<PAGE>
M FUNDS
BRANDES INTERNATIONAL EQUITY FUND
TURNER CORE GROWTH FUND
FRONTIER CAPITAL APPRECIATION FUND
ENHANCED U.S. EQUITY FUND
SEMI-ANNUAL REPORT
JUNE 30, 1999
[LOGO]
<PAGE>
M FUND, INC.
PRESIDENT'S LETTER
July 15, 1999
Dear Contract Owners:
We are pleased to present to you the M Fund, Inc. (the "Company") Semi-Annual
Report dated June 30, 1999. The Company has been growing steadily during the
course of 1999 with total assets under management reaching over $94 million as
of June 30, 1999.
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 period
beginning January 1, 1999 and ending June 30, 1999 in addition to their outlook
for the last six months of 1999.
Sub-Advisers to the Company are: Brandes Investment Partners, L.P. for the
Brandes International Equity Fund, Turner Investment Partners, Inc. for the
Turner Core Growth Fund, Frontier Capital Management Co., Inc. for the Frontier
Capital Appreciation Fund, and Franklin Portfolio Associates, L.L.C. 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,
/s/ DANIEL F. BYRNE
DANIEL F. BYRNE
PRESIDENT
M Fund, Inc.
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
The Brandes International Equity Fund returned 21.62% for the six months
ended June 30, 1999. This compared to a gain of 3.80% for the benchmark Morgan
Stanley Capital International (MSCI) EAFE Index for the same period.
The Fund's outperformance of the benchmark was primarily due to the strong
performance of emerging markets stocks in the portfolio. Emerging markets, in
general, had continued their powerful recovery during the semi-annual period.
For the six months ending June 30, 1999 the MSCI Free Emerging Markets Index
rose 39.87%. In Latin America, equity markets rallied on the back of a surge in
energy prices and early signs of an economic recovery in Brazil. Over the six
month period, the MSCI Free Latin America Index gained 31.02% in U.S. dollars,
led by strength in Argentina and Venezuela.
Among developed foreign markets, Japanese stocks rose 20.72% over the six
months, as the Japanese government proposed to address economic and banking
problems. European markets, however, were generally lower for the period, amid
investor concern about the conflict in Kosovo, prolonged weakness in the euro,
and relatively tepid growth in Germany and Italy. The MSCI Europe Index fell
- -2.41% for the first half of 1999.
Geographically, the Fund's best performing holdings were in South Korea (up
over 70% for the period), as well as South Africa, Argentina, and Mexico (each
up over 60%). Returns generally lagged in European stocks; holdings in several
European countries finished the period with negative returns. On a sector basis,
the Fund's strongest gains came from the materials and commodities sector (De
Beers) and the metals group (British Steel). Holdings in the energy sources
industry also benefited from several takeover overtures late in the period (YPF
Sociedad Anonima and Elf Aquitaine).
It has now been two years since the global economic crisis first erupted in
Asia. Since then, financial markets worldwide have been in a state of flux and
many traditional economic relationships have been turned upside down. While it
is too early to say with certainty that the crisis has passed, it now appears
the global economic environment may be returning to something approaching
"normalcy." This is not to suggest that world stock prices will not continue to
be volatile, or that countries and regions will not experience the usual
economic ups and downs. It also does not insure that the global economy is
necessarily out of the woods.
We welcome this return to more normal conditions. Speculative fervor is
never healthy for any nation's economy or markets. However, as value investors,
we believe that the turmoil caused by the global financial crisis created
abnormally attractive opportunities for those interested in buying good
businesses at reasonable prices. As such, we expect solid performance over time
for value investors patient enough to endure periodic disruptions in the global
economic environment.
BRANDES INVESTMENT PARTNERS, L.P.
INVESTMENT SUB-ADVISER TO THE BRANDES INTERNATIONAL EQUITY FUND
2
<PAGE>
TURNER CORE GROWTH FUND
The Turner Core Growth Fund returned 13.97% for the six months ended June
30, 1999 to outperform both the Wilshire 5000 Stock Index and the Lipper Growth
Funds Average by more than two percentage points. The Wilshire 5000 was up
11.87%; the average growth fund tracked by Lipper Inc., gained 11.64%.
Good stock selection was largely responsible for the Turner Core Fund's
return premium. In our investment approach, we adhere to a "sector-neutral"
policy; i. e., we match the weighting of our combined investments in each of the
10 market sectors to the weighting of the analogous sector in the target index,
so we can exploit the often sudden shifts in performance leadership among
sectors. For the past six months, six of our 10 sector positions beat their
corresponding index sectors, with the best results coming from technology,
materials/processing, producer-durables, and utilities/communication. Subpar
returns in the health-care and consumer-staples sectors in particular detracted
from our performance.
Among individual stocks, our biggest winners (up 30% or more) included
Broadcom, Cisco Systems, Microsoft, MIPS Technologies, Motorola, Siebel Systems,
Sun Microsystems, Tellabs, Texas Instruments, Xilinx, and Yahoo! in technology;
Corning and Georgia-Pacific in materials/processing; AlliedSignal, Applied
Materials, Uniphase, and KLA-Tencor in producer durables; and Global Crossing,
Level 3 Communications, Nextlink Communications, Qualcomm, and Qwest
Communications in utilities/ communication.
The fund's results were also influenced by a market environment in which
growth stocks outperformed in the first three months of the period, then
underperformed in the following three months. Overall, for the entire period,
value stocks, as represented by the Russell 3000 Value Index, returned 12.27%,
versus 10.62% for their growth counterparts. Investment sentiment changed
dramatically in the second half of the period as part of a general broadening of
the stock market that increasingly favored smaller stocks. In response, we
reduced the portfolio's weighted average market capitalization (which was above
$100 billion at one point) to about $84 billion at June 30. We reduced our
weighting in capitalization giants like General Electric and bought smaller
stocks of issuers with stellar earnings prospects.
About the stock market's prospects, we think as long as earnings hold up
reasonably well (and we think they will generally), this remarkable bull market
should continue to rage. The potential earnings power of our own holdings
remains outstanding. Also, we think the above-average market volatility (a
common metaphor for the intensity of market moves recently has been the roller
coaster) will continue to be in evidence. Finally, we remain optimistic about
the superior return potential of growth stocks over time, although investment
sentiment may continue to favor value stocks in the short term.
TURNER INVESTMENT PARTNERS, INC.
INVESTMENT SUB-ADVISER TO THE TURNER CORE GROWTH FUND
3
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
The Frontier Capital Appreciation Fund returned 20.15% for the six months
ended June 30, 1999. The Russell 2500 stock index returned 10.88% during the
same period.
This year has seen large well-known companies experience significant
earnings disappointments. This has occurred during a time of record valuations
for these stocks and has caused investors to broaden their focus to the small
and mid cap sector of the stock market. Earnings growth and earnings potential
have driven performance thus far in 1999.
The economic backdrop remains excellent, which should provide strong
underlying support for the market. Despite fears that better-than-expected GDP
growth and historically low unemployment rates would fuel acceleration in
inflation, thus far strong productivity gains and generally flat to declining
commodity prices have kept inflation rates low.
Corporate profits are expected to be up close to 10% versus a consensus
expectation earlier in the year of only flat to modest gains. As small and mid
cap stocks tend to be more tied to the domestic economy and more cyclical than
their larger cap, typically multinational, counterparts, this economic strength
has been a major driver to their recently improved relative performance. Even
after their recent gains, small cap stocks still sell at historically deep
valuation discounts to the larger cap averages. This combination of strong
relative earnings growth and historically attractive relative valuations
enhances our optimism that the improving performance trends can be sustained.
FRONTIER CAPITAL MANAGEMENT CO., INC.
INVESTMENT SUB-ADVISER TO THE FRONTIER CAPITAL APPRECIATION FUND
4
<PAGE>
ENHANCED U.S. EQUITY FUND
The Enhanced U.S. Equity Fund returned 13.22% for the six months ended June
30, 1999. The S&P 500 returned 12.38% for the same period.
Franklin Portfolio Associates' approach to active management involves
identifying and exploiting differences in relative valuation between securities.
The period immediately prior to the second quarter was a difficult one for this
type of active management, but the second quarter saw a return to a more normal
pattern of returns to relative value.
