<PAGE> 1
M FUNDS
Edinburgh Overseas Equity Fund
Turner Core Growth Fund
Frontier Capital Appreciation Fund
Enhanced U.S. Equity Fund
Annual Report
December 31, 1997
(M Financial Group Logo)
<PAGE> 2
M FUND, INC.
PRESIDENT'S LETTER
January 15, 1998
Dear Contract Owners:
We are pleased to present to you the M Fund, Inc. (the "Company") Annual Report
dated December 31, 1997. The Company has been growing steadily during 1997 with
total assets under management reaching over $33 million as of December 31, 1997.
Sub-Advisers to the portfolios, under the direction of M Financial Investment
Advisers, Inc., the investment adviser to the Company, have prepared the
attached discussion of results for each portfolio of the Company for the year
ended December 31, 1997 in addition to their outlook for 1998.
Sub-Advisers to the Company are: Edinburgh Fund Managers plc for the Edinburgh
Overseas Equity Fund, Turner Investment Partners, Inc. for the Turner Core
Growth Fund, Frontier Capital Management Company, Inc. for the Frontier Capital
Appreciation Fund, and Franklin Portfolio Associates LLC for the Enhanced U.S.
Equity Fund.
The M Fund Board of Directors, in coordination with M Financial Investment
Advisers, Inc. and M Fund's participating insurance carriers remain committed to
providing opportunities to add value to shareholders.
Sincerely,
LOGO
DANIEL F. BYRNE
President
M Fund, Inc.
<PAGE> 3
EDINBURGH OVERSEAS EQUITY FUND
The Edinburgh Overseas Equity Fund returned 2.26% for the year ended
December 31, 1997. The MSCI EAFE Index returned 1.55% for the same period.
The marked deterioration in the economic situation in Asia has cast a
shadow over world stock markets. All international equity markets fell sharply
during October reflecting fears that the economic turmoil in Asia would lead to
a general world slowdown. While this clearly would be negative in terms of
profits growth, particularly for companies actively involved in Asia, the
deflationary impact of this slowdown will reduce the need to raise interest
rates.
Bond markets have reacted positively to this development with yields on
U.S. Treasuries falling to approximately 5.7%, which is an all time low. This
strength also reflects significant international demand from investors seeking a
"safe haven" due to the turmoil in Asian markets. The strength in bonds has
provided strong support for European equities which rallied strongly during the
final weeks of 1997. However, Japan and other Asian markets have shown
pronounced weakness with losses to international investors compounded by
currency depreciation.
The Fund's investment performance has benefited from having an
underweighted position versus the index in Japan and, within the Pacific Basin
(Ex-Japan) area, concentrating primarily on defensive markets such as Australia
and Hong Kong which have held up better than other Asian markets. The Fund's
short term cash balances averaged around 9% which has been a positive during
this period of market uncertainty. At the stock selection level, good relative
returns were seen in the United Kingdom, Continental Europe and the Pacific
Basin (Ex-Japan).
Looking forward, Edinburgh Fund Managers plc believes the global decline in
inflationary expectations will provide a strong underpinning for bonds and will
give support to equities. Merger and acquisition activity is also likely to
remain a positive feature particularly in Continental Europe.
The main uncertainty relates to Asia and the extent to which the sharp
slowdown feeds through to corporate profits growth in other markets. The success
or otherwise of the Japanese government's recent packages to stimulate the
economy and stabilize the banking system will be a critical determinant of
trends in the Japanese equity market. As regards other Asian markets, the
International Monetary Fund's emergency support packages have brought some
stability. A sustained recovery, however, seems unlikely until governments in
the region demonstrate that they have the political will to implement the harsh
measures necessary to restructure their economies.
EDINBURGH FUND MANAGERS PLC
INVESTMENT SUB-ADVISER TO THE EDINBURGH OVERSEAS EQUITY FUND
2
<PAGE> 4
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE EDINBURGH OVERSEAS EQUITY FUND AND MSCI EAFE INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EDINBURGH OVERSEAS
(FISCAL YEAR COVERED) EQUITY FUND MSCI EAFE INDEX**
<S> <C> <C>
1/4/96 10000 10000
3/31/96 10077 10296
6/30/96 10264 10466
9/30/96 9992 10403
12/31/96 9940 10610
3/31/97 9834 10442
6/30/97 10962 11799
9/30/97 10857 11697
12/31/97 10162 10780
</TABLE>
The Fund's total return is calculated net of Investment Advisory fees and
operating expenses. Past performance is not predictive of future performance.
Persons who invest in the Fund through a variable annuity or variable life
insurance contract should note this graph does not reflect separate account
expenses deducted by the insurance company.
- ------------
* Fund's inception date
** 1/1/96 to 12/31/97
MORGAN STANLEY CAPITAL INTERNATIONAL - EUROPE, AUSTRALIA, FAR EAST INDEX
The arithmetic, market value-weighted average of the performance of over 900
securities listed on the stock exchanges of the following 20 countries:
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, and the United Kingdom. It includes the
effect of reinvested dividends, net of foreign taxes withheld, and is measured
in U.S. dollars. The index is calculated on a total return basis.
3
<PAGE> 5
TURNER CORE GROWTH FUND
The Turner Core Growth Fund returned 28.32% for the year ended December 31,
1997. The Wilshire 5000 Stock Index returned 31.29% while the average growth
fund tracked by Lipper Analytic Services returned 28.08% for the same period.
Three characteristics served to define the stock market in the year ended
December 31, 1997:
- - Notable volatility. The market, as measured by the S&P 500 Index, moved up or
down more than 1% in about 70% of the trading days during the year. Volatility
was particularly pronounced in the fourth quarter, when bad news about Asia's
markets, economies, and currencies materialized.
- - The continued outperformance of value stocks over growth stocks. The Russell
1000 Value Index returned 3.0 percentage points more than the Russell 1000
Growth Index.
- - Superior performance versus historical norms. The Wilshire 5000 Index returned
31.29% -- more than 18 percentage points above the compound annual return of
common stocks since 1926.
For its part, in 1997 the Turner Core Growth Fund weathered the volatility
admirably; maintained its established investment discipline of owning shares of
companies with the most promising earnings prospects, notwithstanding the
market's preference for value stocks.
Contributing especially to the Fund's results for the year were investments
in the producer-durables sector (represented by conglomerates, metals and
commercial services), up nearly 50%. Also recording above-average results were
positions in airlines and automotive, financial services, health care (including
medical supplies and pharmaceuticals) and technology (represented by computers
and information, computer software and communications), which recorded returns
of more than 30%.
All told, the Fund's underperformance can largely be attributed to the
market simply not bestowing premium returns on many companies with premium
growth prospects -- a circumstance that has been the case for the past three
years. Growth stocks did reverse the trend briefly in 1997, soaring from April
through September. But as the massive financial problems in Asia made headlines
in late October and roiled the market for the remainder of the year, value
stocks again came to the fore; their relatively lower price/earnings multiples
were sought by jittery investors.
We think the pendulum is likely to swing to the advantage of growth-stock
investing soon. We anticipate that corporate earnings growth will noticeably
slow in 1998. In the past three years the S&P 500 companies have been increasing
their earnings per share at an 18.3% clip, a pace that's unlikely to continue.
Indeed, the consensus forecast of Wall Street analysts is that S&P 500 earnings
per share will increase only 13.8% in 1998. Numerous studies and our own
research have shown that when profits slow, investors gravitate to companies
with predictable earnings.
TURNER INVESTMENT PARTNERS, INC.
INVESTMENT SUB-ADVISER TO THE TURNER CORE GROWTH FUND
4
<PAGE> 6
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE TURNER CORE GROWTH FUND AND WILSHIRE 5000 STOCK INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TURNER CORE GROWTH WILSHIRE 5000 STOCK
(FISCAL YEAR COVERED) FUND INDEX**
<S> <C> <C>
1/4/96 10000 10000
3/31/96 10651 10562
6/30/96 11228 11027
9/30/96 11614 11339
12/31/96 12000 12120
3/31/97 11632 12200
6/30/97 13357 14260
9/30/97 15146 15651
12/31/97 15384 15914
</TABLE>
The Fund's total return is calculated net of Investment Advisory fees and
operating expenses. Past performance is not predictive of future performance.
Persons who invest in the Fund through a variable annuity or variable life
insurance contract should note this graph does not reflect separate account
expenses deducted by the insurance company.
- ------------
* Fund's inception date
** 1/1/96 to 12/31/97
WILSHIRE 5000 STOCK INDEX
A capitalization weighted stock index representing all domestic common stocks
traded regularly on the organized exchanges. The index is the broadest measure
of the aggregate domestic stock market.
5
<PAGE> 7
FRONTIER CAPITAL APPRECIATION FUND
The Frontier Capital Appreciation Fund returned 22.13% for the year ended
December 31, 1997. The Russell 2500 Stock Index returned 24.36% for the same
period.
An examination of the relative performance of sectors within the Russell
2500 showed financial services were the best group, rising 40.9%, while
technology was by far the worst, up just 5.4%. The utility sector was another
area of the Russell 2500 that performed strongly in 1997. In fact, the
combination of financial services and utilities, accounting for 31.0% of the
Russell 2500, generated 48% of the total gain in the index. As growth managers,
we have had significant underweighting versus the index in financials and
utilities and overweighting in technology.
The past three years have seen exceptional stock market gains, especially
in the large cap sector. Over this period, the Russell 2500's cumulative return
of 95.0% has paled in comparison to the S&P 500's total return of 133.4%. This
three-year return for the S&P was the best since 1928. This performance has
reflected well above trendline earnings growth combined with rising relative
multiples driven by declining inflation and interest rates.
We expect a less ebullient stock market in 1998 with performance more
dependent on individual stock selection. The weakness in Asia is likely to have
some moderating effect on US corporate profit growth due to reduced export
activity and more intense foreign price competition, particularly in light of
the strong dollar. This suggests that, even if margins are maintained, overall
earnings trends will track more with the growth of nominal GDP in contrast to
the double digit gains of recent years. In a slower growth economy where pricing
power is limited, those companies that can sustain above average earnings gains
should be rewarded with rising relative multiples. The underperformance of the
past four years has brought relative valuations in the small and mid cap sectors
down to the lower end of their historic ranges. This, plus the lack of
enthusiasm for the sector among investors, has created opportunities that we
believe can be exploited through our active research efforts.
