SEC Company Response from M FUND INC (CIK 0000948258) — Apr 17, 2020
M FUND INC (CIK 0000948258)
Date: April 17, 2020 · CIK: 0000948258 · Accession: 0001104659-20-048156
AI Filing Summary & Sentiment
File numbers found in text: 811-09082
Letter
Re: M Fund, Inc. (Registration No. 033-95472/811-09082)
April 17, 2020
VIA EDGAR CORRESPONDENCE
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Attention: Ms. Yoon Choo
Response to Examiner Comments on Post-Effective
Amendment No. 40
Dear: Ms. Choo:
This letter responds to your comments provided via telephone on April 3, 2020 and April 16, 2020 to Post-Effective Amendment No. 40 to the Registration Statement on Form N-1A of M Fund, Inc. (the “Registrant”) filed on March 13, 2020.
1. Comment: To the extent that comments apply to more than one series of the Registrant, apply such changes as appropriate to each affected series of the Registrant.
Response: The Registrant agrees to apply any such changes as appropriate to each affected series of the Registrant.
2. Comment: Confirm that the Registrant will fill in all bracketed information in the Funds’ fee tables and elsewhere.
Response: The Registrant confirms that it will fill in all bracketed information in the Funds’ fee tables and elsewhere, prior to filing.
3. Comment: With respect to footnote 1 in the Fee Table of M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund (each a “Fund” and together, the “Funds”) the expense waiver agreement filed as an exhibit does not include a provision allowing the Adviser to be reimbursed, while the advisory agreement contains only a general provision that a Fund may pay “such other expenses as the Directors may, from time to time, determine to be properly payable by
the Fund.” Please supplementally explain the basis for recapturing waived expenses. If reimbursement by the Fund is not contractually required, please revise this statement accordingly. Also, please explicitly state the conditions the recaptures are subject to including that the recoupment period is limited to 3 years from the time the expenses were waived or incurred and is limited to the lesser of the (1) the expense cap in effect at the time of the waiver, and (2) the expense cap in effect at the time of recapture.
Response: The Expense Limitation Agreement, a copy of which is included in the Registrant’s filing, conditions the Adviser to recoup any amounts waived or reimbursed earlier in the fiscal year provided that the repayment does not cause operating expenses to exceed 0.25%.
4. Comment: For each Fund, include in the Expense Example narrative disclosure that the example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem or hold (emphasis added) all of your shares at the end of those periods.
Response: The Registrant has revised the disclosure as requested.
5. Comment: For each Fund, remove the disclosure that a higher portfolio turnover rate may result in higher taxes when Fund shares are held in a taxable account because it is not applicable to investors in insurance products.
Response: The Registrant has revised the disclosure as requested.
6. Comment: For the M International Equity Fund, please add disclosure regarding the objective and strategies of the Emerging Markets Core Equity Portfolio of DFA Investment Dimensions Group Inc. (the “Underlying Fund”). Please also clarify the definition of “Non-U.S. Universe.” Lastly, please clarify that Dimensional Fund Advisors LP (“Dimensional”) is the sub adviser of the M International Equity Fund and the Investment Adviser of the Underlying Fund.
Response: The Registrant has revised the disclosure to include the strategy of the Underlying Fund.
Regarding the definition of “Non-U.S. Universe,” please note that the section of the prospectus entitled “Fund Summaries—M International Equity Fund—Principal Investment Strategies” discloses that Dimensional defines the Non-U.S. Universe as a market capitalization weighted portfolio of non-U.S. companies in developed and emerging markets that have been authorized for investment as approved markets by Dimensional’s Investment Committee. The section of the prospectus entitled “Investment Strategies—M International Equity Fund—Principal Investment Strategies” further discloses that, in determining which emerging market countries are eligible markets for
the Fund, Dimensional may consider various factors, including, without limitation, the data, analysis and classification of countries published or disseminated by the International Bank for Reconstruction and Development (commonly known as the World Bank), the International Finance Corporation, FTSE International and MSCI. The disclosure continues that, in determining whether to approve certain emerging markets for investment, Dimensional may take into account, among other things, market liquidity, relative availability of investor information, government regulation, including fiscal and foreign exchange repatriation rules, and the availability of other access to these markets for the Fund. As a result, we believe the definition of the Non-U.S. Universe of the Fund to be appropriately disclosed to investors.