We continue to believe that the US equity market looks a little stretched in
terms of conventional valuation measures such as P/E or dividend yield. The high
returns of recent years have occurred against a background of continuously good
and improving economic news. As recently as last fall the possibility of a
recession over the course of 1999 was widely discussed. Over the subsequent
months expectations were systematically revised upward to their current level,
which is comfortably above trend. Inevitably this has had a major positive
impact on the market.
Such revisions are very difficult to forecast, however, and thus we believe
that market timing is typically not an important component of successful
investment strategies. Instead, holding an appropriate investment mix over the
longer term best suits the objectives of most investors.
We look forward to the future with great confidence. Our investment process
has proved robust over an extended period and through varying market and
economic conditions. We continue to believe that we will outperform both
indexing and the majority of our peers.
FRANKLIN PORTFOLIO ASSOCIATES, L.L.C.
INVESTMENT SUB-ADVISER TO THE ENHANCED U.S. EQUITY FUND
5
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
FOREIGN COMMON STOCKS--90.7%
BRAZIL--6.3%
35,600 Banco Bradesco SA--ADR.................. $ 178,708
2,700 Centrais Electricas Brasileiras SA-- ADR
Class B............................... 27,184
36,300 Centrais Electricas Brasileiras SA--
ADR*.................................. 342,944
270 Centrais Geradoras do Sul do Brasil
SA--ADR............................... 1,081
21,100 Cia Cervejaria Brahma--ADR.............. 238,694
1,000 Embratel Partipacoes SA--ADR*........... 13,875
25,700 Petroleo Brasileiro SA--ADR............. 395,731
100 Tele Celular Sul Participacoes SA--
ADR*.................................. 2,169
333 Tele Centro Oeste Celular Participacoes
SA--ADR............................... 1,311
200 Tele Centro Sul Participacoes SA--
ADR*.................................. 11,100
20 Tele Leste Celular Participacoes
SA--ADR*.............................. 595
50 Tele Nordeste Celular Participacoes
SA--ADR*.............................. 1,350
20 Tele Norte Celular Participacoes
SA--ADR............................... 541
1,000 Tele Norte Leste Participacoes SA--
ADR*.................................. 18,563
50 Telemig Celular Participacoes SA--
ADR................................... 1,231
400 Telesp Celular Partcipacoes SA-- ADR*... 10,700
1,000 Telesp Participacoes SA--ADR*........... 22,875
-----------
1,268,652
-----------
DENMARK--1.7%
3,205 Den Danske Bank......................... 346,616
-----------
FRANCE--6.7%
4,300 Alcatel................................. 604,793
3,400 Elf-Aquitaine SA........................ 498,528
5,900 Michelin (CGDE)--Class B................ 241,168
-----------
1,344,489
-----------
GERMANY--6.7%
8,000 BASF AG................................. 353,221
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
GERMANY (CONTINUED)
270 Bayerische Motoren Werke AG............. $ 186,399
19,000 Deutsche Telekom AG..................... 796,808
-----------
1,336,428
-----------
HONG KONG--5.7%
105,000 Citic Pacific Ltd....................... 334,951
41,000 Hutchison Whampoa Ltd................... 371,233
89,000 Swire Pacific Ltd.--Class A............. 440,492
-----------
1,146,676
-----------
ITALY--4.8%
67,000 ENI SpA................................. 394,890
54,500 Telecom Italia SpA...................... 564,657
-----------
959,547
-----------
JAPAN--18.9%
6,000 Canon, Inc.............................. 172,640
5,000 Daiichi Pharmaceutical Co., Ltd......... 77,639
105,000 Hitachi Ltd............................. 985,368
70 Japan Tobacco, Inc...................... 77,556
54,000 Komatsu, Ltd............................ 345,132
10,000 Kyocera Corp............................ 587,044
19,000 Matsushita Electric Industrial Co....... 369,176
130,000 Mitsubishi Heavy Industries, Ltd........ 527,761
26,000 Nippon Mitsubishi Oil Corp.............. 109,637
50,000 Tokio Marine & Fire Insurance Co.,
Ltd................................... 543,636
-----------
3,795,589
-----------
KOREA--1.4%
7,000 Korea Electric Power Corp............... 290,886
-----------
MEXICO--3.1%
7,700 Telefonos de Mexico SA--ADR............. 622,256
-----------
NETHERLANDS--3.9%
8,992 ING Groep NV............................ 486,431
6,470 Koninklijke KPN NV...................... 303,334
-----------
789,765
-----------
SINGAPORE--3.3%
54,000 Development Bank of Singapore Ltd....... 659,929
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
SOUTH AFRICA--2.8%
18,200 De Beers--Centenary..................... $ 436,148
13,200 South African Breweries Plc*............ 112,990
-----------
549,138
-----------
SPAIN--1.6%
10,400 Argentaria SA........................... 236,720
6,600 Union Electrica Fenosa, SA.............. 86,232
-----------
322,952
-----------
SWITZERLAND--2.3%
21,000 Allied Zurich Plc....................... 264,008
520 Swisscom AG............................. 195,614
-----------
459,622
-----------
UNITED KINGDOM--19.7%
11,000 BOC Group Plc........................... 215,021
32,100 British American Tobacco Plc............ 301,844
152,000 British Steel Plc....................... 393,564
46,188 Diageo Plc.............................. 482,371
3,700 HSBC Holdings Plc....................... 131,060
21,200 HSBC Holdings Plc (Hong Kong)........... 773,284
15,400 Imperial Chemical Industries Plc........ 152,214
94,576 Invensys Plc............................ 447,642
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
UNITED KINGDOM (CONTINUED)
80,400 Marks & Spencer Plc..................... 465,145
22,000 National Power Plc...................... $ 160,225
19,000 Reckitt & Colman Plc.................... 198,130
27,000 Royal & Sun Alliance Insurance Group
Plc................................... 242,182
-----------
3,962,682
-----------
VENEZUELA--1.8%
13,200 Cia Anonima Telefonos de
Venezuela--ADR........................ 359,700
-----------
TOTAL INVESTMENTS--90.7%
(Cost $15,388,157).................... 18,214,927
OTHER ASSETS AND LIABILITIES
(NET)--9.3%........................... 1,877,044
-----------
TOTAL NET ASSETS--100.0%................ $20,091,971
-----------
-----------
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR--American Depositary Receipt
* Non-income producing security.
