M FUND INC, 497, 1996-02-05

M FUND INC
497, 1996-02-05

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M FUND

PROSPECTUS

JANUARY 1, 1996

M Fund, Inc. (the "Company") is an investment company consisting of four
separate diversified investment portfolios or funds (the "Funds"). These Funds
are available through the purchase of variable life insurance and variable
annuity policies issued by certain insurance companies ("Participating
Insurance Companies"). The Funds are intended to be offered in addition to
other portfolios offered by the Participating Insurance Companies. Shares of
the Funds may also be sold to qualified pension and retirement plans.

Each of the Funds seeks long-term capital appreciation or total return, and
each Fund will invest primarily in stocks and other equity securities.
However, the Funds will use different investment techniques or strategies, and
each Fund's Portfolio Manager has a different investment style.

EDINBURGH OVERSEAS EQUITY FUND invests outside of the United States, and
when appropriate will focus on small- to medium-capitalization companies and
emerging markets.

TURNER CORE GROWTH FUND emphasizes common stocks of U.S. companies that show
strong earnings potential and also have reasonable valuations.

FRONTIER CAPITAL APPRECIATION FUND invests in common stock of U.S. companies
of all sizes, with emphasis on stocks of small- to medium-capitalization
companies.

ENHANCED U.S. EQUITY FUND invests primarily in common stock of U.S.
companies perceived to provide an opportunity for higher rates of return than
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500" or the
"Index") while maintaining risk characteristics which approximate those of the
Index.

This Prospectus briefly describes the information that investors should know
before investing in these Funds, including the risks associated with investing
in each. Investors should read and retain this Prospectus for future
reference. A Statement of Additional Information dated January 1, 1996 (the
"SAI"), has been filed with the Securities and Exchange Commission (the "SEC")
and is incorporated herein by reference. The SAI is available without charge,
upon request by writing to the Company at River Park Center, 205 S.E. Spokane
Street, Portland, Oregon 97202, Attn: M Fund Administrator, or by calling
(503) 232-6960.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
INSURANCE POLICIES.
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TABLE OF CONTENTS

<TABLE>
<S> <C>
INTRODUCTION................................................................ 3
INVESTMENT OBJECTIVES AND POLICIES.......................................... 3
Edinburgh Overseas Equity Fund............................................ 4
Turner Core Growth Fund................................................... 4
Frontier Capital Appreciation Fund........................................ 5
Enhanced U.S. Equity Fund................................................. 5
INVESTMENT RESTRICTIONS..................................................... 6
PORTFOLIO TURNOVER.......................................................... 6
MANAGEMENT.................................................................. 7
Directors and Officers.................................................... 7
Investment Adviser........................................................ 7
Portfolio Managers........................................................ 8
INVESTMENT METHODS AND RISKS................................................ 10
Foreign Investments....................................................... 10
Investing in Small-Capitalization Companies............................... 11
Start-Up Period........................................................... 12
Securities Lending........................................................ 12
Other Investments......................................................... 12
PERFORMANCE INFORMATION..................................................... 13
DETERMINATION OF NET ASSET VALUE............................................ 13
OFFERING, PURCHASE AND REDEMPTION OF SHARES................................. 14
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................ 14
TAXES....................................................................... 15
OTHER INFORMATION........................................................... 16
Reports................................................................... 16
Voting and Other Rights................................................... 16
Administrative and Other Services......................................... 16
</TABLE>

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INTRODUCTION

The M Fund investment portfolios are available to the public through the
purchase of variable life insurance and variable annuity policies offered by
members of M Financial Group and issued by certain life insurance companies
affiliated with M Financial Group. M Financial Group is an independent life
insurance producer group, specializing in the distribution of life insurance
to persons of substantial financial means. The M Fund investment portfolios
can be selected by policyholders in addition to other portfolios offered by
the participating insurance companies. The M Fund portfolio managers have been
selected, and are reviewed and monitored, by M Financial Investment Advisers,
Inc., whose Board of Directors consists of members from M Financial Group.

M Fund, Inc. (the "Company") is an open-end management investment company,
commonly known as a mutual fund. The Company consists of four separate
investment portfolios or funds (the "Funds" or a "Fund"), each of which is, in
effect, a separate mutual fund. (Additional Funds may be created from time to
time.) By investing in a Fund, an investor becomes entitled to a pro rata
share of all dividends and distributions arising from the net income and
capital gains on the investments of that Fund. Likewise, an investor shares
pro rata in any losses of that Fund.

Pursuant to an investment advisory agreement and subject to the authority of
the Company's board of directors (the "Board of Directors"), M Financial
Investment Advisers, Inc. (the "Adviser") serves as the Company's investment
adviser and conducts the business and affairs of the Company. The Adviser has
engaged the following Portfolio Managers to act as sub-advisers to provide the
day-to-day portfolio management for the respective Funds.

<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER
---- -----------------
<S> <C>
Edinburgh Overseas Equity Fund Edinburgh Fund Managers plc
Turner Core Growth Fund Turner Investment Partners, Inc.
Frontier Capital Appreciation
Fund Frontier Capital Management Company, Inc.
Enhanced U.S. Equity Fund Franklin Portfolio Associates Trust
</TABLE>
The Company currently offers its shares to separate accounts of
Participating Insurance Companies as funding vehicles for certain variable
life insurance or variable annuity policies (the "Policies"). The Company may
also offer its shares to qualified pension and retirement plans. The Company
does not offer its shares directly to the general public. A separate
prospectus, which accompanies this Prospectus, describes the applicable
Policies and the separate account through which they are funded.

The Fund's shares are sold with no sales load, no redemption fees, and no
"12b-1" or other distribution fees. However, various fees and charges
(possibly including sales loads) are imposed with respect to each Policy, as
described in the prospectus for the applicable Policy.

INVESTMENT OBJECTIVES AND POLICIES

Each Fund has an investment objective and related investment policies and
uses various investment techniques to pursue its objective and policies. THERE
CAN BE NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
Investors should not consider any one Fund alone to be a complete investment
program. Each of the Funds is subject to the risk of changing economic
conditions, as well as the risk inherent in the ability of the Portfolio
Manager to make changes in the portfolio composition of the Fund in
anticipation of changes in economic, business, and financial conditions. As
with any security, a risk of loss is inherent in an investment in the shares
of any of the Funds.

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The different types of securities, investments, and investment techniques
used by each Fund all have attendant risks of varying degrees. For example,
with respect to equity securities, there can be no assurance of capital
appreciation and there is a substantial risk of decline. With respect to debt
securities, there exists the risk that the issuer of the security may not be
able to meet its obligations on interest or principal payments at the time
required by the instrument. In addition, the value of debt instruments
generally rises and falls inversely with prevailing current interest rates. As
described below, an investment in certain of the Funds entails additional
risks as a result of the Funds' ability to invest a substantial portion of
their assets in either foreign investments or small-capitalization issuers or
both. See "Investment Methods and Risks."

Certain types of investments and investment techniques common to one or more
Funds are described in greater detail, including the risks of each, under
"Investment Methods and Risks" below and in the SAI. The Funds are also
subject to certain investment restrictions that are described under the
caption "Investment Restrictions" in either this Prospectus or the SAI.

The investment objective of each Fund, as well as investment policies that
are not fundamental, may be changed by the Board of Directors without
shareholder approval. See "Investment Restrictions."

EDINBURGH OVERSEAS EQUITY FUND

The Edinburgh Overseas Equity Fund's investment objective is long-term
capital appreciation with reasonable investment risk through active management
and investment in common stock and common stock equivalents of foreign
issuers. Current income, if any, is incidental.

The Fund seeks to achieve this objective by focusing on areas of the market
that the Portfolio Manager believes are inefficiently priced. These include
smaller, often emerging markets, and smaller companies.

The investment process utilized by the Portfolio Manager, Edinburgh Fund
Managers plc, combines decisions on country weightings, sector allocations,
and stock selection strategies. Sector weightings are based on research into
demand and supply factors and external independent studies. The stock
selection process is fundamentally driven and focuses on four factors: quality
of management, financial health, long-term industry prospects and valuation
relative to the stock's market price. Research is generally on less-followed
small- to medium-sized companies and, when economic conditions are deemed
appropriate, the Fund may hold up to 30% of its assets in small-cap stocks
(i.e., stocks of companies capitalized at less than $500 million).

When its assets are at a sufficient level, the Edinburgh Overseas Equity
Fund will have on average 60 to 80 different stocks. Under normal market
conditions, it will have at least 90% of the value of its total assets
invested in at least four different countries outside the United States, but
it may "concentrate" its investments by investing a substantial portion of its
assets (e.g., more than 25%) in only one or a few countries or regions.
Securities issued by U.S. based companies will ordinarily not be purchased by
the Fund. The Fund expects generally to be fully invested with less than 10%
cash or cash equivalents.

TURNER CORE GROWTH FUND

The Turner Core Growth Fund's investment objective is long-term capital
appreciation through a diversified portfolio of common stocks that show strong
earnings potential with reasonable market prices. The Portfolio Manager's
style is core "growth at a reasonable price" and is based on the philosophy
that earnings expectations are the primary determinant of stock prices.

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The Portfolio Manager, Turner Investment Partners, Inc., uses a bottom-up
discipline (i.e., an individual stock selection process, rather than a top-
down industry sector selection process) utilizing sophisticated analytical
tools to screen over 3,500 securities for both attractive growth and value
characteristics. Growth factors include increasing earnings estimates and
results, while value measures include price/earnings ratio to growth rate,
ratio of market price to book value, and dividend yield. The first step is a
computer ranking based upon a proprietary model: stocks ranked in the 35th
percentile or above qualify for purchase, while those ranked in the 55th
percentile or below generally will be sold sometime thereafter.

Stocks eligible for purchase are then subjected to rigorous fundamental and
technical analyses. The fundamental analysis focuses on a company's earnings
prospects relative to analysts' consensus expectations, while the technical
analysis evaluates support for a stock based on price and volume patterns.

The Fund purchases stocks with favorable rankings, earnings prospects, and
positive technical indicators. Conversely, stocks are sold when earnings
prospects are deteriorating, as indicated by a ranking below the 55th
percentile (i.e., below 55% of the stocks screened), deteriorating earnings
forecasts, or a worsening of technical indicators.

Generally, the Turner Core Growth Fund will be fully invested (no more than
3% cash or cash equivalents), with an individual security constituting no more
than 2% of the net asset value of the Fund, and when its assets have reached a
sufficient level will generally contain 130 to 140 holdings.

FRONTIER CAPITAL APPRECIATION FUND

The Frontier Capital Appreciation Fund's investment objective is maximum
capital appreciation through investment in common stock of companies of all
sizes, with emphasis on stocks of small- to medium-capitalization companies
(i.e., companies with market capitalization of less than $3 billion).
Importance is placed on an evaluation of earnings per share growth and
expectations of stock price appreciation, rather than income.

The Portfolio Manager, Frontier Capital Management Company, Inc., seeks to
identify companies with unrecognized earnings potential. The investment
process emphasizes earnings growth potential and valuation of those companies
which tend to be less well followed by Wall Street analysts and have a
relatively low level of ownership by other institutional investors. The
process combines traditional fundamental research with a valuation model that
screens dividend valuation, equity valuation, earnings growth, earnings
momentum, and earnings that have the potential to exceed market expectation.

The portfolio is not restricted to any one segment of the market; however,
generally a majority of the portfolio will consist of stocks of small- to
medium-capitalization companies. The portfolio will typically consist of 80 to
120 stocks (when its asset size is sufficient) and generally will be fully
invested (no more than 7% cash or cash equivalents).

Stocks are sold if earnings growth potential is realized, when the
fundamental reasons for purchase are no longer valid, or when a more
attractive situation is identified.

ENHANCED U.S. EQUITY FUND

The Enhanced U.S. Equity Fund's investment objective is above-market total
return through investment in common stock of companies perceived to provide a
return higher than that of the S&P 500 at approximately the same level of
investment risk as the S&P 500.

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The Portfolio Manager, Franklin Portfolio Associates Trust, uses a
quantitative process that seeks to identify those stocks with the highest
expected returns. The Portfolio Manager, using proprietary software, will
attempt to construct a portfolio having similar risk characteristics as those
of the S&P 500. The S&P 500 represents a sampling of the largest U.S. and some
foreign stocks publicly traded in the United States.

Valuation models used to rank the universe of stocks focus on fundamental
momentum, relative value, future cash flow, and supplementary factors (e.g.,
trading by officers or directors and short-term price momentum). Stocks which
fall below the median ranking in this process are sold. A proprietary
optimizer is used to construct the portfolio. The optimizer is a risk
management system comprised of proprietary software created by Franklin
Portfolio Associates. It categorizes both the portfolio and the S&P 500 into
55 industry groups and 13 general risk categories. Stocks are then selected
from the top deciles in Franklin's ranking process so that the portfolio
reflects similar characteristics to those of the industry groups and risk
characteristics of the S&P 500. Thus, industry and sector allocations are
actively neutralized, permitting Franklin's investment process to remain
focused on individual stock selection.

Typically cash is expected to be less than 2% of the Fund's total market
value, and when it reaches a sufficient asset size the Fund will contain
approximately 180 stocks. Under normal market conditions, it will have at
least 65% of the value of its total assets invested in equity securities in
U.S. based companies.

INVESTMENT RESTRICTIONS

Each of the Funds is subject to certain investment restrictions which have
been adopted by the Company for each Fund as fundamental policies that cannot
be changed without the approval of a majority of the outstanding votes
attributable to shares of that Fund. Among other restrictions, a Fund may not,
with respect to 75% of the value of its total assets, purchase the securities
of any one issuer (except U.S. Government securities) if more than 5% of the
value of the Fund's assets would be invested in such issuer or if more than
10% of the outstanding voting securities of that issuer would be owned by the
Fund. Similarly, it is a fundamental investment restriction that none of the
Funds may invest more than 25% of its total assets in securities of issuers in
any one industry, except that this limitation does not apply to U.S.
Government securities. For a more complete description of the investment
restrictions to which each Fund is subject, see the SAI.

PORTFOLIO TURNOVER

The portfolio turnover rate is calculated for each Fund by dividing the
lesser of the dollar amount of sales or purchases of portfolio securities by
the average monthly value of that Fund's portfolio securities, excluding
securities having a maturity at the date of purchase of one year or less. The
Company anticipates the following annual portfolio turnover rates for the
Funds:

<TABLE>
<CAPTION>
ANTICIPATED
PORTFOLIO
TURNOVER
FUND RATE
---- -----------
<S> <C>
Edinburgh Overseas Equity Fund................................. 70%
Turner Core Growth Fund........................................ 125%
Frontier Capital Appreciation Fund............................. 60-80%
Enhanced U.S. Equity Fund...................................... 70%
</TABLE>

High rates of portfolio turnover involve correspondingly greater expenses
which must be borne by a Fund and may under certain circumstances make it more
difficult for a Fund to qualify as a regulated investment company under the
Internal Revenue Code.

