SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
M FUND, INC.
(Name of Registrant/s as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
M FUND, INC.
205 SE SPOKANE STREET
PORTLAND, OR 97202
November 17, 1997
Dear Shareholder:
M Financial Investment Advisers, Inc. ("MFIA"), investment adviser to M
Fund, Inc. (the "Fund"), is undergoing a change in ownership control, to be
effective December 31, 1997, that will, under the provisions of the Investment
Company Act of 1940, cause the advisory and sub-advisory agreements under which
the Fund's portfolios operate, to be terminated. The scheduled termination of
these agreements prompts us to seek the approval of shareholders to enter into a
new advisory agreement with MFIA and new sub-advisory agreements with Edinburgh
Fund Managers, plc (sub-adviser to the Edinburgh Overseas Equity Fund); Turner
Investment Partners, Inc. (sub-adviser to the Turner Core Growth Fund); Frontier
Capital Management Company, Inc. (sub-adviser to the Frontier Capital
Appreciation Fund); and Franklin Portfolio Associates LLC (sub-adviser to the
Enhanced US Equity Fund). Proposals One through Five in the attached proxy
statement relate to these approvals. We believe that subsequent to the change in
control we will continue with the same high quality of service we have received
from MFIA and look forward to continued growth for the Fund.
In addition to the above proposals, we are asking the current
shareholders of the Edinburgh Overseas Equity Fund, the Turner Core Growth Fund,
the Frontier Capital Appreciation Fund and the Enhanced US Equity Fund to elect
the current Board of Directors of the Fund and to ratify the selection of
Coopers & Lybrand L.L.P. as independent accountants for the Fund. These issues
are addressed in Proposals Six and Seven, respectively, in the attached proxy
statement.
In order to consider these Proposals, we have scheduled a Special
Meeting of the Shareholders of M Fund, Inc., to be held on December 19, 1997 at
9:00 am, Pacific time, at the principal office of the Fund, 205 SE Spokane
Street, Portland, Oregon 97202. Each Proposal is discussed in more detail in the
attached Proxy Statement. The Board of Directors of the Fund have unanimously
recommended that the shareholders approve each of the Proposals.
Whether or not you plan to attend personally, it is important that your
shares be represented. I encourage you to sign, date and mail the enclosed
voting instruction/proxy promptly in the postage-paid envelope provided for your
convenience.
Sincerely,
/s/ Daniel F. Byrne
Daniel F. Byrne
President
M FUND, INC.
RIVER PARK CENTER
205 S.E. SPOKANE STREET
PORTLAND, OREGON 97202
(888) 736-2878
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, DECEMBER 19, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of M Fund, Inc. (the "Company") will be held at the principal office
of the Company, River Park Center, 205 S.E. Spokane Street, Portland, Oregon
97202, on Friday, December 19, 1997, at 9:00 a.m., local time, for the purposes
listed below. The matters to be voted on by shareholders are as follows:
FOR THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND, TURNER
CORE GROWTH FUND, FRONTIER CAPITAL APPRECIATION FUND AND
ENHANCED U.S. EQUITY FUND
(collectively the "Funds", each a "Fund"):
1. To approve or disapprove a proposal to adopt a New Investment
Advisory Agreement between the Company and M Financial Investment Advisers, Inc.
(the "Adviser"), with respect to the Funds, which agreement is identical, in all
material respects to the Investment Advisory Agreement between the Company and
the Adviser currently in effect ("Proposal 1").
FOR THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND ONLY:
2. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Edinburgh Fund Managers, plc
("Edinburgh"), which agreement is identical, in all material respects to the
Investment Sub-Advisory Agreement between the Adviser and Edinburgh currently in
effect ("Proposal 2").
FOR THE SHAREHOLDERS OF THE TURNER CORE GROWTH FUND ONLY:
3. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Turner Investment Partners, Inc.
("Turner"), which agreement is identical, in all material respects to the
Investment Sub-Advisory Agreement between the Adviser and Turner currently in
effect ("Proposal 3").
FOR THE SHAREHOLDERS OF THE FRONTIER CAPITAL APPRECIATION FUND ONLY:
4. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Frontier Capital Management
Company, Inc. ("Frontier"), which agreement is identical, in all material
respects to the Investment Sub-Advisory agreement between the Adviser and
Frontier currently in effect ("Proposal 4").
FOR THE SHAREHOLDERS OF THE ENHANCED U.S. EQUITY FUND ONLY:
5. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Franklin Portfolio Associates LLC
("Franklin"), which agreement is identical, in all material respects to the
Investment Sub-Advisory Agreement between the Adviser and Franklin currently in
effect ("Proposal 5").
FOR THE SHAREHOLDERS OF THE FUNDS:
6. To elect five Directors of the Company ("Proposal 6").
7. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants for the Company ("Proposal 7").
The Board of Directors of the Company has fixed the close of business
on November 10, 1997, as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
David W. Schutt
Secretary
November 17, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED VOTING INSTRUCTION/PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE CONTINENTAL UNITED STATES. IF YOU DESIRE TO VOTE IN PERSON AT THE MEETING,
YOU MAY REVOKE YOUR VOTING INSTRUCTION/PROXY AT ANY TIME PRIOR TO THE MEETING.
M FUND, INC.
RIVER PARK CENTER
205 S.E. SPOKANE STREET
PORTLAND, OREGON 97202
(888) 736-2878
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, DECEMBER 19, 1997
This Proxy Statement is being furnished to the shareholders of M Fund, Inc. (the
"Company") in connection with the solicitation of proxies by and on behalf of
the Company's Board of Directors for use at the Special Meeting of Shareholders
(the "Meeting"), to be held at the principal office of the Company, River Park
Center, 205 S.E. Spokane Street, Portland, Oregon, on Friday, December 19, 1997,
at 9:00 a.m., local time. This Proxy Statement is being mailed to shareholders
of the Company on or about November 17, 1997.
As more fully described in this Proxy Statement, the Meeting has been called for
the following purposes:
FOR THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND,
TURNER CORE GROWTH FUND, FRONTIER CAPITAL APPRECIATION FUND
AND ENHANCED U.S. EQUITY FUND (collectively the "Funds", each a "Fund"):
1. To approve or disapprove a proposal to adopt a New Investment
Advisory Agreement between the Company and M Financial Investment Advisers, Inc.
(the "Adviser"), with respect to the Funds, which agreement is identical, in all
material respects to the Investment Advisory Agreement between the Company and
the Adviser currently in effect ("Proposal 1").
FOR THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND ONLY:
2. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Edinburgh Fund Managers, plc
("Edinburgh"), with respect to the Edinburgh Overseas Equity Fund, which
agreement is identical, in all material respects to the Investment Sub-Advisory
Agreement between the Adviser and Edinburgh currently in effect ("Proposal 2").
