<PAGE>
M FUNDS
Brandes International Equity Fund
Turner Core Growth Fund
Frontier Capital Appreciation Fund
Enhanced U.S. Equity Fund
Annual Report
December 31, 1999
[LOGO]-TM-
<PAGE>
M FUND, INC.
PRESIDENT'S LETTER
January 18, 2000
Dear Contract Owners:
We welcome the opportunity to share with you the financial condition of M Fund,
Inc. (the "Company") as presented in the following Annual Report dated December
31, 1999. Total assets under management grew to $172 million during 1999.
Sub-Advisers to the portfolios, under the direction of M Financial Investment
Advisers, Inc., the investment adviser to the Company, have prepared the
attached discussion of results for each portfolio of the Company for the year
ended December 31, 1999 in addition to their outlook for 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 Company, LLC for the Frontier
Capital Appreciation Fund, and Franklin Portfolio Associates for the Enhanced
U.S. Equity Fund.
The M Fund Board of Directors, in coordination with M Financial Investment
Advisers, Inc. and M Fund's participating insurance carriers, remain committed
to providing opportunities to add value to shareholders.
We look forward to continued growth in assets in the upcoming year.
Sincerely,
/s/ DANIEL F. BYRNE
DANIEL F. BYRNE
PRESIDENT
M Fund, Inc.
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
The Brandes International Equity Fund returned 47.86% for the year ended
December 31, 1999. The MSCI EAFE Index returned 26.73% for the same period.
Holdings in Japan, Brazil and Germany contributed the greatest amount of
positive performance on an impact basis for the year. Holdings in Denmark turned
in the lowest performance for the year.
Emerging markets provided strong performance to the portfolio this year. The
MSCI Emerging Markets Free Index was up 66.41% for the twelve months. Emerging
market positions for the fund were up 57.90% for the period. Strengthening
economic fundamentals and diminishing concerns over the Y2K bug bolstered
strength in the emerging markets. Although the advance was broad based, stocks
in Latin America also benefited from an easing of worries over upcoming
elections in the region.
Industry sectors with the most positive impact on performance were
telecommunications (Deutsche Telekom AG), electrical and electronics (Hitachi,
Ltd.) and industrials (Kyocera). The industries that provided the greatest
negative impact to fund performance were beverages, food and household products.
Cyclical companies including metals, energy sources, miscellaneous materials
and industrials were particularly strong. It is important to note that as value
investors, we accumulated many of these positions during the darkest hours of
the global financial crisis of 1998. At that time, tepid demand in Asia and
Latin America caused the prices of commodity and industrial related stocks to
tumble sharply. As often happens during periods of extreme pessimism, bargains
were created that investors with long-term time horizons were able to exploit.
We caution that not all years will be as profitable as 1999, and that volatility
will always remain a hallmark of equity investing. As is our practice, we will
attempt to use that volatility to the benefit of our clients by accumulating
solid businesses at what we believe to be temporarily depressed prices.
This year's performance has been gratifying, with your portfolio's returns
almost doubling that of the MSCI EAFE index. The allocations we made to emerging
markets' and Japanese stocks when they dramatically declined in 1997 and 1998
brought a surfeit of rewards this year. It aptly demonstrates the benefits of
maintaining one's investment discipline and objectivity when other investors are
reacting to short-term events. However, annual performances such as the one we
have just experienced are the exception rather than the norm. We ask you to bear
this in mind as we continue to search for investment opportunities in the years
ahead.
What will the new Millennium bring us? We cannot predict the future, but we
can confidently state that stocks will be volatile and will continue to both
rise and fall in value. There will be both crisis and excessive periods of
optimism. And each of these will bring their own opportunities to investors. We
thank-you for the opportunity to have served you over the last year and we hope
to continue to uncover appropriate values for you in the future.
BRANDES INVESTMENT PARTNERS, L.P.
INVESTMENT SUB-ADVISER TO THE BRANDES INTERNATIONAL EQUITY FUND
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE BRANDES INTERNATIONAL EQUITY FUND AND MSCI EAFE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL MSCI EAFE INDEX**
EQUITY FUND
<S> <C> <C>
1/4/96 $10,000 $10,000
3/31/96 $10,077 $10,296
6/30/96 $10,264 $10,468
9/30/96 $9,992 $10,403
12/31/96 $9,940 $10,610
3/31/97 $9,634 $10,442
6/30/97 $10,962 $11,799
9/30/97 $10,857 $11,697
12/31/97 $10,162 $10,780
3/31/98 $11,503 $12,365
6/30/98 $11,411 $12,493
9/30/98 $9,778 $10,722
12/31/98 $11,728 $12,945
3/31/99 $12,816 $13,115
6/30/99 $14,258 $13,437
9/30/99 $14,356 $14,023
12/31/99 $17,341 $16,405
Average Annual Total Return for the periods ended 12/31/99:
One Year: 47.86%
Since 1/4/96*: 14.78%
</TABLE>
THE FUND'S TOTAL RETURN IS CALCULATED NET OF INVESTMENT ADVISORY FEES AND
OPERATING EXPENSES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERSONS WHO INVEST IN THE FUND THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACT SHOULD NOTE THIS GRAPH DOES NOT REFLECT SEPARATE ACCOUNT
EXPENSES DEDUCTED BY THE INSURANCE COMPANY.
- ---------
* Fund's inception date
** 1/1/96 to 12/31/99
MORGAN STANLEY CAPITAL INTERNATIONAL -- EUROPE, AUSTRALIA, FAR EAST INDEX
The arithmetic, market value-weighted average of the performance of over 900
securities listed on the stock exchanges of the following 21 countries:
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, and the United Kingdom. It includes the
effect of reinvested dividends, net of foreign taxes withheld, and is measured
in U.S. dollars. The index is calculated on a total return basis.
3
<PAGE>
TURNER CORE GROWTH FUND
The Turner Core Growth Fund returned 40.11% for the year ended December 31,
1999 to outperform both the Wilshire 5000 Stock Index and the Lipper Growth
Funds Average by more than 10 percentage points. The Wilshire 5000 advanced
23.56%; the average growth fund tracked by Lipper Inc., 29.31%
The investment planets seemed to be aligned perfectly for the Turner Core
Growth Fund in 1999. The fund benefited from a stock market that bountifully
rewarded growth stocks in general (the broad-based Russell 3000 Growth Index
advanced 33.82%, versus a mere 6.65% for its value counterpart) and stocks with
positive earnings momentum in particular (stocks with good earnings soared, but
stocks of companies that failed to meet earnings expectations were punished
severely.) Those circumstances were ideal for our investment approach, and we
capitalized on them by choosing good stocks, especially in the biggest sectors
that had the largest impact on your portfolio's performance.
Nine of our 10 sector positions outperformed their corresponding index
sectors, with investments in six of the largest sectors -- technology, health
care, consumer discretionary/services, producer durables, financial services,
and utilities/ communication -- contributing the most to performance;
altogether, those sectors accounted for more than 80% of our holdings. In
absolute terms, the producer-durables investments fared best. The strongest
producer-durables performers were the stocks of companies that make equipment
for manufacturing semiconductor chips; we recognized that those companies were
in the prime phase of their profit cycle and invested heavily in them. Also
doing well were telecommunications and Internet-related shares.
Impairing performance slightly was a subpar relative return in just one
sector, autos/transportation. In that sector, we held mainly automotive-parts
and air-transportation company stocks that produced lackluster results;
fortunately, those positions amounted to less than 3% of the fund.
Above all, 1999 was a year in which the quality of stock selection separated
winning investors from losing investors. The above-average gains recorded by the
major averages were misleading, in that they concealed a harsh investment
environment where the returns of many individual shares and individual mutual
funds were poor. For instance, only 50.5% of the stocks in the S&P 500 Index had
a positive return for the year. And just 47% of all stock funds beat the S&P 500
in 1999, according to Morgan Stanley Dean Witter.
In a market that rewarded perceptive stock picking, we think our ability to
identify the best growth companies should again prove vital in 2000. As always,
the Turner Core Growth Fund is invested in a diversified portfolio of companies
whose earnings meet or exceed Wall Street's consensus expectations. And as
always, the fund's sector weightings closely resemble those of the S&P 500
Index. We think the practice of overweighting or underweighting sectors is a
perilous investment practice because it's difficult to consistently anticipate
when the performance of sectors will change for better or worse in the short
run. So in our approach, we've tried to eliminate the risk of making decisions
based on "timing" the sectors, which can't be done consistently well anyway; we
focus instead on what we think we can do well and that adds the most value
strategically to performance -- trying to pick the best stocks within each
sector.
TURNER INVESTMENT PARTNERS, INC.
INVESTMENT SUB-ADVISER TO THE TURNER CORE GROWTH FUND
4
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE TURNER CORE GROWTH FUND AND WILSHIRE 5000 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TURNER CORE GROWTH FUND WILSHIRE 5000 INDEX**
<S> <C> <C>
1/4/96 $10,000 $10,000
3/31/96 $10,651 $10,562
6/30/96 $11,228 $11,027
9/30/96 $11,614 $11,339
12/31/96 $12,000 $12,120
3/31/97 $11,632 $12,200
6/30/97 $13,357 $14,260
9/30/97 $15,146 $15,651
12/31/97 $15,384 $15,914
3/31/98 $17,291 $18,024
6/30/98 $18,600 $18,376
9/30/98 $16,703 $16,166
12/31/98 $20,761 $19,644
3/31/99 $22,566 $20,385
6/30/99 $23,613 $21,976
9/30/99 $22,660 $20,523
12/31/99 $28,269 $24,272
Average Annual Total Return for the periods ended 12/31/99:
One Year: 40.11%
Since 1/4/96*: 30.60%
</TABLE>
THE FUND'S TOTAL RETURN IS CALCULATED NET OF INVESTMENT ADVISORY FEES AND
OPERATING EXPENSES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERSONS WHO INVEST IN THE FUND THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACT SHOULD NOTE THIS GRAPH DOES NOT REFLECT SEPARATE ACCOUNT
EXPENSES DEDUCTED BY THE INSURANCE COMPANY.
