UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-9082 | |
M Fund, Inc. | ||
(Exact name of registrant as specified in charter) | ||
M Financial Plaza 1125 NW Couch Street, Suite 900 Portland, Oregon |
97209 | |
(Address of principal executive offices) | (Zip code) | |
JoNell Hermanson President, M Fund, Inc. M Financial Plaza 1125 NW Couch Street, Suite 900 Portland, Oregon 97209 | ||
(Name and address of agent for service) | ||
with a Copy to:
Frederick R. Bellamy, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Registrant's telephone number, including area code: (503) 232-6960
Date of fiscal year end: 12/31
Date of reporting period: 12/31/2014
Item 1. Reports to Stockholders.
The annual report for the period January 1, 2014 through December 31, 2014 is filed herewith.
M FUND, INC.
M International Equity Fund
M Large Cap Growth Fund
M Capital Appreciation Fund
M Large Cap Value Fund
Annual Report
December 31, 2014
M Fund, Inc.
PRESIDENT’S LETTER
Dear Contract Owners:
We are pleased to share the financial condition of M Fund, Inc. (the “Company”) as presented in the following Annual Report dated December 31, 2014. Total assets under management ended 2014 at $659.4 million.
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, 2014.
Sub-Advisers to the portfolios of the Company are: Northern Cross, LLC for the M International Equity Fund, DSM Capital Partners LLC for the M Large Cap Growth Fund, Frontier Capital Management Company, LLC for the M Capital Appreciation Fund and AJO, LP for the M Large Cap Value Fund.
On behalf of the Company’s Board of Directors, M Financial Investment Advisers, Inc. and the Company’s participating insurance carriers, we thank you for your business and remain committed to providing opportunities that add value to our investors in the upcoming year.
Sincerely,
JoNell Hermanson
President
M Fund, Inc.
M INTERNATIONAL EQUITY FUND
Performance
For the twelve months ended December 31, 2014, the M International Equity Fund had a negative return of 7.06% (net of management fees) versus a total return (including reinvestment of dividends) of -3.87% for its benchmark, the MSCI AC World ex US Index1.
Market Environment/Conditions
2014 was a difficult year for most developed stock markets around the world but the US market performed well. The S&P 500 was up over 13%, while the MSCI AC Word ex US Index lost more than 3%—a 16% differential. Stocks in emerging countries also had a negative return for 2014, but less than developed markets.
The US was the clear winner as an improving employment picture combined with moderate inflation, earnings growth and continued historical low interest rates set the stage for the 6th consecutive year of positive returns for the US market. While the US economy appears strong—although it may be slowing—that is not the case across most other areas of the world including the important markets of Europe, China and Japan.
Global interest rates hovering near zero for more than five years since the start of the “great recession”, has created a difficult market for stock pickers. Investors are looking for alternatives to bonds and have driven up valuations in almost all areas of the market and sometimes beyond basic fundamentals. Finding good values is more difficult than it was five years ago, but not impossible when using a bottom-up, fundamental research process.
Fund Review/Current Positioning
The portfolio is comprised of strong companies in strong industries, despite relative and absolute performance in 2014. Northern Cross continues to implement its philosophy of identifying companies with global or regional franchises that possess high barriers to entry, high margins and pricing power. Northern Cross intends to hold these companies for seven to ten years, which creates a high quality, low turnover portfolio. Northern Cross believes that in the long term these types of companies will provide superior returns to investors.
The Fund underperformed in large part due to stock-specific losses within the Industrials and the Consumer Discretionary sectors, along with a drag from the currency translation of a strong US dollar. Global companies like UK-based jet engine manufacturer Rolls Royce; French energy efficiency and management company Schneider Electric; and French industrial materials manufacturer Saint-Gobain, were the largest detractors within the Industrials sector. Within the Consumer Discretionary sector Swiss luxury goods manufacturers Swatch and Richemont were the biggest drags on Fund performance.
The Fund’s underweight to the Energy sector along with stock selection in the Health Care sector from companies like Danish insulin producer Novo Nordisk and French eye care manufacturer Essilor were positive contributors to performance.
The Fund’s investments are focused on global franchises in well-structured industries, which should demonstrate good pricing power and benefit from a combination of earnings upgrades and higher relative valuations as the global economy—the US in particular—gradually recovers. And, while emerging economies, such as Brazil and China, are clearly slowing, their fundamentals continue to support long-term growth rates above that of the emerging
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world. Because of this, Northern Cross also continues to invest in companies with well-established positions in the major developing economies. While over 80% of the Fund’s holdings are domiciled in Europe, approximately 35% of portfolio company sales come from emerging economies, 21% from North America, and 33% from Europe.
Northern Cross, LLC
Investment Sub-Adviser to the M International Equity Fund
Performance represented is net of fees. The foregoing reflects the thoughts and opinions of Northern Cross exclusively and is subject to change without notice. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. Portfolio characteristics are as of 12/31/14. Please note that all indices are unmanaged and are not available for direct investment.
* This commentary may include statements that constitute “forward looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to the Fund, market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed above are subject to change at any time based upon economic, market, or other conditions and the subadvisory firm undertakes no obligation to update the views expressed herein. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. The views expressed above (including any forward-looking statement) may not be relied upon as investment advice or as an indication of the Fund’s trading intent. Information about the Fund’s holdings, asset allocation or country diversification is historical and is not an indication of future Fund composition, which may vary. Direct investment in any index is not possible. The performance of any index mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. In addition, the returns do not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE M INTERNATIONAL EQUITY FUND, MSCI AC WORLD ex USA AND
MSCI EAFE INDEX (unaudited)
The M International Equity Fund’s total return is calculated net of Investment Advisory Fees and operating expenses. Performance figures represent past performance and are not indicative of future performance of the M International Equity Fund or Index. Share value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original investment. Please note that all indices are unmanaged, do not incur expenses, and are not available for direct investment. Persons who invest in the M International Equity 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.
** | 12/31/04 to 12/31/14 |
+ | MSCI EAFE—Effective May 1, 2014, the Fund changed its benchmark index from the MSCI EAFE Index to the MSCI AC World ex US Index. The MSCI AC World ex US Index is more representative of the Fund’s investment portfolio than its previous index. |
MORGAN STANLEY CAPITAL INTERNATIONAL—ALL COUNTRY WORLD INDEX
1 The MSCI ACWI (All Country World Index) ex US Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets excluding the US.
MORGAN STANLEY CAPITAL INTERNATIONAL—EUROPE, AUSTRALASIA, FAR EAST INDEX
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
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M LARGE CAP GROWTH FUND
Performance
For the twelve months ended December 31, 2014, the M Large Cap Growth Fund had a return of 10.21% (net of management fees) versus a total return (including reinvestment of dividends) of 13.05% for its benchmark, the Russell 1000 Growth Index1.
Market Environment/Conditions
After a strong start to the year, the performance of the Fund was negatively impacted by a variety of macro investor fears during March and April of 2014. DSM believes the underperformance of the March/April period was caused by excessive fear of slowing US, European, and Chinese economic growth as well as the uncertain situation in the Ukraine. At that time, these headlines caused investors to rotate to “safe havens” as evidenced by the outperformance of the traditional yield-oriented, safe-haven sectors such as utilities, consumer staples and sovereign debt.
However, on a micro level, the businesses in the Fund were largely unaffected by the macro fears. Over the first three quarters of the year, the Fund generated low-teens revenue growth and high-teens earnings growth. Driven by solid quarterly earnings results, the performance of the Fund has exceeded that of its benchmark since April.
Over the last several years, DSM has expected global economic growth in the 3% range, with the United States growing 2% or even 3%. In 2015, DSM continues to maintain its 3% global growth view, with United States growth in 2015 possibly reaching 3%. Unfortunately Europe’s economic outlook has deteriorated. DSM expects European GDP to approximate zero, but there is clearly a risk of negative growth. DSM projects growth in China in the 7% range, while Japanese growth looks to be modestly positive.
In the first quarter, United States growth was a negative (2)%; however GDP growth was 3% for the full year. With the price of oil less than half of its high, and other commodity prices falling, 2015 United States growth could move to 3%. The falling price of energy acts like a big tax cut on the economy, helping to lift economic growth. Additional evidence to support this outlook includes modestly growing bank lending, lower unemployment, solid retail sales and continued low interest rates. Unfortunately, investment spending remains weak, likely as a result of anti-growth tax, regulatory and fiscal policies.
In Europe, DSM’s recent expectation of up to 1% GDP growth may be optimistic. The Russia-Ukraine situation appears to have acted as a catalyst to dampen economic growth. The lower cost of oil will help Europe as well, but it is partially offset by high gas taxes. However, inflation in Europe is very low, perhaps even negative, providing the ECB with plenty of room for quantitative easing. It is unlikely that the political situation in Greece will prevent the ECB from pushing forward with quantitative easing and sovereign debt issues are not developing elsewhere in Europe. However, Russia’s largest companies are leveraged with debt, much of it secured by oil prices. Decreasing oil prices and sanctions preventing access to global capital markets, may force the state to absorb these debts, which could exacerbate sovereign debt risk in Russia.
China’s GDP is expected to grow by 7% in 2015. The Chinese government has increased monetary easing and continues with some infrastructure spending projects to avoid economic weakness in 2015. China’s stock market has recently exploded upwards, as Chinese retail investors have increased their investments in equities. Many observers believe that in some cases property is being sold to finance these investments. The recent run-up may well be a bubble, but the diversification into equities and away from real estate and the “shadow banking” system is positive. The Japanese economy continues to recover gradually, driven in part by the mixed success of the much touted “Abenomics” program.
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Fund Review/Current Positioning
The Fund is constructed based on DSM’s view of slow growth in the United States, faster growth in emerging markets and fractional growth in Europe. DSM’s strategy continues to focus on investments in businesses that generate the majority of their revenue in North America and emerging markets. At this time, emerging markets account for approximately 21% of weighted portfolio revenue, with North America at approximately 55%. Europe accounts for approximately 19% of the Fund’s revenue and other developed markets approximate 5%.
The majority of the Fund is invested in the health care, consumer discretionary, and technology sectors, with smaller weightings in the financials, industrials, materials, and consumer staples sectors. The Fund continues to have a solid weighting in the global internet business through investments in Alibaba, Baidu, Google, Priceline, and Tencent. Holdings also include three “business-to-business” global service companies: MasterCard, Visa and Cognizant Technology Solutions. For the year, the Fund underperformed the benchmark primarily as a result of stock selection and an over weighted position in consumer discretionary sector. DSM’s stock selection in the industrials and technology sectors also contributed to negative performance. The Fund’s overweight and stock selections in health care, as well as the underweight in energy, benefitted performance. By security, the top five contributors to the Fund’s performance included Celgene, Monster Beverage, Alexion Pharmaceuticals, Regeneron Pharmaceuticals, and Time Warner.
The Fund continues to be focused on unique global businesses that have been identified, and continuously subject to analysis by DSM’s investment team. DSM believes that the valuation of the Fund, at 20.3x next-four-quarter earnings through December of 2015 based on its calculations, continues to be attractive in the current slow growth economic environment and relative to the market. DSM also continues to project low double-digit revenue growth and mid-to-high teens earnings growth rate through 2018. Additionally, holdings remain characterized by very strong balance sheets and significant free cash flow.
DSM Capital Partners LLC
Investment Sub-Adviser to the M Large Cap Growth Fund
Performance represented is net of fees. The foregoing reflects the thoughts and opinions of DSM exclusively and is subject to change without notice. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. Portfolio characteristics are as of 12/31/14. Please note that all indices are unmanaged and are not available for direct investment.
* This commentary may include statements that constitute “forward looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to the Fund, market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed above are subject to change at any time based upon economic, market, or other conditions and the subadvisory firm undertakes no obligation to update the views expressed herein. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. The views expressed above (including any forward-looking statement) may not be relied upon as investment advice or as an indication of the
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Fund’s trading intent. Information about the Fund’s holdings, asset allocation or country diversification is historical and is not an indication of future Fund composition, which may vary. Direct investment in any index is not possible. The performance of any index mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. In addition, the returns do not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE M LARGE CAP GROWTH FUND AND THE RUSSELL 1000 GROWTH INDEX (Unaudited)
The M Large Cap Growth Fund’s total return is calculated net of Investment Advisory Fees and operating expenses. Performance figures represent past performance and are not indicative of future performance of the M Large Cap Growth Fund or Index. Share value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original investment. Please note that all indices are unmanaged, do not incur expenses, and are not available for direct investment. Persons who invest in the M Large Cap Growth 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.
** | 12/31/04 to 12/31/14 |
RUSSELL 1000 GROWTH INDEX
1 The Russell 1000 Growth Index includes dividends reinvested in the Russell 1000 Growth Index as reported by the Russell Company. The Russell 1000 Growth Index is a capitalization weighted index containing over 600 widely held securities with growth characteristics. DSM uses the Russell 1000 Growth Index as a benchmark because its average market capitalization is similar to that of the M Large Cap Growth Fund, and it is an industry standard. Characteristics of any benchmark may differ materially from accounts managed by DSM.
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M CAPITAL APPRECIATION FUND
Performance
For the twelve months ended December 31, 2014, the M Capital Appreciation Fund had a return of 12.42% (net of management fees) versus 7.07% for its benchmark, the Russell 2500 Index1.
Market Environment/Conditions
During 2014, the market benefited from increasing evidence of a gradual recovery in the domestic economy; a continued low interest rate environment; and reasonable investor expectations. The Fund benefited from significant positive stock selection as a number of holdings produced better-than-expected earnings growth and/or unveiled exciting new strategic developments.
Fund Review/Current Positioning
The technology sector was the largest contributor to relative performance as the average portfolio holding in this group returned 31.0% versus only 5.6% for the benchmark. Most notably, two manufacturers of power amplifiers, Skyworks (+156%) and Triquint (+230%), experienced the early benefits of consolidation within the semi-conductor market and continued strong underlying demand from global mobile device proliferation. Electronic Arts (+105%) posted stronger-than-expected earnings growth as the next generation of gaming consoles gained momentum and the company capitalized on the profit-enhancing shift toward digital distribution.
The Fund also benefited from positive stock selection in the health care sector, yielding an average return of 47.1% versus 21.8% for the benchmark. Intermune was acquired by Roche for $8.3bb after posting very encouraging data on its drug to treat idiopathic pulmonary fibrosis (IPF), a terminal lung scarring disease, and returned over four times the Fund’s original investment, as a result. The Fund was equally affected by the continued contribution from three long-term holdings: Dexcom (+55.5%), Illumina (+66.9%) and Cooper Companies (+30.9%).
Given the Fund’s large position in airline stocks, the consumer durable sector also yielded positive results. United Continental Holdings, Inc. increased 77% for the year. The domestic airline industry continues to benefit from the pronounced industry consolidation and renewed focus on return on capital. In addition, Frontier expects the decline in fuel prices to also drive earnings in the coming year.
On the negative side, Nextel International (-93.7%) was forced to restructure following numerous operational missteps and macroeconomic and currency factors beyond their control. As a result, Frontier eliminated the Fund’s position in Nextel.
Finally, the biggest macroeconomic development during the latter half of 2014 was the substantial decline in oil prices. A surge in shale drilling lifted U.S. output to the fastest pace in three decades amid slowing growth in world demand. Members of the Organization of Petroleum Exporting Countries (OPEC) have resisted calls from producers such as Venezuela and Ecuador to reduce output to stem the price drop and have instead chosen to retain their market share and force higher-cost producers out of the market. Not surprising, energy was by far the worst performing sector in the benchmark, declining 31% for the year. The Fund was slightly overweight (7.9% vs. 5.5%) and its stocks underperformed the benchmark, declining 37% with five of its top ten detractors from performance coming from this sector. Frontier is in the process of eliminating positions where a company’s balance sheet may not provide it with the staying power to weather the current low oil price environment.
