PAGE>
Equity Investment Fund
The Equity Investment Fund invests in common stocks of large, high quality
companies. It is well diversified among 104 companies across all economic
sectors. Individual companies are carefully selected and attractive economic
sectors are slightly overweighted as compared to the Standard & Poor's 500.
NASDAQ Symbol
MCMEX
Ten Largest Holdings(%)
Intel 4.1
FNMA 3.1
General Electric 3.1
Philip Morris 2.7
Chase Manhattan 2.6
Merck 2.0
Compaq 2.0
BankAmerica 1.9
Citicorp 1.8
PepsiCo 1.7
---
25.0
Portfolio Characteristics Sector Weightings (%)
Price/Earnings Ratio 22.14 Financial Services 15.6
Technology 13.8
Beta 0.99 Health-Care 11.4
Energy 11.3
Avg. Market Capitalization $40.6 B Utilities 10.3
Consumer Non-Durables 9.1
Total Number of Stocks 104 Capital Goods 8.6
Retail 6.2
Raw Materials 4.2
Average Annual Returns (%) Consumer Services 2.1
One Since Consumer Durables 2.0
Year Inception Transportation 1.7
---- --------- Shelter 1.4
Business Equip. & Services 1.4
McM Equity 26.8 25.3 Multi-Industry 0.9
---
S&P 500 23.1 25.1 100.0
Equity Investment Fund
July 14, 1994 Inception Date
7/31/94 8/31/94 9/30/94 10/31/94 11/30/94 12/31/94
$10,040 $10,440 $10,160 $10,320 $9,989 $10,124
$10,112 $10,524 $10,270 $10,505 $10,120 $10,267
1/31/95 2/28/95 3/31/95 4/30/95 5/31/95 6/30/95
$10,315 $10,709 $10,965 $11,371 $11,786 $12,155
$10,534 $10,943 $11,267 $11,597 $12,056 $12,340
7/31/95 8/31/95 9/30/95 10/31/95 11/30/95 12/31/95
$12,532 $12,552 $13,094 $13,002 $13,543 $13,761
$12,752 $12,786 $13,323 $13,277 $13,861 $14,124
1/31/96 2/29/96 3/31/96 4/30/96 5/31/96 6/30/96
$14,276 $14,513 $14,613 $14,913 $15,294 $15,380
$14,610 $14,750 $14,892 $15,111 $15,501 $15,564
7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96
$14,779 $15,058 $15,891 $16,452 $17,814 $17,452
$14,870 $15,185 $16,040 $16,481 $17,732 $17,390
Past performance does not guarantee future results.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
PRINCIPAL PRESERVATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------
<S> <C> <C>
FIXED INCOME SECURITIES
U.S. Government Agency Notes - 89.16%
Federal Farm Bank Discount Notes - 6.39%
5.420%, 04/10/97 ..................................... $ 410,000 $ 403,889
5.260%, 06/17/97 ..................................... 1,000,000 975,599
-------------
1,379,488
-------------
Federal Home Loan Bank Discount Notes - 19.72%
5.400%, 01/13/97 ..................................... 1,000,000 998,200
5.470%, 02/14/97 ..................................... 1,300,000 1,291,309
5.470%, 03/03/97 ..................................... 1,000,000 990,731
5.170%, 06/05/97 ..................................... 1,000,000 977,740
-------------
4,257,980
-------------
Federal Home Loan Mortgage Corp. Discount Notes - 32.23%
5.200%, 01/17/97 ..................................... 2,000,000 1,995,378
5.190%, 02/10/97 ..................................... 2,000,000 1,988,467
5.200%, 02/14/97 ..................................... 1,000,000 993,644
5.190%, 03/03/97 ..................................... 2,000,000 1,982,412
-------------
6,959,901
-------------
Federal National Mortgage Assn. Notes - 30.82%
7.600%, 01/10/97 ..................................... 1,500,000 1,500,768
5.550%, 03/14/97 ..................................... 500,000 494,600
5.570%, 03/19/97 ..................................... 200,000 197,682
5.180%, 04/21/97 ..................................... 1,000,000 984,172
5.710%, 05/20/97 ..................................... 1,500,000 1,500,591
5.380%, 06/09/97 ..................................... 1,000,000 976,238
5.860%, 07/03/97 ..................................... 1,000,000 1,001,793
-------------
6,655,844
-------------
Total U.S. Government Agency Notes (Cost $19,253,213) . 19,253,213
-------------
CERTIFICATES OF DEPOSIT - 4.63%
Imperial Bank, 5.450%, 02/19/97 ....................... 1,000,000 1,000,000
-------------
Total Certificates of Deposit (Cost $1,000,000) ....... 1,000,000
-------------
TOTAL INVESTMENTS - 93.79% (Cost $20,253,213)(1)........ 20,253,213
-------------
CASH AND OTHER ASSETS NET OF LIABILITIES - 6.21% ...... 1,340,052
-------------
NET ASSETS - 100.00% .................................. $21,593,265
=============
</TABLE>
(1) At December 31, 1996, cost is identical for book and federal income tax
purposes.
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C>
FIXED INCOME SECURITIES - 98.97%
U.S. Government Obligations - 14.29%
U.S. Treasury Notes
0.000%, 08/15/98* ....................................... $ 235,000 $ 214,149
6.250%, 04/30/01 ........................................ 9,380,000 9,407,107
6.250%, 02/15/03 ........................................ 2,710,000 2,709,756
11.875%, 11/15/03 ....................................... 305,000 397,988
------------
Total U.S. Treasury Obligations (Cost $12,714,700) ........ 12,729,000
------------
U.S. Government Agency Obligations - 21.05%
Federal Home Loan Bank - 3.33%
8.375%, 10/25/99 ........................................ 670,000 709,831
5.940%, 06/13/00 ........................................ 100,000 99,077
6.110%, 07/17/00 ........................................ 150,000 149,289
7.190%, 04/27/01 ........................................ 1,650,000 1,700,803
5.770%, 02/03/04 ........................................ 325,000 311,850
------------
2,970,850
------------
Federal Home Loan Mortgage Corp. - 3.57%
6.550%, 04/19/99 ........................................ 350,000 353,881
7.980%, 01/19/00 ........................................ 410,000 429,844
5.905%, 06/13/00 ........................................ 800,000 791,760
5.990%, 12/01/03 ........................................ 1,650,000 1,607,183
------------
3,182,668
------------
Federal National Mortgage Association - 7.26%
8.700%, 06/10/99 ........................................ 1,185,000 1,255,413
8.350%, 11/10/99 ........................................ 3,615,000 3,830,562
5.500%, 02/02/01 ........................................ 1,400,000 1,359,638
6.375%, 08/14/01 ........................................ 25,000 25,062
------------
6,470,675
------------
Guaranteed Export Trust - 2.52%
6.130%, 06/15/04 ........................................ 441,177 428,122
6.280%, 06/15/04 ........................................ 485,294 482,043
6.550%, 06/15/04 ........................................ 1,323,529 1,331,629
------------
2,241,794
------------
Resolution Funding Corp. - 4.37%
0.000%, 01/15/00* ....................................... 321,000 266,680
0.000%, 04/15/06* ....................................... 3,060,000 1,665,344
0.000%, 04/15/10* ....................................... 4,810,000 1,958,103
------------
3,890,127
------------
Total U.S. Government Agency Obligations (Cost $18,838,116) . 18,756,114
------------
Collateralized Mortgage Obligations - 35.31%
Federal Home Loan Mortgage Corp. - 24.03%
6.000%, 12/15/06 ........................................ 1,500,000 1,486,385
6.000%, 07/15/07 ........................................ 100,000 98,971
5.500%, 12/15/12 ........................................ 350,000 348,202
5.000%, 03/15/13 ........................................ 200,000 199,092
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
INTERMEDIATE FIXED INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
Collateralized Mortgage Obligations - (continued)
5.500%, 04/15/13 ......................................... $ 800,000 $ 796,128
5.500%, 01/15/14 ......................................... 625,000 621,776
5.000%, 08/15/14 ......................................... 300,000 298,503
6.500%, 08/15/14 ......................................... 850,000 854,361
7.500%, 09/15/14 ......................................... 400,000 406,352
5.750%, 02/15/15 ......................................... 950,000 940,339
5.850%, 02/15/18 ......................................... 1,500,000 1,479,007
5.400%, 07/15/18 ......................................... 1,500,000 1,458,695
6.400%, 01/15/19 ......................................... 1,000,000 996,064
5.800%, 02/15/19 ......................................... 1,175,000 1,157,848
6.050%, 05/15/19 ......................................... 700,000 692,953
6.250%, 05/15/19 ......................................... 1,000,000 989,985
6.000%, 07/15/19 ......................................... 1,500,000 1,467,383
6.000%, 02/15/20 ......................................... 1,000,000 977,108
5.500%, 04/15/20 ......................................... 1,100,000 1,072,919
6.000%, 10/15/20 ......................................... 1,600,000 1,568,672
5.750%, 05/15/21 ......................................... 1,600,000 1,542,801
6.350%, 07/15/21 ......................................... 1,000,000 988,888
6.750%, 05/15/23 ......................................... 1,000,000 974,339
------------
21,416,771
------------
Federal National Mortgage Association - 11.28%
0.000%, 07/25/98* ........................................ 316,418 292,285
5.950%, 05/25/05 ......................................... 1,500,000 1,489,192
