M CORP
              
                              ANNUAL REPORT
              
                                   1998

<PAGE>                 
                   
                                  M CORP
     
                       AND CONSOLIDATED SUBSIDIARIES
     
     
                               ANNUAL REPORT
     
     
     
DESCRIPTION AND LINES OF BUSINESS
     
M Corp (sometimes referred to herein as the "Company") was incorporated in 
1958 and operates as a financial holding company. The Company, through its
wholly or majority-owned subsidiaries is engaged in the title insurance 
business and the ownership and rental of real properties.
     
Title Insurance - First Montana Title Insurance Company (FMTIC, a wholly-
owned subsidiary of TSI, Inc., a ninety-two percent owned subsidiary of the 
Company) was organized in 1958. FMTIC issues title insurance policies through
its subsidiaries within the State of Montana only.  
     
Real Estate Investments - The Company owns rental properties through its 
majority-owned subsidiaries. The rental properties include one commercial 
building, two apartment complexes with a total of thirty-two units and 
several one to four unit residential properties. The Company's investments in
real estate are set forth in Note 13 (Investments In Real Estate) of the 
Notes to Consolidated Financial Statements.

     
The Company operates in a competitive business environment and the Company is
not dependent upon one or a few major customers. Information concerning the 
Company's industry segments is set forth in Note 14 (Information on Segments
of Business) of the Notes to Consolidated Financial Statements.
    
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
     
Title insurance premiums and related fees increased $611,165 (36.0%) in 1998 
as compared with 1997 due primarily to an increase in the real estate 
economies within which the Company operates. The Company believes that the 
increase in the real estate economies within which the Company operates was 
due in part to decreased mortgage interest rates.

Interest revenues increased $80,669 (12.0%) in 1998 as compared with 1997 
due primarily to an increase in interest-bearing deposits.



                                    1     
     
<PAGE>     
     
                                  M CORP
     
                       AND CONSOLIDATED SUBSIDIARIES
     
                               ANNUAL REPORT
     
     
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued

Rent revenues increased $8,564 (1.5%) in 1998 as compared with 1997. The 
increase in rent revenues in 1998 as compared with 1997 was due primarily 
to an increase in rental rates.

Other income decreased $4,798,025 (78.3%) in 1998 as compared with 1997. 
During 1997 the Company recognized a gain on the merger of Security Bancorp 
with and into WesterFed Financial Corporation in the amount of $5,351,471. 
Pursuant to the terms of the merger the Company received cash in the amount 
of the gain recognized and approximately 275,000 shares of WesterFed 
Financial Corporation common stock. No  such gains were realized during 
1998. The gain recognized on the merger transaction was the primary reason 
for the decrease in other income in 1998 as compared with 1997 and is also 
the primary reason for the decrease in net income in 1998 as compared with 
1997.

Salaries and other personnel costs increased $91,528 (9.8%) in 1998 as 
compared with 1997 due primarily to an increase in salary rates and an 
increase in the number of personnel employed in the Company's title 
insurance operations.

Other general and administrative expenses increased $268,063 (21.9%) in 1998 
as compared with 1997. During 1998 consolidated subsidiaries of the Company 
made contributions of appreciated assets to a private foundation in the 
total fair value amount of approximately $751,417. The contributions resulted
in an income tax benefit to the Company in the amount of approximately 
$271,000.

Income tax expense decreased $1,695,000 (73.5%) in 1998 as compared with 
1997 due primarily to the decrease in pre-tax income.

The Company is considering acquisitions which would deplete the Company's
available cash and thus affect the liquidity of the Company.


                                   2
<PAGE>

                                  M CORP
     
                       AND CONSOLIDATED SUBSIDIARIES
     
                             FINANCIAL REPORT
     
                             DECEMBER 31, 1998
     
     
     
     
     
                                 CONTENTS
     
     
     
     
                                                                     PAGE
     
   AUDITOR'S REPORT                                                    4
     
     
   CONSOLIDATED FINANCIAL STATEMENTS
     
      Balance Sheets as of December 31, 1998 and 1997                 5-6
     
      Statements of Income and Comprehensive Income
       for the Years Ended 
       December 31, 1998 and 1997                                      7

      Statements of Stockholders' Equity
       for the Years Ended
       December 31, 1998 and 1997                                      8

      Statements of Cash Flows for the Years
       Ended December 31, 1998 and 1997                               9-10
     
      Notes to Consolidated Financial Statements                     11-19
     
     
   OTHER INFORMATION                                                   20     
     
     
                                  3
<PAGE>     
     
                      Report of Independent Auditors
     
     
     