Lastly, please note that the section of the prospectus entitled “Fund Summaries—M International Equity Fund—Principal Investment Strategies” discloses that the Underlying Fund is a series of DFA Investment Dimensions Group Inc. In addition, the section of the prospectus entitled “Investment Strategies—M International Equity Fund—Principal Investment Strategies” discloses that the Underlying Fund is managed by Dimensional, and Dimensional is disclosed throughout the prospectus as the sub-adviser to the M International Equity Fund itself.
7. Comment: Please add the risk of investing in depositary receipts as a principal investment risk of the M International Equity Fund.
Response: The Registrant respectfully acknowledges the comment; however, it believes that the risks entitled “Market Risk,” “Foreign Securities and Currencies Risk,” “Economic and Market Events Risk” and “Emerging Markets Risk” appropriately describe the principal risks of depositary receipts. The Registrant notes that additional risks of depositary receipts are further described in the statement of additional information.
8. Comment: The M International Equity Fund may purchase futures and options on futures contracts. If the fund will count derivatives toward its 80% names policy, please disclose under Item 4 or Item 9 of Form N-1A that the Fund will value derivatives for purposes of the names rule on a mark to market basis using the current market price or, if it is an over-the-counter derivative, its fair value. This comment also applies to the M Large Cap Value Fund investing in “other instruments with similar economic characteristics.”
Response: The Registrant hereby confirms that the M International Equity Fund may count derivatives toward its 80% names policy. For purposes of such policy, the value of the derivatives in which the Fund invests will be calculated in the same way that the values of derivatives are calculated when calculating the Fund’s net asset value. Derivative instruments are valued at market price (not notional value) and may be fair valued, for purposes of calculating a Fund’s net asset value.
The Registrant further confirms that M Large Cap Value Fund may count instruments with similar economic characteristics toward its 80% names policy. For purposes of such
policy, the value of the instruments with similar economic characteristics in which the Fund invests will be calculated in the same way that the value of instruments with similar economic characteristics are calculated when calculating the Fund’s net asset value.
9. Comment: Significant market events have occurred as a result of the COVID-19 crisis. Please consider whether the risk disclosure should be revised based on how these events are effecting both debt and equity markets. If the Registrant does not believe additional risk disclosure is necessary please explain why.
Response: The Registrant has added risk disclosure related to COVID-19.
10. Comment: Each Fund other than the M International Equity Fund includes “Economic and Market Events Risk” as a principle risk factor. Please consider whether this risk factor should also be a principle risk factor of the Fund.
Response: The Registrant has amended its disclosure to add this principal risk factor.
11. Comment: For each Fund that includes investing in emerging markets as a principal investment risk, please add the risk of investing in China in the emerging markets risk factor.
Response: The Registrant respectfully acknowledges the comment; however, risks of investing in China are generally disclosed through emerging markets risk disclosures and also specifically through the “Economic and Markets Events Risk” in the section of the prospectus entitled “Risks of Investing in the Funds.” As a result, the Registrant believes excluding China risk as a principal risk of the Fund to be appropriate.
12. Comment: Under Derivatives Risk in the following sentence, please briefly describe each risk not otherwise described in the risk section. “Derivative instruments are subject to a number of risks including counterparty, settlement, liquidity, interest rate, market, credit and management risks, as well as the risk of improper valuation.”
Response: The Registrant has revised disclosure as requested.
13. Comment: Please confirm whether Large Capitalization Risk is a principal investment risk of the M International Equity Fund.
Response: The Registrant confirms that Large Capitalization Risk is a principal investment risk of the Fund.
14. Comment: The statutory section of the M International Equity Fund under “Other Investment Strategies” states that the Underlying Fund may lend its portfolio securities. If securities lending is a principal investment strategy either because the Fund lends its securities or the Underlying Fund lends its securities, include securities lending in the Fund’s principal investment strategy.
Response: Securities lending is not a principal investment strategy of the Fund at this time. Disclosure regarding securities lending has been removed as a principal investment strategy of the Fund.
15. Comment: If the expense limitation agreement for the M Large Cap Growth Fund, the M Capital Appreciation Fund and M Large Cap Value Fund will not reduce the total annual fund operating expense for at least one year from the date of the Prospectus please remove the footnote in each Fund’s fee table. Also, for each of these Funds, if the expense limitation agreement did not reduce the total annual fund operating expenses remove from the expense example that the example assumes that the Fund’s expense limitation remains in place.