5.400%, 11/25/05 ......................................... 1,300,000 1,276,204
5.900%, 11/25/05 ......................................... 1,600,000 1,586,959
6.000%, 04/01/09 ......................................... 20,394 19,602
5.500%, 07/25/12 ......................................... 357,690 356,038
5.600%, 10/25/13 ......................................... 200,000 198,854
5.250%, 11/25/13 ......................................... 525,000 515,513
5.750%, 02/25/15 ......................................... 1,000,000 991,530
5.250%, 09/25/16 ......................................... 68,957 67,717
6.000%, 11/25/16 ......................................... 1,300,000 1,289,611
9.000%, 06/25/18 ......................................... 189,520 199,777
6.600%, 09/25/18 ......................................... 100,000 100,358
5.500%, 02/25/19 ......................................... 1,175,000 1,144,132
0.000%, 01/25/22* ........................................ 267,073 222,907
0.000%, 03/25/22* ........................................ 283,486 267,350
0.000%, 05/25/22* ........................................ 37,021 33,843
------------
10,051,872
------------
Total Collateralized Mortgage Obligations (Cost $31,367,618) . 31,468,643
------------
Asset Backed Securities - 1.21%
Capital Equipment Receivables Trust, 6.570%, 03/15/01 ...... 1,000,000 1,001,672
CMO Trust 43 Y, 8.200%, 05/20/04 ........................... 51,994 53,127
GMAC 1992 F Grantor Trust, 4.500%, 09/15/97 ................ 11,364 11,328
Morgan Stanley Mortgage Trust, 8.450%, 05/01/17 ............ 13,391 13,611
------------
Total Asset Backed Securities (Cost $1,077,867) ............ 1,079,738
------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
INTERMEDIATE FIXED INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ----------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
Corporate Bonds - 27.11%
Bank & Insurance - 0.57%
BankAmerica Corp., 6.875%, 11/20/97 ........................ $500,000 $504,755
----------
Electric Utility - 0.99%
Commonwealth Edison Co., 6.250%, 10/01/97 .................. 50,000 50,125
Commonwealth Edison Co., 6.000%, 03/15/98 .................. 350,000 349,563
Houston Lighting & Power Co., 7.625%, 03/01/97 ............. 100,000 100,250
Long Island Lighting Co., 8.750%, 02/15/97 ................. 100,000 100,250
Long Island Lighting Co., 7.625%, 04/15/98 ................. 275,000 278,781
----------
878,969
----------
Financial Services - 20.96%
American General Finance Corp., 6.860%, 09/01/97 ........... 175,000 176,207
American General Finance Corp., 8.000%, 02/15/00 ........... 225,000 234,562
American General Finance Corp., 7.250%, 04/15/00 ........... 400,000 409,000
Associates Corp. North America, 8.625%, 06/15/97 ........... 200,000 202,634
Associates Corp. North America, 6.750%, 07/15/97 ........... 125,000 125,871
Associates Corp. North America, 6.625%, 11/15/97 ........... 100,000 100,704
Associates Corp. North America, 6.375%, 07/15/02 ........... 400,000 397,000
Associates Corp. North America, 6.375%, 10/15/02 ........... 330,000 327,525
Beneficial Corp., 6.790%, 11/20/97 ......................... 200,000 201,676
Beneficial Corp., 8.100%, 11/09/99 ......................... 425,000 444,125
Beneficial Corp., 6.850%, 06/17/02 ......................... 325,000 329,063
Chrysler Financial Corp., 5.080%, 01/27/97 ................. 200,000 199,942
Commercial Credit Co., 6.000%, 04/15/00 .................... 225,000 222,187
Commercial Credit Co., 6.375%, 09/15/02 .................... 700,000 694,750
Finova Capital Corp., 6.625%, 09/15/01 ..................... 875,000 871,719
Finova Capital Corp., 6.120%, 05/28/02 ..................... 425,000 416,500
Ford Motor Credit Co., 5.625%, 03/03/97 .................... 25,000 25,010
Ford Motor Credit Co., 7.125%, 12/01/97 .................... 200,000 202,352
Ford Motor Credit Co., 6.550%, 02/03/98 .................... 300,000 301,875
Ford Motor Credit Co., 9.250%, 06/15/98 .................... 100,000 104,375
Ford Motor Credit Co., 8.875%, 06/15/99 .................... 200,000 211,500
Ford Motor Credit Co., 6.375%, 10/06/00 .................... 500,000 496,875
Ford Motor Credit Co., 6.250%, 11/08/00 .................... 700,000 693,000
General Motors Acceptance Corp., 7.375%, 01/15/97 .......... 175,000 175,093
General Motors Acceptance Corp., 7.650%, 02/04/97 .......... 100,000 100,179
General Motors Acceptance Corp., 7.600%, 02/10/97 .......... 100,000 100,211
General Motors Acceptance Corp., 8.375%, 05/01/97 .......... 200,000 201,830
General Motors Acceptance Corp., 7.450%, 06/09/97 .......... 100,000 100,813
General Motors Acceptance Corp., 7.000%, 04/15/98 .......... 100,000 101,250
General Motors Acceptance Corp., 6.625%, 03/22/99 .......... 800,000 806,000
General Motors Acceptance Corp., 7.125%, 06/01/99 .......... 100,000 101,875
General Motors Acceptance Corp., 8.000%, 10/01/99 .......... 200,000 208,250
General Motors Acceptance Corp., 6.700%, 04/30/01 .......... 50,000 50,063
Household Finance Corp., 6.760%, 01/22/98 .................. 100,000 100,875
Household Finance Corp., 6.750%, 06/01/00 .................. 650,000 654,875
Household Finance Corp., 6.960%, 09/04/01 .................. 175,000 177,844
Household Finance Corp., 6.700%, 06/15/02 .................. 500,000 505,625
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
INTERMEDIATE FIXED INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
Corporate Bonds - (continued)
Lehman Brothers, Inc., 6.125%, 02/01/01 ....................................... $ 800,000 $ 780,000
Merrill Lynch & Co., Inc., 6.000%, 01/15/01 ................................... 775,000 757,562
Morgan Stanley Group, Inc., 7.320%, 01/15/97 .................................. 75,000 75,030
Morgan Stanley Group, Inc., 5.650%, 06/15/97 .................................. 250,000 249,882
Morgan Stanley Group, Inc., 7.500%, 09/01/99 .................................. 550,000 565,125
Norwest Financial, Inc., 7.850%, 04/15/97 ..................................... 375,000 377,411
Sears Roebuck Acceptance Corp., 6.730%, 08/29/00 .............................. 1,000,000 1,008,750
Sears Roebuck Acceptance Corp., 6.920%, 10/03/02 .............................. 225,000 228,656
Smith Barney Holdings, Inc., 7.980%, 03/01/00 ................................. 375,000 390,938
Smith Barney Holdings, Inc., 5.875%, 02/01/01 ................................. 1,225,000 1,194,375
Transamerica Financial Group, 8.375%, 02/15/98 ................................ 450,000 460,688
Transamerica Financial Group, 7.510%, 04/15/02 ................................ 150,000 155,625
Transamerica Financial Group, 6.375%, 06/10/02 ................................ 400,000 395,000
Travelers/Aetna P&C, 6.750%, 04/15/01 ......................................... 700,000 704,375
Travelers, Inc., 9.500%, 03/01/02 ............................................. 500,000 563,125
-------------
18,679,777
-------------
Industrial - 4.59%
Philip Morris Cos., Inc., 6.375%, 01/15/98 .................................... 350,000 351,313
Philip Morris Cos., Inc., 6.200%, 02/09/98 .................................... 200,000 200,250
Philip Morris Cos., Inc., 7.125%, 12/01/99 .................................... 50,000 50,750
Philip Morris Cos., Inc., 7.500%, 01/15/02 .................................... 1,150,000 1,180,187
Sara Lee Corp., 4.800%, 01/13/97 .............................................. 700,000 699,867
Sears Roebuck & Co., 5.210%, 02/18/97 ......................................... 300,000 299,775
Sears Roebuck & Co., 7.520%, 02/19/97 ......................................... 100,000 100,255
Sears Roebuck & Co., 9.250%, 04/15/98 ......................................... 25,000 25,938
Tele Communications, Inc., 7.000%, 08/04/97 ................................... 425,000 426,819
Texaco Capital, Inc., 8.620%, 06/16/97 ........................................ 50,000 50,633
Waste Management, Inc., 6.375%, 07/01/97 ...................................... 375,000 376,099
WMX Technologies, Inc., 8.125%, 02/01/98 ...................................... 325,000 332,313
-------------
4,094,199
-------------
Total Corporate Bonds (Cost $24,120,016) ...................................... 24,157,700
-------------
TOTAL FIXED INCOME SECURITIES - 98.97% (Cost $88,118,317)(1) .................. 88,191,195
-------------
CASH AND OTHER ASSETS NET OF LIABILITIES - 1.03% .............................. 918,456
-------------
NET ASSETS 100.00% ............................................................ $89,109,651
=============
(1)Aggregate cost for federal income tax purposes is $88,118,317 and net unrealized
appreciation is as follows:
Gross unrealized appreciation ............................................... $ 386,002
Gross unrealized depreciation ............................................... (313,124)
-----------
Net unrealized appreciaion ................................................. $ 72,878
===========
</TABLE>
* Zero coupon bond.