To The Board of Directors
M Corp
Great Falls, MT  59405
     
     
We have audited the accompanying consolidated balance sheets of M Corp and 
consolidated subsidiaries as of December 31, 1998 and 1997 and the related 
consolidated statements of income and comprehensive income, stockholders' 
equity and cash flows for the years then ended. These financial statements 
are the responsibility of the Company's management. Our responsibility is to 
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
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 audit provides a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial 
position of M Corp and consolidated subsidiaries as of December 31, 1998 
and 1997 and the consolidated results of their operations and their 
consolidated cash flows for the years then ended, in conformity with 
generally accepted accounting principles.



     
     
DWYER & KEITH, CPA's, P.C.
     
     
     
March 19, 1999
Great Falls, Montana
     
                                    4
<PAGE>

                                  M CORP
     
                       AND CONSOLIDATED SUBSIDIARIES
     
                              BALANCE SHEETS
     
                        DECEMBER 31, 1998 and 1997
          
ASSETS                                                1998           1997  
Current Assets          
  Cash (Note 3)                                   $17,931,372    $15,186,576
  Investment Securities (Note 4)                    1,699,672      2,032,576
  Trade Accounts Receivable, Less 
    Allowance for Doubtful Accounts of 
    $8,000 in 1998 and 1997                            77,155          3,521
  Current Portion of Long-Term
    Receivable (Note 8)                                  -             2,026
  Prepaid Expenses                                     28,300         26,900 
  Income Tax Prepayments                                 -             9,309

        Total Current Assets                       19,736,499     17,260,908 
          
Other Assets          
  Noncurrent Investments (Note 4)                     105,000        105,000   
  Other Investments (Note 4)                        5,478,054      8,417,116
  Note Receivable, Excluding
    Current Portion (Note 8)                             -             9,440

         Total Other Assets                         5,583,054      8,531,556
          
Investments In Property, Plant and
  Equipment, at Cost (Notes 1 and 13)          
   Buildings                                        2,131,096      2,145,001
   Furniture, Fixtures and Equipment                  538,595        475,194

                                                    2,669,691      2,620,195
      Less Accumulated Depreciation                (1,985,682)    (1,877,462)
                                                      684,009        742,733 

Title Plants                                          201,113        201,113
Land                                                   84,527         84,527

  Net Property, Plant and Equipment                   969,649      1,028,373

                                                  $26,289,202    $26,820,837
                                                                         
                                                                         
                 See Notes to Consolidated Financial Statements.          

                                       5
<PAGE>
                                  
                                   M CORP
                                                                            
                        AND CONSOLIDATED SUBSIDIARIES
                                                                         
                               BALANCE SHEETS
                                                                         
                         DECEMBER 31, 1998 and 1997
                                                                         
                                                                         
                                                    1998              1997
LIABILITIES AND STOCKHOLDERS' EQUITY          

Current Liabilities          
 Accounts Payable                              $   169,735       $   115,633
 Accrued Liabilities (Note 5)                      136,194           131,470
 Dividends Payable                                 423,118           289,414
 Income Taxes Payable                               43,858              -
 Deferred Income Taxes (Notes 1 and 7)             167,000           280,200

    Total Current Liabilities                      939,905           816,717
          


Provision for Estimated Title and
 Escrow Losses (Note 9)                            970,494         1,005,612

Minority Interests in Consolidated 
 Subsidiaries                                    2,264,242         2,292,081 

Deferred Income Taxes (Notes 1 and 7)              654,800         1,847,400

Excess of Fair Value of Net Assets Acquired
 Over Cost (Note 1)                                 48,635            56,855   

                                                 3,938,171         5,201,948   

Commitments (Note 10)
          
Stockholders' Equity (Notes 1,4  and 11)
  Common Stock, $1.00 Par Value,
    5,000,000 shares authorized, 3,750,905
    shares issued in 1998 and 3,252,004 
    shares issued in 1997                        3,750,905         3,262,004
Capital Surplus                                 16,267,463        15,778,562 
Retained Earnings (Note 11)                      2,329,646         1,185,494
Accumulated Other
   Comprehensive Income (Note 4)                 1,429,456         2,942,456
Less: Cost of Common Shares in Treasury                                     
      2,183,646 Shares in 1998 and 1997         (2,366,344)       (2,366,344)

   Total Stockholders' Equity                   21,411,126        20,802,172  

                                               $26,289,202       $26,820,837 
                                                         
                                                                         
                See Notes to Consolidated Financial Statements.
                                  