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As in 2014, highly selective stock picking will be critical for above-average returns in 2015. Frontier’s research approach uses a bottom-up analysis of company specific fundamentals to ascertain the potential of each new investment. This analysis produces an assessment of each potential portfolio company’s management team, along with a detailed proprietary earnings model that provides a company’s earnings growth potential. Frontier seeks to own companies that have the potential to report much higher earnings than what is currently being generated and to purchase them at valuations that do not appear to recognize that potential. While valuations for the broad market have improved substantially during the nearly six-year bull run, Frontier continues to identify attractive investment opportunities across a broad range of industries.
Frontier Capital Management Company, LLC
Investment Sub-Adviser to the M Capital Appreciation Fund
Performance represented is net of fees. The foregoing reflects the thoughts and opinions of Frontier exclusively and is subject to change without notice. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. Portfolio characteristics are as of 12/31/14. Please note that all indices are unmanaged and are not available for direct investment.
* This commentary may include statements that constitute “forward looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to the Fund, market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed above are subject to change at any time based upon economic, market, or other conditions and the subadvisory firm undertakes no obligation to update the views expressed herein. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. The views expressed above (including any forward-looking statement) may not be relied upon as investment advice or as an indication of the Fund’s trading intent. Information about the Fund’s holdings, asset allocation or country diversification is historical and is not an indication of future Fund composition, which may vary. Direct investment in any index is not possible. The performance of any index mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. In addition, the returns do not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE M CAPITAL APPRECIATION FUND AND RUSSELL 2500 STOCK INDEX (Unaudited)
The M Capital Appreciation Fund’s total return is calculated net of Investment Advisory Fees and operating expenses. Performance figures represent past performance and are not indicative of future performance of the M Capital Appreciation Fund or Index. Share value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original investment. Please note that all indices are unmanaged, do not incur expenses, and are not available for direct investment. Persons who invest in the M Capital Appreciation 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.
** | 12/31/04 to 12/31/14 |
RUSSELL 2500 STOCK INDEX
1 The Russell 2500 Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership.
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M LARGE CAP VALUE FUND
Performance
The M Large Cap Value Fund gained 9.68% (net of management fees) in 2014, as compared to its Russell 1000 Value Index1 return of 13.45% for the same period.
Market Environment/Conditions
The U.S. equity markets reached a number of milestones last year: It was the sixth consecutive year with positive returns and the third with double-digit advances, capping the fourth longest post-war gain. Despite the strength of the market, low-beta stocks unexpectedly dominated. For much of the year, small-cap stocks trailed large-cap stocks (the fourth quarter was an exception to that trend). Similarly, the market exhibited no style preference over the course of the year; however, more recently, value edged out growth. On a broader level, U.S. equities fared better than their international brethren (emerging) and long-term Treasuries and REITs were crowned king.
Fund Review/Current Positioning
The Fund is fully invested in U.S. equities with no broad sector bets, and only modest industry-level and stock-specific bets. The goal is to outperform the benchmark, the Russell 1000 Value Index, with incremental gains across many holdings. Using bottom-up, quantitatively-driven stock selection, AJO evaluates companies relative to their industry peers using four broad categories of measures: value, management, momentum, and sentiment. Value means the somewhat traditional ratios of price to fundamental value; management means evidence that a company’s executive team has and will continue to emphasize earning power; momentum indicates when stocks might begin to rise toward full valuation; and sentiment captures the buying and selling behavior of key investor segments in various markets. When considering new investments, AJO keeps a sharp eye on minimizing transaction costs, which helps maximize profits for the Fund.
The Fund lagged its benchmark this year by -3.8%. It was the second worst four consecutive quarters of underperformance over AJO’s 19-year history of managing the AJO Large Cap—Absolute Value strategy, the strategy utilized by the Fund. AJO was unable to gain traction in an environment where low risk and large cap stocks outperformed high-risk and small-cap stocks. While AJO does not explicitly control for volatility and size, it is ultimately exposed to both as a result of its bottom-up stock selection. AJO’s management and momentum factors—specifically long-term growth and price-relative strength—detracted from the effectiveness of its stock selection, particularly among the Funds’ holdings in the energy and financials sectors. AJO’s value orientation, however, aided relative return, helping to dampen the negative influence of other factors used in its process.
AJO strongly believes that superior results can be achieved through a consistent, systematic approach that focuses on low-priced companies with proven management, earnings power, and favorable sentiment.
AJO, LP
Investment Sub-Adviser to M Large Cap Value Fund
Performance represented is net of fees. The foregoing reflects the thoughts and opinions of AJO exclusively and is subject to change without notice. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or
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opportunities. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. Portfolio characteristics are as of 12/31/14. Please note that all indices are unmanaged and are not available for direct investment.
* This commentary may include statements that constitute “forward looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to the Fund, market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed above are subject to change at any time based upon economic, market, or other conditions and the subadvisory firm undertakes no obligation to update the views expressed herein. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. The views expressed above (including any forward-looking statement) may not be relied upon as investment advice or as an indication of the Fund’s trading intent. Information about the Fund’s holdings, asset allocation or country diversification is historical and is not an indication of future Fund composition, which may vary. Direct investment in any index is not possible. The performance of any index mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. In addition, the returns do not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE M LARGE CAP VALUE FUND AND THE RUSSELL 1000 VALUE INDEX (Unaudited)
The M Large Cap Value Fund’s total return is calculated net of Investment Advisory Fees and operating expenses. Performance figures represent past performance and are not indicative of future performance of the M Large Cap Value Fund or Index. Share value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original investment. Please note that all indices are unmanaged, do not incur expenses, and are not available for direct investment. Persons who invest in the M Large Cap Value 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.
** | 12/31/04 to 12/31/14 |
RUSSELL 1000 VALUE INDEX
1 The Russell 1000® Value Index is a market capitalization-weighted index that measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth rates.
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M International Equity Fund
SCHEDULE OF INVESTMENTS
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
COMMON STOCKS—97.6% | ||||||||
Austria—0.9% | ||||||||
80,537 | Erste Group Bank AG | $ | 1,873,184 | |||||
Belgium—3.1% | ||||||||
59,376 | Anheuser-Busch InBev NV | 6,682,253 | ||||||
Brazil—1.3% | ||||||||
111,120 | Banco Bradesco SA (Preference) | 1,465,603 | ||||||
110,789 | Itau Unibanco Holding SA, ADR (Preference) | 1,441,365 | ||||||
2,906,968 | ||||||||
Canada—0.2% | ||||||||
51,202 | Barrick Gold Corp. | 550,422 | ||||||
Colombia—0.5% | ||||||||
22,863 | Bancolombia SA, SP ADR† | 1,094,680 | ||||||
Denmark—2.4% | ||||||||
125,423 | Novo Nordisk A/S | 5,305,363 | ||||||
France—17.5% | ||||||||
41,427 | Accor SA | 1,862,185 | ||||||
11,638 | Air Liquide SA | 1,440,082 | ||||||
226,406 | AXA SA | 5,217,082 | ||||||
70,797 | Cie de St-Gobain | 2,999,019 | ||||||
39,123 | Cie Generale d’Optique Essilor International SA | 4,362,970 | ||||||
41,203 | Danone SA | 2,693,772 | ||||||
756 | Hermes International† | 269,198 | ||||||
44,622 | JCDecaux SA | 1,536,370 | ||||||
19,426 | L’Oreal SA | 3,251,365 | ||||||
42,005 | Legrand SA | 2,203,505 | ||||||
15,050 | LVMH Moet Hennessy Louis Vuitton SA | 2,383,945 | ||||||
36,275 | Pernod-Ricard SA | 4,031,518 | ||||||
75,592 | Schneider Electric SA | 5,505,306 | ||||||
1,007 | Unibail-Rodamco SE, REIT | 259,362 | ||||||
38,015,679 | ||||||||
Germany—11.0% | ||||||||
29,014 | Allianz SE, Registered | 4,805,478 | ||||||
44,336 | Daimler AG, Registered | 3,682,285 | ||||||
20,937 | Fresenius Medical Care AG & Co. KGaA | 1,562,671 | ||||||
38,195 | Fresenius SE & Co. KGaA | 1,985,912 | ||||||
21,678 | Linde AG | 3,993,138 | ||||||
70,909 | SAP AG | 4,951,459 | ||||||
13,356 | Volkswagen AG (Preference) | 2,968,443 | ||||||
23,949,386 | ||||||||
Hong Kong—1.2% | ||||||||
111,000 | Cheung Kong Holdings, Ltd. | 1,861,750 | ||||||
271,000 | Hang Lung Properties, Ltd. | 756,011 | ||||||
2,617,761 | ||||||||
Italy—1.5% | ||||||||
494,723 | Intesa Sanpaolo SpA | 1,435,142 | ||||||
135,347 | Pirelli & C. SpA | 1,825,479 | ||||||
3,260,621 | ||||||||
Japan—8.4% | ||||||||
53,700 | Dentsu, Inc. | 2,257,624 | ||||||
29,700 | FANUC Corp | 4,896,944 | ||||||
111,405 | Japan Tobacco, Inc.† | 3,066,173 | ||||||
94,900 | Komatsu, Ltd.† | 2,098,043 | ||||||
29,100 | LIXIL Group Corp. | 612,431 | ||||||
5,000 | Mitsubishi Estate Co., Ltd. | 105,354 | ||||||
12,400 | SMC Corp.† | 3,251,577 | ||||||
62,600 | Tokio Marine Holdings, Inc. | 2,033,103 | ||||||
18,321,249 | ||||||||
Jersey—2.4% | ||||||||
477,576 | Glencore Xstrata Plc* | 2,204,409 | ||||||
41,631 | Shire Plc | 2,951,641 | ||||||
5,156,050 | ||||||||
Malaysia—0.8% | ||||||||
667,600 | Genting Bhd | 1,691,185 | ||||||
Netherlands—3.5% | ||||||||
49,044 | Heineken NV | 3,482,501 | ||||||
15,709 | Unibail-Rodamco SE, REIT | 4,029,918 | ||||||
7,512,419 |
The accompanying notes are an integral part of these financial statements.
15 |
M International Equity Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Singapore—1.5% | ||||||||
178,709 | United Overseas Bank, Ltd. | $ | 3,297,904 | |||||
Spain—3.8% | ||||||||
539,065 | Banco Bilbao Vizcaya Argentaria SA | 5,091,146 | ||||||
385,903 | Banco Santander SA | 3,238,928 | ||||||
8,330,074 | ||||||||
Sweden—5.2% | ||||||||
145,810 | Atlas Copco AB | 4,057,257 | ||||||
91,745 | Investor AB | 3,335,647 | ||||||
175,940 | Sandvik AB† | 1,710,678 | ||||||
201,303 | Volvo AB | 2,170,749 | ||||||
11,274,331 | ||||||||
Switzerland—17.0% | ||||||||
164,114 | ABB, Ltd., Registered* | 3,472,347 | ||||||
47,848 | Cie Financiere Richemont SA, Registered | 4,242,137 | ||||||
51,506 | Holcim, Ltd., Registered* | 3,681,862 | ||||||
54,830 | Nestle SA, Registered | 3,997,161 | ||||||
61,516 | Novartis AG, Registered | 5,705,208 | ||||||
21,361 | Roche Holding AG | 5,787,596 | ||||||
5,827 | Swatch Group AG (The) | 2,588,681 | ||||||
11,671 | Syngenta AG, Registered | 3,754,066 | ||||||
213,881 | UBS Group AG* | 3,676,550 | ||||||
36,905,608 | ||||||||
United Kingdom—13.3% | ||||||||
63,854 | Anglo American Plc | 1,181,583 | ||||||
237,639 | BG Group Plc | 3,180,014 | ||||||
130,166 | CRH Plc† | 3,121,221 | ||||||
174,776 | Diageo Plc | 5,006,820 | ||||||
86,354 | Indivior Plc* | 201,080 | ||||||
4,708,025 | Lloyds Banking Group Plc* | 5,537,857 | ||||||
53,325 | Pearson Plc | 984,813 | ||||||
33,914 | Reckitt Benckiser Group Plc | 2,746,828 | ||||||
369,110 | Rolls-Royce Holdings Plc* | 4,958,566 | ||||||
127,763 | Standard Chartered Plc | 1,910,810 | ||||||
28,829,592 | ||||||||
United States—2.2% | ||||||||
123,128 | Freeport-McMoRan Copper & Gold, Inc. | 2,876,270 | ||||||
32,034 | Las Vegas Sands Corp.† | 1,863,098 | ||||||
4,739,368 | ||||||||
TOTAL COMMON STOCKS (Cost $197,795,660) | 212,314,097 |
Expiration | ||||||||||
Date | ||||||||||
WARRANT—0.1% | ||||||||||
Malaysia—0.1% | ||||||||||
214,915 | Genting Bhd (GENTING BHD GENTING BHD CW)* (Cost $101,263) | 12/18/18 | 171,489 | |||||||
RIGHTS—0.0% | ||||||||||
Spain—0.0% | ||||||||||
539,065 | Banco Bilbao Vizcaya Argentaria SA(BBVA RIGHT)†,* (Cost $52,731) | 01/07/15 | 51,531 | |||||||
PREFERRED STOCK—0.0% | ||||||||||
United Kingdom—0.0% | ||||||||||
32,622,930 | Rolls Royce Holdings Plc 0.00%* (Cost $52,363) | 50,846 |
The accompanying notes are an integral part of these financial statements.
16 |
M International Equity Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Par | Value | |||||||||||||
Amount | Yield | Maturity | (Note 1) | |||||||||||
SHORT-TERM INVESTMENTS—3.0% | ||||||||||||||
$ | 4,974,242 | State Street Bank and Trust Co(Euro Time Deposit) | 0.010 | % | 01/02/2015 | $ | 4,974,242 |
Shares | ||||||||||||||
1,549,019 | State Street Navigator Securities Lending Prime Portfolio (Money Market)†† | 0.193 | % | 1,549,019 | ||||||||||
TOTAL SHORT-TERM INVESTMENTS | 6,523,261 | |||||||||||||
TOTAL INVESTMENTS AT VALUE—100.7% (Cost $204,525,278) | 219,111,224 | |||||||||||||
Liabilities in Excess of Other Assets—(0.7)% | (1,586,246 | ) | ||||||||||||
NET ASSETS—100.0%. | $ | 217,524,978 |
Notes to the Schedule of Investments:
ADR—American Depositary Receipt
REIT—Real Estate Investment Trust
SP ADR—Sponsored American Depositary Receipt
* | Non-income producing security |
† | Denotes all or a portion of security on loan (Note 1) |
†† | Represents collateral received from securities lending transactions |
Percentages indicated are based on net assets.
The accompanying notes are an integral part of these financial statements.
17 |
M International Equity Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2014
At December 31, 2014, industry diversification of the M International Equity Fund’s investments as a percentage of net assets was as follows:
Percentage | ||||
of Net | ||||
Summary of Industry Classifications | Assets | |||
Commercial Banks | 12.1 | % | ||
Pharmaceuticals | 9.2 | % | ||
Beverages | 8.8 | % | ||
Machinery | 8.4 | % | ||
Insurance | 5.5 | % | ||
Electrical Equipment | 5.1 | % | ||
Textiles, Apparel and Luxury Goods | 4.4 | % | ||
Chemicals | 4.2 | % | ||
Automobiles | 3.1 | % | ||
Construction Materials | 3.1 | % | ||
Food Products | 3.1 | % | ||
Metals and Mining | 3.1 | % | ||
Hotels, Restaurants & Leisure | 2.5 | % | ||
Aerospace & Defense | 2.3 | % | ||
Software | 2.3 | % | ||
Media | 2.2 | % | ||
Health Care Equipment and Supplies | 2.0 | % | ||
Real Estate Investment Trusts (REITs) | 2.0 | % | ||
Building Products | 1.7 | % | ||
Capital Markets | 1.7 | % | ||
Health Care Providers and Services | 1.6 | % | ||
Diversified Financial Services | 1.5 | % | ||
Oil, Gas and Consumable Fuels | 1.5 | % | ||
Personal Products | 1.5 | % | ||
Tobacco | 1.4 | % | ||
Household Products | 1.3 | % | ||
Real Estate Management and Development | 1.2 | % | ||
Auto Components | 0.8 | % | ||
Warrant | 0.1 | % | ||
Short-Term Investments | 3.0 | % | ||
Total | 100.7 | % |
The accompanying notes are an integral part of these financial statements.