Percentages indicated are based on Net Assets.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BRANDES INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
At June 30, 1999, industry sector diversification of the Brandes
International Equity Fund's investments as a percentage of net assets was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
- -------------------------------------------------------------------------------------- -------------
<S> <C>
Telephone Systems..................................................................... 11.7%
Banking............................................................................... 11.5%
Electronics........................................................................... 7.8%
Insurance............................................................................. 7.6%
Oil & Gas............................................................................. 7.0%
Beverages, Food & Tobacco............................................................. 6.1%
Communications........................................................................ 5.8%
Industrial--Diversified............................................................... 5.7%
Electric Utilities.................................................................... 4.5%
Heavy Machinery....................................................................... 4.4%
Chemicals............................................................................. 3.6%
Electrical Equipment.................................................................. 2.7%
Retailers............................................................................. 2.3%
Industrial Technology................................................................. 2.3%
Mining................................................................................ 2.2%
Automotive............................................................................ 2.1%
Metals................................................................................ 2.0%
Household Products.................................................................... 1.0%
Pharmaceuticals....................................................................... 0.4%
-----
90.7%
-----
-----
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMMON STOCKS--95.5%
ADVERTISING--1.0%
2,410 Omnicom Group, Inc...................... $ 192,800
-----------
AIRLINES--0.7%
2,665 FDX Corp.*.............................. 144,576
-----------
AUTOMOTIVE--2.2%
2,070 Dana Corp............................... 95,349
1,970 Federal-Mogul Corp...................... 102,440
2,475 Ford Motor Co........................... 139,683
1,750 General Motors Corp..................... 98,438
-----------
435,910
-----------
BANKING--5.7%
5,160 Bank of New York Co., Inc. (The)........ 189,308
2,780 Capital One Financial Corp.............. 154,811
2,420 Chase Manhattan Corp.................... 209,633
1,750 Federal Home Loan Mortgage Corp......... 101,500
4,120 Household International, Inc............ 195,185
1,000 Northern Trust Corp..................... 97,000
4,520 Wells Fargo Co.......................... 193,230
-----------
1,140,667
-----------
BEVERAGES, FOOD & TOBACCO--6.1%
2,660 Anheuser-Busch Companies, Inc........... 188,694
4,290 Coca-Cola Co............................ 268,125
4,180 Pepsi Bottling Group, Inc. (The)........ 96,401
3,910 Pepsico, Inc............................ 151,268
2,770 Quaker Oats Co.......................... 183,859
3,845 Seagram Co., Ltd. (The)................. 193,692
4,880 SYSCO Corp.............................. 145,485
-----------
1,227,524
-----------
CHEMICALS--1.1%
2,175 Air Products & Chemicals Inc............ 87,544
2,130 Dupont (E.I.) de Nemours................ 145,506
-----------
233,050
-----------
COMMERCIAL SERVICES--1.1%
4,295 Waste Management, Inc................... 230,856
-----------
COMMUNICATIONS--4.1%
5,860 Lucent Technologies..................... 395,184
580 QUALCOMM Inc.*.......................... 83,230
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMMUNICATIONS (CONTINUED)
2,885 Tellabs, Inc.*.......................... $ 194,918
875 Uniphase Corp.*......................... 145,250
-----------
818,582
-----------
COMPUTER SOFTWARE & PROCESSING-- 13.0%
3,465 America Online, Inc.*................... 382,881
2,230 Automatic Data Processing, Inc.......... 98,120
2,050 BMC Software, Inc.*..................... 110,700
6,280 Cisco Systems, Inc.*.................... 405,060
6,050 Comdisco, Inc........................... 155,031
1,950 Computer Associates International,
Inc................................... 107,250
1,540 Electronic Data Systems Corp............ 87,106
4,150 First Data Corp. ....................... 203,091
8,770 Microsoft Corp.*........................ 790,939
2,200 Oracle Corp.*........................... 81,675
1,610 Siebel Systems, Inc.*................... 106,864
600 Yahoo! Inc.*............................ 103,350
-----------
2,632,067
-----------
COMPUTERS & INFORMATION--2.8%
3,030 International Business Machines......... 391,628
2,420 Sun Microsystems, Inc.*................. 166,678
-----------
558,306
-----------
CONGLOMERATES--0.9%
2,020 Tyco International Ltd.................. 191,395
-----------
COSMETICS & PERSONAL CARE--0.7%
1,345 Colgate-Palmolive Co.................... 132,819
-----------
ELECTRONICS--5.7%
1,980 Applied Materials, Inc.*................ 146,273
960 Broadcom Corp.--Class A*................ 138,780
1,470 KLA Instruments Corp.*.................. 95,366
2,160 LSI Logic*.............................. 99,630
2,760 Motorola, Inc........................... 261,510
4,380 National Semiconductor Corp.*........... 110,869
1,360 Texas Instruments....................... 197,200
1,660 Xilinx, Inc.*........................... 95,035
-----------
1,144,663
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
ENTERTAINMENT & LEISURE--2.5%
5,410 AT&T Corp.--Liberty Media Group--Class
A*.................................... $ 198,818
4,295 Time Warner, Inc........................ 315,683
-----------
514,501
-----------
FINANCIAL SERVICES--4.8%
1,880 American Express Co..................... 244,635
7,552 Citigroup, Inc.......................... 358,720
2,840 Goldman Sachs Group, Inc. (The)......... 205,190
1,520 Morgan Stanley, Dean Witter & Co........ 155,800
-----------
964,345
-----------
FOOD RETAILERS--1.4%
7,100 Kroger Co.*............................. 198,356
2,480 Starbucks Corp.*........................ 93,155
-----------
291,511
-----------
FOREST PRODUCTS & PAPER--1.6%
1,840 International Paper Co.................. 92,920
2,500 Kimberly-Clark Corp..................... 142,500
4,520 Smurfit-Stone Container Corp.*.......... 92,943
-----------
328,363
-----------
HEALTH CARE PROVIDERS--0.8%
6,905 Columbia/HCA Healthcare Corp............ 157,520
-----------
HEAVY MACHINERY--1.0%
2,730 Cooper Cameron Corp.*................... 101,181
2,150 Lam Research Corp.*..................... 100,378
-----------
201,559
-----------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES--1.0%
3,115 Home Depot.............................. 200,723
-----------
HOUSEHOLD PRODUCTS--1.3%
3,815 Corning Inc............................. 267,527
-----------
INSURANCE--5.0%
2,737 American International Group............ 320,400
2,160 CIGNA Corp.............................. 192,240
5,910 Foundation Health Systems, Inc.-- Class
A*.................................... 88,650
2,620 Lincoln National Corp.*................. 137,059
2,430 Marsh & McLennan Co., Inc............... 183,465
1,560 United Healthcare Corp.................. 97,695
-----------
1,019,509
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
MEDIA--BROADCASTING & PUBLISHING--4.5%
3,360 CBS Corp.*.............................. $ 145,950
1,320 Clear Channel Communications, Inc.*..... 90,998
2,900 Comcast Corp.--Class A.................. 111,469
2,960 Cox Communications, Inc.-- Class A*..... 108,965
1,640 Gemstar International Group Ltd.*....... 107,010
4,525 MediaOne Group, Inc.*................... 336,547
-----------
900,939
-----------
MEDICAL SUPPLIES--3.1%
1,410 Bausch & Lomb Inc....................... 107,865
3,550 Boston Scientific Corp.*................ 155,978
3,200 Medtronics, Inc......................... 249,200
3,270 St Jude Medical, Inc.*.................. 116,494
-----------
629,537
-----------
OFFICE EQUIPMENT--0.8%
225 Pitney Bowes, Inc....................... 14,456
2,340 Xerox Corp.............................. 138,206
-----------
152,662
-----------
OIL & GAS--6.0%
2,075 Burlington Resources, Inc............... 89,744
2,340 Enron Corporation....................... 191,295
4,330 Exxon................................... 333,951
1,880 Mobil Corp.............................. 186,120
2,880 Texaco.................................. 180,000
3,585 Unocal Corp............................. 142,056
1,990 Williams Companies, Inc................. 84,699
-----------
1,207,865
-----------
PHARMACEUTICALS--5.0%
2,390 Biogen, Inc*............................ 153,707
4,080 Bristol-Myers Squibb Co................. 287,385
3,805 Johnson & Johnson....................... 372,890
3,300 Pharmacia & Upjohn, Inc................. 187,481
-----------
1,001,463
-----------
RETAILERS--2.6%
1,925 Costco Co., Inc.*....................... 154,120
7,780 Wal-Mart Stores, Inc.................... 375,385
-----------
529,505
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
TELEPHONE SYSTEMS--9.0%
3,780 Ameritech Corp.......................... $ 277,830
4,205 Bell Atlantic Corp...................... 274,902
830 Exodus Communications, Inc.*............ 99,548
3,130 Frontier Corp........................... 184,670
2,080 Level 3 Communications, Inc.*........... 124,930
3,745 MCI WorldCom, Inc.*..................... 323,006
2,660 Metromedia Fiber Network, Inc.-- Class
A*.................................... 95,594
1,360 NEXTLINK Communications, Inc.--Class
A*.................................... 101,150
3,400 Sprint Corp............................. 179,563
2,540 Sprint Corp. (PCS Group)*............... 145,098
-----------
1,806,291
-----------