FRONTIER CAPITAL MANAGEMENT CO., INC.
INVESTMENT SUB-ADVISER TO THE FRONTIER CAPITAL APPRECIATION FUND
6
<PAGE> 8
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE FRONTIER CAPITAL APPRECIATION FUND, RUSSELL MIDCAP STOCK INDEX
AND RUSSELL 2500 STOCK INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD FRONTIER CAPITAL RUSSELL MIDCAP RUSSELL 2500
(FISCAL YEAR COVERED) APPRECIATION FUND INDEX ** INDEX **
<S> <C> <C> <C>
1/4/96 10000 10000 10000
3/31/96 10927 10602 10586
6/30/96 11931 10900 11026
9/30/96 12436 11242 11275
12/31/96 13030 11900 11903
3/31/97 12484 11802 11505
6/30/97 14372 13403 13243
9/30/97 17477 15183 15143
12/31/97 15905 15351 14803
</TABLE>
The Fund's total return is calculated net of Investment Advisory fees and
operating expenses. Past performance is not predictive of future performance.
Persons who invest in the Fund through a variable annuity or variable life
insurance contract should note this graph does not reflect separate account
expenses deducted by the insurance company.
- ------------
* Funds inception date
** 1/1/96 to 12/31/97. In 1997, the benchmark for the Frontier Capital
Appreciation Fund was changed retroactively from the Russell Midcap Index to
the Russell 2500 Stock Index. The new index better reflects the investment
style, capitalization and valuation characteristics of the Fund. A comparison
to the prior benchmark, the Russell Midcap Index, has also been provided.
RUSSELL MIDCAP STOCK INDEX
A capitalization weighted stock index representing the 200-800 ranked domestic
stocks in terms of market capitalization. The index captures the performance of
medium sized companies.
RUSSELL 2500 STOCK INDEX
The 2,500 smallest capitalization securities in the Russell 3000 Index,
representing approximately 7% of the Russell 3000 total market capitalization.
The index is reconstituted annually in June, based upon the May 31 market
capitalization rankings. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
7
<PAGE> 9
ENHANCED U.S. EQUITY FUND
The Enhanced U.S. Equity Fund returned 32.68% for the year ended December
31, 1997. The S&P 500 index returned 33.45% for the same period.
The superior returns of large capitalization U.S. stocks resumed in the
last quarter, and is quite evident in any examination of year to date results.
The largest 25 stocks in the Index as of September 30, 1997 had a total return
during the fourth quarter of 4.1%. The S&P 500 itself returned 2.8%. For the
full year, the largest 25 stocks outperformed the entire index by over five
percentage points. Most actively managed portfolios have trouble matching the
Index when the largest components of the Index are driving performance.
Likewise, when the largest components of the Index are laggards, managed money
performs better.
While the recent financial upset in Asia is cause for near term concern,
our outlook for the future is positive. While we continue to believe U.S.
equities are mildly overvalued we also believe that "staying the course" with a
well-chosen investment mix will generate the best long term results. We believe
the Enhanced U.S. Equity Fund is an excellent vehicle to gain investment
exposure to large U.S. companies.
FRANKLIN PORTFOLIO ASSOCIATES, LLC
INVESTMENT SUB-ADVISER TO THE ENHANCED U.S. EQUITY FUND
8
<PAGE> 10
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE ENHANCED U.S. EQUITY FUND AND S&P 500 STOCK INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ENHANCED U.S. EQUITY
(FISCAL YEAR COVERED) FUND S & P 500 STOCK INDEX
<S> <C> <C>
1/4/96 10000 10000
3/31/96 10875 10538
6/30/96 11194 11007
9/30/96 11432 11342
12/31/96 12370 12280
3/31/97 12456 12614
6/30/97 14413 14816
9/30/97 16105 15926
12/31/97 16405 16383
</TABLE>
The Fund's total return is calculated net of Investment Advisory fees and
operating expenses. Past performance is not predictive of future performance.
Persons who invest in the Fund through a variable annuity or variable life
insurance contract should note this graph does not reflect separate account
expenses deducted by the insurance company.
- ------------
* Fund's inception date
** 1/1/96 to 12/31/97
S&P 500 STOCK INDEX
A capitalization weighted index of 500 large stocks, representing approximately
70% of the broad U.S. equity market. The stocks represent the largest companies
in 88 industries. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
9
<PAGE> 11
EDINBURGH OVERSEAS EQUITY FUND
PORTFOLIO OF INVESTMENTS
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
FOREIGN COMMON STOCKS - 89.2%
ARGENTINA - 1.1%
690 Inversiones y Representaciones SA
GDR................................. $ 25,961
1,140 Telecom Argentina Stet - France
Telecom SA ADR...................... 40,755
----------
66,716
----------
AUSTRALIA - 2.7%
15,000 Gio Australian Holdings Ltd. ......... 38,335
3,000 Lend Lease Corp. Ltd. ................ 58,631
34,000 Orogen Minerals ...................... 66,448
----------
163,414
----------
BRAZIL - 1.1%
2,700 Centrais Electricas Brasileiras SA
ADR................................. 68,950
----------
DENMARK - 2.3%
1,025 Den Danske Bank....................... 136,579
----------
FRANCE - 8.3%
1,200 Elf Aquitaine SA...................... 139,570
1,600 France Telecom SA*.................... 58,034
2,000 Rhone-Poulenc Class A................. 89,590
740 Societe Generale Ord.................. 100,822
1,030 Suez Lyonnaise des Eaux-Dumez......... 113,979
----------
501,995
----------
GERMANY - 7.8%
2,200 Bayer AG.............................. 82,181
249 Mannesmann AG......................... 125,818
1,750 Metro AG.............................. 62,745
450 Thyssen AG............................ 96,306
1,525 VEBA AG............................... 103,845
----------
470,895
----------
HONG KONG - 1.1%
34,000 Hong Kong & China Gas Ltd. ........... 65,815
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
ITALY - 2.2%
22,900 ENI SpA............................... $ 130,772
----------
JAPAN - 20.3%
3,000 Bridgestone Corp. .................... 65,070
2,000 Canon Sales Co., Inc. ................ 22,840
2,000 Canon, Inc. .......................... 46,599
4,000 Citizen Watch Co. .................... 26,825
8,000 Daihatsu Motor Co. Ltd. .............. 37,034
3 DDI Corp. ............................ 7,933
3 East Japan Railway Co. ............... 13,543
1,000 Fuji Machine Manufacturing Co.
Ltd. ............................... 24,143
1,000 Fuji Photo Film....................... 38,322
6,000 Fujikura Ltd. ........................ 39,732
6,000 Hitachi Ltd. ......................... 42,767
3,000 Matsushita Electric Industrial Co. ... 43,916
5,000 Matsushita Electric Works............. 43,303
5,000 Mitsui Fudosan........................ 48,285
6,000 Mitsui & Co. ......................... 35,501
1,000 NAMCO Ltd. ........................... 29,048
400 Nichiei Co. Ltd. ..................... 42,614
3,000 Nippon Comsys Corp. .................. 37,019
9 Nippon Telegraph & Telephone.......... 77,256
6,000 Nissan Motors......................... 24,832
2,000 Nitto Denko Corp. .................... 34,489
1,000 Ono Pharmaceutical Co. ............... 19,391
20 People Co. Ltd. ...................... 307
1,100 Promise Co. Ltd. ..................... 61,039
5,000 Sakura Bank Ltd. ..................... 14,294
1,000 Sankyo Co. Ltd. ...................... 22,610
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 12
EDINBURGH OVERSEAS EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
FOREIGN COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
7,000 Sekisui Chemical Co. ................. $ 35,570
3,000 Shiseido Co. Ltd. .................... 40,927
4,000 Sumitomo Electric Industries ......... 54,570
2,000 Sumitomo Trust & Banking ............. 10,393
2,000 Terumo Corp. ......................... 29,431
4,000 The Bank of Tokyo Mitsubishi Ltd. .... 55,183
3,000 The Industrial Bank of Japan Ltd. .... 21,383
2,000 The Sanwa Bank Ltd. .................. 20,234
1,600 Tokyo Electric Power.................. 29,186
1,000 Toyota Motor Corp. ................... 28,664
----------
1,224,253
----------
MEXICO - 1.0%
8,000 Cemex SA de C.V. Class A.............. 36,242
5,700 Kimberly Clark de Mexico SA de C.V.
Class A............................. 26,988
----------
63,230
----------
NETHERLANDS - 7.3%
3,660 ING Groep NV.......................... 154,151
4,785 Koninklijke Ahold NV.................. 124,837
5,300 Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit... 149,513
----------
428,501
----------
NEW ZEALAND - 0.1%
9,000 Restaurant Brands New Zealand Ltd.*... 8,884
----------
SINGAPORE - 1.6%
8,000 DBS Land Ltd. ........................ 12,275
6,120 Overseas Chinese Banking Corp. ....... 35,668
4,000 Singapore Press Holdings Ltd. ........ 50,193
----------
98,136
----------
VALUE
SHARES (NOTE 1)
----------
SWEDEN - 4.7%
7,600 Astra AB Class A...................... $ 131,614
14,000 Nordbanken Holding AB*................ 79,170
2,000 Telefonaktiebolaget LM Ericsson Class
B................................... 75,190
----------
285,974
----------
SWITZERLAND - 7.5%
108 Novartis ............................. 175,183
12 Roche Holding AG ..................... 119,129
110 Union Bank of Switzerland ............ 159,003
----------
453,315
----------
UNITED KINGDOM - 20.1%
3,650 Anglian Water Plc..................... 50,324
8,000 BAA Plc............................... 65,469
2,000 Barclays Plc.......................... 53,269
3,200 British Aerospace Plc................. 91,236
7,200 British Petroleum Co. Plc ............ 95,305
6,000 British Telecommunications ........... 46,982
10,000 General Electric Plc.................. 64,828
2,200 GKN Plc............................... 45,082
3,400 Glaxo Wellcome Plc.................... 81,097
4,500 Diageo Plc............................ 41,189
1,800 HSBC Holdings......................... 46,144
6,500 Legal and General Group Plc .......... 57,466
10,000 Lloyds TSB Group Plc.................. 130,159
6,500 Marks & Spencer Plc................... 63,982
7,200 Smithkline Beecham Plc................ 73,712
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 13
EDINBURGH OVERSEAS EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
FOREIGN COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
16,500 Vodafone Group Plc.................... $ 119,032
5,000 Wolseley Plc ......................... 39,760
1,400 Zeneca Group Plc...................... 49,614
----------
1,214,650
----------
TOTAL FOREIGN COMMON STOCKS (Cost
$5,141,599)......................... 5,382,079
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MATURITY
AMOUNT RATE DATE
- ---------- ----- --------
<C> <S> <C> <C> <C>
CONVERTIBLE FOREIGN BONDS - 2.1%
CAYMAN ISLANDS - 0.5%
Y5,000,000 STB Cayman Capital
Ltd. ............ 0.50% 10/01/07 28,500
----------
FRANCE - 1.6%
1,380,000F Finaxa............. 2.75% 01/01/06 100,430
----------
TOTAL CONVERTIBLE FOREIGN BONDS
(Cost $128,297).................. 128,930
----------
TOTAL INVESTMENTS - 91.3%
(Cost $5,269,896)................ 5,511,009
Other Assets and Liabilities
(net) - 8.7%................... 522,976
----------
NET ASSETS - 100.0%................ $6,033,985
=========
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR American Depositary Receipt
GDR Global Depositary Receipt
Y Japanese Yen
F French Franc
* Non-income producing security
See accompanying notes to financial statements.