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MANAGEMENT

DIRECTORS AND OFFICERS

The Board of Directors is responsible for deciding matters of general policy
and reviewing the actions of the Adviser and the Portfolio Managers, the
custodian, accounting and administrative services provider and other providers
of services to the Company. The officers of the Company supervise the
Company's daily business operations. The SAI contains information as to the
identity of, and other information about, the directors and officers of the
Company.

INVESTMENT ADVISER

M Financial Investment Advisers, Inc. (the "Adviser") is the investment
adviser of the Company and its Funds. The Adviser is an affiliate of M Life
Insurance Company ("M Life"), a Colorado stock insurance company.

M Life is an agent-owned reinsurance company in that its capital stock is
owned primarily by independent insurance agents who are engaged primarily in
selling insurance policies, including variable insurance policies which will
be invested in the Funds. M Life, for a fee paid by the insurance carriers,
reinsures a portion of the mortality risk on insurance policies sold by its
shareholder-agents.

The Adviser and M Life are controlled by Management Partnership, a general
partnership which does business under the name M Financial Group. M Financial
Group is engaged in providing product development and marketing support
services for participating insurance agents, most of which are shareholders of
M Life. M Financial Group receives from insurance carriers compensation based,
in part, upon the volume of insurance premiums generated by its participating
agents. A majority interest in M Financial Group is owned by M Corporation, of
which 50% is owned by each of Ellison C. Morgan and Mark I. Solomon. Messrs.
Carl G. Mammel, Peter W. Mullin, and Thomas N. Spitzer, either directly or
through corporations controlled by them, are also partners in M Financial
Group. Mr. Mullin is a director of the Company.

The Adviser, located at River Park Center, 205 S.E. Spokane Street,
Portland, Oregon 97202, is newly organized and therefore has no previous
experience in providing investment advisory services.

The Adviser has entered into an investment advisory agreement, dated
December 5, 1995, with the Company under which the Adviser assumes overall
responsibility, subject to the ongoing supervision of the Company's Board of
Directors, for administering all operations of the Company and for monitoring
and evaluating the management of the assets of each of the Funds by the
Portfolio Manager. The Adviser provides or arranges for the provision of the
overall business management and administrative services necessary for the
Company's operations and furnishes or procures any other services and
information necessary for the proper conduct of the Company's business. The
Adviser also acts as liaison among, and supervisor of, the various service
providers to the Company, including the custodian, transfer agent,
administration agent, and accounting services agent. The Adviser is also
responsible for overseeing the Company's compliance with the requirements of
applicable law and with each Fund's investment objective, policies, and
restrictions.

For its services to the Company, the Adviser receives an advisory fee that
is based on the average daily net assets of each of the Funds, deducted daily
from the assets of each of the Funds, and paid to the Adviser monthly.

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The following annual rates represent total advisory fees for each Fund:

<TABLE>
<CAPTION>
FUND TOTAL ADVISORY FEES
---- -------------------
<S> <C>
Edinburgh Overseas Equity Fund........... 1.05% on the first $10 million
0.90% on the next $15 million
0.75% on the next $75 million
0.60% on amounts above $100 million
Turner Core Growth Fund.................. 0.45%
Frontier Capital Appreciation Fund....... 0.90%
Enhanced U.S. Equity Fund................ 0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100 million
</TABLE>

The investment advisory agreement does not place limits on the operating
expenses of the Company or of any Fund. However, the Adviser has voluntarily
undertaken to pay any such expenses (but not including brokerage or other
portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for each Fund, through December 31, 1996, exceed 0.25% of that Fund's
estimated average daily net assets on an annualized basis.

PORTFOLIO MANAGERS

EDINBURGH FUND MANAGERS PLC ("Edinburgh") is the Portfolio Manager of the
Edinburgh Overseas Equity Fund. Edinburgh's principal business address is
Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD, Scotland, and
Edinburgh maintains a non-investment branch at 600 Peachtree Street, N.E.,
Suite 3820, Atlanta, Georgia 30308. Edinburgh was formed in 1969 and
registered as an investment adviser with the Securities and Exchange
Commission in 1984. As of September 30, 1995, Edinburgh managed approximately
$5.213 billion of assets.

Edinburgh manages the Fund on a team basis. The Chief Investment Director of
Edinburgh is Michael Balfour, CA (Chartered Accountant). Mr. Balfour holds a
B.Comm. degree from Edinburgh University. He joined Edinburgh in 1985 and
became Manager of the Pacific Rim Department the following year. He was
involved in the launching of Edinburgh Pacific Fund and the Edinburgh Dragon
Trust in 1987. In 1992, he was appointed a director of Edinburgh responsible
for overseas investment, and in 1995 he became Chief Investment Director
responsible for all investment departments and Chair of the asset allocation
committee. In addition, Mr. Balfour is a director of Edinburgh Java Trust plc
(Indonesia) and Edinburgh Inca Trust plc (Latin America), closed-end
investment trusts managed by Edinburgh. He is also a director of Creditcapital
Asset Management, an investment management company in Bombay, India.

TURNER INVESTMENT PARTNERS, INC. ("Turner") is the Portfolio Manager of the
Turner Core Growth Fund. Turner's principal business address is 1235 Westlakes
Drive, Suite 350, Berwyn, Pennsylvania 19312. Turner is a professional
investment management firm founded in 1990. Robert E. Turner is the
controlling shareholder of Turner. Turner has provided investment advisory
services to investment companies since 1992. At September 30, 1995, Turner
managed approximately $2.628 billion of assets.

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and is active with the following organizations: Board of Directors--Financial
Analysts of Philadelphia; Program Chairman--Financial Analysts of Philadelphia
(Suburban); Advisory Board--Investment Counseling Inc.; and Technology Council
of Greater Philadelphia. Prior to forming Turner, Mr. Turner was employed as
Senior Investment Manager with Meridian Investment Company (1985 to 1990),
Portfolio Manager/Analyst with Integon Corporation (1983 to 1985), and Analyst
with McMillion/Eubanks (1981 to 1983), and he served as a consultant with
Andersen Consulting (1979 to 1981).

FRONTIER CAPITAL MANAGEMENT COMPANY, INC. ("Frontier") is the Portfolio
Manager of the Frontier Capital Appreciation Fund. Frontier's principal
business address is 99 Summer Street, Boston, Massachusetts 02110. Frontier's
investment process combines its fundamental in-depth research effort with a
proprietary computer model to identify areas of investment opportunity.
Frontier was founded in 1980. As of September 30, 1995 Frontier managed a
total of $2.242 billion.

Michael A. Cavaretta, CFA, is the person primarily responsible for the day-
to-day management of the Fund's investment portfolio. Mr. Cavaretta holds a
B.S. degree from the University of Maine and an M.B.A. degree from Harvard
Business School. He joined Frontier in 1988 and has served as sole portfolio
manager for Frontier's capital appreciation portfolios for four of the past
seven years. Prior to attending Harvard Business School, Mr. Cavaretta was
employed as a Financial Analyst with General Electric Company (1981-1986).

FRANKLIN PORTFOLIO ASSOCIATES TRUST ("Franklin") is the Portfolio Manager of
the Enhanced U.S. Equity Fund. Franklin's principal business address is One
Post Office Square, Suite 3660, Boston, Massachusetts 02109. Franklin is a
professional investment counseling firm which specializes in the management of
common stock portfolios through the use of quantitative investment models.
Founded in 1982, Franklin, a Massachusetts business trust, is a wholly-owned
subsidiary of MBC Investments Corporation, which in turn is a wholly-owned
subsidiary of Mellon Bank Corporation. As of September 30, 1995, Franklin
provided investment advisory services with respect to approximately $8.3
billion of client assets. Franklin employs proprietary computer models in
selecting individual equity securities and in structuring investment
portfolios for its clients, including the Fund.

John J. Nagorniak, CFA, President of Franklin, is the person primarily
responsible for the day-to-day management of the Fund's investment portfolio;
he will oversee the application of Franklin's quantitative techniques to the
Fund's assets. Mr. Nagorniak and the other investment principals of Franklin
are responsible for the ongoing development and enhancement of Franklin's
quantitative investment techniques. Mr. Nagorniak is a graduate of Princeton
University and has received a M.S. degree from the Sloan School at the
Massachusetts Institute of Technology. Prior to joining Franklin, he was
associated with State Street Bank and Trust Company as Chief Investment
Officer (1979 to 1981). Prior to that, he was Director of Investment
Management Technology for John Hancock Mutual Life Insurance Company (1970 to
1979). He is past President of the Investment Technology Association and has
been on the Council of that organization and the Council of the Quantitative
Discussion Group. Mr. Nagorniak is on the Board of Directors and is past
President of the Boston Security Analysts Society. He has 24 years of
investment experience.

Investment Sub-Advisory Agreements. Each Portfolio Manager has entered into
an investment sub-advisory agreement with the Adviser under which the
Portfolio Manager, subject to the general supervision of the Adviser and the
Company's Board of Directors, manages the investment portfolio of the Fund of
which it is the Portfolio Manager. Under the investment sub-advisory
agreements, the Portfolio Managers are responsible for making investment
decisions for the Funds and for placing the purchase and sale orders for the
portfolio transactions of each Fund. In this capacity, the Portfolio Managers
obtain and evaluate appropriate economic, statistical, timing, and financial
information and formulate and implement investment programs in furtherance of

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each Fund's investment objective. The Portfolio Managers may place orders for
portfolio transactions with any broker including, to the extent and in the
manner permitted by applicable law, affiliated brokers. As compensation for
their services, each Portfolio Manager receives a fee (paid by the Adviser)
based on the average daily net assets of the applicable Fund. See the SAI for
more detailed information about the investment sub-advisory fees and
agreements.

Change of Portfolio Managers. The Company and the Adviser plan to apply for
an exemptive order from the SEC that would permit the Adviser, with the
approval of the Company's Board of Directors, to retain a different Portfolio
Manager for a Fund without submitting the investment sub-advisory agreements
to a vote of the Fund's shareholders. The Company will notify shareholders in
the event of any change in the identity of the Portfolio Manager of a Fund.
Until or unless this exemptive order is granted, if a duly appointed Portfolio
Manager is terminated or otherwise ceases to advise a Fund, the Company will
propose that a new Portfolio Manager be engaged to manage the Fund's assets.
The Company would then be required to submit to the vote of the Fund's
shareholders the approval of an investment sub-advisory agreement with the new
Portfolio Manager.

INVESTMENT METHODS AND RISKS

FOREIGN INVESTMENTS

Investments in the securities of companies organized outside the United
States or of companies whose securities are principally traded outside the
United States ("foreign issuers"), or investments in securities denominated or
quoted in a currency other than the U.S. dollar ("non-dollar securities"), may
present potential benefits and risks not available from investments solely in
securities of domestic issuers or U.S. dollar-denominated securities. The
Edinburgh Overseas Equity Fund and the Enhanced U.S. Equity Fund may invest in
securities of foreign issuers. The Edinburgh Overseas Equity Fund also may
invest in non-dollar securities. (However, the Edinburgh Overseas Equity Fund
may not invest in Canadian government securities, and the Enhanced U.S. Equity
Fund may not invest in any foreign government securities.) Benefits of
investing in foreign issuers or non-dollar securities may include the
opportunity to invest in foreign issuers that appear, in the opinion of the
Portfolio Manager, to offer better opportunity for long-term capital
appreciation or current earnings than investments in domestic issuers, the
opportunity to invest in foreign countries with economic policies or business
cycles different from those of the United States, and the opportunity to
reduce fluctuations in portfolio value by taking advantage of foreign
securities markets that do not necessarily move in a manner parallel to U.S.
markets.

Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar-denominated securities or in securities of domestic issuers. Such
investments 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). For example, a decline in the
exchange rate would reduce the value of certain portfolio investments. In
addition, if the exchange rate for the currency in which a Fund receives
dividend or interest payments declines against the U.S. dollar before such
interest is paid as a dividend to the Fund's shareholders, the Fund may have
to sell portfolio securities to obtain sufficient cash to pay the dividend.
The Edinburgh Overseas Equity Fund may engage in forward foreign currency
exchange contracts to hedge its foreign currency exposure; however, such
investments also entail certain risks (described in the State of Additional
Information). 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 may be different in foreign countries and,
in certain markets, on certain

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occasions, such procedures have been unable to keep pace with the volume of
securities transactions, thus making it difficult to conduct such
transactions. For example, delays in settlement could result in temporary
periods when a portion of the assets of a Fund are uninvested and no return is
earned thereon. The inability of a Fund to make intended investments due to
settlement problems could cause it to miss attractive investment
opportunities. Inability to dispose of portfolio securities or other
investments due to settlement problems could result either in losses to a Fund
due to subsequent declines in value of the portfolio investment or, if the
Fund has entered into a contract to sell the investment, could result in
possible liability to the purchaser.

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 a
Fund, 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.

Many securities of foreign issuers are represented by American Depository
Receipts ("ADRs"), which represent the right to receive securities of foreign
issuers deposited in a domestic bank or foreign correspondent bank. Prices of
ADRs are quoted in U.S. dollars. Additional information regarding ADRs and
other aspects of foreign securities is in the Statement of Additional
Information.

Emerging Market Securities. The Edinburgh Overseas Equity Fund may invest in
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth (emerging markets). The risks of investing
in foreign securities may be intensified in the case of investments in
emerging markets. Emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers and have different clearance and
settlement procedures that may not keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of
the Fund is uninvested and no return is earned thereon. The inability to
dispose of portfolio securities due to settlement problems could result in
losses to the Fund.

Securities prices in emerging markets can be significantly more volatile
than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present greater risk of nationalization of businesses,
restrictions on foreign ownership, or prohibitions of repatriation of assets,
and may have less protection of property rights than more developed countries.
Also, issuers located in emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements. A more detailed
discussion of the risks associated with investing in emerging markets can be
found in the Statement of Additional Information.