- ---------
* Fund's inception date
** 1/1/96 to 12/31/99
WILSHIRE 5000 STOCK INDEX
A capitalization weighted stock index representing all domestic common stocks
traded regularly on the organized exchanges. The index is the broadest measure
of the aggregate domestic stock market.
5
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
The Frontier Capital Appreciation Fund returned 44.17% for the year ended
December 31, 1999. The Russell 2500 Stock Index returned 24.13% during the same
period.
A strong December finish enabled the Russell 2500 index to outperform the
large cap Russell 1000 and S&P 500. This was the first year since 1993 that the
small and mid cap index outperformed its larger cap counterparts. The gains for
the Russell 2500 were extremely narrow, however, as over 70% of the performance
came from the technology sector. The strength in technology reflected investor
enthusiasm for the Internet related companies, which as a group were up over
100%. The lack of breadth in the market was evidenced by the fact that more than
half of the Russell 2500 stocks were down for the year.
We are particularly pleased with the performance of your portfolio in 1999
considering we did not own any of the pure Internet companies. As we have
discussed with you in the past, we have a very disciplined investment process
that is highly focused on earnings growth. The Internet sector is currently in a
class of its own, with prices soaring without any evidence earnings will ever
materialize. For example, Amazon.com recently reported that its sales during the
fourth quarter increased dramatically to $650 million. This is a 157% increase
over the $253 million they reported last year. However, rather than reporting a
significantly reduced loss, as most on Wall Street expected, the company
announced that its loss actually widened compared to last year. Our portfolio
contains many already profitable companies that are benefiting from the building
of the Internet. These companies have generated positive earnings surprises when
their revenues have come in higher than expected.
The narrow leadership of the market last year represents both opportunity
and risk. The risks have become evident in the first week of the New Year as
many of the high multiple technology and telecommunications stocks have
experienced significant corrections. The opportunity is that, since most of the
small and mid cap universe lagged in 1999, there are still many well positioned,
growing companies selling at very reasonable valuations. We are beginning to see
signs of some rotation into other less exploited sectors and believe that
sustaining this trend is key to the market's continued advance.
The economic backdrop remains solid although some moderation in growth will
be necessary to keep the economy in balance. Consumer confidence is high, as
reflected in strong holiday sales. However, consumer spending has been outpacing
the growth in personal income, an unsustainable trend that reflects, in part,
the wealth effect associated with rising stock prices. Concerns about the
inflationary consequences of the above trend line GDP growth are reflected in
the upward trend in long-term rates as the yield on the benchmark 30 year
Treasury is now above 6.5%. A further hike in rates by the Fed seems likely at
next month's FOMC meeting unless some signs of slowing intervene.
Changes in leadership typically occur during market corrections. There are
currently signs of a shift from the narrow leadership of last year to a broader,
more balanced market. This is happening at a time when the global economy
appears to be growing again. In fact, for the first time in 10 years, all the
major regions are expanding at the same time. This should have a positive impact
on those companies that have been hurt over the last two years as a result of
global economic weakness. We have expanded our exposure
6
<PAGE>
to economically sensitive stocks over the last few months and have reduced our
exposure to the technology sector. After a more than five-year period of
underperformance, which appears to have ended in March, we believe small and mid
caps are well positioned to participate broadly in the next phase of the
market's advance.
FRONTIER CAPITAL MANAGEMENT CO., L.L.C.
INVESTMENT SUB-ADVISER TO THE FRONTIER CAPITAL APPRECIATION FUND
7
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE FRONTIER CAPITAL APPRECIATION FUND AND RUSSELL 2500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FRONTIER CAPITAL RUSSELL 2500
APPRECIATION FUND STOCK INDEX**
<S> <C> <C>
1/4/96 $10,000 $10,000
3/31/96 $10,927 $10,586
6/30/96 $11,931 $11,026
9/30/96 $12,436 $11,275
12/31/96 $13,030 $11,903
3/31/97 $12,464 $11,505
6/30/97 $14,372 $13,243
9/30/97 $17,477 $15,143
12/31/97 $15,905 $14,803
3/31/98 $17,081 $16,320
6/30/98 $16,260 $15,640
9/30/98 $12,844 $12,657
12/31/98 $16,206 $14,860
3/31/99 $15,925 $14,156
6/30/99 $19,442 $16,477
9/30/99 $19,078 $15,413
12/31/99 $23,364 $18,446
Average Annual Total Return for the periods ended 12/31/99:
One Year: 44.17%
Since 1/4/96*: 23.64%
</TABLE>
THE FUND'S TOTAL RETURN IS CALCULATED NET OF INVESTMENT ADVISORY FEES AND
OPERATING EXPENSES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERSONS WHO INVEST IN THE FUND THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACT SHOULD NOTE THIS GRAPH DOES NOT REFLECT SEPARATE ACCOUNT
EXPENSES DEDUCTED BY THE INSURANCE COMPANY.
- ---------
* Fund's inception date
** 1/1/96 to 12/31/99
RUSSELL 2500 STOCK INDEX
The 2,500 smallest capitalization securities in the Russell 3000 Index,
representing approximately 7% of the Russell 3000 total market capitalization.
The index is reconstituted annually in June, based upon the May 31 market
capitalization rankings. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
8
<PAGE>
ENHANCED U.S. EQUITY FUND
The Enhanced U.S. Equity Fund returned 26.07% for the year ended
December 31, 1999. The S&P 500 Index returned 21.04% for the same period.
Investors in the Enhanced U.S. Equity Fund ("Fund") continue to be
generously rewarded. Since the fund's inception, the markets and your holdings
have had exceptional returns. These returns have been well above reasonable
long-term expectations. We caution our investors that the road forward may not
provide as good a journey as we have had in the past four years. Nonetheless, we
view an equity investment as an integral part of any long-term investment
strategy.
Volatility in the equity market increased over the already high levels
prevalent in January. Stocks with high growth prospects (in some cases not yet
proven) drove equity market performance during the year. Our mild bias to
"value" in the Enhanced U.S. Equity Fund was counterbalanced by some successful
stock selection, producing a year with returns well above the market.
Managing the Enhanced U.S. Equity Fund was quite challenging in 1999. The
market's volatility made any portfolio revision a more risky venture. Changes in
relative valuation occurred in a rapid-fire manner. After a weak first quarter,
we beat the S&P 500 Index in each of the next three quarters. The momentum
measures in our stock selection approach performed well during 1999. "Value"
measures performed poorly. Holding the leading technology issues was the key to
good performance during the year. We had more than our share of the market
leaders, including a profitable position in QUALCOMM Inc. This maker of wireless
telephone equipment was a spectacular performer during the year.
We look forward to the investment challenges of the new millenium. We feel
strongly that the Enhanced U.S. Equity Fund is an excellent choice as the large
cap component of a long-term diversified investment program. We very much
appreciate your continued support and will do our best to provide competitive
returns within the context of a broadly diversified core portfolio invested in
large U.S. stocks.
FRANKLIN PORTFOLIO ASSOCIATES, L.L.C.
INVESTMENT SUB-ADVISER TO THE ENHANCED U.S. EQUITY FUND
9
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE ENHANCED U.S. EQUITY FUND AND S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ENHANCED US S&P 500
EQUITY FUND INDEX**
<S> <C> <C>
1/4/96 $10,000 $10,000
3/31/96 $10,875 $10,538
6/30/96 $11,194 $11,007
9/30/96 $11,432 $11,342
12/31/96 $12,370 $12,280
3/31/97 $12,456 $12,614
6/30/97 $14,413 $14,816
9/30/97 $16,105 $15,926
12/31/97 $16,405 $16,383
3/31/98 $18,727 $18,668
6/30/98 $19,392 $19,285
9/30/98 $16,879 $17,365
12/31/98 $20,333 $21,063
3/31/99 $21,252 $22,113
6/30/99 $22,981 $23,671
9/30/99 $21,869 $22,193
12/31/99 $25,634 $25,495
Average Annual Total Return for the periods ended 12/31/99:
One Year: 26.07%
Since 1/4/96*: 26.54%
</TABLE>
THE FUND'S TOTAL RETURN IS CALCULATED NET OF INVESTMENT ADVISORY FEES AND
OPERATING EXPENSES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PERSONS WHO INVEST IN THE FUND THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACT SHOULD NOTE THIS GRAPH DOES NOT REFLECT SEPARATE ACCOUNT
EXPENSES DEDUCTED BY THE INSURANCE COMPANY.