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
FIXED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -----------
<S> <C> <C>
FIXED INCOME SECURITIES - 98.03%
U.S. Government Obligations - 14.39%
U.S. Treasury Notes
6.875%, 08/31/99 ........................................... $ 90,000 $ 91,924
7.500%, 05/15/02 ........................................... 70,000 74,062
6.250%, 02/15/03 ........................................... 25,000 24,998
10.750%, 05/15/03 .......................................... 150,000 184,732
11.875%, 11/15/03 .......................................... 60,000 78,293
5.875%, 02/15/04 ........................................... 60,000 58,450
7.500%, 11/15/16 ........................................... 532,000 576,465
8.875%, 08/15/17 ........................................... 130,000 160,664
-----------
Total U.S. Treasury Obligations (Cost $1,203,697) ........... 1,249,588
-----------
U.S. Government Agency Obligations - 13.07%
Federal Home Loan Bank - 6.92%
7.440%, 08/10/01 ........................................... 150,000 156,366
7.780%, 10/19/01 ........................................... 275,000 290,887
5.770%, 02/03/04 ........................................... 160,000 153,526
-----------
600,779
-----------
Federal Home Loan Mortgage Corp. - 3.77%
7.125%, 11/18/02 ........................................... 315,000 327,411
-----------
Guaranteed Export Trust - 0.59%
6.130%, 06/15/04 ........................................... 52,941 51,738
-----------
Resolution Funding Corp. - 1.79%
0.000%, 10/15/11* .......................................... 260,000 94,544
0.000%, 04/15/17* .......................................... 250,000 60,710
-----------
155,254
-----------
Total U.S. Government Agency Obligations (Cost $1,115,877) .. 1,135,182
-----------
Collateralized Mortgage Obligations - 42.61%
Federal Home Loan Mortgage Corp. - 23.17%
6.250%, 11/15/18 ........................................... 175,000 173,300
6.250%, 05/15/19 ........................................... 250,000 248,100
6.400%, 05/15/19 ........................................... 150,000 149,375
6.500%, 10/15/19 ........................................... 200,000 198,954
5.950%, 11/15/19 ........................................... 200,000 197,363
6.500%, 06/25/20 ........................................... 100,000 98,473
6.350%, 07/15/21 ........................................... 150,000 148,333
6.500%, 08/15/21 ........................................... 75,000 74,636
6.000%, 02/15/22 ........................................... 200,000 191,050
6.650%, 07/15/22 ........................................... 150,000 147,417
6.000%, 02/15/23 ........................................... 200,000 190,488
6.750%, 05/15/23 ........................................... 200,000 194,868
-----------
2,012,357
-----------
Federal National Mortgage Association - 19.44%
7.500%, 07/25/18 ........................................... 25,969 26,223
6.000%, 09/25/18 ........................................... 40,000 39,069
6.500%, 03/25/19 ........................................... 150,000 149,687
6.500%, 04/25/19 ........................................... 150,000 149,681
3.500%, 05/25/19 ........................................... 125,000 110,127
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
FIXED INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -----------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
Collateralized Mortgage Obligations - (continued)
6.500%, 09/25/19 ......................................... $150,000 $ 145,045
6.250%, 01/25/20 ......................................... 220,000 216,380
6.850%, 10/25/20 ......................................... 40,000 39,346
6.750%, 11/25/20 ......................................... 200,000 195,867
6.750%, 05/25/21 ......................................... 200,000 195,888
6.500%, 10/25/21 ......................................... 200,000 194,493
0.000%, 03/25/22* ........................................ 28,349 26,755
7.000%, 06/25/23 ......................................... 200,000 200,340
-----------
1,688,901
-----------
Total Collateralized Mortgage Obligations (Cost $3,656,736) 3,701,258
-----------
Asset Backed Securities - 0.13%
CMO Trust 39 Y, 8.650%, 03/01/03 .......................... 11,162 11,431
-----------
Total Asset Backed Securities (Cost $11,276) .............. 11,431
-----------
Corporate Bonds - 27.83%
Bank & Insurance - 2.64%
BankAmerica Corp., 6.875%, 11/20/97 ....................... 50,000 50,476
KeyCorp, 6.750%, 03/15/06 ................................. 80,000 78,300
Wells Fargo & Co., 7.125%, 08/15/06 ....................... 100,000 100,250
-----------
229,026
-----------
Electric Utility - 0.87%
Commonwealth Edison Co., 6.250%, 10/01/97 ................. 50,000 50,125
Long Island Lighting Co., 7.625%, 04/15/98 ................ 25,000 25,344
-----------
75,469
-----------
Financial Services - 18.00%
Associates Corp. North America, 6.375%, 10/15/02 .......... 120,000 119,100
Beneficial Corp., 8.100%, 11/09/99 ........................ 100,000 104,500
Beneficial Corp., 9.470%, 03/09/01 ........................ 20,000 22,050
Chrysler Financial Corp., 6.500%, 06/15/98 ................ 25,000 25,156
Commercial Credit Co., 8.250%, 11/01/01 ................... 75,000 80,156
Commercial Credit Co., 6.375%, 09/15/02 ................... 100,000 99,250
Commercial Credit Co., 6.625%, 11/15/06 ................... 150,000 147,000
Finova Capital Corp., 6.625%, 09/15/01 .................... 100,000 99,625
Ford Motor Credit Co., 6.250%, 11/08/00 ................... 100,000 99,000
General Motors Acceptance Corp., 6.500%, 12/05/05 ......... 50,000 48,187
Household Finance Corp., 6.760%, 01/22/98 ................. 50,000 50,437
Household Finance Corp., 6.700%, 06/15/02 ................. 75,000 75,844
Lehman Brothers, Inc., 7.625%, 06/01/06 ................... 80,000 81,300
Morgan Stanley Group, Inc., 5.650%, 06/15/97 .............. 50,000 49,976
Morgan Stanley Group, Inc., 7.500%, 09/01/99 .............. 75,000 77,063
Norwest Financial, Inc., 7.850%, 04/15/97 ................. 50,000 50,322
Sears Roebuck Acceptance Corp., 6.125%, 01/15/06 .......... 100,000 94,625
Transamerica Financial Group, 7.500%, 09/14/01 ............ 75,000 77,939
Transamerica Financial Group, 7.510%, 04/15/02 ............ 75,000 77,812
Travelers, Inc., 9.500%, 03/01/02 ......................... 75,000 84,469
-----------
1,563,811
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
FIXED INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- ------------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
Corporate Bonds - (continued)
Industrial - 6.32%
International Business Machines Corp., 6.375%, 06/15/00 ....................... $ 75,000 $ 74,906
Philip Morris Cos., Inc., 6.375%, 01/15/98 .................................... 50,000 50,188
Philip Morris Cos., Inc., 7.500%, 01/15/02 .................................... 175,000 179,594
Sears Roebuck & Co., 9.250%, 04/15/98 ......................................... 50,000 51,875
Tele Communications, Inc., 7.000%, 08/04/97 ................................... 25,000 25,107
Tele Communications, Inc., 6.875%, 02/15/06 ................................... 100,000 90,625
WMX Technologies, Inc., 8.125%, 02/01/98 ...................................... 75,000 76,687
------------
548,982
------------
Total Corporate Bonds (Cost $2,421,430) ....................................... 2,417,288
------------
TOTAL FIXED INCOME SECURITIES - 98.03% (Cost $8,409,016)(1)..................... 8,514,747
------------
CASH AND OTHER ASSETS NET OF LIABILITIES - 1.97% .............................. 171,003
------------
NET ASSETS 100.00% ............................................................ $8,685,750
============
(1)Aggregate cost for federal income tax purposes is $8,409,016 and net
unrealized appreciation is as follows:
Gross unrealized appreciation .............................................. $145,618
Gross unrealized depreciation .............................................. (39,887)
-----------
Net unrealized appreciation .............................................. $105,731
===========
</TABLE>
*Zero coupon bond.
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
BALANCED FUND
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
COMMON STOCKS - 59.07%
Business Equipment & Service - 0.72%
ACNielson Corp.* ............................................ 250 $ 3,781
Automatic Data Processing, Inc. ............................. 2,500 107,188
Dun & Bradstreet Corp. ...................................... 750 17,812
Flightsafety International, Inc. ............................ 800 40,000
-----------
168,781
-----------
Capital Goods - 4.45%
Cooper Industries, Inc. ..................................... 1,000 42,125
Emerson Electric Co. ........................................ 1,500 145,125
General Electric Co. ........................................ 4,650 459,769
Illinois Tool Works, Inc. ................................... 600 47,925
Ingersoll Rand Co. .......................................... 2,100 93,450
PPG Industries, Inc. ........................................ 2,100 117,863
Tyco International, Ltd. .................................... 2,700 142,762
-----------
1,049,019
-----------
Consumer Durables - 1.16%
Ford Motor Co. .............................................. 4,200 133,875
General Motors Corp. ........................................ 2,500 139,375
-----------
273,250
-----------
Consumer Non-Durables - 5.72%
Anheuser Busch Cos., Inc. ................................... 2,000 80,000
CPC International, Inc. ..................................... 1,600 124,000
Darden Restaurants, Inc. .................................... 200 1,750
Eastman Kodak Co. ........................................... 1,300 104,325
General Mills, Inc. ......................................... 950 60,206
Imation Corp.* .............................................. 110 3,094
PepsiCo, Inc. ............................................... 9,100 266,175
Philip Morris Cos., Inc. .................................... 3,700 416,713
Procter & Gamble Co. ........................................ 1,300 139,750
Sara Lee Corp. .............................................. 4,100 152,725
-----------
1,348,738
-----------
Consumer Services - 1.37%
Disney (Walt) Co. ........................................... 1,500 104,437
Hilton Hotels Corp. ......................................... 1,600 41,800
Knight-Ridder, Inc. ......................................... 1,800 68,850
Time Warner, Inc. ........................................... 2,850 106,875
-----------
321,962
-----------
Energy - 6.49%
Amerada Hess Corp. .......................................... 900 52,087
Amoco Corp. ................................................. 1,950 156,975
Atlantic Richfield Co. ...................................... 300 39,750
Baker Hughes, Inc. .......................................... 1,200 41,400
British Petroleum Co. PLC ................................... 1,050 148,444
Burlington Resources, Inc. .................................. 850 42,819
Chevron Corp. ............................................... 2,400 156,000
Exxon Corp. ................................................. 2,500 245,000
Mobil Corp. ................................................. 1,300 158,925
Royal Dutch Petroleum Co. ................................... 800 136,600
Schlumberger, Ltd. .......................................... 700 69,912
Texaco, Inc. ................................................ 1,700 166,813
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
BALANCED FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
COMMON STOCKS - (continued)
Unocal Corp. ............................................... 1,800 $ 73,125
Valero Energy Corp. ........................................ 1,400 40,075
-----------
1,527,925
-----------
Financial Services - 9.20%
American International Group, Inc. ......................... 1,325 143,431
BankAmerica Corp. .......................................... 2,850 284,287
Bankers Trust Corp. ........................................ 1,400 120,750
