<PAGE>
M FUNDS
BRANDES INTERNATIONAL EQUITY FUND
TURNER CORE GROWTH FUND
FRONTIER CAPITAL APPRECIATION FUND
CLIFTON ENHANCED U.S. EQUITY FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
[LOGO]
<PAGE>
M FUND, INC.
PRESIDENT'S LETTER
Dear Contract Owners:
We are pleased to present to you the M Fund, Inc. (the "Company") Semi-Annual
Report dated June 30, 2000. The Company has been growing steadily during the
course of 2000 with total assets under management reaching over $199 million as
of June 30, 2000.
It is with great enthusiasm that we announce a change in portfolio managers.
After an overwhelming majority shareholder vote, The Clifton Group began
managing the Enhanced U.S. Equity Fund on May 1, 2000. As such, the Fund has
been renamed the Clifton Enhanced U.S. Equity Fund and follows a synthetic
enhanced index strategy. Please see the current M Fund Prospectus for additional
information.
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, 2000 and ending June 30, 2000 in addition to their outlook
for the last six months of 2000. The Clifton Group has reported results as of
May 1, 2000.
Sub-Advisers to the Company are: Brandes Investment Partners, L.P. for the
Brandes International Equity Fund, Turner Investment Partners for the Turner
Core Growth Fund, Frontier Capital Management for the Frontier Capital
Appreciation Fund, and The Clifton Group for the Clifton 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 gained 4.1% for the six-month period
ending June 30, 2000 versus a 4.1% decline for the MSCI EAFE Index.
Returns benefited from investors' reevaluation of companies in undervalued
sectors such as insurance, beverages & tobacco, and energy sources. Among the
best-performing holdings during the period were Sun Life Financial
(Canada--insurance), Alcatel Alsthom (France--electrical & electronics), and
Daiichi Pharmaceuticals (Japan--health & personal care). Holdings in France,
Japan, and Canada were among the best performers while holdings in the United
Kingdom generally delivered the weakest returns. Stock-specific declines within
the industrial components industry proved the greatest detriment to returns
during the period. As a result of our bottom-up approach and stock price
fluctuations, we reduced exposure to telecommunications and electrical &
electronics issues while increasing the weightings in the insurance and food &
household products industries. County allocations remained largely unchanged.
Volatility characterized international stock markets during the first six
months of 2000. After a poor start in January, strong returns for technology and
telecom stocks lifted investor confidence later in the first quarter. Still, the
MSCI EAFE Index fell slightly in the first quarter, down 0.1%. A tech-stock
swoon in April and May dragged returns lower and contributed to the EAFE Index
shedding 4.0% in the second quarter. Year to date, the Index fell 4.1%. As tech
stocks stumbled, investors turned their attention to undervalued,
long-overlooked sectors. As a result, value stocks posted solid gains in April
and May. In addition to turbulent returns for technology stocks, rising interest
rates, currency weakness, and political uncertainties weighed on
non-U.S. markets during the period, creating a challenging environment. Similar
to developed markets, fluctuating returns for technology stocks, rising interest
rates, currency woes, and political concerns weighed on emerging markets during
the period. While most emerging markets declined, there were exceptions. Stocks
in China generally delivered gains, propelled by strong economic reports and
passage of a key trade bill in the United States.
We believe recent reluctance to investing in emerging markets has created an
exceptional opportunity for long-term investors, given the attractive valuation
levels compared to developed markets and the long-term growth potential of the
asset class. The margin of safety inherent in fund constituents proved its merit
during the period as the fund weathered a difficult environment and delivered
gains when many indices declined. The fundamental strengths of individual
holdings inspire optimism for the future. We retain strict adherence to our
value investing philosophy and believe this will reward long-term shareholders.
We appreciate the confidence you have shown in us and remain committed to
helping you achieve your long-term investment goals.
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 5.18% for the six-month period ended
June 30, 2000 to outperform both the Wilshire 5000 Stock Index and the Lipper
Growth Funds Average. The Wilshire 5000 was down 0.69% and the average growth
fund tracked by Lipper Inc. was up 3.04%.
Most of the Turner Core Growth Fund's gains came early and late in the
period. In between, the fund declined sharply, as the stock market--and
technology stocks especially--faltered; the Wilshire 5000, for instance,
declined more than 10% from March 24 to April 14. Market pundits largely
attributed the downturn to investor fears that high-priced tech stocks were
overdue for a pullback and that future Federal Reserve hikes in interest rates
would be bearish for stocks. But the market rebounded strongly in June, in
response to evidence of favorable corporate earnings prospects and the Federal
Reserve's disinclination to continue raising rates indefinitely.
Altogether, during the period the market ended up not going much of
anywhere, but bounced vigorously up and down en route like a 10-year-old on a
pogo stick. Growth stocks fared better than value stocks did; the broad-based
Russell 3000 Growth Index advanced 4.04%, versus a negative 3.56% for its value
counterpart.
The key to the Turner Core Growth Fund's performance advantage was good
stock selection. Six of our 10 sector positions outperformed their corresponding
index sectors, with investments in four sectors--technology, producer durables,
energy, and financial services--contributing the most to performance; those four
sectors accounted for more than 50% of our holdings.
In absolute terms, our energy investments fared best, rising more than 29%.
The strongest energy performers were the stocks of oil-services and diversified
energy-process companies. In relative terms, our technology holdings--which
represented our largest single sector weighting--added the most value to the
fund's results by far. Our technology performance was enhanced by nimble
trading; as certain stocks fluctuated dramatically, we got into and out of them
at opportune times to nail down profits or minimize losses. Some of our best
performers were stocks of wireless-communications, optical-fiber,
data-networking, semiconductor capital-equipment, and software companies. In our
judgment, these companies are primed to capitalize on the convergence of
telecommunications, computer, and television technologies. This convergence is
creating highly profitable opportunities for improving the capacity and
performance of all kinds of digital networks and devices, ranging from the
Internet to mobile telephones, and from mainframe computers to household
appliances.
Detracting the most from performance was a negative return in the
consumer-discretionary/services sector. Our consumer holdings were victims of
higher interest rates.
In our judgment, corporate earnings prospects in aggregate continue to be
attractive; we anticipate that most companies will report earnings for the
remainder of the year that are either in line with or better than Wall Street's
expectations. We continue to emphasize the stocks of leading companies that, in
our analysis, can sustain their earnings growth. The stocks that we think should
do best are precisely those types of companies--companies with leading market
shares in their industries and with what Wall Street calls "earnings
visibility," i.e., a predictable pattern of earnings growth. In the market
downturn during the past six months, the stocks that were hit hardest were those
with the weakest earnings visibility, with the least solid fundamentals. In a
market that has come to prize companies that can deliver earnings growth, we
think the Turner Core Growth Fund is particularly well positioned for the times
ahead.
TURNER INVESTMENT PARTNERS, INC.
INVESTMENT SUB-ADVISER TO THE TURNER CORE GROWTH FUND
3
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
For the quarter ended June 30, 2000, the Frontier Capital Appreciation Fund
declined by 3.5% as compared to the 4.0% decline in the Russell 2500 index.
Through the first half of 2000, the Fund gained 15.2% compared to the 5.7%
increase in the Russell 2500. While the Russell 2500 gained 6.6% during the
month, the capital appreciation portfolio appreciated by just 3.7%. The
underperformance in June is attributable to our repositioning of the portfolio.
Earlier in the quarter we began to take profits on stocks in which we had
significant gains. In many cases, these stocks were purchased 18 to 24 months
ago at prices significantly below current prices. The stocks were purchased
because the market failed to recognize the earnings growth potential of the
underlying companies. These stocks were focused primarily in the technology and
biotechnology sectors. By the first quarter of this year, we believe the market
fully recognized the earnings growth potential of several of our holdings. We
reduced our weightings in technology and biotechnology significantly when
compared to the benchmark weighting. However, during the month of June investors
became much more optimistic about the outlook for interest rates as news of a
slowing economy started to emerge. This change in sentiment led to a very strong
rally in the stock market, which benefited mid to large cap tech stocks that had
previously been momentum leaders--some of which we had reduced due to valuation
concerns. As a result, our performance did not keep up with the index during the
strong June rally.
We believe many of the stocks we have recently purchased for your portfolio
will be greatly rewarded over the next 12 to 24 months. The recent upturn in the
stock market has been accompanied by increased breadth. This should prove
helpful to our non-tech holdings that we have been adding to over the last
couple of months.
FRONTIER CAPITAL MANAGEMENT CO., L.L.C.
INVESTMENT SUB-ADVISER TO THE FRONTIER CAPITAL APPRECIATION FUND
4
<PAGE>
CLIFTON ENHANCED U.S. EQUITY FUND
The Clifton Enhanced U.S. Equity Fund returned (2.53)% for the first six
months ending June 30, 2000. The S&P Composite Index returned (.42)% for the
same period. For the period January 1, 2000 to April 30, 2000, the Fund was
named the U.S. Enhanced Equity Fund and had a similar investment objective.
During that time, the Fund was managed by Franklin Portfolio Associates, L.L.C.