TOTAL INVESTMENTS--95.5%
(Cost $16,834,308).................... 19,257,035
OTHER ASSETS AND LIABILITIES
(NET)--4.5%........................... 917,045
-----------
TOTAL NET ASSETS--100.0%................ $20,174,080
-----------
-----------
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
Percentages indicated are based on Net Assets.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMMON STOCKS--98.9%
AEROSPACE & DEFENSE--0.8%
12,500 Orbital Sciences Corp.*................. $ 295,313
-----------
APPAREL RETAILERS--0.7%
23,800 North Face Inc. (The)*.................. 235,025
-----------
BUILDING MATERIALS--2.0%
12,360 Cameron Ashley Building Products*....... 129,008
13,010 Elcor Corp.............................. 568,374
-----------
697,382
-----------
CHEMICALS--0.8%
29,930 Hexcel Corp.*........................... 303,041
-----------
COMMERCIAL SERVICES--8.1%
10,800 Angelica Corp........................... 190,350
8,400 Bright Horizons Family Solutions,
Inc.*................................. 158,550
32,900 Celgene Corp.*.......................... 577,806
18,900 Lo-Jack Corp.*.......................... 158,288
9,400 Quanta Services, Inc.*.................. 413,600
30,200 Republic Services, Inc.--Class A*....... 747,450
14,300 Stone & Webster, Inc.................... 380,738
20,490 US Oncology, Inc.*...................... 245,880
-----------
2,872,662
-----------
COMMUNICATIONS--7.8%
4,700 Adaptive Broadband Corp.*............... 102,813
15,800 Cable Design Technologies*.............. 243,913
32,400 Coyote Network Systems, Inc.*........... 175,164
12,200 Digital Microwave Corp.*................ 155,550
19,000 Intervoice, Inc.*....................... 274,313
13,300 Itron, Inc.*............................ 113,881
12,700 Newbridge Network Corp.*................ 365,125
19,200 P-Com, Inc.*............................ 100,500
33,700 PictureTel Corporation*................. 269,600
5,500 Sawtek Inc.*............................ 252,313
22,300 Tollgrade Communications, Inc.*......... 340,075
13,330 Transaction Network Services, Inc.*..... 389,903
-----------
2,783,150
-----------
COMPUTER SOFTWARE & PROCESSING-- 10.9%
39,600 Ansoft Corp.*........................... 321,750
22,400 ANSYS, Inc.*............................ 222,600
10,300 Ardent Software, Inc.*.................. 218,875
33,200 Information Resources, Inc.*............ 290,500
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMPUTER SOFTWARE & PROCESSING
(CONTINUED)
9,900 Integrated Measurement Systems, Inc.*... $ 127,463
39,100 ISG International Software Group
Ltd.*................................. 369,006
42,400 Mentor Graphics Corp.*.................. 543,250
18,100 NOVA Corp.*............................. 452,500
8,700 Pathways Group, Inc. (The)*............. 57,638
8,300 Project Software & Development, Inc.*... 259,375
11,250 Sandisk Corp.*.......................... 506,250
12,200 Sybase, Inc.*........................... 134,200
5,600 Synopsys, Inc.*......................... 309,050
36,000 System Software Associates, Inc.*....... 59,627
-----------
3,872,084
-----------
COMPUTERS & INFORMATION--3.4%
27,800 Box Hill Systems Corp.*................. 163,325
18,700 Data General Corp.*..................... 272,319
30,600 In Focus Systems, Inc.*................. 459,000
7,100 Seagate Technology, Inc.*............... 181,938
8,100 Silicon Graphics, Inc.*................. 132,638
-----------
1,209,220
-----------
CONTAINERS & PACKAGING--1.8%
28,490 US Can Corp.*........................... 633,903
-----------
ELECTRICAL EQUIPMENT--1.5%
14,600 Artesyn Technologies, Inc.*............. 323,938
22,500 Checkpoint Systems, Inc.*............... 201,094
-----------
525,032
-----------
ELECTRONICS--18.1%
36,285 3Dfx Interactive, Inc.*................. 566,952
14,600 Aavid Thermal Technologies*............. 330,324
36,800 American Superconductor Corp.*.......... 549,699
9,300 Analog Devices, Inc.*................... 466,743
8,500 Arrow Electronics, Inc.*................ 161,499
15,600 Atmel Corp.*............................ 408,524
5,500 Benchmark Electronics, Inc.*............ 197,655
3,900 Black Box Corp.*........................ 195,487
27,900 Cypress Semiconductor Corp.*............ 460,349
8,600 Exar Corp.*............................. 212,849
8,000 Galileo Technology Ltd.*................ 362,499
4,100 Harman International Industries......... 180,399
3,720 Lattice Semiconductor*.................. 231,569
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
ELECTRONICS (CONTINUED)
12,930 LSI Logic*.............................. $ 596,396
7,200 Micron Technology, Inc.*................ 290,250
4,900 MMC Networks, Inc.*..................... 219,275
10,800 SIPEX Corp.*............................ 221,400
61,960 Trimble Navigation Ltd.*................ 797,735
-----------
6,449,604
-----------
ENTERTAINMENT & LEISURE--4.0%
24,600 American Coin Merchandising, Inc.*...... 159,900
37,500 Family Golf Centers, Inc.*.............. 288,281
7,600 Hasbro, Inc............................. 212,325
9,820 International Game Technology........... 181,670
19,612 Mattel, Inc............................. 518,492
4,860 Sodak Gaming*........................... 45,563
-----------
1,406,231
-----------
FOREST PRODUCTS & PAPER--2.6%
48,400 Gaylord Container Corp.--Class A*....... 384,175
13,560 Louisiana Pacific Corp.................. 322,050
11,300 Smurfit-Stone Container Corp.*.......... 232,356
-----------
938,581
-----------
HEALTH CARE PROVIDERS--1.2%
17,400 Centennial HealthCare Corp.*............ 91,895
9,700 Sunrise Assisted Living, Inc.*.......... 338,288
-----------
430,183
-----------
HEAVY CONSTRUCTION--0.2%
12,700 Layne Christensen Co.*.................. 80,963
-----------
HEAVY MACHINERY--5.1%
10,013 Albany International Corp.-- Class A*... 207,770
11,700 Applied Science & Technology, Inc.*..... 263,250
18,400 Central Sprinkler Corp.*................ 518,650
2,800 Cooper Cameron Corp.*................... 103,775
15,330 Insituform Technologies*................ 331,511
4,100 Lam Research Corp.*..................... 191,419
12,800 Paxar Corp.*............................ 115,200
6,800 Varco International, Inc.*.............. 74,375
-----------
1,805,950
-----------
INSURANCE--1.7%
12,700 HCC Insurance Holdings, Inc............. 288,131
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
INSURANCE (CONTINUED)
33,700 Mid Atlantic Medical
Services, Inc.*....................... $ 332,788
-----------
620,919
-----------
MEDIA--BROADCASTING & PUBLISHING--2.0%
25,430 Mail-Well, Inc.*........................ 411,648
1,700 Scholastic Corp.*....................... 86,063
4,500 Viacom, Inc.*........................... 198,000
-----------
695,711
-----------
MEDICAL SUPPLIES--3.4%
29,800 Endocardial Solutions, Inc.*............ 281,238
8,100 EndoSonics Corp.*....................... 56,700
12,700 Haemonetics Corp.*...................... 254,794
6,800 Mentor Corp............................. 126,650
18,300 Merit Medical Systems, Inc.*............ 91,215
4,500 STERIS Corp.*........................... 87,188
19,100 Visible Genetics Inc.*.................. 307,988
-----------
1,205,773
-----------
MEDICAL & BIO-TECHNOLOGY--1.1%
4,800 VISX, Inc.*............................. 380,100
-----------
METALS--4.4%
72,700 Armco Inc.*............................. 481,638
24,370 Birmingham Steel Corp................... 100,526
2,800 Carpenter Technology.................... 79,975
7,000 Howmet International, Inc.*............. 120,313
11,200 Northwest Pipe Co.*..................... 186,200
11,250 Oregon Steel Mills...................... 149,766
12,200 Quanex Corp............................. 347,700
13,000 Synalloy Corp........................... 105,625
-----------
1,571,743
-----------
OIL & GAS--1.4%
3,600 BJ Services Co.*........................ 105,975
7,180 Noble Drilling Corp.*................... 141,356
4,400 Transocean Offshore Inc................. 115,500
2,600 Vastar Resources, Inc................... 136,338
-----------
499,169
-----------
PHARMACEUTICALS--7.7%
21,200 Advanced Polymer Systems, Inc.*......... 148,400
8,000 AmeriSource Health Corp.-- Class A*..... 204,000
11,197 Bergen Brunswig Corp.--Class A.......... 193,148
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
PHARMACEUTICALS (CONTINUED)
7,466 Bindley Western Industries, Inc......... $ 172,196
17,900 Copley Pharmaceutical, Inc.*............ 183,475
29,130 DUSA Pharmaceuticals, Inc.*............. 336,816
10,800 GelTex Pharmaceuticals, Inc.*........... 194,400
22,900 Guilford Pharmaceuticals Inc.*.......... 291,975
9,900 ICN Pharmaceuticals, Inc................ 318,656
3,300 Pharmacyclics, Inc.*.................... 92,400
26,700 Protein Design Labs, Inc.*.............. 592,406
-----------
2,727,872
-----------
REAL ESTATE--2.0%
6,900 Boston Properties, Inc.--REIT........... 247,538
6,580 CB Richard Ellis Services Group,
Inc.*................................. 163,678
10,700 Healthcare Realty Trust, Inc.--REIT..... 224,700
2,400 Jones Lang LaSalle Inc.*................ 71,550
-----------
707,466
-----------
RETAILERS--0.7%
6,700 CKE Restaurants, Inc.................... 108,875
14,300 PETsMART, Inc.*......................... 146,575
-----------
255,450
-----------
TELEPHONE SYSTEMS--2.6%
5,200 Century Communications Corp.*........... 239,200
4,600 ITC DeltaCom, Inc.*..................... 128,800
5,840 VoiceStream Wireless Corp.*............. 166,075
7,740 Western Wireless Corp.--Class A*........ 208,980
3,900 WinStar Communications, Inc.*........... 190,125
-----------
933,180
-----------
TEXTILES, CLOTHING & FABRICS--1.5%
28,800 Fruit of the Loom, Inc.--Class A*....... 280,800
5,000 Unifi, Inc.............................. 106,250
9,300 Wolverine World Wide, Inc............... 130,200
-----------
517,250
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
TRANSPORTATION--1.4%
6,700 Coach USA, Inc.*........................ $ 280,981
22,500 Global Vacation Group, Inc.*............ 101,250
4,900 Westinghouse Air Brake Co............... 127,094
-----------
509,325
-----------
TOTAL COMMON STOCKS 35,162,282
(Cost $28,422,566)....................