Response: The Registrant has revised the disclosure as requested.
16. Comment: The principal investment strategy of the M Large Cap Growth Fund includes normally investing at least 80% of its total assets in U.S. large cap equity securities, including, but not limited to, common stocks, preferred stocks and American Depositary Receipts. Please add the risk of investing in preferred stock as a principal investment risk of the Fund. Also, U.S. large cap equity securities are not represented by American Depositary Receipts. Please remove that reference and similar disclosure in the SAI.
Response: The Registrant has revised the disclosure as requested.
17. Comment: The M Large Cap Growth Fund’s strategy is not fundamental (it may be changed without shareholder approval), but should the Fund decide to change this strategy, it will provide shareholders with at least 60 days’ notice. Please clarify this sentence to indicate which strategy it references. Please also make a conforming change in the statutory section of the Prospectus.
Response: The Registrant has revised the disclosure as requested.
18. Comment: Please consider whether Market Risk should be a principle investment risk for only M International Equity Fund and M Capital Appreciation Fund or for all Funds.
Response: The Registrant has added Market Risk as a principal investment risk to the M Large Cap Growth Fund and the M Large Cap Value Fund.
19. Comment: The M Large Cap Growth Fund and the M Capital Appreciation Fund are not concentrated in any industry but each Fund includes Concentration Risk. Consider revising this disclosure.
Response: Disclosure for both Funds has been amended to remove the reference to “Concentration Risk.”
20. Comment: Under Foreign Securities and Currencies Risk, the M International Equity Fund and the M Capital Appreciation Find indicate that neither Fund hedges for currency risk. Please confirm whether the Funds hedge for foreign security risk.
Response: The Registrant confirms that neither Fund hedges for foreign security risk. The Registrant has revised its disclosure to clarify.
21. Comment: If the technology, financials and healthcare sectors are principal investment strategies of the M Large Cap Growth Fund, please reference each sector in the Fund’s principal investment strategies. If any of these sectors are not principal investment strategies of the Fund, please remove the respective risk factor.
Response: The Registrant confirms that the technology, financials and healthcare sectors are not principle investment strategies of the Fund and have therefore been removed as principal investment risks.
22. Comment: For the M Capital Appreciation Fund, please include the capitalization range of the Russell 2500 Index as of a recent date.
Response: The Registrant has revised the disclosure as requested.
23.
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CORRESP 1 filename1.htm April 17, 2020 VIA EDGAR CORRESPONDENCE Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Attention: Ms. Yoon Choo Re: M Fund, Inc. (Registration No. 033-95472/811-09082) Response to Examiner Comments on Post-Effective Amendment No. 40 Dear: Ms. Choo: This letter responds to your comments provided via telephone on April 3, 2020 and April 16, 2020 to Post-Effective Amendment No. 40 to the Registration Statement on Form N-1A of M Fund, Inc. (the “Registrant”) filed on March 13, 2020. 1. Comment: To the extent that comments apply to more than one series of the Registrant, apply such changes as appropriate to each affected series of the Registrant. Response: The Registrant agrees to apply any such changes as appropriate to each affected series of the Registrant. 2. Comment: Confirm that the Registrant will fill in all bracketed information in the Funds’ fee tables and elsewhere. Response: The Registrant confirms that it will fill in all bracketed information in the Funds’ fee tables and elsewhere, prior to filing. 3. Comment: With respect to footnote 1 in the Fee Table of M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund and M Large Cap Value Fund (each a “Fund” and together, the “Funds”) the expense waiver agreement filed as an exhibit does not include a provision allowing the Adviser to be reimbursed, while the advisory agreement contains only a general provision that a Fund may pay “such other expenses as the Directors may, from time to time, determine to be properly payable by the Fund.” Please supplementally explain the basis for recapturing waived expenses. If reimbursement by the Fund is not contractually required, please revise this statement accordingly. Also, please explicitly state the conditions the recaptures are subject to including that the recoupment period is limited to 3 years from the time the expenses were waived or incurred and is limited to the lesser of the (1) the expense cap in effect at the time of the waiver, and (2) the expense cap in effect at the time of recapture. Response: The Expense Limitation Agreement, a copy of which is included in the Registrant’s filing, conditions the Adviser to recoup any amounts waived or reimbursed earlier in the fiscal year provided that the repayment does not cause operating expenses to exceed 0.25%. 4. Comment: For each Fund, include in the Expense Example narrative disclosure that the example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem or hold (emphasis added) all of your shares at the end of those periods. Response: The Registrant has revised the disclosure as requested. 