For the period May 1, 2000 to June 30, 2000, the Fund was managed by The Clifton
Group.
During the second quarter the portfolio was restructured to a "synthetic"
index position by the Fund's new manager The Clifton Group. We believe the
synthetic index structure will fulfill the Fund's enhanced index return
objective while reducing performance differences versus the S&P Composite Index
on a quarterly basis. An investor that earns enhanced index results with a high
level of consistency will realize superior relative investment performance.
A synthetic enhanced index investment approach combines cash management with
an investment in an index futures contract. The S&P Composite Index return is
earned through a fully invested position in S&P futures contracts plus all
income produced by the cash management. An investment in a futures contract is a
non-cash transaction creating a contract to deliver or receive value based on
market level changes. Therefore, assets of the enhanced index fund can be
invested in a cash portfolio. It is this area which is targeted to generate
excess returns.
The Clifton Group converted the portfolio to a synthetic index structure in
early May. The Fund currently holds high grade enhanced cash position combined
with full index participation via S&P Composite futures. Over the brief period
Clifton has managed the Fund, results are in the range of expected long term
performance objectives. Specifically, our objective for this strategy is to
consistently outperform the S&P Composite Index while maintaining close tracking
with the index.
The account is currently positioned to deliver enhanced index results in the
coming year. Enhanced index results in the future should deliver competitive
investment returns while greatly reducing the risk of realizing sub par
performance.
THE CLIFTON GROUP
INVESTMENT SUB-ADVISER TO THE CLIFTON ENHANCED U.S. EQUITY FUND
5
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- ----------
<C> <S> <C>
FOREIGN COMMON STOCKS--96.2%
BRAZIL--5.7%
74,000 Banco Bradesco SA--ADR.................. $ 644,029
114,000 Centrais Electricas Brasileiras
SA--ADR............................... 1,159,619
2,700 Centrais Electricas Brasileiras
SA--ADR--Class B...................... 29,785
270 Centrais Geradoras do Sul do Brasil
SA--ADR*.............................. 1,684
40,600 Cia Cervejaria Brahma--ADR.............. 690,200
51,000 Petroleo Brasileiro SA--ADR............. 1,540,787
100 Tele Celular Sul Participacoes
SA--ADR............................... 4,525
333 Tele Centro Oeste Celular Participacoes
SA--ADR............................... 3,996
200 Tele Centro Sul Participacoes SA--ADR... 14,613
20 Tele Leste Celular Participacoes
SA--ADR............................... 885
50 Tele Nordeste Celular Participacoes
SA--ADR............................... 3,463
20 Tele Norte Celular Participacoes
SA--ADR............................... 1,015
1,117 Tele Norte Leste Participacoes
SA--ADR............................... 26,389
1,000 Telecomunicacoes de Sao Paulo........... 18,500
50 Telemig Celular Participacoes SA--ADR... 3,575
400 Telesp Celular Partcipacoes SA--ADR..... 17,950
----------
4,161,015
----------
CANADA--2.2%
93,000 Sun Life Financial Services of
Canada*............................... 1,569,375
----------
CHINA--1.2%
4,288,000 PetroChina Co. Ltd.*.................... 891,087
----------
DENMARK--1.7%
10,095 Den Danske Bank......................... 1,214,444
----------
FRANCE--7.2%
22,300 Alcatel................................. 1,462,993
8,500 Eridania Beghin-Say SA.................. 832,812
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- ----------
<C> <S> <C>
FRANCE (CONTINUED)
40,100 Michelin (CGDE)--Class B................ $1,287,044
11,211 Total SA--Class B....................... 1,719,375
----------
5,302,224
----------
GERMANY--6.4%
26,100 BASF AG................................. 1,058,032
63,630 Bayerische Motoren Werke (BMW) AG....... 1,923,164
10,500 Deutsche Telekom AG--Registered......... 597,608
2,000 Muenchener Rueckversicherungs-
Gesellschaft AG....................... 628,357
9,900 VEBA AG................................. 477,427
----------
4,684,588
----------
HONG KONG--1.8%
221,500 Swire Pacific Ltd.--Class A............. 1,295,654
----------
IRELAND--1.9%
19,884 Allied Irish Banks Plc.................. 177,920
37,316 Allied Irish Banks Plc.................. 334,255
137,500 Bank of Ireland......................... 867,011
----------
1,379,186
----------
ITALY--4.0%
385,800 ENI SpA................................. 2,225,255
52,100 Telecom Italia SpA...................... 715,447
----------
2,940,702
----------
JAPAN--15.2%
40,000 Daiichi Pharmaceutical Co., Ltd......... 1,013,708
97,000 Daiwa House Industry Co., Ltd........... 707,315
129,000 Hitachi Ltd............................. 1,859,438
126 Japan Tobacco, Inc...................... 1,105,149
119,000 Komatsu, Ltd............................ 836,347
28,000 Matsushita Electric
Industrial Co......................... 725,423
357,000 Mitsubishi Heavy Industries, Ltd........ 1,580,762
313,000 Nippon Mitsubishi Oil Corp.............. 1,433,115
162,000 Tokio Marine & Fire Insurance Co.,
Ltd................................... 1,868,086
----------
11,129,343
----------
MEXICO--3.1%
40,100 Telefonos de Mexico SA--ADR............. 2,290,713
----------
</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, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- ----------
<C> <S> <C>
NETHERLANDS--2.9%
31,521 ING Groep NV............................ $2,131,149
----------
NEW ZEALAND--1.2%
253,700 Telecom Corp. of New Zealand Ltd........ 886,818
----------
PORTUGAL--2.0%
127,993 Portugal Telecom SA..................... 1,437,389
----------
SINGAPORE--2.9%
83,736 DBS Group Holdings Ltd.................. 1,076,086
245,259 Jardine Matheson Holdings Ltd........... 1,074,234
----------
2,150,320
----------
SOUTH AFRICA--2.5%
54,600 De Beers--Centenary..................... 1,329,742
66,000 South African Breweries Plc............. 483,227
----------
1,812,969
----------
SOUTH KOREA--0.9%
34,000 Korea Electric Power Corp............... 626,875
----------
SPAIN--1.3%
55,833 Banco Bilbao Vizcaya Argentaria, SA..... 834,422
6,600 Union Electrica Fenosa, SA.............. 119,436
----------
953,858
----------
SWITZERLAND--5.8%
187,800 Allied Zurich Plc....................... 2,225,918
690 Nestle SA............................... 1,381,227
1,770 Swisscom AG............................. 613,133
----------
4,220,278
----------
UNITED KINGDOM--25.3%
32,000 Allied Domecq Plc....................... 169,865
50,500 BOC Group Plc........................... 727,613
235,000 British Aerospace Plc................... 1,468,421
246,500 British American Tobacco Plc............ 1,648,697
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- ----------
<C> <S> <C>
UNITED KINGDOM (CONTINUED)
87,000 British Energy Plc...................... $ 236,848
51,000 British Telecommunications Plc.......... 660,562
193,249 Cadbury Schweppes Plc................... 1,272,015
152,000 Corus Group Plc......................... 222,462
227,328 Diageo Plc.............................. 2,044,528
11,100 HSBC Holdings Plc....................... 127,187
110,800 HSBC Holdings Plc
(Hong Kong)........................... 1,264,970
104,600 Imperial Chemical Industries Plc........ 832,075
182,576 Invensys Plc............................ 686,722
524,800 Marks & Spencer Plc..................... 1,848,566
209,600 National Power Plc...................... 1,338,316
51,500 Reckitt & Colman Plc.................... 577,995
97,700 Royal & Sun Alliance Insurance Group
Plc................................... 635,678
303,900 Safeway Plc............................. 1,184,539
261,300 Unilever Plc............................ 1,585,203
----------
18,532,262
----------
VENEZUELA--1.0%
25,700 Cia Anonima Telefonos de
Venezuela--ADR........................ 698,719
----------
TOTAL INVESTMENTS AT MARKET VALUE--96.2%
(Cost $62,063,257).................... 70,308,968
OTHER ASSETS IN EXCESS OF
LIABILITIES--3.8%..................... 2,754,885
----------
NET ASSETS--100.0%...................... $73,063,853
==========
</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.