Chase Manhattan Corp. ...................................... 4,432 395,556
Chubb Corp. ................................................ 2,600 139,750
Citicorp ................................................... 2,700 278,100
Federal National Mortgage Assn. ............................ 11,200 417,200
First Bank System, Inc. .................................... 2,050 139,913
General Re Corp. ........................................... 900 141,975
Morgan (JP) & Co., Inc. .................................... 1,100 107,387
-----------
2,168,349
-----------
Health Care - 6.72%
Alza Corp. Cl. A* .......................................... 1,400 36,225
Bausch & Lomb, Inc. ........................................ 450 15,750
Baxter International, Inc. ................................. 3,300 135,300
Bristol-Myers Squibb Co. ................................... 1,900 206,625
Columbia/HCA Healthcare Corp. .............................. 1,425 58,069
Johnson & Johnson .......................................... 3,500 174,125
Lilly (Eli) & Co. .......................................... 2,200 160,600
Merck & Co., Inc. .......................................... 3,700 293,225
Schering Plough Corp. ...................................... 3,500 226,625
St. Jude Medical, Inc.* .................................... 1,200 51,150
United Healthcare Corp. .................................... 1,650 74,250
Warner-Lambert Co. ......................................... 2,000 150,000
-----------
1,581,944
-----------
Multi-Industry - 0.84%
Allegiance Corp. ........................................... 480 13,260
Cognizant Corp. ............................................ 1,550 51,150
Minnesota Mining & Mfg. Co. ................................ 1,600 132,600
-----------
197,010
-----------
Raw Materials - 2.18%
Aluminum Co. of America .................................... 1,150 73,312
Dow Chemical Co. ........................................... 1,700 133,237
DuPont (EI) De Nemours & Co. ............................... 1,600 151,000
Monsanto Co. ............................................... 4,000 155,500
-----------
513,049
-----------
Retail - 3.56%
Albertson's, Inc. .......................................... 4,350 154,969
Dillard Dept. Stores, Inc. Cl. A ........................... 2,450 75,644
Limited, Inc. .............................................. 2,626 48,253
May Department Stores Co.* ................................. 2,850 133,238
Penney (JC), Inc. .......................................... 1,600 78,000
Price/Costco, Inc.* ........................................ 2,900 72,862
Toys R Us, Inc.* ........................................... 600 18,000
Wal-Mart Stores, Inc. ...................................... 6,500 148,688
Walgreen Co. ............................................... 2,700 108,000
-----------
837,654
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
BALANCED FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Value
-------- ------------
<S> <C> <C>
COMMON STOCKS - (continued)
Shelter - 0.83%
Georgia-Pacific Corp. ...................................... 1,800 $ 129,600
Kimberly-Clark Corp. ....................................... 700 66,675
------------
196,275
------------
Technology - 9.53%
Airtouch Communications, Inc.* ............................. 4,500 113,625
AMP, Inc. .................................................. 3,650 140,069
Boeing Co. ................................................. 500 53,187
Compaq Computer Corp.* ..................................... 4,100 304,425
Hewlett-Packard Co. ........................................ 5,100 256,275
Honeywell, Inc. ............................................ 2,000 131,500
Intel Corp. ................................................ 4,600 602,313
International Business Machines Corp. ...................... 1,250 188,750
Lucent Technologies, Inc. .................................. 1,582 73,167
Motorola, Inc. ............................................. 3,750 230,156
Seagate Technology, Inc.* .................................. 2,900 114,550
Tandem Computers, Inc.* .................................... 2,700 37,125
------------
2,245,142
------------
Transportation - 0.92%
AMR Corp.* ................................................. 1,500 132,188
CSX Corp. .................................................. 2,000 84,500
------------
216,688
------------
Utilities - 5.38%
AT & T Corp. ............................................... 4,150 180,525
Edison International ....................................... 5,600 111,300
El Paso Natural Gas Co. .................................... 1,000 50,500
GTE Corp. .................................................. 6,000 273,000
MCI Communications Corp. ................................... 3,700 120,944
Pacific Gas & Electric Co. ................................. 3,300 69,300
Pacific Telesis Group ...................................... 2,600 95,550
PECO Energy Co. ............................................ 4,100 103,525
SBC Communications, Inc. ................................... 3,050 157,837
Unicom Corp. ............................................... 3,900 105,788
------------
1,268,269
------------
TOTAL COMMON STOCKS (Cost $11,509,212) ..................... 13,914,055
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
----------- --------------
<S> <C> <C>
FIXED INCOME SECURITIES - 38.89%
U.S. Government Obligations - 10.37%
U.S. Treasury Notes
6.875%, 08/31/99 ......................................... $ 125,000 127,672
7.500%, 05/15/02 ......................................... 1,235,000 1,306,667
6.375%, 08/15/02 ......................................... 525,000 529,006
11.625%, 11/15/02 ........................................ 100,000 126,337
6.250%, 02/15/03 ......................................... 280,000 279,975
10.750%, 05/15/03 ........................................ 60,000 73,893
--------------
Total U.S. Treasury Obligations (Cost $2,456,394) .......... 2,443,550
--------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
BALANCED FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
----------- --------------
<S> <C> <C>
FIXED INCOME SECURITIES - (continued)
U.S. Government Agency Obligations - 1.29%
Federal Home Loan Bank - 0.67%
7.360%, 07/01/04 ........................................... $150,000 $ 157,378
--------------
Federal Home Loan Mortgage Corp. - 0.62%
5.990%, 12/01/03 ........................................... 150,000 146,108
--------------
Total U.S. Government Agency Obligations (Cost $305,460) ..... 303,486
--------------
Collateralized Mortgage Obligations - 12.98%
Federal Home Loan Mortgage Corp. - 8.81%
6.300%, 10/15/18 ........................................... 100,000 97,535
6.250%, 05/15/19 ........................................... 100,000 98,998
6.500%, 10/15/19 ........................................... 200,000 198,954
5.950%, 11/15/19 ........................................... 100,000 98,682
7.000%, 02/15/21 ........................................... 100,000 100,294
6.500%, 08/15/21 ........................................... 40,000 39,806
6.500%, 11/15/21 ........................................... 300,000 292,878
6.000%, 02/15/22 ........................................... 100,000 95,525
6.650%, 07/15/22 ........................................... 100,000 98,278
6.250%, 11/15/22 ........................................... 150,000 145,348
6.500%, 11/15/22 ........................................... 100,000 97,263
7.000%, 01/15/23 ........................................... 200,000 200,649
6.000%, 02/15/23 ........................................... 150,000 141,751
6.500%, 02/15/23 ........................................... 100,000 98,061
6.750%, 05/15/23 ........................................... 150,000 146,151
7.000%, 06/25/23 ........................................... 125,000 125,213
--------------
2,075,386
--------------
Federal National Mortgage Association - 4.17%
6.000%, 09/25/18 ........................................... 50,000 48,836
6.250%, 01/25/20 ........................................... 100,000 98,355
6.850%, 10/25/20 ........................................... 50,000 49,183
6.750%, 11/25/20 ........................................... 100,000 100,587
6.750%, 05/25/21 ........................................... 100,000 97,944
6.500%, 10/25/21 ........................................... 200,000 194,493
6.500%, 11/25/21 ........................................... 100,000 97,247
6.800%, 09/25/22 ........................................... 300,000 296,934
--------------
983,579
--------------
Total Collateralized Mortgage Obligations (Cost $3,014,372) .. 3,058,965
--------------
Corporate Bonds - 14.25%
Bank & Insurance - 0.62%
KeyCorp, 6.750%, 03/15/06 .................................... 45,000 44,044
Wells Fargo & Co., 7.125%, 08/15/06 .......................... 100,000 100,250
--------------
144,294
--------------
Financial Services - 12.69%
American General Finance Corp., 7.450%, 07/01/02 ............. 175,000 181,563
Associates Corp. North America, 6.375%, 10/15/02 ............. 50,000 49,625
Associates Corp. North America, 7.625%, 04/27/05 ............. 125,000 130,312
Beneficial Corp., 10.100%, 11/27/00 .......................... 150,000 168,188
Beneficial Corp., 9.470%, 03/09/01 ........................... 30,000 33,075
Commercial Credit Co., 6.375%, 09/15/02 ...................... 50,000 49,625
Commercial Credit Co., 6.625%, 11/15/06 ...................... 275,000 269,500
Finova Capital Corp., 6.625%, 09/15/01 ....................... 50,000 49,812
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
BALANCED FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -------------
<S> <C> <C>
CORPORATE BONDS - (continued)
Finova Capital Corp., 6.120%, 05/28/02 .................... $ 200,000 $ 196,000
Ford Motor Credit Co., 6.250%, 11/08/00 ................... 50,000 49,500
Ford Motor Credit Co., 6.550%, 07/07/03 ................... 125,000 124,063
General Motors Acceptance Corp., 6.600%, 11/22/04 ......... 175,000 171,062
Household Finance Corp., 6.700%, 06/15/02 ................. 50,000 50,563
Household Finance Corp., 7.250%, 07/15/03 ................. 125,000 129,062
Lehman Brothers, Inc., 7.625%, 06/01/06 ................... 40,000 40,650
Sears Roebuck Acceptance Corp., 6.900%, 08/01/03 .......... 125,000 126,094
Sears Roebuck Acceptance Corp., 6.125%, 01/15/06 .......... 50,000 47,313
Smith Barney Holdings, Inc., 7.980%, 03/01/00 ............. 50,000 52,125
Smith Barney Holdings, Inc., 6.500%, 10/15/02 ............. 125,000 124,219
Student Loan Marketing Association, 6.350%, 03/17/03 ...... 350,000 347,658
Transamerica Corp., 6.750%, 11/15/06 ...................... 200,000 196,000
Transamerica Financial Group, 7.510%, 04/15/02 ............ 30,000 31,125
Travelers/Aetna P&C, 6.750%, 11/15/06 ..................... 200,000 196,500
Travelers, Inc., 9.500%, 03/01/02 ......................... 25,000 28,156
Travelers, Inc., 6.625%, 09/15/05 ......................... 150,000 147,000
-------------
2,988,790
-------------
Industrial - 0.94%
Philip Morris Cos., Inc., 7.500%, 01/15/02 ................ 50,000 51,312
Philip Morris Cos., Inc., 8.250%, 10/15/03 ................ 75,000 80,063
Philip Morris Cos., Inc., 6.375%, 02/01/06 ................ 25,000 23,687
Tele Communications, Inc., 6.875%, 02/15/06 ............... 75,000 67,969
-------------
223,031
-------------
Total Corporate Bonds (Cost $3,322,920) ................... 3,356,115
-------------
TOTAL FIXED INCOME SECURITIES (Cost $9,099,146) ........... 9,162,116
-------------
TOTAL INVESTMENTS - 97.96% (Cost $20,608,358)(1) .......... 23,076,171
-------------
CASH AND OTHER ASSETS NET OF LIABILITIES - 2.04% .......... 479,558
-------------
NET ASSETS - 100.00% ...................................... $23,555,729
=============
(1)Aggregate cost for federal income tax purposes is
$20,608,358 and net unrealized appreciation is as follows:
Gross unrealized appreciation ........................ $2,571,657
Gross unrealized depreciation ........................ (103,844)
------------
Net unrealied appreciation ......................... $2,467,813
============
</TABLE>
* Non-dividend paying stock.