                                   6
<PAGE>

                                 M CORP
                       AND CONSOLIDATED SUBSIDIARIES
              STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
          
                              
                                                    1998              1997    
Revenue          
 Title Insurance Premiums and Related Fees     $ 2,309,024       $ 1,697,859   
 Interest                                          754,510           673,841 
 Rent                                              591,056           582,492   
 Other (Note 6)                                  1,333,248         6,131,273

                                                 4,987,838         9,085,465   

Operating Expenses          
 Salaries and Other Personnel Costs              1,029,842           938,314
 Depreciation                                      108,219           123,202   
 Rent                                               42,490            35,284   
 Title and Escrow Losses                            30,544            15,049
 Interest                                               34              -   
 Other General and Administrative Expenses       1,489,776         1,221,713

                                                 2,700,905         2,333,562 

         Operating Income                        2,286,933         6,751,903

Minority Share of Consolidated Subsidiaries
 Net (Income)                                     (140,463)         (373,696)

Income Before Income Taxes                       2,146,470         6,378,207   

Income Taxes (Note 7)                             (610,000)       (2,305,000)

         Net Income                              1,536,470         4,073,207

Other Comprehensive Income (Loss),
   Net of Income Taxes:
   Unrealized Holding Gains (Losses):
   Gain (Loss) Arising During Year              (1,011,664)        1,567,637 
   Reclassification Adjustment                    (501,336)       (2,912,453)

           Other Comprehensive Income (Loss)    (1,513,000)       (1,344,816)

           Comprehensive Income                $    23,470       $ 2,728,391 


                                                                         
                See Notes to Consolidated Financial Statements.              
                                                         
                                        7
<PAGE>

                                      M CORP

                           AND CONSOLIDATED SUBSIDIARIES

                        STATEMENTS OF STOCKHOLDERS' EQUITY

                  FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997

<TABLE>
  
                                                                   Accumulated
                                                                      Other
                             Common      Capital        Retained  Comprehensive      Treasury
                             Stock       Surplus        Earnings      Income           Stock        Total     
<S>                        <C>          <C>            <C>          <C>            <C>            <C>          
Balances, January 1, 1997  $3,051,004   $ 9,934,562    $2,382,380   $4,287,272     $(2,366,344)   $17,288,874   
                                                                                                                
Recapitalization                          5,000,000    (5,000,000)                                      -         
                                                                                                                  
Net Income                                              4,073,207                                   4,073,207  
                                                                                                                  
Dividends Paid                                           (270,093)                                   (270,093)  
                                                                                                                 
Exercise of Stock Options                                                                                      
   211,000 Shares             211,000       844,000                                                 1,055,000  
                                                                                                                
Change in Net Unrealized                                                                                          
  Holding Gains                                                     (1,344,816)                    (1,344,816)
                                                                                                                    
Balances, December                                                                                              
  31, 1997                  3,262,004    15,778,562     1,185,494    2,942,456      (2,366,344)    20,802,172 
                                                                                                                  
Net Income                                              1,536,470                                   1,536,470   
                                                                                                                   
Dividends Paid                                           (392,318)                                   (392,318)  
                                                                                                               
Issuance of Common Stock                                                                                        
   488,901 Shares             488,901       488,901                                                   977,802   
                                                                                                                
Change in Net Unrealized                                                                                       
   Holding Gains                                                    (1,513,000)                    (1,513,000) 
                                                                                                                  
Balances, December                                                                                               
  31, 1998                 $3,750,905   $16,267,463    $2,329,646   $1,429,456     $(2,366,344)   $21,411,126  
                                                                                                                 
</TABLE>


                     See Notes to Consolidated Financial Statements.

                                         8

<PAGE>


                                     M CORP
 
                          AND CONSOLIDATED SUBSIDIARIES
                                                                         
                            STATEMENTS OF CASH FLOWS
                                                                         
                  FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
                                                                         
                           INCREASE (DECREASE) IN CASH
          
                              
                                                       1998          1997   
CASH FLOWS FROM OPERATING ACTIVITIES:          
 Cash Received From Customers                      $ 2,850,658   $ 2,352,199   
 Cash Paid to Suppliers and Employees               (1,816,449)   (1,771,166)  
 Interest and Dividends Received in Cash             1,025,055       951,942
 Cash Proceeds From Sales of Noncurrent Assets          13,905         6,994
 Interest Paid in Cash                                     (34)         -   
 Income Taxes Paid in Cash                            (716,833)   (2,287,950)