7
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
At June 30, 2000, industry sector diversification of the Brandes
International Equity Fund's investments as of percentage of net assets was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
--------------- ----------
<S> <C>
Beverages, Food & Tobacco................................... 14.1%
Insurance................................................... 12.3%
Oil & Gas................................................... 10.7%
Banking..................................................... 9.0%
Telephone Systems........................................... 8.2%
Electric Utilities.......................................... 5.5%
Communications.............................................. 4.8%
Automotive.................................................. 4.4%
Chemicals................................................... 3.6%
Electronics................................................. 3.6%
Heavy Machinery............................................. 3.3%
Industrial--Diversified..................................... 3.3%
Retailers................................................... 2.5%
Aerospace & Defense......................................... 2.0%
Household Products.......................................... 1.9%
Mining...................................................... 1.8%
Food Retailers.............................................. 1.6%
Pharmaceuticals............................................. 1.4%
Commercial Services......................................... 1.0%
Industrial Technology....................................... 0.9%
Metals...................................................... 0.3%
----
96.2%
====
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
COMMON STOCKS--98.2%
AIRLINES--0.5%
4,210 Delta Air Lines, Inc.................... $ 212,868
----------
AUTOMOTIVE--1.3%
6,920 Ford Motor Co........................... 297,560
1,560 SPX Corp.*.............................. 188,663
906 Visteon Corp*........................... 10,986
----------
497,209
----------
BANKING--3.6%
10,090 Bank of New York Co., Inc. (The)........ 469,185
7,670 FleetBoston Financial Corp.............. 260,780
4,000 Northern Trust Corp..................... 260,250
10,570 Wells Fargo Co.......................... 409,588
----------
1,399,803
----------
BEVERAGES, FOOD & TOBACCO--4.5%
11,600 Coca-Cola Co............................ 666,275
13,000 Pepsico, Inc............................ 577,688
4,000 Quaker Oats Co.......................... 300,500
4,815 SYSCO Corp.............................. 202,832
----------
1,747,295
----------
CHEMICALS--1.3%
10,520 Air Products & Chemicals, Inc........... 324,148
3,721 Pharmacia Corp.......................... 192,329
----------
516,477
----------
COMMERCIAL SERVICES--0.7%
6,412 Paychex, Inc............................ 269,304
----------
COMMUNICATIONS--5.8%
2,920 JDS Uniphase Corp.*..................... 350,035
8,620 McLeodUSA, Inc.--Class A*............... 178,326
2,070 Network Appliance, Inc.*................ 166,635
9,830 Nokia Oyj--ADR.......................... 490,886
9,680 Nortel Networks Corp.................... 660,660
2,670 Scientific-Atlanta, Inc................. 198,915
3,100 Tellabs, Inc.*.......................... 212,156
----------
2,257,613
----------
COMPUTER SOFTWARE &
PROCESSING--13.4%
12,440 America Online, Inc.*................... 656,210
2,090 Ariba, Inc.*............................ 204,918
5,490 Automatic Data Processing, Inc.......... 294,058
6,260 First Data Corp......................... 310,653
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
COMPUTER SOFTWARE &
PROCESSING (CONTINUED)
5,080 Fiserv, Inc.*........................... $ 219,710
16,310 Genuity, Inc*........................... 149,339
1,380 Juniper Networks, Inc.*................. 200,876
15,900 Microsoft Corp.*........................ 1,272,000
8,110 Oracle Corp.*........................... 681,747
1,120 Siebel Systems, Inc.*................... 183,190
1,250 VeriSign, Inc.*......................... 220,625
2,410 VERITAS Software Corp.*................. 272,368
4,200 Yahoo! Inc.*............................ 520,275
----------
5,185,969
----------
COMPUTERS & INFORMATION--12.5%
20,790 Cisco Systems, Inc.*.................... 1,321,457
1,810 Comverse Technology, Inc.*.............. 168,330
14,640 Dell Computer Corp.*.................... 721,935
9,720 EMC Corp.*.............................. 747,833
11,740 Gateway, Inc.*.......................... 666,245
5,610 International Business Machines......... 614,646
6,580 Sun Microsystems, Inc.*................. 598,369
----------
4,838,815
----------
CONGLOMERATES--1.4%
11,400 Tyco International, Ltd................. 540,075
----------
CONTAINERS & PACKAGING--0.8%
4,375 Avery-Dennison Corp..................... 293,672
----------
ELECTRIC UTILITIES--1.5%
9,590 AES Corp.*.............................. 437,544
2,790 Duke Energy Corp........................ 157,286
----------
594,830
----------
ELECTRONICS--8.9%
5,440 Applied Materials, Inc.*................ 493,000
2,080 Applied Micro Circuits Corp.*........... 205,400
1,170.. Broadcom Corp.--Class A* 256,157
3,350 Celestica, Inc.......................... 166,244
10,260 Intel Corp.............................. 1,371,634
4,720 KLA Instruments Corp.*.................. 276,415
3,030 Micron Technology, Inc.*................ 266,829
2,120 RF Micro Devices, Inc.*................. 185,765
840 SDL, Inc.*.............................. 239,558
----------
3,461,002
----------
</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, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
ENTERTAINMENT & LEISURE--1.7%
12,340 AT&T Corp.--Liberty Media
Group--Class A*....................... $ 299,245
9,440 Walt Disney Co.......................... 366,390
----------
665,635
----------
FINANCIAL SERVICES--4.7%
10,677 Citigroup, Inc.......................... 643,289
5,350 Federal National Mortgage Association... 279,203
2,570 Lehman Brothers Holdings, Inc........... 243,026
10,930 MBNA Corp............................... 296,476
3,110 Merrill Lynch & Co...................... 357,650
----------
1,819,644
----------
HEALTH CARE PROVIDERS--1.0%
13,130 HCA--The Healthcare Corp................ 398,824
----------
HEAVY MACHINERY--0.5%
3,080 Cooper Cameron Corp.*................... 203,280
----------
HOME CONSTRUCTION, FURNISHING &
APPLIANCES--3.3%
24,060 General Electric Co..................... 1,275,180
----------
HOUSEHOLD PRODUCTS--1.4%
2,020 Corning, Inc............................ 545,148
----------
INSURANCE--2.7%
5,860 American International Group............ 688,550
6,270 Hartford Financial Services
Group, Inc............................ 350,728
----------
1,039,278
----------
MEDIA--BROADCASTING & PUBLISHING--3.3%
5,080 Clear Channel Communications, Inc.*..... 381,000
7,240 Comcast Corp.--Class A *................ 293,220
3,420 Gemstar International Group Ltd.*....... 210,170
5,644 Viacom, Inc.--Class B *................. 384,850
----------
1,269,240
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
MEDICAL SUPPLIES--2.3%
4,800 Baxter International, Inc............... $ 337,500
4,000 Medtronics, Inc......................... 199,250
2,590 PE Corp-PE Biosystems Group............. 170,616
6,810 Tenet Healthcare Corp.*................. 183,870
----------
891,236
----------
MEDICAL & BIO-TECHNOLOGY--1.0%
2,340 Genentech, Inc.*........................ 402,480
----------
OIL & GAS--4.5%
9,990 Burlington Resources, Inc............... 382,118
2,332 Dynegy, Inc............................. 159,305
9,450 Enron Corp.............................. 609,525
5,566 Exxon Mobil Corp........................ 436,931
3,540 Phillips Petroleum Co................... 179,434
----------
1,767,313
----------
PHARMACEUTICALS--5.9%
6,670 American Home Products Corp............. 391,863
5,690 Amgen, Inc.*............................ 399,723
1,830 Eli Lilly & Co.......................... 182,771
19,197 Pfizer, Inc............................. 921,456
7,990 Schering-Plough Corp.................... 403,495
----------
2,299,308
----------
RETAILERS--4.1%
5,060 CVS Corp................................ 202,400
3,560 Kohl's Corp.*........................... 198,025
10,790 Safeway, Inc.*.......................... 486,899
12,550 Wal-Mart Stores, Inc.................... 723,194
----------
1,610,518
----------
TELEPHONE SYSTEMS--5.6%
6,260 BellSouth Corp.......................... 266,833
4,590 Level 3 Communications, Inc.*........... 403,920
9,690 Metromedia Fiber Network, Inc.--
Class A*.............................. 384,572
3,240 Nextel Communications, Inc.--
Class A*.............................. 198,248
10,160 SBC Communications, Inc................. 439,420
</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, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
TELEPHONE SYSTEMS (CONTINUED)
4,710 Sprint Corp. (PCS Group)*............... $ 280,245
1,570 VoiceStream Wireless Corp.*............. 182,586
----------
2,155,824
----------
TOTAL INVESTMENTS AT MARKET VALUE--98.2%
(Cost $35,776,890).................... 38,157,840
OTHER ASSETS IN EXCESS OF
LIABILITIES--1.8%..................... 695,415
----------
NET ASSETS--100.0%...................... $38,853,255
==========
</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.