FOR THE SHAREHOLDERS OF THE TURNER CORE GROWTH FUND ONLY:
3. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Turner Investment Partners, Inc.
("Turner"), with respect to the Turner Core Growth Fund, which agreement is
identical, in all material respects to the Investment Sub-Advisory Agreement
between the Adviser and Turner currently in effect ("Proposal 3").
FOR THE SHAREHOLDERS OF THE FRONTIER CAPITAL APPRECIATION FUND ONLY:
4. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Frontier Capital Management
Company, Inc. ("Frontier"), with respect to the Frontier Capital Appreciation
Fund, which agreement is identical, in all material respects to the Investment
Sub-Advisory Agreement between the Adviser and Frontier currently in effect
("Proposal 4").
FOR THE SHAREHOLDERS OF THE ENHANCED U.S. EQUITY FUND ONLY:
5. To approve or disapprove a proposal to adopt a New Investment
Sub-Advisory Agreement between the Adviser and Franklin Portfolio Associates LLC
("Franklin"), with respect to the Enhanced U.S. Equity
Fund, which agreement is identical, in all material respects to the Investment
Sub-Advisory Agreement between the Adviser and Franklin currently in effect
("Proposal 5").
FOR THE SHAREHOLDERS OF THE FUNDS:
6. To elect five Directors of the Company ("Proposal 6").
7. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants for the Company ("Proposal 7").
THE PROPOSALS AFFECTING A PARTICULAR FUND ARE AS FOLLOWS:
Name of Fund Proposal Numbers
------------ ----------------
Edinburgh Overseas Equity Fund .......... 1, 2, 6 and 7
Turner Core Growth Fund ................. 1, 3, 6 and 7
Frontier Capital Appreciation Fund ...... 1, 4, 6 and 7
Enhanced U.S. Equity Fund ............... 1, 5, 6 and 7
Proxy solicitations will be made, beginning on or about November 17, 1997,
primarily by mail, but proxy solicitations also may be made by telephone,
telefax or personal interviews. The costs of the proxy solicitation and expenses
incurred in connection with the preparation of this Proxy Statement and its
enclosures will be paid by the Adviser.
The financial statements of the Company for the fiscal year ended December 31,
1996 and for the period ended June 30, 1997, are included in the Annual and
Semi-Annual Reports to Shareholders, respectively, and are available without
charge and upon request by calling Anna Nye at (888) 736-2878.
PROXIES
Any shareholder giving a proxy has the power to revoke it prior to its exercise
by submission of a later dated proxy, by voting in person or by letter to the
Secretary of the Company.
In the event that a quorum is not present at the Meeting or in the event that a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR any such proposal in favor of such
an adjournment and will vote those proxies required to be voted AGAINST any such
proposal against such adjournment. A shareholder vote may be taken on one of the
proposals in this Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.
Under the By-laws of the Company, the presence in person or by proxy of the
shareholders holding one-third of the outstanding shares of a fund or funds, as
the case may be, entitled to be cast at the Meeting shall constitute a quorum.
If a proxy is not received from a particular shareholder, then the votes
attributable to him or her will be allocated in the same ratio as votes for
which instructions have been received. If a proxy is received with no direction
indicated, then the votes attributable to such proxy will be voted for the
proposals.
RECORD DATE
The Board of Directors of the Company has fixed the close of business on
November 10, 1997, as the record date (the "Record Date") for the determination
of shareholders entitled to notice of and to vote at the Meeting and any
adjournment thereof. Only holders of record of shares at the close of business
on the Record Date are entitled to notice of and to vote at the Meeting and any
adjournment thereof. At the close of business on the Record Date, there were
outstanding 573,915, 251,182, 1,013,498 and 451,362 shares of Edinburgh Overseas
Equity Fund ("Edinburgh Fund"), Turner Core Growth Fund ("Turner Fund"),
Frontier Capital Appreciation Fund ("Frontier Fund") and Enhanced U.S. Equity
Fund ("Enhanced Fund"), respectively.
2
BACKGROUND
GENERAL. The Company is an open-end investment company consisting of four
separate diversified investment portfolios: Edinburgh Fund, Turner Fund,
Frontier Fund and Enhanced Fund. These Funds are available through the purchase
of variable life insurance and variable annuity policies issued by certain
insurance companies ("Participating Insurance Companies"). As of November 10,
1997, the ownership of each Fund by Participating Insurance Companies and by M
Life Insurance Co. was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP AND NUMBER OF SHARES OWNED
M Life John Hancock
Insurance Variable Life Pacific Life New York Life
Name of Fund Co.* Insurance Co. Insurance Co. Insurance Co.
------------ ---- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Edinburgh Fund ....................... 35% 56% 9% 0%
201,247 shares 320,254 shares 52,412 shares 0 shares
Turner Fund .......................... 41% 38% 20% 0%
104,050 shares 96,529 shares 50,599 shares 0 shares
Frontier Fund ........................ 10% 51% 39% 0.1%
104,126 shares 516,177 shares 392,000 shares 1,189 shares
Enhanced Fund ........................ 23% 5% 71% 0%
105,549 shares 25,671 shares 320,141 shares 0 shares
</TABLE>
- -------------------
* M Life Insurance Co. ("M Life") provided seed capital to each Fund. M Life is
an affiliate of M Financial Investment Advisers, Inc. Peter Mullin, a Director
of the Company, indirectly owns 24.1% of M Life. M Life will vote its shares
for the proposals.
The remaining Directors and officers of the Company as a whole own less than 1%
of the assets of each Fund.
To the best knowledge of the Company, the names and addresses of the contract
owners who own 5% or more of the outstanding shares of each Fund as of the
Record Date, and the amount of outstanding shares owned of record by such
holders, are set forth below.
SECURITY OWNERSHIP
OF CERTAIN CONTRACT OWNERS
EDINBURGH FUND:
NAME AND ADDRESS SHARES HELD PERCENT OWNERSHIP
- ---------------- ----------- -----------------
Rabbi Trust .......................... 65,369.030 11.39%
c/o Wachovia Bank on behalf of
JH Networking Insurance Agency
200 Clarendon Street
Boston, MA 02116
FRONTIER FUND:
NAME AND ADDRESS SHARES HELD PERCENT OWNERSHIP
- ---------------- ----------- -----------------
Portland General Corporation ......... 118,863.7164 11.73%
One World Trade Center
121 S.W. Salmon Street
Portland, OR 97204
Rabbi Trust .......................... 93,748.636 9.25%
c/o Wachovia Bank on behalf of
JH Networking Insurance Agency
200 Clarendon Street
Boston, MA 02116
ENHANCED FUND:
NAME AND ADDRESS SHARES HELD PERCENT OWNERSHIP
- ---------------- ----------- -----------------
Portland General Corporation ......... 170,736.6536 37.83%
One World Trade Center
121 S.W. Salmon Street
Portland, OR 97204
3
The Company is advised by M Financial Investment Advisers, Inc. (the "Adviser"),
and the Adviser has retained the services of Edinburgh Fund Managers, plc
("Edinburgh"), Turner Investment Partners, Inc. ("Turner"), Frontier Capital
Management Company, Inc. ("Frontier") and Franklin Portfolio Associates LLC
("Franklin") (each a "Sub-Adviser," collectively the "Sub-Advisers") to provide
the day-to-day portfolio management for the Edinburgh Fund, Turner Fund,
Frontier Fund and Enhanced Fund, respectively. This Meeting has been called for
the purpose of considering a New Investment Advisory Agreement between the
Company and the Adviser on behalf of the Funds and New Investment Sub-Advisory
Agreements between the Adviser and each of the Sub-Advisers on behalf of a Fund.