Net Cash Provided (Used) By Operating Activities     1,356,302      (747,981)

CASH FLOWS FROM INVESTING ACTIVITIES:          
 Cash Received on Principal of Notes Receivable         11,466         1,852
 Cash Purchases of Minority Interests                  (15,536)       (6,335)
 Capital Expenditures Paid in Cash                     (63,401)      (31,785) 
 Cash Received on Dispositions of 
  Current Investments                                  342,656        68,213
 Cash Received on Dispositions of
  Noncurrent Investments                               527,582     5,351,471
 Cash Purchases of Current Investments                (133,460)     (109,666)  

Net Cash Provided By Investing Activities              669,307     5,273,750

CASH FLOWS FROM FINANCING ACTIVITIES:          
 Dividends Paid in Cash                               (258,615)      (11,278)
 Issuance Of Common Stock For Cash                     977,802     1,055,000

Net Cash Provided By Financing Activities              719,187     1,043,722

     NET INCREASE IN CASH                            2,744,796     5,569,491  

     CASH - BEGINNING OF YEAR                       15,186,576     9,617,085

     CASH - END OF YEAR                            $17,931,372   $15,186,576 
                                 
                               (Continued)
     
                                    9
     
<PAGE>     
     
                                  M CORP
     
                      AND CONSOLIDATED SUBSIDIARIES
     
                   STATEMENTS OF CASH FLOWS - Continued
     
               FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
     
              RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
                           BY OPERATING ACTIVITIES
     
          
                              
                                                     1998            1997      

Net Income                                       $ 1,536,470     $ 4,073,207  

Adjustments to Reconcile Net Income
to Net Cash Provided (Used) 
By Operating Activities:         
  Depreciation                                       108,219         123,202  
  Provision for Doubtful Account Receivable            -              (3,825)
  Minority Share of Consolidated Subsidiaries 
    Net Income                                       140,463         373,696
  Amortization of Deferred Credit                     (8,220)         (8,220) 
  Net Book Value of Assets Sold                       13,905           6,994  
  Contribution in Kind                               163,182         116,875
  Realized (Gains) on Dispositions 
     of Investments                                 (439,559)     (5,395,369)

  Changes in Operating Assets and Liabilities           
    (Increase) Decrease in Accounts Receivable       (73,634)         28,197
    (Increase) Decrease in Prepaid Expenses           (1,400)        (26,900)
    (Increase) Decrease in Income Tax Prepayments      9,309          17,050
    Increase (Decrease) in Payables and 
       Accrued Liabilities                            23,709         (52,888)
    (Increase) in Deferred Income Taxe              (160,000)           -    
    Increase (Decrease) in Income Taxes Payable       43,858            -   

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES  $1,356,302      $ (747,981)
                  
                               
                See Notes to Consolidated Financial Statements.
         
                                   10
<PAGE>
   
                                 M CORP
     
                      AND CONSOLIDATED SUBSIDIARIES
     
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     
     
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     
(a) Principles of Consolidation
     
The consolidated financial statements include the accounts of the Company and
its wholly and majority owned subsidiaries. All significant intercompany 
transactions and balances have been eliminated in consolidation.
     
(b) Title Insurance Income and Related Fees
    
The Company follows the practice of recording title insurance premiums as 
income upon the issuance of the title insurance policy or the collection of 
payment for the title insurance preliminary commitment, whichever occurs 
first. All other fees and charges are recognized as income upon the rendering
of services.
     
(c) Excess of Fair Value of Net Assets of Acquired Subsidiaries Over
     Cost
     
The excess of fair value of the net assets of acquired subsidiaries over cost
is amortized over a twenty year period using the straight-line method.
     
(d) Depreciation and Amortization
     
Property, plant and equipment is comprised of furniture and fixtures, 
buildings, title plants and land. Furniture and fixtures are carried at cost.
Depreciation is computed over recovery periods of three to ten years using 
declining balance methods with a mid-quarter convention.
     
Buildings and building improvements are carried at cost. Depreciation is 
computed over recovery periods of ten to twenty-seven and one-half years 
using the straight line method with a mid-month convention.
     
Title plants and land are carried at cost and are not depreciated.
     
(e) Income Taxes
     
The Company follows the practice of recording deferred income taxes resulting
from timing differences between financial reporting and income tax reporting.
The Company does not provide for deferred income taxes resulting from the 
undistributed earnings of subsidiary companies included in the consolidated 
statements of income because the companies file consolidated federal income 
tax returns and therefore any dividends paid to the Company are nontaxable. 
Investment tax credits are recorded as a reduction of the provision for 
federal income taxes in the year utilized.
                             