12
<PAGE> 14
EDINBURGH OVERSEAS EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997 (UNAUDITED)
At December 31, 1997, industry sector diversification of the Edinburgh Overseas
Equity Fund's investments as a percentage of net assets was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
------------------------------------------ -------------
<S> <C>
Banking................................... 16.8%
Pharmaceuticals........................... 10.4
Oil & Gas................................. 7.2
Telephone Systems......................... 5.7
Electrical Equipment...................... 4.7
Financial Services........................ 4.0
Chemicals................................. 3.4
Electric Utilities........................ 3.3
Automotive................................ 3.3
Media - Broadcasting & Publishing......... 3.3
Heavy Machinery........................... 2.5
Real Estate............................... 2.4
Retailers................................. 2.1
Food Retailers............................ 2.1
Communications............................ 2.0
Building Materials........................ 2.0
Municipal Services........................ 1.9
Manufacturing............................. 1.6
Insurance................................. 1.6
Aerospace & Defense....................... 1.5
Commercial Services....................... 1.5
Medical Supplies.......................... 1.2
Metals.................................... 1.1
Water Companies........................... 0.8
Electronics............................... 0.7
Beverages, Food & Tobacco................. 0.7
Cosmetics & Personal Care................. 0.7
Household Products........................ 0.6
Wholesale Trade........................... 0.6
Entertainment & Leisure................... 0.5
Forest Products & Paper................... 0.4
Miscellaneous............................. 0.4
Transportation............................ 0.2
Restaurants............................... 0.1
----
91.3%
====
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 15
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
COMMON STOCKS - 95.8%
AIRLINES - 1.2%
1,025 Southwest Airlines, Inc............... $ 25,241
300 US Airways Group, Inc.*............... 18,750
----------
43,991
----------
APPAREL RETAILERS - 0.5%
610 Abercrombie & Fitch Co. - Class A*.... 19,063
----------
AUTOMOTIVE - 2.1%
670 Federal-Mogul Corp. .................. 27,135
580 Ford Motor Co. ....................... 28,239
520 Lear Corp.*........................... 24,700
----------
80,074
----------
BANKING - 5.3%
555 Associates First Capital Corp. ....... 39,474
600 BankAmerica Corp. .................... 43,800
440 H.F. Ahmanson & Co. .................. 29,453
510 Mellon Bank Corp. .................... 30,919
730 Newcourt Credit Group, Inc. .......... 24,364
300 U.S. BanCorp. ........................ 33,581
----------
201,591
----------
BEVERAGES, FOOD & TOBACCO - 3.9%
660 Campbell Soup Co. .................... 38,363
910 Coca-Cola Enterprises, Inc. .......... 32,362
1,170 Pepsico, Inc. ........................ 42,632
670 Quaker Oats Co. ...................... 35,343
----------
148,700
----------
BUILDING MATERIALS - 0.5%
380 Lowe's Companies, Inc. ............... 18,121
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMERCIAL SERVICES - 4.0%
1,760 Allied Waste Industries, Inc.*........ $ 41,030
780 Browning-Ferris Industries, Inc. ..... 28,860
1,057 Cendant Corp.*........................ 36,347
610 Paychex, Inc. ........................ 30,881
420 Quintiles Transnational Corp.*........ 16,065
----------
153,183
----------
COMMUNICATIONS - 5.4%
760 ADC Telecommunications, Inc.*......... 31,730
850 AirTouch Communications*.............. 35,328
510 CIENA Corp.*.......................... 31,174
450 Lucent Technologies................... 35,944
1,020 Network Appliance, Inc.*.............. 36,210
780 Omnipoint Corp.*...................... 18,135
880 Tel-Save Holdings, Inc.*.............. 17,490
----------
206,011
----------
COMPUTER SOFTWARE & PROCESSING - 10.0%
440 America Online, Inc.*................. 39,243
750 Cisco Systems, Inc.*.................. 41,813
370 Citrix Systems, Inc.*................. 28,120
675 Computer Associates
International, Inc. ................ 35,691
1,130 Compuware Corp.*...................... 36,160
1,570 FORE Systems, Inc.*................... 23,943
800 HBO & Co. ............................ 38,400
320 Microsoft Corp.*...................... 41,360
1,340 Peoplesoft*........................... 52,260
1,840 Unisys Corp.*......................... 25,530
270 Yahoo!, Inc.*......................... 18,698
----------
381,218
----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 16
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS & INFORMATION - 2.5%
1,020 EMC Corp.*............................ $ 27,986
435 International Business Machines....... 45,485
590 Tech Data Corp.*...................... 22,936
----------
96,407
----------
CONGLOMERATES - 2.8%
1,620 Republic Industries, Inc.*............ 37,766
1,570 Tyco International Ltd. .............. 70,748
----------
108,514
----------
COSMETICS & PERSONAL CARE - 1.4%
1,010 Alberto-Culver Co. ................... 27,270
1,350 The Dial Corp. ....................... 28,097
----------
55,367
----------
ELECTRONICS - 0.7%
520 Tellabs, Inc.*........................ 27,495
----------
ENTERTAINMENT & LEISURE - 0.8%
310 Walt Disney Co. ...................... 30,709
----------
FINANCIAL SERVICES - 5.7%
640 American Express Co. ................. 57,120
700 Federal National Mortgage
Association......................... 39,944
630 Merrill Lynch & Co., Inc. ............ 45,951
1,020 Morgan Stanley, Dean Witter, Discover
& Co. .............................. 60,308
600 The Money Store, Inc.................. 12,600
----------
215,923
----------
FOOD RETAILERS - 1.6%
845 General Nutrition Co., Inc.*.......... 28,730
620 Whole Foods Market, Inc.*............. 31,698
----------
60,428
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
FOREST PRODUCTS & PAPER - 0.6%
500 Kimberly-Clark Corp................... $ 24,656
----------
HEALTH CARE PROVIDERS - 2.5%
990 Healthsouth Corp.*.................... 27,473
740 Renal Treatment Centers, Inc.*........ 26,733
820 Universal Health Services,
Inc. - Class B*..................... 41,308
----------
95,514
----------
HEAVY CONSTRUCTION - 1.4%
1,500 McDermott International, Inc. ........ 54,938
----------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES - 0.7%
465 Home Depot ........................... 27,377
----------
HOUSEHOLD PRODUCTS - 3.7%
1,040 Illinois Tool Works, Inc. ............ 62,530
490 Procter & Gamble Co. ................. 39,108
500 The Clorox Co. ....................... 39,531
----------
141,169
----------
INSURANCE - 3.8%
280 Ace Ltd. ............................. 27,020
560 Conseco, Inc. ........................ 25,445
430 EXEL Ltd. ............................ 27,251
690 SunAmerica, Inc. ..................... 29,498
675 Travelers Group....................... 36,366
----------
145,580
----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 17
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDIA - BROADCASTING &
PUBLISHING - 2.5%
920 Comcast Corp. - Class A............... $ 29,038
810 Cox Communications, Inc. - Class A*... 32,451
1,156 Tele-Communications, Inc.*............ 32,296
----------
93,785
----------
MEDICAL SUPPLIES - 2.0%
580 Guidant Corp. ........................ 36,105
1,180 Tenet Healthcare Corp.*............... 39,088
----------
75,193
----------
METALS - 2.0%
750 Danaher Corp. ........................ 47,344
560 Masco Corp. .......................... 28,490
----------
75,834
----------
OFFICE EQUIPMENT - 1.0%
430 Pitney Bowes, Inc. ................... 38,673
----------
OIL & GAS - 8.6%
450 Anadarko Petroleum Corp. ............. 27,309
620 Apache Corp. ......................... 21,739
470 El Paso Natural Gas Co. .............. 31,255
885 Exxon................................. 54,151
1,560 Global Industries Ltd.*............... 26,520
640 Mobil Corp. .......................... 46,200
620 Ocean Energy, Inc.*................... 30,574
1,080 Union Pacific Resources Group,
Inc. ............................... 26,190
1,060 USX-Marathon Group.................... 35,775
994 Williams Companies, Inc. ............. 28,205
----------
327,918
----------
VALUE
SHARES (NOTE 1)
----------
PHARMACEUTICALS - 4.3%
480 Bristol-Myers Squibb Co. ............. $ 45,420
380 Cardinal Health, Inc. ................ 28,548
740 Eli Lilly & Co. ...................... 51,523
540 Pfizer, Inc. ......................... 40,264
----------
165,755
----------
REAL ESTATE - 2.0%
790 Boston Properties, Inc. - REIT........ 26,119
490 First Industrial Reality Trust,
Inc. - REIT......................... 17,701
1,080 Patriot American Hospitality,
Inc. - REIT......................... 31,118
----------
74,938
----------
RETAILERS - 7.2%
660 CKE Restaurants, Inc. ................ 27,803
710 CompUSA, Inc.*........................ 22,010
380 CVS Corp. ............................ 24,344
700 Dollar Tree Stores, Inc.*............. 28,963
270 Kohl's Corp.*......................... 18,394
1,240 Office Depot, Inc.*................... 29,683
800 Safeway, Inc.*........................ 50,600
1,000 Tandy Corp. .......................... 38,563
1,140 Walgreen Co. ......................... 35,768
----------
276,128
----------
TELEPHONE SYSTEMS - 3.9%
660 AT&T Corp. ........................... 40,425
415 Qwest Communications
International, Inc.*................ 24,693
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 18
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELEPHONE SYSTEMS (CONTINUED)
970 Teleport Communications Group, Inc. -
Class A*............................ $ 53,229
1,010 WorldCom, Inc.*....................... 30,537
----------
148,884
----------
TEXTILES, CLOTHING & FABRICS - 1.2%
1,130 Unifi, Inc. .......................... 45,977
----------
TOTAL INVESTMENTS - 95.8%
(Cost $3,160,186)................... 3,659,114
Other Assets and Liabilities
(net) - 4.2%........................ 161,028
----------
NET ASSETS - 100.0%................... $3,820,142
==========
NOTES TO THE PORTFOLIO OF INVESTMENTS:
REIT Real Estate Investment Trust
* Non-income producing security
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 19