18 |
M Large Cap Growth Fund
SCHEDULE OF INVESTMENTS
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
COMMON STOCKS—99.4% | ||||||||
Aerospace & Defense—6.0% | ||||||||
30,225 | Precision Castparts Corp. | $ | 7,280,598 | |||||
224,300 | Safran SA, SP ADR | 3,422,818 | ||||||
10,703,416 | ||||||||
Beverages—2.7% | ||||||||
44,600 | Monster Beverage Corp.* | 4,832,410 | ||||||
Biotechnology—21.3% | ||||||||
43,050 | Alexion Pharmaceuticals, Inc.* | 7,965,541 | ||||||
22,200 | Biogen Idec, Inc.* | 7,535,790 | ||||||
132,200 | Celgene Corp.* | 14,787,892 | ||||||
18,300 | Regeneron Pharmaceuticals, Inc.†,* | 7,507,575 | ||||||
37,796,798 | ||||||||
Capital Markets—7.4% | ||||||||
22,600 | Affiliated Managers Group, Inc.* | 4,796,624 | ||||||
9,175 | BlackRock, Inc. | 3,280,613 | ||||||
128,200 | Invesco, Ltd. | 5,066,464 | ||||||
13,143,701 | ||||||||
Chemicals—3.1% | ||||||||
46,700 | Monsanto Co. | 5,579,249 | ||||||
Health Care Equipment and Supplies—3.5% | ||||||||
139,300 | Abbott Laboratories | 6,271,286 | ||||||
Hotels, Restaurants & Leisure—7.8% | ||||||||
59,300 | Las Vegas Sands Corp. | 3,448,888 | ||||||
84,000 | Starbucks Corp. | 6,892,200 | ||||||
24,100 | Wynn Resorts, Ltd. | 3,585,116 | ||||||
13,926,204 | ||||||||
Internet and Catalog Retail—4.0% | ||||||||
6,285 | Priceline.com, Inc.* | 7,166,220 | ||||||
Internet Software and Services—12.7% | ||||||||
46,700 | Alibaba Group Holding, Ltd., SP ADR†,* | 4,853,998 | ||||||
21,000 | Baidu.com, Inc. SP ADR* | 4,787,370 | ||||||
6,880 | Google, Inc., Class A* | 3,650,941 | ||||||
5,480 | Google, Inc., Class C* | 2,884,672 | ||||||
437,700 | Tencent Holdings, Ltd., ADR† | 6,351,027 | ||||||
22,528,008 | ||||||||
IT Services—11.2% | ||||||||
139,700 | Cognizant Technology Solutions Corp., Class A* | 7,356,602 | ||||||
63,400 | MasterCard, Inc., Class A | 5,462,544 | ||||||
27,100 | Visa, Inc., Class A† | 7,105,620 | ||||||
19,924,766 | ||||||||
Media—9.7% | ||||||||
101,700 | Comcast Corp., Class A. | 5,899,617 | ||||||
52,800 | Discovery Communications, Inc.* | 1,780,416 | ||||||
63,100 | Discovery Communications, Inc., Class A†,* | 2,173,795 | ||||||
87,400 | Time Warner, Inc. | 7,465,708 | ||||||
17,319,536 | ||||||||
Multiline Retail—4.9% | ||||||||
52,600 | Dollar General Corp.* | 3,718,820 | ||||||
70,400 | Dollar Tree, Inc.* | 4,954,752 | ||||||
8,673,572 | ||||||||
Pharmaceuticals—3.6% | ||||||||
38,300 | Perrigo Co. Plc. | 6,402,228 | ||||||
Semiconductors and Semiconductor Equipment—1.5% | ||||||||
34,800 | NXP Semiconductors NV* | 2,658,720 | ||||||
TOTAL COMMON STOCKS (Cost $134,399,910) | 176,926,114 |
The accompanying notes are an integral part of these financial statements.
19 |
M Large Cap Growth Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Par | Value | |||||||||||||
Amount | Yield | Maturity | (Note 1) | |||||||||||
SHORT-TERM INVESTMENTS—8.7% | ||||||||||||||
$ | 677,137 | State Street Bank and Trust Co(Euro Time Deposit) | 0.010 | % | 01/02/2015 | $ | 677,137 |
Shares | ||||||||||||||
14,729,915 | State Street Navigator Securities Lending Prime Portfolio (Money Market)†† | 0.193 | % | 14,729,915 | ||||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $15,407,052) | . | 15,407,052 | ||||||||||||
TOTAL INVESTMENTS AT VALUE—108.1% (Cost $149,806,962) | 192,333,166 | |||||||||||||
Liabilities in Excess of Other Assets—(8.1)% | (14,428,864 | ) | ||||||||||||
NET ASSETS—100.0% | $ | 177,904,302 |
Notes to the Schedule of Investments:
ADR—American Depositary Receipt
SP ADR—Sponsored American Depositary Receipt
* | Non-income producing security |
† | Denotes all or a portion of security on loan (Note 1) |
†† | Represents collateral received from securities lending transactions |
Percentages indicated are based on net assets.
The accompanying notes are an integral part of these financial statements.
20 |
M Large Cap Growth Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2014
At December 31, 2014, industry sector diversification of the M Large Cap Growth Fund’s investments as a percentage of net assets was as follows:
Percentage | ||||
of Net | ||||
Summary of Sector Classifications | Assets | |||
Health Care | 28.4 | % | ||
Consumer Discretionary | 26.4 | % | ||
Information Technology | 25.4 | % | ||
Financials | 7.4 | % | ||
Industrials | 6.0 | % | ||
Materials | 3.1 | % | ||
Consumer Staples | 2.7 | % | ||
Short-Term Investments | 8.7 | % | ||
Total | 108.1 | % |
The accompanying notes are an integral part of these financial statements.
21 |
M Capital Appreciation Fund
SCHEDULE OF INVESTMENTS
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
COMMON STOCKS—99.4% | ||||||||
Air Freight and Logistics—1.2% | ||||||||
21,512 | Hub Group, Inc., Class A* | $ | 819,177 | |||||
106,892 | UTi Worldwide, Inc.†,* | 1,290,186 | ||||||
2,109,363 | ||||||||
Airlines—8.4% | ||||||||
27,153 | American Airlines Group, Inc. | 1,456,215 | ||||||
181,276 | Controladora Vuela Cia de | |||||||
Aviacion SAB de CV, ADR†,* | 1,635,110 | |||||||
93,793 | JetBlue Airways Corp.†,* | 1,487,557 | ||||||
159,668 | United Continental Holdings, Inc.* | 10,680,192 | ||||||
15,259,074 | ||||||||
Auto Components—2.4% | ||||||||
11,856 | Autoliv, Inc.† | 1,258,159 | ||||||
72,171 | Fox Factory Holding Corp.* | 1,171,335 | ||||||
46,390 | Modine Manufacturing Co.* | 630,904 | ||||||
6,310 | Tenneco, Inc.* | 357,209 | ||||||
9,274 | TRW Automotive Holdings Corp.* | 953,831 | ||||||
4,371,438 | ||||||||
Biotechnology—1.4% | ||||||||
5,259 | BioMarin Pharmaceutical, Inc.* | 475,414 | ||||||
26,363 | Celladon Corp.†,* | 514,869 | ||||||
30,786 | Myriad Genetics, Inc.†,* | 1,048,571 | ||||||
29,830 | Sangamo BioSciences, Inc.* | 453,714 | ||||||
2,492,568 | ||||||||
Building Products—2.4% | ||||||||
16,636 | Armstrong World Industries, Inc.* | 850,432 | ||||||
26,293 | Lennox International, Inc. | 2,499,675 | ||||||
24,094 | Trex Co., Inc.†,* | 1,025,923 | ||||||
4,376,030 | ||||||||
Capital Markets—1.9% | ||||||||
33,559 | E*TRADE Financial Corp.* | 813,973 | ||||||
16,445 | LPL Financial Holdings, Inc. | 732,625 | ||||||
23,902 | Raymond James Financial, Inc. | 1,369,346 | ||||||
9,752 | Waddell & Reed Financial, Inc., | |||||||
Class A | 485,845 | |||||||
3,401,789 | ||||||||
Chemicals—3.4% | ||||||||
16,827 | Albemarle Corp.† | 1,011,808 | ||||||
21,895 | Cabot Corp. | 960,315 | ||||||
7,744 | Celanese Corp., Series A | 464,330 | ||||||
17,305 | FMC Corp. | 986,904 | ||||||
83,850 | Kraton Performance | |||||||
Polymers, Inc.* | 1,743,241 | |||||||
42,833 | Tronox, Ltd., Class A | 1,022,852 | ||||||
6,189,450 | ||||||||
Commercial Banks—2.5% | ||||||||
66,390 | PacWest Bancorp | 3,018,089 | ||||||
46,399 | Popular, Inc.* | 1,579,886 | ||||||
4,597,975 | ||||||||
Commercial Services & | ||||||||
Supplies—0.7% | ||||||||
28,712 | KAR Auction Services, Inc. | 994,871 | ||||||
13,213 | Ritchie Bros. Auctioneers, Inc.† | 355,297 | ||||||
1,350,168 | ||||||||
Communications | ||||||||
Equipment—0.2% | ||||||||
13,194 | ADTRAN, Inc. | 287,629 | ||||||
Computers and Peripherals—0.7% | ||||||||
91,403 | QLogic Corp.* | 1,217,488 | ||||||
Construction and Engineering—1.3% | ||||||||
15,871 | KBR, Inc. | 269,014 | ||||||
28,644 | MasTec, Inc.†,* | 647,641 | ||||||
19,122 | Primoris Services Corp. | 444,395 | ||||||
33,941 | Quanta Services, Inc.* | 963,585 | ||||||
2,324,635 | ||||||||
Construction Materials—2.8% | ||||||||
36,905 | Caesarstone Sdot-Yam, Ltd. | 2,207,657 | ||||||
27,529 | Eagle Materials, Inc. | 2,093,030 | ||||||
6,310 | Martin Marietta Materials, Inc.† | 696,119 | ||||||
4,996,806 | ||||||||
Consumer Finance—0.3% | ||||||||
30,691 | Green Dot Corp., Class A* | 628,859 |
The accompanying notes are an integral part of these financial statements.
22 |
M Capital Appreciation Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Containers and Packaging—1.9% | ||||||||
80,073 | Berry Plastics Group, Inc.* | $ | 2,526,303 | |||||
12,716 | Packaging Corp. of America | 992,484 | ||||||
3,518,787 | ||||||||
Diversified Consumer Services—0.4% | ||||||||
35,590 | 2u, Inc.* | 699,699 | ||||||
3,938 | Career Education Corp.* | 27,409 | ||||||
727,108 | ||||||||
Diversified Financial Services—0.5% | ||||||||
37,446 | Leucadia National Corp. | 839,539 | ||||||
Diversified Telecommunication Services—2.1% | ||||||||
75,700 | Cogent Communications Group, Inc. | 2,679,023 | ||||||
112,533 | Premiere Global Services, Inc.* | 1,195,101 | ||||||
3,874,124 | ||||||||
Electrical Equipment—0.2% | ||||||||
3,729 | Hubbell, Inc., Class B | 398,369 | ||||||
Electronic Equipment, Instruments & Components—7.1% | ||||||||
41,877 | Belden, Inc. | 3,300,327 | ||||||
29,830 | Control4 Corp.†,* | 458,487 | ||||||
44,459 | DTS, Inc.* | 1,367,114 | ||||||
142,554 | Flextronics International, Ltd.* | 1,593,754 | ||||||
33,032 | Itron, Inc.* | 1,396,923 | ||||||
59,087 | Jabil Circuit, Inc. | 1,289,869 | ||||||
32,794 | Rogers Corp.* | 2,670,743 | ||||||
26,984 | Universal Display Corp.†,* | 748,806 | ||||||
12,826,023 | ||||||||
Energy Equipment and Services—0.9% | ||||||||
13,577 | Dril-Quip, Inc.* | 1,041,763 | ||||||
174,788 | McDermott International, Inc.†,* | 508,633 | ||||||
1,550,396 | ||||||||
Health Care Equipment and Supplies—7.1% | ||||||||
20,575 | Cooper Cos., Inc. (The) | 3,335,002 | ||||||
61,119 | Dexcom, Inc.* | 3,364,601 | ||||||
9,752 | Edwards Lifesciences Corp.* | 1,242,210 | ||||||
8,414 | HeartWare International, Inc.†,* | 617,840 | ||||||
77,286 | Insulet Corp.†,* | 3,559,793 | ||||||
196,096 | Unilife Corp.†,* | 656,921 | ||||||
12,776,367 | ||||||||
Health Care Providers and Services—1.4% | ||||||||
17,709 | Catamaran Corp.* | 916,441 | ||||||
24,763 | Mednax, Inc.* | 1,637,082 | ||||||
2,553,523 | ||||||||
Health Care Technology—0.4% | ||||||||
50,195 | Allscripts Healthcare Solutions, Inc.* | 640,990 | ||||||
Household Durables—1.0% | ||||||||
17,401 | Harman International Industries, Inc. | 1,856,861 | ||||||
Industrial Conglomerates—0.4% | ||||||||
9,083 | Carlisle Cos., Inc. | 819,650 | ||||||
Insurance—2.1% | ||||||||
9,370 | Everest Re Group, Ltd. | 1,595,711 | ||||||
16,349 | HCC Insurance Holdings, Inc. | 874,999 | ||||||
27,440 | W. R. Berkley Corp. | 1,406,574 | ||||||
3,877,284 | ||||||||
Internet Software and Services—2.6% | ||||||||
20,174 | Akamai Technologies, Inc.* | 1,270,155 | ||||||
164,258 | Brightcove, Inc.†,* | 1,277,927 | ||||||
76,523 | Gogo, Inc.†,* | 1,264,925 | ||||||
84,412 | QuinStreet, Inc.* | 512,381 | ||||||
22,153 | Web.com Group, Inc.* | 420,686 | ||||||
4,746,074 | ||||||||
IT Services—0.7% | ||||||||
7,936 | Global Payments, Inc. | 640,673 | ||||||
16,540 | Verifone Systems, Inc.* | 615,288 | ||||||
1,255,961 |
The accompanying notes are an integral part of these financial statements.