11
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
COMMON STOCKS--95.4%
ADVERTISING--0.5%
14,100 Snyder Communications, Inc.*............ $ 334,875
----------
AEROSPACE & DEFENSE--0.5%
21,500 BE Aerospace, Inc.*..................... 147,813
11,200 Orbital Sciences Corp.*................. 136,500
----------
284,313
----------
BEVERAGES, FOOD & TOBACCO--0.3%
60,400 Seminis, Inc.*.......................... 158,550
----------
BUILDING MATERIALS--1.3%
26,500 Ingram Micro, Inc.*..................... 462,094
17,000 U.S. Aggregates, Inc.................... 308,125
----------
770,219
----------
CHEMICALS--1.4%
36,930 Hexcel Corp.*........................... 350,835
40,100 IMC Global, Inc......................... 521,300
----------
872,135
----------
COMMERCIAL SERVICES--7.9%
27,700 Bright Horizons Family
Solutions, Inc.*...................... 592,088
17,700 Fluor Corp.............................. 559,763
15,300 Interim Services, Inc.*................. 271,575
76,900 Lo-Jack Corp.*.......................... 533,494
18,300 MarchFirst, Inc.*....................... 333,975
14,200 Omnicare, Inc........................... 128,688
5,950 Quanta Services, Inc.*.................. 327,250
52,900 Republic Services, Inc.--Class A*....... 846,400
19,100 Ritchie Bros. Auctioneers*.............. 457,206
65,100 SITEL Corp.*............................ 325,500
19,000 Tetra Tech, Inc.*....................... 434,625
----------
4,810,564
----------
COMMERCIAL SPORTS--0.0%
400 Speedway Motorsports, Inc*.............. 9,200
----------
COMMUNICATIONS--1.7%
10,000 Digital Microwave Corp.*................ 381,250
24,500 Glenayre Technologies, Inc.*............ 258,781
17,500 Intervoice, Inc.*....................... 114,844
15,400 Itron, Inc.*............................ 127,050
27,500 P-Com, Inc.*............................ 156,406
----------
1,038,331
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
COMPUTER SOFTWARE &
PROCESSING--10.3%
49,000 3DO Co. (The)*.......................... $ 384,346
6,700 Acxiom Corp.*........................... 182,575
45,100 Ansoft Corp.*........................... 451,000
8,700 Brooktrout, Inc.*....................... 189,769
9,500 Caminus Corp.*.......................... 232,750
11,400 Documentum, Inc.*....................... 1,018,875
10,500 Hyperion Solutions Corp.*............... 340,594
7,500 iGate Capital Corp.*.................... 103,125
52,500 Information Resources, Inc.*............ 206,719
64,900 Informix Corp.*......................... 482,694
27,100 ISG International Software Group,
Ltd.*................................. 320,119
21,200 NOVA Corp.*............................. 592,275
46,000 Parametric Technology Co.*.............. 506,000
14,600 Progress Software Corp.*................ 261,888
13,300 Project Software &
Development, Inc.*.................... 239,400
6,300 Sandisk Corp.*.......................... 385,481
12,900 Sybase, Inc.*........................... 296,700
7,400 Sykes Enterprises, Inc.*................ 95,275
----------
6,289,585
----------
COMPUTERS & INFORMATION--3.4%
32,300 Cirrus Logic, Inc.*..................... 516,800
26,900 FVC.COM, Inc.*.......................... 208,475
30,600 Indigo N.V.*............................ 177,863
18,900 InFocus Corp.*.......................... 608,344
10,300 Seagate Technology, Inc.*............... 566,500
----------
2,077,982
----------
CONTAINERS & PACKAGING--2.0%
38,900 American National Can Group, Inc........ 656,438
32,590 US Can Corp.*........................... 566,251
----------
1,222,689
----------
ELECTRICAL EQUIPMENT--3.2%
22,900 Artesyn Technologies, Inc.*............. 636,906
51,500 Checkpoint Systems, Inc.*............... 386,250
8,700 SBS Technologies, Inc.*................. 321,356
47,200 UCAR International, Inc.*............... 616,550
----------
1,961,062
----------
ELECTRONICS--17.3%
18,800 American Superconductor Corp.*.......... 907,100
18,100 Analog Devices, Inc.*................... 1,375,600
</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, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
ELECTRONICS (CONTINUED)
14,800 Arrow Electronics, Inc.*................ $ 458,800
21,000 Atmel Corp.*............................ 774,375
9,600 Benchmark Electronics, Inc.*............ 351,000
9,400 Cypress Semiconductor Corp.*............ 397,150
12,600 Exar Corp.*............................. 1,098,563
11,600 Galileo Technology, Ltd.*............... 249,400
6,600 Harman International
Industries, Inc....................... 402,600
9,700 Harris Corp............................. 317,675
5,300 Innovex, Inc.*.......................... 51,675
11,540 Lattice Semiconductor Corp.*............ 797,703
14,360 LSI Logic Corp.*........................ 777,235
10,800 Sage, Inc.*............................. 139,725
15,400 SIPEX Corp.*............................ 426,388
41,560 Trimble Navigation, Ltd.*............... 2,028,633
----------
10,553,622
----------
ENTERTAINMENT & LEISURE--3.2%
9,500 American Coin Merchandising, Inc.*...... 23,750
32,200 Callaway Golf Co........................ 525,263
9,100 Hasbro, Inc............................. 137,069
9,500 Imax Corp.*............................. 216,125
23,012 Mattel, Inc............................. 303,471
33,600 Premier Parks, Inc.*.................... 764,400
----------
1,970,078
----------
FINANCIAL SERVICES--2.1%
10,800 E*TRADE Group, Inc.*.................... 178,200
14,900 Investment Technology Group, Inc.*...... 634,181
7,400 Knight Trading Group, Inc.*............. 220,613
8,400 Waddell & Reed Financial, Inc.--
Class A............................... 275,625
----------
1,308,619
----------
FOREST PRODUCTS & PAPER--1.2%
49,400 Packaging Corp. of America*............. 500,175
17,200 Smurfit-Stone Container Corp.*.......... 221,450
----------
721,625
----------
HEALTH CARE PROVIDERS--1.5%
6,000 Express Scripts, Inc.--Class A*......... 372,750
73,400 HEALTHSOUTH Corp.*...................... 527,563
----------
900,313
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
HEAVY CONSTRUCTION--1.0%
35,500 Chicago Bridge & Iron Co. N.V........... $ 521,406
19,800 Layne Christensen Co.*.................. 89,100
----------
610,506
----------
HEAVY MACHINERY--4.9%
36,093 Albany International Corp.--
Class A*.............................. 523,348
4,500 Cooper Cameron Corp.*................... 297,000
17,730 Insituform Technologies*................ 480,926
14,900 Kaydon Corp............................. 312,900
9,100 Lam Research Corp.*..................... 341,250
21,800 Paxar Corp.*............................ 260,238
11,200 Pentair, Inc............................ 397,600
13,100 York International Corp................. 342,238
----------
2,955,500
----------
INDUSTRIAL--DIVERSIFIED--1.2%
17,000 AptarGroup, Inc......................... 459,000
13,500 Identix, Inc.*.......................... 211,781
5,300 Zomax, Inc.*............................ 69,563
----------
740,344
----------
INSURANCE--3.1%
31,600 HCC Insurance Holdings, Inc............. 596,450
15,900 HSB Group, Inc.......................... 494,888
43,500 Mid Atlantic Medical Services, Inc.*.... 587,250
3,700 XL Capital, Ltd.--Class A............... 200,263
----------
1,878,851
----------
MEDIA--BROADCASTING & PUBLISHING--1.5%
4,672 Adelphia Communications Corp.--
Class A*.............................. 219,000
30,630 Mail-Well, Inc.*........................ 264,184
5,500 Meredith Corp........................... 185,625
6,000 Salem Communications Corp.--
Class A*.............................. 55,688
2,600 Scholastic Corp.*....................... 158,925
----------
883,422
----------
MEDICAL SUPPLIES--3.0%
48,300 Endocardial Solutions, Inc.*............ 410,550
15,200 Haemonetics Corp.*...................... 319,200
8,600 Mentor Corp............................. 233,813
</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, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
MEDICAL SUPPLIES (CONTINUED)
10,900 STERIS Corp.*........................... $ 96,738
16,500 Visible Genetics, Inc.*................. 744,563
----------
1,804,864
----------
MEDICAL & BIO-TECHNOLOGY--0.7%
24,000 North American Scientific, Inc.*........ 430,500
----------
METALS--5.2%
49,080 AK Steel Holding Corp................... 392,640
40,750 Allegheny Technologies, Inc............. 733,500