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ -----------
<C> <S> <C>
COMMON STOCKS - 84.3%
AEROSPACE & DEFENSE - 0.9%
5,200 Orbital Sciences Corp.*............. $ 154,700
----------
AIRLINES - 1.5%
3,920 American West Holdings Corp.*....... 73,010
6,980 Mesaba Holdings, Inc.*.............. 181,480
----------
254,490
----------
BUILDING MATERIALS - 1.2%
4,460 Cameron Ashley Building Products*... 74,705
5,310 Elcor Corp. ........................ 127,440
----------
202,145
----------
CHEMICALS - 2.2%
3,050 Brunswick Technologies, Inc.*....... 44,606
5,000 Compass Plastics & Technologies,
Inc.*............................. 38,125
7,030 Hexcel Corp.*....................... 175,311
3,300 Lesco, Inc. ........................ 68,888
1,970 Spartech Corp. ..................... 29,796
----------
356,726
----------
COMMERCIAL SERVICES - 2.9%
2,200 Bright Horizons, Inc.*.............. 41,250
22,800 Celgene Corp.*...................... 192,375
2,400 Fine Host Corp.*.................... 24,300
1,210 Lason, Inc.*........................ 32,216
17,800 Magal Security Systems Ltd.*........ 60,075
4,800 Market Facts, Inc.*................. 80,400
1,200 Stone & Webster, Inc. .............. 56,250
----------
486,866
----------
COMMUNICATIONS - 7.4%
5,800 360 Communications Co.*............. 117,088
2,120 ADC Telecommunications, Inc.*....... 88,510
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
2,880 AirTouch Communications*............ $ 119,700
8,400 ANTEC Corp.*........................ 131,250
17,130 Arch Communications Group, Inc.*.... 87,791
4,000 Cable Design Technologies*.......... 155,500
4,700 Coherent Communications Systems
Corp.*............................ 131,013
2,460 DSC Communications*................. 59,040
4,300 Harmon Industries, Inc. ............ 119,325
3,000 Omnipoint Corp.*.................... 69,750
4,400 Paging Network, Inc.*............... 47,300
5,530 Transaction Network Services,
Inc.*............................. 95,393
----------
1,221,660
----------
COMPUTER SOFTWARE & PROCESSING - 11.8%
1,800 Activision, Inc.*................... 32,175
4,250 BARRA, Inc.*........................ 102,531
1,500 DataWorks Corp.*.................... 29,813
1,700 FileNet Corp.*...................... 51,213
3,500 Hypercom Corp.*..................... 49,438
3,700 Information Resources, Inc.*........ 49,488
21,000 ISG International Software Group
Ltd.*............................. 304,500
4,000 Kronos, Inc.*....................... 123,250
6,240 Level 8 Systems, Inc.*.............. 85,020
17,100 Mentor Graphics Corp.*.............. 165,656
3,341 Network Associates, Inc.*........... 176,655
24,130 Optika Imaging Systems*............. 82,947
800 Project Software & Development,
Inc.*............................. 18,800
5,450 Sandisk Corp.*...................... 110,703
8,500 State of the Art, Inc.*............. 138,125
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 20
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE & PROCESSING (CONTINUED)
11,260 The Learning Co., Inc.*............. $ 180,864
10,200 UBICS, Inc.*........................ 153,000
8,040 Wonderware Corp.*................... 113,565
----------
1,967,743
----------
COMPUTERS & INFORMATION - 2.6%
7,660 Cirrus Logic, Inc.*................. 81,388
6,200 Data General Corp.*................. 108,113
7,030 Evans & Sutherland Computer Co.*.... 203,870
1,900 Seagate Technology, Inc.*........... 36,575
----------
429,946
----------
CONTAINERS & PACKAGING - 0.7%
6,990 US Can Corp.*....................... 117,956
----------
COSMETICS & PERSONAL CARE - 1.1%
4,780 Wesley Jessen VisionCare, Inc.*..... 186,420
----------
ELECTRIC UTILITIES - 0.7%
4,160 Calenergy, Inc.*.................... 119,600
----------
ELECTRICAL EQUIPMENT - 0.6%
3,200 Computer Products, Inc.*............ 72,400
1,000 Encore Wire Corp.*.................. 30,688
----------
103,088
----------
ELECTRONICS - 11.2%
2,300 Atmel Corp.*........................ 42,694
1,700 Black Box Corp.*.................... 60,138
5,400 Cypress Semiconductor Corp.*........ 45,900
4,700 DII Group, Inc.*.................... 128,075
5,700 Essex International, Inc.*.......... 169,575
3,200 Exar Corp.*......................... 52,800
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
ELECTRONICS (CONTINUED)
7,500 FARO Technologies, Inc.*............ $ 87,188
2,250 Harman International Industries..... 95,484
1,180 Intel Corp. ........................ 82,895
2,920 Lattice Semiconductor*.............. 138,335
5,630 LSI Logic*.......................... 111,193
2,820 Maxim Intergrated Products*......... 97,290
2,130 Oak Industries, Inc.*............... 63,234
1,700 Power - One, Inc.*.................. 23,375
3,600 Read - Rite Corp.*.................. 56,700
3,280 Rogers Corp.*....................... 134,070
7,560 Semiconductor Packaging Materials
Co., Inc.*........................ 57,173
4,300 SpeedFam International, Inc.*....... 113,950
8,560 Trimble Navigation Ltd.*............ 186,715
4,770 VLSI Technology*.................... 112,691
----------
1,859,475
----------
ENTERTAINMENT & LEISURE - 3.0%
8,300 American Coin Merchandising,
Inc.*............................. 146,288
3,900 American Skiing Corp.*.............. 58,013
10,580 Galoob Lewis Toys, Inc.*............ 107,784
4,720 International Game Technology....... 119,180
9,510 Sodak Gaming*....................... 60,626
----------
491,891
----------
FOREST PRODUCTS & PAPER - 1.5%
8,660 Louisiana Pacific Corp. ............ 164,540
2,500 Willamette Industries, Inc. ........ 80,469
----------
245,009
----------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 21
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS - 1.2%
9,300 Apple Orthodontix, Inc.*............ $ 110,438
3,200 Coventry Corp.*..................... 48,800
800 Lincare Holdings, Inc.*............. 45,600
----------
204,838
----------
HEAVY CONSTRUCTION - 0.5%
9,080 Perini Corp.*....................... 81,720
----------
HEAVY MACHINERY - 3.0%
6,220 Brown & Sharpe Manufacturing Co.*... 63,366
5,000 Central Sprinkler Corp.*............ 92,188
3,200 General Scanning, Inc.*............. 55,200
18,330 Insituform Technologies,
Inc. - Class A*................... 142,058
9,530 Paxar Corp.*........................ 141,163
----------
493,975
----------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES - 0.9%
13,700 Diamond Home Services, Inc.*........ 97,613
2,000 Virco Manufacturing Corp. .......... 56,000
----------
153,613
----------
INDUSTRIAL - DIVERSIFIED - 0.6%
8,500 Nanophase Technologies Corp.*....... 107,844
----------
INSURANCE - 2.4%
2,390 Conseco, Inc. ...................... 108,596
6,540 John Alden Financial Corp. ......... 156,960
3,500 Penn - America Group, Inc. ......... 71,750
2,180 United Wisconsin Services........... 56,135
----------
393,441
----------
MANUFACTURING - 1.0%
5,857 Halter Marine Group, Inc.*.......... 169,121
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
MEDIA - BROADCASTING & PUBLISHING - 2.6%
3,965 Mail - Well, Inc.*.................. $ 160,583
4,820 Scientific Games Holdings Corp.*.... 97,605
4,240 Viacom, Inc. - Class B*............. 175,695
----------
433,883
----------
MEDICAL SUPPLIES - 0.8%
12,780 CNS, Inc.*.......................... 85,466
4,900 Merit Medical Systems, Inc.*........ 30,625
4,540 Uroquest Medical Corp.*............. 11,918
----------
128,009
----------
MEDICAL & BIO - TECHNOLOGY - 2.9%
7,610 American Service Group, Inc.*....... 114,626
19,622 Interferon Sciences, Inc.*.......... 170,466
7,140 Neoprobe Corp.*..................... 42,840
6,900 VISX, Inc.*......................... 152,663
----------
480,595
----------
METALS - 5.4%
10,970 Birmingham Steel Corp. ............. 172,778
2,220 Carpenter Technology................ 106,699
2,400 CommScope, Inc.*.................... 32,250
3,600 General Cable Corp. ................ 130,275
4,400 J&L Specialty Steel, Inc. .......... 44,275
3,850 Oregon Steel Mills ................. 82,053
3,900 Quanex Corp. ....................... 109,688
2,600 Reliance Steel & Aluminum Co. ...... 77,350
9,300 Synalloy Corp. ..................... 137,175
----------
892,543
----------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 22
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL & GAS - 3.7%
3,670 Carbo Ceramics, Inc. ............... $ 117,440
16,780 COHO Energy, Inc.*.................. 153,106
4,700 KCS Energy, Inc. ................... 97,525
2,425 Louis Dreyfus Natural
Gas Corp.*........................ 45,317
3,680 Noble Drilling Corp.*............... 112,700
1,500 Vastar Resources, Inc. ............. 53,625
2,770 Wiser Oil Co. ...................... 39,126
----------
618,839
----------
PHARMACEUTICALS - 2.4%
4,880 Anesta Corp.*....................... 79,910
17,000 Cellegy Pharmaceuticals, Inc.*...... 142,375
10,630 DUSA Pharmaceuticals, Inc.*......... 122,245
4,220 NeXstar Pharmaceuticals, Inc.*...... 48,003
----------
392,533
----------
REAL ESTATE - 3.5%
3,300 Boston Properties, Inc. - REIT...... 109,106
11,680 CB Commercial Real Estate Services
Group, Inc.*...................... 375,950
1,200 LaSalle Partners, Inc.*............. 42,750
3,900 Prime Retail, Inc. - REIT........... 55,331
----------
583,137
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ -----------
<C> <S> <C>
RETAILERS - 0.4%
3,300 Claire's Stores, Inc. .............. $ 64,144
----------
TELEPHONE SYSTEMS - 0.9%
4,840 Western Wireless Corp. - Class A*... 84,095
2,500 WinStar Communications, Inc.*....... 62,344
----------
146,439
----------
TEXTILES, CLOTHING & FABRICS - 0.9%
6,400 Hartmarx Corp.*..................... 48,800
2,600 Unifi, Inc. ........................ 105,788
----------
154,588
----------
TRANSPORTATION - 1.9%
7,000 ABC Rail Products Corp.*............ 140,000
5,100 Celadon Group, Inc.*................ 68,850
3,370 USFreightways Corp. ................ 109,525
----------
318,375
----------
TOTAL INVESTMENTS - 84.3%
(Cost $13,522,084).................. 14,015,352
Other Assets and Liabilities (net) -
15.7%............................. 2,613,096
----------
NET ASSETS - 100.0%................. $16,628,448
==========
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
REIT Real Estate Investment Trust
* Non - income producing security
See accompanying notes to financial statements.