- ---------
* Fund's inception date
** 1/1/96 to 12/31/99
S&P 500 STOCK INDEX
A capitalization weighted index of 500 large stocks, representing approximately
70% of the broad U.S. equity market. The stocks represent the largest companies
in 88 industries. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
10
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
FOREIGN COMMON STOCKS - 97.0%
BRAZIL - 7.5%
74,000 Banco Bradesco SA - ADR................. $ 584,652
91,000 Centrais Electricas Brasileiras
SA - ADR.............................. 1,002,338
2,700 Centrais Electricas Brasileiras SA - ADR
Class B............................... 32,442
270 Centrais Geradoras do Sul do Brasil
SA - ADR.............................. 1,483
40,600 Cia Cervejaria Brahma - ADR............. 568,400
1,000 Embratel Partipacoes SA - ADR........... 27,250
51,000 Petroleo Brasileiro SA - ADR............ 1,308,048
100 Tele Celular Sul Participacoes
SA - ADR.............................. 3,175
333 Tele Centro Oeste Celular Participacoes
SA - ADR.............................. 2,165
200 Tele Centro Sul Participacoes
SA - ADR.............................. 18,150
20 Tele Leste Celular Participacoes
SA - ADR.............................. 850
50 Tele Nordeste Celular Participacoes
SA - ADR.............................. 2,525
20 Tele Norte Celular Participacoes
SA - ADR.............................. 859
1,000 Tele Norte Leste Participacoes
SA - ADR.............................. 25,500
50 Telemig Celular Participacoes
SA - ADR.............................. 2,309
400 Telesp Celular Partcipacoes SA - ADR.... 16,950
1,000 Telesp Participacoes SA - ADR........... 24,438
-----------
3,621,534
-----------
DENMARK - 1.4%
6,095 Den Danske Bank......................... 667,561
-----------
FRANCE - 8.4%
8,200 Alcatel................................. 1,881,846
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
FRANCE (CONTINUED)
2,000 Eridania Beghin - Say SA................ $ $214,999
16,100 Michelin (CGDE) - Class B............... 632,013
10,011 Total SA - Class B*..................... 1,335,146
-----------
4,064,004
-----------
GERMANY - 8.5%
12,000 BASF AG................................. 616,009
24,730 Bayerische Motoren Werke AG............. 771,651
31,100 Deutsche Telekom AG..................... 2,213,172
2,000 Muenchener Rueckversicherungs-
Gesellschaft AG*...................... 512,334
-----------
4,113,166
-----------
HONG KONG - 3.2%
150,000 Citic Pacific Ltd....................... 564,418
167,500 Swire Pacific Ltd. - Class A............ 989,033
-----------
1,553,451
-----------
ITALY - 4.4%
154,300 ENI SpA................................. 845,356
90,400 Telecom Italia SpA...................... 1,269,340
-----------
2,114,696
-----------
JAPAN - 16.6%
6,000 Canon, Inc.............................. 238,448
11,000 Daiichi Pharmaceutical Co., Ltd......... 143,098
129,000 Hitachi Ltd............................. 2,070,868
50 Japan Tobacco, Inc...................... 382,733
95,000 Komatsu, Ltd............................ 437,060
6,500 Kyocera Corp............................ 1,686,081
28,000 Matsushita Electric Industrial Co....... 775,646
240,000 Mitsubishi Heavy Industries, Ltd........ 801,096
93,000 Nippon Mitsubishi Oil Corp.............. 409,652
95,000 Tokio Marine & Fire Insurance Co.,
Ltd................................... 1,111,247
-----------
8,055,929
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
FOREIGN COMMON STOCKS (CONTINUED)
MEXICO - 2.2%
9,450 Telefonos de Mexico SA - ADR............ $ 1,063,125
NETHERLANDS - 4.7%
17,444 ING Groep NV............................ 1,052,442
12,854 Koninklijke KPN NV...................... 1,253,711
-----------
2,306,153
-----------
NEW ZEALAND - 0.7%
76,700 Telecom Corp. of New Zealand Ltd.*...... 360,682
PORTUGAL - 1.9%
82,700 Portugal Telecom SA*.................... 906,502
SINGAPORE - 3.7%
83,736 DBS Group Holdings Ltd.*................ 1,372,556
106,455 Jardine Matheson Holdings Ltd.*......... 419,433
-----------
1,791,989
-----------
SOUTH AFRICA - 2.5%
29,600 De Beers - Centenary.................... 860,829
34,600 South African Breweries Plc*............ 349,116
-----------
1,209,945
-----------
SPAIN - 1.3%
21,500 Argentaria SA........................... 504,880
6,600 Union Electrica Fenosa, SA.............. 115,194
-----------
620,074
-----------
SWITZERLAND - 4.9%
69,800 Allied Zurich Plc....................... 822,700
470 Nestle SA............................... 861,012
1,770 Swisscom AG............................. 715,870
-----------
2,399,582
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
-----------
UNITED KINGDOM (CONTINUED)
32,000 Allied Domecq Plc*...................... 158,209
11,000 BOC Group Plc........................... $ 236,377
135,000 British Aerospace Plc*.................. 894,290
213,500 British American Tobacco Plc............ 1,213,368
152,000 Corus Group Plc*........................ 395,394
143,328 Diageo Plc.............................. 1,153,244
110,800 HSBC Holdings Plc (Hong Kong)*.......... 1,553,637
11,100 HSBC Holdings Plc*...................... 154,773
24,600 Imperial Chemical Industries Plc........ 260,536
182,576 Invensys Plc............................ 994,110
331,800 Marks & Spencer Plc..................... 1,580,123
124,600 National Power Plc...................... 721,719
51,500 Reckitt & Colman Plc.................... 483,026
78,700 Royal & Sun Alliance Insurance Group
Plc................................... 599,539
202,900 Safeway Plc*............................ 694,990
60,000 Unilever Plc*........................... 441,571
-----------
11,534,906
-----------
VENEZUELA - 1.3%
25,700 Cia Anonima Telefonos de
Venezuela - ADR....................... 632,863
-----------
TOTAL INVESTMENTS - 97.0% (Cost
$37,889,494).......................... 47,016,162
Other Assets and Liabilities
(net) - 3.0%.......................... 1,491,373
-----------
TOTAL NET ASSETS - 100.0%............... $48,507,535
===========
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR - American Depositary Receipt
* Non-income producing security.
Percentages indicated are based on Net Assets.
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
DECEMBER 31, 1999
At December 31, 1999, industry sector diversification of the Brandes
International Equity Fund's investments as a percentage of net assets was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
--------------- -------------
<S> <C>
Telephone Systems................................. 15.7%
Electronics....................................... 13.2%
Beverages, Food & Tobacco......................... 10.6%
Banking........................................... 10.0%
Insurance......................................... 8.4%
Oil & Gas......................................... 8.0%
Industrial - Diversified.......................... 4.1%
Electric Utilities................................ 3.9%
Retailers......................................... 3.3%
Automotive........................................ 2.9%
Heavy Machinery................................... 2.6%
Chemicals......................................... 2.3%
Industrial Technology............................. 2.1%
Communications.................................... 1.9%
Aerospace & Defense............................... 1.8%
Mining............................................ 1.8%
Household Products................................ 1.4%
Food Retailers.................................... 1.4%
Metals............................................ 0.8%
Electrical Equipment.............................. 0.5%
Pharmaceuticals................................... 0.3%
---------
97.0%
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS - 98.4%
ADVERTISING - 1.6%
1,220 DoubleClick Inc.*....................... $ 308,736
5,120 Omnicom Group, Inc...................... 512,000
-----------
820,736
-----------
AIRLINES - 0.4%
14,450 Southwest Airlines, Inc................. 233,909
-----------
AUTOMOTIVE - 1.5%
9,730 Ford Motor Co........................... 519,947
2,770 General Motors Corp..................... 265,920
-----------
785,867
-----------
BANKING - 2.1%
7,230 SunTrust Banks, Inc..................... 497,514
14,535 Wells Fargo Co.......................... 587,759
-----------
1,085,273
-----------
BEVERAGES, FOOD & TOBACCO - 2.5%
6,560 Bestfoods............................... 344,810
12,950 Coca-Cola Co............................ 754,338
5,945 SYSCO Corp.............................. 235,199
-----------
1,334,347
-----------
CHEMICALS - 1.5%
2,970 Dow Chemical............................ 396,866
17,815 Occidental Petroleum Corp............... 385,249
-----------
782,115
-----------
COMMERCIAL SERVICES - 1.1%
13,915 Paychex, Inc............................ 556,600
-----------
COMMUNICATIONS - 5.6%
3,825 EchoStar Communications Corp.*.......... 372,938
3,350 JDS Uniphase Corp.*..................... 540,397
6,250 McLeodUSA, Inc. - Class A*.............. 367,969
3,660 Nokia Oyj - ADR*........................ 695,400
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMUNICATIONS (CONTINUED)
4,430 Nortel Networks Corp.................... $ $447,430
3,160 QUALCOMM Inc.*.......................... 556,555
-----------
2,980,689
-----------
COMPUTER SOFTWARE & PROCESSING - 20.8%
1,000 Akamai Technologies, Inc.*.............. 327,624
12,340 America Online, Inc.*................... 930,898
14,750 Automatic Data Processing, Inc.......... 794,655
1,790 Brocade Communications
Systems, Inc.*........................ 316,829
13,670 Cisco Systems, Inc.*.................... 1,464,398
3,800 CNET, Inc.*............................. 215,650
8,110 First Data Corp......................... 399,924
9,710 Fiserv, Inc.*........................... 372,014
3,280 Internet Capital Group, Inc.*........... 557,600
570 Juniper Networks, Inc.*................. 193,800
20,765 Microsoft Corp.*........................ 2,424,314
9,100 Oracle Corp.*........................... 1,019,769
3,010 Portal Software, Inc.*.................. 309,654
3,000 RealNetworks, Inc.*..................... 360,938
1,890 VeriSign, Inc.*......................... 360,872
3,300 VERITAS Software Corp.*................. 472,313
1,050 Yahoo! Inc.*............................ 454,322
-----------
10,975,574
-----------
COMPUTERS & INFORMATION - 4.6%
1,900 Comverse Technology, Inc.*.............. 275,025
12,990 Dell Computer Corp.*.................... 662,490
6,390 EMC Corp.*.............................. 698,108
10,020 Sun Microsystems, Inc.*................. 775,924
-----------
2,411,547
-----------
CONTAINERS & PACKAGING - 1.4%
10,035 Avery-Dennison Corp..................... 731,301
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COSMETICS & PERSONAL CARE - 1.3%
10,860 Colgate-Palmolive Co.................... $ 705,900
ELECTRIC UTILITIES - 0.8%
5,625 AES Corp.*.............................. 420,469
ELECTRONICS - 9.3%
5,350 Applied Materials, Inc.*................ 677,778