INFORMATION ABOUT THE ADMINISTRATOR
Pursuant to an Administration Agreement dated December 4, 1995, Investors Bank &
Trust Company ("Investors Bank") provides certain administrative services to the
Company, such as calculating each Fund's standardized performance information,
preparing annual and semiannual reports to shareholders and the Securities and
Exchange Commission ("SEC"), preparing each Fund's tax returns, monitoring
compliance and performing other administrative duties. Investors Bank's
principal business address is 200 Clarendon Street, Boston, Massachusetts 02116.
INFORMATION ABOUT THE PROPOSED TRANSACTION
The Company's Adviser is currently a wholly-owned subsidiary of M Financial
Holdings Incorporated, which does business under the name M Financial Group. The
address of M Financial Group is 205 S.E. Spokane Street, Portland, Oregon 97202.
M Financial Group is engaged in providing product development and marketing
support services for participating insurance agents. Currently, M Financial
Group has two classes of stock outstanding. The class A shares are owned by the
participating insurance agents. PWM Insurance Services owns 18.049% of the class
A shares. Peter Mullin, a Director of the Company, owns 100% of PWM Insurance
Services. The class B shares are owned by five individuals (either directly or
indirectly through corporations owned by them). The following four individuals
own greater than 10% of the class B shares:
Ellison Morgan (through M Corp.) .................. 29.625%
2030 Investors, LLC
One Sansome Street
Suite 2000
San Francisco, CA 94104
Mark Solomon (through M Corp.) .................... 29.625%
CMS Companies
1926 Arch Street
Philadelphia, PA 19103
Peter Mullin (through PWM Insurance Services) ..... 22.93%
M Financial Group
205 S.E. Spokane Street
Portland, OR 97202
Carl Mammel (through Mammel
Investment Company, LLC) .......................... 15.82%
Office of the Chairman
Mammel Investment Company, LLC
8805 Indian Hills Drive
Omaha, NE 68114
M Financial Group is going through a reorganization and recapitalization
pursuant to which it is anticipated that all of the class A and class B shares
of M Financial Group would be exchanged for a new, single class of shares (the
"Proposed Transaction"). This may effectively give control of M Financial Group
to
4
the independent agents (although Mr. Mullin would own a substantial minority
block of approximately 24% of the new shares). This change in control of the
Adviser's ultimate parent automatically terminates the Existing Investment
Advisory Agreement and the four Existing Investment Sub-Advisory Agreements.
Accordingly, shareholders are being asked to approve a "new" Investment Advisory
Agreement and four "new" Investment Sub-Advisory Agreements (one for each of the
Funds) embodying the same terms and fees with the Adviser and Sub-Advisers,
differing only in the effective and termination dates.
Prior to January 3, 1997, the Adviser was 100% owned by Management Partnership.
Peter Mullin, a current director and nominee for re-election, indirectly owned
or controlled 22.93% of Management Partnership. As a part of the overall
reorganization, on January 3, 1997, the interests in Management Partnership were
acquired by M Financial Group. In exchange for the interests in Management
Partnership, Mr. Mullin indirectly (through entities he controls) received
$5,357,306 from M Financial Holdings Incorporated.
As required by the Investment Company Act of 1940, as amended (the "1940 Act"),
the Company's current Investment Advisory Agreement provides for its automatic
termination upon its "assignment." The consummation of the Proposed Transaction
will give rise to an "assignment" of the Company's current Investment Advisory
Agreement within the meaning of the 1940 Act and will result in a termination of
each of the Investment Sub-Advisory Agreements according to their terms.
Accordingly, the Investment Advisory and Sub-Advisory Agreements must be
re-approved since they will be deemed terminated upon the consummation of the
Proposed Transaction.
BOARD OF DIRECTORS' EVALUATION
At a meeting held on October 16, 1997, the Board of Directors of the Company,
including a majority of the Independent Directors, unanimously approved, subject
to shareholder approval, the New Investment Advisory Agreement and the four New
Investment Sub-Advisory Agreements, to be effective on the consummation of the
Proposed Transaction on December 31, 1997. A copy of the New Investment Advisory
Agreement and each New Investment Sub-Advisory Agreement is attached to this
Proxy Statement as Exhibits A through E. In approving the New Investment
Advisory Agreement and each New Investment Sub-Advisory Agreement, the Board of
Directors reviewed materials furnished by the Adviser regarding the Proposed
Transaction and materials furnished by the Adviser and each Sub-Adviser
regarding their personnel, philosophy of management, investment performance and
the fees and expense structures of the Funds and of other funds within the peer
group. The Board of Directors took into account the terms of the Proposed
Transaction and the fact that there are no material differences between the
provisions of the Existing Investment Advisory and Sub-Advisory Agreements and
the New Investment Advisory and Sub-Advisory Agreements. The Board of Directors
also determined that the Adviser and each Sub-Adviser were presently providing
satisfactory services to the Funds. Additional information regarding each
agreement is provided below under the appropriate Proposal Number. Such
information is only a summary and is qualified by reference to the attached
Exhibits A through E.
EXISTING SUB-ADVISORY AGREEMENTS
Under the Existing Investment Sub-Advisory Agreements, each Sub-Adviser is
responsible for making investment decisions for its respective Fund and for
placing the purchase and sale orders for the portfolio transactions of such
Fund. In this capacity, the Sub-Advisers obtain and evaluate appropriate
economic, statistical, timing, and financial information and formulate and
implement investment programs in furtherance of such Fund's investment
objective. The Sub-Advisers 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 Sub-Adviser
receives a fee (paid by the Adviser) based on the average daily net assets of
the applicable Fund.
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 below. For the period
January 4, 1996 (commencement of operations) to Decem-
5
ber 31, 1996, the Adviser paid the Sub-Advisers the following sub-advisory fees:
Edinburgh Fund - $22,219; Turner Fund - $5,360; Frontier Fund - $14,509;
Enhanced Fund - $4,573.
Each New Investment Sub-Advisory Agreement will become effective on January 1,
1998 and will thereafter be reviewed for continuation on an annual basis by the
Board of Directors.