21
<PAGE> 23
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
COMMON STOCKS - 96.8%
AEROSPACE & DEFENSE - 1.0%
600 General Dynamics..................... $ 51,863
183 Lockheed Martin Corp. ............... 18,026
----------
69,889
----------
AIRLINES - 1.2%
1,500 Federal Express Corp.*............... 91,594
----------
AUTOMOTIVE - 3.0%
4,500 Ford Motor Co. ...................... 219,094
----------
BANKING - 7.4%
100 Banc One Corp. ...................... 5,431
2,100 BankAmerica Corp. ................... 153,300
500 Bankers Trust New York Corp. ........ 56,219
200 CitiCorp............................. 25,288
200 First Union Corp. ................... 10,250
100 Golden West Financial Corp. ......... 9,781
1,000 H.F. Ahmanson & Co. ................. 66,938
1,300 J.P. Morgan & Co., Inc. ............. 146,738
1,100 Nationsbank Corp. ................... 66,894
----------
540,839
----------
BEVERAGES, FOOD & TOBACCO - 4.2%
700 Adolph Coors Co. .................... 23,275
1,687 Archer-Daniels-Midland............... 36,587
800 ConAgra.............................. 26,250
1,900 Philip Morris Co. ................... 86,094
1,900 Quaker Oats Co. ..................... 100,225
500 The Coca-Cola Co. ................... 33,313
----------
305,744
----------
BUILDING & CONSTRUCTION - 0.8%
900 Centex Corp. ........................ 56,644
80 Martin Marietta Materials, Inc. ..... 2,925
----------
59,569
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
CHEMICALS - 3.7%
1,900 Dow Chemical......................... $ 192,837
1,500 Praxair, Inc. ....................... 67,500
200 Sigma Aldrich Corp. ................. 7,950
----------
268,287
----------
COMMERCIAL SERVICES - 0.9%
300 AccuStaff, Inc.*..................... 6,900
800 Browning-Ferris Industries, Inc. .... 29,600
700 Dun & Bradstreet Corp. .............. 21,656
100 Robert Half International, Inc.*..... 4,000
----------
62,156
----------
COMMUNICATIONS - 4.0%
4,400 AirTouch Communications*............. 182,875
500 Bay Networks*........................ 12,781
1,232 Lucent Technologies.................. 98,406
----------
294,062
----------
COMPUTER SOFTWARE & PROCESSING - 2.8%
400 Automatic Data Processing, Inc. ..... 24,550
700 Deluxe Corp. ........................ 24,150
1,000 Microsoft Corp.*..................... 129,250
1,300 Oracle Corp.*........................ 29,006
----------
206,956
----------
COMPUTERS & INFORMATION - 4.0%
3,350 Compaq Computer ..................... 189,066
200 Dell Computer Corp.*................. 16,800
1,900 Silicon Graphics, Inc.*.............. 23,631
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 24
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS & INFORMATION (CONTINUED)
100 Storage Technology Corp.*............ $ 6,194
500 Sun Microsystems, Inc.*.............. 19,938
900 Tech Data Corp.*..................... 34,988
----------
290,617
----------
CONGLOMERATES - 2.9%
800 Raychem Corp. ....................... 34,450
4,000 Tyco International Ltd. ............. 180,250
----------
214,700
----------
CONTAINERS & PACKAGING - 0.8%
800 Avery-Dennison Corp. ................ 35,800
400 Crown Cork & Seal, Inc. ............. 20,050
----------
55,850
----------
COSMETICS & PERSONAL CARE - 0.1%
100 Gillette Co. ........................ 10,044
----------
ELECTRIC UTILITIES - 4.7%
500 American Electric Power Co., Inc. ... 25,813
600 Carolina Power & Light Co. .......... 25,463
1,311 Houston Industries, Inc. ............ 34,987
800 Northern States Power Co. ........... 46,600
2,400 PacifiCorp. ......................... 65,550
2,200 PP&L Resources, Inc. ................ 52,663
3,000 Public Service Enterprise Group,
Inc. .............................. 95,063
----------
346,139
----------
ELECTRICAL EQUIPMENT - 0.1%
100 Thomas & Betts Corp. ................ 4,725
----------
ELECTRONICS - 0.9%
600 Intel Corp. ......................... 42,150
200 National Semiconductor Corp.*........ 5,188
400 Texas Instruments.................... 18,000
----------
65,338
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
ENTERTAINMENT & LEISURE - 1.2%
900 Walt Disney Co. ..................... $ 89,156
----------
FINANCIAL SERVICES - 4.1%
2,000 Green Tree Financial Corp............ 52,375
700 Merrill Lynch & Co., Inc. ........... 51,056
3,360 Morgan Stanley, Dean Witter, Discover
& Co. ............................. 198,660
----------
302,091
----------
FOOD RETAILERS - 1.2%
400 Interstate Bakeries Corp. ........... 14,950
1,700 Supervalu, Inc. ..................... 71,188
----------
86,138
----------
FOREST PRODUCTS & PAPER - 0.7%
500 Fort James Corp. .................... 19,125
600 Union Camp Corp. .................... 32,213
----------
51,338
----------
HEALTH CARE PROVIDERS - 1.0%
1,000 Beverly Enterprises, Inc.*........... 13,000
1,200 Healthsouth Corp.*................... 33,300
700 Wellpoint Health Networks, Inc.*..... 29,575
----------
75,875
----------
HEAVY MACHINERY - 4.2%
2,100 Caterpiller, Inc. ................... 101,981
700 Cooper Industries, Inc. ............. 34,300
600 Dover Corp. ......................... 21,675
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 25
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEAVY MACHINERY (CONTINUED)
2,400 Ingersoll Rand Co. .................. $ 97,200
1,000 Parker-Hannifin Corp. ............... 45,875
100 WW Grainger, Inc. ................... 9,719
----------
310,750
----------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES - 2.6%
2,150 Home Depot........................... 126,581
1,200 Whirlpool Corp. ..................... 66,000
----------
192,581
----------
HOUSEHOLD PRODUCTS - 0.4%
400 Procter & Gamble Co. ................ 31,925
----------
INSURANCE - 8.5%
86 Aegon NV............................. 7,708
200 Allstate Corp. ...................... 18,175
2,400 American International Group......... 261,000
1,100 Conseco, Inc. ....................... 49,981
500 Hartford Financial Services Group,
Inc. .............................. 46,781
400 Jefferson Pilot Corp. ............... 31,150
200 Torchmark Corp. ..................... 8,413
3,148 Travelers Group...................... 169,599
700 United Healthcare Corp. ............. 34,781
----------
627,588
----------
MANUFACTURING - 0.1%
150 Halter Marine Group, Inc.*........... 4,331
----------
MEDIA - BROADCASTING & PUBLISHING - 2.3%
1,700 Gannett Co, Inc. .................... 105,081
200 Knight-Ridder, Inc. ................. 10,400
900 Tribune Co. ......................... 56,025
----------
171,506
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
MEDICAL SUPPLIES - 0.6%
1,500 Alza Corp.*.......................... $ 47,719
----------
METALS - 1.8%
1,000 Nucor Corp. ......................... 48,313
300 Phelps Dodge Corp. .................. 18,675
2,000 USX-US Steel Group, Inc. ............ 62,500
----------
129,488
----------
OFFICE EQUIPMENT - 0.4%
2,000 Moore Corp. Ltd. .................... 30,250
----------
OIL & GAS - 8.7%
500 Ashland, Inc. ....................... 26,844
700 Atlantic Richfield Co. .............. 56,088
800 Baker Hughes, Inc. .................. 34,900
400 Burlington Resources, Inc. .......... 17,925
1,900 Exxon................................ 116,256
300 Helmerich & Payne, Inc. ............. 20,363
100 Imperial Oil Ltd. ................... 6,394
1,100 Mobil Corp. ......................... 79,406
400 Pennzoil ............................ 26,725
300 Phillips Petroleum Co. .............. 14,588
400 Royal Dutch Petroleum Co. ........... 21,675
1,800 Schlumberger Ltd. ................... 144,900
1,200 Sun Co., Inc. ....................... 50,475
900 Union Pacific Resources Group,
Inc. .............................. 21,825
----------
638,364
----------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 26
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
(PERCENTAGES OF NET ASSETS)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS - 7.7%
600 Abbott Laboratories ................. $ 39,338
500 American Home Products Corp. ........ 38,250
1,300 Cardinal Health, Inc. ............... 97,663
2,100 Johnson & Johnson.................... 138,338
2,300 Merck & Co, Inc. .................... 244,375
455 PharMerica, Inc.*.................... 4,721
----------
562,685
----------
RESTAURANTS - 0.2%
1,500 Ryans Family Steak House, Inc.*...... 12,844
----------
RETAILERS - 5.3%
200 CompUSA, Inc.*....................... 6,200
600 Costco Co., Inc.*.................... 26,775
3,500 Dayton-Hudson Corp. ................. 236,250
450 Snap-On, Inc. ....................... 19,631
900 TJX Co., Inc. ....................... 30,938
1,800 Wal-Mart Stores, Inc. ............... 70,988
----------
390,782
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------ ----------
<C> <S> <C>
TELEPHONE SYSTEMS - 2.8%
500 Alltel Corp. ........................ $ 20,531
2,000 Bell Atlantic Corp. ................. 182,000
200 WorldCom, Inc.*...................... 6,050
----------
208,581
----------
TEXTILES, CLOTHING & FABRICS - 0.1%
100 Liz Claiborne........................ 4,181
----------
TRANSPORTATION - 0.4%
400 Union Pacific Corp. ................. 24,975
300 Yellow Corp.*........................ 7,538
----------
32,513
----------
TOTAL INVESTMENTS - 96.8%
(Cost $6,503,077).................... 7,106,289
Other Assets and Liabilities
(net) - 3.2%....................... 238,523
----------
NET ASSETS - 100.0%.................. $7,344,812
==========
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security
See accompanying notes to financial statements.