11,640 Atmel Corp.*............................ 344,108
13,930 Intel Corp.............................. 1,146,613
4,950 KLA Instruments Corp.*.................. 551,306
6,880 LSI Logic*.............................. 464,400
4,685 Motorola, Inc........................... 689,866
2,000 PMC-Sierra, Inc.*....................... 320,625
1,120 Sycamore Networks, Inc.*................ 344,960
3,745 Texas Instruments....................... 362,797
-----------
4,902,453
-----------
ENTERTAINMENT & LEISURE - 1.0%
9,600 AT&T Corp. - Liberty Media
Group - Class A*...................... 544,800
FINANCIAL SERVICES - 4.5%
4,740 American Express Co..................... 788,025
16,997 Citigroup, Inc.......................... 944,396
4,660 Morgan Stanley, Dean Witter & Co........ 665,215
-----------
2,397,636
-----------
HEALTH CARE PROVIDERS - 0.7%
12,710 Columbia/HCA Healthcare Corp............ 372,562
HEAVY MACHINERY - 0.9%
4,390 Lam Research Corp.*..................... 489,759
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 1.6%
12,285 Home Depot.............................. 842,290
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
HOUSEHOLD PRODUCTS - 2.5%
3,080 Corning Inc............................. $ 397,128
8,345 Procter & Gamble Co..................... 914,299
-----------
1,311,427
-----------
INSURANCE - 2.9%
8,916 American International Group............ 964,043
5,780 Marsh & McLennan Cos., Inc.............. 553,074
-----------
1,517,117
-----------
MEDIA - BROADCASTING & PUBLISHING - 3.7%
8,650 CBS Corp.*.............................. 553,059
18,320 Charter
Communications, Inc. - Class A*....... 400,750
6,825 Clear Channel Communications, Inc.*..... 609,131
7,970 Comcast Corp. - Class A................. 402,983
-----------
1,965,923
-----------
MEDICAL SUPPLIES - 1.7%
17,840 Medtronics, Inc......................... 650,045
2,030 PE Corp-PE Biosystems Group*............ 244,234
-----------
894,279
-----------
MEDICAL & BIO-TECHNOLOGY - 0.9%
3,680 Genentech, Inc.*........................ 494,960
METALS - 1.5%
9,745 Alcoa Inc............................... 808,835
OIL & GAS - 3.7%
9,180 Enron Corp.............................. 407,363
13,846 Exxon Mobil Corp........................ 1,115,468
7,940 Texaco.................................. 431,241
-----------
1,954,072
-----------
PHARMACEUTICALS - 5.6%
14,310 Amgen, Inc.*............................ 859,494
2,460 Immnunex Corp.*......................... 269,370
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
TURNER CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
6,310 Johnson & Johnson....................... $ $587,619
2,305 MedImmune, Inc.*........................ 382,342
10,580 Warner Lambert Co....................... 866,899
-----------
2,965,724
-----------
RETAILERS - 2.6%
17,320 Wal-Mart Stores, Inc.................... 1,197,245
12,070 Webvan Group Inc.*...................... 199,155
-----------
1,396,400
-----------
TELEPHONE SYSTEMS - 9.2%
4,110 ALLTEL Corp............................. 339,846
16,700 AT&T Corp............................... 847,525
9,640 Global Crossing Ltd.*................... 482,000
4,460 Level 3 Communications, Inc.*........... 365,163
8,980 Metromedia Fiber
Network, Inc. - Class A*.............. 430,479
3,765 Nextel
Communications, Inc. - Class A*....... 388,266
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
TELEPHONE SYSTEMS (CONTINUED)
11,040 Sprint Corp............................. $ 743,130
3,465 Sprint Corp. (PCS Group)*............... 355,163
2,310 VoiceStream Wireless Corp.*............. 328,742
6,140 Western Wireless Corp. - Class A*....... 409,845
2,630 WinStar Communications, Inc.*........... 197,908
-----------
4,888,067
-----------
TRANSPORTATION - 0.9%
7,060 United Parcel
Service, Inc. - Class B............... 487,140
-----------
TOTAL INVESTMENTS - 98.4% (Cost
$43,179,984).......................... 52,057,771
Other Assets and Liabilities
(net) - 1.6%.......................... 867,808
-----------
TOTAL NET ASSETS - 100.0%............... $52,925,579
===========
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR - American Depositary Receipt
* Non-income producing security.
Percentages indicated are based on Net Assets.
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS - 94.3%
ADVERTISING - 0.5%
12,700 Snyder Communications, Inc.*............ $ 244,475
-----------
AEROSPACE & DEFENSE - 0.5%
12,500 Orbital Sciences Corp.*................. 232,031
-----------
BEVERAGES, FOOD & TOBACCO - 0.3%
24,000 Seminis, Inc.*.......................... 151,500
-----------
BUILDING MATERIALS - 1.5%
12,360 Cameron Ashley Building Products*....... 123,600
15,515 Elcor Corp.............................. 467,389
11,600 U.S. Aggregates, Inc.................... 139,200
-----------
730,189
-----------
CHEMICALS - 0.7%
33,130 Hexcel Corp.*........................... 184,286
7,800 IMC Global Inc.......................... 127,725
-----------
312,011
-----------
COMMERCIAL SERVICES - 7.3%
24,800 Bright Horizons Family
Solutions, Inc.*...................... 465,000
9,000 Celgene Corp.*.......................... 630,000
11,300 Interim Services Inc.*.................. 279,675
37,900 Lo-Jack Corp.*.......................... 255,825
12,900 Omnicare, Inc........................... 154,800
8,100 Quanta Services, Inc.*.................. 228,825
47,900 Republic Services, Inc. - Class A*...... 688,563
5,400 Safety-Kleen Corp.*..................... 61,088
17,100 SITEL Corp.*............................ 119,700
35,500 Stone & Webster, Inc.................... 596,844
-----------
3,480,320
-----------
COMMUNICATIONS - 5.8%
15,800 Cable Design Technologies*.............. 363,400
12,200 Digital Microwave Corp.*................ 285,938
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMUNICATIONS (CONTINUED)
19,200 Intervoice, Inc.*....................... $ 446,400
13,300 Itron, Inc.*............................ 81,463
16,300 PairGain Technologies, Inc.*............ 231,256
22,500 P-Com, Inc.*............................ 198,986
6,100 Sawtek Inc.*............................ 406,031
22,400 Tollgrade Communications, Inc.*......... 772,800
-----------
2,786,274
-----------
COMPUTER SOFTWARE & PROCESSING - 13.4%
15,900 3DO Co. (The)*.......................... 144,591
40,300 Ansoft Corp.*........................... 241,800
13,600 Ardent Software, Inc.*.................. 530,400
6,300 CIBER, Inc.*............................ 173,250
5,200 Comdisco, Inc........................... 193,700
10,300 Documentum, Inc.*....................... 616,713
9,400 Hyperion Solutions Corp.*............... 408,900
33,200 Information Resources, Inc.*............ 307,100
11,000 Informix Corp.*......................... 125,813
9,900 Integrated Measurement
Systems, Inc.*........................ 139,838
40,000 ISG International Software Group
Ltd.*................................. 630,000
4,900 Keane, Inc.*............................ 155,575
6,600 Mastech Corp.*.......................... 163,350
18,200 NOVA Corp.*............................. 574,438
6,600 Parametric Technology Co.*.............. 178,613
15,200 Project Software &
Development, Inc.*.................... 843,600
4,450 Sandisk Corp.*.......................... 428,313
4,800 Sterling Commerce, Inc.*................ 163,500
12,200 Sybase, Inc.*........................... 207,400
4,700 Sykes Enterprises, Inc.*................ 206,213
-----------
6,433,107
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS & INFORMATION - 3.2%
22,900 Cirrus Logic, Inc.*..................... $ $304,856
20,900 Dot Hill Systems Corp.*................. 103,194
19,200 FVC.COM, Inc.*.......................... 224,400
21,200 In Focus Systems, Inc.*................. 491,575
9,100 Seagate Technology, Inc.*............... 423,719
-----------
1,547,744
-----------
CONTAINERS & PACKAGING - 2.1%
20,200 American National Can Group, Inc........ 262,600
7,800 Crown Cork & Seal, Inc.................. 174,525
28,990 US Can Corp.*........................... 576,176
-----------
1,013,301
-----------
ELECTRICAL EQUIPMENT - 3.4%
16,700 Artesyn Technologies, Inc.*............. 350,700
42,800 Checkpoint Systems, Inc.*............... 436,025
7,900 SBS Technologies, Inc.*................. 288,350
32,400 UCAR International Inc.*................ 577,125
-----------
1,652,200
-----------
ELECTRONICS - 17.8%
14,600 Aavid Thermal Technologies*............. 358,612
37,600 American Superconductor Corp.*.......... 1,052,800
9,900 Analog Devices, Inc.*................... 920,700
14,300 Arrow Electronics, Inc.*................ 362,862
29,000 Atmel Corp.*............................ 857,312
5,500 Benchmark Electronics, Inc.*............ 126,155
3,800 Black Box Corp.*........................ 254,600
14,500 Cypress Semiconductor Corp.*............ 469,437
8,600 Exar Corp.*............................. 506,324
10,700 Galileo Technology Ltd.*................ 258,137
5,800 Harman International Industries......... 325,524
7,440 Lattice Semiconductor*.................. 350,609
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
ELECTRONICS (CONTINUED)
8,730 LSI Logic*.............................. $ 589,274
16,600 Pioneer-Standard Electronics, Inc....... 239,662
3,600 REMEC, Inc.*............................ 91,800
18,800 SIPEX Corp.*............................ 461,774
59,560 Trimble Navigation Ltd.*................ 1,287,984
-----------
8,513,566
-----------
ENTERTAINMENT & LEISURE - 1.8%
24,600 American Coin Merchandising, Inc.*...... 67,650
11,200 Callaway Golf Co........................ 198,100
7,600 Hasbro, Inc............................. 144,875
9,520 International Game Technology........... 193,375
19,612 Mattel, Inc............................. 257,408
-----------
861,408
-----------
FINANCIAL SERVICES - 1.0%
13,500 Investment Technology Group, Inc.*...... 388,125
4,100 Waddell & Reed
Financial, Inc. - Class A............. 111,213
-----------
499,338
-----------
FOREST PRODUCTS & PAPER - 1.3%
48,400 Gaylord Container Corp. - Class A*...... 329,725
11,300 Smurfit-Stone Container Corp.*.......... 276,850
-----------
606,575
-----------
HEALTH CARE PROVIDERS - 1.4%
17,400 Centennial HealthCare Corp.*............ 52,200
4,000 Express Scripts, Inc. - Class A*........ 256,000
65,800 HEALTHSOUTH Corp.*...................... 353,675
-----------
661,875
-----------
HEAVY CONSTRUCTION - 0.7%
15,800 Chicago Bridge & Iron Co. N.V........... 217,250
16,700 Layne Christensen Co.*.................. 121,075
-----------
338,325
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEAVY MACHINERY - 3.9%
14,293 Albany International
Corp. - Class A*...................... $ 221,546
10,300 Applied Science & Technology, Inc.*..... 342,314
3,900 Cooper Cameron Corp.*................... 190,856
15,330 Insituform Technologies*................ 433,073
4,100 Lam Research Corp.*..................... 457,406
19,200 Paxar Corp.*............................ 162,000