INVESTING IN SMALL-CAPITALIZATION COMPANIES

All of the Funds may invest in small-capitalization companies (generally
considered to be companies with a capitalization of less than $500 million).
Investing in securities of smaller, lesser-known companies involves greater
risks than investing in larger, more mature, better known issuers, including
an increased possibility of portfolio price volatility. Historically, small-
capitalization stocks and stocks of recently organized companies, in

11
<PAGE>

which all of the Funds may also invest, have been more volatile in price than
the larger-capitalization stocks (such as those included in the S&P 500).
Among the reasons for the greater price volatility of the stocks of these
smaller companies are the less certain growth prospects of smaller firms, the
lower degree of liquidity in the markets for such stocks, and the greater
sensitivity of smaller companies to changing economic conditions. For example,
such companies may be subject to greater business risks resulting from their
limited product lines, markets, distribution channels, and financial and
managerial resources.

The stock prices of smaller companies may fluctuate independently of larger
company stock prices. Thus, small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should, therefore, expect that to the extent a Fund invests
in stock of small-capitalization companies, the net asset value of that Fund's
shares may be more volatile than, and may fluctuate independently of, broad
stock market indices such as the S&P 500. Furthermore, the securities of
companies with small stock market capitalizations may trade less frequently
and in limited volumes.

START-UP PERIOD

Since the Funds are new, during the start-up period their asset size may not
be sufficient to invest in the number of different stocks indicated above or
to take advantage of certain investment opportunities, and they may not be as
diversified as other mutual fund portfolios. There is no certainty as to how
rapidly a Fund's assets will increase.

SECURITIES LENDING

All Funds may seek to increase their income by lending portfolio securities.
Under present regulatory policies, such loans may be made to institutions,
such as certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. A Fund may experience a loss or delay in the recovery of
its securities if the institution with which it has engaged in a portfolio
security loan transaction breaches its agreement with the Fund. If the
Portfolio Manager determines to make securities loans, the value of the
securities loaned will not exceed one-third of the value of the total assets
of the Fund making the loan.

OTHER INVESTMENTS

Some or all of the Funds may also utilize the following investment
techniques or make the following types of investments. However, it is
anticipated that no Fund will have more than 5% of its assets invested in any
one of the following:

. Foreign Government Obligations
. Sovereign Debt Obligations (Brady Bonds)
. American Depository Receipts, European Depository Receipts, International
Depository Receipts, and Global Depository Receipts
. Forward Foreign Currency Exchange Contracts
. Short-Term Bank and Corporate Obligations
. Zero Coupon Bonds
. Warrants and Rights
. Convertible Securities
. Repurchase Agreements
. Restricted and Illiquid Securities
. Borrowing

12
<PAGE>

The Statement of Additional Information contains descriptions of these
investments and investment techniques.

PERFORMANCE INFORMATION

From time to time, the Company may publish average annual total return
figures for one or more of the Funds in advertisements, communications to
shareholders, and sales literature. Average annual total return is determined
by computing the annual percentage change in value of $1,000 invested for
specified periods ending with the most recent calendar quarter, assuming
reinvestment of all dividends and distributions at net asset value. The
average annual total return calculation assumes a complete redemption of the
investment at the end of the relevant period.

The Company also may, from time to time, publish year-by-year total return,
cumulative total return and yield information for the Funds in advertisements,
communications to shareholders, and sales literature. These may be provided
for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a
specified period are each derived by calculating the percentage rate required
to make a $1,000 investment in a Fund (assuming all distributions are
reinvested) at the beginning of such period equal to the actual total value of
such investment at the end of such period.

The Funds also may advertise their yields. Yield is computed by dividing net
investment income earned during a recent 30-day period by the product of the
average daily number of shares outstanding and entitled to receive dividends
during the period and the price per share on the last day of the relevant
period. The results are compounded on a bond-equivalent (semiannual) basis and
then annualized. Net investment income per share is equal to the dividends and
interest earned during the period, reduced by accrued expenses for the period.
The calculation of net investment income for these purposes may differ from
the net investment income determined for accounting purposes. Performance data
for the Funds will not reflect charges deducted under the Policies. If Policy
charges were taken into account, such performance data would reflect lower
returns.

In addition, the Company may from time to time publish the performance of
its Funds relative to certain performance rankings and indices.

The investment results of the Funds will fluctuate over time and any
presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what a Fund's
performance may be in any future period. In addition to information provided
in shareholder reports, the Company may, in its discretion, from time to time
make lists of a Fund's holdings available to investors upon request.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each Fund is normally determined once daily
as of the close of regular trading on the New York Stock Exchange, currently
4:00 p.m. New York time (with exceptions), on each day when the New York Stock
Exchange is open. The New York Stock Exchange is scheduled to be open Monday
through Friday throughout the year, except for certain federal and other
holidays. The net asset value of each Fund is determined by dividing the value
of the Fund's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses) by the number of shares of the Fund outstanding.

13
<PAGE>

The value of each Fund's securities and assets, except certain short-term
debt securities, is determined on the basis of their market values. Short-term
debt securities having remaining maturities of 60 days or less held by any of
the Funds are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Board of Directors. See "Determination of Net Asset Value"
in the SAI.

OFFERING, PURCHASE AND REDEMPTION OF SHARES

Shares of the Funds are sold in a continuous offering to separate accounts
of the Participating Insurance Companies to support the insurance and annuity
Policies. Net purchase payments under the Policies are placed in one or more
subaccounts of the Participating Insurance Company's separate account, and the
assets of each such subaccount are invested in the shares of the Fund
corresponding to that subaccount. The separate accounts purchase and redeem
shares of the Funds for their subaccounts at net asset value without sales or
redemption charges.

For each day on which a Fund's net asset value is calculated, the separate
accounts transmit to the Transfer Agent any orders to purchase or redeem
shares of the Fund(s) based on the purchase payments, redemption (surrender)
requests, death benefits, Policy charges, and transfer requests from Policy
owners, annuitants and beneficiaries that have been processed on that day. The
separate accounts purchase and redeem shares of each Fund at the Fund's net
asset value per share calculated as of that same day although such purchases
and redemptions may be executed the next morning.

Please refer to the separate prospectus for the Policies (and the separate
account through which they are funded) for a more detailed description of the
procedures whereby a Policy owner, annuitant, or beneficiary may allocate his
or her interest in the separate account to a subaccount using the shares of
one of the Funds as an underlying investment medium.

The Company may also offer shares of one or more of the Funds (including new
Funds that might be added to the Company) to qualified pension and retirement
plans.

A potential for certain conflicts may exist between the interests of
variable annuity contract owners, variable life insurance policy owners and
plan participants. The Company currently does not foresee any disadvantage to
owners of the Policies arising from the fact that shares of any Fund might be
held by such entities. The Board of Directors, however, will monitor the Funds
in order to identify any material irreconcilable conflicts of interest which
may possibly arise, and to determine what action, if any, should be taken in
response to any such conflicts.

INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Company will pay dividends for each Fund from that Fund's net investment
income and will make distributions from net realized securities gains, if any,
once a year, but may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), in all events in a manner consistent with the provisions
of the Investment Company Act of 1940 (the "1940 Act"). The Company will not
make distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. Dividends are
automatically reinvested in additional Company shares at net asset value
unless payment in cash is selected. All expenses are accrued daily and
deducted before declaration of dividends to investors.

14
<PAGE>

Notice as to the tax status of dividends and distributions will be mailed to
shareholders annually. Dividends from net investment income, together with
distributions of net realized short-term securities gains and gains from
certain market discount bonds, generally are taxable as ordinary income
whether received in cash or reinvested in additional shares. Distributions
from net realized long-term securities gains generally are taxable as long-
term capital gains whether received in cash or reinvested in additional
shares. Since the Company's shareholders are the Participating Insurance
Companies and their separate accounts, no discussion is included herein as to
the federal income tax consequences to variable life insurance or annuity
policy holders. For information concerning the federal income tax consequences
to such holders, see the prospectus for such contract or policy.

TAXES

Tax Status. The Company believes that each Fund will qualify as a regulated
investment company under Subchapter M, Chapter 1, Subtitle A of the Code, and
each Fund intends to distribute substantially all of its net income and net
capital gain to its shareholders. As a result, under the provisions of
Subchapter M, there should be little or no income or gains taxable to the
Fund. In addition, each Fund intends to comply with certain other distribution
rules specified in the Code so that it will not incur a 4% nondeductible
federal excise tax that otherwise would apply. Under current law, the net
income of the Funds, including net capital gain, is not taxed to Participating
Insurance Companies to the extent that it is applied to increase the reserves
held by the Participating Insurance Company in respect of the Policies.

Foreign Investments. Funds investing in foreign securities or currencies may
be required to pay withholding or other taxes to foreign governments. Foreign
tax withholding from dividends and interest, if any, is generally at a rate
between 10% and 35%. The investment yield of the Funds that invest in foreign
securities or currencies will be reduced by these foreign taxes. Shareholders
will bear the cost of any foreign tax withholding, but may not be able to
claim a foreign tax credit or deduction for these foreign taxes. Funds
investing in securities of passive foreign investment companies may be subject
to U.S. federal income taxes and interest charges, and the investment yield of
the Funds making such investments will be reduced by these taxes and interest
charges. Shareholders will bear the cost of these taxes and interest charges,
but will not be able to claim a deduction for these amounts.

Additional Tax Considerations. If a Fund fails to qualify as a regulated
investment company, owners of Policies supported by the Fund (1) might be
taxed currently on the investment earnings under their Policies and thereby
lose the benefit of tax deferral, and (2) the Fund might incur additional
taxes. In addition, if a Fund fails to comply with the diversification
requirements of Section 817(h) of the Code, owners of Policies supported by
the Fund would be taxed on the investment earnings under their Policies and
thereby lose the benefit of tax deferral. Accordingly, compliance with the
above rules is carefully monitored by the Portfolio Managers and the Adviser,
and it is intended that the Funds will comply with these rules as they exist
or as they may be modified from time to time. In order to comply with the
diversification and other requirements of Subchapter M and Section 817(h), a
Fund may not be able to buy or sell certain securities at certain times, so
the investments utilized (and the time at which such investments are purchased
and sold) may be different from that the Portfolio Manager might otherwise
believe to be desirable.

For more information regarding the tax implications for the purchaser of a
Policy who allocates investments to the Funds, please refer to the prospectus
for the Policy.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.

15
<PAGE>

OTHER INFORMATION

REPORTS

Annual Reports containing audited financial statements of the Company and
Semiannual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Policy owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Company at the telephone number
or address set forth on the cover page of this Prospectus.

VOTING AND OTHER RIGHTS

Each share outstanding is entitled to one vote on all matters submitted to a
vote of shareholders (of a Fund or the Company) and is entitled to a pro rata
share of any distributions made by the applicable Fund and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of each Fund), when issued, is nonassessable and has
no preemptive or conversion rights. The shares have noncumulative voting
rights. The Participating Insurance Companies will vote shares of a Fund held
by their separate accounts which are attributable to Policies in accordance
with instructions received from Policy owners, annuitants and beneficiaries as
provided in the prospectus for the Policies. Fund shares held by the separate
accounts as to which no instructions have been received will be voted for or
against any proposition, or in abstention, in the same proportion as the
shares of that separate account as to which instructions have been received.
Fund shares held by a Participating Insurance Company that are not
attributable to Policies will also be voted for or against any proposition in
the same proportion as the shares for which voting instructions are received
by that company. However, if a Participating Insurance Company determines that
it is permitted to vote any such shares of a Fund in its own right, it may
elect to do so, subject to the then-current interpretation of the 1940 Act and
the rules thereunder.

As a Maryland corporation, the Company is not required to, and does not
intend to, hold regular annual shareholder meetings. The Company is, however,
required to hold shareholder meetings for the following purposes: (i)
approving investment advisory and sub-advisory agreements as required by the
1940 Act (unless, with respect to sub-advisory agreements, the Company and the
Adviser obtain the SEC exemptive order); (ii) changing any fundamental
investment policy or restriction of any Fund; and (iii) filling vacancies on
the Board of Directors in the event that less than a majority of the Company's
directors were elected by shareholders. Directors may also be removed by
shareholders by a vote of two-thirds of the outstanding votes attributable to
shares at a meeting called at the request of holders of 10% or more of such
votes. The Company has the obligation to assist in shareholder communications.

At the inception of the Company, M Life owns more than 25% of the
outstanding shares of each Fund, which ownership may result in it being deemed
a controlling person of each of the Funds, as that term is defined in the 1940
Act.

ADMINISTRATIVE AND OTHER SERVICES

Pursuant to a custody agreement with the Company, Investors Bank & Trust
Company ("Investors Bank") serves as the custodian of the Funds' assets.

16
<PAGE>

each Fund's daily net asset value. Investors Bank is responsible for providing
certain administrative services to the Company, such as calculating each
Fund's standardized performance information, preparing annual and semiannual
reports to shareholders and the SEC, preparing each Fund's tax returns,
monitoring compliance and performing other administrative duties.

Pursuant to a Transfer Agency and Service Agreement with the Company,
Investors Bank also acts as a transfer, redemption and dividend disbursing
agent for the Company. Investors Bank's principal business address is 89 South
Street, Boston, Massachusetts 02111.

Investors Bank is not involved in the investment decisions made by the
Portfolio Managers.

The Company was incorporated in Maryland on August 11, 1995. It has no
employees and relies on the Adviser and other service providers for its day-
to-day operations.

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<PAGE>

M FUND

PROSPECTUS

JANUARY 1, 1996

This prospectus describes three separate diversified investment portfolios
or funds (the "Funds") which are a part of M Fund, Inc. (the "Company"), an
investment company. These Funds are available through the purchase of variable
life insurance and variable annuity policies issued by John Hancock Mutual and
John Hancock Variable Life Insurance Companies and certain other insurance
companies ("Participating Insurance Companies"). The Funds are intended to be
offered in addition to other portfolios offered by the Participating Insurance
Companies. Shares of the Funds may also be sold to qualified retirement plans.

EDINBURGH OVERSEAS EQUITY FUND invests outside of the United States, and
when appropriate will focus on small- to medium-capitalization companies and
emerging markets.

TURNER CORE GROWTH FUND emphasizes common stocks of U.S. companies that show
strong earnings potential and also have reasonable valuations.

FRONTIER CAPITAL APPRECIATION FUND invests in common stock of U.S. companies
of all sizes, with emphasis on stocks of small- to medium-capitalization
companies.

THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
INSURANCE POLICIES.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
INTRODUCTION................................................................ 1

INVESTMENT OBJECTIVES AND POLICIES.......................................... 1
Edinburgh Overseas Equity Fund............................................ 2
Turner Core Growth Fund................................................... 2
Frontier Capital Appreciation Fund........................................ 3

INVESTMENT RESTRICTIONS..................................................... 3

PORTFOLIO TURNOVER.......................................................... 4

MANAGEMENT.................................................................. 4
Directors and Officers.................................................... 4
Investment Adviser........................................................ 4
Portfolio Managers........................................................ 5

INVESTMENT METHODS AND RISKS................................................ 7
Foreign Investments....................................................... 7
Emerging Market Securities................................................ 8
Investing in Small-Capitalization Companies............................... 8
Start-Up Period........................................................... 9
Securities Lending........................................................ 9
Other Investments......................................................... 9

PERFORMANCE INFORMATION..................................................... 10

DETERMINATION OF NET ASSET VALUE............................................ 10

OFFERING, PURCHASE AND REDEMPTION OF SHARES................................. 11

INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................ 11

TAXES....................................................................... 12

OTHER INFORMATION........................................................... 13
Reports................................................................... 13
Voting and Other Rights................................................... 13
Administrative and Other Services......................................... 14
</TABLE>
<PAGE>

INTRODUCTION

M Fund, Inc. (the "Company") is an open-end management investment company,
commonly known as a mutual fund. The Company consists of a number of separate
investment portfolios or funds (the "Funds" or a "Fund"), each of which is, in
effect, a separate mutual fund. (Additional Funds may be created from time to
time.) By investing in a Fund, an investor becomes entitled to a pro rata
share of all dividends and distributions arising from the net income and
capital gains on the investments of that Fund. Likewise, an investor shares
pro rata in any losses of that Fund.

The Company currently offers its shares to separate accounts of
Participating Insurance Companies as funding vehicles for certain variable
life insurance or variable annuity policies (the "Policies"). The Company may
also offer its shares to qualified pension and retirement plans. The Company
does not offer its shares directly to the general public. A separate
prospectus, which accompanies this Prospectus, describes the applicable
Policies and the separate account through which they are funded.

INVESTMENT OBJECTIVES AND POLICIES

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<PAGE>

The investment objective of each Fund, as well as investment policies that
are not fundamental, may be changed by the Board of Directors without
shareholder approval. See "Investment Restrictions."

EDINBURGH OVERSEAS EQUITY FUND

TURNER CORE GROWTH FUND

2
<PAGE>

The Portfolio Manager, Turner Investment Partners Inc., uses a bottom-up
discipline (i.e., an individual stock selection process, rather than a top-
down industry sector selection process) utilizing sophisticated analytical
tools to screen over 3,500 securities for both attractive growth and value
characteristics. Growth factors include increasing earnings estimates and
results, while value measures include price/earnings ratio to growth rate,
ratio of market price to book value, and dividend yield. The first step is a
computer ranking based upon a proprietary model: stocks ranked in the 35th
percentile or above qualify for purchase, while those ranked in the 55th
percentile or below generally will be sold sometime thereafter.

FRONTIER CAPITAL APPRECIATION FUND

The Portfolio Manager, Frontier Capital Management Company Inc., seeks to
identify companies with unrecognized earnings potential. The investment
process emphasizes earnings growth potential and valuation of those companies
which tend to be less well followed by Wall Street analysts and have a
relatively low level of ownership by other institutional investors. The
process combines traditional fundamental research with a valuation model that
screens dividend valuation, equity valuation, earnings growth, earnings
momentum, and earnings that have the potential to exceed market expectation.

Stocks are sold if earnings growth potential is realized, when the
fundamental reasons for purchase are no longer valid, or when a more
attractive situation is identified.

INVESTMENT RESTRICTIONS

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<PAGE>

75% of the value of its total assets, purchase the securities of any one
issuer (except U.S. Government securities) if more than 5% of the value of the
Fund's assets would be invested in such issuer or if more than 10% of the
outstanding voting securities of that issuer would be owned by the Fund.
Similarly, it is a fundamental investment restriction that none of the Funds
may invest more than 25% of its total assets in securities of issuers in any
one industry, except that this limitation does not apply to U.S. Government
securities. For a more complete description of the investment restrictions to
which each Fund is subject, see the SAI.

PORTFOLIO TURNOVER

MANAGEMENT

DIRECTORS AND OFFICERS

INVESTMENT ADVISER

4
<PAGE>

and marketing support services for participating insurance agents, most of
which are shareholders of M Life. M Financial Group receives from insurance
carriers compensation based, in part, upon the volume of insurance premiums
generated by its participating agents. A majority interest in M Financial
Group is owned by M Corporation, of which 50% is owned by each of Ellison C.
Morgan and Mark I. Solomon. Messrs. Carl G. Mammel, Peter W. Mullin, and
Thomas N. Spitzer, either directly or through corporations controlled by them,
are also partners in M Financial Group. Mr. Mullin is a director of the
Company.

The Adviser, located at River Park Center, 205 S.E. Spokane Street,
Portland, Oregon 97202, is newly organized and therefore has no previous
experience in providing investment advisory services.

The following annual rates represent total advisory fees for each Fund:

<TABLE>
<CAPTION>
FUND TOTAL ADVISORY FEES
---- -------------------
<S> <C>
Edinburgh Overseas Equity Fund........ 1.05% on the first $10 million
0.90% on the next $15 million
0.75% on the next $75 million
0.60% on amounts above $100 million
Turner Core Growth Fund............... 0.45%
Frontier Capital Appreciation Fund.... 0.90%
</TABLE>

PORTFOLIO MANAGERS

5
<PAGE>

Mr. Turner, CFA (Chartered Financial Analyst), Chairman and Chief Investment
Officer of Turner, is the person primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Turner holds a B.S. degree
in accounting and an M.B.A. degree in finance from Bradley University and has
over 15 years of investment experience. He is a member of the Association for
Investment Management and Research and is active with the following
organizations: Board of Directors--Financial Analysts of Philadelphia; Program
Chairman--Financial Analysts of Philadelphia (Suburban); Advisory Board--
Investment Counseling Inc.; and Technology Council of Greater Philadelphia.
Prior to forming Turner, Mr. Turner was employed as Senior Investment Manager
with Meridian Investment Company (1985 to 1990), Portfolio Manager/Analyst
with Integon Corporation (1983 to 1985), and Analyst with McMillion/Eubanks
(1981 to 1983), and he served as a consultant with Andersen Consulting (1979
to 1981).

6
<PAGE>

compensation for their services, each Portfolio Manager receives a fee (paid
by the Adviser) based on the average daily net assets of the applicable Fund.
See the SAI for more detailed information about the investment sub-advisory
fees and agreements.

INVESTMENT METHODS AND RISKS

FOREIGN INVESTMENTS

Investments in the securities of companies organized outside the United
States or of companies whose securities are principally traded outside the
United States ("foreign issuers"), or investments in securities denominated or
quoted in a currency other than the U.S. dollar ("non-dollar securities"), may
present potential benefits and risks not available from investments solely in
securities of domestic issuers or U.S. dollar-denominated securities. The
Edinburgh Overseas Equity Fund may invest in securities of foreign issuers.
The Edinburgh Overseas Equity Fund also may invest in non-dollar securities.
(However, the Edinburgh Overseas Equity Fund may not invest in Canadian
government securities.) Benefits of investing in foreign issuers or non-dollar
securities may include the opportunity to invest in foreign issuers that
appear, in the opinion of the Portfolio Manager, to offer better opportunity
for long-term capital appreciation or current earnings than investments in
domestic issuers, the opportunity to invest in foreign countries with economic
policies or business cycles different from those of the United States, and the
opportunity to reduce fluctuations in portfolio value by taking advantage of
foreign securities markets that do not necessarily move in a manner parallel
to U.S. markets.

Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar-denominated securities or in securities of domestic issuers. Such
investments 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). For example, a decline in the
exchange rate would reduce the value of certain portfolio investments. In
addition, if the exchange rate for the currency in which a Fund receives
dividend or interest payments declines against the U.S. dollar before such
interest is paid as a dividend to the Fund's shareholders, the Fund may have
to sell portfolio securities to obtain sufficient cash to pay the dividend.
The Edinburgh Overseas Equity Fund may engage in forward foreign currency
exchange contracts to hedge its foreign currency exposure; however, such
investments also entail certain risks (described in the Statement of
Additional Information). 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 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. For example, delays in
settlement could result in temporary periods when a portion of the assets of a
Fund are uninvested and no return is earned thereon. The inability of a

7
<PAGE>

Fund to make intended investments due to settlement problems could cause it to
miss attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Fund due to subsequent declines in value of the portfolio
investment or, if the Fund has entered into a contract to sell the investment,
could result in possible liability to the purchaser.

EMERGING MARKET SECURITIES

The Edinburgh Overseas Equity Fund may invest in countries or regions with
relatively low gross national product per capita compared to the world's major
economies, and in countries or regions with the potential for rapid economic
growth (emerging markets). The risks of investing in foreign securities may be
intensified in the case of investments in emerging markets. Emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers and have different clearance and settlement procedures that may not
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Fund is uninvested and no return
is earned thereon. The inability to dispose of portfolio securities due to
settlement problems could result in losses to the Fund.

INVESTING IN SMALL-CAPITALIZATION COMPANIES

8
<PAGE>

(such as those included in the S&P 500). Among the reasons for the greater
price volatility of the stocks of these smaller companies are the less certain
growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of smaller companies to
changing economic conditions. For example, such companies may be subject to
greater business risks resulting from their limited product lines, markets,
distribution channels, and financial and managerial resources.

START-UP PERIOD

SECURITIES LENDING

OTHER INVESTMENTS

9
<PAGE>

The Statement of Additional Information contains descriptions of these
investments and investment techniques.

PERFORMANCE INFORMATION

In addition, the Company may from time to time publish the performance of
its Funds relative to certain performance rankings and indices.

DETERMINATION OF NET ASSET VALUE

10
<PAGE>

OFFERING, PURCHASE AND REDEMPTION OF SHARES

The Company may also offer shares of one or more of the Funds (including new
Funds that might be added to the Company) to qualified pension and retirement
plans.

INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

11
<PAGE>

Company shares at net asset value unless payment in cash is selected. All
expenses are accrued daily and deducted before declaration of dividends to
investors.

TAXES

For more information regarding the tax implications for the purchaser of a
Policy who allocates investments to the Funds, please refer to the prospectus
for the Policy.

12
<PAGE>

OTHER INFORMATION

REPORTS

VOTING AND OTHER RIGHTS

13
<PAGE>

ADMINISTRATIVE AND OTHER SERVICES

Pursuant to a custody agreement with the Company, Investors Bank & Trust
Company ("Investors Bank") serves as the custodian of the Funds' assets.

Investors Bank also performs certain accounting services for the Company.
These services include maintaining and keeping current the Company's books,
accounts, records, journals and other records of original entry related to the
Company's business, performing certain daily functions related thereto,
including calculating each Fund's daily net asset value. Investors Bank is
responsible for providing certain administrative services to the Company, such
as calculating each Fund's standardized performance information, preparing
annual and semiannual reports to shareholders and the SEC, preparing each
Fund's tax returns, monitoring compliance and performing other administrative
duties.

Investors Bank is not involved in the investment decisions made by the
Portfolio Managers.

The Company was incorporated in Maryland on August 11, 1995. It has no
employees and relies on the Adviser and other service providers for its day-
to-day operations.

14
<PAGE>

___________________________________

STATEMENT OF ADDITIONAL INFORMATION
___________________________________

M FUND
Edinburgh Overseas Equity Fund
Turner Core Growth Fund
Frontier Capital Appreciation Fund
Enhanced U.S. Equity Fund

January 1, 1996

This Statement of Additional Information ("SAI") is not a prospectus. Much of
the information contained in this SAI expands upon information discussed in the
prospectus for M Fund, Inc. (the "Company") and should, therefore, be read in
conjunction with the prospectus for the Company. To obtain a copy of the
Prospectus with the same date as this SAI, write to the Company at River Park
Center, 205 S.E. Spokane Street, Portland, Oregon 97202, Attn: M Fund
Administration, or call (503) 232-6960.
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

Page
----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 4

SPECIAL INVESTMENT METHODS AND RISKS . . . . . . . . . . . . . 6
Foreign Investments . . . . . . . . . . . . . . . . . . . 6
Restricted and Illiquid Securities. . . . . . . . . . . . 16
Sovereign Debt Obligations - Brady Bonds. . . . . . . . . 17
Fixed-Income Securities . . . . . . . . . . . . . . . . . 19
Convertible Securities. . . . . . . . . . . . . . . . . . 24
Warrants and Rights . . . . . . . . . . . . . . . . . . . 25
Repurchase Agreements . . . . . . . . . . . . . . . . . . 26
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 27
Other Investment Companies. . . . . . . . . . . . . . . . 27

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 28
Fundamental Restrictions. . . . . . . . . . . . . . . . . 28
Non-Fundamental Restrictions. . . . . . . . . . . . . . . 31
Interpretive Rules. . . . . . . . . . . . . . . . . . . . 34

INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . 35
Investment Advisory Agreement . . . . . . . . . . . . . . 35
Expenses of the Company . . . . . . . . . . . . . . . . . 36

PORTFOLIO MANAGERS . . . . . . . . . . . . . . . . . . . . . . 37

PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . 38

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . 40

PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 44

SHARES OF STOCK. . . . . . . . . . . . . . . . . . . . . . . . 49

CUSTODY OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . 50

DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . 51

TAX INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 53

OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 56
Financial Statements. . . . . . . . . . . . . . . . . . . 56
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . 56
Company Name. . . . . . . . . . . . . . . . . . . . . . . 56
Other Information . . . . . . . . . . . . . . . . . . . . 56

APPENDIX A -- DESCRIPTION OF CORPORATE BOND RATINGS
</TABLE>
<PAGE>

INTRODUCTION

M Fund, Inc. (the "Company") is an open-end management investment company
established as a Maryland corporation on August 11, 1995. The Company consists
of four separate investment portfolios or funds (the "Funds" or a "Fund"), each
of which is, in effect, a separate mutual fund. The Company issues a separate
class of stock for each Fund representing fractional undivided interests in that
Fund. By investing in a Fund, an investor becomes entitled to a pro rata share
of all dividends and distributions arising from the net income and capital gains
on the investments of that Fund. Likewise, an investor shares pro rata in any
losses of that Fund.