     
                                     11

<PAGE>     
                                   M CORP
     
                        AND CONSOLIDATED SUBSIDIARIES
     
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
     
          
     
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
     
(f) Fiduciary Assets and Liabilities   
     
The assets and liabilities of the escrows administered by the Company are not
included in the consolidated balance sheet.
     
(g) Policy of Cash Equivalents
     
For purposes of the statements of cash flows, cash equivalents include time 
deposits, certificates of deposit and money market accounts, all with 
original maturities of three months or less.

(h) Retirement Plans

The Company adopted an employees' savings plan under Section 401(k) of the 
Internal Revenue Code (the "Code") during 1998. The Company allows eligible 
employees to contribute the maximum percentage of their compensation allowed 
by the Code. The Company matches employee contributions in an amount 
equal to fifty percent of the first six percent of the employee's 
compensation up to a maximum of $1,080. Participants are at all times fully 
vested in their contributions and are gradually vested in the Company's
contributions. The Company's 401(k) contributions and administrative costs 
were $8,423 for 1998.

(i)Reclassifications

Certain reclassifications have been made to the prior year amounts to make 
them comparable to the 1998 presentation. These changes had no impact on 
previously reported results of operations or shareholders' equity.


2.  NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES

The Company is engaged in the title insurance business within the state of 
Montana,  in  the  title insurance agency business in Yellowstone, Rosebud 
and Cascade Counties, Montana and in the ownership and rental of properties 
located primarily in Montana. The Company's primary business, based on 
revenues, is title insurance.

The process of preparing financial statements in conformity with generally 
accepted accounting principles requires the use of estimates and assumptions 
that affect the reported amounts of certain types of assets, liabilities, 
revenues and expenses. Such estimates primarily relate to unsettled 
transactions and events as of the date of the financial statements. Actual 
results could differ from those estimates.

As the Company's operations are conducted almost exclusively within the 
State of Montana, items and/or events affecting the economy within the 
State of Montana could adversely affect the Company and the Company's 
operations.


                                  12
<PAGE>

                                M CORP

                     AND CONSOLIDATED SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


3.CASH BALANCES

The Company maintains accounts with various financial institutions and stock
brokerage firms. Cash balances are insured up to $100,000 by either the 
Securities Investor Protection Corporation ("SIPC") or the Federal Deposit 
Insurance Corporation ("FDIC"). At December 31, 1998, cash balances totaling
$14,956,222 were uninsured by either the SIPC or the FDIC.
     
     
4.   INVESTMENT SECURITIES AND OTHER INVESTMENTS
     
The Company adopted Statement of Financial Accounting Standards No. 115 
("SFAS No. 115"), "Accounting For Investments in Certain Debt and Equity 
Securities" effective January 1, 1994. In accordance with SFAS No. 115, the 
Company has classified all of its current and other investments as available
for sale. On the following page is a summary of the Company's investments, 
all of which consist of equity securities:
          
                                                        1998         1997    
    Current Assets          
    Cost                                           $ 1,152,704   $ 1,374,728
    Gross Unrealized Holding Gains                     551,638       673,389  
    Gross Unrealized Holding Losses                     (4,670)      (15,541) 

    Fair Value                                     $ 1,699,672   $ 2,032,576   
          
    Other (Noncurrent) Assets          
    Cost                                           $ 3,385,128   $ 3,623,505
    Gross Unrealized Holding Gains                   2,092,926     4,793,611 

    Fair Value                                     $ 5,478,054   $ 8,417,116  
     
Realized gains and losses are determined on the basis of specific 
identification. During 1998 and 1997, sales proceeds and gross realized gains
and losses were as follows:
     
          
                                                       1998          1997      

    Sales Proceeds                                 $   870,238   $ 5,419,622
    Gross Realized Losses                          $    17,159   $     -  
    Gross Realized Gains                           $   456,718   $ 5,395,368   
     
            


                                     13
<PAGE>


                                  M CORP

                       AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


4.  INVESTMENT SECURITIES AND OTHER INVESTMENTS - Continued

Stockholders' equity at December 31, 1998 has been increased by $1,429,456,
the difference between the total net unrealized gain at December 31, 1998 
and deferred income taxes and minority interests in the net unrealized gain. 
Other noncurrent investments totaling $105,000 at December 31, 1998
consist of certificates of deposit which are on deposit with the State of 
Montana Commissioner of Insurance and are restricted as to use by law.
     