6,800 Varco International, Inc.*.............. 69,275
-----------
1,876,470
-----------
INDUSTRIAL - DIVERSIFIED - 0.3%
5,800 AptarGroup, Inc......................... 145,725
INSURANCE - 1.4%
28,600 HCC Insurance Holdings, Inc............. 377,163
33,700 Mid Atlantic Medical Services, Inc.*.... 280,131
-----------
657,294
-----------
MEDIA - BROADCASTING & PUBLISHING - 1.9%
3,472 Adelphia Communications
Corp. - Class A*...................... 227,850
27,330 Mail-Well, Inc.*........................ 368,955
5,000 Meredith Corp........................... 208,438
1,700 Scholastic Corp.*....................... 105,719
-----------
910,962
-----------
MEDICAL SUPPLIES - 3.3%
31,300 Endocardial Solutions, Inc.*............ 273,875
13,100 Haemonetics Corp.*...................... 311,944
6,800 Mentor Corp............................. 175,525
9,600 STERIS Corp.*........................... 99,000
23,800 Visible Genetics Inc.*.................. 714,000
-----------
1,574,344
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
MEDICAL & BIO-TECHNOLOGY - 0.4%
21,700 North American Scientific, Inc.*........ $ 195,300
METALS - 6.8%
43,680 AK Steel Holding Corp................... 824,460
27,250 Allegheny Technologies Inc.*............ 611,422
24,370 Birmingham Steel Corp................... 129,466
7,500 Carpenter Technology.................... 205,781
7,000 Cleveland-Cliffs Inc.................... 217,875
7,000 Howmet International, Inc.*............. 126,438
24,800 Northwest Pipe Co.*..................... 347,200
19,250 Oregon Steel Mills...................... 152,797
7,200 Precision Castparts Corp................ 189,000
13,000 Synalloy Corp........................... 97,500
10,300 USX-US Steel Group, Inc.*............... 339,900
-----------
3,241,839
-----------
OIL & GAS - 0.8%
7,180 Noble Drilling Corp.*................... 235,145
4,400 Transocean Sedco Forex Inc.............. 148,225
-----------
383,370
-----------
PHARMACEUTICALS - 5.2%
8,000 AmeriSource Health Corp. - Class A*..... 121,500
7,466 Bindley Western Industries, Inc......... 112,457
13,830 DUSA Pharmaceuticals, Inc.*............. 394,155
20,700 Guilford Pharmaceuticals Inc.*.......... 351,900
15,900 ICN Pharmaceuticals, Inc................ 402,469
7,900 Mylan Laboratories Inc.................. 198,981
13,200 Protein Design Labs, Inc.*.............. 924,000
-----------
2,505,462
-----------
REAL ESTATE - 0.9%
6,900 Boston Properties, Inc. - REIT.......... 214,763
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
REAL ESTATE (CONTINUED)
10,700 Healthcare Realty Trust, Inc. - REIT.... $ $167,188
2,400 Jones Lang LaSalle Inc.*................ 28,500
-----------
410,451
-----------
RETAILERS - 1.0%
16,900 Action Performance Co., Inc.*........... 194,350
26,600 CKE Restaurants, Inc.................... 156,275
13,900 Gerald Stevens, Inc.*................... 116,413
-----------
467,038
-----------
TELEPHONE SYSTEMS - 2.3%
2,940 VoiceStream Wireless Corp.*............. 418,399
5,540 Western Wireless Corp. - Class A*....... 369,795
3,900 WinStar Communications, Inc.*........... 293,475
-----------
1,081,669
-----------
TEXTILES, CLOTHING & FABRICS - 1.9%
33,300 Unifi, Inc.............................. 410,006
13,900 WestPoint Stevens Inc.*................. 243,250
24,900 Wolverine World Wide, Inc............... 272,344
-----------
925,600
-----------
TRANSPORTATION - 1.5%
39,100 Global Vacation Group, Inc.*............ 112,413
34,680 Westinghouse Air Brake Co............... 615,570
-----------
727,983
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
TOTAL COMMON STOCKS
(Cost $32,781,709).................... $45,167,746
CONVERTIBLE PREFERRED STOCKS - 0.1%
HEALTH CARE PROVIDERS - 0.1%
8,300 MedPartners, Inc. - TAPS 6.50%.......... 65,881
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $71,813)........................ 65,881
-----------
TOTAL INVESTMENTS - 94.4%
(Cost $32,853,522).................... 45,233,627
Other Assets and Liabilities
(net) - 5.6%.......................... 2,685,735
-----------
TOTAL NET ASSETS - 100.0%............... $47,919,362
===========
NOTES TO THE PORTFOLIO OF INVESTMENTS:
REIT - Real Estate Investment Trust
TAPS - Threshold Appreciation Price Security
* Non-income producing security.
Percentages indicated are based on Net Assets.
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS - 97.8%
AEROSPACE & DEFENSE - 1.7%
7,200 Boeing Co. (The)........................ $ 299,250
1,700 General Dynamics........................ 89,675
-----------
388,925
-----------
AUTOMOTIVE - 1.7%
2,500 Ford Motor Co........................... 133,594
1,100 General Motors Corp..................... 79,956
1,200 Johnson Controls, Inc................... 68,250
300 PACCAR Inc.............................. 13,294
1,900 TRW Inc................................. 98,681
-----------
393,775
-----------
BANKING - 5.3%
1,100 AmSouth Bancorp......................... 21,243
6,100 Associates First Capital Corp........... 167,368
4,689 Bank of America Corp.................... 235,328
500 BB&T Corp............................... 13,687
400 Chase Manhattan Corp.................... 31,074
900 Fifth Third Bancorp..................... 66,037
7,100 FleetBoston Financial Corp.............. 247,167
2,700 Golden West Financial Corp.............. 90,449
3,200 KeyCorp................................. 70,799
900 PNC Bank Corp........................... 40,049
700 SouthTrust Corp......................... 26,468
1,800 SunTrust Banks, Inc..................... 123,862
1,200 Wachovia Corp........................... 81,599
-----------
1,215,130
-----------
BEVERAGES, FOOD & TOBACCO - 4.4%
2,900 Anheuser-Busch Co., Inc................. 205,538
7,000 ConAgra................................. 157,938
2,800 General Mills, Inc...................... 100,100
5,900 Pepsico, Inc............................ 207,975
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
BEVERAGES, FOOD & TOBACCO (CONTINUED)
4,800 Philip Morris Co........................ $ $111,300
2,800 Quaker Oats Co.......................... 183,750
1,200 UST Inc................................. 30,225
-----------
996,826
-----------
BUILDING & CONSTRUCTION - 0.2%
1,600 Centex Corp............................. 39,500
CHEMICALS - 1.0%
1,200 Dow Chemical............................ 160,350
1,800 Occidental Petroleum Corp............... 38,925
600 Sigma Aldrich Corp...................... 18,038
-----------
217,313
-----------
COMMERCIAL SERVICES - 0.4%
500 H&R Block, Inc.......................... 21,875
2,500 R.R. Donnelley & Sons Co................ 62,031
-----------
83,906
-----------
COMMUNICATIONS - 6.8%
2,600 General Instrument Corp.*............... 221,000
8,428 Lucent Technologies..................... 630,520
4,000 QUALCOMM Inc.*.......................... 704,500
-----------
1,556,020
-----------
COMPUTER SOFTWARE & PROCESSING - 10.2%
3,100 America Online, Inc.*................... 233,856
4,600 Cisco Systems, Inc.*.................... 492,775
1,500 Compuware Corp.*........................ 55,875
700 Deluxe Corp............................. 19,206
1,400 Electronic Data Systems Corp............ 93,713
8,300 Microsoft Corp.*........................ 969,025
3,500 Novell, Inc.*........................... 139,781
2,650 Oracle Corp.*........................... 296,966
900 Unisys Corp.*........................... 28,744
-----------
2,329,941
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS & INFORMATION - 2.5%
2,100 EMC Corp.*.............................. $ 229,425
400 International Business Machines......... 43,200
700 Lexmark International
Group, Inc. - Class A*................ 63,350
900 Seagate Technology, Inc.*............... 41,906
2,100 Solectron Corp.*........................ 199,763
-----------
577,644
-----------
CONGLOMERATES - 1.8%
10,400 Tyco International Ltd.................. 404,300
ELECTRIC UTILITIES - 3.8%
3,600 Central & South West Corp............... 72,000
600 Constellation Energy Group.............. 17,400
800 DTE Energy Co........................... 25,100
2,000 Duke Energy Corp........................ 100,250
1,600 Edison International.................... 41,900
1,600 FPL Group, Inc.......................... 68,500
5,800 PG&E Corp............................... 118,900
3,500 Public Service Enterprise
Group, Inc............................ 121,844
711 Reliant Energy, Inc..................... 16,264
4,800 Southern Co............................. 112,800
4,500 Texas Utilities Co...................... 160,031
700 Unicom Corp............................. 23,450
-----------
878,439
-----------
ELECTRICAL EQUIPMENT - 2.0%
3,000 General Electric........................ 464,250
ELECTRONICS - 5.4%
3,200 Adaptec, Inc.*.......................... 159,600
1,000 Applied Materials, Inc.*................ 126,688
5,300 Intel Corp.............................. 436,256
700 LSI Logic*.............................. 47,250
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
ELECTRONICS (CONTINUED)
300 Micron Technology, Inc.*................ $ 23,325
1,400 Motorola, Inc........................... 206,150
1,300 National Semiconductor Corp.*........... 55,656
1,900 Texas Instruments....................... 184,063
-----------
1,238,988
-----------
ENTERTAINMENT & LEISURE - 0.7%
1,800 Eastman Kodak Co........................ 119,250
2,400 Hasbro, Inc............................. 45,750
-----------
165,000
-----------
FINANCIAL SERVICES - 6.4%
8,272 Citigroup, Inc.......................... 459,613
300 Federal Home Loan Mortgage Corp......... 14,119
1,300 J.P. Morgan & Co., Inc.................. 164,613
1,400 Lehman Brothers Holdings, Inc........... 118,563
5,000 MBNA Corp............................... 136,250
800 Merrill Lynch & Co...................... 66,800
3,560 Morgan Stanley, Dean Witter & Co........ 508,190
-----------
1,468,148
-----------
FOOD RETAILERS - 0.2%
2,700 Supervalu, Inc.......................... 54,000
FOREST PRODUCTS & PAPER - 3.2%
4,300 Georgia-Pacific Corp.................... 218,225
2,600 International Paper Co.................. 146,738
2,100 Kimberly-Clark Corp..................... 137,025
1,900 Louisiana Pacific Corp.................. 27,075
500 Temple-Inland Inc....................... 32,969
1,900 Weyerhaeuser Co......................... 136,444
600 Willamette Industries, Inc.*............ 27,863
-----------
726,339
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEAVY MACHINERY - 0.4%
400 Dover Corp.............................. $ $18,150
1,500 Ingersoll Rand Co....................... 82,594
-----------
100,744
-----------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 3.0%
7,800 Home Depot.............................. 534,788
1,100 Pulte Corp.............................. 24,750
1,700 Whirlpool Corp.......................... 110,606
-----------
670,144
-----------
HOUSEHOLD PRODUCTS - 0.2%
1,200 Fortune Brands, Inc..................... 39,675
INDUSTRIAL - DIVERSIFIED - 0.9%
2,200 Minnesota Mining & Manufacturing Co.