23 |
M Capital Appreciation Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Life Sciences Tools and Services—1.8% | ||||||||
14,150 | Illumina, Inc.* | $ | 2,611,807 | |||||
26,388 | QIAGEN NV†,* | 619,063 | ||||||
3,230,870 | ||||||||
Machinery—3.4% | ||||||||
25,623 | Harsco Corp. | 484,018 | ||||||
100,199 | Meritor, Inc.* | 1,518,015 | ||||||
13,577 | Pall Corp. | 1,374,128 | ||||||
124,771 | Wabash National Corp.†,* | 1,542,170 | ||||||
11,282 | WABCO Holdings, Inc.* | 1,182,128 | ||||||
6,100,459 | ||||||||
Marine—0.3% | ||||||||
7,266 | Kirby Corp.* | 586,657 | ||||||
Media—1.5% | ||||||||
35,184 | Imax Corp.†,* | 1,087,186 | ||||||
52,012 | Lions Gate Entertainment Corp.† | 1,665,424 | ||||||
2,752,610 | ||||||||
Metals and Mining—2.3% | ||||||||
37,192 | Agnico-Eagle Mines, Ltd.† | 925,709 | ||||||
40,156 | Allegheny Technologies, Inc.† | 1,396,224 | ||||||
82,831 | Globe Specialty Metals, Inc. | 1,427,178 | ||||||
23,541 | Horsehead Holding Corp.†,* | 372,654 | ||||||
4,121,765 | ||||||||
Oil, Gas and Consumable Fuels—4.2% | ||||||||
31,456 | Cabot Oil & Gas Corp. | 931,412 | ||||||
61,477 | Carrizo Oil & Gas, Inc.* | 2,557,443 | ||||||
12,716 | CONSOL Energy, Inc. | 429,928 | ||||||
26,962 | Continental Resources, Inc.†,* | 1,034,262 | ||||||
198,964 | Emerald Oil, Inc.†,* | 238,757 | ||||||
27,822 | InterOil Corp.†,* | 1,357,435 | ||||||
26,539 | Rex Energy Corp.†,* | 135,349 | ||||||
98,986 | SandRidge Energy, Inc.†,* | 180,155 | ||||||
63,853 | WPX Energy, Inc.* | 742,611 | ||||||
7,607,352 | ||||||||
Paper and Forest Products—1.7% | ||||||||
30,117 | Boise Cascade Co.* | 1,118,846 | ||||||
120,564 | Louisiana-Pacific Corp.†,* | 1,996,540 | ||||||
3,115,386 | ||||||||
Pharmaceuticals—0.1% | ||||||||
6,827 | Intersect ENT, Inc.†,* | 126,641 | ||||||
Real Estate Investment Trusts (REITs)—0.3% | ||||||||
53,350 | Ares Commercial Real Estate | |||||||
Corp., REIT | 612,458 | |||||||
Real Estate Management and Development—0.0% | ||||||||
520 | RE/MAX Holdings, Inc., Class A† . | 17,810 | ||||||
Road and Rail—0.4% | ||||||||
5,354 | Kansas City Southern | 653,349 | ||||||
Semiconductors and Semiconductor Equipment—14.1% | ||||||||
21,225 | Altera Corp. | 784,052 | ||||||
100,868 | Atmel Corp.* | 846,787 | ||||||
116,449 | Cypress Semiconductor Corp.†,* | 1,662,892 | ||||||
74,480 | Fairchild Semiconductor | |||||||
International, Inc.* | 1,257,222 | |||||||
55,167 | Integrated Device Technology, Inc.* | 1,081,273 | ||||||
30,786 | International Rectifier Corp.* | 1,228,361 | ||||||
36,619 | Maxim Integrated Products, Inc. | 1,167,048 | ||||||
6,501 | Microsemi Corp.* | 184,498 | ||||||
48,952 | Monolithic Power Systems, Inc. | 2,434,872 | ||||||
85,571 | ON Semiconductor Corp.* | 866,834 | ||||||
288,455 | QuickLogic Corp.†,* | 905,749 | ||||||
20,000 | Semtech Corp.* | 551,400 | ||||||
10,421 | Silicon Laboratories, Inc.* | 496,248 | ||||||
35,729 | Skyworks Solutions, Inc. | 2,597,856 | ||||||
53,637 | SunEdison, Inc.†,* | 1,046,458 | ||||||
18,931 | Synaptics, Inc.†,* | 1,303,210 | ||||||
50,386 | Tessera Technologies, Inc. | 1,801,803 | ||||||
138,252 | TriQuint Semiconductor, Inc.* | 3,808,843 | ||||||
84,141 | Ultratech, Inc.†,* | 1,561,657 | ||||||
25,587,063 |
The accompanying notes are an integral part of these financial statements.
24 |
M Capital Appreciation Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Software—6.5% | ||||||||
22,277 | Advent Software, Inc.† | $ | 682,567 | |||||
35,662 | Electronic Arts, Inc.* | 1,676,649 | ||||||
17,114 | Ellie Mae, Inc.†,* | 690,037 | ||||||
41,017 | FleetMatics Group Plc†,* | 1,455,693 | ||||||
42,164 | Fortinet, Inc.* | 1,292,748 | ||||||
91,149 | Rovi Corp.* | 2,059,056 | ||||||
55,527 | Seachange International, Inc.* | 354,262 | ||||||
71,919 | Silver Spring Networks, Inc.†,* | 606,277 | ||||||
59,278 | Tangoe, Inc.†,* | 772,393 | ||||||
83,276 | TiVo, Inc.* | 985,988 | ||||||
420,014 | Zynga, Inc., Class A†,* | 1,117,237 | ||||||
11,692,907 | ||||||||
Specialty Retail—1.6% | ||||||||
37,326 | Chico’s FAS, Inc. | 605,055 | ||||||
41,400 | MarineMax, Inc.* | 830,070 | ||||||
57,079 | Select Comfort Corp.* | 1,542,845 | ||||||
2,977,970 | ||||||||
Textiles, Apparel and Luxury | ||||||||
Goods—0.2% | ||||||||
19,313 | Vera Bradley, Inc.†,* | 393,599 | ||||||
Trading Companies and Distributors—1.9% | ||||||||
54,186 | MRC Global, Inc.* | 820,918 | ||||||
60,139 | Stock Building Supply | |||||||
Holdings, Inc.* | 921,329 | |||||||
15,298 | Watsco, Inc. | 1,636,886 | ||||||
3,379,133 | ||||||||
Wireless Telecommunication | ||||||||
Services—0.7% | ||||||||
10,804 | SBA Communications Corp., | |||||||
Class A* | 1,196,651 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $103,422,611) | 180,017,008 |
Par | ||||||||||||||
Amount | Yield | Maturity | ||||||||||||
SHORT-TERM INVESTMENTS—17.4% | ||||||||||||||
$ | 964,852 | State Street Bank and Trust Co. (Euro Time Deposit) | 0.010% | 01/02/2015 | 964,852 |
Shares | ||||||||||||||||
30,486,938 | State Street Navigator Securities Lending Prime Portfolio (Money Market)†† | 0.193% | 30,486,938 | |||||||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $31,451,790) | 31,451,790 | |||||||||||||||
TOTAL INVESTMENTS AT VALUE—116.8% | ||||||||||||||||
(Cost $134,874,401) | 211,468,798 | |||||||||||||||
Liabilities in Excess of Other Assets—(16.8)% | (30,488,401 | ) | ||||||||||||||
NET ASSETS—100.0% | $ | 180,980,397 |
Notes to the Schedule of Investments:
ADR—American Depositary Receipt
REIT—Real Estate Investment Trust
* | Non-income producing security |
† | Denotes all or a portion of security on loan (Note 1) |
†† | Represents collateral received from securities lending transactions |
Percentages indicated are based on net assets.
The accompanying notes are an integral part of these financial statements.
25 |
M Capital Appreciation Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2014
At December 31, 2014, industry sector diversification of the M Capital Appreciation Fund’s investments as a percentage of net assets was as follows:
Percentage | ||||
of Net | ||||
Summary of Sector Classifications | Assets | |||
Information Technology | 31.9 | % | ||
Industrials | 20.6 | % | ||
Health Care | 12.2 | % | ||
Materials | 12.1 | % | ||
Financials | 7.6 | % | ||
Consumer Discretionary | 7.1 | % | ||
Energy | 5.1 | % | ||
Telecommunication Services | 2.8 | % | ||
Short-Term Investments | 17.4 | % | ||
Total | 116.8 | % |
The accompanying notes are an integral part of these financial statements.
26 |
M Large Cap Value Fund
SCHEDULE OF INVESTMENTS
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
COMMON STOCKS—97.5% | ||||||||
Aerospace & Defense—3.5% | ||||||||
2,030 | Alliant Techsystems, Inc.† | $ | 235,987 | |||||
22,300 | Exelis, Inc. | 390,919 | ||||||
3,280 | General Dynamics Corp. | 451,394 | ||||||
3,740 | Huntington Ingalls Industries, Inc. | 420,600 | ||||||
3,100 | Lockheed Martin Corp. | 596,967 | ||||||
5,700 | Northrop Grumman Corp. | 840,123 | ||||||
2,935,990 | ||||||||
Air Freight and Logistics—1.4% | ||||||||
6,470 | FedEx Corp. | 1,123,580 | ||||||
Airlines—3.8% | ||||||||
15,420 | Alaska Air Group, Inc. | 921,499 | ||||||
24,640 | Delta Air Lines, Inc. | 1,212,042 | ||||||
23,400 | Southwest Airlines Co. | 990,288 | ||||||
3,123,829 | ||||||||
Auto Components—2.5% | ||||||||
4,790 | Delphi Automotive Plc . | 348,329 | ||||||
8,330 | Lear Corp. | 817,006 | ||||||
8,510 | Magna International, Inc. | 924,952 | ||||||
2,090,287 | ||||||||
Beverages—0.6% | ||||||||
6,470 | Dr Pepper Snapple Group, Inc. | 463,770 | ||||||
Biotechnology—2.4% | ||||||||
2,300 | Biogen Idec, Inc.* | 780,735 | ||||||
4,170 | Gilead Sciences, Inc.* | 393,064 | ||||||
6,200 | United Therapeutics Corp.* | 802,838 | ||||||
1,976,637 | ||||||||
Capital Markets—2.6% | ||||||||
5,580 | Ameriprise Financial, Inc. | 737,955 | ||||||
3,900 | Goldman Sachs Group, Inc. (The) | 755,937 | ||||||
11,880 | Morgan Stanley . | 460,944 | ||||||
2,750 | T. Rowe Price Group, Inc. | 236,115 | ||||||
2,190,951 | ||||||||
Chemicals—1.9% | ||||||||
2,920 | CF Industries Holdings, Inc. | 795,817 | ||||||
9,390 | LyondellBasell Industries NV, | |||||||
Class A | 745,472 | |||||||
1,541,289 | ||||||||
Commercial Banks—6.0% | ||||||||
37,080 | Citigroup, Inc. | 2,006,399 | ||||||
21,010 | Huntington Bancshares, Inc./OH | 221,025 | ||||||
44,230 | JPMorgan Chase & Co. | 2,767,913 | ||||||
4,995,337 | ||||||||
Computers and Peripherals—2.9% | ||||||||
7,360 | Apple, Inc. | 812,397 | ||||||
11,430 | Lexmark International, Inc.† | 471,716 | ||||||
10,420 | Western Digital Corp. | 1,153,494 | ||||||
2,437,607 | ||||||||
Consumer Finance—3.1% | ||||||||
13,830 | Ally Financial, Inc.* | 326,665 | ||||||
14,270 | Capital One Financial Corp. | 1,177,988 | ||||||
16,220 | Discover Financial Services | 1,062,248 | ||||||
2,566,901 | ||||||||
Diversified Financial Services—4.1% | ||||||||
3,370 | Berkshire Hathaway, Inc., Class B* | 506,005 | ||||||
7,900 | CBOE Holdings, Inc. | 501,018 | ||||||
9,660 | McGraw Hill Financial, Inc. | 859,547 | ||||||
8,600 | Moody’s Corp. | 823,966 | ||||||
17,200 | Voya Financial, Inc. | 728,936 | ||||||
3,419,472 | ||||||||
Diversified Telecommunication | ||||||||
Services—2.3% | ||||||||
37,500 | AT&T, Inc. | 1,259,625 | ||||||
17,190 | CenturyLink, Inc. | 680,380 | ||||||
1,940,005 | ||||||||
Electric Utilities—3.5% | ||||||||
13,650 | American Electric Power Co., Inc. | 828,828 | ||||||
17,460 | Edison International | 1,143,281 | ||||||
11,000 | Entergy Corp. | 962,280 | ||||||
2,934,389 | ||||||||
Electronic Equipment, Instruments & | ||||||||
Components—1.8% | ||||||||
6,740 | Arrow Electronics, Inc.* | 390,179 | ||||||
460 | Avnet, Inc. | 19,789 | ||||||
65,140 | Flextronics International, Ltd.* | 728,265 | ||||||
15,260 | Jabil Circuit, Inc. | 333,126 | ||||||
1,471,359 |
The accompanying notes are an integral part of these financial statements.
27 |
M Large Cap Value Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Energy Equipment and Services—4.1% | ||||||||
8,270 | Baker Hughes, Inc. | $ | 463,699 | |||||
17,600 | Cameron International Corp.* | 879,120 | ||||||
12,940 | Halliburton Co. | 508,930 | ||||||
17,190 | Nabors Industries, Ltd. | 223,126 | ||||||
16,500 | Oil States International, Inc.* | 806,850 | ||||||
22,420 | Patterson-UTI Energy, Inc. | 371,948 | ||||||
8,070 | Superior Energy Services, Inc. | 162,611 | ||||||
3,416,284 | ||||||||
Food and Staples Retailing—1.9% | ||||||||
14,890 | Kroger Co. (The) | 956,087 | ||||||
7,620 | Wal-Mart Stores, Inc | 654,406 | ||||||
1,610,493 | ||||||||
Food Products—2.9% | ||||||||
4,500 | Archer-Daniels-Midland Co | 234,000 | ||||||
10,720 | Bunge, Ltd. | 974,555 | ||||||
11,080 | Pilgrim’s Pride Corp.†,* | 363,313 | ||||||
21,710 | Tyson Foods, Inc., Class A | 870,354 | ||||||
2,442,222 | ||||||||
Health Care Providers and Services—11.5% | ||||||||
7,280 | Aetna, Inc. | 646,682 | ||||||
10,370 | AmerisourceBergen Corp. | 934,959 | ||||||
7,270 | Anthem, Inc. | 913,621 | ||||||
12,800 | Cardinal Health, Inc. | 1,033,344 | ||||||
6,100 | Cigna Corp | 627,751 | ||||||
11,880 | Express Scripts Holding Co.* | 1,005,880 | ||||||
12,940 | HCA Holdings, Inc.* | 949,667 | ||||||
11,800 | Health Net Inc/CA* | 631,654 | ||||||
7,200 | Humana, Inc.† | 1,034,136 | ||||||
4,430 | McKesson Corp | 919,579 | ||||||
12,230 | Omnicare, Inc. | 891,934 | ||||||
9,589,207 | ||||||||
Household Durables—1.2% | ||||||||
5,110 | Whirlpool Corp | 990,011 | ||||||
Independent Power Producers and Energy Traders—2.3% | ||||||||
60,450 | AES Corp./VA | 832,396 | ||||||
39,800 | Calpine Corp.* | 880,774 | ||||||
6,120 | NRG Energy, Inc. | 164,934 | ||||||
1,878,104 | ||||||||
Insurance—11.2% | ||||||||
16,570 | Allstate Corp. (The) | 1,164,042 | ||||||
26,860 | American International Group, Inc. | 1,504,429 | ||||||
7,060 | Assurant, Inc. | 483,116 | ||||||
13,200 | Assured Guaranty, Ltd | 343,068 | ||||||
9,590 | Axis Capital Holdings, Ltd | 489,953 | ||||||
7,510 | Chubb Corp | 777,060 | ||||||
3,600 | Everest Re Group, Ltd | 613,080 | ||||||
11,700 | Lincoln National Corp | 674,739 | ||||||
4,520 | PartnerRe, Ltd | 515,868 | ||||||
5,550 | Reinsurance Group of America, Inc. | 486,291 | ||||||
4,870 | RenaissanceRe Holdings, Ltd.† | 473,461 | ||||||
11,170 | Travelers Cos., Inc. (The) | 1,182,344 | ||||||
16,490 | Unum Group | 575,171 | ||||||
9,282,622 | ||||||||
Internet Software and Services—0.1% | ||||||||
2,200 | VeriSign, Inc.†,* | 125,400 | ||||||
IT Services—1.6% | ||||||||
9,390 | Amdocs, Ltd.† | 438,090 | ||||||
3,840 | Computer Sciences Corp | 242,112 | ||||||
34,700 | Western Union Co.† | 621,477 | ||||||
1,301,679 | ||||||||
Machinery—0.5% | ||||||||
13,470 | Trinity Industries, Inc.† | 377,295 | ||||||
Media—0.3% | ||||||||
10,640 | Cablevision Systems Corp.† | 219,610 | ||||||
Metals and Mining—1.1% | ||||||||
12,050 | Alcoa, Inc. | 190,270 | ||||||
28,300 | United States Steel Corp.† | 756,742 | ||||||
947,012 | ||||||||
Multi-Utilities—0.2% | ||||||||
3,000 | PG&E Corp | 159,720 | ||||||
Multiline Retail—1.1% | ||||||||
13,530 | Macy’s, Inc. | 889,598 |
The accompanying notes are an integral part of these financial statements.