-----------
CONVERTIBLE PREFERRED STOCKS--0.3%
HEALTH CARE PROVIDERS--0.3%
8,300 MedPartners, Inc.--TAPS................. 89,225
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $71,813)........................ 89,225
-----------
TOTAL INVESTMENTS--99.2%
(Cost $28,494,379).................... 35,251,507
OTHER ASSETS AND LIABILITIES
(NET)--0.8%........................... 288,225
-----------
TOTAL NET ASSETS--100.0%................ $35,539,732
-----------
-----------
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
REIT--Real Estate Investment Trust
TAPS--Threshold Appreciation Price Securities
* Non-income producing security.
Percentages indicated are based on Net Assets.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMMON STOCKS--98.6%
AIRLINES--0.6%
2,200 FDX Corp.*.............................. $ 119,350
-----------
AUTOMOTIVE--2.0%
2,500 Ford Motor Co........................... 141,094
900 Genuine Parts Co........................ 31,500
1,400 Johnson Controls, Inc................... 97,038
2,000 TRW Inc................................. 109,750
-----------
379,382
-----------
BANKING--8.3%
1,500 Associates First Capital Corp........... 66,468
4,889 Bank of America Corp.................... 358,424
3,000 Bank One Corporation.................... 178,687
1,200 Chase Manhattan Corp.................... 103,949
8,200 Fleet Financial Group, Inc.............. 363,874
900 Golden West Financial Corp.............. 88,199
300 National City Corp...................... 19,649
2,000 SunTrust Banks, Inc..................... 138,874
1,000 Wachovia Corp........................... 85,562
3,200 Wells Fargo Co.......................... 136,800
-----------
1,540,486
-----------
BEVERAGES, FOOD & TOBACCO--3.6%
100 Adolph Coors Co......................... 4,950
1,700 Anheuser-Busch Co., Inc................. 120,594
7,000 ConAgra................................. 186,375
700 General Mills, Inc...................... 56,263
800 Philip Morris Co........................ 32,150
3,400 Quaker Oats Co.......................... 225,675
1,200 UST Inc................................. 35,100
-----------
661,107
-----------
BUILDING MATERIALS--0.2%
1,000 Owens Corning........................... 34,375
-----------
BUILDING & CONSTRUCTION--0.8%
3,700 Centex Corp............................. 138,981
-----------
CHEMICALS--1.1%
600 Air Products & Chemicals Inc............ 24,150
1,100 B.F. Goodrich Co........................ 46,750
1,000 Dow Chemical............................ 126,875
-----------
197,775
-----------
COMMERCIAL SERVICES--0.5%
2,500 R.R. Donnelley & Sons Co................ 92,656
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
COMMUNICATIONS--3.8%
2,600 General Instrument Corp.*............... $ 110,500
8,928 Lucent Technologies..................... 602,082
-----------
712,582
-----------
COMPUTER SOFTWARE & PROCESSING-- 6.2%
2,000 America Online, Inc.*................... 221,000
600 Cisco Systems, Inc.*.................... 38,700
1,400 Compuware Corp.*........................ 44,538
1,200 Deluxe Corp............................. 46,725
5,700 Microsoft Corp.*........................ 514,069
4,150 Oracle Corp.*........................... 154,069
3,600 Unisys Corp.*........................... 140,175
-----------
1,159,276
-----------
COMPUTERS & INFORMATION--5.5%
2,200 Dell Computer Corp.*.................... 81,400
3,200 EMC Corp.*.............................. 176,000
900 Gateway Inc.*........................... 53,100
3,700 Hewlett-Packard Co...................... 371,850
400 International Business Machines......... 51,700
6,200 Seagate Technology, Inc.*............... 158,875
2,000 Solectron Corp.*........................ 133,375
-----------
1,026,300
-----------
CONGLOMERATES--4.1%
8,100 Tyco International Ltd.................. 767,475
-----------
ELECTRIC UTILITIES--4.6%
3,600 Central & South West Corp............... 84,150
1,200 Dominion Resources, Inc................. 51,975
600 FPL Group, Inc.......................... 32,775
7,400 PG&E Corp............................... 240,500
2,400 Public Service Enterprise Group, Inc.... 98,100
2,211 Reliant Energy, Inc..................... 61,079
6,400 Southern Co............................. 169,600
2,700 Texas Utilities Co...................... 111,375
-----------
849,554
-----------
ELECTRICAL EQUIPMENT--0.8%
1,300 General Electric........................ 146,900
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
ELECTRONICS--3.1%
1,000 Applied Materials, Inc.*................ $ 73,875
8,400 Intel Corp.............................. 499,800
-----------
573,675
-----------
ENTERTAINMENT & LEISURE--1.1%
1,900 Eastman Kodak Co........................ 128,725
2,900 Hasbro, Inc............................. 81,019
-----------
209,744
-----------
FINANCIAL SERVICES--8.8%
6,672 Citigroup, Inc.......................... 316,920
3,500 Federal Home Loan Mortgage Corp......... 203,000
1,100 Federal National Mortgage Association... 75,213
1,000 J.P. Morgan & Co., Inc.................. 140,499
2,400 Lehman Brothers Holdings, Inc........... 149,400
6,400 MBNA Corp............................... 196,000
500 Merrill Lynch & Co...................... 39,969
4,160 Morgan Stanley, Dean Witter & Co. ...... 426,400
1,200 Transamerica Corp....................... 90,000
-----------
1,637,401
-----------
FOOD RETAILERS--1.3%
2,300 Albertson's, Inc........................ 118,594
2,066 Archer-Daniels-Midland.................. 31,894
3,400 Supervalu, Inc.......................... 87,338
-----------
237,826
-----------
FOREST PRODUCTS & PAPER--1.1%
2,800 Georgia-Pacific Corp.................... 132,650
500 Kimberly-Clark Corp..................... 28,500
1,800 Louisiana Pacific Corp.................. 42,750
-----------
203,900
-----------
HEAVY CONSTRUCTION--0.1%
900 McDermott International, Inc............ 25,425
-----------
HEAVY MACHINERY--1.3%
3,800 Ingersoll Rand Co....................... 245,575
-----------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES--3.4%
5,800 Home Depot.............................. 373,738
2,388 Newell Rubbermaid Inc................... 111,042
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES (CONTINUED)
1,300 Pulte Corporation....................... $ 29,981
1,700 Whirlpool Corp.......................... 125,800
-----------
640,561
-----------
HOUSEHOLD PRODUCTS--0.3%
1,200 Fortune Brands, Inc..................... 49,650
-----------
INSURANCE--3.8%
600 Aetna, Inc.............................. 53,663
3,700 American International Group............ 433,131
300 Jefferson Pilot Corp.................... 19,856
900 Loews Corp.............................. 71,213
1,800 Marsh & McLennan Co., Inc............... 135,900
-----------
713,763
-----------
MEDIA--BROADCASTING & PUBLISHING--4.2%
5,100 Comcast Corp.--Class A.................. 196,031
1,500 Gannett Co, Inc......................... 107,063
1,300 Knight-Ridder, Inc...................... 71,419
9,100 Viacom, Inc.*........................... 400,400
-----------
774,913
-----------
MEDICAL SUPPLIES--0.4%
700 Allergan, Inc........................... 77,700
-----------
METALS--0.7%
600 Alcan Aluminium Ltd..................... 19,163
3,200 Barrick Gold Corp....................... 62,000
3,800 Placer Dome Inc......................... 44,888
-----------
126,051
-----------
OIL & GAS--5.3%
600 Apache Corp............................. 23,400
3,300 Coastal Corp............................ 132,000
600 Consolidated Natural Gas Co............. 36,450
800 Enron Corp.............................. 65,400
2,100 Exxon................................... 161,963
2,500 Mobil Corp.............................. 247,500
4,800 Royal Dutch Petroleum Co................ 289,200
800 USX-Marathon Group...................... 26,050
-----------
981,963
-----------
PHARMACEUTICALS--8.3%
1,900 Abbott Laboratories..................... 86,450
1,100 American Home Products Corp............. 63,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
PHARMACEUTICALS (CONTINUED)
5,700 Cardinal Health, Inc.................... $ 365,513
3,000 Johnson & Johnson....................... 294,000
5,300 Merck & Co, Inc......................... 392,200
5,200 Pharmacia & Upjohn, Inc................. 295,425
500 Warner Lambert Co....................... 34,688
-----------
1,531,526
-----------
RESTAURANTS--0.3%
1,100 Tricon Global Restaurants, Inc.*........ 59,538
-----------
RETAILERS--4.4%
2,400 Dayton-Hudson Corp...................... 156,000
2,400 KMart Corp.*............................ 39,450
600 May Department Stores Co. (The)......... 24,525