Pursuant to an investment advisory agreement and subject to the authority
of the Company's board of directors (the "Board of Directors"), M Financial
Investment Advisers, Inc. (the "Adviser") serves as the Company's investment
adviser and conducts the business and affairs of the Company. The Adviser has
engaged the following sub-advisers to act as Portfolio Managers to provide the
day-to-day portfolio management for the respective Funds:

<PAGE>

================================================================================
Fund Portfolio Manager
================================================================================
<S> <C>
Edinburgh Overseas Equity Fund Edinburgh Fund Managers plc
- --------------------------------------------------------------------------------
Turner Core Growth Fund Turner Investment Partners, Inc.
- --------------------------------------------------------------------------------
Frontier Capital Appreciation Fund Frontier Capital Management Company,
Inc.
- --------------------------------------------------------------------------------
Enhanced U.S. Equity Fund Franklin Portfolio Associates Trust
================================================================================
</TABLE>

The Company currently offers one or more classes of its stock to separate
accounts of certain insurance companies (the "Participating Insurance
Companies") as the underlying funding vehicles for certain variable annuity and
variable life insurance policies (the "Policies") issued by the Participating
Insurance Companies. The Company may also offer its stock to qualified pension
and retirement plans. The Company does not offer its stock directly to the
general public. Each such separate account, like the Company, is registered as
an investment company with the Securities and Exchange Commission (the "SEC"),
and a separate prospectus, which accompanies the prospectus for the Company (the
"Prospectus"), describes that separate account and the Policies. The prospectus
for that separate account and the Policies, which should be read in conjunction
with the Company's prospectus, also has a statement of additional information
similar to this SAI.

Terms appearing in this SAI that are defined in the Prospectus have the
same meaning herein as in the Prospectus.
<PAGE>

SPECIAL INVESTMENT METHODS AND RISKS
Foreign Investments

Because investments in foreign issuers may involve currencies of foreign
countries, because a Fund may temporarily hold funds in bank deposits in foreign
currencies during completion of investment programs, and because a Fund may be
subject to currency exposure independent of its securities positions, the Fund
may be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations and may incur costs in connection with conversions
between various currencies. The Edinburgh Overseas Equity Fund and the Enhanced
U.S. Equity Fund may invest in securities of foreign issuers.

Foreign investment markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of transactions, making it difficult to
conduct such transactions. Mail and courier service and other communications
between the United States and foreign countries may be slower or less reliable
than within the United States, thus increasing the risk of delayed settlements
of portfolio transactions or loss of certificates for portfolio securities.

Investments in ADRs, EDRs, IDRs, and GDRs. Many securities of foreign
issuers are represented by American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), International Depository Receipts ("IDRs"), and
Global Depository Receipts ("GDRs"). The Edinburgh Overseas Equity Fund and the
Enhanced U.S. Equity Fund may invest in ADRs.

ADRs represent the right to receive securities of foreign issuers deposited
in a domestic bank or a foreign correspondent
<PAGE>

bank. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the
United States on exchanges or over-the-counter and are sponsored and issued by
domestic banks. ADRs do not eliminate all the risk inherent in investing in the
securities of foreign issuers. To the extent that a Fund acquires ADRs through
banks which do not have a contractual relationship with the foreign issuer of
the security underlying the ADR to issue and service such ADRs (i.e.,
unsponsored programs), there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as stock
splits or rights offerings involving the foreign issuer in a timely manner. In
addition, the lack of information may result in inefficiencies in the valuation
of such instruments. However, by investing in ADRs rather than directly in the
stock of foreign issuers, a Fund will avoid currency risks during the settlement
period for purchases and sales. In general, there is a large, liquid market in
the United States for ADRs quoted on a national securities exchange or the
Nasdaq National Market. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject.

The Edinburgh Overseas Equity Fund may also invest in EDRs, IDRs, and GDRs,
which are receipts evidencing an arrangement with a bank similar to that for
ADRs and are designed for use in the foreign securities markets. EDRs, IDRs, and
GDRs are not necessarily quoted in the same currency as the underlying
security.
<PAGE>

Foreign Currency Transactions. 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. They 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.
<PAGE>

The Edinburgh Overseas Equity Fund may enter into forward foreign currency
exchange contracts for hedging purposes in order to protect against anticipated
changes in future foreign currency exchange rates or to increase total return. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. The market in forward foreign currency exchange contracts
offers less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. A forward
contract generally has no deposit requirement, and no commissions are generally
charged at any stage for trades.

At the maturity of a forward contract the Fund may either accept or make
delivery of the currency specified in the contract or, at or prior to maturity,
enter into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.

The Fund may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Fund enters into a contract for the
purchase or sale of a security denominated or noted in a foreign currency, or
when the Fund antici-
<PAGE>

pates the receipt in a foreign currency of dividend or interest payments on such
a security which it holds, the Fund may desire to "lock in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, the Fund will attempt to
protect itself against an adverse change in the relationship between the U.S.
dollar and the subject foreign currency during the period between the date on
which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.

Additionally, when the Portfolio Manager believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward contracts to
protect the value of the Fund's portfolio securities against a decline in the
value of a currency does not eliminate
<PAGE>

fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange which a Fund can achieve at some future point in time. The
precise projection of short-term currency market movements is not possible, and
short-term hedging provides a means of fixing the dollar value of only a portion
of the Fund's foreign assets.

The Fund may engage in cross-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency if the Portfolio Manager determines that there is a pattern
of correlation between the two currencies. The Fund may also purchase and sell
forward contracts for non-hedging purposes when the Portfolio Manager
anticipates that the foreign currency will appreciate or depreciate in value,
but securities denominated in that currency do not present attractive investment
opportunities and are not held in the Fund's portfolio.

The Fund's custodian will place cash or high grade liquid debt securities
(i.e. securities rated in one of the top three ratings categories by Standard &
Poor's or by Moody's or, if unrated, deemed by the Portfolio Manager to be of
comparable credit quality) into a segregated account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
forward foreign currency exchange contracts requiring the Fund to purchase
foreign currencies or forward contracts entered into for non-hedging purposes.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis

<PAGE>

so that the value of the account will equal the amount of the Fund's commitments
with respect to such contracts. The segregated account will be marked-to-market
on a daily basis. Although the contracts are not presently regulated by the
Commodity Futures Trading Commission ("CFTC"), the CFTC may in the future assert
authority to regulate these contracts. In such event, the Fund's ability to
utilize forward foreign currency exchange contracts may be restricted.

While the Fund will enter into forward contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus, while the Fund may benefit from such transactions, unanticipated changes
in currency prices may result in a poorer overall performance for the Fund that
if it had not engaged in any such transactions. Moreover, there may be imperfect
correlation between the Fund's portfolio holdings of securities denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may cause the Fund to sustain losses which will prevent
the Fund from achieving a complete hedge or expose the Fund to risk of foreign
exchange loss.

Forward contracts are subject to the risk that the counter-party to such
contract will default on its obligations. Since a forward foreign currency
exchange contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive the Fund of unrealized profits, transaction costs
or expected benefits of a currency hedge or force the Fund to cover its
purchase or sale commitments, if any, at the current market price. The Fund will
not enter into such transactions unless the
<PAGE>

credit quality of the unsecured senior debt or the claims-paying ability of the
counterparty is considered to be investment grade by the Portfolio Manager.

Emerging Market Securities. The Edinburgh Overseas Equity Fund may invest
in countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth (emerging markets). Emerging markets will
include any country: (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii) with low-to-middle income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the Adviser to be an emerging market as defined above. The Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
or (iv) companies traded in any market that derives 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market.

The risks of investing in foreign securities may be intensified in the case
of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement

<PAGE>

procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Fund is uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. Certain
markets may require payment for securities before delivery.

Securities prices in emerging markets can be significantly more volatile
than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may

<PAGE>

be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible at
time. Securities of issuers located in countries with emerging markets may have
limited marketability and may be subject to more abrupt or erratic price
movements.

Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.

Restricted and Illiquid Securities

The Edinburgh Overseas Equity Fund and the Turner Core Growth Fund may
purchase limited amounts of illiquid securities (i.e., securities which may not
be sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Company has valued the investment). The
Edinburgh Overseas Equity Fund and the Frontier Capital Appreciation Fund may
purchase certain restricted securities (i.e., securities which are not
registered under the Securities Act of 1933 (the "1933 Act")) as "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act.
Investments in illiquid securities and restricted securities are not anticipated
<PAGE>

to exceed 5% of a Fund's assets, but see non-fundamental investment
restrictions 12 and 13, respectively, below.

The Board of Directors has adopted guidelines and delegated to the
Portfolio Managers the daily function of determining and monitoring the
liquidity of restricted securities. The Board, however, will retain oversight
and be ultimately responsible for the determinations. It is not possible to
predict with assurance exactly how the market for restricted securities sold and
offered under Rule 144A will develop. To the extent that qualified in-
stitutional buyers become uninterested in purchasing these restricted
securities, this investment practice could have the effect of decreasing the
level of liquidity in a Fund.

Certain repurchase agreements which provide for settlement in more than
seven days, however, can be liquidated before the nominal fixed term on seven
days' or less notice. The Company will consider such repurchase agreements as
liquid. Likewise, restricted securities (including commercial paper issued
pursuant to Section 4(2) of the 1933 Act) that the Board of Directors of the
Company or a Portfolio Manager has determined to be liquid will be treated as
such.

The SEC staff has taken the position that fixed-time deposits maturing in
more than seven days that cannot be traded on a secondary market and
participation interests in loans are illiquid and not readily marketable. Until
such time (if any) as this position changes, the Company will include such
investments in the percentage limitation on illiquid investments applicable to
each Fund.
<PAGE>

Sovereign Debt Obligations - Brady Bonds

The Edinburgh Overseas Equity Fund may invest in certain Sovereign Debt
Obligations customarily referred to as "Brady Bonds," which are created through
the exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring. Brady Bonds have been issued
only recently, and, accordingly, do not have a long payment history. They may be
collateralized or uncollateralized and issued in various currencies (although
most are U.S. dollar-denominated), and they are actively traded in the over-the-
counter secondary market.

U.S. dollar-denominated, collateralized Brady Bonds which may be fixed-rate
par bonds or floating-rate discount bonds, are generally collateralized in full
as to principal due at maturity by U.S. Treasury zero coupon obligations which
have the same maturity as the Brady Bonds. Interest payments on these Brady
Bonds generally are collateralized by cash or securities in an amount that, in
the case of fixed-rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating-rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
that time and is adjusted at regular intervals thereafter.

Certain Brady Bonds are entitled to "value recovery payments" in certain
circumstances, which in effect constitute supplemental interest payment but
generally are not collateralized. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal
<PAGE>

at final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute the "residual
risk"). In the event of a default with respect to collateralized Brady Bonds as
a result of which the payment obligations of the issuer are accelerated, the
U.S. Treasury zero coupon obligations held as collateral for the payment of
principal will not be distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be held by the collateral
agent to the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the collateral will
equal the principal payments which would have then been due on the Brady Bonds
in the normal course. In view of the residual risk of Brady Bonds and, among
other factors, the history of defaults with respect to commercial bank loans by
the public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds should be viewed as speculative. Investments in Brady Bonds will not
exceed 5% of the Edinburgh Overseas Equity Fund's assets (and will count toward
the Fund's 25% maximum investment in emerging markets).

Fixed-Income Securities

The Edinburgh Overseas Equity Fund and the Enhanced U.S. Equity Fund may
invest in fixed-income securities (the Frontier Capital Appreciation Fund may
invest in convertible securities; see discussion below). Fixed-income securities
tend to decrease in value when prevailing interest rates rise and
<PAGE>

increase in value when prevailing interest rates fall. Because the value of a
Fund's investments in fixed-income securities is interest rate sensitive, its
performance may be affected by the Portfolio Manager's ability to anticipate
and respond to fluctuations in market interest rates. Fixed-income securities
include U.S. Government securities, debt obligations of states or municipalities
or state or municipal government agencies or instrumentalities, corporate debt
obligations, preferred stock, zero coupon bonds and deferred interest bonds.

U.S. Government Securities. The Edinburgh Overseas Equity Fund and Enhanced
U.S. Equity Fund may invest in U.S. Government securities. U.S. Government
securities are obligations issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities. Some U.S. Government securities,
such as Treasury bills, notes and bonds, which differ only in their interest
rates, maturities and times of issuance, are supported by the full faith and
credit of the United States. Others, such as obligations issued or guaranteed by
U.S. Government agencies, authorities or instrumentalities are supported either
by (a) the full faith and credit of the U.S. Government (such as securities of
the Small Business Administration), (b) the right of the issuer to borrow from
the Treasury (such as securities of the Federal Home Loan Banks), (c) the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association),
or (d) only the credit of the issuer. No assurance can be given that the U.S.
Government will provide financial support
<PAGE>

to U.S. Government agencies, authorities or instrumentalities in the future.
U.S. Government securities may also include zero coupon bonds.

Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are considered to include (a)
securities for which the payment of principal and interest is backed by a
guarantee of or an irrevocable letter of credit issued by the U.S. Government,
its agencies, authorities or instrumentalities and (b) participation in loans
made to foreign governments or their agencies that are so guaranteed. The
secondary market for certain of these participations is limited. Such
participations may therefore be regarded as illiquid.

Corporate Debt Obligations. The Edinburgh Overseas Equity Fund may purchase
corporate debt obligations. The Fund will limit its investment in corporate debt
obligations to 5% of its total assets. Corporate debt securities are subject to
the risk of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). The
Portfolio Manager considers both credit risk and market risk in making
investment decisions as to corporate debt obligations. The Edinburgh Overseas
Equity Fund may only purchase investment-grade bonds (i.e., bonds rated BBB or
higher by Standard & Poor's Corporation ("S&P") or Baa or higher by Moody's
Investors Service, Inc. ("Moody's")). See
<PAGE>

Appendix A for a description of the ratings issued by these investment rating
services.

Short-Term Bank and Corporate Obligations. Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corporations, and finance companies. Only the Edinburgh
Overseas Equity Fund may invest in commercial paper. Commercial paper consists
of direct U.S. dollar-denominated obligations of domestic issuers. Bank
obligations include certificates of deposit, bankers' acceptances, fixed-time
deposits and bank notes.

Certificates of deposit are certificates issued against funds deposited in
a commercial bank for a definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Fixed-time deposits are bank
obligations payable at a stated maturity date and bearing interest at a fixed
rate. Fixed-time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed-time deposit to a third party, although there is no market for such
deposits. Certain fixed-time deposits maturing in more than seven days may be
deemed to be illiquid securities. Bank notes rank junior to
<PAGE>

deposit liabilities of the bank and pari passu with other senior, unsecured
obligations of the bank. Bank notes are classified as "other borrowings" on a
bank's balance sheet, while deposit notes and certificates of deposit are
classified as deposits. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.