28 |
M Large Cap Value Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2014
Value | ||||||||
Shares | (Note 1) | |||||||
Oil, Gas and Consumable | ||||||||
Fuels—6.7% | ||||||||
3,630 | Chevron Corp | $ | 407,213 | |||||
16,660 | Exxon Mobil Corp | 1,540,217 | ||||||
9,310 | Marathon Petroleum Corp | 840,321 | ||||||
4,430 | Phillips 66 | 317,631 | ||||||
7,450 | SM Energy Co.† | 287,421 | ||||||
11,800 | Tesoro Corp | 877,330 | ||||||
21,360 | Valero Energy Corp | 1,057,320 | ||||||
6,300 | Western Refining, Inc. | 238,014 | ||||||
5,565,467 | ||||||||
Real Estate Management and | ||||||||
Development—0.8% | ||||||||
19,500 | CBRE Group, Inc.* | 667,875 | ||||||
Road and Rail—1.0% | ||||||||
12,500 | Avis Budget Group, Inc.†,* | 829,125 | ||||||
Semiconductors and Semiconductor | ||||||||
Equipment—2.9% | ||||||||
48,100 | Intel Corp.† | 1,745,549 | ||||||
19,500 | Micron Technology, Inc.* | 682,695 | ||||||
2,428,244 | ||||||||
Software—0.2% | ||||||||
4,960 | Take-Two Interactive | |||||||
Software, Inc.†,* | 139,029 | |||||||
Specialty Retail—1.1% | ||||||||
16,040 | Foot Locker, Inc. | 901,127 | ||||||
Thrifts and Mortgage | ||||||||
Finance—0.5% | ||||||||
25,790 | Radian Group, Inc.† | 431,209 | ||||||
Tobacco—1.9% | ||||||||
4,340 | Altria Group, Inc. | 213,832 | ||||||
14,620 | Lorillard, Inc. | 920,183 | ||||||
5,410 | Philip Morris International, Inc. | 440,644 | ||||||
1,574,659 | ||||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $69,980,634) | 80,977,395 | |||||||
Exchange-Traded | ||||||||
Fund—0.9% | ||||||||
7,540 | iShares Russell 1000 Value ETF | |||||||
(Cost $800,027) | 787,176 |
Par | ||||||||||||||
Amount | Yield | Maturity | ||||||||||||
SHORT-TERM INVESTMENTS—10.4% | ` | |||||||||||||
$ | 1,993,848 | State Street Bank and Trust Co. (Euro Time Deposit) | 0.010% | 01/02/2015 | 1,993,848 |
Shares | ||||||||||||||||
6,617,512 | State Street Navigator Securities Lending Prime Portfolio (Money Market)†† | 0.193% | 6,617,512 | |||||||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $8,611,360) | 8,611,360 | |||||||||||||||
TOTAL INVESTMENTS AT VALUE—108.8% | ||||||||||||||||
(Cost $79,392,021) | 90,375,931 | |||||||||||||||
Liabilities in Excess of Other Assets—(8.8)% | (7,341,015 | ) | ||||||||||||||
NET ASSETS—100.0% | $ | 83,034,916 |
Notes to the Schedule of Investments:
* | Non-income producing security |
† | Denotes all or a portion of security on loan (Note 1) |
†† | Represents collateral received from securities lending transactions |
Percentages indicated are based on net assets.
The accompanying notes are an integral part of these financial statements.
29 |
M Large Cap Value Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2014
At December 31, 2014, industry sector diversification of the M Large Cap Value Fund’s investments as a percentage of net assets was as follows:
Percentage | ||||
of Net | ||||
Summary of Sector Classifications | Assets | |||
Financials | 28.3 | % | ||
Health Care | 13.9 | % | ||
Energy | 10.8 | % | ||
Industrials | 10.2 | % | ||
Information Technology | 9.5 | % | ||
Consumer Staples | 7.3 | % | ||
Consumer Discretionary | 6.2 | % | ||
Utilities | 6.0 | % | ||
Materials | 3.0 | % | ||
Telecommunication Services | 2.3 | % | ||
Exchange-traded | 0.9 | % | ||
Short-Term Investments | 10.4 | % | ||
Total | 108.8 | % |
The accompanying notes are an integral part of these financial statements.
30 |
M Fund, Inc.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2014
M Capital | ||||||||||||||||
M International | M Large Cap | Appreciation | M Large Cap | |||||||||||||
Equity Fund | Growth Fund | Fund | Value Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments, at value (Note 1)*/**—see accompanying Schedules of Investments | $ | 219,111,224 | $ | 192,333,166 | $ | 211,468,798 | $ | 90,375,931 | ||||||||
Cash denominated in foreign currencies*** | 496 | — | — | — | ||||||||||||
Receivable from: | ||||||||||||||||
Securities sold | 29,884 | 1,687,924 | 507,069 | 109,564 | ||||||||||||
Capital stock subscriptions | 112,784 | 22,676 | 15,991 | 46,021 | ||||||||||||
Dividends and interest | 441,258 | 54,767 | 72,127 | 61,505 | ||||||||||||
Prepaid expenses | 97 | 60 | 64 | 30 | ||||||||||||
Total assets | 219,695,743 | 194,098,593 | 212,064,049 | 90,593,051 | ||||||||||||
Liabilities: | ||||||||||||||||
Payable for: | ||||||||||||||||
Securities purchased | 136,637 | 1,297,712 | 371,221 | 860,490 | ||||||||||||
Capital stock redemptions | 283,829 | 27,771 | 39,786 | 11,791 | ||||||||||||
Investment Adviser, net (Note 2) | 132,577 | 89,963 | 135,191 | 31,643 | ||||||||||||
Payable upon return of securities loaned (Note 1) | 1,549,019 | 14,729,915 | 30,486,938 | 6,617,512 | ||||||||||||
M Financial Group-compliance expense (Note 2) | 4,707 | 3,456 | 3,505 | 1,704 | ||||||||||||
Accrued expenses and other liabilities | 63,996 | 45,474 | 47,011 | 34,995 | ||||||||||||
Total liabilities | 2,170,765 | 16,194,291 | 31,083,652 | 7,558,135 | ||||||||||||
Net assets | $ | 217,524,978 | $ | 177,904,302 | $ | 180,980,397 | $ | 83,034,916 | ||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $ | 333,814,789 | $ | 128,008,432 | $ | 102,471,059 | $ | 70,011,088 | ||||||||
Undistributed (distributions in excess of) net investment income | (1,820,226 | ) | 49,029 | — | — | |||||||||||
Accumulated net realized gain (loss) on investments | (129,016,958 | ) | 7,320,637 | 1,914,941 | 2,039,918 | |||||||||||
Net unrealized appreciation on investments and foreign currency | 14,547,373 | 42,526,204 | 76,594,397 | 10,983,910 | ||||||||||||
Net assets | $ | 217,524,978 | $ | 177,904,302 | $ | 180,980,397 | $ | 83,034,916 | ||||||||
Shares outstanding# | 18,239,934 | 7,427,750 | 5,988,596 | 6,215,106 | ||||||||||||
Net asset value, offering price and redemption price per share | $ | 11.93 | $ | 23.95 | $ | 30.22 | $ | 13.36 | ||||||||
* Cost of investments | $ | 204,525,278 | $ | 149,806,962 | $ | 134,874,401 | $ | 79,392,021 | ||||||||
** Includes securities on loan with values of | $ | 1,484,315 | $ | 14,261,523 | $ | 29,557,276 | $ | 6,399,535 | ||||||||
*** Cost of cash denominated in foreign currencies | $ | 498 | $ | — | $ | — | $ | — |
# | The number of authorized shares with a par value of $0.001 per share, for each of the M International Equity Fund, the M Large Cap Growth Fund, the M Capital Appreciation Fund and the M Large Cap Value Fund is 100,000,000. |
The accompanying notes are an integral part of these financial statements.
31 |
M Fund, Inc.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2014
M Capital | ||||||||||||||||
M International | M Large Cap | Appreciation | M Large Cap | |||||||||||||
Equity Fund | Growth Fund | Fund | Value Fund | |||||||||||||
Investment income: | ||||||||||||||||
Interest | $ | 442 | $ | 135 | $ | 385 | $ | 93 | ||||||||
Securities lending income | 154,349 | 5,897 | 298,896 | 10,439 | ||||||||||||
Dividends* | 7,227,570 | 1,472,604 | 1,026,283 | 1,532,551 | ||||||||||||
Total investment income | 7,382,361 | 1,478,636 | 1,325,564 | 1,543,083 | ||||||||||||
Expenses: | ||||||||||||||||
Investment Advisory fee (Note 2) | 1,869,116 | 1,064,817 | 1,637,623 | 401,545 | ||||||||||||
Custody, fund accounting, transfer agent and administration fees | 467,489 | 174,021 | 196,994 | 131,223 | ||||||||||||
Professional fees | 27,824 | 26,003 | 25,259 | 23,272 | ||||||||||||
Printing and shareholder reporting | 17,496 | 15,402 | 15,865 | 12,810 | ||||||||||||
Directors’ fees and expenses | 50,563 | 40,364 | 38,304 | 17,337 | ||||||||||||
Compliance expenses (Note 2) | 19,901 | 13,194 | 13,478 | 6,658 | ||||||||||||
Other | 39,333 | 24,631 | 25,223 | 12,669 | ||||||||||||
Total expenses | 2,491,722 | 1,358,432 | 1,952,746 | 605,514 | ||||||||||||
Net investment income (loss) | 4,890,639 | 120,204 | (627,182 | ) | 937,569 | |||||||||||
Realized and unrealized gain (loss): | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investment transactions | 16,586,929 | 22,539,682 | 19,187,633 | 10,109,251 | ||||||||||||
Foreign currency transactions | (25,442 | ) | — | — | — | |||||||||||
Net realized gain | 16,561,487 | 22,539,682 | 19,187,633 | 10,109,251 | ||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | (36,520,130 | ) | (4,687,351 | ) | 2,533,556 | (2,755,060 | ) | |||||||||
Foreign currency and net other assets | (43,814 | ) | — | — | — | |||||||||||
Net change in unrealized appreciation (depreciation) | (36,563,944 | ) | (4,687,351 | ) | 2,533,556 | (2,755,060 | ) | |||||||||
Net realized and unrealized gain (loss) | (20,002,457 | ) | 17,852,331 | 21,721,189 | 7,354,191 | |||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (15,111,818 | ) | $ | 17,972,535 | $ | 21,094,007 | $ | 8,291,760 | |||||||
* Net of foreign taxes withheld of: | $ | 780,372 | $ | 36,696 | $ | 8,443 | $ | 1,654 |
The accompanying notes are an integral part of these financial statements.
32 |
M Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
M International | M Large Cap | |||||||||||||||
Equity Fund | Growth Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Increase (decrease) in net assets from: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 4,890,639 | $ | 4,567,039 | $ | 120,204 | $ | 402,078 | ||||||||
Net realized gain on investments and foreign currency transactions | 16,561,487 | 2,565,892 | 22,539,682 | 25,630,644 | ||||||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (36,563,944 | ) | 35,293,904 | (4,687,351 | ) | 24,652,140 | ||||||||||
Net increase (decrease) in net assets resulting from operations | (15,111,818 | ) | 42,426,835 | 17,972,535 | 50,684,862 | |||||||||||
Distributions to shareholders: | ||||||||||||||||
From net investment income | (5,364,651 | ) | (6,811,012 | ) | (71,175 | ) | (922,797 | ) | ||||||||
From net realized capital gains | — | — | (22,598,397 | ) | (8,763,576 | ) | ||||||||||
Total distributions to shareholders | (5,364,651 | ) | (6,811,012 | ) | (22,669,572 | ) | (9,686,373 | ) | ||||||||
Fund share transactions (Note 4): | ||||||||||||||||
Proceeds from shares sold | 22,905,846 | 56,854,525 | 22,772,014 | 33,315,175 | ||||||||||||
Net asset value of shares issued on reinvestment of distributions | 5,364,651 | 6,811,012 | 22,669,572 | 9,686,373 | ||||||||||||
Cost of shares repurchased | (92,009,217 | ) | (40,541,813 | ) | (46,104,278 | ) | (43,009,447 | ) | ||||||||
Net increase (decrease) in net assets resulting from Fund share transactions | (63,738,720 | ) | 23,123,724 | (662,692 | ) | (7,899 | ) | |||||||||
Total change in net assets | (84,215,189 | ) | 58,739,547 | (5,359,729 | ) | 40,990,590 | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 301,740,167 | 243,000,620 | 183,264,031 | 142,273,441 | ||||||||||||
End of year* | $ | 217,524,978 | $ | 301,740,167 | $ | 177,904,302 | $ | 183,264,031 | ||||||||
* Including undistributed (distributions in excess of) net investment income of: | $ | (1,820,226 | ) | $ | (2,253,283 | ) | $ | 49,029 | $ | 19,585 |
The accompanying notes are an integral part of these financial statements.
33 |
M Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
M Capital | M Large Cap | |||||||||||||||
Appreciation Fund | Value Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Increase (decrease) in net assets from: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (627,182 | ) | $ | (375,993 | ) | $ | 937,569 | $ | 1,208,542 | ||||||
Net realized gain on investments and foreign currency transactions | 19,187,633 | 16,327,441 | 10,109,251 | 22,168,046 | ||||||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | 2,533,556 | 38,599,102 | (2,755,060 | ) | 62,513 | |||||||||||
Net increase (decrease) in net assets resulting from operations | 21,094,007 | 54,550,550 | 8,291,760 | 23,439,101 | ||||||||||||
Distributions to shareholders: | ||||||||||||||||
From net investment income | — | — | (937,026 | ) | (2,191,583 | ) | ||||||||||
From net realized capital gains | (17,536,408 | ) | (16,224,308 | ) | (8,902,580 | ) | (7,280,727 | ) | ||||||||
Total distributions to shareholders | (17,536,408 | ) | (16,224,308 | ) | (9,839,606 | ) | (9,472,310 | ) | ||||||||
Fund share transactions (Note 4): | ||||||||||||||||
Proceeds from shares sold | 19,882,302 | 20,345,350 | 15,132,800 | 17,210,580 | ||||||||||||
Net asset value of shares issued on reinvestment of distributions | 17,536,408 | 16,224,308 | 9,839,606 | 9,472,310 | ||||||||||||
Cost of shares repurchased | (47,102,523 | ) | (29,712,140 | ) | (33,422,886 | ) | (15,843,661 | ) | ||||||||
Net increase (decrease) in net assets resulting from Fund share transactions | (9,683,813 | ) | 6,857,518 | (8,450,480 | ) | 10,839,229 | ||||||||||
Total change in net assets | (6,126,214 | ) | 45,183,760 | (9,998,326 | ) | 24,806,020 | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 187,106,611 | 141,922,851 | 93,033,242 | 68,227,222 | ||||||||||||
End of year* | $ | 180,980,397 | $ | 187,106,611 | $ | 83,034,916 | $ | 93,033,242 | ||||||||
* Including undistributed (distributions in excess of) net investment income of: | $ | — | $ | — | $ | — | $ | 1,307 |
The accompanying notes are an integral part of these financial statements.