(3M).................................. 215,325
INSURANCE - 4.0%
2,000 Aetna, Inc.............................. 111,625
1,500 American General Corp................... 113,813
3,325 American International Group............ 359,516
1,900 Conseco, Inc............................ 33,963
2,300 Marsh & McLennan Cos., Inc.............. 220,081
1,300 St. Paul Cos., Inc...................... 43,794
500 United Healthcare Corp.................. 26,563
-----------
909,355
-----------
MEDIA - BROADCASTING & PUBLISHING - 5.3%
1,000 Clear Channel Communications, Inc.*..... 89,250
4,700 Comcast Corp. - Class A *............... 237,644
1,900 Gannett Co, Inc......................... 154,969
1,100 Knight-Ridder, Inc...................... 65,450
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
MEDIA (CONTINUED)
2,700 Tribune Co.............................. $ 148,669
8,400 Viacom, Inc.*........................... 507,675
-----------
1,203,657
-----------
MEDICAL SUPPLIES - 0.5%
1,800 Allergan, Inc........................... 89,550
2,300 Thermo Electron Corp.*.................. 34,500
-----------
124,050
-----------
METALS - 0.2%
700 Alcan Aluminium Ltd..................... 28,831
1,100 Inco Ltd.*.............................. 25,850
-----------
54,681
-----------
OIL & GAS - 6.6%
800 Anadarko Petroleum Corp................. 27,300
2,200 Apache Corp............................. 81,263
3,200 Coastal Corp............................ 113,400
600 Consolidated Natural Gas Co............. 38,963
1,600 Enron Corp.............................. 71,000
6,984 Exxon Mobil Corp........................ 562,649
2,500 Kerr-McGee Corp......................... 155,000
6,500 Royal Dutch Petroleum Co................ 392,844
2,800 USX-Marathon Group...................... 69,125
-----------
1,511,544
-----------
PHARMACEUTICALS - 7.0%
5,500 Abbott Laboratories..................... 199,719
4,100 Cardinal Health, Inc.................... 196,288
3,400 Johnson & Johnson....................... 316,625
5,900 Merck & Co, Inc......................... 395,669
6,300 Pfizer, Inc.*........................... 204,356
5,100 Pharmacia & Upjohn, Inc................. 229,500
500 Warner Lambert Co....................... 40,969
-----------
1,583,126
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
ENHANCED U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAILERS - 4.2%
600 Circuit City Stores..................... $ 27,038
1,300 Federated Department Stores*............ 65,731
2,000 May Department Stores Co. (The)......... 64,500
1,500 Safeway, Inc.*.......................... 53,344
1,100 Sherwin-Williams Co.*................... 23,100
10,600 Wal-Mart Stores, Inc.................... 732,725
-----------
966,438
-----------
TELEPHONE SYSTEMS - 6.9%
12,395 AT&T Corp............................... 629,046
1,500 BellSouth Corp.......................... 70,219
12,900 MCI WorldCom, Inc.*..................... 684,506
1,700 Nextel Communications,
Inc. - Class A*....................... 175,313
-----------
1,559,084
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
TRANSPORTATION - 0.9%
4,000 Carnival Corp. - Class A................ $ 191,250
500 Union Pacific Corp...................... 21,813
-----------
213,063
-----------
TOTAL INVESTMENTS - 97.8% (Cost
$18,146,765).......................... 22,349,330
Other Assets and Liabilities
(net) - 2.2%.......................... 514,151
-----------
TOTAL NET ASSETS - 100.0%............... $22,863,481
===========
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
Percentages indicated are based on Net Assets.
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
M FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL ENHANCED
INTERNATIONAL TURNER CORE APPRECIATION U.S. EQUITY
EQUITY FUND GROWTH FUND FUND FUND
------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1)* - see accompanying Portfolio
of Investments............................................. $47,016,162 $52,057,771 $45,233,627 $22,349,330
Cash......................................................... 1,449,066 1,766,310 2,782,630 491,454
Receivable from:
Securities sold.......................................... -- 1,038,173 22,115 --
Capital stock subscriptions.............................. 10,834 473 7,897 7,353
Dividends and interest................................... 105,474 21,308 16,254 30,652
Investment Adviser, net (Note 2)......................... -- 2,494 -- 10,426
Deferred organization expense................................ 19,534 19,534 19,534 19,534
----------- ----------- ----------- -----------
Total assets......................................... 48,601,070 54,906,063 48,082,057 22,908,749
----------- ----------- ----------- -----------
LIABILITIES:
Payable for:
Securities purchased..................................... -- 1,934,282 46,811 --
Capital stock redemptions................................ 18 282 19 64
Investment Adviser (Note 2).............................. 42,909 -- 64,829 --
Accrued expenses and other liabilities................... 50,608 45,920 51,036 45,204
----------- ----------- ----------- -----------
Total liabilities.................................... 93,535 1,980,484 162,695 45,268
----------- ----------- ----------- -----------
NET ASSETS....................................................... $48,507,535 $52,925,579 $47,919,362 $22,863,481
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Paid-in capital.............................................. $38,484,667 $43,685,413 $34,205,358 $17,979,098
Undistributed net investment income (distributions in excess
of net investment income).................................. 30,820 -- -- 260
Accumulated net realized gain on investments and foreign
currency transactions...................................... 865,583 362,379 1,333,899 681,558
Net unrealized appreciation on investments and net other
assets..................................................... 9,126,465 8,877,787 12,380,105 4,202,565
----------- ----------- ----------- -----------
NET ASSETS....................................................... $48,507,535 $52,925,579 $47,919,362 $22,863,481
=========== =========== =========== ===========
SHARES OUTSTANDING............................................... 3,124,537 2,307,893 2,269,038 1,090,315
=========== =========== =========== ===========
Net asset value, offering price and redemption price per share... $ 15.52 $ 22.93 $ 21.12 $ 20.97
=========== =========== =========== ===========
* Cost of investments........................................... $37,889,494 $43,179,984 $32,853,522 $18,146,765
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
M FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL ENHANCED
INTERNATIONAL TURNER CORE APPRECIATION U.S. EQUITY
EQUITY FUND GROWTH FUND FUND FUND
------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest..................................................... $ 61,017 $ 53,130 $ 79,400 $ 15,019
Dividends*................................................... 546,241 141,048 125,727 233,472
----------- ---------- ----------- ----------
Total investment income.............................. 607,258 194,178 205,127 248,491
----------- ---------- ----------- ----------
EXPENSES:
Investment Advisory fee (Note 2)............................. 229,744 98,552 321,001 100,168
Custody and administration fees.............................. 151,496 130,964 125,443 117,252
Professional fees............................................ 35,260 32,750 32,750 32,750
Shareholder reporting........................................ 8,020 7,810 7,810 7,909
Directors' fees and expenses................................. 9,021 9,021 9,021 9,021
Amortization of organization costs........................... 20,489 20,489 20,489 20,489
Other........................................................ 7,196 7,285 8,892 8,523
----------- ---------- ----------- ----------
Total expenses....................................... 461,226 306,871 525,406 296,112
Less: Expenses reimbursable by the Adviser (Note 2).......... (165,622) (153,568) (115,238) (150,413)
----------- ---------- ----------- ----------
Net operating expenses....................................... 295,604 153,303 410,168 145,699
----------- ---------- ----------- ----------
NET INVESTMENT INCOME (LOSS)..................................... 311,654 40,875 (205,041) 102,792
----------- ---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment transactions.................................. 2,120,876 2,803,356 4,195,967 2,483,769
Foreign currency transactions............................ (7,165) -- -- --
----------- ---------- ----------- ----------
Net realized gain........................................ 2,113,711 2,803,356 4,195,967 2,483,769
----------- ---------- ----------- ----------
Net change in unrealized appreciation (depreciation) on:
Investments.............................................. 8,515,942 6,750,251 9,824,763 1,645,919
Forward currency and net other assets.................... (709) -- -- --
----------- ---------- ----------- ----------
Net change in unrealized appreciation................ 8,515,233 6,750,251 9,824,763 1,645,919
----------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN................................. 10,628,944 9,553,607 14,020,730 4,129,688
----------- ---------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $10,940,598 $9,594,482 $13,815,689 $4,232,480
=========== ========== =========== ==========
* Net of foreign taxes withheld of:.............................. $ 35,745 $ 173 $ 0 $ 187
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL TURNER CORE
EQUITY FUND GROWTH FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income........................ $ 311,654 $ 88,165 $ 40,875 $ 19,857
Net realized gain on investment and foreign
currency transactions...................... 2,113,711 824,536 2,803,356 954,676
Net change in unrealized appreciation on
investments, forward currency contracts,
foreign currency, and other assets......... 8,515,233 370,427 6,750,251 1,628,144
----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations................................. 10,940,598 1,283,128 9,594,482 2,602,677
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... (274,130) (63,907) (49,484) (20,760)
In excess of net investment income........... -- -- -- (1,451)
From net realized capital gains.............. (1,255,022) (567,349) (3,139,438) (221,904)
In excess of net realized capital gains...... -- (69,238) -- --
----------- ----------- ----------- -----------
Total distributions to shareholders...... (1,529,152) (700,494) (3,188,922) (244,115)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold.................... 30,942,799 7,277,243 39,846,687 10,510,061