5. Comment: For each Fund, remove the disclosure that a higher portfolio turnover rate may result in higher taxes when Fund shares are held in a taxable account because it is not applicable to investors in insurance products. Response: The Registrant has revised the disclosure as requested. 6. Comment: For the M International Equity Fund, please add disclosure regarding the objective and strategies of the Emerging Markets Core Equity Portfolio of DFA Investment Dimensions Group Inc. (the “Underlying Fund”). Please also clarify the definition of “Non-U.S. Universe.” Lastly, please clarify that Dimensional Fund Advisors LP (“Dimensional”) is the sub adviser of the M International Equity Fund and the Investment Adviser of the Underlying Fund. Response: The Registrant has revised the disclosure to include the strategy of the Underlying Fund. Regarding the definition of “Non-U.S. Universe,” please note that the section of the prospectus entitled “Fund Summaries—M International Equity Fund—Principal Investment Strategies” discloses that Dimensional defines the Non-U.S. Universe as a market capitalization weighted portfolio of non-U.S. companies in developed and emerging markets that have been authorized for investment as approved markets by Dimensional’s Investment Committee. The section of the prospectus entitled “Investment Strategies—M International Equity Fund—Principal Investment Strategies” further discloses that, in determining which emerging market countries are eligible markets for the Fund, Dimensional may consider various factors, including, without limitation, the data, analysis and classification of countries published or disseminated by the International Bank for Reconstruction and Development (commonly known as the World Bank), the International Finance Corporation, FTSE International and MSCI. The disclosure continues that, in determining whether to approve certain emerging markets for investment, Dimensional may take into account, among other things, market liquidity, relative availability of investor information, government regulation, including fiscal and foreign exchange repatriation rules, and the availability of other access to these markets for the Fund. As a result, we believe the definition of the Non-U.S. Universe of the Fund to be appropriately disclosed to investors. Lastly, please note that the section of the prospectus entitled “Fund Summaries—M International Equity Fund—Principal Investment Strategies” discloses that the Underlying Fund is a series of DFA Investment Dimensions Group Inc. In addition, the section of the prospectus entitled “Investment Strategies—M International Equity Fund—Principal Investment Strategies” discloses that the Underlying Fund is managed by Dimensional, and Dimensional is disclosed throughout the prospectus as the sub-adviser to the M International Equity Fund itself. 7. Comment: Please add the risk of investing in depositary receipts as a principal investment risk of the M International Equity Fund. Response: The Registrant respectfully acknowledges the comment; however, it believes that the risks entitled “Market Risk,” “Foreign Securities and Currencies Risk,” “Economic and Market Events Risk” and “Emerging Markets Risk” appropriately describe the principal risks of depositary receipts. The Registrant notes that additional risks of depositary receipts are further described in the statement of additional information. 8. Comment: The M International Equity Fund may purchase futures and options on futures contracts. If the fund will count derivatives toward its 80% names policy, please disclose under Item 4 or Item 9 of Form N-1A that the Fund will value derivatives for purposes of the names rule on a mark to market basis using the current market price or, if it is an over-the-counter derivative, its fair value. This comment also applies to the M Large Cap Value Fund investing in “other instruments with similar economic characteristics.” Response: The Registrant hereby confirms that the M International Equity Fund may count derivatives toward its 80% names policy. For purposes of such policy, the value of the derivatives in which the Fund invests will be calculated in the same way that the values of derivatives are calculated when calculating the Fund’s net asset value. Derivative instruments are valued at market price (not notional value) and may be fair valued, for purposes of calculating a Fund’s net asset value. The Registrant further confirms that M Large Cap Value Fund may count instruments with similar economic characteristics toward its 80% names policy. For purposes of such policy, the value of the instruments with similar economic characteristics in which the Fund invests will be calculated in the same way that the value of instruments with similar economic characteristics are calculated when calculating the Fund’s net asset value. 9. Comment: Significant market events have occurred as a result of the COVID-19 crisis. Please consider whether the risk disclosure should be revised based on how these events are effecting both debt and equity markets. If the Registrant does not believe additional risk disclosure is necessary please explain why. Response: The Registrant has added risk disclosure related to COVID-19. 