800 Safeway, Inc.*.......................... 39,600
2,000 Staples, Inc.*.......................... 61,875
10,100 Wal-Mart Stores, Inc.................... 487,325
-----------
808,775
-----------
TELEPHONE SYSTEMS--7.4%
7,195 AT&T Corp............................... 401,571
3,200 Bell Atlantic Corp...................... 209,200
<CAPTION>
VALUE
SHARES (NOTE 1)
- ------- -----------
<C> <S> <C>
TELEPHONE SYSTEMS (CONTINUED)
1,500 BellSouth Corp.......................... 70,313
1,800 MCI WorldCom, Inc.*..................... $ 155,250
2,700 Vodafone AirTouch Plc--ADR.............. 531,900
-----------
1,368,234
-----------
TRANSPORTATION--1.2%
4,300 Carnival Corp.--Class A................. 208,550
300 Union Pacific Corp...................... 17,494
-----------
226,044
-----------
TOTAL INVESTMENTS--98.6%
(Cost $14,558,708).................... 18,318,463
OTHER ASSETS AND LIABILITIES
(NET)--1.4%........................... 263,795
-----------
TOTAL NET ASSETS--100.0%................ $18,582,258
-----------
-----------
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR--American Depository Receipt
* Non-income producing security.
Percentages indicated are based on Net Assets.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
M FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
FRONTIER
BRANDES CAPITAL ENHANCED
INTERNATIONAL TURNER CORE APPRECIATION U.S. EQUITY
EQUITY FUND GROWTH FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note
1)*--see accompanying
Portfolio of
Investments............... $18,214,927 $19,257,035 $35,251,507 $18,318,463
Cash........................ 1,494,470 1,106,844 483,776 263,972
Cash, denominated in foreign
currency (cost
$199,211)................. 198,547 -- -- --
Receivable from:
Securities sold........... 286,355 429,506 87,196 293,305
Unrealized appreciation on
forward foreign currency
contracts (Note 6)...... 3,891 -- -- --
Dividends and interest.... 91,675 13,141 10,150 20,282
Investment Adviser, net
(Note 2)................ -- 18,579 -- 13,463
Deferred organization
expense................... 29,862 29,863 29,862 29,863
----------- ----------- ----------- -----------
Total assets.......... 20,319,727 20,854,968 35,862,491 18,939,348
----------- ----------- ----------- -----------
LIABILITIES:
Payable for:
Securities purchased...... 186,369 645,717 234,341 324,646
Investment Adviser (Note
2)...................... 1,517 -- 40,680 --
Accrued expenses and other
liabilities............. 39,870 35,171 47,738 32,444
----------- ----------- ----------- -----------
Total liabilities..... 227,756 680,888 322,759 357,090
----------- ----------- ----------- -----------
NET ASSETS.................... $20,091,971 $20,174,080 $35,539,732 $18,582,258
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET ASSETS CONSIST OF:
Paid-in capital........... $16,476,361 $15,885,444 $28,192,849 $14,039,156
Undistributed net
investment income
(distributions in excess
of net investment
income)................. 167,320 13,517 (100,443 ) 45,068
Accumulated net realized
gain on investments and
foreign currency
transactions............ 622,772 1,852,392 690,198 738,279
Net unrealized
appreciation on
investments and net
other assets............ 2,825,518 2,422,727 6,757,128 3,759,755
----------- ----------- ----------- -----------
NET ASSETS.................. $20,091,971 $20,174,080 $35,539,732 $18,582,258
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARES OUTSTANDING.......... 1,524,015 1,030,659 1,960,649 908,248
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net asset value, offering
price and redemption price
per share................. $ 13.18 $ 19.57 $ 18.13 $ 20.46
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
* Cost of investments....... $15,388,157 $16,834,308 $28,494,379 $14,558,708
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
M FUND, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
BRANDES TURNER FRONTIER ENHANCED
INTERNATIONAL CORE CAPITAL U.S.
EQUITY GROWTH APPRECIATION EQUITY
FUND FUND FUND FUND
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.................... $ 16,202 $ 13,461 $ 37,884 $ 6,178
Dividends *................. 252,363 58,933 52,805 106,183
---------- ---------- ---------- ----------
Total investment
income............ 268,565 72,394 90,689 112,361
---------- ---------- ---------- ----------
EXPENSES:
Investment Advisory fee
(Note 2).................. 77,180 37,849 149,582 46,263
Custody and administration
fees...................... 73,970 64,123 76,523 60,132
Professional fees........... 14,856 13,841 13,841 13,842
Shareholder reporting....... 3,798 3,798 3,798 3,798
Directors' fees and
expenses.................. 4,484 4,484 4,484 4,484
Amortization of organization
costs..................... 10,161 10,161 10,161 10,161
Other....................... 3,926 3,947 4,458 4,433
---------- ---------- ---------- ----------
Total expenses...... 188,375 138,203 262,847 143,113
Less: Expenses reimbursable
by the Adviser (Note 2)... (87,845 ) (79,326 ) (71,715 ) (75,820 )
---------- ---------- ---------- ----------
Net operating expenses...... 100,530 58,877 191,132 67,293
---------- ---------- ---------- ----------
NET INVESTMENT INCOME
(LOSS)...................... 168,035 13,517 (100,443 ) 45,068
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on:
Investment
transactions.......... 624,694 1,867,123 1,975,666 839,245
Foreign currency
transactions.......... (1,922 ) -- -- --
---------- ---------- ---------- ----------
Net realized gain....... 622,772 1,867,123 1,975,666 839,245
---------- ---------- ---------- ----------
Net change in unrealized
appreciation
(depreciation) on:
Investments............. 2,216,045 295,191 4,201,786 1,203,109
Forward currency and net
other assets.......... (1,759 ) -- -- --
---------- ---------- ---------- ----------
Net change in unrealized
appreciation.......... 2,214,286 295,191 4,201,786 1,203,109
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN...................... 2,837,058 2,162,314 6,177,452 2,042,354
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................ $3,005,093 $2,175,831 $6,077,009 $2,087,422
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
* Net of foreign taxes
withheld of:.............. $ 20,952 $ 60 $ 0 $ 120
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL TURNER CORE
EQUITY FUND GROWTH FUND
------------------------ ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER JUNE 30, DECEMBER
1999 31, 1999 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM:
OPERATIONS:
Net investment income............ $168,035 $ 88,165 $ 13,517 $ 19,857
Net realized gain on investment
and foreign currency
transactions................... 622,772 824,536 1,867,123 954,676
Net change in unrealized
appreciation on investments,
forward currency contracts,
foreign currency, and other
assets......................... 2,214,286 370,427 295,191 1,628,144
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations...... 3,005,093 1,283,128 2,175,831 2,602,677
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....... -- (63,907 ) -- (20,760 )
In excess of net investment
income......................... -- -- -- (1,451 )
From net realized capital
gains.......................... -- (567,349 ) (720,897 ) (221,904 )
In excess of net realized capital
gains.......................... -- (69,238 ) -- --
----------- ----------- ----------- -----------
Total distributions to
shareholders................. -- (700,494 ) (720,897 ) (244,115 )
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold........ 6,916,982 7,277,243 5,988,086 10,510,061
Net asset value of shares issued
on reinvestment of
distributions.................. -- 700,494 720,897 244,115
Cost of shares repurchased....... (2,213,420 ) (2,211,040 ) (1,869,891 ) (3,052,826 )
----------- ----------- ----------- -----------
Net increase in net assets
resulting from Fund share
transactions................... 4,703,562 5,766,697 4,839,092 7,701,350
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS......... 7,708,655 6,349,331 6,294,026 10,059,912
NET ASSETS:
Beginning of period.............. 12,383,316 6,033,985 13,880,054 3,820,142
----------- ----------- ----------- -----------
End of period *.................. $20,091,971 $12,383,316 $20,174,080 $13,880,054
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
* Including undistributed net
investment income (distributions
in excess of net investment
income) of:...................... $167,320 $ (715 ) $ 13,517 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FRONTIER CAPITAL ENHANCED U.S.