8,200 Carpenter Technology.................... 173,225
27,100 Northwest Pipe Co.*..................... 321,813
27,900 Precision Castparts Corp................ 1,262,475
7,500 RTI International Metals, Inc.*......... 85,313
11,400 USX-US Steel Group, Inc................. 211,613
----------
3,180,579
----------
OIL & GAS--6.1%
14,800 Anadarko Petroleum Corp................. 729,825
16,700 EOG Resources, Inc...................... 559,450
18,300 Friede Goldman Halter, Inc*............. 163,556
10,880 Noble Drilling Corp.*................... 448,120
32,800 Ocean Energy, Inc.*..................... 465,350
7,200 Swift Energy Company*................... 204,300
17,000 Talisman Energy, Inc.*.................. 563,125
10,600 Transocean Sedco Forex Inc.............. 566,438
----------
3,700,164
----------
PHARMACEUTICALS--3.1%
8,800 AmeriSource Health Corp.--Class A*...... 272,800
20,200 Guilford Pharmaceuticals, Inc.*......... 304,263
18,100 ICN Pharmaceuticals, Inc................ 503,406
8,700 Mylan Laboratories, Inc................. 158,775
3,900 Protein Design Labs, Inc.*.............. 643,317
----------
1,882,561
----------
REAL ESTATE--0.6%
8,900 Boston Properties, Inc.--REIT........... 343,763
3,700 Jones Lang LaSalle, Inc.*............... 49,488
----------
393,251
----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ----------
<C> <S> <C>
RETAILERS--1.0%
18,600 Action Performance Co., Inc.*........... $ 134,850
25,200 Claire's Stores, Inc.................... 485,100
----------
619,950
----------
TELEPHONE SYSTEMS--1.4%
2,640 VoiceStream Wireless Corp.*............. 307,024
6,140 Western Wireless Corp.--Class A*........ 334,630
5,600 WinStar Communications, Inc.*........... 189,700
----------
831,354
----------
TEXTILES, CLOTHING & FABRICS--3.4%
23,700 Delta & Pine Land Co.................... 593,981
75,200 Unifi, Inc.*............................ 930,600
15,500 WestPoint Stevens, Inc.................. 172,438
39,700 Wolverine World Wide, Inc............... 392,038
----------
2,089,057
----------
TRANSPORTATION--1.4%
7,900 Kirby Corp.*............................ 167,875
65,380 Wabtec Corp............................. 678,318
----------
846,193
----------
TOTAL INVESTMENTS AT
MARKET VALUE--95.4%
(Cost $51,824,453).................... 58,130,858
OTHER ASSETS IN EXCESS OF
LIABILITIES--4.6%..................... 2,781,298
----------
NET ASSETS--100.0%...................... $60,912,156
======
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
* Non-Income Producing Security
Percentages indicated are based on net assets
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
CLIFTON ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
PAR VALUE
AMOUNT COUPON MATURITY (NOTE 1)
---------- ------ ---------- ----------
<C> <S> <C> <C> <C>
DOMESTIC BONDS & DEBT SECURITIES--90.3%
ASSET BACKED SECURITIES--52.5%
$ 645,557 Amresco Residential Securities Mortgage Loan Trust Ser. 1998-2,
Class A2................................................................ 6.245% 04/25/2022 $ 640,667
842,258 Chase Manhattan Auto Owner Trust Ser. 1996-C, Class A4.................. 6.150% 03/15/2002 839,642
958,032 Chevy Chase Auto Receivables Trust, Ser. 1998-1, Class A................ 5.970% 10/20/2004 947,154
510,806 CIT RV Trust, Ser. 1999-A, Class A1..................................... 5.330% 12/15/2005 508,959
1,112,685 Compass Auto Receivable Trust, Ser. 1998-A, Class A3.................... 5.900% 05/15/2004 1,101,720
675,000 Copelco Capital Funding Corp., Ser. 1999-A, Class A3.................... 5.665% 03/15/2002 669,063
809,000 Ford Credit Auto Owner Trust, Ser. 1999-B, Class A4..................... 5.800% 06/15/2002 801,416
697,969 Green Tree Home Improvement Loan Trust, Ser. 1996-C, Class HIA3......... 7.350% 07/15/2021 698,544
725,000 Honda Auto Receivables Owner Trust, Ser.1999-1, Class A3................ 5.300% 09/15/2002 716,971
1,000,000 Ikon Receivables LLC, Ser. 1999-1, Class A3............................. 5.990% 05/15/2005 989,615
1,000,000 John Deere Owner Trust, Ser. 1999-A, Class A3........................... 5.940% 10/15/2002 986,645
1,000,000 Life Financial Service Trust, Ser. 1998-1, Class A2..................... 6.220% 10/25/2013 993,795
571,962 MMCA Automobile Trust, Ser. 1998-1, Class A3............................ 5.860% 08/16/2004 568,573
842,294 Newcourt Receivables Assets Trust, Ser. 1997-1, Class A4................ 6.193% 05/20/2005 835,299
763,083 Nissan Auto Receivable Grantor Trust, Ser. 1998-A, Class A.............. 5.450% 04/15/2004 753,541
750,000 Premier Auto Trust, Ser. 1998-1, Class A4............................... 5.700% 10/06/2002 741,446
426,446 Union Acceptance Corp., Ser. 1996-C, Class A2........................... 6.510% 11/08/2002 425,860
700,000 World Financial Network Credit Card Master Trust, Ser.1996-A, Class A.. 6.700% 02/15/2004 697,225
----------
13,916,135
----------
CORPORATE DEBT--8.5%
1,000,000 Bear Stearns Cos., Inc. (FR)(a)......................................... 7.059% 05/16/2003 997,330
250,000 General Motors Acceptance Corp. (FR).................................... 6.500% 04/29/2002 249,857
1,000,000 Household Finance Corp. (FR)(a)......................................... 7.078% 06/17/2005 996,282
----------
2,243,469
----------
MORTGAGE BACKED SECURITIES--13.4%
750,000 Chase Funding Mortgage Loan Asset-Backed Certificates, Ser. 1998-1,
Class IA2............................................................... 6.080% 05/25/2013 742,669
500,000 Federal Home Loan Mortgage Corp., Ser. 1618, Class FB (FR).............. 5.420% 10/15/2008 460,865
500,000 Federal National Mortgage Association, Ser. 1993-138, Class FM (FR)..... 5.390% 12/25/2021 458,233
415,570 Federal National Mortgage Association, Ser. G92-5, Class FA (FR)........ 5.515% 01/25/2022 395,921
500,000 Federal National Mortgage Association, Ser. 1993-155, Class FC (FR)..... 5.140% 04/25/2022 460,941
533,956 Morgan Stanley Capital Inc., Ser. 1996-1, Class A1...................... 7.250% 01/25/2027 531,850
505,082 Prudential Home Mortgage Securities, Ser. 1994-1, Class A3.............. 6.000% 02/25/2009 499,327
----------
3,549,806
----------
<CAPTION>
MATURITY
----------
EQUITY LINKED SECURITIES--15.9%
<C> <S> <C> <C> <C>
17,800 Bear Stearns, S&P 500 Equity Linked Notes......................................... 05/20/2003 124,600
4,400 Lehman Brothers Holdings, Inc., Cisco Systems YEELDS.............................. 02/26/2001 418,000
30,300 Merrill Lynch, S&P 500 MITTS...................................................... 05/10/2001 712,050
35,550 Merrill Lynch, S&P 500 MITTS...................................................... 09/16/2002 608,794
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
CLIFTON ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
PAR VALUE
AMOUNT MATURITY (NOTE 1)
---------- ---------- ----------
<C> <S> <C> <C> <C>
EQUITY LINKED SECURITIES (CONTINUED)
$ 44,900 Morgan Stanley, Cisco Systems, Inc. PERQS......................................... 08/01/2001 $ 331,138
81,500 Morgan Stanley, Sun Microsystems PERQS............................................ 05/30/2001 723,313
1,800 Smith Barney, S&P 500 Equity Linked Notes......................................... 08/13/2001 61,650
2,200 Smith Barney, S&P 500 Equity Linked Notes......................................... 03/11/2002 59,950
56,700 Smith Barney, S&P 500 Equity Linked Notes......................................... 01/01/2003 1,169,432
----------
4,208,927
----------
TOTAL DOMESTIC BONDS AND DEBT SECURITIES (Cost $23,798,079)..................................... 23,918,337
----------
</TABLE>
<TABLE>
<CAPTION>
STRIKE EXPIRATION VALUE
PRICE DATE CONTRACTS (NOTE 1)
------ ---------- --------- ----------
<S> <C> <C> <C> <C>
PURCHASED PUT OPTIONS--0.9%
Cisco Systems, Inc. 35.00 08/03/2000 100 $ 625
Cisco Systems, Inc. 35.00 10/21/2000 100 3,750
Cisco Systems, Inc. 42.50 01/20/2001 50 10,626
Lehman Brothers
Holdings, Inc. 30.00 02/26/2001 100 3,125
Lehman Brothers
Holdings, Inc. 45.00 01/19/2002 20 5,375
Sun Microsystems, Inc. 42.50 07/22/2000 50 313
Sun Microsystems, Inc. 47.50 07/22/2000 50 313
Sun Microsystems, Inc. 100.00 01/20/2001 75 144,375
Sun Microsystems, Inc. 110.00 01/20/2001 30 81,000
----------
TOTAL OPTIONS (Cost $291,098)................... 249,502
----------
TOTAL INVESTMENTS--91.2%