Zero Coupon Bonds. The Edinburgh Overseas Equity Fund may invest in zero
coupon bonds, which are debt obligations that do not entitle the holder to any
periodic payments of interest prior to maturity or provide for a specified cash
payment date when the bonds begin paying current interest. As a result, zero
coupon bonds are generally issued and traded at a significant discount from
their face value. The discount approximates the present value amount of interest
the bonds would have accrued and compounded over the period until maturity.

Zero coupon bonds benefit the issuer by mitigating its initial need for
cash to meet debt service, but generally provide a higher rate of return to
compensate investors for the deferment of cash interest and principal payments.
Such securities are often issued by companies that may not have the capacity to
pay current interest and so may be considered to have more risk than current
interest-bearing securities. In addition, the market price of zero coupon bonds
generally is more volatile than the market prices of securities that provide for
the periodic payment of interest. The market prices of zero coupon bonds are
likely
<PAGE>

to fluctuate more in response to changes in interest rates than those of
interest-bearing securities having similar maturities and credit quality.

Zero coupon bonds carry the additional risk that, unlike securities that
provide for the periodic payment of interest to maturity, a Fund will realize no
cash until a specified future payment date unless a portion of such securities
is sold. If the issuer of such securities defaults, a Fund may obtain no return
at all on its investment. In addition, a Fund's investment in zero coupon bonds
may require it to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements. See "Tax
Information" below.

Other Risks Associated with Fixed-Income Securities. The prices of fixed-
income securities fluctuate in response to the general level of interest rates.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. Fluctuations
in the prices of portfolio securities subsequent to their acquisition will not
affect cash income from such securities but will be reflected in a Fund's net
asset value.

Convertible Securities

The Edinburgh Overseas Equity Fund, the Frontier Capital Appreciation Fund,
and the Enhanced U.S. Equity Fund may invest in convertible securities.
Convertible securities may include corporate notes or preferred stock but more
commonly are long-term debt obligations of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all debt
<PAGE>

securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities generally rank senior to common stock in an issuer's
capital structure and are consequently of higher quality and entail less risk of
declines in market value than the issuer's common stock. However, the extent to
which such common-stock-like risk is reduced for the holder of a convertible
security is inversely related to the amount by which the convertible security's
market price exceeds its value as a fixed-income security.

Warrants and Rights

The Edinburgh Overseas Equity Fund, the Frontier Capital Appreciation Fund,
and the Enhanced U.S. Equity Fund each may invest in warrants or rights which
entitle the holder to buy equity securities at a specific price for a specific
period of time but will do so only if such equity securities are deemed
appropriate by the Portfolio Manager for investment by the Fund.
<PAGE>

Warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.

Repurchase Agreements

The Turner Core Growth Fund and the Enhanced U.S. Equity Fund may enter
into repurchase agreements with "primary dealers" in U.S. Government securities
and member banks of the Federal Reserve System which furnish collateral at least
equal in value or market price to the amount of their repurchase obligation. The
collateral must consist of U.S. Government securities or instruments that are
rated in the highest rating category by at least two nationally recognized
statistical rating organizations ("NRSROs") or by a single NRSRO if only one has
assigned a rating. In a repurchase agreement, an investor (e.g., a Fund)
purchases a debt security from a seller which undertakes to repurchase the
security at a specified resale price on an agreed future date (ordinarily a week
or less). The resale price generally exceeds the purchase price by an amount
which reflects an agreed-upon market interest rate for the term of the
repurchase agreement. The primary risk is that, if the seller defaults, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by that Fund in connection with
the related repurchase agreement are less than the repurchase price. In
addition, in the event of bankruptcy of the seller or failure of the seller to
repurchase the securities as agreed, that Fund could suffer losses, including
loss of interest on or principal of the security and costs associated with delay
and enforcement of the repurchase
<PAGE>

agreement. In evaluating whether to enter into a repurchase agreement, the
Portfolio Manager will carefully consider the creditworthiness of the seller
pursuant to procedures established by the Board of Directors.

Borrowing

The Edinburgh Overseas Equity Fund may borrow money but only from banks and
only for temporary or short-term purposes. Temporary or short-term purposes may
include: (i) short-term (i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets; and (iii)
borrowing in order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio securities or assets
in the near future. The Fund will not borrow for leveraging purposes. The Fund
will maintain continuous asset coverage of at least 300% with respect to all of
its borrowings. Should the value of the Fund's assets decline to below 300% of
borrowings, the Fund may be required to sell portfolio securities within three
days to reduce the Fund's debt and restore 300% asset coverage. Borrowing
involves interest costs.

Other Investment Companies

The Edinburgh Overseas Equity Fund reserves the right to invest up to 10%
of its total assets, calculated at the time of purchase, in the securities of
other investment companies including money market funds, business development
companies, and small
<PAGE>

business investment companies (although it is anticipated that such investments
will not exceed 5% of total assets). The Fund may not invest more than 5% of its
total assets in the securities of any one investment company nor in more than 3%
of the voting securities of any other investment company. The Fund will indi-
rectly bear their proportionate share of any advisory fees paid by investment
companies in which they invest in addition to the management fee paid by the
Fund.

INVESTMENT RESTRICTIONS

Fundamental Restrictions

The following investment restrictions have been adopted by the Company as
fundamental policies for the Funds to which each applies, as shown below. A
fundamental policy is one that cannot be changed without the affirmative vote of
"a majority of the outstanding voting securities" (as defined in the Investment
Company Act of 1940 (the "1940 Act")) attributable to that Fund. The investment
objective of each Fund and all other investment policies or practices of the
Funds are considered by the Company not to be fundamental and accordingly may be
changed by the Board of Directors without shareholder approval. See "Investment
Objectives and Policies" in the Company's Prospectus. For purposes of the 1940
Act, "a majority of the outstanding voting securities" means the lesser of (a)
67% or more of the votes attributable to shares of the Fund present at a
meeting, if the holders of more than 50% of such votes are present or
represented
<PAGE>

by proxy, or (b) more than 50% of the votes attributable to shares of the Fund.

None of the Funds may:
---------------------

1. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings.

2. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions.

3. Underwrite securities issued by others, except to the extent that the
sale of portfolio securities by a Fund may be deemed to be underwriting.

4. Purchase, hold or deal in real estate (including real estate limited
partnerships) or oil, gas or mineral leases, although a Fund may purchase and
sell securities that are secured by real estate or interests therein and may
purchase mortgage-related securities (unless otherwise prohibited in these
investment restrictions) and securities issued by real estate investment
trusts and may hold and sell real estate acquired for the Fund as a result of
the ownership of securities.

5. Invest in commodities.

6. Lend any money or other assets, except through the purchase of all or
a portion of an issue of securities or obligations of the type in which the
Fund may invest. However, a Fund may lend its portfolio securities in an amount
not to exceed one-third of the value of its total assets, unless otherwise
prohibited in these investment restrictions.
<PAGE>

7. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act) except as otherwise permitted under these fundamental investment
restrictions.

8. Alone or together with any other of the Funds, make investments for
the purpose of exercising control over, or management of, any issuer.

9. Borrow money except from banks for temporary or short-term purposes
and then only if the Fund maintains asset coverage of at least 300% for such
borrowings. None of the Funds will purchase securities when such borrowings
exceed 5% of its assets.

10. Sell securities short or maintain a short position including short
sales against the box.

11. Invest more than 25% of the value of its total assets in the
securities of issuers conducting their principal business activities in the same
industry. This limitation does not apply to U.S. Government securities.

12. As to 75% of the value of its total assets, purchase the securities of
any one issuer (except U.S. Government securities) if, as a result thereof,
more than 5% of the value of the Fund's total assets would be invested in
securities of that issuer or if, as a result thereof, more than 10% of the
outstanding voting securities of that issuer would be owned by the Fund.
<PAGE>

Non-Fundamental Restrictions

In addition to the fundamental investment restrictions mentioned above, the
Board of Directors has adopted certain non-fundamental restrictions for each
Fund as shown below. Non-fundamental restrictions represent the current
intentions of the Board of Directors, and they differ from fundamental
investment restrictions in that they may be changed or amended by the Board of
Directors without prior notice to or approval of shareholders.

None of the Funds may:
---------------------

1. Purchase the securities of any one issuer if, by such purchase, the
Fund would own more than 10% of the outstanding voting securities of that
issuer.

2. Write call or put options.

3. Purchase variable-amount master demand notes, which are obligations
that permit the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the lender and the borrower.

4. Purchase variable- or floating-rate demand instruments, which are debt
securities that include a variable or floating interest rate adjustment feature.

5. Purchase fixed-income investments (e.g., corporate debt obligations,
including commercial paper) that are unrated or rated at the time of purchase in
the lower rating categories by S&P or Moody's (i.e., ratings of BB or lower by
S&P or Ba or lower by Moody's for corporate debt obligations and ratings below
A-3 by S&P or Prime-3 by Moody's for commercial paper).
<PAGE>

6. Invest in mortgage-backed securities, which represent direct or
indirect participation in, or are collateralized by and payable from, mortgage
loans secured by real property.

7. Invest in asset-backed securities, which represent participation in,
or are secured by and payable from, assets such as motor vehicle installment
sales, installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (i.e., credit card) agreements and
other categories of receivables.

8. Invest in options or futures.

9. Invest in when-issued securities (or delayed-delivery or forward
commitment contracts).

10. Invest in interest-only ("IO") or principal only ("PO") securities.
However, this does not preclude investments in zero coupon bonds.

11. Invest more than 25% of its net asset value in emerging markets,
including no more than 5% of net asset value in Brady Bonds.

Fund-specific restrictions:
--------------------------

12. The Edinburgh Overseas Equity Fund and the Turner Core Growth Fund may
not purchase illiquid securities, including certain repurchase agreements or
time deposits maturing in more than seven days, if, as a result thereof, more
than 5% of the value of its total assets would be invested in assets that are
either illiquid or are not readily marketable. The Frontier Capital
<PAGE>

Appreciation Fund and the Enhanced U.S. Equity Fund may not invest in illiquid
securities.

13. The Edinburgh Overseas Equity Fund and the Frontier Capital
Appreciation Fund may not purchase restricted securities (except securities
offered and sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act, and except foreign securities offered and sold outside
the United States) if, as a result thereof, more than 10% of the value of its
total assets would be invested in restricted securities. The Turner Core Growth
Fund and the Enhanced U.S. Equity Fund may not invest in restricted securities.

14. The Edinburgh Overseas Equity Fund and the Enhanced U.S. Equity Fund
may not invest in securities of foreign issuers unless, after such investment,
issuers in at least the following number of different countries are represented
in the Fund's portfolio: if up to 40% of the Fund's total assets are invested in
foreign issuers, two foreign countries; if between 40% and 60% of the Fund's
total assets are invested in foreign issuers, three foreign countries; if
between 60% and 80% of the Fund's total assets are invested in foreign issuers,
four foreign countries; and if over 80% of the Fund's total assets are invested
in foreign issuers, five foreign countries. The Frontier Capital Appreciation
Fund and the Turner Core Equity Fund may not invest in securities of foreign
issuers.

15. The Edinburgh Overseas Equity Fund, the Frontier Capital Appreciation
Fund, and the Enhanced U.S. Equity Fund may not invest in warrants or rights
(other than those
<PAGE>

acquired in units or otherwise attached to other securities) if, as a result
thereof, more than 5% of the value of its total assets would be invested in
warrants or rights, and each may not invest more than 2% of its total assets,
calculated at the time of purchase, in warrants or rights that are not listed on
the New York Stock Exchange or the American Stock Exchange. The Turner Core
Growth Fund may not invest in warrants or rights.

16. The Turner Core Growth Fund, the Frontier Capital Appreciation Fund,
and the Enhanced U.S. Equity Fund will not invest in other investment companies.

17. The Edinburgh Overseas Equity Fund will not engage in forward foreign
currency exchange contracts with respect to more than 5% of its assets. The
other Funds will not enter into such contracts.

Interpretive Rules

For purposes of the foregoing fundamental and non-fundamental limitations,
any limitation which involves a maximum percentage will not be violated unless
an excess over the percentage occurs immediately after, and is caused by, an
acquisition or encumbrance of securities or assets of, or borrowings by, a
Fund. In addition, with regard to exceptions recited in a restriction, a Fund
may only rely on an exception if its investment objective or policies otherwise
permit it to rely on the exception.
<PAGE>

INVESTMENT ADVISER

M Financial Investment Advisers, Inc. (the "Adviser") is the investment
adviser of the Company and its Funds.

The Adviser was organized on September 11, 1995. Although the Adviser is
not primarily responsible for the daily management of the Funds, the Adviser
oversees the management of the assets of the Funds by each of the Portfolio
Managers. In turn, each Portfolio Manager is responsible for the day-to-day
management of a specific Fund.

Investment Advisory Agreement

The investment advisory agreement provides that the Adviser may render
similar services to others (although there is no current intent for the Adviser
to do so) so long as the services that it provides to the Company are not
impaired thereby. The investment advisory agreement also provides that the
Adviser will not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
management of the Company, except for (i) willful misfeas-
<PAGE>

ance, bad faith or gross negligence in the performance of its duties or by
reason of reckless disregard of its duties or obligations under the investment
advisory agreement, and (ii) to the extent specified in Section 36(b) of the
1940 Act concerning loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation.

The investment advisory agreement was approved for each Fund by the Board
of Directors, including a majority of the Directors who are not parties to the
investment advisory agreement or "interested persons" (as such term is defined
in the 1940 Act) of any party thereto (the "non-interested Directors"), on
November 20, 1995, and by the sole initial shareholder of the Company on ___,
1996. The investment advisory agreement will remain in effect until __, 1998,
and from year to year thereafter provided such continuance is specifically
approved as to each Fund at least annually by (a) the vote of a majority of the
outstanding voting securities of that Fund or by the Board of Directors, and (b)
the vote of a majority of the non-interested Directors, cast in person at a
meeting called for the purpose of voting on such approval. The investment
advisory agreement will terminate automatically if assigned (as defined in the
1940 Act). The investment advisory agreement is also terminable as to any Fund
at any time by the Board of Directors or by vote of a majority of the votes
attributable to outstanding voting securities of the applicable Fund (a) without
penalty and (b) on 60 days' written notice to the Adviser. The agreement is
also
<PAGE>

terminable by the Adviser on 90 days' written notice to the Company.