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
EQUITY INVESTMENT FUND
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
COMMON STOCKS - 98.58%
Business Equipment & Service - 1.07%
Automatic Data Processing, Inc. ............................. 5,800 $ 248,675
Dun & Bradstreet Corp. ...................................... 1,500 35,625
Flightsafety International, Inc. ............................ 2,750 137,500
-----------
421,800
-----------
Capital Goods - 7.47%
Cooper Industries, Inc. ..................................... 5,500 231,688
Emerson Electric Co. ........................................ 4,500 435,375
General Electric Co. ........................................ 12,400 1,226,050
Illinois Tool Works, Inc. ................................... 500 39,937
Ingersoll Rand Co. .......................................... 3,300 146,850
PPG Industries, Inc. ........................................ 8,000 449,000
Tyco International, Ltd. .................................... 7,980 421,942
-----------
2,950,842
-----------
Consumer Durables - 2.01%
Ford Motor Co. .............................................. 13,000 414,375
General Motors Corp. ........................................ 6,800 379,100
-----------
793,475
-----------
Consumer Non-Durables - 8.94%
Anheuser Busch Cos., Inc. ................................... 6,300 252,000
CPC International, Inc. ..................................... 5,550 430,125
Darden Restaurants, Inc. .................................... 100 875
Eastman Kodak Co. ........................................... 3,450 276,862
General Mills, Inc. ......................................... 2,500 158,438
Imation Corp.* .............................................. 333 9,366
PepsiCo, Inc. ............................................... 22,500 658,125
Philip Morris Cos., Inc. .................................... 9,325 1,050,228
Procter & Gamble Co. ........................................ 3,000 322,500
Sara Lee Corp. .............................................. 10,000 372,500
-----------
3,531,019
-----------
Consumer Services - 2.10%
Disney (Walt) Co. ........................................... 4,000 278,500
Hilton Hotels Corp. ......................................... 4,000 104,500
Knight-Ridder, Inc. ......................................... 5,300 202,725
Time Warner, Inc. ........................................... 6,500 243,750
-----------
829,475
-----------
Energy - 11.13%
Amerada Hess Corp. .......................................... 3,700 214,137
Amoco Corp. ................................................. 6,300 507,150
Atlantic Richfield Co. ...................................... 200 26,500
Baker Hughes, Inc. .......................................... 4,500 155,250
British Petroleum Co. PLC ................................... 3,001 424,266
Burlington Resources, Inc. .................................. 2,500 125,938
Chevron Corp. ............................................... 7,720 501,800
Exxon Corp. ................................................. 5,500 539,000
Mobil Corp. ................................................. 3,700 452,325
Royal Dutch Petroleum Co. ................................... 2,000 341,500
Schlumberger, Ltd. .......................................... 1,850 184,769
Texaco, Inc. ................................................ 6,500 637,812
Unocal Corp. ................................................ 3,500 142,188
Valero Energy Corp. ......................................... 5,000 143,125
-----------
4,395,760
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
EQUITY INVESTMENT FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
COMMON STOCKS - (continued)
Financial Services - 15.27%
American International Group, Inc. ......................... 4,100 $ 443,825
BankAmerica Corp. .......................................... 7,112 709,422
Bankers Trust Corp. ........................................ 4,300 370,875
Chase Manhattan Corp. ...................................... 11,327 1,010,935
Chubb Corp. ................................................ 7,580 407,425
Citicorp ................................................... 7,000 721,000
Federal National Mortgage Assn. ............................ 33,000 1,229,250
First Bank System, Inc. .................................... 5,800 395,850
General Re Corp. ........................................... 2,500 394,375
Morgan (JP) & Co., Inc. .................................... 3,550 346,569
-----------
6,029,526
-----------
Health Care - 11.11%
Alza Corp. Cl. A* .......................................... 4,500 116,437
Bausch & Lomb, Inc. ........................................ 1,400 49,000
Baxter International, Inc. ................................. 10,500 430,500
Bristol-Myers Squibb Co. ................................... 5,600 609,000
Columbia/HCA Healthcare Corp. .............................. 4,450 181,338
Johnson & Johnson .......................................... 10,000 497,500
Lilly (Eli) & Co. .......................................... 5,660 413,180
Merck & Co., Inc. .......................................... 9,960 789,330
Schering Plough Corp. ...................................... 9,000 582,750
St. Jude Medical, Inc.* .................................... 3,100 132,137
United Healthcare Corp. .................................... 4,000 180,000
Warner-Lambert Co. ......................................... 5,400 405,000
-----------
4,386,172
-----------
Multi-Industry - 1.30%
Allegiance Corp. ........................................... 1,440 39,780
Cognizant Corp. ............................................ 4,000 132,000
Minnesota Mining & Mfg. Co. ................................ 4,130 342,274
-----------
514,054
-----------
Raw Materials - 4.16%
Aluminum Co. of America .................................... 4,640 295,800
Dow Chemical Co. ........................................... 3,970 311,149
DuPont (EI) De Nemours & Co. ............................... 5,800 547,375
Monsanto Co. ............................................... 12,500 485,937
-----------
1,640,261
-----------
Retail - 6.24%
Albertson's, Inc. .......................................... 13,300 473,813
Dillard Dept. Stores, Inc. Cl. A ........................... 6,500 200,687
Limited, Inc. .............................................. 11,432 210,063
May Department Stores Co.* ................................. 7,500 350,625
Penney (JC), Inc. .......................................... 8,250 402,188
Price/Costco, Inc.* ........................................ 7,500 188,437
Toys R Us, Inc.* ........................................... 1,000 30,000
Wal-Mart Stores, Inc. ...................................... 14,750 337,406
Walgreen Co. ............................................... 6,800 272,000
-----------
2,465,219
-----------
Shelter - 1.36%
Georgia-Pacific Corp. ...................................... 5,000 360,000
Kimberly-Clark Corp. ....................................... 1,860 177,165
-----------
537,165
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM Funds -- Schedule of Investments (unaudited) December 31, 1996
===============================================================================
EQUITY INVESTMENT FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - (continued)
Technology -15.33%
Airtouch Communications, Inc.* ................................... 10,850 $ 273,962
AMP, Inc. ........................................................ 11,000 422,125
Boeing Co. ....................................................... 300 31,913
Compaq Computer Corp.* ........................................... 10,500 779,625
Hewlett-Packard Co. .............................................. 12,000 603,000
Honeywell, Inc. .................................................. 6,060 398,445
Intel Corp. ...................................................... 12,500 1,636,719
International Business Machines Corp. ............................ 4,200 634,200
Lucent Technologies, Inc. ........................................ 5,953 275,326
Motorola, Inc. ................................................... 10,500 644,437
Seagate Technology, Inc.* ........................................ 7,500 296,250
Tandem Computers, Inc.* .......................................... 4,000 55,000
-------------
6,051,002
-------------
Transportation - 1.66%
AMR Corp.* ....................................................... 4,100 361,313
CSX Corp. ........................................................ 7,000 295,750
-------------
657,063
-------------
Utilities - 9.43%
AT & T Corp. ..................................................... 13,030 566,805
Edison International ............................................. 15,000 298,125
El Paso Natural Gas Co. .......................................... 3,500 176,750
GTE Corp. ........................................................ 13,900 632,450
MCI Communications Corp. ......................................... 5,400 176,513
Pacific Gas & Electric Co. ....................................... 17,000 357,000
Pacific Telesis Group ............................................ 8,000 294,000
PECO Energy Co. .................................................. 17,000 429,250
SBC Communications, Inc. ......................................... 9,000 465,750
Unicom Corp. ..................................................... 12,000 325,500
-------------
3,722,143
-------------
TOTAL COMMON STOCKS - 98.58% (Cost $32,668,982)(1) ............... 38,924,976
-------------
CASH AND OTHER ASSETS NET OF LIABILITIES - 1.42% ................. 559,602
-------------
NET ASSETS - 100.00% ............................................. $39,484,578
=============
(1)Aggregate cost for federal income tax purposes is $32,668,982 and
net unrealized appreciation is as follows:
Gross unrealized appreciation ............................... $6,445,181
Gross unrealized depreciation ............................... (189,187)
-------------
Net unrealized appreciation ................................ $6,255,994
=============
* Non-dividend paying stock.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Assets and Liabilities (unaudited) December 31, 1996
===============================================================================
<TABLE>
<CAPTION>
McM
McM Intermediate McM McM
Principal Fixed Fixed McM Equity
Preservation Income Income Balanced Investment
Fund Fund Fund Fund Fund
-------------- -------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities at value (cost
$20,253,213, $88,118,317, $8,409,016,
$20,608,358 and $32,668,982, respectively) $20,253,213 $88,191,195 $8,514,747 $23,076,171 $38,924,976
Cash-interest bearing accounts .......... 1,294,345 73,704 35,165 231,914 620,987
Dividends and interest receivable ....... 99,160 932,055 96,520 152,794 94,520
Receivable for fund shares sold ......... 0 0 140,000 82,235 20,200
Due from advisor, net ................... 16,203 0 17,734 0 0
Deferred organization cost (Note A) ..... 9,935 9,935 9,935 9,935 9,935
Other assets ............................ 7,012 22,583 2,156 4,501 7,446
-------------- -------------- ------------ ------------- -------------
Total assets .......................... 21,679,868 89,229,472 8,816,257 23,557,550 39,678,064
-------------- -------------- ------------ ------------- -------------
Liabilities:
Payable for securities purchased ........ 0 0 98,272 0 135,673
Fund shares redeemed .................... 0 0 32,235 0 0
Distributions payable ................... 86,603 0 0 0 0