(Cost $24,089,177)............................ 24,167,839
OTHER ASSETS IN EXCESS OF LIABILITIES 8.8%...... 2,331,702
----------
NET ASSETS 100.0%............................... $26,499,541
==========
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS:
FR--Floating Rate Securities
MITTS--Market Index Target-Term Securities
PERQS--Performance Equity-Linked Quarterly-Pay Securities
YEELDS--Yield Enhanced, Equity-Linked Debt Securities
(a) Held as collateral for open futures contracts
Percentages indicated are based on net assets
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
M FUND, INC
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL CLIFTON 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............... $70,308,968 $38,157,840 $58,130,858 $24,167,839
Cash........................ 1,654,365 346,242 2,987,240 2,086,835
Cash denominated in foreign
currencies**.............. 51,103 -- -- --
Receivable from:
Securities sold........... 1,163,257 2,046,451 21,796 --
Capital stock
subscriptions........... 211,618 49 17,920 4,385
Dividends and interest.... 246,736 19,968 36,900 118,974
Investment Adviser, net
(Note 2)................ -- 25,645 -- --
Net variation margin on
financial futures
contracts (Note 1)...... -- -- -- 156,550
Deferred organization
expense................... 9,319 9,319 9,319 9,319
----------- ----------- ----------- -----------
Total assets.......... 73,645,366 40,605,514 61,204,033 26,543,902
----------- ----------- ----------- -----------
LIABILITIES:
Payable for:
Securities purchased...... 409,210 1,683,885 151,418 --
Capital stock
redemptions............. 42,733 25,933 4,473 9,265
Investment Adviser (Note
2)...................... 88,998 -- 100,112 2,235
Accrued expenses and other
liabilities............. 40,572 42,441 35,874 32,861
----------- ----------- ----------- -----------
Total liabilities..... 581,513 1,752,259 291,877 44,361
----------- ----------- ----------- -----------
NET ASSETS.................... $73,063,853 $38,853,255 $60,912,156 $26,499,541
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Paid-in capital........... $59,921,453 $29,560,866 $43,451,025 $22,901,006
Undistributed net
investment income
(distributions in excess
of net investment
income)................. 655,615 (1,083) (65,237) 212,437
Accumulated net realized
gain on investments,
foreign currency
transactions, and option
and futures contracts... 4,244,605 6,912,522 11,219,963 3,367,311
Net unrealized
appreciation on
investments, option and
futures contracts, and
net other assets........ 8,242,180 2,380,950 6,306,405 18,787
----------- ----------- ----------- -----------
NET ASSETS.................. $73,063,853 $38,853,255 $60,912,156 $26,499,541
=========== =========== =========== ===========
SHARES OUTSTANDING.......... 4,579,322 1,630,025 2,571,395 1,331,660
=========== =========== =========== ===========
Net asset value, offering
price and redemption price
per share................. $ 15.96 $ 23.84 $ 23.69 $ 19.90
=========== =========== =========== ===========
* Cost of investments...... $62,063,257 $35,776,890 $51,824,453 $24,089,177
** Cost of cash denominated
in foreign currencies..... $ 51,172 -- -- --
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
M FUND, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL CLIFTON ENHANCED
INTERNATIONAL TURNER CORE APPRECIATION U.S. EQUITY
EQUITY FUND GROWTH FUND FUND FUND
------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.................... $ 69,834 $ 55,648 $ 111,881 $ 212,331
Dividends *................. 895,888 120,188 174,762 89,528
---------- ----------- ----------- -----------
Total investment
income............ 965,722 175,836 286,643 301,859
---------- ----------- ----------- -----------
EXPENSES:
Investment Advisory fee
(Note 2).................. 238,840 113,734 275,384 59,202
Custody and administration
fees...................... 88,887 70,086 68,265 64,191
Professional fees........... 16,954 17,490 16,419 13,307
Shareholder reporting....... 11,599 4,648 4,039 6,255
Directors' fees and
expenses.................. 4,784 6,225 5,391 2,963
Amortization of organization
costs..................... 10,216 10,216 10,216 10,216
Other....................... 8,499 8,530 6,525 6,975
---------- ----------- ----------- -----------
Total expenses...... 379,779 230,929 386,239 163,109
Less: Expenses reimbursable
by the Adviser (Note 2).. (75,384) (54,010) (34,359) (73,687)
---------- ----------- ----------- -----------
Net operating expenses...... 304,395 176,919 351,880 89,422
---------- ----------- ----------- -----------
NET INVESTMENT INCOME
(LOSS)...................... 661,327 (1,083) (65,237) 212,437
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on:
Investment
transactions.......... 4,267,581 6,994,940 11,521,695 3,847,459
Foreign currency
transactions.......... (22,605) -- -- --
Option contracts........ -- -- -- (15,377)
Futures contracts....... -- -- -- (452,425)
---------- ----------- ----------- -----------
Net realized gain....... 4,244,976 6,994,940 11,521,695 3,379,657
---------- ----------- ----------- -----------
Net change in unrealized
(depreciation) on:
Investments............. (880,955) (6,496,837) (6,073,700) (4,082,307)
Forward currency and net
other assets.......... (3,330) -- -- --
Option contracts........ -- -- -- (41,596)
Futures contracts....... -- -- -- (59,875)
---------- ----------- ----------- -----------
Net change in unrealized
(depreciation)........ (884,285) (6,496,837) (6,073,700) (4,183,778)
---------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS)............... 3,360,691 498,103 5,447,995 (804,121)
---------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS................ $4,022,018 $ 497,020 $ 5,382,758 $ (591,684)
========== =========== =========== ===========
* Net of foreign taxes
withheld of:.............. $ 95,699 $ 632 $ 320 $ 7
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL TURNER CORE
EQUITY FUND GROWTH FUND
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment income
(loss).................... $ 661,327 $ 311,654 $ (1,083) $ 40,875
Net realized gain on
investment and foreign
currency transactions and
option and futures
contracts................. 4,244,976 2,113,711 6,994,940 2,803,356
Net change in unrealized
appreciation
(depreciation) on
investments, forward
currency contracts,
foreign currency, option
and futures contracts and
other assets.............. (884,285) 8,515,233 (6,496,837) 6,750,251
----------- ----------- ------------ ------------
Net increase in net assets
resulting from
operations................ 4,022,018 10,940,598 497,020 9,594,482
----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment
income.................... (36,532) (274,130) -- (49,484)
In excess of net investment
income.................... -- -- -- --
From net realized capital
gains..................... (865,954) (1,255,022) (444,797) (3,139,438)
In excess of net realized
capital gains............. -- -- -- --
----------- ----------- ------------ ------------
Total distributions to
shareholders............ (902,486) (1,529,152) (444,797) (3,188,922)
----------- ----------- ------------ ------------
FUND SHARE TRANSACTIONS (NOTE
4):
Proceeds from shares sold... 22,640,861 30,942,799 33,529,442 39,846,687
Net asset value of shares
issued on reinvestment of
distributions............. 902,486 1,529,152 444,797 3,188,922
Cost of shares
repurchased............... (2,106,561) (5,759,178) (48,098,786) (10,395,644)
----------- ----------- ------------ ------------
Net increase (decrease) in
net assets resulting from
Fund share transactions... 21,436,786 26,712,773 (14,124,547) 32,639,965
----------- ----------- ------------ ------------
TOTAL CHANGE IN NET ASSETS.... 24,556,318 36,124,219 (14,072,324) 39,045,525
NET ASSETS:
Beginning of year........... 48,507,535 12,383,316 52,925,579 13,880,054
----------- ----------- ------------ ------------
End of year *............... $73,063,853 $48,507,535 $ 38,853,255 $ 52,925,579
=========== =========== ============ ============
* Including undistributed net
investment income
(distributions in excess of
net investment income)
of:......................... $ 655,615 $ 30,820 $ (1,083) $ --
</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>
FRONTIER CAPITAL CLIFTON ENHANCED U.S.