Expenses of the Company

The Company incurs certain operating and general administrative expenses
in addition to the Adviser's fee. These expenses, which are accrued daily,
include but are not limited to: taxes; expenses for legal and auditing services;
costs of printing; charges for custody services; transfer agent fees, if any;
expenses of redemption of shares; expense of registering shares under federal
and state securities laws; accounting costs; insurance; dues of trade
associations; interest; brokerage costs; and other expenses properly payable by
the Company.

In general, each Fund is charged for the expenses incurred in its
operations as well as for a portion of the Company's general administrative
expenses, allocated on the basis of the asset size of the respective Funds, or
by the Board of Directors as appropriate. Expenses other than the Adviser's fee
that are borne directly and paid individually by a Fund include, but are not
limited to, brokerage commissions, dealer markups, taxes, custody fees, expenses
of redemption, and other costs properly payable by the Fund. Expenses which are
allocated among the Funds include, but are not limited to, Directors' fees and
expenses, independent accountant fees, transfer agent fees, insurance costs,
legal fees, and all other costs of operation properly payable by the Company.

PORTFOLIO MANAGERS
<PAGE>

As compensation for their services, each Portfolio Manager receives a fee
(paid by the Adviser) based on the average daily net assets of the applicable
Fund at the following annual rates:

================================================================================
Fund Sub-Advisory Fee
================================================================================
<S> <C>
Edinburgh Overseas 0.90% on the first $10 million
Equity Fund 0.75% on the next $15 million
0.60% on the next $75 million
0.45% on amounts above $100 million
- --------------------------------------------------------------------------------
Turner Core Growth Fund 0.30%
- --------------------------------------------------------------------------------
Frontier Capital Appreciation Fund 0.75%
- --------------------------------------------------------------------------------
Enhanced U.S. Equity Fund 0.40% on the first $25 million
0.30% on the next $75 million
0.15% on amounts above $100 million
================================================================================
</TABLE>

Since they are paid by the Adviser, the sub-advisory fees form a portion
of, and are not in addition to, the Advisory fees described in the Prospectus.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Portfolio Managers are responsible for decisions to buy and sell
securities for the Funds, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a securities exchange are effected through brokers
who charge a negotiated commission for their services. Orders may be directed to
any broker including, to the extent and in the manner permitted by applicable
law, affiliates of the Adviser or the Portfolio Managers.
<PAGE>

In placing orders for portfolio securities of a Fund, its Portfolio Manager
is required to give primary consideration to obtaining the most favorable price
and efficient execution. This means that the Portfolio Manager will seek to
execute each transaction at a price and commission, if any, which provide the
most favorable total cost or proceeds reasonably attainable in the
circumstances. While the Portfolio Manager generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. Within the framework of this policy, the
Portfolio Managers may consider research and investment services provided by
brokers or dealers who effect or are parties to portfolio transactions of the
Funds, the Portfolio Managers and their affiliates, or other clients of the
Portfolio Managers or their affiliates. Such research and investment services
include statistical and economic data and research reports on particular
companies and industries. Such services are used by the Portfolio Managers in
connection with all of their investment activities, and some of such services
obtained in connection with the execution of transactions for the Funds may be
used in managing other investment accounts. Conversely, brokers furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than those of the Funds, and
the services furnished by such brokers may be used by the Portfolio Managers in
providing investment sub-advisory services to the Funds.
<PAGE>

On occasions when the Portfolio Manager deems the purchase or sale of a
security to be in the best interest of a Fund as well as its other advisory
clients (including any other fund or other investment company or advisory
account for which the Portfolio Manager or an affiliate acts as investment
adviser), the Portfolio Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for such other customers in order to obtain
the best net price and most favorable execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in the manner it considers
to be most equitable and consistent with its fiduciary obligations to the Fund
and such other customers. In some instances, this procedure may adversely
affect the price and size of the position obtainable for a Fund.

Commission rates are established pursuant to negotiations with the broker
based on the quality and quantity of execution services provided by the broker
in the light of generally prevailing rates. The allocation of orders among
brokers and the commission rates paid are reviewed periodically by the Board of
Directors.

DETERMINATION OF NET ASSET VALUE

The Board of Directors is responsible for determining in good faith the
fair value of securities of each Fund. The price per share, and therefore the
net asset value per share, was initially established at $10.00 by the Board of
Directors.
<PAGE>

Thereafter, in accordance with procedures adopted by the Board of Directors, the
net asset value per share is calculated by determining the net worth of each
Fund (assets, including securities at market value or amortized cost value,
minus liabilities) divided by the number of that Fund's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. Each Fund will compute its net asset value once daily at the close of
such trading (normally 4:00 p.m. New York time). In addition, the Funds may
compute their net asset value as of any time permitted pursuant to any
exemption, order or statement of the SEC or its staff.

Portfolio assets of the Funds are valued as follows:

(a) securities and other investments listed on any U.S. or foreign stock
exchange or the National Association of Securities Dealers Automated
Quotation system ("Nasdaq") are valued at the last sale price on that
exchange or Nasdaq on the valuation day; if no sale occurs, securities
traded on a U.S. exchange or Nasdaq are valued at the mean between the
closing bid and closing asked prices and securities traded principally
on a foreign exchange will be valued at the official bid price (the
last sale price and official bid price for securities traded
principally on a foreign exchange will be determined as of the close
of the London Foreign Exchange);

(b) over-the-counter securities not quoted on Nasdaq are valued at the
last sale price on the valuation day or,
<PAGE>

if no sale occurs, at the mean between the last bid and asked prices;

(c) debt securities with a remaining maturity of 61 days or more are
valued on the basis of dealer-supplied quotations or by a pricing
service selected by the Portfolio Manager and approved by the Board of
Directors if those prices are deemed by the Portfolio Manager to be
representative of market values at the close of business of the New
York Stock Exchange;

(d) all other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not deemed by
the Portfolio Manager to be representative of market values, but
excluding debt securities with remaining maturities of 60 days or
less, are valued at fair value as determined in good faith pursuant to
procedures established by the Board of Directors; and

(e) debt securities with a remaining maturity of 60 days or less will be
valued at their amortized cost which approximates market value.

Portfolio securities traded on more than one U.S. national securities
exchange or foreign securities exchange are valued at the last sale price on
each business day at the close of the exchange representing the principal market
for such securities. The value of all assets and liabilities expressed in
foreign currencies will be converted into U.S. dollar values at the mean between
the buying and selling rates of such currencies against
<PAGE>

U.S. dollars last quoted by any major bank. If such quotations are not
available, the rate of exchange will be determined in good faith by or under
procedures established by the Board of Directors.

Trading in securities on European and Far Eastern securities exchanges and
on over-the-counter markets is normally completed well before the close of
business on each business day. In addition, European or Far Eastern securities
trading generally or in a particular country or countries may not take place on
all business days. Furthermore, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days which are not business
days for the Company and days on which a Fund's net asset value is not
calculated. Such calculation does not take place contemporaneously with the
determination of the prices of a majority of the portfolio securities used in
such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of regular
trading on the New York Stock Exchange will not be reflected in a Fund's
calculation of net asset value until the following business day, unless the
Portfolio Manager deems that the particular event would materially affect net
asset value, in which case an adjustment will be made.

Under the amortized cost method of valuation, securities are valued at cost
on the date of their acquisition, and thereafter a constant accretion of any
discount or amortization of any premium to maturity is assumed, regardless of
the impact of fluctuating interest rates on the market value of the security.
While this
<PAGE>

method provides certainty in valuation, it may result in periods in which value
as determined by amortized cost is higher or lower than the price a Fund would
receive if it sold the security. During such periods, the quoted yield to
investors may differ some-what from that obtained by a similar fund or portfolio
which uses available market quotations to value all of its portfolio securities.

PERFORMANCE INFORMATION

The Company may from time to time quote or otherwise use average annual
total return information for the Funds in advertisements, shareholder reports,
and sales literature. Average annual total return values are computed pursuant
to equations specified by the SEC.

Average annual total return for a specified period is derived by
calculating the actual dollar amount of the investment return on a $1,000
investment in a Fund made at the beginning of the period, and then calculating
the annual compounded rate of return which would produce that amount, assuming a
redemption at the end of the period. This calculation assumes a complete
redemption of the investment. It also assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.

The Company also may from time to time quote or otherwise use year-by-year
total return, cumulative total return and yield information for the Funds in
advertisements, shareholder reports, and sales literature. Year-by-year total
return and cumulative
<PAGE>

total return for a specified period are each derived by calculating the
percentage rate required to make a $1,000 investment in a Fund (assuming all
distributions are reinvested) at the beginning of such period equal to the
actual total value of such investment at the end of such period.

Yield is computed by dividing net investment income earned during a recent
30-day period by the product of the average daily number of shares outstanding
and entitled to receive dividends during the period and the price per share on
the last day of the relevant period. The results are compounded on a bond-
equivalent (semiannual) basis and then annualized. Net investment income per
share is equal to the dividends and interest earned during the period, reduced
by accrued expenses for the period. The calculation of net investment income
for these purposes may differ from the net investment income determined for
accounting purposes.

Any performance data quoted for a Fund will represent historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Funds will not reflect charges
deducted under the Policies. If Policy charges were taken into account, such
performance data would reflect lower returns.

From time to time the Company may publish an indication of the Funds' past
performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Fund Report, Barron's, Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's Personal
Finance and The Wall Street Journal. The Company may also advertise information
which has been provided to the NASD for publication in regional and local
newspapers. In addition, the Company may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Fund
Performance Analysis, Fixed-Income Analysis and Mutual Fund Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Fund Report published by CDA
Investment Technologies, Inc. (which analyzes price, risk and various measures
of return for the mutual fund industry); (c) the Consumer Price Index published
by the U.S. Bureau of Labor Statistics (which measures changes in the price of
goods and services); (d) Stocks, Bonds, Bills and Inflation published by
Ibbotson Associates (which provides historical performance figures for stocks,
government securities and inflation); (e) the Hambrecht & Quist Growth Stock
Index; (f) the Nasdaq OTC Composite Prime Return; (g) the Russell Midcap Index;
(h) the Russell 2000 Index- Total Return; (i) the ValueLine Composite-Price
Return; (j) the Wilshire 4500 Index; (k) the Salomon Brothers' World Bond Index
(which measures the total return in U.S. dollar terms of government bonds,
Eurobonds and foreign bonds of ten countries, with all such bonds having a
minimum maturity of five years); (l) the Shearson Lehman Brothers Aggregate Bond
Index or its component
<PAGE>

indices (the Aggregate Bond Index measures the performance of Treasury, U.S.
Government agencies, mortgage and Yankee bonds); (m) the S&P Bond indices (which
measure yield and price of corporate, municipal and U.S. Government bonds); (n)
the J.P. Morgan Global Government Bond Index; (o) Donoghue's Money Market Fund
Report (which provides industry averages of 7-day annualized and compounded
yields of taxable, tax-free and U.S. Government money market funds); (p) other
taxable investments including certificates of deposit, money market deposit
accounts, checking accounts, savings accounts, money market mutual funds and
repurchase agreements; (q) historical investment data supplied by the research
departments of Goldman Sachs, Lehman Brothers, CS First Boston, Morgan Stanley
(including EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin & Jenrette
or other providers of such data; (r) the FT-Actuaries Europe and Pacific Index;
(s) mutual fund performance indices published by Variable Annuity Research &
Data Service; (t) S&P 500 Index; and (u) mutual fund performance indices
published by Morningstar, Inc. The composition of the investments in such
indices and the characteristics of such benchmark investments are not identical
to, and in some cases are very different from, those of a Fund's portfolio.
These indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Company to calculate a Fund's performance figures.

The Company may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements
<PAGE>

and publish the Portfolio Managers' views as to markets, the rationale for a
Fund's investments and discussions of a Fund's current asset allocation.

From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Fund. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.

Such performance data will be based on historical results and will not be
intended to indicate future performance. The total return and yield of a Fund
will vary based on market conditions, portfolio expenses, portfolio
investments, and other factors. The value of a Fund's shares will fluctuate, and
an investor's shares may be worth more or less than the investor's original cost
upon redemption. The Company may also, at its discretion, from time to time make
a list of a Fund's holdings available to investors upon request.

SHARES OF STOCK

The Company issues a separate class of shares for each Fund representing
fractional undivided interests in that Fund. The Board of Directors has
authority to divide or combine the shares of any Fund into greater or lesser
numbers without thereby changing the proportionate beneficial interests in the
Fund.

Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared for the respective class and, upon
liquidation or dissolution, in net assets
<PAGE>

allocated to such class remaining after satisfaction of outstanding
liabilities. The shares of each class, when issued, will be fully paid and
nonassessable and have no preemptive or conversion rights.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act, applicable state law or otherwise
to the holders of the outstanding voting securities of an investment company
such as the Company shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
class or series affected by such matter. Rule 18f-2 further provides that a
class or series shall be deemed to be affected by a matter unless the interests
of each class or series in the matter are substantially identical or the matter
does not affect any interest of such class or series. However, Rule 18f-2
exempts the selection of independent public accountants, the approval of
principal underwriting contracts and the election of Directors from the separate
voting requirements of Rule 18f-2.

Under normal circumstances, subject to the reservation of rights explained
above, the Company will redeem shares of the Funds in cash within seven days.
However, the right of a shareholder to redeem shares and the date of payment by
the Company may be suspended for more than seven days for any period during
which the New York Stock Exchange is closed, other than the customary weekends
or holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as
<PAGE>

determined by the SEC, as a result of which it is not reasonably practicable for
a Fund to dispose of securities owned by it or fairly to determine the value of
its net assets; or for such other period as the SEC may by order permit for the
protection of shareholders.

Under Maryland law, the Company is not required to hold annual shareholder
meetings and does not intend to do so.

CUSTODY OF ASSETS

Pursuant to a custodian agreement with the Company, Investors Bank & Trust
Company ("Investors Bank") holds the cash and portfolio securities of the
Company as custodian.

Investors Bank is responsible for holding all securities and cash of each
Fund, receiving and paying for securities purchased, delivering against payment
securities sold, and receiving and collecting income from investments, making
all payments covering expenses of the Company, all as directed by persons
authorized by the Company. Investors Bank does not exercise any supervisory
function in such matters as the purchase and sale of portfolio securities,
payment of dividends, or payment of expenses of the Funds or the Company.
Portfolio securities of the Funds purchased domestically are maintained in the
custody of Investors Bank and may be entered into the Federal Reserve,
Depository Trust Company, or Participant's Trust Company book entry systems.
Pursuant to the custodian agreement, portfolio securities purchased outside the
United States will be maintained in the custody of various other custodians or
subcustodians, including
<PAGE>

foreign banks and foreign securities depositories, as are approved by the Board
of Directors, in accordance with regulations under the 1940 Act.