25
<PAGE> 27
M FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ENHANCED
EDINBURGH FRONTIER CAPITAL U.S.
OVERSEAS TURNER CORE APPRECIATION EQUITY
EQUITY FUND GROWTH FUND FUND FUND
----------- ----------- ---------------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1)* - see
accompanying Portfolio of Investments.......... $5,511,009 $3,659,114 $ 14,015,352 $7,106,289
Cash............................................. 486,740 96,670 2,678,221 180,959
Receivable from:
Securities sold............................. - 10,029 18,260 -
Capital stock subscriptions................. - 1,554 - 7,043
Dividends and interest...................... 10,985 3,559 13,063 12,982
Investment Adviser, net (Note 2)............ 14,809 16,064 - 8,899
Deferred organization expense.................... 60,811 60,811 60,811 60,811
---------- ---------- ----------- ----------
Total assets............................ 6,084,354 3,847,801 16,785,707 7,376,983
---------- ---------- ----------- ----------
LIABILITIES:
Payable for:
Payable for securities purchased............ 19,503 - 126,358 5,124
Unrealized depreciation on forward foreign
currency contracts (Note 6)............... 110 - - -
Capital stock redemptions................... 47 - 684 -
Accrued expenses and other liabilities...... 30,709 27,659 30,217 27,047
---------- ---------- ----------- ----------
Total liabilities....................... 50,369 27,659 157,259 32,171
---------- ---------- ----------- ----------
NET ASSETS........................................... $6,033,985 $3,820,142 $ 16,628,448 $7,344,812
========== ========== =========== ==========
NET ASSETS CONSIST OF:
Paid-in capital.................................. $6,061,551 $3,345,905 $ 16,067,147 $6,712,187
Undistributed net investment income
(distributions in excess of net investment
income)........................................ (7,124) 903 - 882
Accumulated net realized gain (loss) on
investments and foreign currency
transactions................................... (261,247) (25,594) 68,033 28,531
Net unrealized appreciation on investments,
forward currency contracts, and net other
assets......................................... 240,805 498,928 493,268 603,212
---------- ---------- ----------- ----------
NET ASSETS........................................... $6,033,985 $3,820,142 $ 16,628,448 $7,344,812
========== ========== =========== ==========
SHARES OUTSTANDING................................... 605,730 282,925 1,114,444 486,792
========== ========== =========== ==========
Net asset value, offering price and redemption price
per share.......................................... $ 9.96 $ 13.50 $ 14.92 $ 15.09
========== ========== =========== ==========
* Cost of investments................................ $5,269,896 $3,160,186 $ 13,522,084 $6,503,077
</TABLE>
See accompanying notes to financial statements.
26
<PAGE> 28
M FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
EDINBURGH FRONTIER CAPITAL ENHANCED
OVERSEAS TURNER CORE APPRECIATION U.S. EQUITY
EQUITY FUND GROWTH FUND FUND FUND
----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest..................................... $ 21,172 $ 5,189 $ 62,401 $ 7,637
Dividends*................................... 82,383 25,296 27,626 58,235
--------- --------- --------- ---------
Total investment income............. 103,555 30,485 90,027 65,872
--------- --------- --------- ---------
EXPENSES:
Investment Advisory fee (Note 2)............. 51,064 13,152 79,263 18,371
Custody and administration fees.............. 129,338 109,469 114,194 104,249
Professional fees............................ 18,852 17,476 17,476 17,476
Shareholder reporting........................ 6,443 6,653 6,653 6,653
Directors' fees and expenses................. 7,172 7,172 7,172 7,172
Amortization of organization costs........... 20,586 20,586 20,586 20,586
Other........................................ 6,701 6,701 6,701 6,701
--------- --------- --------- ---------
Total expenses...................... 240,156 181,209 252,045 181,208
Less: Expenses reimbursable by the Adviser
(Note 2)................................... (176,933) (160,750) (150,764) (154,486)
--------- --------- --------- ---------
Net operating expenses....................... 63,223 20,459 101,281 26,722
--------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS)..................... 40,332 10,026 (11,254) 39,150
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment transactions................. (147,371) 310,733 521,608 201,780
Foreign currency transactions........... (934) - - -
--------- --------- --------- ---------
Net realized gain (loss)................ (148,305) 310,733 521,608 201,780
--------- --------- --------- ---------
Net change in unrealized appreciation
(depreciation) on:
Investments............................. 165,526 418,627 328,082 467,676
Forward currency and net other assets... (319) - - -
--------- --------- --------- ---------
Net unrealized appreciation during
the period........................ 165,207 418,627 328,082 467,676
--------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN................. 16,902 729,360 849,690 669,456
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $ 57,234 $ 739,386 $ 838,436 $ 708,606
========= ========= ========= =========
* Net of foreign taxes withheld of: $ 11,366 - - $ 257
</TABLE>
See accompanying notes to financial statements.
27
<PAGE> 29
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EDINBURGH OVERSEAS TURNER CORE
EQUITY FUND GROWTH FUND
---------------------------- ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(A) 1997 1996(A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss)................ $ 40,332 $ 16,426 $ 10,026 $ 9,868
Net realized gain (loss) on investment and
foreign currecy transactions.............. (148,305) (115,841) 310,733 60,656
Net change in unrealized appreciation on
investments, forward currency contracts,
foreign currency, and other assets........ 165,207 75,598 418,627 80,301
----------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations................. 57,234 (23,817) 739,386 150,825
----------- ---------- ---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. (42,365) (18,231) (10,958) (9,844)
In excess of net investment income.......... (17,077) - - -
From net realized capital gains............. - - (312,314) (59,075)
In excess of net realized capital gains..... - - (25,594) -
Tax return of capital....................... (25,490) - - -
----------- ---------- ---------- -----------
Total distributions to shareholders.... (84,932) (18,231) (348,866) (68,919)
----------- ---------- ---------- -----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold................... 4,061,904 3,391,448 1,883,531 3,875,674
Net asset value of shares issued on
reinvestment of distributions............. 103,163 - 417,785 -
Cost of shares repurchased.................. (1,280,581) (212,203) (874,625) (1,974,649)
----------- ---------- ---------- -----------
Net increase in net assets resulting from
Fund share transactions................... 2,884,486 3,179,245 1,426,691 1,901,025
----------- ---------- ---------- -----------
TOTAL CHANGE IN NET ASSETS...................... 2,856,788 3,137,197 1,817,211 1,982,931
NET ASSETS:
Beginning of period......................... 3,177,197 40,000 2,002,931 20,000
----------- ---------- ---------- -----------
End of period *............................. $ 6,033,985 $3,177,197 $3,820,142 $ 2,002,931
=========== ========== ========== ===========
* Including undistributed net investment
income (distributions in excess of net
investment income) of: $ (7,124) $ 2,033 $ 903 $ 930
(a) Funds commenced operations on January 4, 1996
</TABLE>
See accompanying notes to the financial statements.
28
<PAGE> 30
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FRONTIER CAPITAL ENHANCED U.S.
APPRECIATION FUND EQUITY FUND
---------------------------- ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(A) 1997 1996(A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss)................ $ (11,254) $ (5,885) $ 39,150 $ 16,304
Net realized gain (loss) on investment and
foreign currency transactions............. 521,608 75,231 201,780 83,462
Net change in unrealized appreciation on
investments, forward currency contracts,
foreign currency, and other assets........ 328,082 165,186 467,676 135,536
----------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations................. 838,436 234,532 708,606 235,302
----------- ----------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. - - (39,983) (16,399)
In excess of net investment income.......... - - - -
From net realized capital gains............. (391,663) (121,789) (204,015) (52,695)
In excess of net realized capital gains..... - - - -
Tax return of capital....................... - - - -
----------- ----------- ---------- ----------
Total distributions to shareholders.... (391,663) (121,789) (243,998) (69,094)
----------- ----------- ---------- ----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold................... 19,956,544 4,878,023 5,516,206 1,397,149
Net asset value of shares issued on
reinvestment of distributions............. 513,452 - 313,092 -
Cost of shares repurchased.................. (7,294,264) (2,004,823) (531,235) (1,216)
----------- ----------- ---------- ----------
Net increase in net assets resulting from
Fund share transactions................... 13,175,732 2,873,200 5,298,063 1,395,933
----------- ----------- ---------- ----------
TOTAL CHANGE IN NET ASSETS...................... 13,622,505 2,985,943 5,762,671 1,562,141
NET ASSETS:
Beginning of period......................... 3,005,943 20,000 1,582,141 20,000
----------- ----------- ---------- ----------
End of period *............................. $16,628,448 $ 3,005,943 $7,344,812 $1,582,141
=========== =========== ========== ==========
* Including undistributed net investment
income (distributions in excess of net
investment income) of: $ - $ - $ 882 $ 810
(a) Funds commenced operations on January 4, 1996
</TABLE>
See accompanying notes to the financial statements.