34 |
M Fund, Inc.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
M International Equity Fund | ||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of year | $ | 13.15 | $ | 11.57 | $ | 9.78 | $ | 11.72 | $ | 11.57 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income‡ | 0.24 | 0.20 | 0.19 | 0.30 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | (1.16 | ) | 1.68 | 1.83 | (1.89 | ) | 0.19 | |||||||||||||
Total from investment operations | (0.92 | ) | 1.88 | 2.02 | (1.59 | ) | 0.53 | |||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.30 | ) | (0.30 | ) | (0.23 | ) | (0.35 | ) | (0.38 | ) | ||||||||||
Total distributions | (0.30 | ) | (0.30 | ) | (0.23 | ) | (0.35 | ) | (0.38 | ) | ||||||||||
Net asset value, end of year | $ | 11.93 | $ | 13.15 | $ | 11.57 | $ | 9.78 | $ | 11.72 | ||||||||||
Total Return+ | (7.06 | )% | 16.32 | % | 20.68 | % | (13.56 | )% | 4.61 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000’s) | $ | 217,525 | $ | 301,740 | $ | 243,001 | $ | 232,953 | $ | 295,324 | ||||||||||
Net expenses to average daily net assets | 0.93 | % | 0.94 | % | 0.95 | % | 0.93 | % | 0.91 | % | ||||||||||
Net investment income to average daily net assets | 1.83 | % | 1.65 | % | 1.75 | % | 2.69 | % | 3.02 | % | ||||||||||
Without the waiver/reimbursement of expenses by the adviser, the ratios of net expenses and net investment income to average daily net assets would have been: | ||||||||||||||||||||
Expenses | N/A | N/A | 0.97 | % | 0.95 | % | 0.92 | % | ||||||||||||
Net investment income | N/A | N/A | 1.73 | % | 2.67 | % | 3.01 | % | ||||||||||||
Portfolio turnover rate | 15 | % | 14 | % | 15 | % | 103%¤ | 11 | % |
‡ | Calculation based on average shares outstanding. |
+ | Does not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower. |
¤ | The increase in portfolio turnover rate during the year was primarily attributable to portfolio adjustments made in response to a change in the Fund’s sub-adviser. |
The accompanying notes are an integral part of these financial statements.
35 |
M Fund, Inc.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
M Large Cap Growth Fund | ||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of year | $ | 24.74 | $ | 19.20 | $ | 16.10 | $ | 16.23 | $ | 13.24 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)‡ | 0.02 | 0.05 | 0.08 | 0.01 | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.45 | 6.86 | 3.03 | (0.14 | ) | 3.05 | ||||||||||||||
Total from investment operations | 2.47 | 6.91 | 3.11 | (0.13 | ) | 3.04 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.01 | ) | (0.12 | ) | (0.01 | ) | — | (0.05 | ) | |||||||||||
From net realized capital gains | (3.25 | ) | (1.25 | ) | — | — | — | |||||||||||||
Total distributions | (3.26 | ) | (1.37 | ) | (0.01 | ) | — | (0.05 | ) | |||||||||||
Net asset value, end of year | $ | 23.95 | $ | 24.74 | $ | 19.20 | $ | 16.10 | $ | 16.23 | ||||||||||
Total Return+ | 10.21 | % | 36.15 | % | 19.31 | % | (0.80 | )% | 23.06 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000’s) | $ | 177,904 | $ | 183,264 | $ | 142,273 | $ | 101,129 | $ | 110,644 | ||||||||||
Net expenses to average daily net assets | 0.75 | % | 0.77 | % | 0.80 | % | 0.83 | % | 0.83 | % | ||||||||||
Net investment income (loss) to average daily net assets | 0.07 | % | 0.25 | % | 0.42 | % | 0.06 | % | (0.11 | )% | ||||||||||
Portfolio turnover rate | 46 | % | 74 | % | 67 | % | 78 | % | 81 | % |
‡ | Calculation based on average shares outstanding. |
+ | Does not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower. |
The accompanying notes are an integral part of these financial statements.
36 |
M Fund, Inc.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
M Capital Appreciation Fund | ||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of year | $ | 29.71 | $ | 23.38 | $ | 21.33 | $ | 25.94 | $ | 20.47 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)‡ | (0.11 | ) | (0.06 | ) | 0.02 | (0.09 | ) | (0.02 | ) | |||||||||||
Net realized and unrealized gain (loss) on investments | 3.81 | 9.13 | 3.67 | (1.77 | ) | 5.54 | ||||||||||||||
Total from investment operations | 3.70 | 9.07 | 3.69 | (1.86 | ) | 5.52 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | — | — | (0.08 | ) | — | (0.05 | ) | |||||||||||||
From net realized capital gains | (3.19 | ) | (2.74 | ) | (1.56 | ) | (2.75 | ) | — | |||||||||||
Total distributions | (3.19 | ) | (2.74 | ) | (1.64 | ) | (2.75 | ) | (0.05 | ) | ||||||||||
Net asset value, end of year | $ | 30.22 | $ | 29.71 | $ | 23.38 | $ | 21.33 | $ | 25.94 | ||||||||||
Total Return+ | 12.42 | % | 39.20 | % | 17.43 | % | (7.22 | )% | 27.00 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000’s) | $ | 180,980 | $ | 187,107 | $ | 141,923 | $ | 132,680 | $ | 156,460 | ||||||||||
Net expenses to average daily net assets | 1.07 | % | 1.07 | % | 1.10 | % | 1.10 | % | 1.10 | % | ||||||||||
Net investment income (loss) to average daily net assets | (0.34 | )% | (0.23 | )% | 0.10 | % | (0.35 | )% | (0.09 | )% | ||||||||||
Portfolio turnover rate | 17 | % | 18 | % | 21 | % | 35 | % | 22 | % |
‡ | Calculation based on average shares outstanding. |
+ | Does not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower. |
The accompanying notes are an integral part of these financial statements.
37 |
M Fund, Inc.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
M Large Cap Value Fund | ||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of year | $ | 13.77 | $ | 11.44 | $ | 9.84 | $ | 10.30 | $ | 9.50 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income‡ | 0.15 | 0.20 | 0.16 | 0.08 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.20 | 3.68 | 1.53 | (0.50 | ) | 0.84 | ||||||||||||||
Total from investment operations | 1.35 | 3.88 | 1.69 | (0.42 | ) | 0.87 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.17 | ) | (0.37 | ) | (0.09 | ) | (0.04 | ) | (0.07 | ) | ||||||||||
From net realized capital gains | (1.59 | ) | (1.18 | ) | — | — | — | |||||||||||||
Total distributions | (1.76 | ) | (1.55 | ) | (0.09 | ) | (0.04 | ) | (0.07 | ) | ||||||||||
Net asset value, end of year | $ | 13.36 | $ | 13.77 | $ | 11.44 | $ | 9.84 | $ | 10.30 | ||||||||||
Total Return+ | 9.68 | % | 34.22 | % | 17.29 | % | (4.11 | )% | 9.27 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000’s) | $ | 83,035 | $ | 93,033 | $ | 68,227 | $ | 65,188 | $ | 78,650 | ||||||||||
Net expenses to average daily net assets | 0.68 | % | 0.61 | % | 0.64 | % | 0.89 | % | 0.88 | % | ||||||||||
Net investment income to average daily net assets | 1.05 | % | 1.52 | % | 1.47 | % | 0.81 | % | 0.34 | % | ||||||||||
Without the waiver/reimbursement of expenses by the adviser, the ratios of net expenses and net investment income to average daily net assets would have been: | ||||||||||||||||||||
Expenses | N/A | 0.78 | % | 0.93 | % | 0.91 | % | 0.90 | % | |||||||||||
Net investment income | N/A | 1.35 | % | 1.18 | % | 0.79 | % | 0.32 | % | |||||||||||
Portfolio turnover rate | 80 | % | 154%¤ | 41 | % | 35 | % | 49 | % |
‡ | Calculation based on average shares outstanding. |
+ | Does not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Fund may pay. If these additional fees were reflected, performance would have been lower. |
¤ | The increase in portfolio turnover rate during the year was primarily attributable to portfolio adjustments made in response to a change in the Fund’s sub-adviser. |
The accompanying notes are an integral part of these financial statements.
38 |
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. As of December 31, 2014, the Company consisted of four separate diversified investment portfolios: M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund (each singularly a “Fund” or collectively the “Funds”), each of which is, in effect, a separate mutual fund.
The Company offers shares of the Funds to certain insurance company separate accounts, which serve as the underlying funding vehicles for certain variable annuity and variable life insurance policies. These annuities and insurance policies are offered by members of M Financial Holdings Incorporated (“M Financial Group”) and are issued by certain life insurance companies. Shares of the Funds may also be sold to qualified pension and retirement plans.
M International Equity Fund seeks long-term capital appreciation with a strategy of normally investing at least 80% of its total assets in equity securities of issuers located in at least three countries other than the United States, with a focus on stocks with capitalizations of $1 billion or more. M Large Cap Growth Fund seeks long-term capital appreciation with a strategy of normally investing at least 80% of its total assets in large-cap equity securities, including common stocks, preferred stocks and American Depositary Receipts, with capitalizations of $10 billion or more. M Capital Appreciation Fund seeks maximum capital appreciation with a strategy of investing in common stocks of U.S. companies of all sizes, with emphasis on stocks of companies with capitalizations that are consistent with capitalization of those companies found in the Russell 2500 Index. M Large Cap Value Fund seeks long-term capital appreciation with a strategy of normally investing at least 80% of its total assets in the large-capitalization segment of the U.S. stock market (defined by the Fund’s sub-adviser as $5 billion or more), including equity securities of U.S. issuers.
1. | Significant Accounting Policies |
The following is a summary of significant accounting policies for the Funds. Such policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for investment companies and are consistently followed by the Funds in the preparation of the financial statements.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Portfolio Valuation
Equity securities and other similar investments traded on a recognized U.S. securities exchange are valued at the last sale price on the exchange on which the securities are traded. If no sale occurs, equity securities and other similar investments traded on a U.S. exchange are valued at the most recent bid price. Equity securities and other similar investments traded on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) are valued at the NASDAQ Official Closing Price. If no sale occurs, equity securities and other
39 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. | Significant Accounting Policies (Continued) |
similar investments traded on NASDAQ are valued at the most recent bid price. Equity securities and other similar investments traded on a non-U.S. exchange are generally valued according to the latest closing values on that exchange prior to the close of the New York Stock Exchange. However, if an event which may change the value of a security occurs after the time that the closing value on the non-U.S. exchange was determined, the Board of Directors may decide to value the security based on fair value. The Board of Directors has approved the use of an independent fair value service for foreign securities, which may provide a fair value price on trading days when the S&P 500 Index moves more than 1%. The use of a fair value price may cause the value of the security on the books of the Fund to be significantly different from the closing value on the non-U.S. exchange and may affect the calculation of the Fund’s NAV. Over-the-counter securities not quoted on NASDAQ are valued at the last sale price on the valuation date or, if no sale occurs, at the most recent bid price. Short-term obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Amortized cost valuation involves initially valuing a security at its cost, and thereafter, assuming a constant accretion or 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 a pricing service supplies no quotations or quotations are not deemed to be representative of market value or for which there are no readily available market quotations are valued at fair value as determined in good faith by the Pricing Committee appointed by the Board of Directors (excluding debt securities with a remaining maturity of sixty days or less).
Fair value is defined as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is utilized to maximize the use of observable data inputs and minimize the use of unobservable data inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use to price the asset or liability, including assumptions about risk. Observable inputs are inputs that reflect the assumptions market participants would use to price the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use to price the asset or liability based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments; |
• | Level 2—quoted prices in markets that are not active or other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.); and |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments). |
The valuation techniques used by the Funds to measure fair value during the year ended December 31, 2014 maximized the use of observable inputs and minimized the use of unobservable inputs.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on
40 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. | Significant Accounting Policies (Continued) |
models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
As of December 31, 2014, all of the Funds, with the exception of M International Equity Fund, had (i) all long-term investments classified as Level 1, as represented on the Schedule of Investments; and (ii) all short-term investments classified as Level 2.
The following is a summary of the inputs used as of December 31, 2014 in valuing the M International Equity Fund investments:
Asset Valuation Input
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Common Stocks | ||||||||||||||||
Austria | $ | — | $ | 1,873,184 | $ | — | $ | 1,873,184 | ||||||||
Belgium | — | 6,682,253 | — | 6,682,253 | ||||||||||||
Brazil | 2,906,968 | — | — | 2,906,968 | ||||||||||||
Canada | 550,422 | — | — | 550,422 | ||||||||||||
Colombia | 1,094,680 | — | — | 1,094,680 | ||||||||||||
Denmark | — | 5,305,363 | — | 5,305,363 | ||||||||||||
France | 259,362 | 37,756,317 | — | 38,015,679 | ||||||||||||
Germany | — | 23,949,386 | — | 23,949,386 | ||||||||||||
Hong Kong | — | 2,617,761 | — | 2,617,761 | ||||||||||||
Italy | — | 3,260,621 | — | 3,260,621 | ||||||||||||
Japan | — | 18,321,249 | — | 18,321,249 | ||||||||||||
Jersey | — | 5,156,050 | — | 5,156,050 | ||||||||||||
Malaysia | — | 1,691,185 | — | 1,691,185 | ||||||||||||
Netherlands | 7,512,419 | — | — | 7,512,419 | ||||||||||||
Singapore | — | 3,297,904 | — | 3,297,904 | ||||||||||||
Spain | — | 8,330,074 | — | 8,330,074 | ||||||||||||
Sweden | — | 11,274,331 | — | 11,274,331 | ||||||||||||
Switzerland | 3,676,550 | 33,229,058 | — | 36,905,608 |
41 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. | Significant Accounting Policies (Continued) |
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
United Kingdom | $ | 201,080 | $ | 28,628,512 | $ | — | $ | 28,829,592 | ||||||||
United States | 4,739,368 | — | — | 4,739,368 | ||||||||||||
Total Common Stocks | 16,910,931 | 195,403,166 | — | 212,314,097 | ||||||||||||
Warrants | ||||||||||||||||
Malaysia | 171,489 | — | — | 171,489 | ||||||||||||
Total Warrants | 171,489 | — | — | 171,489 | ||||||||||||
Rights | ||||||||||||||||
Spain | 51,531 | — | — | 51,531 | ||||||||||||
Total Rights | 51,531 | — | — | 51,531 | ||||||||||||
Preferred Stock | ||||||||||||||||
United Kingdom | 50,846 | — | — | 50,846 | ||||||||||||
Total Preferred Stock | 50,846 | — | — | 50,846 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Short-Term Investments | — | 4,974,242 | — | 4,974,242 | ||||||||||||
Investments in Securities Lending Collateral . | — | 1,549,019 | — | 1,549,019 | ||||||||||||
Total Short-Term Investments | — | 6,523,261 | — | 6,523,261 | ||||||||||||
Total | $ | 17,184,797 | $ | 201,926,427 | $ | — | $ | 219,111,224 |
The following table shows transfers between Level 1 and Level 2 of the fair value hierarchy:
Transfers In* | Transfers Out* | |||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | |||||||||||||
M International Equity Fund | $ | — | $ | 237,960,982 | $ | 237,960,982 | $ | — |
* | The Fund(s) recognize transfers between levels that occurred at the beginning of the year, December 31, 2013. |
During the year ended December 31, 2014, financial assets with a combined fair value of $237,960,982 held by M International Equity Fund transferred from Level 1 to Level 2. At December 31, 2013, these financial assets were priced using unadjusted quoted market prices. At December 31, 2014, these financial assets were priced with a fair value factor applied to quoted market prices.
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
42 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. | Significant Accounting Policies (Continued) |
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 that cannot be directly attributed are apportioned among Funds by the Company based on average net assets of each Fund.
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 GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by each Fund and 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 characterizations of distributions made by each Fund and reclassifications to paid-in capital.
Securities Lending
The Funds participate in a securities lending program, under the terms of a Securities Lending Agency Agreement, whereby each Fund may loan its portfolio securities in an amount up to 33 1/3% of its total assets. The Funds receive cash (U.S. currency) as collateral against the loaned securities. Such collateral is invested by the securities lending agent in a money market mutual fund that meets certain quality and diversification requirements in accordance with Rule 2a-7 under the 1940 Act. All collateral received will be in an amount at least equal to 102% (for loans of U.S. securities) or 105% (for loans of non-U.S. securities) of the market value of the loaned securities at the inception of each loan. The market value of the loaned securities is determined each day at the close of business of the Funds and any change in the amount of collateral is delivered to or paid by the Fund the next day. The collateral value does not include the calculated mark, which is the amount charged/returned to the borrower daily to maintain 102%/105% of market value. There is a day lag in receiving the mark and at times the collateral percentage may be above or below 102%/105%.