Payable to advisor, net ................. 0 119,821 0 1,821 57,813
-------------- -------------- ------------ ------------- -------------
Total liabilities ..................... 86,603 119,821 130,507 1,821 193,486
-------------- -------------- ------------ ------------- -------------
Net Assets:
Applicable to 21,592,379, 8,697,102, 831,275,
1,707,726 and 2,364,251 shares outstanding,
respectively .......................... $21,593,265 $89,109,651 $8,685,750 $23,555,729 $39,484,578
============== ============== ============ ============= =============
Net Assets Consist of:
Capital paid-in ......................... $21,592,379 $89,053,172 $8,581,282 $21,124,942 $33,229,927
Accumulated undistributed (distributions in
excess of) net investment income ...... 0 (78,764) (13,291) (10,521) (1,493)
Accumulated net realized gain (loss) on
investments ........................... 886 62,365 12,028 (26,505) 150
Net unrealized appreciation/depreciation on
investments ........................... 0 72,878 105,731 2,467,813 6,255,994
-------------- -------------- ------------ ------------- -------------
$21,593,265 $89,109,651 $8,685,750 $23,555,729 $39,484,578
============== ============== ============ ============= =============
Net asset value and redemption price per share $ 1.00 $ 10.25 $ 10.45 $ 13.79 $ 16.70
============== ============== ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
===============================================================================
<TABLE>
<CAPTION>
McM
McM Intermediate McM McM
Principal Fixed Fixed McM Equity
Preservation Income Income Balanced Investment
Fund Fund Fund Fund Fund
-------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends ................................ $ 0 $ 0 $ 0 $ 127,699 $ 367,553
Interest ................................. 653,576 2,723,515 285,607 249,579 15,421
-------------- -------------- ---------- ------------ ------------
Total investment income ................ 653,576 2,723,515 285,607 377,278 382,974
-------------- -------------- ---------- ------------ ------------
Expenses:
Investment advisory fees (Note E) ........ 30,540 149,345 14,559 41,137 76,891
Transfer agent fees ...................... 12,042 10,987 10,387 11,335 11,714
Administration fees ...................... 9,656 9,498 9,380 9,581 9,658
Accounting fees .......................... 11,247 20,724 11,367 11,182 11,591
Custodian fees ........................... 4,477 7,223 2,000 10,400 7,255
Insurance fees ........................... 5,209 16,755 1,796 2,859 4,999
Legal fees ............................... 2,385 7,072 757 1,359 2,335
Amortization of organization costs (Note A) 1,820 1,820 1,820 1,820 1,820
Registration expenses .................... 7,440 19,904 3,557 5,855 9,000
Trustees fees ............................ 909 2,724 409 682 1,076
Auditing fees ............................ 6,000 6,000 6,000 6,000 6,000
Miscellaneous expenses ................... 155 643 67 117 409
Other expenses ........................... 1,110 1,857 411 304 594
-------------- -------------- ---------- ------------ ------------
Total expenses ......................... 92,990 254,552 62,510 102,631 143,342
Expenses reimbursed (Note E) ............. (56,341) (41,203) (41,711) (47,782) (28,006)
-------------- -------------- ---------- ------------ ------------
Net expenses ........................... 36,649 213,349 20,799 54,849 115,336
-------------- -------------- ---------- ------------ ------------
Net Investment Income ...................... 616,927 2,510,166 264,808 322,429 267,638
-------------- -------------- ---------- ------------ ------------
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments .. (703) 89,974 14,040 (4,030) 5,298
Net change in unrealized appreciation/
depreciation on investments ........... 0 929,527 128,092 1,564,048 3,864,425
-------------- -------------- ---------- ------------ ------------
Net realized and unrealized gain (loss) on
investments ........................... (703) 1,019,501 142,132 1,560,018 3,869,723
-------------- -------------- ---------- ------------ ------------
Increase in Net Assets from Operations ..... $616,224 $3,529,667 $406,940 $1,882,447 $4,137,361
============== ============== ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets
===============================================================================
<TABLE>
<CAPTION>
McM Principal McM Intermediate
Preservation Fund Fixed Income Fund
-------------------------------- ---------------------------------
Six Months Ended For the Six Months Ended For the
12/31/96 Year Ended 12/31/96 Year Ended
(unaudited) 06/30/96 (unaudited) 06/30/96
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ..................................... $ 616,927 $ 989,059 $ 2,510,166 $ 3,298,089
Net realized gain (loss) on investments .................. (703) 1,584 89,974 428,006
Net change in unrealized
appreciation/ depreciation on investments ............... 0 0 929,527 (1,350,540)
------------ ------------ ------------ ------------
Increase in net assets .................................... 616,224 990,643 3,529,667 2,375,555
------------ ------------ ------------ ------------
Dividends and Distributions to Shareholders:
From net investment income ................................ (616,927) (989,059) (2,802,166) (3,160,286)
From capital gains ........................................ 0 0 (164,477) (539,436)
------------ ------------ ------------ ------------
Total Distributions ....................................... (616,927) (989,059) (2,966,643) (3,699,722)
------------ ------------ ------------ ------------
Capital Share Transactions - Note C .......................... (2,601,154) 12,380,593 12,501,902 47,432,633
------------ ------------ ------------ ------------
Total increase (decrease) in net assets .................. (2,601,857) 12,382,177 13,064,926 46,108,466
Net Assets:
Beginning of period ....................................... 24,195,122 11,812,945 76,044,725 29,936,259
------------ ------------ ------------ ------------
End of period (including undistributed (distributions
in excess of) net investment income of $0, $0, ($78,764),
$214,359, ($13,291) and $23,026, respectively) .......... $ 21,593,265 $ 24,195,122 $ 89,109,651 $ 76,044,725
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
McM Fixed
Income Fund
------------------------------
Six Months Ended For the
12/31/96 Year Ended
(unaudited) 06/30/96
---------------- ------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 264,808 $ 439,630
Net realized gain (loss) on investments .................. 14,040 16,664
Net change in unrealized
appreciation/ depreciation on investments ............... 128,092 (169,853)
----------- -----------
Increase in net assets .................................... 406,940 286,441
----------- -----------
Dividends and Distributions to Shareholders:
From net investment income ................................ (301,101) (433,144)
From capital gains ........................................ (10,143) (37,168)
----------- -----------
Total Distributions ....................................... (311,244) (470,312)
----------- -----------
Capital Share Transactions - Note C .......................... 598,409 1,576,877
----------- -----------
Total increase (decrease) in net assets .................. 694,105 1,393,006
Net Assets:
Beginning of period ....................................... 7,991,645 6,598,639
----------- -----------
End of period (including undistributed (distributions
in excess of) net investment income of $0, $0, ($78,764),
$214,359, ($13,291) and $23,026, respectively) ......... $ 8,685,750 $ 7,991,645
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
McM Balanced McM Equity
Fund Investment Fund
----------------------------------- ----------------------------------
Six Months Ended For the Six Months Ended For the
12/31/96 Year Ended 12/31/96 Year Ended
(unaudited) 06/30/96 (unaudited) 06/30/96
------------------ -------------- ------------------ -------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ..................... $ 322,429 $ 216,803 $ 267,638 $ 179,744
Net realized gain (loss) on investments ... (4,030) (15,053) 5,298 18,284
Net change in unrealized appreciation/
depreciation on investments ............. 1,564,048 680,345 3,864,425 2,003,550
----------- ---------- ----------- -----------
Increase in net assets .................... 1,882,447 882,095 4,137,361 2,201,578
----------- ---------- ----------- -----------
Dividends and Distributions to Shareholders:
From net investment income ................ (348,093) (206,101) (280,047) (171,896)
From capital gains ........................ 0 (33,641) (15,401) (19,520)
----------- ---------- ----------- -----------
Total Distributions ....................... (348,093) (239,742) (295,448) (191,416)
----------- ---------- ----------- -----------
Capital Share Transactions - Note C .......... 10,106,406 8,202,740 11,729,744 17,037,000
----------- ---------- ----------- -----------
Total increase in net assets .............. 11,640,760 8,845,093 15,571,657 19,047,162
Net Assets:
Beginning of period ....................... 11,914,969 3,069,876 23,912,921 4,865,759
----------- ---------- ----------- -----------
End of period (including undistributed
(distributions in excess of) net investment
income of ($10,521), $15,143, ($1,493) and
$10,916, respectively) .................. $23,555,729 $11,914,969 $39,484,578 $23,912,921
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McM FUNDS
Notes to Financial Statements (unaudited) December 31, 1996
- --------------------------------------------------------------------------------
Note (A) Significant Accounting Policies: McM Funds (the "Company") operates
as a series company currently issuing five series of shares of beneficial
interest (collectively, the "Funds"): McM Principal Preservation Fund (the
"Principal Preservation Fund"), McM Intermediate Fixed Income Fund (the
"Intermediate Fixed Income Fund"), McM Fixed Income Fund (the "Fixed Income
Fund"), McM Balanced Fund (the "Balanced Fund") and McM Equity Investment
Fund (the "Equity Investment Fund"). The Company is a no-load, open-end
management investment company which is registered under the Investment
Company Act of 1940 (the "Act"), as amended. The Company was organized as a
Delaware business trust on February 3, 1994. The Principal Preservation Fund
commenced investment operations on July 13, 1994. The Intermediate Fixed
Income Fund, Fixed Income Fund, Balanced Fund and Equity Investment Fund
commenced investment operations on July 14, 1994. Investment in the Principal
Preservation Fund is neither insured nor guaranteed by the U.S. Government,
and there can be no assurance that the Principal Preservation Fund will be
able to maintain a stable net asset value of $1.00. Certain officers and
trustees of the Funds are also officers and directors of McMorgan and Company
(the "Advisor"). No officer or employee of the Advisor receives any
compensation from the Funds for acting as a trustee of the Funds. The
officers of the Funds receive no compensation directly from the Funds for
performing the duties of their offices. All Company officers serve without
direct compensation from the Funds. The following is a summary of the
significant accounting policies consistently followed by each Fund in the
preparation of its financial statements. These policies are in conformity
with generally accepted accounting principles.