29
<PAGE> 31
M FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EDINBURGH OVERSEAS TURNER CORE
EQUITY FUND GROWTH FUND
----------------------------- -----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(A) 1997 1996(A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 9.88 $ 10.00 $ 11.60 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.07 0.06 0.04 0.06
Net realized and unrealized gain (loss)
on investments......................... 0.15 (0.12) 3.22 1.94
------- ------- ------- -------
Total from investment operations.... 0.22 (0.06) 3.26 2.00
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............... (0.07) (0.06) (0.04) (0.06)
In excess of net investment income....... (0.03) -- -- --
From net realized capital gains.......... -- -- (1.22) (0.34)
In excess of net realized capital
gains.................................. -- -- (0.10) --
Tax return of capital.................... (0.04) -- -- --
------- ------- ------- -------
Total distributions................. (0.14) (0.06) (1.36) (0.40)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 9.96 $ 9.88 $ 13.50 $ 11.60
======= ======= ======= =======
TOTAL RETURN................................. 2.26% (0.63)%* 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........ $ 6,034 $ 3,177 $ 3,820 $ 2,003
Net expenses to average daily net assets
before interest expense**.............. 1.30% 1.30% 0.70% 0.70%
Net expenses to average daily net assets
after interest expense**............... 1.30% 1.30% 0.70% 0.78%
Net investment income (loss) to average
daily net assets**..................... 0.83% 0.67% 0.34% 0.55%
Portfolio turnover rate.................. 74% 65% 206% 258%
Average commission rate paid***.......... $ 0.0342 $ 0.0474 $ 0.0598 $ 0.0600
Without the reimbursement of expenses by
the adviser, the ratio of net expenses
and net investment income (loss) to
average net assets would have been:
Expenses before interest expense:... 4.94% 7.34% 6.20% 8.51%
Net investment income (loss):....... (2.81)% (5.37)% (5.16)% (7.26)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
*** Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
Amount is computed on a non annualized basis.
See accompanying notes to the financial statements.
30
<PAGE> 32
M FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FRONTIER CAPITAL ENHANCED U.S.
APPRECIATION FUND EQUITY FUND
----------------------------- -----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(A) 1997 1996(A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 12.52 $ 10.00 $ 11.85 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.00 0.00 0.08 0.12
Net realized and unrealized gain (loss)
on investments......................... 2.76 3.03 3.78 2.25
------- ------- ------- -------
Total from investment operations.... 2.76 3.03 3.86 2.37
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............... -- -- (0.09) (0.12)
In excess of net investment income....... -- -- -- --
From net realized capital gains.......... (0.36) (0.51) (0.53) (0.40)
In excess of net realized capital
gains.................................. -- -- -- --
Tax return of capital.................... -- -- -- --
------- ------- ------- -------
Total distributions................. (0.36) (0.51) (0.62) (0.52)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 14.92 $ 12.52 $ 15.09 $ 11.85
======= ======= ======= =======
TOTAL RETURN................................. 22.13% 30.31%* 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........ $ 16,628 $ 3,006 $ 7,345 $ 1,582
Net expenses to average daily net assets
before interest expense**.............. 1.15% 1.15% 0.80% 0.80%
Net expenses to average daily net assets
after interest expense**............... 1.15% 1.20% 0.80% 0.80%
Net investment income (loss) to average
daily net assets**..................... (0.13)% (0.30)% 1.17% 1.43%
Portfolio turnover rate.................. 61% 140% 52% 79%
Average commission rate paid***.......... $ 0.0422 $ 0.0362 $ 0.0273 $ 0.0227
Without the reimbursement of expenses by
the adviser, the ratio of net expenses
and net investment income (loss) to
average net assets would have been:
Expenses before interest expense.... 2.86% 8.19% 5.42% 12.45%
Net investment income (loss):....... (1.84)% (7.34)% (3.45)% (10.22)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
*** Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
Amount is computed on a non annualized basis.
See accompanying notes to the financial statements.
31
<PAGE> 33
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS
M Fund, Inc. (the "Company") was incorporated in Maryland on August 11, 1995 and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. The Company consists of
four separate diversified investment portfolios: Edinburgh Overseas Equity Fund,
Turner Core Growth Fund, Frontier Capital Appreciation Fund and Enhanced U.S.
Equity Fund (the "Funds"), each of which is, in effect, a separate mutual fund.
Each of the Funds commenced operations on January 4, 1996.
The Company offers its shares to separate accounts of certain insurance
companies as the underlying funding vehicle for certain variable annuity and
variable life insurance policies offered by members of M Financial Group and
issued by certain life insurance companies affiliated with M Financial Group.
Shares of the Company may also be sold to qualified pension and retirement
plans. Currently shares of the Company are offered only to separate accounts
funding variable annuity and variable life contracts issued by John Hancock
Variable Life Insurance Co., Pacific Life Insurance Co. and New York Life
Insurance Co.
Each Fund's investment objective is either long term capital appreciation or
total return. Edinburgh Overseas Equity Fund's investment objective is long-term
capital appreciation with reasonable investment risk through active management
and investment in common stocks and common stock equivalents of foreign issuers.
Turner Core Growth Fund seeks long-term capital appreciation through a
diversified portfolio of common stocks that show strong earning potential with
reasonable market prices. Frontier Capital Appreciation Fund seeks maximum
capital appreciation through investment in common stocks of companies of all
sizes, with emphasis on stocks of small to medium capitalization companies (i.e.
companies with market capitalization of less than $3 billion). Enhanced U.S.
Equity Fund's objective is above market total return through investment in
common stock of companies perceived to provide a return higher than that of the
S&P 500 at approximately the same level of investment risk as the S&P 500.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The following is a summary of significant accounting policies for the Funds.
Such policies are in conformity with generally accepted accounting principles
for investment companies and are consistently followed by the Funds in the
preparation of the financial statements.
PORTFOLIO VALUATION
Equity securities and other similar investments traded on a recognized U.S. or
foreign securities exchange or the National Association of Securities Dealers
Automated Quotation System (NASDAQ) are valued at their last sale price on the
principal exchange on which they are traded or NASDAQ (if NASDAQ is the
principal market for such securities). If no sale occurs, equities traded on a
U.S. exchange or NASDAQ are valued at
32
<PAGE> 34
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
the mean between the closing bid and asked price. Equities traded on a foreign
exchange, for which no sale occurs, are valued at the official bid price.
Unlisted equity securities for which market quotations are readily available are
valued at the last sale price or, if no sale occurs, at the mean between the
last bid and asked price. Debt securities and other fixed-income investments of
the Funds will be valued at prices supplied by independent pricing agents
approved by the Board of Directors. Short-term obligations maturing in sixty
days or less are valued at amortized cost. Amortized cost valuation involves
initially valuing a security at its cost, and thereafter, 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 security. Securities for
which there are no readily available market quotations or whose market value
does not, in the Investment Adviser's opinion, reflect fair value, are valued at
fair value using methods determined in good faith by the Board of Directors.
REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation (i.e. collateral) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Funds' Investment Adviser, acting under the
supervision of the Board of Directors, reviews the value of the collateral and
the creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
FOREIGN CURRENCY
Edinburgh Overseas Equity Fund may invest in non-U.S. dollar denominated assets.
Foreign currencies, investments and other assets and liabilities of the Fund are
translated into U.S. dollars at the exchange rates available at twelve noon
Eastern Time. Purchases and sales of investment securities, income receipts and
expense payments are translated into U.S. dollars at the prevailing exchange
rate on the respective dates of such transactions.
The Fund does not isolate that portion of the results for changes in foreign
currency exchange rates from the fluctuations arising from changes in the market
prices of securities held at period end. Net realized foreign currency gains and
losses result from changes in exchange rates, including foreign currency gains
and losses between trade date and settlement date on investment securities
transactions, foreign currency transactions
33
<PAGE> 35
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
and the difference between the amounts of interest and dividends recorded on the
books of the Fund and the amount actually received. The portion of foreign
currency gains and losses related to fluctuation in exchange rates between the
initial trade date and subsequent sale trade date is included in realized gains
and losses on investment transactions.
FORWARD FOREIGN CURRENCY CONTRACTS
Edinburgh Overseas Equity Fund may enter into forward foreign currency exchange
contracts. Forward foreign currency contracts are valued at the forward rate and
are marked-to-market daily. The change in market value is recorded by the Fund
as an unrealized gain or loss. When the contract is closed or delivery is taken,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value of the contract at
settlement date.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts can limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
SECURITIES TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Securities transactions are recorded as of the trade date. Realized gains or
losses from securities sold are recorded on the identified cost basis. Interest
income is recorded on the accrual basis and consists of interest accrued and, if
applicable, discount earned less premiums amortized. Dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the Fund is informed of the ex-dividend date. Investment
income is recorded net of foreign taxes withheld where the recovery of such
taxes is uncertain. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the securities received. Most expenses of
the Company can be directly attributed to a fund. Expenses which cannot be
directly attributed are apportioned between funds in the Company.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Each Fund declares and pays dividends from net investment income, if any, and
distributes net short-term capital gains, if any, on an annual basis. Each Fund
also distributes, at least annually, substantially all of the long-term capital
gains in excess of available capital losses, if any, which it realizes for each
taxable year. Distributions are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by each Fund, timing
differences, including the deferral of wash sales and the
34
<PAGE> 36
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
deferral of net realized capital losses recognized subsequent to October.
Permanent differences relating to shareholder distributions will result in
differing characterization of distributions made by each Fund and
reclassifications to paid-in capital.
FEDERAL INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company, by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no provision for federal income or excise tax is necessary. For federal income
tax purposes, the Edinburgh Overseas Equity Fund had a capital loss carryforward
of $20,515 expiring in 2004 and $133,846 expiring in 2005, as of December 31,
1997, which is available to offset future capital gains. The Edinburgh Overseas
Equity Fund and the Turner Core Growth Fund elected to defer to their fiscal
years ending December 31, 1998, $105,080 and $24,458, respectively, of losses
recognized during the period November 1, 1997 to December 31, 1997.
2. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into an investment advisory agreement (the "Advisory
Agreement") with M Financial Investment Advisers, Inc. (the "Adviser"). The
Advisory Agreement provides for the Funds to pay the Adviser a quarterly fee at
an annual rate of the value of each Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
FUND TOTAL ADVISORY FEES
------------------------------------------------ ------------------------------------
<S> <C>
Edinburgh Overseas Equity Fund.................. 1.05% on the first $10 million
0.90% on the next $15 million
0.75% on the next $75 million
0.60% on amounts above $100 million
Turner Core Growth Fund......................... 0.45%
Frontier Capital Appreciation Fund.............. 0.90%
Enhanced U.S. Equity Fund....................... 0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100 million
</TABLE>
The Adviser has engaged Edinburgh Fund Managers plc., Turner Investment
Partners, Inc., Frontier Capital Management Company, Inc., and Franklin
Portfolio Associates L.L.C. to act as sub-advisers to provide day to day
portfolio management for the Edinburgh Overseas Equity Fund, Turner Core Growth
Fund, Frontier Capital Appreciation Fund and Enhanced U.S. Equity Fund,
respectively.