5.  ACCRUED LIABILITIES
     
Accrued liabilities consist of the following at December 31,:
          
                                                        1998          1997     

    Property Taxes                                $    48,627   $    50,635   
    Compensation                                       61,884        36,638  
    Payroll Taxes                                        -           16,037 
    Other                                              25,683        28,160  

                                                  $   136,194   $   131,470 

6.  OTHER INCOME
                                                                         
Other income consists of the following:
          
                                                        1998          1997   

    Dividends                                     $   270,545   $   278,101 
    Gain on Sales of Securities                       439,559     5,395,368
    Amortization of Deferred Credit                     8,220         8,220 
    Gain on Contribution in Kind                      588,235       408,125 
    Other                                              26,689        41,459   

                                                  $ 1,333,248   $ 6,131,273 

7.  INCOME TAXES
                                                                         
Income tax expense consists of the following:
                                                                         
           
                                                       1998          1997    
      Federal and State Income Taxes          
         Currently Payable                        $   770,000   $ 2,305,000  
         Deferred                                    (160,000)        -    

                                                  $   610,000   $ 2,305,000   



                                   14

<PAGE>


                                 M CORP

                      AND CONSOLIDATED SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


7.  INCOME TAXES - Continued

The income tax expense reflected in the financial statements differs from the
amounts that would normally be expected by applying the U.S. Federal income 
tax rates to income before income taxes. The reasons for the differences are 
as follows:
          
                                                      1998           1997    

    Computed "Expected" Tax Expense               $   729,800   $ 2,168,600   
    Purchase Accounting Adjustments                    (2,800)       (4,600) 
    Tax Exempt Income                                    -           (2,300)
    Special Dividends Received Deduction              (64,400)      (65,000) 
    Minority Share of Consolidated
       Subsidiaries Income                             47,800       127,100  
    Contribution At Fair Value                       (200,000)     (138,800)
    State Income Taxes                                 70,300       187,900   
    Other                                              29,300        32,100   

                                                  $   610,000   $ 2,305,000   
                                                                          

Deferred income taxes result from timing differences in the recognition of
income and expense for tax and financial reporting purposes. The sources and
tax effects of these timing differences are as follows:
                                                                         
                                                      1998           1997    
    Installment sales recognized for
      financial reporting purposes
      but not income tax purposes              $      -         $    (2,100)   
    Allowance for doubtful accounts                  2,700            2,700    
    Excess of income tax depreciation
      over financial reporting
      depreciation                                 (13,000)         (13,500)   
    Contribution Deduction Carryover               157,400             -
    Unrealized Gains on Investments             (1,075,800)      (2,221,600)   
    Excess of financial reporting
      reserves for title and escrow 
      losses over income tax reporting
      for title and escrow losses                  106,900          106,900    
                      
                                               $  (821,800)     $(2,127,600)


                                   15

<PAGE>

                                 M CORP

                      AND CONSOLIDATED SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


7.  INCOME TAXES - Continued

The amounts of deferred tax assets and liabilities as of December 31, 
are as follows:

                                                   1998             1997     

     Deferred tax asset, net of
       valuation allowance of $0 in
       1998 and 1997                           $     -          $     -       
       
     Deferred tax liabilty                     $   821,800      $ 2,127,600    
     


8.   NOTE RECEIVABLE
     
Note receivable has resulted from the sale of certain assets and is 
summarized as follows as of December 31, 1997:
          
     9% Contract For Deed, due in monthly
      installments of $248 including interest 
      until September, 2002                          $  11,466   
                                                                        
     Less Current Portion of Long-Term Receivables       2,026     

     Long-Term Notes Receivable                      $   9,440   
                                                                         
                                                                         
                                                                         
9.   PROVISION FOR ESTIMATED TITLE AND ESCROW LOSSES
                                                                         
The Company's subsidiary, First Montana Title Insurance Company (FMTIC,wholly-
owned by TSI, Inc.) issues title insurance policies in the State of Montana. 
The terms of policies issued are indefinite and premiums are not refundable. 
FMTIC is a party to various lawsuits wherein, among other things, plaintiffs 
generally claim defects in insured titles, unreported liens or improper 
practices. FMTIC is also required under many of its policies issued to 
provide defense for its insureds in litigation founded upon alleged defects 
or other matters insured against by the policy. Such litigation and claims 
are normal occurrences within the title insurance industry. In accordance 
with generally accepted accounting practices, FMTIC has established a 
provision for estimated title and escrow losses which appears on the
consolidated balance sheets under the same title. FMTIC has established the 
provision for estimated losses on (1) claims known to FMTIC and (2) claims 
unknown to FMTIC but incurred upon issuance of policies as well as for 
estimated external settlement expenses to be incurred. The provision has been
reduced for estimated recoveries.
     