(1) Security Valuation: The net asset value per share of each Fund is
computed as of the close of regular trading on the New York Stock
Exchange. The net asset value per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the
number of shares outstanding. The equity securities of each Fund listed
or traded on a stock exchange are valued at the last sale price on its
principal exchange. If no sale price is reported, the mean of the last
bid and asked prices is used. Securities traded over-the-counter are
priced at the mean of the last bid and asked prices. Fixed-income
securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established
by the Board of Trustees. All securities held in the portfolio of the
Principal Preservation Fund, and the debt securities with maturities of
60 days or less held by the other Funds, are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost
when purchased, and thereafter by assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. When
market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith by the Board of
Trustees.
(2) Repurchase Agreements: Each Fund may enter into repurchase agreements
to earn income. The Funds may only enter into repurchase agreements with
financial institutions that are deemed to be creditworthy by the Advisor,
pursuant to guidelines established by the Funds' Board of Trustees.
During the term of any repurchase agreement, the Advisor will continue to
monitor the creditworthiness of the seller. Repurchase agreements are
considered under the Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund. Repurchase
agreements under the Act will be fully collateralized by securities in
which the Fund may invest directly. Such collateral will be
marked-to-market daily. If the seller of the underlying security under
the repurchase agreement should default on its obligation to repurchase
the underlying security, a Fund may experience delay or difficulty in
exercising its right to realize upon the security and, in addition, may
incur a loss if the value of the security should decline, as well as
disposition costs in liquidating the security.
<PAGE>
McM FUNDS
Notes to Financial Statements (unaudited) December 31, 1996
- --------------------------------------------------------------------------------
(3) Investment Income and Securities Transactions: Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
Securities transactions are accounted for on the date securities are
purchased or sold. The cost of securities sold is determined using the
first-in-first-out method.
(4) Federal Income Taxes: The Funds have elected to be treated as
"regulated investment companies" under Sub-chapter M of the Internal
Revenue Code and to distribute substantially all of their respective net
taxable income. Each Fund qualified for such treatment for the six month
period ended December 31, 1996. Accordingly, no provisions for federal
income taxes have been made in the accompanying financial statements.
(5) Dividends and Distributions: Dividends and distributions to
shareholders are recorded on the ex-dividend date.
(6) Organization Costs: Organization costs are being amortized on a
straight-line basis over five years.
Note (B) Dividends from Net Investment Income and Distributions of Capital
Gains: The Principal Preservation Fund declares dividends daily from its net
investment income. The Principal Preservation Fund's dividends are payable
monthly and are automatically reinvested in additional Fund shares, at the
month-end net asset value, for those shareholders that have elected the
reinvestment option. The Intermediate Fixed Income Fund and the Fixed Income
Fund distribute their respective net investment income to shareholders
monthly and net capital gains, if any, are distributed annually. With respect
to the Balanced Fund and the Equity Investment Fund, dividends from net
investment income are distributed quarterly and net realized gains from
investment transactions, if any, are distributed to shareholders annually.
Note (C) Capital Share Transactions: Each Fund is authorized to issue an
unlimited number of shares of beneficial interest with no par value.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
PRINCIPAL PRESERVATION FUND INTERMEDIATE FIXED INCOME FUND
-------------------------------------------------------- -------------------------------------------
Six Months Ended Six Months Ended
December 31, 1996 Year Ended December 31, 1996 Year Ended
(unaudited) June 30, 1996 (unaudited) June 30, 1996
--------------------------- --------------------------- ---------------------- ------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------------ ------------ ------------ ------------ --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ........... 30,915,595 $ 30,915,595 48,186,845 $ 48,186,845 1,909,775 $19,592,198 5,055,407 $52,223,621
Shares issued through
reinvestment of
dividends ............ 513,585 513,585 954,210 954,210 281,213 2,879,687 344,344 3,547,475
Shares redeemed ....... (34,030,334) (34,030,334) (36,760,462) (36,760,462) (968,234) (9,969,983) (813,233) (8,338,463)
------------ ------------ ------------ ------------ --------- ----------- --------- -----------
Net Increase (Decrease) (2,601,154) ($ 2,601,154) 12,380,593 $ 12,380,593 1,222,754 $12,501,902 4,586,518 $47,432,633
============ ============ ============ ============ ========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME FUND BALANCED FUND
---------------------------------------------------- -----------------------------------------------
Six Months Ended Six Months Ended
December 31, 1996 Year Ended December 31, 1996 Year Ended
(unaudited) June 30, 1996 (unaudited) June 30, 1996
------------------------ ------------------------- ------------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ----------- ---------- ------------ ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ........... 55,588 $ 583,398 131,506 $1,383,524 766,982 $10,016,477 662,596 $8,186,373
Shares issued through
reinvestment of
dividends ............ 29,842 311,025 44,326 467,474 24,927 334,032 17,679 218,104
Shares redeemed ....... (28,004) (296,014) (25,846) (274,121) (18,467) (244,103) (16,574) (201,737)
---------- ----------- ---------- ------------ ---------- ------------ ---------- ----------
Net Increase .......... 57,426 $ 598,409 149,986 $1,576,877 773,442 $10,106,406 663,701 $8,202,740
========== =========== ========== ============ ========== ============ ========== ==========
</TABLE>
<PAGE>
McM FUNDS
Notes to Financial Statements (unaudited) December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INVESTMENT FUND
---------------------------------------------------------
Six Months Ended
December 31, 1996 Year Ended
(unaudited) June 30, 1996
--------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold .............. 790,228 $12,333,176 1,249,130 $17,659,811
Shares issued through
reinvestment of dividends 17,643 280,574 13,380 186,095
Shares redeemed .......... (53,446) (884,006) (59,989) (808,906)
---------- ------------- ----------- -------------
Net Increase ............. 754,425 $11,729,744 1,202,521 $17,037,000
========== ============= =========== =============
</TABLE>
Note (D) Investment Transactions: Aggregate purchases and proceeds from sales
of investment securities (other than short-term investments) for the six
month period ended December 31, 1996 were:
<TABLE>
<CAPTION>
Aggregate Proceeds from
Purchases Sales
-------------- ---------------
<S> <C> <C>
Intermediate Fixed Income Fund $22,385,837 $9,545,966
Fixed Income Fund ............ 1,760,578 1,234,627
Balanced Fund ................ 14,267,981 4,450,023
Equity Investment Fund ....... 11,475,869 25,026
</TABLE>
Note (E) Advisory, Administration and Distribution Services Agreements: Under
its investment advisory agreements with each of the Funds, the Advisor
provides investment advisory services to the Funds. The Funds will pay the
Advisor at the following annual percentage rates of the average daily net
assets of each Fund: 0.25% for the Principal Preservation Fund; 0.35% for the
Intermediate Fixed Income Fund; 0.35% for the Fixed Income Fund; 0.45% for
the Balanced Fund; and 0.50% for the Equity Investment Fund. These fees are
accrued daily and paid monthly. The Advisor has voluntarily undertaken to
absorb for the Principal Preservation Fund, Intermediate Fixed Income Fund,
Fixed Income Fund, Balanced Fund and Equity Investment Fund operating
expenses which cause total expenses to exceed 0.30%, 0.50%, 0.50%, 0.60%, and
0.75%, respectively. For the period July 1, 1996 through December 31, 1996,
the Advisor absorbed, subject to repayment, expenses totaling $215,043;
$56,341 for the Principal Preservation Fund, $41,203 for the Intermediate
Fixed Income Fund, $41,711 for the Fixed Income Fund, $47,782 for the
Balanced Fund and $28,006 for the Equity Investment Fund.
The investment advisory agreements provide that any fee reductions or expense
reimbursements made by the Advisor are subject to reimbursement by the Funds
within the three years following such reduction or reimbursement provided
that the Funds are able to make such reimbursements and remain in compliance
with applicable expense limitations. Since July 14, 1994 (July 13, 1994 for
the Principal Preservation Fund) through December 31, 1996, the Advisor has
reduced its management fee and otherwise absorbed Fund expenses for each Fund
in the following amounts: Principal Preservation Fund $204,971, Intermediate
Fixed Income Fund $246,656, Fixed Income Fund $161,203, Balanced Fund
$174,599 and Equity Investment Fund $151,510.
Note (F) Special Meeting of Shareholders: A Special Meeting of Shareholders
was held on December 2, 1996. At the meeting, shareholders of the Funds were
asked to consider the election of three (3) nominees to the Board of
Trustees.