FOR THE SHAREHOLDERS OF THE FUNDS:
PROPOSAL 1: APPROVAL OR DISAPPROVAL OF THE ADOPTION OF A NEW INVESTMENT ADVISORY
AGREEMENT WITH M FINANCIAL INVESTMENT ADVISERS, INC. (THE "ADVISER"), ON BEHALF
OF THE FUNDS, WHICH AGREEMENT IS IDENTICAL, IN ALL MATERIAL RESPECTS TO THE
INVESTMENT ADVISORY AGREEMENT CURRENTLY IN EFFECT.
EXISTING INVESTMENT ADVISORY AGREEMENT
The Existing Investment Advisory Agreement, executed on December 5, 1995, and
amended on March 1, 1996, was initially approved for each Fund by the Board of
Directors on November 20, 1995, and by the sole initial shareholder of the Funds
on December 5, 1995. Under the terms of the Existing Investment Advisory
Agreement, the Adviser renders investment management services with respect to
the Funds. Such services include the overall business management and
administrative services necessary for the Funds' operations. For its services to
the Funds, the Adviser receives an advisory fee that is based on the average
daily net assets of each of the Funds.
Such fee is presently paid to the Adviser on a quarterly basis according to the
following schedule:
FUND TOTAL ADVISORY FEES
---- -------------------
Edinburgh 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 Fund .............. 0.45%
Frontier Fund ............ 0.90%
Enhanced Fund ............ 0.55% on the first $25 million
0.45% on the next $75 million
0.30% on amounts above $100 million
For the period January 4, 1996 (commencement of operations) to December 31,
1996, the Funds paid the following amounts as investment advisory fees
payable to the Adviser: Edinburgh Fund, $25,922; Turner Fund, $8,040; Frontier
Fund, $17,411; Enhanced Fund, $6,289.
The Existing 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 the advisory
fee, 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, 1997,
exceed 0.25% of that Fund's estimated average daily net assets on an annualized
basis.For the period January 4, 1996 (commencement of operations) to December
31, 1996, the Adviser reimbursed the Funds for operating expenses that exceeded
the voluntary expense limitation in the following amounts: Edinburgh, $146,502;
Turner Fund, $137,012; Frontier Fund, $133,645; Enhanced Fund, $130,220.
The New Investment Advisory Agreement will become effective on January 1, 1998
and will thereafter be reviewed for continuation on an annual basis by the Board
of Directors.
INFORMATION ABOUT THE ADVISER
The Adviser was organized on September 11, 1995, and its address is River Park
Center, 205 S.E. Spokane Street, Portland, Oregon 97202. See "Information about
the Proposed Transaction" for additional information about the Adviser.
6
The current Directors and Officers of the Adviser and their addresses and
principal occupations during the past five years are set forth below:
<TABLE>
<CAPTION>
Name and Position Address Principal Occupation
with Adviser ------- --------------------
------------
<S> <C> <C>
David Spungen* ............. CMS Companies, 1926 Arch St., Philadelphia, Director, Capital Management, CMS
Director Pennsylvania 19103 Companies
Harry Levitt ............... Mullin Consulting, Inc., 644 South Figueroa Principal, Mullin Consulting, Inc.
Director St., Los Angeles, California 90017
Michael Molewski ........... Cornerstone Advisor Group, 1802 Hamilton Managing Partner, Cornerstone Advisor
Director St., Allentown, Pennsylvania 18104 Group
James Belk ................. BCG Companies, Managing Director, BCG Companies
Director 707 E. Main St., 9th Floor, Richmond,
Virginia 23219
James Cheney ............... Evergreen Management, Inc., 100 Tallan Principal, Evergreen Management, Inc.
Director Building, 2 Union Square, Chattanooga,
Tennessee 37402
Michael Kiley .............. KFM Financial & Insurance Services President, KFM Financial & Insurance
Director Corporation, 2030 Main St., Ste. 1240, Services Corporation
Irvine, California 97614
Daniel Byrne** ............. M Financial Group, 205 SE Spokane St., Senior Vice President, Product
President Portland, Oregon 97202 Development & Sales, M Financial Group
David Schutt** ............. M Financial Group, 205 SE Spokane St., Director, Finance, M Financial Group
Secretary and Treasurer Portland, Oregon 97202
JoNell Hermanson ........... M Financial Group, 205 SE Spokane St., Director, Product Development & Sales, M
Marketing Officer Portland, Oregon 97202 Financial Group
</TABLE>
- --------------
*Also a Director of the Company
**Also an Officer of the Company
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of each Fund will vote on Proposal 1. The
affirmative vote of the holders of a majority of the outstanding shares of a
Fund is required to approve the New Investment Advisory Agreement between the
Company and the Adviser with respect to that Fund. "Majority" for this purpose
under the 1940 Act means the lesser of (i) 67% of the shares represented at the
Meeting if more than 50% of such outstanding shares are represented, or (ii)
more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal. A copy of the New Investment Advisory Agreement
is attached to this Proxy Statement as Exhibit A.
FOR THE REASONS STATED ABOVE UNDER "BOARD OF DIRECTORS' EVALUATION", THE BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF EACH FUND APPROVE THE NEW
INVESTMENT ADVISORY AGREEMENT.
7
FOR THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND ONLY:
PROPOSAL 2: APPROVAL OR DISAPPROVAL OF THE ADOPTION OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND EDINBURGH FUND MANAGERS, PLC
("EDINBURGH"), ON BEHALF OF THE EDINBURGH OVERSEAS EQUITY FUND, WHICH AGREEMENT
IS IDENTICAL, IN ALL MATERIAL RESPECTS TO SUCH INVESTMENT SUB-ADVISORY AGREEMENT
CURRENTLY IN EFFECT.
EXISTING INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND EDINBURGH
The Existing Investment Sub-Advisory Agreement between the Adviser and Edinburgh
was executed on January 2, 1996, and was initially approved by the Board of
Directors on November 20, 1995, and by the sole initial shareholder of the
Edinburgh Fund on December 5, 1995. Edinburgh is Sub-Adviser to the Edinburgh
Fund. Edinburgh's principal business address is Donaldson House, 97 Haymarket
Terrace, Edinburgh EH12 5HD, Scotland.