                                 16
<PAGE>

                               M CORP

                   AND CONSOLIDATED SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


     
10.   COMMITMENTS
     
The Company and its subsidiaries are obligated under various lease agreements
for office space expiring at various dates through 2002. Rental expense for 
office space for the years ended December 31, 1998 and 1997, was $39,204 and
$32,030, respectively. Annual rental commitments for the ensuing calendar 
years are as follows:

                 1999     2000     2001     2002   

               $38,400  $35,400  $32,400  $32,400


11.  DIVIDEND RESTRICTIONS

M Corp, the parent company, depends in part upon cash dividends from its
subsidiaries for the funding of its cash requirements. Dividends paid by
First Montana Title Insurance Company (FMTIC), the parent company's lower 
tier subsidiary, are restricted by statutes of the State of Montana. FMTIC 
is required to obtain regulatory approval before making any dividend 
distributions. At December 31, 1998, substantially all retained earnings
were subject to such restrictions. At December 31, 1998, FMTIC's statutory
capital and surplus as regars policyholders amounted to $8,761,566.

12.  RELATED PARTY TRANSACTIONS

During 1998, consolidated subsidiaries of the Company contributed assets in 
kind with a fair market value and a cost basis of $751,417 and $163,182, 
respectively, to a charitable foundation established by a controlling 
shareholder of the Company. The contribution in kind resulted in an 
income tax benefit to the Company in the approximate amount of $271,000. 
During 1997, consolidated subsidiaries of the Company contributed assets in 
kind with a fair market value and a cost basis of $525,000 and $116,875, 
respectively, to a charitable foundation established by a controlling 
shareholder of the Company. The contribution in kind resulted in an income 
tax benefit to the Company in the approximate amount of $203,000. Outstanding
options to purchase 211,000 shares of the Company's common stock at the 
exercise price of five dollars per share were exercised during 1997 by 
majority holders of the Company. 


13.  INVESTMENTS IN REAL ESTATE

The Company is the lessor of property under operating leases expiring in 
various years through 1999. Minimum future rentals to be received on 
non-cancelable leases as of December 31, 1998, for the 1999 calendar year 
was $128,100. The consolidated statements of income do not contain any 
contingent rental income. The Company's investments in real estate are shown 
in detail on the following page.


                                    17


                                   M CORP
 
                         AND CONSOLIDATED SUBSIDIARIES                   

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


<TABLE>
<CAPTION>
          
13. INVESTMENTS IN REAL ESTATE - Continued                                                   
                                                                                               
                                     GROSS AMOUNT CARRIED                                     
                      DATE             ON BALANCE SHEET          ACCUMULATED    AMOUNT OF
DESCRIPTION         ACQUIRED    LAND      BUILDINGS    TOTAL    DEPRECIATION  ENCUMBRANCE    
                                                                                                  
<S>                   <C>     <C>        <C>         <C>         <C>           <C>                                      
December 31, 1998                                                                             
                                                                                                
Commercial Building                                                                               
 Helena, Montana      1966    $  23,037  $  320,294  $  343,331  $  311,314    $     --       
                                                                                             
Apartment Complex                                                                               
 Polson, Montana      1983       23,037     275,850     298,887     275,850    $     --       
                                                                                              
Apartment Complex                                                                            
 Great Falls, Montana 1974       10,252     217,243     227,495     217,243    $     --            
                                                                                              
Other Rental Units    Var.        1,093   1,169,909   1,171,002     527,650    $     --        
                                                                                             
Buildings Occupied                                                                             
 By the Company and                                                                           
 Miscellaneous                                                                              
 Properties           Var.       27,108     147,800     174,908     147,436    $     --          
                                                                                              
                              $  84,527  $2,131,096  $2,215,623  $1,479,493    $     --       
                                                                                             
                                                                                            
December 31, 1997:                                                                              
                                                                                                  
Commercial Building                                                                           
 Helena, Montana      1966    $  23,037  $  320,294  $  343,331  $  305,338    $     --       
                                                                                             
Apartment Complex                                                                             
 Polson, Montana      1983       23,037     275,850     298,887     274,180    $     --     
                                                                                              