APPRECIATION FUND EQUITY FUND
------------------------ ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER JUNE 30, DECEMBER
1999 31, 1999 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM:
OPERATIONS:
Net investment income (loss)..... $(100,443 ) $ (76,307 ) $ 45,068 $ 84,226
Net realized gain (loss) on
investment and foreign currency
transactions................... 1,975,666 (1,228,603 ) 839,245 250,664
Net change in unrealized
appreciation on investments,
forward currency contracts,
foreign currency, and other
assets......................... 4,201,786 2,062,074 1,203,109 1,952,550
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations...... 6,077,009 757,164 2,087,422 2,287,440
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....... -- -- -- (85,107 )
In excess of net investment
income......................... -- -- -- (1,344 )
From net realized capital
gains.......................... -- (125,048 ) -- (279,242 )
In excess of net realized capital
gains.......................... -- -- -- (101,027 )
----------- ----------- ----------- -----------
Total distributions to
shareholders................. -- (125,048 ) -- (466,720 )
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold.......... 10,776,558 21,363,350 5,097,923 7,278,986
Net asset value of shares issued on
reinvestment of distributions.... -- 125,048 -- 466,720
Cost of shares repurchased......... (13,091,730) (6,971,067 ) (3,685,517 ) (1,828,808 )
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from Fund share
transactions..................... (2,315,172 ) 14,517,331 1,412,406 5,916,898
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS......... 3,761,837 15,149,447 3,499,828 7,737,618
NET ASSETS:
Beginning of period.............. 31,777,895 16,628,448 15,082,430 7,344,812
----------- ----------- ----------- -----------
End of period *.................. $35,539,732 $31,777,895 $18,582,258 $15,082,430
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
* Including undistributed net
investment income (distributions
in excess of net investment
income) of:...................... $(100,443 ) $ -- $ 45,068 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY
FUND
--------------------------------
SIX
MONTHS
ENDED YEAR YEAR PERIOD
JUNE ENDED ENDED ENDED
30, DECEMBER DECEMBER DECEMBER
1999 31, 31, 31,
(UNAUDITED) 1998 1997 1996(A)
------- ------- ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.84 $9.96 $9.88 $10.00
------- ------- ------ ------
Income from investment
operations:
Net investment
income............... 0.11 0.09 0.07 0.06
Net realized and
unrealized gain
(loss) on
investments.......... 2.23 1.44 0.15 (0.12 )
------- ------- ------ ------
Total from investment
operations......... 2.34 1.53 0.22 (0.06 )
------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- (0.06 ) (0.07 ) (0.06 )
In excess of net
investment income.... -- -- (0.03 ) --
From net realized
capital gains........ -- (0.53 ) -- --
In excess of net
realized capital
gains................ -- (0.06 ) -- --
Tax return of
capital.............. -- -- (0.04 ) --
------- ------- ------ ------
Total
distributions...... -- (0.65 ) (0.14 ) (0.06 )
------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $13.18 $10.84 $9.96 $9.88
------- ------- ------ ------
------- ------- ------ ------
TOTAL RETURN............. 21.62%* 15.37% 2.26% (0.63 )%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $20,092 $12,383 $6,034 $3,177
Net expenses to average
daily net assets
before interest
expense**............ 1.30% 1.30% 1.30% 1.30%
Net expenses to average
daily net assets
after interest
expense**............ 1.30% 1.30% 1.30% 1.30%
Net investment income
to average daily net
assets**............. 2.17% 1.00% 0.83% 0.67%
Portfolio turnover
rate................. 14% 116% 74% 65%
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**+........... 2.44% 3.57% 4.93% 7.28%
Net investment income
(loss)**+:........... 1.04% (1.27 )% (2.80 )% (5.31 )%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
+ Prior year ratios have been restated to conform with current year reporting
practices.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
TURNER CORE GROWTH FUND
--------------------------------
SIX
MONTHS
ENDED YEAR YEAR PERIOD
JUNE ENDED ENDED ENDED
30, DECEMBER DECEMBER DECEMBER
1999 31, 31, 31,
(UNAUDITED) 1998 1997 1996(A)
------- ------- ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $17.84 $13.50 $11.60 $10.00
------- ------- ------ ------
Income from investment
operations:
Net investment
income............... 0.01 0.02 0.04 0.06
Net realized and
unrealized gain on
investments.......... 2.45 4.64 3.22 1.94
------- ------- ------ ------
Total from investment
operations......... 2.46 4.66 3.26 2.00
------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- (0.03 ) (0.04 ) (0.06 )
In excess of net
investment income.... -- -- -- --
From net realized
capital gains........ (0.73 ) (0.29 ) (1.22 ) (0.34 )
In excess of net
realized capital
gains................ -- -- (0.10 ) --
Tax return of
capital.............. -- -- -- --
------- ------- ------ ------
Total
distributions...... (0.73 ) (0.32 ) (1.36 ) (0.40 )
------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $19.57 $17.84 $13.50 $11.60
------- ------- ------ ------
------- ------- ------ ------
TOTAL RETURN............. 13.97%* 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $20,174 $13,880 $3,820 $2,003
Net expenses to average
daily net assets
before interest
expense**............ 0.70% 0.70% 0.70% 0.70%
Net expenses to average
daily net assets
after interest
expense**............ 0.70% 0.70% 0.70% 0.78%
Net investment income
to average daily net
assets**............. 0.16% 0.31% 0.34% 0.55%
Portfolio turnover
rate................. 147% 242% 206% 258%
Without the
reimbursement of
expenses by the
adviser, the ratio of
net expenses and net
investment loss to
average net assets
would have been:
Expenses before
interest
expense**+........... 1.64% 3.42% 6.18% 8.43%
Net investment
loss**+:............. (0.78 )% (2.41 )% (5.14 )% (7.18 )%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
+ Prior year ratios have been restated to conform with current year reporting
practices.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION
FUND
---------------------------------
SIX
MONTHS
ENDED YEAR YEAR PERIOD
JUNE ENDED ENDED ENDED
30, DECEMBER DECEMBER DECEMBER
1999 31, 31, 31,
(UNAUDITED) 1998 1997 1996(A)
------- ------- ------- ------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $15.09 $14.92 $12.52 $10.00
------- ------- ------- ------
Income from investment
operations:
Net investment income
(loss)............... (0.05 ) (0.04 ) 0.00 0.00
Net realized and
unrealized gain on
investments.......... 3.09 0.29 2.76 3.03
------- ------- ------- ------
Total from investment
operations......... 3.04 0.25 2.76 3.03
------- ------- ------- ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- -- -- --
In excess of net
investment income.... -- -- -- --
From net realized
capital gains........ -- (0.08 ) (0.36 ) (0.51 )
In excess of net
realized capital
gains................ -- -- -- --
------- ------- ------- ------
Total
distributions...... -- (0.08 ) (0.36 ) (0.51 )
------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $18.13 $15.09 $14.92 $12.52
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN............. 20.15%* 1.68% 22.13% 30.31%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)................ $35,540 $31,778 $16,628 $3,006
Net expenses to average
daily net assets before
interest expense**..... 1.15% 1.15% 1.15% 1.15%
Net expenses to average
daily net assets after
interest expense**..... 1.15% 1.15% 1.15% 1.20%
Net investment loss to
average daily
net assets**........... (0.60 )% (0.32 )% (0.13 )% (0.30 )%
Portfolio turnover
rate................... 38% 68% 61% 140%
Without the reimbursement
of expenses by the
adviser, the ratio of
net expenses and net
investment loss to
average net assets
would have been:
Expenses before
interest
expense**+:........ 1.58% 1.75% 2.86% 8.12%
Net investment
loss**+:........... (1.04 )% (0.92 )% (1.84 )% (7.27 )%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
+ Prior year ratios have been restated to conform with current year reporting
practices.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
ENHANCED U.S. EQUITY FUND
--------------------------------
SIX
MONTHS
ENDED YEAR YEAR PERIOD
JUNE ENDED ENDED ENDED
30, DECEMBER DECEMBER DECEMBER
1999 31, 31, 31,
(UNAUDITED) 1998 1997 1996(A)
------- ------- ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $18.07 $15.09 $11.85 $10.00
------- ------- ------ ------
Income from investment
operations:
Net investment
income............... 0.05 0.11 0.08 0.12
Net realized and
unrealized gain on
investments.......... 2.34 3.45 3.78 2.25
------- ------- ------ ------
Total from investment
operations......... 2.39 3.56 3.86 2.37
------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- (0.10 ) (0.09 ) (0.12 )
In excess of net
investment income.... -- (0.01 ) -- --
From net realized