The results of all matters voted on by shareholders of the Funds at the
Special Meeting of Shareholders, in dollar weighted values for shares voted
by proxy, were as follows: nominees Mark R. Taylor, Gregory L. Watson and
S.D. Sicotte received 146,622,830, 146,993,113 and 146,993,113 votes FOR,
respectively and 374,409, 4,126 and 4,126 votes withholding authority,
respectively.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of beneficial interest
outstanding throughout each period presented.
<TABLE>
<CAPTION>
McM Principal McM Intermediate
Preservation Fund Fixed Income Fund
--------------------------------------------- --------------------------------------------
Six Months Ended For the For the Six Months Ended For the For the
12/31/96 Year Ended Period Ended 12/31/96 Year Ended Period Ended
(unaudited) 06/30/96 06/30/95* (unaudited) 06/30/96 06/30/95**
---------------- ------------ -------------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period . $ 1.00 $ 1.00 $ 1.00 $ 10.17 $ 10.37 $ 10.00
--------- ------- --------- ---------- -------- ---------
Income from investment
operations
Net investment income ............ 0.03 0.05 0.05 0.30 0.57 0.54
Net realized and unrealized gain (loss)
on investments ................. 0.00 0.00 0.00 0.14 (0.10) 0.34
--------- -------- --------- ---------- -------- --------
Total from investment operations . 0.03 0.05 0.05 0.44 0.47 0.88
--------- -------- --------- ---------- -------- --------
Less Distributions:
From net investment income ....... (0.03) (0.05) (0.05) (0.30) (0.57) (0.51)
In excess of net investment income . 0.00 0.00 0.00 (0.04) 0.00 0.00
From capital gains ............... 0.00 0.00 0.00 (0.02) (0.10) 0.00
--------- -------- --------- ---------- -------- --------
Total distributions ............ (0.03) (0.05) (0.05) (0.36) (0.67) (0.51)
--------- -------- --------- ---------- -------- --------
Net Asset Value, end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 10.25 $ 10.17 $ 10.37
========= ======== ========= ========== ======== =========
Total return ........................ 2.57%(2) 5.39% 5.10%(2) 4.34%(2) 4.61% 9.19%(2)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 21,593 $ 24,195 $ 11,813 $ 89,110 $ 76,045 $ 29,936
Ratio of expenses to average net assets
before reimbursement of expenses by
Advisor ........................ 0.76%(1) 0.93% 2.77%(1) 0.59%(1) 0.69% 1.72%(1)
Ratio of expenses to average net assets
after reimbursement of expenses by
Advisor ........................ 0.30%(1) 0.30% 0.30%(1) 0.50%(1) 0.50% 0.50%(1)
Ratio of net investment income to
average net assets before
reimbursement of expenses by
Advisor ........................ 4.56%(1) 4.60% 2.91%(1) 5.75%(1) 5.52% 5.01%(1)
Ratio of net investment income to
average net assets after
reimbursement of expenses by
Advisor ........................ 5.02%(1) 5.23% 5.38%(1) 5.84%(1) 5.71% 6.24%(1)
Portfolio turnover ............... N/A N/A N/A 11.39%(2) 75.26% 227.09%(2)
Average commission rate paid ..... N/A N/A N/A N/A N/A N/A
</TABLE>
* McM Principal Preservation Fund commenced investment operations on July
13, 1994.
** McM Intermediate Fixed Income Fund commenced investment operations on July
14, 1994.
(1) Annualized.
(2) Not annualized.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of beneficial interest
outstanding throughout each period presented.
<TABLE>
<CAPTION>
McM Fixed McM Balanced
Income Fund Fund
---------------------------------------------- ----------------------------------------------
Six Months Ended For the For the Six Months Ended For the For the
12/31/96 Year Ended Period Ended 12/31/96 Year Ended Period Ended
(unaudited) 06/30/96 06/30/95* (unaudited) 06/30/96 06/30/95*
------------- ------------ ------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period . $ 10.33 $ 10.58 $ 10.00 $ 12.75 $ 11.35 $ 10.00
--------- --------- ---------- --------- --------- --------
Income from investment
operations
Net investment income ........... 0.33 0.64 0.55 0.21 0.40 0.36
Net realized and unrealized gain
(loss) on investments ......... 0.18 (0.20) 0.56 1.06 1.49 1.33
--------- --------- ---------- --------- --------- --------
Total from investment operations 0.51 0.44 1.11 1.27 1.89 1.69
--------- --------- ---------- --------- --------- --------
Less Distributions:
From net investment income ...... (0.33) (0.63) (0.53) (0.21) (0.40) (0.34)
In excess of net investment income (0.05) 0.00 0.00 (0.02) 0.00 0.00
From capital gains .............. (0.01) (0.06) 0.00 0.00 (0.09) 0.00
--------- --------- ---------- --------- --------- --------
Total distributions ........... (0.39) (0.69) (0.53) (0.23) (0.49) (0.34)
--------- --------- ---------- --------- --------- --------
Net Asset Value, end of period ..... $ 10.45 $ 10.33 $ 10.58 $ 13.79 $ 12.75 $ 11.35
========= ========= ========== ========= ========= ========
Total return ....................... 5.02%(2) 4.16% 11.55%(2) 10.00%(2) 16.86% 17.31%(2)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 8,686 $ 7,992 $ 6,599 $ 23,556 $ 11,915 $ 3,070
Ratio of expenses to average net assets
before reimbursement of expenses
by Advisor .................... 1.49%(1) 1.82% 7.29%(1) 1.11%(1) 2.21% 8.41%(1)
Ratio of expenses to average net assets
after reimbursement of expenses by
Advisor ....................... 0.50%(1) 0.50% 0.50%(1) 0.60%(1) 0.60% 0.60%(1)
Ratio of net investment income to
average net assets before
reimbursement of expenses by
Advisor ....................... 5.33%(1) 4.70% -0.47%(1) 2.98%(1) 1.81% -3.54%(1)
Ratio of net investment income to
average net assets after
reimbursement of expenses by
Advisor ....................... 6.32%(1) 6.02% 6.33%(1) 3.49%(1) 3.43% 4.28%(1)
Portfolio turnover .............. 15.18%(2) 37.62% 150.77%(2) 25.22%(2) 26.16% 81.05%(2)
Average commission rate paid .... N/A N/A N/A $0.0600 $0.0600 N/R
</TABLE>
* McM Fixed Income Fund and McM Balanced Fund commenced investment operations
on July 14, 1994.
(1) Annualized.
(2) Not annualized.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
<TABLE>
<CAPTION>
McM Equity
Investment Fund
--------------------------------------------------
Six Months Ended For the For the
12/31/96 Year Ended Period Ended
(unaudited) 06/30/96 06/30/95*
---------------- ------------ --------------
<S> <C> <C> <C>
Net Asset Value, beginning of period .................................. $ 14.85 $ 11.95 $ 10.00
------------ --------- -----------
Income from investment operations
Net investment income ............................................... 0.13 0.21 0.19
Net realized and unrealized gain on investments ..................... 1.86 2.94 1.94
-------------- ----------- -------------
Total from investment operations ................................. 1.99 3.15 2.13
-------------- ----------- -------------
Less Distributions:
From net investment income .......................................... (0.13) (0.21) (0.18)
From capital gains .................................................. (0.01) (0.04) 0.00
-------------- ----------- -------------
Total distributions .............................................. (0.14) (0.25) (0.18)
-------------- ----------- -------------
Net Asset Value, end of period ........................................ $ 16.70 $ 14.85 $ 11.95
============== =========== =============
Total return .......................................................... 13.46%(2) 26.53% 21.57%(2)
Ratios/Supplemental Data
Net assets, end of period (in 000's) ................................ $ 39,485 $ 23,913 $ 4,866
Ratio of expenses to average net assets before reimbursement of expenses
by Advisor ....................................................... 0.92%(1) 1.72% 8.48%(1)
Ratio of expenses to average net assets after reimbursement of expenses
by Advisor ....................................................... 0.75%(1) 0.75% 0.75%(1)
Ratio of net investment income to average net assets before
reimbursement of expenses by Advisor ............................. 1.54%(1) 0.80% -5.50%(1)
Ratio of net investment income to average net assets after reimbursement
of expenses by Advisor ........................................... 1.71%(1) 1.77% 2.24%(1)
Portfolio turnover .................................................. 0.08%(2) 0.92% 1.81%(2)
Average commission rate paid ........................................ $0.0600 $0.0600 N/R
</TABLE>
* McM Equity Investment Fund commenced investment operations on July 14,
1994.
(1) Annualized.
(2) Not annualized.
See accompanying notes to financial statements.
<PAGE>
Board of Trustees
Robert R. Barron
Terry A. O'Toole
Walter B. Rose
Kenneth I. Rosenblum
S.D. Sicotte
Mark R. Taylor
Gregory L. Watson
Officers
Terry A. O'Toole, CEO and President
Robert R. Barron, Vice President and Treasurer
Deane A. Nelson, Vice President and Secretary
Investment Advisor Custodian
McMorgan & Company The Bank of New York
One Bush Street, Suite 800 48 Wall Street
San Francisco, CA 94104 New York, New York 10286
(800) 788-9485
Underwriter Legal Counsel
FPS Broker Services, Inc. Heller, Ehrman, White & McAuliffe
3200 Horizon Drive 333 Bush Street
King of Prussia, PA 19406 San Francisco, CA 94104-2878
Shareholder Services Auditors
FPS Services, Inc. Tait, Weller & Baker
3200 Horizon Drive 2 Penn Center Plaza, Suite 700
King of Prussia, PA 19406 Philadelphia, PA 19102-1707
For Additional Information about
McM Funds call:
(800) 788-9485
This report is submitted for general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which
includes details regarding the Funds' objectives, policies, expenses and
other information.