APPRECIATION FUND EQUITY FUND
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment income
(loss).................... $ (65,237) $ (205,041) $ 212,437 $ 102,792
Net realized gain on
investment and foreign
currency transactions and
option and futures
contracts................. 11,521,695 4,195,967 3,379,657 2,483,769
Net change in unrealized
appreciation
(depreciation) on
investments, forward
currency contracts,
foreign currency, option
and futures contracts and
other assets.............. (6,073,700) 9,824,763 (4,183,778) 1,645,919
------------ ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
operations................ 5,382,758 13,815,689 (591,684) 4,232,480
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment
income.................... -- -- (260) (103,437)
In excess of net investment
income.................... -- -- -- --
From net realized capital
gains..................... (1,635,631) (1,374,766) (693,904) (1,701,245)
In excess of net realized
capital gains............. -- -- -- --
------------ ------------ ----------- -----------
Total distributions to
shareholders............ (1,635,631) (1,374,766) (694,164) (1,804,682)
------------ ------------ ----------- -----------
FUND SHARE TRANSACTIONS (NOTE
4):
Proceeds from shares sold... 40,096,688 20,857,440 6,667,639 10,487,770
Net asset value of shares
issued on reinvestment of
distributions............. 1,635,631 1,374,766 694,164 1,804,682
Cost of shares
repurchased............... (32,486,652) (18,531,662) (2,439,895) (6,939,199)
------------ ------------ ----------- -----------
Net increase in net assets
resulting from Fund share
transactions.............. 9,245,667 3,700,544 4,921,908 5,353,253
------------ ------------ ----------- -----------
TOTAL CHANGE IN NET ASSETS.... 12,992,794 16,141,467 3,636,060 7,781,051
NET ASSETS:
Beginning of year........... 47,919,362 31,777,895 22,863,481 15,082,430
------------ ------------ ----------- -----------
End of year *............... $ 60,912,156 $ 47,919,362 $26,499,541 $22,863,481
============ ============ =========== ===========
* Including undistributed net
investment income
(distributions in excess of
net investment income)
of:......................... $ (65,237) $ -- $ 212,437 $ 260
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY FUND
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
ENDED JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996(A)
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 15.52 $ 10.84 $ 9.96 $ 9.88 $10.00
------- ------- ------- ------ ------
Income from investment
operations:
Net investment
income............... 0.14 0.10 0.09 0.07 0.06
Net realized and
unrealized gain
(loss) on
investments.......... 0.50 5.09 1.44 0.15 (0.12)
------- ------- ------- ------ ------
Total from investment
operations......... 0.64 5.19 1.53 0.22 (0.06)
------- ------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (0.01) (0.09) (0.06) (0.07) (0.06)
In excess of net
investment income.... -- -- -- (0.03) --
From net realized
capital gains........ (0.19) (0.42) (0.53) -- --
In excess of net
realized capital
gains................ -- -- (0.06) -- --
Tax return of
capital.............. -- -- -- (0.04) --
------- ------- ------- ------ ------
Total
distributions...... (0.20) (0.51) (0.65) (0.14) (0.06)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 15.96 $ 15.52 $ 10.84 $ 9.96 $ 9.88
======= ======= ======= ====== ======
TOTAL RETURN............. 4.14% 47.86% 15.37% 2.26% (0.63)%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $73,064 $48,508 $12,383 $6,034 $3,177
Net expenses to average
daily net assets
before interest
expense**............ 1.06% 1.24% 1.30% 1.30% 1.30%
Net expenses to average
daily net assets
after interest
expense**............ 1.06% 1.24% 1.30% 1.30% 1.30%
Net investment income
(loss) to average
daily net assets**... 2.31% 1.31% 1.00% 0.83% 0.67%
Portfolio turnover
rate................. 12% 19% 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**... 1.32% 1.93% 3.57% 4.93% 7.28%
Net investment income
(loss)**............. 2.05% 0.61% (1.27)% (2.80)% (5.31)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
TURNER CORE GROWTH FUND
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
ENDED JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996(A)
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 22.93 $ 17.84 $ 13.50 $11.60 $10.00
------- ------- ------- ------ ------
Income from investment
operations:
Net investment
income............... -- 0.02 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on
investments.......... 1.19 6.92 4.64 3.22 1.94
------- ------- ------- ------ ------
Total from investment
operations......... 1.19 6.94 4.66 3.26 2.00
------- ------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- (0.02) (0.03) (0.04) (0.06)
In excess of net
investment income.... -- -- -- -- --
From net realized
capital gains........ (0.28) (1.83) (0.29) (1.22) (0.34)
In excess of net
realized capital
gains................ -- -- -- (0.10) --
------- ------- ------- ------ ------
Total
distributions...... (0.28) (1.85) (0.32) (1.36) (0.40)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 23.84 $ 22.93 $ 17.84 $13.50 $11.60
======= ======= ======= ====== ======
TOTAL RETURN............. 5.18% 40.11% 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $38,853 $52,926 $13,880 $3,820 $2,003
Net expenses to average
daily net assets
before interest
expense**............ 0.70% 0.70% 0.70% 0.70% 0.70%
Net expenses to average
daily net assets
after interest
expense**............ 0.70% 0.70% 0.70% 0.70% 0.78%
Net investment income
(loss) to average
daily net assets**... -- 0.19% 0.31% 0.34% 0.55%
Portfolio turnover
rate................. 306% 286% 242% 206% 258%
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**... 0.91% 1.40% 3.42% 6.18% 8.43%
Net investment income
(loss)**............. (0.21)% (0.51)% (2.41)% (5.14)% (7.18)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
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>
FRONTIER CAPITAL APPRECIATION FUND
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
ENDED JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996(A)
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 21.12 $ 15.09 $ 14.92 $ 12.52 $10.00
------- ------- ------- ------- ------
Income from investment
operations:
Net investment
income............... (0.03) 0.09 (0.04) 0.00 0.00
Net realized and
unrealized gain on
investments.......... 3.25 6.74 0.29 2.76 3.03
------- ------- ------- ------- ------
Total from investment
operations......... 3.22 6.65 0.25 2.76 3.03
------- ------- ------- ------- ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net realized
capital gains........ (0.65) (0.62) (0.08) (0.36) (0.51)
------- ------- ------- ------- ------
Total
distributions...... (0.65) (0.62) (0.08) (0.36) (0.51)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 23.69 $ 21.12 $ 15.09 $ 14.92 $12.52
======= ======= ======= ======= ======
TOTAL RETURN............. 15.25% 44.17% 1.68% 22.13% 30.31%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $60,912 $47,919 $31,778 $16,628 $3,006
Net expenses to average
daily net assets
before interest
expense**............ 1.15% 1.15% 1.15% 1.15% 1.15%
Net expenses to average
daily net assets
after interest
expense**............ 1.15% 1.15% 1.15% 1.15% 1.20%
Net investment income
(loss) to average
daily net assets**... (0.21)% (0.57)% (0.32)% (0.13)% (0.30)%
Portfolio turnover
rate................. 73% 75% 68% 61% 140%
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**... 1.26% 1.47% 1.75% 2.86% 8.12%
Net investment income
(loss)**............. (0.32)% (0.90)% (0.92)% (1.84)% (7.27)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
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>
CLIFTON ENHANCED U.S. EQUITY FUND
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
ENDED JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996(A)
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 20.97 $ 18.07 $ 15.09 $11.85 $10.00
------- ------- ------- ------ ------
Income from investment
operations:
Net investment
income............... 0.16 0.10 0.11 0.08 0.12
Net realized and
unrealized gain on
investments.......... (0.69) 4.60 3.45 3.78 2.25
------- ------- ------- ------ ------
Total from investment
operations......... (0.53) 4.70 3.56 3.86 2.37
------- ------- ------- ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... -- (0.10) (0.10) (0.09) (0.12)
In excess of net
investment income.... -- -- (0.01) -- --
From net realized
capital gains........ (0.54) (1.70) (0.35) (0.53) (0.40)
In excess of net
realized capital
gains................ -- -- (0.12) -- --
------- ------- ------- ------ ------
Total
distributions...... (0.54) (1.80) (0.58) (0.62) (0.52)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 19.90 $ 20.97 $ 18.07 $15.09 $11.85
======= ======= ======= ====== ======
TOTAL RETURN............. (2.53)% 26.07% 23.69% 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $26,500 $22,863 $15,082 $7,345 $1,582
Net expenses to average
daily net assets
before interest
expense**............ 0.74% 0.86% 0.80% 0.80% 0.80%
Net expenses to average
daily net assets
after interest
expense**............ 0.74% 0.80% 0.80% 0.80% 0.80%
Net investment income
(loss) to average
daily net assets**... 1.77% 0.56% 0.80% 1.17% 1.43%
Portfolio turnover
rate................. 142% 69% 50% 52% 79%
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**... 1.36% 1.63% 2.34% 5.41% 12.32%
Net investment income
(loss)**............. 1.15% (0.26)% (0.74)% (3.44)% (10.09)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
The accompanying notes are an integral part of these financial statements.
24
<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, Turner Core Growth Fund, Frontier Capital Appreciation Fund and Clifton
Enhanced U.S. Equity Fund (formerly 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 May 1, 2000 the name of the Enhanced U.S. Equity Fund was changed to Clifton
Enhanced U.S. Equity Fund. This change was made in connection with the change in
sub-adviser to The Clifton Group, replacing Franklin Portfolio Associates,
L.L.C.
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, 2000, 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). Clifton Enhanced
U.S. Equity Fund's objective is to achieve above-market total return by using a
combination of S&P futures contracts and a cash portfolio to create a synthetic
enhanced S&P product.
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 an
U.S. exchange or NASDAQ are valued at 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
25
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 fluctuation in exchange rates between the initial trade date and
subsequent sale trade date is included in realized gains and losses on
investment transactions.
26
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
FUTURES CONTRACTS
The Brandes International Equity Fund and Clifton Enhanced U.S. Equity Fund may
invest in futures. A futures contract is an agreement involving the delivery of
a particular asset on a specified future date at an agreed upon price. These
contracts are generally used to provide the return of an index without
purchasing all of the securities underlying the index or as a temporary
substitute for purchasing or selling specific securities. The Brandes
International Equity Fund may enter into futures transactions only as a hedge
against the risk of unexpected changes in the value of securities held or
intended to be held by the Fund. Hedging theoretically reduces market risk, and
exposure exists to the extent there is a related imperfect correlation. The use
of futures contracts for hedging involves the risk of imperfect correlation in
movement in the price of the futures contracts compared to the underlying hedged
assets. The Clifton Enhanced U.S. Equity Fund may enter into futures
transactions to have a 100% exposure to the S&P 500. The loss from investing in
futures that are unhedged or uncovered, is potentially unlimited.