capital gains........ -- (0.35 ) (0.53 ) (0.40 )
In excess of net
realized capital
gains................ -- (0.12 ) -- --
------- ------- ------ ------
Total
distributions...... -- (0.58 ) (0.62 ) (0.52 )
------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $20.46 $18.07 $15.09 $11.85
------- ------- ------ ------
------- ------- ------ ------
TOTAL RETURN............. 13.22%* 23.69% 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)................ $18,582 $15,082 $7,345 $1,582
Net expenses to average
daily net assets before
interest expense**..... 0.80% 0.80% 0.80% 0.80%
Net expenses to average
daily net assets after
interest expense**..... 0.80% 0.80% 0.80% 0.80%
Net investment income to
average daily
net assets**........... 0.54% 0.80% 1.17% 1.43%
Portfolio turnover
rate................... 34% 50% 52% 79%
Without the reimbursement
of expenses by the
adviser, the ratio of
net expenses and net
investment loss to
average net assets
would have been:
Expenses before
interest
expense**+:........ 1.70% 2.34% 5.41% 12.32%
Net investment
loss**+:........... (0.37 )% (0.74 )% (3.44 )% (10.09)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
+ Prior year ratios have been restated to conform with current year reporting
practices.
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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: Brandes International Equity
Fund (formerly the Edinburgh Overseas Equity Fund), Turner Core Growth Fund,
Frontier Capital Appreciation Fund and Enhanced U.S. Equity Fund (singularly the
"Fund" or collectively the "Funds"), each of which is, in effect, a separate
mutual fund. Pursuant to a vote of the majority of the Directors of the Company,
on July 1, 1998 the name of the Edinburgh Overseas Equity Fund was changed to
Brandes International Equity Fund. This change was made in connection with the
change in sub-adviser to Brandes Investment Partners L.P., replacing Edinburgh
Fund Managers plc. 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. In addition, at June 30, 1999, shares of the Company were offered to
separate accounts funding variable annuity and variable life contracts issued by
John Hancock Variable Life Insurance Co. and Pacific Life Insurance Co.
Brandes International Equity Fund's investment objective is long-term capital
appreciation by investing principally in equity securities 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 total 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 the mean between the closing bid and asked
price. Equities traded on a foreign exchange, for
26
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Brandes International 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 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
27
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Brandes International 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 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.
28
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Frontier Capital Appreciation Fund had a capital loss
carryforward of $993,816 expiring in 2006, as of December 31, 1998, which is
available to offset future capital gains. The Brandes International Equity Fund
and the Enhanced U.S. Equity Fund elected to defer to their fiscal years ending
December 31, 1999, $715 and $100,966, respectively, of losses recognized during
the period November 1, 1998 to December 31, 1998.
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>
Brandes International 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 Brandes Investment Partners, L.P., 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 Brandes International Equity Fund, Turner Core
Growth Fund, Frontier Capital Appreciation Fund and Enhanced U.S. Equity Fund,
respectively. On July 1, 1998 Brandes Investment Partners, L.P. replaced
Edinburgh Fund Managers plc., as subadviser on the Brandes International Equity
Fund (formerly the Edinburgh Overseas Equity Fund). The advisory fee structure
of the Brandes International Equity Fund is the same as the previous fee
structure of the Edinburgh Overseas Equity Fund.
29
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Adviser has voluntarily undertaken to waive or otherwise reimburse the
Brandes International 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, 1999.
M Holdings Securities, Inc. acts as distributor (the "Distributor") for each of
the Funds. The Distributor is a wholly-owned subsidiary of M Financial Group. No
fees are due the Distributor for these services.
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, $10,000 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
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the six months ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -------------
<S> <C> <C>
Brandes International Equity Fund.............................. $ 5,519,907 $ 2,050,028
Turner Core Growth Fund........................................ 27,559,046 24,139,237
Frontier Capital Appreciation Fund............................. 12,068,338 13,266,133
Enhanced U.S. Equity Fund...................................... 7,293,916 5,724,639
</TABLE>
At June 30, 1999, 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 NET
INCOME TAX UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Brandes International Equity Fund...................... $ 15,388,157 $ 3,297,494 $ (470,724) $ 2,826,770
Turner Core Growth Fund................................ 16,834,308 2,625,441 (202,714) 2,422,727
Frontier Capital Appreciation Fund..................... 28,494,379 9,020,681 (2,263,553) 6,757,128
Enhanced U.S. Equity Fund.............................. 14,558,708 3,932,279 (172,524) 3,759,755
</TABLE>
30
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. SHARES OF BENEFICIAL INTEREST
At June 30, 1999 an unlimited number of shares of beneficial interest
without par value were authorized. Changes in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL
EQUITY FUND TURNER CORE GROWTH FUND
--------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Shares sold............................................ 572,265 679,420 311,425 678,243
Shares repurchased..................................... (190,256) (207,945) (97,135) (197,108)
Distributions reinvested............................... -- 64,801 38,551 13,758
------------- ------------ ------------- ------------
Net increase........................................... 382,009 536,276 252,841 494,893
Fund shares:
Beginning of period.................................. 1,142,006 605,730 777,818 282,925
------------- ------------ ------------- ------------
End of period........................................ 1,524,015 1,142,006 1,030,659 777,818
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FRONTIER CAPITAL
APPRECIATION FUND ENHANCED U.S. EQUITY FUND
--------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Shares sold............................................ 696,162 1,491,323 264,907 430,789
Shares repurchased..................................... (842,043) (507,585) (191,258) (108,830)
Distributions reinvested............................... -- 8,348 -- 25,848
------------- ------------ ------------- ------------
Net increase........................................... (145,881) 992,086 73,649 347,807
Fund shares:
Beginning of period.................................. 2,106,530 1,114,444 834,599 486,792
------------- ------------ ------------- ------------
End of period........................................ 1,960,649 2,106,530 908,248 834,599
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
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 and will be fully
amortized January 4, 2001. 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.
31
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. FINANCIAL INSTRUMENTS
Brandes International 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 June 30, 1999,
the Brandes International Equity Fund had the following open forward currency
exchange contract:
<TABLE>
<CAPTION>
SETTLEMENT MARKET UNREALIZED
TYPE CURRENCY DATE $U.S. VALUE VALUE APPRECIATION
- --------- --------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Sale Euro 07/30/99 $ 290,246 $ 286,355 $ 3,891
</TABLE>
7. CONCENTRATION
At June 30, 1999, a substantial portion of the Brandes International 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 June 30, 1999, the ownership of each fund was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
---------------------------------------------------
JOHN HANCOCK
M LIFE VARIABLE LIFE PACIFIC LIFE
INSURANCE CO. INSURANCE CO. INSURANCE CO.
--------------- ----------------- ---------------
<S> <C> <C> <C>
Brandes International Equity Fund................................... 14.2% 65.8% 20.0%
Turner Core Growth Fund............................................. 11.7% 58.3% 30.0%
Frontier Capital Appreciation Fund.................................. 5.5% 60.0% 34.5%
Enhanced U.S. Equity Fund........................................... 12.3% 24.9% 62.8%
</TABLE>
32