The collateral received is recorded on a lending Fund’s statement of assets and liabilities, along with the related obligation to return the collateral. A Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. Upon an event of default under the Securities Agency Lending Agreement, there is a risk of delay in the recovery of the securities or loss of rights in the collateral. Any dividends or interest payable by the issuers of the loaned portfolio securities, during the time that the securities are on loan, are paid to the borrowers of those securities. Dividend or interest payments that are made to borrowers of the loaned securities are reimbursed by the borrowers to the Funds. Such reimbursement amounts do not comprise qualified dividend income under the Internal Revenue Code of 1986, as amended.
43 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. | Significant Accounting Policies (Continued) |
Income generated from the investment of cash collateral, less negotiated rebate fees paid to the borrower through State Street Bank and Trust Company as the securities lending agent, is the source of the Fund’s securities lending income, 70% of which is paid to the Fund, 30% of which is paid to the custodian as securities lending agent.
The following table presents financial instruments that are subject to enforceable netting arrangements as of December 31, 2014.
Net Amounts | ||||||||||||||||||||||||
Gross | of Assets | Gross Amount Not Offset | ||||||||||||||||||||||
Amounts | Presented | in the Statement | ||||||||||||||||||||||
Gross | Offset in the | in the | of Assets and Liabilities | |||||||||||||||||||||
Amounts of | Statement | Statement | Cash | |||||||||||||||||||||
Recognized | Assets | Assets | Financial | Collateral | Net | |||||||||||||||||||
Fund | Assets | and Liabilities | and Liabilities | Instruments | Received | Amount | ||||||||||||||||||
M International Equity Fund | $ | 1,549,019 | $ | — | $ | 1,549,019 | $ | — | $ | 1,549,019 | $ | — | ||||||||||||
M Large Cap Growth Fund | $ | 14,729,915 | $ | — | $ | 14,729,915 | $ | — | $ | 14,729,915 | $ | — | ||||||||||||
M Capital Appreciation Fund | $ | 30,486,938 | $ | — | $ | 30,486,938 | $ | — | $ | 30,486,938 | $ | — | ||||||||||||
M Large Cap Value Fund | $ | 6,617,512 | $ | — | $ | 6,617,512 | $ | — | $ | 6,617,512 | $ | — |
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 Funds did not have any unrecognized tax benefits as of December 31, 2014, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statements of Operations. During the year ended December 31, 2014, the Funds did not incur any such interest or penalties. The Funds’ tax returns are subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years, December 2011 through December 2013. No examination of any of the Funds’ tax filings is currently in progress.
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”), a wholly-owned subsidiary of M Financial Group. The Advisory
44 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. | Advisory Fee and Other Transactions with Affiliates (Continued) |
Agreement provides that the Funds will pay the Adviser a fee at an annual rate of the value of each Fund’s average daily net assets as follows:
Fund | Total Advisory Fees | |
M International Equity Fund | 0.70% on the first $1 billion | |
0.65% on amounts above $1 billion | ||
M Large Cap Growth Fund | 0.65% of the first $50 million | |
0.60% of the next $50 million | ||
0.55% on amounts above $100 million | ||
M Capital Appreciation Fund | 0.90% | |
M Large Cap Value Fund | 0.45% of the first $250 million | |
0.35% of the next $250 million | ||
0.30% of the next $250 million | ||
0.275% on amounts thereafter |
For the period from May 1, 2014 to April 30, 2015, the Adviser has contractually agreed to reimburse each Fund for any expenses (other than advisory fees, brokerage or other portfolio transaction expenses or expenses for litigation, indemnification, taxes or other extraordinary expenses) to the extent that such expenses exceed 0.25% of a Fund’s annualized daily average net assets. The Adviser did not have to make any reimbursements to the Funds during the year ended December 31, 2014.
Prior to May 1, 2014, the Adviser had contractually agreed to reimburse each Fund for any expenses (other than advisory fees, brokerage or other portfolio transaction expenses or expenses for litigation, indemnification, taxes or other extraordinary expenses) to the extent that such expenses exceed 0.25% of a Fund’s annualized daily average net assets.
The Adviser has engaged Northern Cross, LLC, DSM Capital Partners LLC, Frontier Capital Management Company, LLC and AJO, LP to act as sub-advisers to provide day-to-day portfolio management for the M International Equity Fund, the M Large Cap Growth Fund, the M Capital Appreciation Fund and the M Large Cap Value Fund, respectively.
As compensation for their services, each sub-adviser receives a fee based on the average daily net assets of the applicable Fund at the following annual rates:
Fund | Total Sub-Advisory Fees | |
M International Equity Fund | 0.55% on the first $1 billion | |
0.50% on the amounts above $1 billion | ||
M Large Cap Growth Fund | 0.50% on the first $50 million | |
0.45% on the next $50 million | ||
0.40% on the amounts above $100 million | ||
M Capital Appreciation Fund | 0.75% | |
M Large Cap Value Fund | 0.30% on the first $250 million | |
0.20% on the next $250 million | ||
0.15% on the next $250 million | ||
0.125% on amounts thereafter |
45 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. | Advisory Fee and Other Transactions with Affiliates (Continued) |
The sub-advisory fees are paid by the Adviser out of the investment advisory fees disclosed above.
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 its services.
The Company pays no compensation to its officers, other than the Chief Compliance Officer (“CCO”). The Company pays each interested Director $1,500 per meeting attended. The Company pays each non-interested Director $20,000 per annum plus $1,500 per meeting attended with an additional $1,500 per audit committee meeting attended. The Chairman and Audit Committee Chair receive an additional $10,000 annually. CCO compensation is paid to M Financial Group pursuant to an employee leasing agreement between the Company and M Financial Group and is included under compliance expenses on the Funds’ Statements of Operations.
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, 2014, were as follows:
Non-U.S. | ||||||||
Government Securities | ||||||||
Purchases | Sales | |||||||
M International Equity Fund | $ | 40,271,649 | $ | 103,966,629 | ||||
M Large Cap Growth Fund | 82,594,995 | 105,721,118 | ||||||
M Capital Appreciation Fund | 30,906,823 | 55,119,045 | ||||||
M Large Cap Value Fund | 70,857,538 | 89,260,113 |
4. | Common Stock |
Changes in the capital shares outstanding were as follows:
M International Equity Fund | M Large Cap Growth Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Shares sold | 1,759,225 | 4,660,516 | 921,710 | 1,535,828 | ||||||||||||
Shares repurchased | (6,905,718 | ) | (3,241,766 | ) | (1,838,526 | ) | (1,937,106 | ) | ||||||||
Distributions reinvested | 440,448 | 530,724 | 936,598 | 398,260 | ||||||||||||
Net increase (decrease) | (4,706,045 | ) | 1,949,474 | 19,782 | (3,018 | ) | ||||||||||
Fund Shares: | ||||||||||||||||
Beginning of year | 22,945,979 | 20,996,505 | 7,407,968 | 7,410,986 | ||||||||||||
End of year | 18,239,934 | 22,945,979 | 7,427,750 | 7,407,968 |
46 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. | Common Stock (Continued) |
M Capital Appreciation Fund | M Large Cap Value Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Shares sold | 637,317 | 720,526 | 1,062,935 | 1,293,399 | ||||||||||||
Shares repurchased | (1,519,859 | ) | (1,050,680 | ) | (2,325,331 | ) | (1,200,925 | ) | ||||||||
Distributions reinvested | 573,099 | 558,343 | 722,634 | 696,445 | ||||||||||||
Net increase (decrease) | (309,443 | ) | 228,189 | (539,762 | ) | 788,919 | ||||||||||
Fund Shares: | ||||||||||||||||
Beginning of year | 6,298,039 | 6,069,850 | 6,754,868 | 5,965,949 | ||||||||||||
End of year | 5,988,596 | 6,298,039 | 6,215,106 | 6,754,868 |
5. | Financial Instruments |
Forward Currency Exchange Contracts
M International Equity Fund 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 forward foreign currency exchange rates. These financial instruments are limited to forward foreign 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 forward foreign currency exchange contracts is meaningful only when all related and offsetting transactions are considered.
The Funds did not engage in derivative transactions for the year ended December 31, 2014.
Foreign Investments and Foreign Currency
Each of the Funds may invest in securities of companies that are organized under the laws of a foreign country and (i) are unlisted or listed primarily on a non-U.S. exchange; or (ii) are listed on a U.S. exchange or over-the-counter as a sponsored or unsponsored American Depositary Receipt (“foreign issuers”). M International Equity Fund may also invest in non-U.S. dollar denominated securities and securities of foreign issuers represented by European Depositary Receipts (“EDRs”), International Depositary Receipts (“IDRs”) and Global Depositary Receipts (“GDRs”). The value of all assets and liabilities expressed in foreign currencies are translated into U.S. dollars at the exchange rates captured as of twelve noon Eastern Time each business day other than market holidays or early closures. 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. 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 Funds 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.
47 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. | Financial Instruments (Continued) |
M International Equity Fund does not isolate that portion of the results for changes in foreign currency exchange rates from the fluctuations arising from changes in market prices of securities held at year end.
Investments in non-U.S. dollar denominated securities or in the securities of foreign issuers may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and in exchange control regulations (e.g., currency blockage). Some foreign stock markets may have substantially less volume than, for example, the New York Stock Exchange, and securities of some foreign issuers may be less liquid than securities of comparable domestic issuers. Commissions and dealer mark-ups on transactions in foreign investments may be higher than for similar transactions in the United States. In addition, clearance and settlement procedures for such securities may be different in foreign countries and, in certain markets, on certain occasions, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. There may be less publicly available information about a foreign issuer than about a domestic one. In addition, there is generally less government regulation of stock exchanges, brokers, and listed and unlisted issuers in foreign countries than in the United States. Furthermore, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, imposition of withholding taxes on dividend or interest payments, limitations on the removal of funds or other assets of the Funds, or political or social instability or diplomatic developments which could affect investments in those countries. Individual foreign economies also may differ favorably or unfavorably from the United States economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Because investment in foreign issuers will usually involve currencies of foreign countries, and because the Funds may be exposed to currency exposure independent of their securities positions, the value of the assets of the Funds invested in foreign issuers as measured in U.S. dollars will be affected by changes in foreign currency exchange rates. To the extent that a Fund’s assets consist of investments denominated in a particular currency, the Fund’s exposure to adverse developments affecting the value of such currency will increase.
Currency exchange rates may fluctuate significantly over short periods of time causing, along with other factors, a Fund’s net asset value to fluctuate as well. Currency exchange rates generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the U.S. or abroad. To the extent that a substantial portion of a Fund’s total assets, adjusted to reflect the Fund’s net position after giving effect to currency transactions, is denominated in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries.
48 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. | Beneficial Interest |
Shares of the Funds are owned by insurance companies through their separate accounts that are used primarily to fund variable annuity contracts and variable life insurance contracts and by M Financial Holdings Incorporated through direct ownership of seed money and general investment shares. As of December 31, 2014, John Hancock Variable Life Insurance Co., Pacific Life Insurance Co., Pruco Life Insurance Co. of Arizona, Security Life of Denver (an indirect, wholly owned subsidiary of Voya Financial, Inc. (“Voya®”)), Lincoln National Life Insurance Co., New York Life Insurance Co., Nationwide Financial Services, Inc., Delaware Life Insurance Co. and TIAA-CREF Life Insurance Co. and M Financial Holdings Incorporated owned all shares of the Funds. John Hancock Variable Life Insurance Co. and Pacific Life Insurance Co. may each be deemed a control person of each Fund because their separate accounts hold more than 25% of the shares of each Fund.
As of December 31, 2014 the ownership of each Fund was as follows:
Percentage of Ownership | ||||||||||||||||||||
John Hancock | Pruco Life | Security | ||||||||||||||||||
M Financial | Variable Life | Pacific Life | Insurance Co. | Life of | ||||||||||||||||
Holdings, Inc. | Insurance Co. | Insurance Co. | Of Arizona | Denver | ||||||||||||||||
M International Equity Fund . | 0.9 | % | 43.9 | % | 39.0 | % | 3.6 | % | 6.1 | % | ||||||||||
M Large Cap Growth Fund | 1.2 | % | 47.6 | % | 34.8 | % | 5.2 | % | 3.8 | % | ||||||||||
M Capital Appreciation Fund | 1.2 | % | 45.3 | % | 41.7 | % | 1.7 | % | 5.0 | % | ||||||||||
M Large Cap Value Fund | 2.7 | % | 46.6 | % | 33.0 | % | 4.8 | % | 2.8 | % |
Percentage of Ownership | ||||||||||||||||||||
Lincoln | Nationwide | TIAA-CREF | ||||||||||||||||||
National Life | New York Life | Financial | Delaware Life | Life | ||||||||||||||||
Insurance Co. | Insurance Co. | Services, Inc. | Insurance Co. | Insurance Co. | ||||||||||||||||
M International Equity Fund . | 2.9 | % | 0.0 | %(1) | 1.4 | % | 1.4 | % | 0.8 | % | ||||||||||
M Large Cap Growth Fund | 2.8 | % | —% | 0.6 | % | 2.9 | % | 1.1 | % | |||||||||||
M Capital Appreciation Fund | 2.7 | % | —% | 0.7 | % | 1.1 | % | 0.6 | % | |||||||||||
M Large Cap Value Fund | 5.4 | % | —% | 1.3 | % | 1.4 | % | 2.0 | % |
(1) | Amount rounds to less than 0.05%. |
49 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. | Tax Information |
At December 31, 2014, aggregated gross unrealized appreciation for investment securities in which there is an excess of value over tax cost and aggregate gross unrealized depreciation for investment securities in which there is an excess of tax cost over value were as follows:
Tax Basis | ||||||||||||||||
Federal | Tax Basis | Tax Basis | Net Unrealized | |||||||||||||
Income Tax | Unrealized | Unrealized | Appreciation/ | |||||||||||||
Cost | Appreciation | Depreciation | (Depreciation) | |||||||||||||
M International Equity Fund | $ | 206,487,461 | $ | 27,420,597 | $ | (14,796,834 | ) | $ | 12,623,763 | |||||||
M Large Cap Growth Fund | 149,844,952 | 43,065,282 | (577,068 | ) | 42,488,214 | |||||||||||
M Capital Appreciation Fund | 135,627,358 | 81,354,730 | (5,513,290 | ) | 75,841,440 | |||||||||||
M Large Cap Value Fund | 79,433,663 | 13,020,254 | (2,077,986 | ) | 10,942,268 |
The tax character of distributions paid during 2014 and 2013 was as follows:
December 31, | December 31, | |||||||
2014 | 2013 | |||||||
M International Equity Fund | ||||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 5,364,651 | $ | 6,811,012 | ||||
M Large Cap Growth Fund | ||||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 1,779,382 | $ | 922,797 | ||||
Long-Term Capital Gain | 20,890,190 | 8,763,576 | ||||||
Total Distributions | $ | 22,669,572 | $ | 9,686,373 | ||||
M Capital Appreciation Fund | ||||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 21,762 | $ | — | ||||
Long-Term Capital Gain | 17,514,646 | 16,224,308 | ||||||
Total Distributions | $ | 17,536,408 | $ | 16,224,308 | ||||
M Large Cap Value Fund | ||||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 4,191,292 | $ | 2,191,583 | ||||
Long-Term Capital Gain | 5,648,314 | 7,280,727 | ||||||
Total Distributions | $ | 9,839,606 | $ | 9,472,310 |
50 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. | Tax Information (Continued) |
At December 31, 2014, the components of distributable earnings on a tax basis were as follows:
Undistributed | Undistributed | Unrealized | Total | |||||||||||||||||||||
Ordinary | Long-Term | Capital Loss | Deferred Post | Appreciation/ | Distributable | |||||||||||||||||||
Income | Gain | Carryforwards | October Losses | Depreciation | Earnings | |||||||||||||||||||
M International Equity Fund | $ | 52,619 | $ | — | $ | (128,859,953 | ) | $ | (67,621 | ) | $ | 12,585,144 | $ | (116,289,811 | ) | |||||||||
M Large Cap Growth Fund | 2,097,985 | 5,309,671 | — | — | 42,488,214 | 49,895,870 | ||||||||||||||||||
M Capital Appreciation Fund | — | 2,886,922 | — | (219,024 | ) | 75,841,440 | 78,509,338 | |||||||||||||||||
M Large Cap Value Fund | — | 2,081,560 | — | — | 10,942,268 | 13,023,828 |
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Net capital loss carryforwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expirations dates, whichever occurs first. At December 31, 2014, M International Equity Fund had available, for federal tax purposes, unused short-term capital losses of $43,585,941 and $10,383,578, expiring on December 31, 2017 and 2018, respectively. In addition, M International Equity Fund had unused short-term capital losses of $3,659,796 and unused long-term capital losses of $71,230,638 permitted to be carried for an unlimited period.