Edinburgh receives a fee (paid by the Adviser) based on the average daily net
assets of the Edinburgh Fund at the following annual rate:
0.90% on the first $10 million
0.75% on the next $15 million
0.60% on the next $75 million
0.45% on amounts above $100 million
INFORMATION ABOUT EDINBURGH
The current directors and officers of Edinburgh and their addresses and
principal occupations during the past five years are set forth below:
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
Michael Warren Balfour .......... "Mayfield House," 20 West Mayfield, Chief Investment Officer
Edinburgh, EH9 1TF
Lloyd Andrew Beat ............... 45 Bonaly Crescent, Edinburgh, EH13 0EP Head of Sales & Marketing
(North America)
Graham Meikle Brock ............. 23a Campbell Road, Edinburgh, EH12 6DT Finance Director
Graham Hugh Campbell ............ 42 Bellhouse Road, Aberdour, KY3 0TL Head of UK Income
Alistair Malcolm Thomson Currie . 22 Glencairn Crescent, Edinburgh, EH12 Head of UK Smaller Companies
5BT
David Whitson Currie ............ 83 Trinity Road, Edinburgh, EH5 3JX Head of US
Helen Watson Fallow ............. 27 Drummond Place, Gargunnock, FK8 3BZ Head of Research - Emerging
Markets
Alexander John Gowans ........... 4 Forrester Road, Edinburgh, EH12 8AB Investment Trust Development
and Investor Relations
Jimmy Smith Hay ................. 2 Pentland Court, Bilston, Roslin, Managing Director - Unit Trust
Midlothian EH25 9TA
Carole Haddow ................... "Sunny Den House," Ayton Hill, Near Group Marketing
Cupar, Fife, KY14 6JH
8
Name Address Principal Occupation
- ---- ------- --------------------
Roderick MacLeod MacRae ......... 18 Cairnmiller Road, Edinburgh, EH12 6LP Head of Administration
David McCraw .................... 108 Grange Loan, Edinburgh, EH9 2EF Head of Institutional
Investment Management
Kenneth Brian McKenna ........... 21 St Ronans Terrace, Edinburgh, EH10 5PG Head of Information Technology
Robert Graham Harkness McGeorge . 11 Essex Brae, Edinburgh, EH4 6LN Institutional Sales &
Marketing (Canada)
Ian Edward Massie ............... 3 Cammo Bank, Edinburgh, EH4 8HE Investment Trust Development
and Investor Relations
Catherine Chee Jian Miller ...... 93 Woodfield Park, Colinton, Edinburgh, Company Secretary
EH13 0RA
Harry James Morgan .............. 7 Park Avenue, Edinburgh, EH15 1JT Managing Director - Private
Clients
Richard Davidson Muckart ........ Marchmont, 22 March Street, Peebles, Investment Director
EH45 8EP
Colin Fraser Peters ............. Wester Bavelaw, Balerno, Midlothian, EH4 Human Resources and Operations
1HD
Jamie MacGregor Sandison ........ 4 Learmouth Gardens, Edinburgh, EH4 1HD Head of Europe
Elizabeth Thorn ................. 4 Royal Circus, Edinburgh, EH3 6SR Head of UK Large Companies
Iain Alasdair Watt* ............. "Sycamore Bank," 19 Ferryhills Road, Chief Executive Officer
North Queensferry, KY11 1HE
Nigel Patrick Whittingham ....... Greenend House, 49 Ellens Glen Road, Head of Sales & Marketing
Edinburgh, EH17 7QA
- -----------------
</TABLE>
*Principal executive officer
The principal business address of Edinburgh Fund Managers Group plc, Edinburgh's
parent company, is Donaldson House, 97 Haymarket Terrace, Edinburgh, EH12 5HD.
Edinburgh Fund Managers Group plc owns a 100% interest in Edinburgh.
Edinburgh advises another mutual fund, the Pacific European Growth Fund, which
has a similar investment objective as the Edinburgh Fund. The Pacific European
Growth Fund had net assets of $97 million as of August 31, 1997. Edinburgh
receives a fee for its services based on the average daily net assets of the
Pacific European Growth Fund at the following annual rate:
1.00% on the first $100 million
0.875% on the next $100 million
0.75% on amounts above $200 million plus
performance element up to (+ or -) 25% of fee
9
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of the Edinburgh Fund will vote on Proposal 2.
The affirmative vote of the holders of a majority of the outstanding shares of
the Edinburgh Fund is required to approve this proposal. "Majority" for this
purpose under the 1940 Act means the lesser of (i) 67% of the shares represented
at the Meeting if more than 50% of such outstanding shares are represented, or
(ii) more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal. A copy of the New Investment Sub-Advisory
Agreement is attached to this Proxy Statement as Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE EDINBURGH FUND
APPROVE THE NEW INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND
EDINBURGH.
FOR THE SHAREHOLDERS OF THE TURNER CORE GROWTH FUND ONLY:
PROPOSAL 3: APPROVAL OR DISAPPROVAL OF THE ADOPTION OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND TURNER INVESTMENT PARTNERS, INC.
("TURNER"), ON BEHALF OF THE TURNER CORE GROWTH FUND, WHICH AGREEMENT IS
IDENTICAL, IN ALL MATERIAL RESPECTS TO SUCH INVESTMENT SUB-ADVISORY AGREEMEN
CURRENTLY IN EFFECT.
EXISTING INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND TURNER
The Existing Investment Sub-Advisory Agreement between the Adviser and Turner
was executed on December 20, 1995, and was initially approved by the Board of
Directors on November 20, 1995, and by the sole initial shareholder of the
Turner Fund on December 5, 1995. Turner is Sub-Adviser to the Turner Fund.
Turner's principal business address is 1235 Westlakes Drive, Suite 350, Berwyn,
Pennsylvania 19312.
Turner receives a fee (paid by the Adviser) based on the average daily net
assets of the Turner Core Growth Fund at the annual rate of 0.30%.
INFORMATION ABOUT TURNER
The current officers of Turner and their address and principal occupation during
the past five years are set forth below:
Name Position with Turner and Principal Occupation
- ---- ---------------------------------------------
Robert E. Turner*(1) ..... Chairman and Chief Executive Officer, Turner
Investment Partners, Inc.; Chief Investment Officer
Mark D. Turner*(1) ....... President, Turner Investment Partners, Inc.; Chief
Fixed Income Investment Officer
Stephen J. Kneeley* ...... Chief Operating Officer, Turner Investment Partners,
Inc.; Corporate Secretary and Treasurer
Michael R. Thompson* ..... Corporate Assistant Secretary, Marketing Director,
Turner Investment Partners, Inc.
- ------------------------
* The principal business address of Turner is 1235 Westlakes Drive, Suite 350,
Berwyn, Pennsylvania 19312.
(1) Robert E. Turner and Mark D. Turner each own 10% or more of the outstanding
voting securities of Turner Investment Partners, Inc.
Turner advises another mutual fund, the Turner Growth Equity Fund, which has a
similar investment objective as the Turner Fund. The Turner Growth Equity Fund
had net assets of $100 million as of September 30, 1997. Turner receives a fee
for its services based on 0.75% of the average daily net assets of the Turner
Growth Equity Fund. Turner has agreed, on a voluntary basis, to waive its
advisory fees from the Turner Growth Equity Fund to the extent necessary to keep
the "Total Operating Expenses" of such Fund from exceeding 1.00% of average
daily net assets.