Apartment Complex                                                                            
 Great Falls, Montana 1974       10,252     217,243     227,495     217,243    $     --     
                                                                                              
Other Rental Units    Var.        1,093   1,183,814   1,184,907     467,845    $     --      
                                                                                           
Buildings Occupied                                                                            
 By the Company and                                                                           
 Miscellaneous                                                                                
 Properties           Var.       27,108     147,800     174,908     146,119    $     --     
                                                                                             
                              $  84,527  $2,145,001  $2,229,528  $1,410,725    $     --              
                                                                                                
</TABLE>
                                       18
<PAGE>

                                    M CORP
                         AND CONSOLIDATED SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -Continued

<TABLE>
<CAPTION>
14.   INFORMATION ON SEGMENTS OF BUSINESS

The Company's operations are classified into three reportable segments that 
provide different products or services. The Company's reportable segments, 
the title insurance business, ownership and rental of properties and 
financial holding company are managed separately because of their differing 
operations, customers and requirements. The Company's accounting policies for 
segments are the same as those described in the summary of significant 
accounting policies. Management evaluates segment performance based on 
segment profit or loss before income taxes. Substantially all of the 
Company's business is conducted within the state of Montana.


                       Sales to                       Segment          Total Net                      Expenditures  
                        Outside         Interest     Operating           Segment      Depreciation     For Segment            
                       Concerns         Revenues       Profit            Assets         Expense          Assets        
<S>                    <C>            <C>          <C>              <C>                <C>               <C>                
Year Ended                                                                                                            
 December 31, 1998                                                                                                  
                                                                                                                   
Financial Holding                                                                                                 
   Company             $   650,639    $   387,754  $    472,943     $ 12,148,486       $      841        $     632    
                                                                                                                        
Title Insurance                                                                                                           
   Operations            2,991,633        366,756     1,572,935       13,369,296           39,727           62,769      
                                                                                                                      
Rental Properties          591,056           -          241,055          771,420           67,651              -        
                                                                                                                        
Consolidated           $ 4,233,328    $   754,510   $ 2,286,933     $ 26,289,202       $  108,219           63,401     
                                                                                                                        
                                                                                                                        
                                                                                                                        
Year Ended                                                                                                             
 December 31, 1997                                                                                                        
                                                                                                                        
Financial Holding                                                                                                           
   Company             $ 4,013,651    $   330,624   $ 3,716,728     $ 11,914,807       $    1,833        $     -          
                                                                                                                          
Title Insurance                                                                                                        
   Operations            3,805,481        353,217     2,638,113       14,109,761           36,970           31,785     
                                                                                                                      
Rental Properties          582,492           -          397,062          796,269           84,399              -     
                                                                                                                         
Consolidated           $ 8,401,624    $   683,841   $ 6,751,903     $ 26,820,837       $  123,202           31,785   
                                                                                                                          
                                   19

<PAGE>                                                               
                                 M CORP
     
                      AND CONSOLIDATED SUBSIDIARIES
     
                         DIRECTORS AND OFFICERS
     
     
     
     
        NAME                              OCCUPATION
     
   S. M. McCann                 Attorney at Law, Business Owner,
   Director and                 Investor
   President                    San Luis Obispo, California
     
     
   R. Bruce Robson              Data Processing Manager,
   Director                     Sletten Construction Co.
                                Great Falls, Montana
     
     
   G. Robert Crotty, Jr.        Attorney at Law,
   Director                     Great Falls, Montana
     


     
     
                              MARKET INFORMATION
     
     
  The Company's common stock is not traded on any securities exchange, nor
  are there records kept of any quotations by securities dealers or the
  National Quotation Bureau, Inc. To the best knowledge of the Company, bid
  and asked quotations for the Company's common stock are not reported in any
  newspapers.

  A dividend of $.25 per share was declared on December 30, 1998, payable 
  to shareholder's of record on December 31, 1998, to be paid on or before 
  March 15, 1999. A dividend of $.25 per share was declared on December 31, 
  1997, payable to shareholder's of record on December 31, 1997, to be 
  paid on or before March 15, 1998. 
     
  There are approximately 750 holders of record of the Company's common
  stock.
     
  A copy of the Form 10-KSB Annual Report may be obtained upon written
  request to the Company.
     
     
       
                                    M Corp
                                 P.O. Box 2249
                            110 Second Street South
                          Great Falls, MT  59403-2249

                                     20

<PAGE>

</TABLE>