Net asset value of shares issued on
reinvestment of distributions.............. 1,529,152 700,494 3,188,922 244,115
Cost of shares repurchased................... (5,759,178) (2,211,040) (10,395,644) (3,052,826)
----------- ----------- ----------- -----------
Net increase in net assets resulting from
Fund share transactions.................... 26,712,773 5,766,697 32,639,965 7,701,350
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS....................... 36,124,219 6,349,331 39,045,525 10,059,912
NET ASSETS:
Beginning of year............................ 12,383,316 6,033,985 13,880,054 3,820,142
----------- ----------- ----------- -----------
End of year *................................ $48,507,535 $12,383,316 $52,925,579 $13,880,054
=========== =========== =========== ===========
* Including undistributed net investment income
(distributions in excess of net investment
income) of:.................................. $ 30,820 $ (715) $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
M FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FRONTIER CAPITAL ENHANCED U.S.
APPRECIATION FUND EQUITY FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss)................................. $ (205,041) $ (76,307) $ 102,792 $ 84,226
Net realized gain (loss) on investment and foreign currency
transactions............................................... 4,195,967 (1,228,603) 2,483,769 250,664
Net change in unrealized appreciation on investments, forward
currency contracts, foreign currency, and other assets..... 9,824,763 2,062,074 1,645,919 1,952,550
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations......... 13,815,689 757,164 4,232,480 2,287,440
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................... -- -- (103,437) (85,107)
In excess of net investment income........................... -- -- -- (1,344)
From net realized capital gains.............................. (1,374,766) (125,048) (1,701,245) (279,242)
In excess of net realized capital gains...................... -- -- -- (101,027)
----------- ----------- ----------- -----------
Total distributions to shareholders...................... (1,374,766) (125,048) (1,804,682) (466,720)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares sold.................................... 20,857,440 21,363,350 10,487,770 7,278,986
Net asset value of shares issued on reinvestment of
distributions.............................................. 1,374,766 125,048 1,804,682 466,720
Cost of shares repurchased................................... (18,531,662) (6,971,067) (6,939,199) (1,828,808)
----------- ----------- ----------- -----------
Net increase in net assets resulting from Fund share
transactions............................................... 3,700,544 14,517,331 5,353,253 5,916,898
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS....................................... 16,141,467 15,149,447 7,781,051 7,737,618
NET ASSETS:
Beginning of year............................................ 31,777,895 16,628,448 15,082,430 7,344,812
----------- ----------- ----------- -----------
End of year *................................................ $47,919,362 $31,777,895 $22,863,481 $15,082,430
=========== =========== =========== ===========
* Including undistributed net investment income (distributions
in excess of net investment income) of:...................... $ -- $ -- $ 260 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY FUND
-------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(A)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.84 $ 9.96 $ 9.88 $10.00
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.10 0.09 0.07 0.06
Net realized and unrealized gain (loss) on
investments........................................... 5.09 1.44 0.15 (0.12)
------- ------- ------ ------
Total from investment operations.................... 5.19 1.53 0.22 (0.06)
------- ------- ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.............................. (0.09) (0.06) (0.07) (0.06)
In excess of net investment income...................... -- -- (0.03) --
From net realized capital gains......................... (0.42) (0.53) -- --
In excess of net realized capital gains................. -- (0.06) -- --
Tax return of capital................................... -- -- (0.04) --
------- ------- ------ ------
Total distributions................................. (0.51) (0.65) (0.14) (0.06)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ 15.52 $ 10.84 $ 9.96 $ 9.88
======= ======= ====== ======
TOTAL RETURN................................................ 47.86% 15.37% 2.26% (0.63)%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....................... $48,508 $12,383 $6,034 $3,177
Net expenses to average daily net assets before interest
expense**............................................. 1.24% 1.30% 1.30% 1.30%
Net expenses to average daily net assets after interest
expense**............................................. 1.24% 1.30% 1.30% 1.30%
Net investment income to average daily net assets**..... 1.31% 1.00% 0.83% 0.67%
Portfolio turnover rate................................. 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**.................. 1.93% 3.57% 4.93% 7.28%
Net investment income (loss)**...................... 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.
29
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
TURNER CORE GROWTH FUND
-------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(A)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 17.84 $ 13.50 $11.60 $10.00
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.02 0.02 0.04 0.06
Net realized and unrealized gain on investments......... 6.92 4.64 3.22 1.94
------- ------- ------ ------
Total from investment operations.................... 6.94 4.66 3.26 2.00
------- ------- ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.............................. (0.02) (0.03) (0.04) (0.06)
From net realized capital gains......................... (1.83) (0.29) (1.22) (0.34)
In excess of net realized capital gains................. -- -- (0.10) --
------- ------- ------ ------
Total distributions................................. (1.85) (0.32) (1.36) (0.40)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ 22.93 $ 17.84 $13.50 $11.60
======= ======= ====== ======
TOTAL RETURN................................................ 40.11% 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....................... $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%
Net expenses to average daily net assets after interest
expense**............................................. 0.70% 0.70% 0.70% 0.78%
Net investment income to average daily net assets**..... 0.19% 0.31% 0.34% 0.55%
Portfolio turnover rate................................. 286% 242% 206% 258%
Without the reimbursement of expenses by the adviser,
the ratio of net expenses and net investment loss to
average net assets would have been:
Expenses before interest expense**.................. 1.40% 3.42% 6.18% 8.43%
Net investment loss**............................... (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.
30
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION FUND
-------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(A)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 15.09 $ 14.92 $ 12.52 $10.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss..................................... (0.09) (0.04) 0.00 0.00
Net realized and unrealized gain on investments......... 6.74 0.29 2.76 3.03
------- ------- ------- ------
Total from investment operations.................... 6.65 0.25 2.76 3.03
------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net realized capital gains......................... (0.62) (0.08) (0.36) (0.51)
------- ------- ------- ------
Total distributions................................. (0.62) (0.08) (0.36) (0.51)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ 21.12 $ 15.09 $ 14.92 $12.52
======= ======= ======= ======
TOTAL RETURN................................................ 44.17% 1.68% 22.13% 30.31%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....................... $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%
Net expenses to average daily net assets after interest
expense**............................................. 1.15% 1.15% 1.15% 1.20%
Net investment loss to average daily net assets**....... (0.57)% (0.32)% (0.13)% (0.30)%
Portfolio turnover rate................................. 75% 68% 61% 140%
Without the reimbursement of expenses by the adviser,
the ratio of net expenses and net investment loss to
average net assets would have been:
Expenses before interest expense**.................. 1.47% 1.75% 2.86% 8.12%
Net investment loss**............................... (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.
31
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
ENHANCED U.S. EQUITY FUND
-------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(A)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 18.07 $ 15.09 $11.85 $10.00
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.10 0.11 0.08 0.12
Net realized and unrealized gain on investments......... 4.60 3.45 3.78 2.25
------- ------- ------ ------
Total from investment operations.................... 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......................... (1.70) (0.35) (0.53) (0.40)
In excess of net realized capital gains................. -- (0.12) -- --
------- ------- ------ ------
Total distributions................................. (1.80) (0.58) (0.62) (0.52)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ 20.97 $ 18.07 $15.09 $11.85
======= ======= ====== ======
TOTAL RETURN................................................ 26.07% 23.69% 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....................... $22,863 $15,082 $7,345 $1,582
Net expenses to average daily net assets before interest
expense**............................................. 0.80% 0.80% 0.80% 0.80%
Net expenses to average daily net assets after interest
expense**............................................. 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets**..... 0.56% 0.80% 1.17% 1.43%
Portfolio turnover rate................................. 69% 50% 52% 79%
Without the reimbursement of expenses by the adviser,
the ratio of net expenses and net investment loss to
average net assets would have been:
Expenses before interest expense**.................. 1.63% 2.34% 5.41% 12.32%
Net investment loss**............................... (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.