The following Fund(s) utilized capital loss carryforwards during the year ended December 31, 2014:
Capital Losses | ||||
M International Equity Fund | $ | 15,726,057 | ||
M Large Cap Growth Fund | — | |||
M Capital Appreciation Fund | — | |||
M Large Cap Value Fund | — |
Dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment. Temporary differences do not require reclassification.
51 |
M Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. | Tax Information (Continued) |
During the year ended December 31, 2014, the Funds reclassified for book purposes, amounts arising from permanent book/tax difference primarily relating to realized foreign currency gains and losses, return of capital distributions from non-REIT securities, capital gain distributions from REITs, passive foreign investment company gains and losses and distribution re-designation.
Permanent differences incurred during the year ended December 31, 2014, resulting from differences in book and tax accounting, have been reclassified at year-end between undistributed net investment income (loss), undistributed (accumulated) net realized gain (loss) and paid-in capital as follows, with no impact to the net asset value per share:
Undistributed | ||||||||||||
Undistributed | (Accumulated) | |||||||||||
Net Investment | Net Realized | |||||||||||
Income (Loss) | Gain (Loss) | Paid-in Capital | ||||||||||
M International Equity Fund | $ | 907,069 | $ | (907,069 | ) | $ | — | |||||
M Large Cap Growth Fund | (19,585 | ) | 19,585 | — | ||||||||
M Capital Appreciation Fund | 627,182 | (370,346 | ) | (256,836 | ) | |||||||
M Large Cap Value Fund | (1,850 | ) | 1,850 | — |
8. | Disclosure of Certain Commitments and Contingencies |
In the normal course of business, the Company may enter into contracts and agreements that contain a variety of representations and warranties that provide general indemnifications. The maximum exposure to the Company under these arrangements is unknown, as it involves future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company believes that the current risk of loss is remote.
9. | Subsequent Events |
The Funds have evaluated subsequent events through the date of issuance of the Funds’ financial statements and have determined there is no material impact to the Funds’ financial statements.
52 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of M Fund, Inc.
and the Shareholders of the
M International Equity Fund,
M Large Cap Growth Fund,
M Capital Appreciation Fund and
M Large Cap Value Fund
We have audited the accompanying statements of assets and liabilities of the M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund, each a series of shares of M Fund, Inc., including the schedules of investments, as of December 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2014 by correspondence with the custodian and brokers and by other appropriate auditing procedures where responses from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund as of December 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP
Philadelphia, Pennsylvania
February 26, 2015
53 |
M Fund, Inc.
SUPPLEMENTAL INFORMATION (Unaudited)
Director’s and Officer’s Tables
Interested Director:
Other | ||||||||||
Number of | Directorships | |||||||||
Portfolios | Held by | |||||||||
Position | Term of Office* | in Fund Complex | Director | |||||||
Held with | and Length of | Principal Occupations | Overseen by | During Past 5 | ||||||
Name, Address and Age | Fund | Time Served | During Past 5 Years | Director | Years | |||||
Peter W. Mullin(1) 1125 NW Couch St. Suite 900 Portland, OR 97209 73 | Director | Nineteen Years | Chairman Emeritus, MullinTBG, Inc. (insurance agency); Chairman, M Financial Holdings, Inc. | 4 | Avery Dennison from 1988 to 2013 | |||||
Lawton M. Nease(1) Nease Lagana Eden & Culley, Inc. 1125 NW Couch St. Suite 900 Portland, OR 97209 71 | Director | Five Years | President, Nease, Lagana Eden & Culley (life insurance advisory firm) | 4 | NLEC |
(1) | Mr. Mullin and Mr. Nease are deemed to be Interested Persons as defined by the 1940 Act, because they own 20.17% and 1.94%, respectively, of M Financial Group, which controls the Adviser. Mr. Mullin and Mr. Nease are also deemed to be Interested Persons because they are Directors of M Financial Group and because Mr. Nease is a Director of the Adviser. |
* | In accordance with the Company’s current by-laws, each Director serves for an indefinite term until the date such Director resigns, retires or is removed by the Board of Directors or shareholders in accordance with the Company’s Articles of Incorporation. |
54 |
M Fund, Inc.
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
Director’s and Officer’s Tables (Continued)
Independent Directors:
Other | ||||||||||
Number of | Directorships | |||||||||
Portfolios | Held by | |||||||||
Position(s) | Term of Office* | in Fund Complex | Director | |||||||
Held with | and Length of | Principal Occupation(s) | Overseen by | During Past 5 | ||||||
Name, Address and Age | Fund | Time Served | During Past 5 Years | Director | Years | |||||
Gerald Bidwell Bidwell Capital LLC 1125 NW Couch St., Suite 900 Portland, OR 97209 72 | Director and Chair of the Board | Nineteen Years | Retired. Through 2003, President and Chief Executive Officer, Bidwell & Co. (discount brokerage firm). | 4 | N/A | |||||
Neil E. Goldschmidt 1125 NW Couch St., Suite 900 Portland, OR 97209 74 | Director | Nineteen Years | Retired. Through 2005, President, Neil Goldschmidt, Inc. (law firm). | 4 | N/A | |||||
Bruce W. Madding 1125 NW Couch St., Suite 900 Portland, OR 97209 63 | Director and Audit Committee Chair | Seven Years | CEO and CIO, C.M. Capital Corp from February 2011 to present; President, C.M. Capital Corp from July 2010 to February 2011; Senior Vice President, Chief Financial Officer and Chief Investment Officer for the Henry J. Kaiser Family Foundation from 1988 to June 2010. | 4 | N/A | |||||
Wayne Pierson 1125 NW Couch St., Suite 900 Portland, OR 97209 64 | Director | Three Years | Chief Financial Officer, Chief Investment Officer, Meyer Memorial Trust from June 1982 to June 2014 (private foundation); President (2005 to present) and Director, Acorn Investors LLC from August 2004 to present (investment holding company); Principal Clifford Capital Partners LLC from April 2010 to present (investment manager). | 4 | Director, Oaktree Capital Group from November 2007 to present (investment manager). |
55 |
M Fund, Inc.
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
Director’s and Officer’s Tables (Continued)
Principal Officers who are not Directors:
Positions | Term of Office | |||||
Held with | and Length of | Principal Occupations | ||||
Name, Address and Age | Fund | Time Served | During Past 5 Years | |||
Shannon Hartwell 1125 NW Couch St., Suite 900 Portland, OR 97209 44 | Chief Compliance Officer | One Year Nine Years | Chief Compliance Officer of M Financial Asset Management, Inc., 2011-present; Chief Compliance Officer, M Financial Investment Advisers, Inc., 2006-present. | |||
JoNell Hermanson 1125 NW Couch Street, Suite 900 Portland, OR 97209 55 | President | One Year Eight Years* | President, M Financial Investment Advisers, Inc., February 2010-present; President of M Financial Wealth Partners, Inc., and M Financial Assets Management, Inc. 2008-present; Vice President of M Financial Group, Inc., 2004-present. | |||
David Lees 1125 NW Couch St., Suite 900 Portland, OR 97209 49 | Secretary and Treasurer | One year Eight Years | Accounting Director, M Financial Group, 2007-present; Secretary and Treasurer, M Financial Investment Advisers, Inc., 2007 to present. |
* | Includes Ms. Hermanson’s previous service as Chief Compliance Officer of the Company from 2005-2006 and her service as Vice President from 2009-2010. |
56 |
M Fund, Inc.
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
Quarterly Form N-Q Portfolio Schedule
Each Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q at the end of the first and third fiscal quarters within 60 days of the end of the quarter to which it relates. The Company’s Form N-Q will be available on the Company’s website at www.mfin.com and on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the Company’s proxy voting policies and procedures and the Company’s proxy voting record for the most recent twelve-month period ending June 30 are available (1) without charge, upon request, by calling the Company toll-free at 1-888-736-2878; and (2) on Form N-PX on the SEC’s website at www.sec.gov.
Tax Disclosures
For corporate shareholders, a portion of the ordinary dividends paid during the Fund’s year ended December 31, 2014 qualified for the dividends received deduction as follows.
Dividend Received | ||||
Fund | Deduction | |||
M International Equity Fund | 1.83 | % | ||
M Large Cap Growth Fund | 28.66 | % | ||
M Capital Appreciation Fund | 100.00 | % | ||
M Large Cap Value Fund | 29.77 | % |
Pursuant to Internal Revenue Section 852(b), M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund paid $20,890,190, $17,514,646 and $5,648,314, respectively, which have been designated as capital gains distributions for the fiscal year ended December 31, 2014.
M International Equity Fund
In accordance with federal tax law, the Fund elects to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign securities. Accordingly, the Fund made the following designations regarding its fiscal year ended December 31, 2014:
• | the total amount of foreign taxes creditable was $426,289. |
• | the total amount of income sourced from foreign countries was $5,365,359. |
57 |
M Fund, Inc.
HYPOTHETICAL EXPENSE EXAMPLE (Unaudited)
As an indirect shareholder of a Fund, you incur ongoing costs, including management fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2014 to December 31, 2014.
Actual Expenses
The first line under each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line under each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing Fund costs only. As an indirect shareholder of a Fund, you do not incur any transactional costs, such as sales charges (loads), redemption fees or exchange fees. However, you do incur such transactional costs, as well as other fees and charges as an owner of a variable annuity contract or variable life insurance policy. If these transactional and other insurance company fees and charges were included, your costs would have been higher. Therefore, the second line under each Fund in the table is useful in comparing ongoing Fund costs only, and will not help you determine the relative total costs of owning different variable annuities or variable life insurance policies.
Expenses | ||||||||||||||||
Ending | Paid During | |||||||||||||||
Beginning | Account Value | Annualized | Period* | |||||||||||||
Account Value | December 31, | Expense | (July 1, 2014 to | |||||||||||||
July 1, 2014 | 2014 | Ratio | December 31, 2014) | |||||||||||||
M International Equity Fund | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 778.20 | 0.94 | % | $ | 4.21 | ||||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,020.50 | 0.94 | % | 4.79 | |||||||||||
M Large Cap Growth Fund | ||||||||||||||||
Actual | 1,000.00 | 1,174.70 | 0.76 | % | 4.17 | |||||||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,021.40 | 0.76 | % | 3.87 | |||||||||||
M Capital Appreciation Fund | ||||||||||||||||
Actual | 1,000.00 | 1,055.70 | 1.08 | % | 5.60 | |||||||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,019.80 | 1.08 | % | 5.50 |
58 |
M Fund, Inc.
HYPOTHETICAL EXPENSE EXAMPLE (Unaudited) (Continued)
Expenses | ||||||||||||||||
Ending | Paid During | |||||||||||||||
Beginning | Account Value | Annualized | Period* | |||||||||||||
Account Value | December 31, | Expense | (July 1, 2014 to | |||||||||||||
July 1, 2014 | 2014 | Ratio | December 31, 2014) | |||||||||||||
M Large Cap Value Fund | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,067.10 | 0.69 | % | $ | 3.60 | ||||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,021.70 | 0.69 | % | 3.52 |
* | Expenses are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (365 days). |
59 |
Item 2. Code of Ethics.
As of December 31, 2014, the Registrant has adopted a code of ethics that applies to the Registrant’s President/Principal Executive Officer and Treasurer/Principal Financial and Accounting Officer. For the year ended December 31, 2014, there were no amendments to a provision of its code of ethics, nor were there any waivers (including implicit waivers) granted from a provision of the code of ethics. A copy of its code of ethics is filed with this Form N-CSR under Item 12(a)(1).
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Directors has determined that the Registrant has two audit committee financial experts serving on its audit committee. The audit committee financial experts serving on the Registrant’s audit committee are Bruce Madding and Wayne Pierson, who are “independent” as defined in Item 3 of Form N-CSR. Mr. Madding serves as the Chairman of the Registrant’s audit committee.
Item 4. Principal Accountant Fees and Services.
BBD, LLP served as the principal accountant for the Registrant for the fiscal years ended December 31, 2013 and December 31, 2014.
(a) | AUDIT FEES: The aggregate fees billed for professional services rendered by its principal accountant, BBD, LLP for the audit of the Registrant’s annual financial statements for the fiscal years ended December 31, 2013 and December 31, 2014 were $80,500 and $80,500, respectively. | |
(b) | AUDIT RELATED FEES: No such fees were billed to the Registrant by BBD, LLP for the fiscal years ended December 31, 2013 and December 31, 2014. | |
(c) | TAX FEES: The aggregate fees billed for professional services rendered by BBD, LLP for tax compliance, tax advice, and tax planning for the fiscal years ended December 31, 2013 and December 31, 2014 were $10,500 and $10,500, respectively. Such services included the review of the Fund’s tax and excise returns. | |
(d) | ALL OTHER FEES: No such fees were billed to the Registrant by BBD, LLP for the fiscal years ended December 31, 2013 and December 31, 2014. | |
(e) | (1)The Registrant’s audit committee pre-approves all audit and non-audit services to be performed by the Registrant’s accountant before the accountant is engaged by the Registrant to perform such services. | |
(2)The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: | ||
(b) Not applicable | ||
(c) 100% | ||
(d) Not applicable | ||
(f) | Not applicable. | |
(g) | The aggregate fees billed by the Registrant’s principal accountant, BBD, LLP, for non-audit services rendered to the Registrant, the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entities controlling, controlled by, or under common control with the Registrant’s investment adviser that provides ongoing services to the Registrant for the fiscal years ended December 31, 2013 and December 31, 2014 were $10,500 and $10,500, respectively. |
(h) | Not applicable. | |
Item 5. Audit Committee of Listed Registrants. | ||
Not applicable. | ||
Item 6. Investments. | ||
(a) | A schedule of investments is contained in the Registrant’s annual report, which is attached to this report in response to Item 1. | |
(b) | Not applicable. | |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. | ||
Not applicable. | ||
Item 8. Portfolio Managers of Closed-End Management Investment Companies. | ||
Not applicable. | ||
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. | ||
Not applicable. | ||
Item 10. Submission of Matters to a Vote of Security Holders. | ||
Not applicable. | ||
Item 11. Controls and Procedures. |
(a) The Registrant's Principal Executive Officer and Principal Financial Officer concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))) (the “1940 Act”) were effective as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"), based on their evaluation of the effectiveness of the Registrant's disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)) (the “1934 Act”) as of the Evaluation Date. | |
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) Code of Ethics as described in Item 2 is attached hereto as Exhibit 12(a)(1). | |
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 12(a)(2). | |
(a)(3) Not applicable to this filing. |
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 as required by Rule 30a-2(b), under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a – 14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) is attached hereto as Exhibit 12(b).
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
M Fund, Inc. | ||
By: | /s/ JoNell Hermanson | |
JoNell Hermanson | ||
President/Principal Executive Officer | ||
Date: | March 4, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ JoNell Hermanson | |
JoNell Hermanson | ||
President/Principal Executive Officer | ||
Date: | March 4, 2015 | |
By: | /s/ David Lees | |
David Lees | ||
Treasurer/Principal Financial | ||
and Accounting Officer | ||
Date: | March 4, 2015 |