35
<PAGE> 37
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES - (CONTINUED)
The Adviser has voluntarily undertaken to waive or otherwise reimburse the
Edinburgh Overseas Equity Fund, Turner Core Growth Fund, Frontier Capital
Appreciation Fund and Enhanced U.S. Equity Fund for their operating expenses,
exclusive of advisory fees, brokerage or other portfolio transaction expenses or
expenses of litigation, indemnification, taxes or other extraordinary expenses,
to the extent that they exceed 0.25% of the average daily net assets of the Fund
through December 31, 1998.
No officer, director or employee of the Adviser, or sub-advisers receives any
compensation from the Company for serving as a director or officer of the
Company. The Company paid each Director who is not an officer or employee of the
Adviser and their affiliates, $8,000 per annum plus $500 per meeting attended
and reimbursed each such Director for travel and out-of-pocket expenses.
3. PURCHASES AND SALES OF SECURITIES
Costs of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the period January 1, 1997 through December 31,
1997, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------
<S> <C> <C>
Edinburgh Overseas Equity Fund........................... $ 5,903,591 $3,184,518
Turner Core Growth Fund.................................. 6,649,684 5,600,342
Frontier Capital Appreciation Fund....................... 15,174,012 4,695,104
Enhanced U.S. Equity Fund................................ 6,800,869 1,671,085
</TABLE>
At December 31, 1997, aggregated gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value were as follows:
<TABLE>
<CAPTION>
FEDERAL TAX BASIS TAX BASIS
INCOME UNREALIZED UNREALIZED NET UNREALIZED
TAX COST APPRECIATION DEPRECIATION APPRECIATION
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Edinburgh Overseas Equity Fund........ $ 5,293,786 $ 646,476 $ (429,253) $217,223
Turner Core Growth Fund............... 3,162,505 544,613 (48,004) 496,609
Frontier Capital Appreciation Fund.... 13,578,950 1,491,430 (1,055,028) 436,402
Enhanced U.S. Equity Fund............. 6,503,123 741,244 (138,078) 603,166
</TABLE>
36
<PAGE> 38
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SHARES OF BENEFICIAL INTEREST
At December 31, 1997, an unlimited number of shares of beneficial interest
without par value were authorized. Changes in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
EDINBURGH OVERSEAS EQUITY FUND TURNER CORE GROWTH FUND
---------------------------------------- ----------------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996(A) DECEMBER 31, 1997 DECEMBER 31, 1996(A)
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Shares sold........ 400,630 338,734 146,803 358,098
Shares
repurchased...... (126,803) (21,193) (68,463) (187,484)
Distributions
reinvested....... 10,362 - 31,971 -
--------- -------- ------- --------
Net increase....... 284,189 317,541 110,311 170,614
Fund shares:
Beginning of
period........ 321,541 4,000 172,614 2,000
--------- -------- ------- --------
End of period.... 605,730 321,541 282,925 172,614
========= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION FUND ENHANCED U.S. EQUITY FUND
---------------------------------------- ----------------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996(A) DECEMBER 31, 1997 DECEMBER 31, 1996(A)
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Shares sold........ 1,325,768 417,701 369,645 131,623
Shares
repurchased...... (487,715) (179,703) (38,550) (98)
Distributions
reinvested....... 36,393 - 22,172 -
--------- -------- ------- --------
Net increase....... 874,446 237,998 353,267 131,525
Fund shares:
Beginning of
period........ 239,998 2,000 133,525 2,000
--------- -------- ------- --------
End of period.... 1,114,444 239,998 486,792 133,525
========= ======== ======= ========
</TABLE>
(a) The Funds commenced operations on January 4, 1996.
37
<PAGE> 39
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. ORGANIZATION COSTS
Each Fund has borne all costs in connection with its organization. Such costs
are being amortized on the straight-line method over a period of five years from
the commencement of operations for each Fund. In the event that any of the
initial shares of the Funds are redeemed during such amortization period, the
Funds will be reimbursed for any unamortized costs in the same proportion as the
number of shares redeemed bears to the number of initial shares held at the time
of redemption.
6. FINANCIAL INSTRUMENTS
Edinburgh Overseas Equity Fund regularly trades financial instruments with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to market risks, such as foreign currency exchange
rates. These financial instruments are limited to forward currency exchange
contracts.
The notional or contractual amounts of these instruments represent the
investments the Fund has in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At December 31,
1997, the Edinburgh Overseas Equity Fund had the following open forward currency
exchange contracts:
<TABLE>
<CAPTION>
SETTLEMENT MARKET UNREALIZED
TYPE CURRENCY DATE $U.S. VALUE VALUE DEPRECIATION
- --------- ------------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Purchase Japanese Yen 01/06/98 $19,630 $19,520 $ (110)
</TABLE>
7. CONCENTRATION
At December 31, 1997, a substantial portion of the Edinburgh Overseas Equity
Fund's net assets consist of securities denominated in foreign currencies.
Changes in currency exchange rates will affect the value of and investment
income from such securities. Foreign securities are subject to greater price
volatility, more limited capitalization and liquidity, and higher rates of
inflation than securities of companies based in the United States.
8. BENEFICIAL INTEREST
At December 31, 1997, the ownership of each fund was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
-------------------------------------------------------------------
JOHN HANCOCK PACIFIC NEW YORK
M LIFE VARIABLE LIFE LIFE LIFE
INSURANCE CO. INSURANCE CO. INSURANCE CO. INSURANCE CO.
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Edinburgh Overseas Equity Fund......... 33.7% 56.7% 9.6% --
Turner Core Growth Fund................ 40.3% 37.9% 21.8% --
Frontier Capital Appreciation Fund..... 9.6% 51.6% 38.6% 0.2%
Enhanced U.S. Equity Fund.............. 22.3% 6.8% 70.6% 0.3%
</TABLE>
38
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
M Fund, Inc.
We have audited the statements of assets and liabilities, including the
portfolios of investments, of M Fund, Inc. (comprising respectively Edinburgh
Overseas Equity Fund, Turner Core Growth Fund, Frontier Capital Appreciation
Fund and Enhanced U.S. Equity Fund) as of December 31, 1997, and the related
statements of operations for the year then ended, the statements of changes in
net assets and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of M Fund, Inc.'s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting M Fund, Inc. as of December 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets, and their financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 11, 1998
39
<PAGE> 41
M FUND, INC.
PROXY VOTING RESULTS (UNAUDITED)
A special meeting of the Funds' shareholders was held on December 19, 1997.
The results of votes taken among shareholders on proposals are listed below.
PROPOSAL 1
To ratify the proposal to adopt a New Investment Advisory Agreement between
M Fund, Inc. and M Financial Investment Advisers, Inc.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 2,280,796 99.60%
Against............................................. 0 0.00%
Abstain............................................. 9,148 0.40%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
</TABLE>
PROPOSAL 2 Edinburgh Overseas Equity Fund Shareholders
To ratify the proposal to adopt a New Investment Sub-Advisory Agreement
between M Financial Investment Advisers, Inc. and Edinburgh Fund Managers, plc.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 572,464 99.75%
Against............................................. 332 0.06%
Abstain............................................. 1,117 0.19%
--------- ------
TOTAL.......................................... 573,913 100.00%
</TABLE>
PROPOSAL 3 Turner Core Growth Fund Shareholders
To ratify the proposal to adopt a New Investment Sub-Advisory Agreement
between M Financial Investment Advisers, Inc. and Turner Investment Partners,
Inc.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 251,178 100.00%
Against............................................. 0 0.00%
Abstain............................................. 0 0.00%
--------- ------
TOTAL.......................................... 251,178 100.00%
</TABLE>
40
<PAGE> 42
M FUND, INC.
PROXY VOTING RESULTS (UNAUDITED)(CONTINUED)
PROPOSAL 4 Frontier Capital Appreciation Fund Shareholders
To ratify the proposal to adopt a New Investment Sub-Advisory Agreement
between M Financial Investment Advisers, Inc. and Frontier Capital Management
Co., Inc.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 1,008,432 99.50%
Against............................................. 528 0.05%
Abstain............................................. 4,532 0.45%
--------- ------
TOTAL.......................................... 1,013,492 100.00%
</TABLE>
PROPOSAL 5 Enhanced U.S. Equity Fund Shareholders
To ratify the proposal to adopt a New Investment Sub-Advisory Agreement
between M Financial Investment Advisers, Inc. and Franklin Portfolio Associates
LLC.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 447,861 99.22%
Against............................................. 0 0.00%
Abstain............................................. 3,500 0.78%
------- ------
TOTAL.......................................... 451,361 100.00%
</TABLE>
PROPOSAL 6
To elect as Directors of M Fund, Inc. the following five nominees.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Peter W. Mullin
Affirmative......................................... 2,288,227 99.93%
Witheld............................................. 1,717 0.07%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
David M. Spungen
Affirmative......................................... 2,288,227 99.93%
Witheld............................................. 1,717 0.07%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
</TABLE>
41
<PAGE> 43
M FUND, INC.
PROXY VOTING RESULTS (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Gerald Bidwell
Affirmative......................................... 2,288,227 99.93%
Witheld............................................. 1,717 0.07%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
Neil E. Goldschmidt
Affirmative......................................... 2,288,227 99.93%
Witheld............................................. 1,717 0.07%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
Philip W. Halpern
Affirmative......................................... 2,288,227 99.93%
Witheld............................................. 1,717 0.07%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
</TABLE>
PROPOSAL 7
To ratify the selection of Coopers & Lybrand LLP as independant accountants
for M Fund, Inc.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES
----------------- -----------
<S> <C> <C>
Affirmative......................................... 2,212,848 96.63%
Against............................................. 67,734 2.96%
Abstain............................................. 9,362 0.41%
--------- ------
TOTAL.......................................... 2,289,944 100.00%
</TABLE>
42