10. Comment: Each Fund other than the M International Equity Fund includes “Economic and Market Events Risk” as a principle risk factor. Please consider whether this risk factor should also be a principle risk factor of the Fund. Response: The Registrant has amended its disclosure to add this principal risk factor. 11. Comment: For each Fund that includes investing in emerging markets as a principal investment risk, please add the risk of investing in China in the emerging markets risk factor. Response: The Registrant respectfully acknowledges the comment; however, risks of investing in China are generally disclosed through emerging markets risk disclosures and also specifically through the “Economic and Markets Events Risk” in the section of the prospectus entitled “Risks of Investing in the Funds.” As a result, the Registrant believes excluding China risk as a principal risk of the Fund to be appropriate. 12. Comment: Under Derivatives Risk in the following sentence, please briefly describe each risk not otherwise described in the risk section. “Derivative instruments are subject to a number of risks including counterparty, settlement, liquidity, interest rate, market, credit and management risks, as well as the risk of improper valuation.” Response: The Registrant has revised disclosure as requested. 13. Comment: Please confirm whether Large Capitalization Risk is a principal investment risk of the M International Equity Fund. Response: The Registrant confirms that Large Capitalization Risk is a principal investment risk of the Fund. 14. Comment: The statutory section of the M International Equity Fund under “Other Investment Strategies” states that the Underlying Fund may lend its portfolio securities. If securities lending is a principal investment strategy either because the Fund lends its securities or the Underlying Fund lends its securities, include securities lending in the Fund’s principal investment strategy. Response: Securities lending is not a principal investment strategy of the Fund at this time. Disclosure regarding securities lending has been removed as a principal investment strategy of the Fund. 15. Comment: If the expense limitation agreement for the M Large Cap Growth Fund, the M Capital Appreciation Fund and M Large Cap Value Fund will not reduce the total annual fund operating expense for at least one year from the date of the Prospectus please remove the footnote in each Fund’s fee table. Also, for each of these Funds, if the expense limitation agreement did not reduce the total annual fund operating expenses remove from the expense example that the example assumes that the Fund’s expense limitation remains in place. Response: The Registrant has revised the disclosure as requested. 16. Comment: The principal investment strategy of the M Large Cap Growth Fund includes normally investing at least 80% of its total assets in U.S. large cap equity securities, including, but not limited to, common stocks, preferred stocks and American Depositary Receipts. Please add the risk of investing in preferred stock as a principal investment risk of the Fund. Also, U.S. large cap equity securities are not represented by American Depositary Receipts. Please remove that reference and similar disclosure in the SAI. Response: The Registrant has revised the disclosure as requested. 17. Comment: The M Large Cap Growth Fund’s strategy is not fundamental (it may be changed without shareholder approval), but should the Fund decide to change this strategy, it will provide shareholders with at least 60 days’ notice. Please clarify this sentence to indicate which strategy it references. Please also make a conforming change in the statutory section of the Prospectus. Response: The Registrant has revised the disclosure as requested. 18. Comment: Please consider whether Market Risk should be a principle investment risk for only M International Equity Fund and M Capital Appreciation Fund or for all Funds. Response: The Registrant has added Market Risk as a principal investment risk to the M Large Cap Growth Fund and the M Large Cap Value Fund. 19. Comment: The M Large Cap Growth Fund and the M Capital Appreciation Fund are not concentrated in any industry but each Fund includes Concentration Risk. Consider revising this disclosure. Response: Disclosure for both Funds has been amended to remove the reference to “Concentration Risk.” 20. Comment: Under Foreign Securities and Currencies Risk, the M International Equity Fund and the M Capital Appreciation Find indicate that neither Fund hedges for currency risk. Please confirm whether the Funds hedge for foreign security risk. Response: The Registrant confirms that neither Fund hedges for foreign security risk. The Registrant has revised its disclosure to clarify. 21. Comment: If the technology, financials and healthcare sectors are principal investment strategies of the M Large Cap Growth Fund, please reference each sector in the Fund’s principal investment strategies. If any of these sectors are not principal investment strategies of the Fund, please remove the respective risk factor. Response: The Registrant confirms that the technology, financials and healthcare sectors are not principle investment strategies of the Fund and have therefore been removed as principal investment risks. 22. Comment: For the M Capital Appreciation Fund, please include the capitalization range of the Russell 2500 Index as of a recent date. Response: The Registrant has revised the disclosure as requested. 23.