10
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of the Turner Fund will vote on Proposal 3. The
affirmative vote of the holders of a majority of the outstanding shares of the
Turner Fund is required to approve this proposal. "Majority" for this purpose
under the 1940 Act means the lesser of (i) 67% of the shares represented at the
Meeting if more than 50% of such outstanding shares are represented, or (ii)
more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal. A copy of the New Investment Sub-Advisory
Agreement is attached to this Proxy Statement as Exhibit C.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE TURNER FUND APPROVE
THE NEW INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND TURNER.
FOR THE SHAREHOLDERS OF THE FRONTIER CAPITAL APPRECIATION FUND ONLY:
PROPOSAL 4: APPROVAL OR DISAPPROVAL OF THE ADOPTION OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRONTIER CAPITAL MANAGEMENT
COMPANY, INC. ("FRONTIER"), ON BEHALF OF THE FRONTIER CAPITAL APPRECIATION FUND,
WHICH AGREEMENT IS IDENTICAL, IN ALL MATERIAL RESPECTS TO SUCH INVESTMENT
SUB-ADVISORY AGREEMENT CURRENTLY IN EFFECT.
EXISTING INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRONTIER
The Existing Investment Sub-Advisory Agreement between the Adviser and Frontier
was executed on December 11, 1995, and was initially approved by the Board of
Directors on November 20, 1995, and by the sole initial shareholder of the
Frontier Fund on December 5, 1995. Frontier is Sub-Adviser to the Frontier Fund.
Frontier's principal business address is 99 Summer Street, Boston, Massachusetts
02110.
Frontier receives a fee (paid by the Adviser) based on the average daily net
assets of the Frontier Capital Appreciation Fund at the annual rate of 0.75%.
INFORMATION ABOUT FRONTIER
The current directors and officers of Frontier and their addresses and principal
occupations during the past five years are set forth below:
Name Position with Frontier and Principal Occupation
- ---- -----------------------------------------------
J. David Wimberley, CFA*(1) ... Chairman and Director; Portfolio Manager,
Frontier Growth Portfolios
Thomas W. Duncan, CFA*(1) ..... President and Director; Portfolio Manager,
Frontier Small Cap Portfolios
Donald E. August*(2) .......... Executive Vice President and Director; Chief
Financial Officer and Research Analyst
Grace K. Fey, CFA*(3) ......... Executive Vice President and Director; Portfolio
Manager, Frontier Capital Advisors
- ----------------
*The principal business address of Frontier is 99 Summer Street, Boston,
Massachusetts 02110.
(1) Mr. Wimberley and Mr. Duncan each own 25% of the outstanding voting
securities of Frontier.
(2) Mr. August owns 12% of the outstanding voting securities of Frontier.
(3) Ms. Fey owns 8% of the outstanding voting securities of Frontier.
The remaining 30% of the outstanding voting securities of Frontier is owned by
current and former employees of Frontier, with no one individual owning a 10% or
greater interest in such securities.
Frontier advises another mutual fund, the Hirtle Callaghan Trust, which has a
similar investment objective as the Frontier Fund. The Hirtle Callaghan Trust
had net assets of $59 million as of June 30, 1997.
11
Frontier receives a fee for its services based on 0.45% of the average daily net
assets of the Hirtle Callaghan Trust.
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of the Frontier Fund will vote on Proposal 3.
The affirmative vote of the holders of a majority of the outstanding shares of
the Frontier Fund is required to approve this proposal. "Majority" for this
purpose under the 1940 Act means the lesser of (i) 67% of the shares represented
at the Meeting if more than 50% of such outstanding shares are represented, or
(ii) more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal. A copy of the New Investment Sub-Advisory
Agreement is attached to this Proxy Statement as Exhibit D.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE FRONTIER FUND APPROVE
THE NEW INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRONTIER.
FOR THE SHAREHOLDERS OF THE ENHANCED U.S. EQUITY FUND ONLY:
PROPOSAL 5: APPROVAL OR DISAPPROVAL OF THE ADOPTION OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRANKLIN PORTFOLIO ASSOCIATES LLC
("FRANKLIN"), ON BEHALF OF THE ENHANCED U.S. EQUITY FUND, WHICH AGREEMENT IS
IDENTICAL, IN ALL MATERIAL RESPECTS TO SUCH INVESTMENT SUB-ADVISORY AGREEMENT
CURRENTLY IN EFFECT.
EXISTING INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRANKLIN
The Existing Investment Sub-Advisory Agreement between the Adviser and Franklin
was executed on December 15, 1995, and was initially approved by the Board of
Directors on November 20, 1995, and by the sole initial shareholder of the
Enhanced Fund on December 5, 1995. Franklin is Sub-Adviser to the Enhanced Fund.
Franklin's principal business address is Two International Place, 22nd Floor,
Boston, Massachusetts 02110.
Franklin receives a fee (paid by the Adviser) based on the average daily net
assets of the Enhanced U.S. Equity Fund at the following annual rates:
0.40% on the first $25 million
0.30% on the next $75 million
0.15% on amounts above $100 million
INFORMATION ABOUT FRANKLIN
The current directors and officers of Franklin and their address and principal
occupation during the past five years are set forth below:
Name Position with Franklin and Principal Occupation
- ---- -----------------------------------------------
John Nagorniak ........ Director; Chief Executive Officer and President of
Franklin
John Cone ............. Director; Executive Vice President of Franklin
Peter Robbins ......... Director; Senior Vice President of Franklin
W. Keith Smith ........ Director; Vice Chairman of Mellon Bank
Christopher Condron ... Director; Vice Chairman of Mellon Bank
Ronald O'Hanley ....... Director; Chief Operating Officer of Mellon Global Asset
Management
The principal business address of the directors and officers listed above is
Franklin Portfolio Associates, Two International Place, 22nd Floor, Boston,
Massachusetts 02110.
12
Franklin is a wholly-owned subsidiary of Franklin Portfolio Holdings, Inc.1
(99%) and The Boston Company2 (1%). Franklin Portfolio Holdings, Inc. is a
wholly-owned subsidiary of The Boston Company (100%), which is owned by Boston
Group Holdings3 (100%), which is owned by Mellon Bank Corporation4 (100%).
Franklin advises another mutual fund, the Vanguard Growth & Income Fund, which
has a similar investment objective as the Enhanced Fund. The Vanguard Growth &
Income Fund had net assets of $2 billion as of September 30, 1997. Franklin
receives a fee for its services to the Vanguard Growth & Income Fund based on
0.30% on the first $100 million of such fund's average daily net assets, 0.15%
on the next $650 million of average daily net assets and 0.10% on average daily
net assets over $750 million. This fee may be increased or reduced by applying
an adjustment formula based on the investment performance of such fund relative
to the S&P 500 Index.
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of the Enhanced Fund will vote on Proposal 5.