DIRECTORS AND OFFICERS

The Directors and officers of the Company are listed below together with
their respective positions with the Company and a brief statement of their
principal occupations during the past five years and any positions held with
affiliates of the Company:

David M. Spungen* Director Director of CMS Capital
(age 34) Management, a division of CMS
Investment Resources, Inc.

Gerald Bidwell Director President and Chief Executive
[address] Officer, Bidwell & Co.
(age 52)

Neil E. Goldschmidt Director President, Neil Goldschmidt,
222 SW Columbia Inc.; Formerly, Governor,
Suite 1850 State of Oregon
Portland, OR 97201
(age 56)

Philip Halpern Director Chief Investment Officer,
(age 41) Washington State Investment
Board

Daniel F. Byrne* President Senior Vice President, Product
(age 39) Development and Sales Support,
of M Financial Group, since
1992. Formerly, Director of
Product Development for Sun
Life of Canada.
</TABLE>
<PAGE>

Position(s)
Held with Principal Occupation(s)
Name, Address, and Age the Company During Past 5 Years
- ---------------------- ----------- -----------------------
<S> <C> <C>
David W. Schutt* Secretary Secretary and Treasurer of M
(age 40) and Life and Director of Finance
Treasurer for M Financial Group, since
1992. Formerly, Controller of
OECO Corporation (electronics
manufacturer).
</TABLE>

* "Interested Person" of the Company for purposes of the 1940 Act. The
address of Interested Persons is M Fund, Inc., River Park Center, 205 S.E.
Spokane Street, Portland, Oregon 97202.

There is no family relationship between any of the Directors or officers
listed above.
<PAGE>

The Directors of the Company are expected to receive the following
compensation from the Company during the current fiscal year:

Pension or Total
Retirement Compensation
Benefits Estimated from the
Aggregate Accrued as Annual Company and
Compensation Part of the Benefits Fund Complex
Name of Person, from the Company's upon Paid to
Position Company** Expenses** Retirement Directors**
- -------------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Peter W. Mullin $ 0 $ 0 $ 0 $ 0
Director

David M. Spungen $ 0 $ 0 $ 0 $ 0
Director

Gerald Bidwell $10,000 $ 0 $ 0 $10,000
Director

Neil Goldschmidt $10,000 $ 0 $ 0 $10,000
Director

Philip Halpern $10,000 $ 0 $ 0 $10,000
Director
</TABLE>

** Each non-interested Director currently receives an annual retainer of
$8,000 plus $500 per meeting of the Board or a committee thereof which he
attends.

TAX INFORMATION

Sources of Gross Income. To qualify for treatment as a regulated investment
company, a Fund must, among other things, derive its income from certain
sources. Specifically, in each taxable year, a Fund must generally derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
<PAGE>

securities or foreign currencies, or other income derived with respect to its
business of investing in securities or currencies. A Fund must also generally
derive less than 30% of its gross income from the sale or other disposition of
any of the following which was held for less than three months: (1) stock or
securities, (2) options, futures, or forward contracts (other than options,
futures, or forward contracts on foreign currencies), or (3) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts on currencies) are
not directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stock or securities). For
purposes of these tests, gross income generally is determined without regard to
losses from the sale or other disposition of stock or securities or other Fund
assets.

Diversification of Assets. To qualify for treatment as a regulated
investment company, a Fund must also satisfy certain requirements with respect
to the diversification of its assets. A Fund must have, at the close of each
quarter of the taxable year, at least 50% of the value of its total assets
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies, and other securities which, in respect of any
one issuer, do not represent more than 5% of the value of the assets of the Fund
nor more than 10% of the voting securities of that issuer. In addition, at those
times, not more than 25% of the value of the Fund's assets may be invested in
securities (other than U.S. Government securities or
<PAGE>

the securities of other regulated investment companies) of any one issuer, or of
two or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses or related trades or businesses. For purposes of a
Fund's requirements to maintain diversification for tax purposes, the issuer of
a loan participation will generally be the underlying borrower. However, in
cases where the Fund does not have recourse directly against the borrower, both
the borrower and each agent bank and co-lender interposed between the Fund and
the borrower will be deemed issuers of the loan participation for tax
diversification purposes. A Fund's investments in U.S. Government securities are
not subject to these limitations. The foregoing diversification requirements are
in addition to those imposed by the 1940 Act.

Because the Company is established as an investment medium for variable
annuity contracts and variable life insurance policies, Section 817(h) of the
Code imposes additional diversification requirements on each Fund. These
requirements generally are that no more than 55% of the value of the assets of a
Fund may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each U.S. Government agency or
instrumentality is treated as a separate issuer.
<PAGE>

OTHER INFORMATION

Financial Statements

This Statement of Additional Information contains audited Statements of
Assets and Liabilities for the Company dated as of January 2, 1996. Coopers &
Lybrand, L.L.P., acts as the Company's independent certified public accountants.

Legal Counsel

Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2404, has provided advice to the Company with respect to certain
matters relating to federal securities laws.

Company Name

The Company's Articles of Incorporation acknowledge that the Company
adopted its name through permission of M Life Insurance Company, an affiliate of
the Adviser. Under certain circumstances, the Company has agreed to eliminate
the name "M" from its name upon request of M Life Insurance Company.

Other Information

The Prospectus and this SAI do not contain all the information included in
the registration statement filed with the SEC under the 1933 Act with respect to
the securities offered by the Prospectus. Certain portions of the registration
statement have been omitted from the Prospectus and this SAI pursuant to the
rules and regulations of the SEC. The registration statement including the
exhibits filed therewith may be examined at the office of the SEC in Washington,
D.C.

Statements contained in the Prospectus or in this SAI as to the contents of
any contract or other document referred to are not necessarily complete, and, in
each instance, reference is
<PAGE>

made to the copy of such contract or other document filed as an exhibit to the
registration statement of which the Prospectus and this SAI are parts, each such
statement being qualified in all respects by such reference.
<PAGE>

APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS/1/

Description of Moody's Investors Service, Inc.'s
------------------------------------------------
Corporate Bond Ratings
----------------------

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

A-1
<PAGE>

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

Absence of Rating: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonably up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

A-2
<PAGE>

Description of Standard & Poor's Corporation, Inc.'s
----------------------------------------------------
Corporate Bond Ratings
----------------------
Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Speculative Grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will like impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment

A-3
<PAGE>

of interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or B-
rating.

CC: The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.

C: The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC-debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The rating CI is reserved for income bonds on which no interest
is being paid.

D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

N.R.: Not rated.

____________________

A-4
<PAGE>

- ----------------------------- COMPARISON OF NOTES ------------------------------

The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of the SAI for the securities listed.
Ratings are generally given to securities at the time of issuance. While the
rating agencies may from time to time revise such ratings, they undertake no
obligations to do so, and the ratings indicated do not necessarily represent
ratings which will be given to these securities on the date of the Fund's fiscal
year end.

A - 5
<PAGE>

APPENDIX B

Description of Commercial Paper Ratings

Commercial Paper - Moody's Investors Service, Inc.
- --------------------------------------------------

"PRIME-1" - Commercial paper issuers rated Prime-1 are judged to be one
of the best quality. Their short-term debt obligations carry the smallest
degree of investment risk. Margins of support for current indebtedness are
large or stable with cash flow and asset protection well assured. Current
liquidity provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such changes are most
unlikely to impair the fundamentally strong position of short-term obligations.

"PRIME-2" - Issuers in the Commercial Paper market rated Prime-2 are high
quality. Protection for short-term holders is assured with liquidity and value
of current assets as well as cash generation in sound relationship to current
indebtedness. They are rated lower than the best commercial paper issuers
because margins of protection may not be as large or because fluctuations of
protective elements over the near or immediate term may be of greater amplitude.
Temporary increases in relative short and overall debt load may occur.
Alternative means of financing remain assured.

"PRIME-3" - Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

Commercial Paper - Standard & Poor's Corporation
- ------------------------------------------------

"A" - Issues assigned this highest rate are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.

"A-1" - This designation indicates that the degree of safety regarding
timely payment is very strong.

"A-2" - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not overwhelming as for
issues designated "A-1".
<PAGE>

"A-3" - Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designation.

<PAGE>

M FUND, INC.

___________

REPORT ON AUDIT OF FINANCIAL STATEMENTS
AS OF JANUARY 2, 1996
<PAGE>

[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Directors of the M Fund, Inc.:

We have audited the accompanying statements of assets and liabilities of the
Edinburgh Overseas Equity Fund, the Turner Core Growth Fund, the Frontier
Capital Appreciation Fund, and the Enhanced U.S. Equity Fund as of January 2,
1996. These financial statements are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the statements of assets and liabilities are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of assets and
liabilities. Our procedures included confirmation of cash balances as of January
2, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements of
assets and liabilities. We believe our audits provide a reasonable basis for
our opinion.

In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of the
Edinburgh Overseas Equity Fund, the Turner Core Growth Fund, the Frontier
Capital Appreciation Fund, and the Enhanced U.S. Equity Fund as of January 2,
1996, in conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Portland, Oregon
January 3, 1996

<PAGE>

M FUND, INC
STATEMENTS OF ASSETS AND LIABILITIES
January 2, 1996

<TABLE>
<CAPTION>
EDINBURGH TURNER FRONTIER
OVERSEAS CORE CAPITAL ENHANCED
EQUITY GROWTH APPRECIATION U.S.EQUITY
FUND FUND FUND FUND
--------- ------ ------------ ----------

ASSETS
<S> <C> <C> <C> <C>
cash $ 40,000 $ 20,000 $ 20,000 $ 20,000
Deferred organization expenses
(Note 1) 100,500 100,500 100,500 100,500
------------- ------------- ------------- ------------
Total assets 140,500 120,500 120,500 120,500

LIABILITIES AND
SHAREHOLDER'S EQUITY

Liabilities:
Organization expenses payable
(Note 1) 100,500 100,500 100,500 100,500
------------- ------------- ------------- -------------

Net assets $ 40,000 $ 20,000 $ 20,000 $ 20,000
============= ============= ============= =============

Net assets consists of:
Paid in capital $ 40,000 $ 20,000 $ 20,000 $ 20,000
============= ============= ============= =============

Net asset value of redemption
price per share $ 10.00 $ 10.00 $ 10.00 $ 10.00
============= ============= ============= =============

Number of fund shares outstanding 4,000 2,000 2,000 2,000
============= ============= ============= =============

Capital stock authorized 100,000,000 100,000,000 100,000,000 100,000,000
============= ============= ============= =============

Par value $.001 $.001 $.001 $.001
============= ============= ============= =============
</TABLE>

The accompanying notes are an integral part of this financial statement.

<PAGE>

M FUND, INC.
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES

1. ORGANIZATION:

M Fund, Inc. (the Company) was incorporated in Maryland on August 11, 1995,
and is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Company consists of four
separate diversified investment portfolios or Funds (the Fund): the
Edinburgh Overseas Equity Fund, the Turner Core Growth Fund, the Frontier
Capital Appreciation Fund, and the Enhanced U.S. Equity Fund. The Company
and the Fund have had no operations, other than those relating to
organizational matters, including the issuance of shares of common stock on
January 2, 1996 to M Life Insurance Company, the provider of the Fund's
initial capital.

These Funds are available through the purchase of variable life insurance
and variable annuity policies. Shares of the Funds may also be sold to
qualified pension and retirement plans. Each of the Funds seeks long-term
capital appreciation or total return, and each Fund will invest primarily in
stocks and other equity securities.

The net asset value per share of each Fund is normally determined once
daily as of the close of regular trading on the New York Stock Exchange. The
value of each Fund's securities and assets, except certain short-term debt
securities , is determined on the basis of their market values. Short-term
debt securities having remaining maturities of 60 days or less held by any
of the Funds are valued by the amortized cost method, which approximates
market value.

Costs incurred by the Company in connection with its organization and
initial registration and public offering shares will be deferred and
amortized using the straight-line method over a period of five years from
the commencement of operations of the Fund. In the event that any of the
10,000 initial shares of the Fund are redeemed during the amortization
period, the redemption proceeds will be reduced by any unamortized
organization and registration costs in the same proportion as the number of
shares being redeemed bears to the number of initial shares outstanding at
the time of such redemption.

The organization expenses payable represents a liability to an affiliated
Company.

3
<PAGE>

2. COMMITMENTS AND RELATED AGREEMENTS:

The Company has entered into an investment advisory agreement (the Advisory
Agreement) with M Financial Investment Advisers, Inc. (the Adviser). The
Adviser is affiliated, through common ownership, with M Life Insurance
Company. Certain officers and directors of the Adviser are also officers
and directors of the Company. The Advisory Agreement provides for the Fund
to pay the Adviser an advisory fee based on each Fund's average daily net
assets. The following annual rates represent advisory fees of each Fund:

<TABLE>
<CAPTION>
FUND TOTAL ADVISORY FEES
---- -------------------

<S> <C>
Edinburgh Overseas Equity Fund 1.05% on the first $10 million
0.90% on the next $15 million
0.75% on the next $75 million
0.60% on amounts above $100 million

Turner Core Growth Fund 0.45%

Frontier Capital Appreciation Fund 0.90%

Enhanced U.S. Equity Fund 0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100 million
</TABLE>

The Adviser has engaged Edinburgh Fund Managers plc, Turner Investment
Partners, Inc., Frontier Capital Management Company, Inc., and Franklin
Portfolio Associates Trust to act as sub-advisers to provide the day-to-
day portfolio management for the Edinburgh Overseas Equity Fund, Turner
Core Growth Fund, Frontier Capital Appreciation Fund, and Enhanced U.S.
Equity Fund, respectively.

Investors Bank and Trust will provide transfer agency, fund accounting and
custody services for the Fund. These fees will be the greater of $6,000 and
$7,250 per month for each domestic fund and international fund,
respectively, or .10% of net assets per year for the first $500 million and
.06% of net assets in excess of $500 million. The aforementioned fees are
exclusive of transaction costs and out-of-pocket expenses.

The Adviser has voluntarily undertaken to pay expenses (but not including
transaction expenses or expenses of litigation, indemnification, taxes or
other extraordinary expenses) to the extent that such expenses, as accrued
for each Fund, exceed 0.25% of that Fund's estimated average daily net
assets on an annualized basis.

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3. INCOME TAXES:
The Company intends to comply with the requirements of the Internal Revenue
Code necessary to qualify as a regulated investment company and to make the
requisite distributions of taxable income to its shareholders which will be
sufficient to relieve it from all or substantially all federal income taxes.