32
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS
M Fund, Inc. (the "Company") was incorporated in Maryland on August 11, 1995 and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. The Company consists of
four separate diversified investment portfolios: Brandes International Equity
Fund (formerly the Edinburgh Overseas Equity Fund), Turner Core Growth Fund,
Frontier Capital Appreciation Fund and Enhanced U.S. Equity Fund (singularly the
"Fund" or collectively the "Funds"), each of which is, in effect, a separate
mutual fund.
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 December 31, 1999, shares of the Company were offered to
separate accounts funding variable annuity and variable life contracts issued by
John Hancock Variable Life Insurance Co. and Pacific Life Insurance Co.
Brandes International Equity Fund's investment objective is long-term capital
appreciation by investing principally in equity securities of foreign issuers.
Turner Core Growth Fund seeks long-term capital appreciation through a
diversified portfolio of common stocks that show strong earning potential with
reasonable market prices. Frontier Capital Appreciation Fund seeks maximum
capital appreciation through investment in common stocks of companies of all
sizes, with emphasis on stocks of small to medium capitalization companies (i.e.
companies with market capitalization of less than $3 billion). Enhanced U.S.
Equity Fund's objective is above market total return through investment in
common stock of companies perceived to provide a total return higher than that
of the S&P 500 at approximately the same level of investment risk as the S&P
500.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The following is a summary of significant accounting policies for the Funds.
Such policies are in conformity with generally accepted accounting principles
for investment companies and are consistently followed by the Funds in the
preparation of the financial statements.
PORTFOLIO VALUATION
Equity securities and other similar investments traded on a recognized U.S. or
foreign securities exchange or the National Association of Securities Dealers
Automated Quotation System (NASDAQ) are valued at their last sale price on the
principal exchange on which they are traded or NASDAQ (if NASDAQ is the
33
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
principal market for such securities). If no sale occurs, equities traded on a
U.S. exchange or NASDAQ are valued at the mean between the closing bid and asked
price. Equities traded on a foreign exchange, for which no sale occurs, are
valued at the official bid price. Unlisted equity securities for which market
quotations are readily available are valued at the last sale price or, if no
sale occurs, at the mean between the last bid and asked price. Debt securities
and other fixed-income investments of the Funds will be valued at prices
supplied by independent pricing agents approved by the Board of Directors.
Short-term obligations maturing in sixty days or less are valued at amortized
cost. Amortized cost valuation involves initially valuing a security at its
cost, and thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the security. Securities for which there are no readily
available market quotations or whose market value does not, in the investment
adviser's opinion, reflect fair value, are valued at fair value using methods
determined in good faith by the Board of Directors.
REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation (i.e. collateral) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Funds' Investment Adviser, acting under the
supervision of the Board of Directors, reviews the value of the collateral and
the creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
FOREIGN CURRENCY
Brandes International Equity Fund may invest in non-U.S. dollar denominated
assets. Foreign currencies, investments and other assets and liabilities of the
Fund are translated into U.S. dollars at the exchange rates available at twelve
noon Eastern Time. Purchases and sales of investment securities, income receipts
and expense payments are translated into U.S. dollars at the prevailing exchange
rate on the respective dates of such transactions.
34
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
FORWARD FOREIGN CURRENCY CONTRACTS
Brandes International Equity Fund may enter into forward foreign currency
exchange contracts. Forward foreign currency contracts are valued at the forward
rate and are marked-to-market daily. The change in market value is recorded by
the Fund as an unrealized gain or loss. When the contract is closed or delivery
is taken, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value of the
contract at settlement date.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts can limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
SECURITIES TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Securities transactions are recorded as of the trade date. Realized gains or
losses from securities sold are recorded on the identified cost basis. Interest
income is recorded on the accrual basis and consists of interest accrued and, if
applicable, discount earned less premiums amortized. Dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the Fund is informed of the ex-dividend date. Investment
income is recorded net of foreign taxes withheld where the recovery of such
taxes is uncertain. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the securities received. Most expenses of
the Company can be directly attributed to a fund. Expenses which cannot be
directly attributed are apportioned between funds in the Company.
35
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1999, $5,629 of losses recognized during the period November 1,
1998 to December 31, 1998.
36
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (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>
Brandes International Equity Fund....... 1.05% on the first $10 million
0.90% on the next $15 million
0.75% on the next $75 million
0.60% on amounts above $100
million
Turner Core Growth Fund................. 0.45%
Frontier Capital Appreciation Fund...... 0.90%
Enhanced U.S. Equity Fund............... 0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100
million
</TABLE>
The Adviser has engaged Brandes Investment Partners, L.P., Turner Investment
Partners, Inc., Frontier Capital Management Company, L.L.C., and Franklin
Portfolio Associates L.L.C. to act as sub-advisers to provide day to day
portfolio management for the Brandes International Equity Fund, Turner Core
Growth Fund, Frontier Capital Appreciation Fund and Enhanced U.S. Equity Fund,
respectively.
The Adviser has voluntarily undertaken to waive or otherwise reimburse the
Brandes International Equity Fund, Turner Core Growth Fund, Frontier Capital
Appreciation Fund and Enhanced U.S. Equity Fund for their operating expenses,
exclusive of advisory fees, brokerage or other portfolio transaction expenses or
expenses of litigation, indemnification, taxes or other extraordinary expenses,
to the extent that they exceed 0.25% of the average daily net assets of the Fund
through December 31, 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.
37
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Brandes International Equity Fund.................. $29,163,416 $ 4,490,687
Turner Core Growth Fund............................ 91,832,360 63,003,108
Frontier Capital Appreciation Fund................. 26,807,838 25,651,361
Enhanced U.S. Equity Fund.......................... 15,879,209 12,333,558
</TABLE>
At December 31, 1999, aggregated gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value were as follows:
<TABLE>
<CAPTION>
FEDERAL TAX BASIS TAX BASIS TAX BASIS NET
INCOME TAX UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Brandes International
Equity Fund.............. $37,889,509 $10,960,788 $(1,834,135) $ 9,126,653
Turner Core Growth Fund.... 43,262,351 9,484,282 (688,862) 8,795,420
Frontier Capital
Appreciation Fund........ 33,154,994 15,462,079 (3,383,446) 12,078,633
Enhanced U.S. Equity
Fund..................... 18,159,030 5,273,240 (1,082,940) 4,190,300
</TABLE>
38
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SHARES OF BENEFICIAL INTEREST
At December 31, 1999 an unlimited number of shares of beneficial interest
without par value were authorized. Changes in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL
EQUITY FUND TURNER CORE GROWTH FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold................. 2,332,187 679,420 1,920,003 678,243
Shares repurchased.......... (448,438) (207,945) (536,725) (197,108)
Distributions reinvested.... 98,782 64,801 146,797 13,758
--------- --------- --------- --------
Net increase................ 1,982,531 536,276 1,530,075 494,893
Fund shares:
Beginning of year......... 1,142,006 605,730 777,818 282,925
--------- --------- --------- --------
End of year............... 3,124,537 1,142,006 2,307,893 777,818
========= ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER CAPITAL
APPRECIATION FUND ENHANCED U.S. EQUITY FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold................. 1,234,034 1,491,323 522,322 430,789
Shares repurchased.......... (1,137,812) (507,585) (353,244) (108,830)
Distributions reinvested.... 66,286 8,348 86,638 25,848
---------- --------- --------- --------
Net increase................ 162,508 992,086 255,716 347,807
Fund shares:
Beginning of year......... 2,106,530 1,114,444 834,599 486,792
---------- --------- --------- --------
End of year............... 2,269,038 2,106,530 1,090,315 834,599
========== ========= ========= ========
</TABLE>
5. ORGANIZATION COSTS
Each Fund has borne all costs in connection with its organization. Such costs
are being amortized on the straight-line method over a period of five years from
the commencement of operations for each Fund and will be fully amortized January
4, 2001. In the event that any of the initial shares of the Funds are redeemed
during such amortization period, the Funds will be reimbursed for any
unamortized costs in the
39
<PAGE>
M FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. ORGANIZATION COSTS (CONTINUED)
same proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
6. FINANCIAL INSTRUMENTS
Brandes International Equity Fund regularly trades financial instruments with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to market risks, such as foreign currency exchange
rates. These financial instruments are limited to forward currency exchange
contracts. The notional or contractual amounts of these instruments represent
the investments the Fund has in particular classes of financial instruments and
do not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At December 31,
1999, the Brandes International Equity Fund had no open forward currency
exchange contracts.
7. CONCENTRATION
At December 31, 1999, a substantial portion of the Brandes International Equity
Fund's net assets consist of securities denominated in foreign currencies.
Changes in currency exchange rates will affect the value of and investment
income from such securities. Foreign securities are subject to greater price
volatility, more limited capitalization and liquidity, and higher rates of
inflation than securities of companies based in the United States.
8. BENEFICIAL INTEREST
At December 31, 1999, the ownership of each fund was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
---------------------------------------------
JOHN HANCOCK
M LIFE VARIABLE LIFE PACIFIC LIFE
INSURANCE CO. INSURANCE CO. INSURANCE CO.
------------- ------------- -------------
<S> <C> <C> <C>
Brandes International Equity Fund...................... 7.1% 63.8% 29.1%
Turner Core Growth Fund................................ 5.5% 49.8% 44.7%
Frontier Capital Appreciation Fund..................... 4.9% 64.3% 30.8%
Enhanced U.S. Equity Fund.............................. 11.2% 29.4% 59.4%
</TABLE>
40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of M Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Brandes
International Equity Fund, Turner Core Growth Fund, Frontier Capital
Appreciation Fund and Enhanced U.S. Equity Fund (constituting M Funds, Inc.,
hereafter referred to as the "Funds"), at December 31, 1999, the results of each
of their operations, the changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 10, 2000
41