The affirmative vote of the holders of a majority of the outstanding shares of
the Fund is required to approve this proposal. "Majority" for this purpose under
the 1940 Act means the lesser of (i) 67% of the shares represented at the
Meeting if more than 50% of such outstanding shares are represented, or (ii)
more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal. A copy of the New Investment Sub-Advisory
Agreement is attached to this Proxy Statement as Exhibit E.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE ENHANCED FUND APPROVE
THE NEW INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND FRANKLIN.
FOR APPROVAL BY THE SHAREHOLDERS OF THE FUNDS:
PROPOSAL 6: ELECTION OF DIRECTORS
The sixth proposal to be considered at the Meeting is the election of the five
(5) Directors of the Company. Each of the nominees currently serves as a
Director of the Company and has consented to continue to serve as a Director of
the Company if elected at the Meeting. If a designated nominee declines or
otherwise becomes unavailable for election, however, the persons named in the
proxy have discretionary authority to vote in favor of a substitute nominee or
nominees.
Any Director may resign and any Director may be removed at any annual or special
meeting of shareholders called for that purpose and at which a quorum is present
by a vote of a majority of the votes entitled to be cast on the matter. In case
a vacancy shall exist for any reason, the remaining Directors may fill such
vacancy by appointing another Director. If, at any time, less than a majority of
the Directors holding office have been elected by the shareholders, the
Directors then in office will call a shareholders meeting for the purpose of
electing Directors to fill any existing vacancies in the Board of Directors.
- ---------------------------------
1 The principal business address of Franklin Portfolio Holdings, Inc. is Two
International Place, 22nd Floor, Boston, MA 02110.
2 The principal business address of The Boston Company is One Boston Place,
Boston, MA 02108.
3 The principal business address of Boston Group Holdings is One Boston Place,
Boston, MA 02108.
4 The principal business address of Mellon Bank Corporation is 500 Grant Street,
One Mellon Bank Center, Pittsburgh, PA 15258.
13
Set forth below is a list of the nominees for election to the Company's Board of
Directors, together with certain other information:
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE THE COMPANY DURING PAST 5 YEARS
- ---------------------- ----------- -------------------
<S> <C> <C>
Peter W. Mullin*(1) .................. Director since 1995 Chairman and Chief Executive Officer, Mullin
(age 56) Consulting, Inc.
David M. Spungen*(2) ................. Director since 1995 Director of CMS Capital Management, a division of CMS
(age 35) Investment Resources, Inc.
Gerald Bidwell ....................... Director since 1995 President and Chief Executive Officer, Bidwell & Co.
209 SW Oak Street
Portland, Oregon 97204
(age 53)
Neil E. Goldschmidt .................. Director since 1995 President, Neil Goldschmidt, Inc.
222 SW Columbia
Suite 1850
Portland, Oregon 97201
(age 57)
Philip W. Halpern .................... Director since 1995 Treasurer and Chief Investment Officer, California
1400 Fones Road Institute of Technology, since September 1996. Chief
Olympia, Washinton 98501 Investment Officer, Washington State Investment
(age 42) Board, since 1992.
</TABLE>
- --------------------
*"Interested Person" of the Company for purposes of the 1940 Act. The address
for Messrs. Mullin and Spungen is M Fund, Inc., River Park Center, 205 S.E.
Spokane Street, Portland, Oregon 97202.
(1) Mr. Mullin is a shareholder of M Financial Holding Incorporated,the parent
company of the Adviser.
(2) Mr. Spungen is a director of the Adviser.
The Board of Directors held three meetings during the fiscal year ended December
31, 1996. Four of the Directors attended all three Board meetings. Mr. Spungen
attended two of the three meetings held by the Board of Directors during the
fiscal year ended December 31, 1996.
The Funds have no standing audit, nominating or compensation committees.
Each non-interested Director receives as compensation an annual retainer of
$8,000 plus $500 per meeting of the Board which he attends. During the period
January 4, 1996 (commencement of operations) to December 31, 1996, the Directors
of the Company received the following compensation from the Company:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS ACCRUED COMPENSATION
AGGREGATE AS PART OF THE ESTIMATED ANNUAL FROM THE COMPANY
NAME OF PERSON, COMPENSATION FROM COMPANY'S EXPENSES BENEFITS UPON AND FUND COMPLEX
POSITION THE COMPANY* RETIREMENT PAID TO 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 E. Goldschmidt ......... $10,000 $ 0 $ 0 $10,000
Director
Philip W. Halpern ........... $10,000 $ 0 $ 0 $10,000
Director
</TABLE>
- ---------------------
*Includes compensation for attendance at the Company's Organizational Meeting
held November 20, 1995.
14
The executive officers of the Company are listed in the table below. Mr. Byrne
and Mr. Schutt were first elected to office in 1995. Each officer of the Company
will hold such office at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS, AND AGE THE COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---------------------- ----------- -------------------------------------------
<S> <C> <C>
Daniel F. Byrne* .......... President Senior Vice President, Product Development and Sales
(age 40) Support, of M Financial Group, since 1992.
David W. Schutt* .......... Secretary and Secretary and Treasurer of M Life and Director of
(age 41) Treasurer Finance for M Financial Group, since 1992.
</TABLE>
- ---------------------
*The address for Messrs. Byrne and Schutt is M Fund, Inc., River Park Center,
205 S.E. Spokane Street, Portland, Oregon 97202.
RECOMMENDATION AND REQUIRED VOTE
Election of each of the listed nominees for Director of the Company will require
the affirmative vote of a plurality of the votes cast by shareholders of each
Fund at the Meeting in person or by proxy (i.e., the nominees receiving the most
votes will be elected). Where a shareholder abstains, the shares represented
will be counted as present and entitled to vote on the matter for purposes of
determinating a quorom, but the abstention will have the affect of a negative
vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF EACH FUND VOTE "FOR"
THE ELECTION OF EACH NOMINEE.
FOR THE SHAREHOLDERS OF THE FUNDS:
PROPOSAL 7: RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, 28th
Floor, Boston, Massachusetts 02109, has served as independent accountants for
the Company since the Company's commencement of operations on January 4, 1996,
and is being recommended by the Directors of the Company to continue to serve in
such capacity.
During the fiscal year ending December 31, 1997, the services to be provided to
the Company by Coopers & Lybrand will include examination of financial
statements, review of filings with the SEC and preparation of tax returns.
It is intended that proxies not limited to the contrary will be voted in favor
of ratifying the selection of Coopers & Lybrand as independent public
accountants to certify every financial statement of the Company required by any
law or regulation to be certified by independent public accountants and filed
with the SEC. Coopers & Lybrand has no direct or material indirect interest in
the Company. Representatives of Coopers & Lybrand will be available at the
Meeting by telephone and will be given the opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
RECOMMENDATION AND REQUIRED VOTE
A majority of the votes cast by shareholders of each Fund at the Meeting, in
person or by proxy, is required for ratification of the selection of Coopers &
Lybrand as independent accountants for the Company.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE DIRECTORS WHO ARE NOT "INTERESTED
PERSONS" OF THE COMPANY, RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE
"FOR" RATIFICATION OF COOPERS & LYBRAND AS INDEPENDENT ACCOUNTANTS FOR THE
COMPANY.