Upon entering into a futures contract, the Fund is required to make initial
margin deposits with the broker or segregate liquid investments to satisfy the
broker's margin requirements. Initial margin deposits are recorded as assets and
held in a segregated account at the custodian. During the period the futures
contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" the contract on a daily basis
to reflect the value of the contract's settlement price at the end of each day's
trading. Variation margin payments are made or received and recognized as assets
due from or liabilities to the broker depending upon whether unrealized gains or
losses, respectively, are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and its basis in the contract.
27
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OPTIONS CONTRACTS
The Brandes International Equity Fund and Clifton Enhanced U.S. Equity Fund may
purchase or write options.
A purchased option contract gives the buyer the right, but not the obligation,
to buy (call) or sell (put) an underlying item at a fixed exercise price during
a specified period. Purchases of put and call options are recorded as
investments, the value of which are marked-to-market daily. When a purchased
option expires, the Fund will realize a loss equal to the premium paid. When the
Fund enters into a closing sale transaction, the Fund will realize a gain or
loss depending on whether the sales proceeds from the closing sale transaction
are greater or less the cost of the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
The premium received for a written option is recorded as a liability. The
liability is marked-to-market daily based on the option's quoted market price.
When an option expires or the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or loss if the cost of the closing purchase
transaction exceeds the premium received when the option was sold) without
regard to any unrealized gain or loss on the underlying security. The liability
related to such options is also eliminated when this occurs. When a written call
option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the underlying security
purchased.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity for profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised this loss can be greater than premium received. In
addition, the Fund could be exposed to risks if the counterparties to the
transactions are unable to meet the terms of the 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
28
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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. The Brandes
International Equity Fund elected to defer to its fiscal year ending December
31, 2000, $5,629 of losses recognized during the period November 1, 1999, to
December 31, 1999.
29
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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>
Turner Core Growth Fund 0.45%
Frontier Capital Appreciation Fund 0.90%
Brandes International Equity Fund* FOR THE PERIOD JANUARY 1, 2000 THROUGH
APRIL 30, 2000:
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
AS OF MAY 1, 2000:
1.10% on the first $10 million
0.95% on the next $10 million
0.75% on the next $30 million
0.65% on amounts above $50 million
Clifton Enhanced U.S. Equity Fund* FOR THE PERIOD JANUARY 1, 2000 THROUGH
APRIL 30, 2000:
0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100 million
AS OF MAY 1, 2000:
0.40% on the first $25 million
0.35% on amounts above $25 million
</TABLE>
* Pursuant to a vote of the majority of shareholders, the advisory fee
structure of these Funds changed effective May 1, 2000.
The Adviser has engaged Brandes Investment Partners, L.P., Turner Investment
Partners, Inc., Frontier Capital Management Company, L.L.C., and The Clifton
Group 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 Clifton Enhanced U.S. Equity Fund, respectively. On
May 1, 2000, The Clifton Group replaced Franklin Portfolio Associates L.L.C. as
sub-adviser of the Clifton Enhanced U.S. Equity Fund (formerly Enhanced U.S.
Equity Fund).
30
<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 Clifton 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, 2000.
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, 2000, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Brandes International Equity Fund................ $ 26,344,393 $ 7,041,731
Turner Core Growth Fund.......................... 155,917,150 168,454,535
Frontier Capital Appreciation Fund............... 50,648,179 43,201,537
Clifton Enhanced U.S. Equity Fund................ 34,634,206 32,756,036
</TABLE>
At June 30, 2000, 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.......... $60,063,257 $11,071,998 $(2,826,287) $8,245,711
Turner Core Growth Fund.................... 35,776,890 3,219,636 (838,686) 2,380,950
Frontier Capital Appreciation Fund......... 51,824,453 10,607,224 (4,300,819) 6,306,405
Clifton Enhanced U.S. Equity Fund.......... 24,089,177 214,420 (135,758) 78,662
</TABLE>
31
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. SHARES OF BENEFICIAL INTEREST
At June 30, 2000 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 YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Shares sold................................. 1,540,411 2,332,187 1,425,922 1,920,003
Shares repurchased.......................... (142,709) (448,438) (2,122,605) (536,725)
Distributions reinvested.................... 57,083 98,782 18,815 146,797
--------- --------- ---------- ---------
Net increase................................ 1,454,785 1,982,531 (677,868) 1,530,075
Fund shares:
Beginning of year......................... 3,142,537 1,142,006 2,307,893 777,818
--------- --------- ---------- ---------
End of year............................... 4,597,322 3,142,537 1,630,025 2,307,893
========= ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER CAPITAL CLIFTON ENHANCED
APPRECIATION FUND U.S. EQUITY FUND
------------------------------ ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Shares sold................................. 1,635,212 1,234,034 327,878 522,322
Shares repurchased.......................... (1,401,579) (1,137,812) (121,645) (353,244)
Distributions reinvested.................... 68,724 66,286 35,112 83,638
---------- ---------- ---------- ----------
Net increase................................ 302,357 162,508 241,345 255,716
Fund shares:
Beginning of year......................... 2,269,038 2,106,530 1,090,315 834,599
---------- ---------- ---------- ----------
End of year............................... 2,571,395 2,269,038 1,331,660 1,090,315
========== ========== ========== ==========
</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.
32
<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 Clifton Enhanced U.S. Equity Fund trades financial instruments
with off-balance sheet risk in the normal course of its investing activities to
maintain a 100% exposure to the S&P 500 Composite Stock Price Index (S&P 500).
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, 2000,
the Brandes International Equity Fund had no open forward currency exchange
contracts and the Clifton Enhanced U.S. Equity Fund was invested in futures
contracts as described in Note 7.
7. FUTURES CONTRACTS
Transactions in futures contracts for the Clifton Enhanced U.S. Equity Fund
for the period ended June 30, 2000 were as follows:
<TABLE>
<S> <C>
Futures Contracts Outstanding at December 31, 1999.......... 0
Contracts Opened.......................................... 310
Contracts Closed.......................................... (202)
----
Futures Contracts Outstanding at June 30, 2000.............. 108
====
</TABLE>
The futures contracts outstanding as of June 30, 2000 and the description and
unrealized appreciation or depreciation for the Clifton U.S. Equity Enhanced
Fund were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NOTIONAL APPRECIATION/
CONTRACTS VALUE (DEPRECIATION)
--------- ----------- --------------
<S> <C> <C> <C>
EuroDollar Futures
September 2000 -- Long.................................. 20 $ 4,653,250 $ 14,000
EuroDollar Futures
December 2000 -- Long................................... 20 $ 4,643,750 $ 2,625
S&P 500 Index Futures
December 2000 -- Long................................... 28 $10,434,900 $ 6,650
S&P 500 Index Futures
March 2001 -- Long...................................... 37 $14,001,725 $(90,650)
S&P 500 Index Futures
September 2000 -- Short................................. 3 $ 1,101,075 $ 7,500
</TABLE>
33
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. CONCENTRATION
At June 30, 2000, 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.
9. BENEFICIAL INTEREST
At June 30, 2000 the ownership of each fund was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
---------------------------------------------
JOHN HANCOCK PACIFIC
M LIFE VARIABLE LIFE LIFE
INSURANCE CO. INSURANCE CO. INSURANCE CO.
------------- ------------- -------------
<S> <C> <C> <C>
Brandes International Equity Fund...................... 4.9% 55.2% 39.9%
Turner Core Growth Fund................................ 7.8% 57.6% 34.6%
Frontier Capital Appreciation Fund..................... 4.4% 61.4% 34.2%
Clifton Enhanced U.S. Equity Fund...................... 9.4% 37.4% 53.2%
</TABLE>
10. PROXY VOTING RESULTS
A special meeting of the Company's shareholders was held on April 11, 2000.
The results of votes taken among shareholders on proposals before them are
reported below.
Proposal 1
To adopt an amended Investment Advisory Agreement between the Company and the
Adviser, with respect to Brandes International Equity Fund, changing the
management fee of the Fund.
<TABLE>
<CAPTION>
# OF % OF
SHARES VOTED SHARES VOTED
------------- ------------
<S> <C> <C>
In Favor.................................................... 3,041,805.024 92.535%
Against..................................................... 245,377.698 7.465%
Total....................................................... 3,287,182.722 100%
</TABLE>
Proposal 2
To adopt an amended Investment Advisory Agreement between the Company and the
Adviser, with respect to Enhanced U.S. Equity Fund, changing the management fee
of the Fund.
<TABLE>
<CAPTION>
# OF % OF
SHARES VOTED SHARES VOTED
------------- ------------
<S> <C> <C>
In Favor.................................................... 1,088,085.825 97.688%
Against..................................................... 21,960.530 1.972%
Abstaining.................................................. 3,789.690 .340%
Total....................................................... 1,113,836.045 100%
</TABLE>
34
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. PROXY VOTING RESULTS (CONTINUED)
Proposal 3
To change the fundamental investment policy of Enhanced U.S. Equity Fund with
regard to purchasing securities on margin.
<TABLE>
<CAPTION>
# OF % OF
SHARES VOTED SHARES VOTED
------------- ------------
<S> <C> <C>
In Favor.................................................... 4,398,793.686 100%
</TABLE>
35