15
SHAREHOLDER PROPOSALS
Proposals of shareholders which are intended to be presented at a future
shareholder meeting must be received by the Company a reasonable time prior to
the Company's solicitation of proxies relating to such future meeting. The
Company is a Maryland corporation, and as such it is not required to hold, and
has no intention of holding, annual meetings, although the Company may hold
special shareholder meetings.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other matters to be
considered at the Meeting other than those referred to above. If any other
matters are properly presented to the Meeting, it is the intention of proxy
holders to vote such proxies on such matters in accordance with their judgment.
By Order of the Board of Directors
David W. Schutt
Secretary
November 17, 1997
Portland, Oregon
16
EXHIBIT A
M FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of January, 1998, by
and between M Fund, Inc., a corporation organized and existing under the laws of
the State of Maryland (the "Fund"), and M Financial Investment Advisers, Inc., a
corporation organized and existing under the laws of the State of Colorado (the
"Adviser").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several portfolios of shares, each having its own
investment policies; and
WHEREAS, the Adviser is duly registered as an investment adviser
pursuant to the Investment Adviser Act of 1940; and
WHEREAS, the Fund desires to retain the Adviser to render investment
management services with respect to its Edinburgh Overseas Equity Fund, Turner
Core Growth Fund, Frontier Capital Appreciation Fund, and Enhanced U.S. Equity
Fund, and such other portfolios as the Fund and the Adviser may agree upon (the
"Portfolios"), and the Adviser is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE ADVISER. The Fund employs the Adviser:
(a) to manage the investment and reinvestment of the assets;
(b) to hire, and thereafter supervise the investment activities
of, one or more sub-advisers deemed necessary to carry out the
investment program of any Portfolios of the Fund, pursuant to
a written sub-advisory agreement and subject to approval by:
(i) the Fund's Board of Directors;
(ii) the vote of a majority of Directors, who are not
parties to such sub-advisory agreement or
interested persons of any such party, cast in
person at a meeting called for the purpose of
voting on such approval; and
(iii) except as otherwise permitted under the terms of
any exemptive relief obtained from the Securities
and Exchange Commission (the "SEC"), or by rule or
regulation, a majority of the outstanding voting
securities of any affected Portfolio(s);
(c) to continuously review, supervise and (except where delegated
to a sub-adviser) administer the investment program of the
Portfolios;
(d) to determine in its discretion (except where delegated to a
sub-adviser) the securities to be purchased or sold;
(e) to provide the administrator of the Fund (the "Administrator")
and the Fund with records concerning the Adviser's activities
which the Fund is required to maintain; and
(f) to render regular reports to the Administrator and to the
Fund's officers and Directors concerning the Adviser's
discharge of the foregoing responsibilities. The retention of
a sub-adviser by the Adviser shall not relieve the Adviser of
its responsibilities under this Agreement.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Directors of the Fund and in compliance with such
policies as the Directors may from time to time establish, and in compliance
with the objectives, policies, and restrictions for each such Portfolio set
forth in the Fund's prospectus and statement of additional information, as
amended from time to time (referred to collectively as
A-1
the "Prospectus"), and applicable laws and regulations. The Fund will furnish
the Adviser from time to time with copies of all amendments or supplements to
the Prospectus, if any.
The Adviser accepts such employment and agrees, at its own expense, to
render the investment advisory services and to furnish, for the use of the Fund,
office space and all necessary office facilities, equipment and personnel
(including any sub-advisers) for servicing the investments of the Fund,
maintaining its organization and assisting in providing shareholder
communications and information services and to permit any of its officers and
employees to serve, without compensation, as Directors or officers of the Fund
if elected to such positions.
2. FEES AND EXPENSES.
(a) PAYABLE BY THE FUND. The Fund shall pay all of its expenses
other than those expressly stated to be payable by the
Adviser. The expenses payable by the Fund shall include,
without limitation:
(i) interest and taxes;
(ii) brokerage commissions and other costs in connection
with the purchase or sale of securities,
commodities, and other investments for the Fund;
(iii) fees and expenses of its Directors (other than
those who are "interested persons" of the Fund or
the Adviser);
(iv) legal and audit expenses;
(v) transfer agent expenses and expenses for servicing
shareholder accounts;
(vi) expenses of computing the net asset value of the
shares of the Fund and the amount of its dividends;
(vii) custodian fees and expenses;
(viii) fees and expenses related to the registration and
qualification of the Fund and its shares for
distribution under state and federal securities
laws;
(ix) expenses of printing and mailing reports, notices
and proxy materials to shareholders of the Fund;
(x) the cost of share certificates, if any;
(xi) reports, membership and dues in the Investment
Company Institute or any similar organization;
(xii) expenses of preparing and typesetting prospectuses;
(xiii) expenses of printing and mailing prospectuses sent
to existing shareholders;
(xiv) such nonrecurring expenses as may arise, including
expenses incurred in actions, suits or proceedings
to which the Fund is a party and the legal
obligation which the Fund may have to indemnify its
officers and Directors in respect thereto; and
(xv) such other expenses as the Directors may, from time
to time, determine to be properly payable by the
Fund.
(b) PAYABLE BY THE ADVISER. The Adviser shall pay the following:
(i) salaries and fees, if any, of all officers of the
Fund and of all Directors of the Fund who are
"interested persons" (as defined in the 1940 Act)
of the Fund or of the Adviser and of all personnel
of the Fund or Adviser performing services relating
to research, statistical and investment activities;
(ii) expenses of printing and distributing any
prospectuses or reports prepared for its use or the
use of the Fund in connection with the offering of
the shares of the Fund's common stock for sale to
the public;
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(iii) expenses of preparing and typesetting any other
literature used by the Adviser in connection with
such offering;
(iv) the cost of any advertising employed in such
offering; and
(v) fees of any sub-adviser.
3. DELIVERY OF DOCUMENTS. The Fund has furnished Adviser with copies
properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws");
(c) Current Prospectus(es) of the Portfolios.
4. OTHER COVENANTS. The Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the SEC
and will in addition conduct its activities under this
Agreement in accordance with other applicable law; and
(b) (directly or indirectly through one or more sub-advisers)
place orders pursuant to its investment determinations for the
Portfolios either directly with the issuer of the security or
with any broker or dealer. In executing Portfolio transactions
and selecting brokers or dealers, the Adviser (directly or
indirectly through one or more sub-advisers) will use its best
efforts to seek on behalf of the Portfolio the best overall
terms available. In assessing the best overall terms available
for any transaction, the Adviser, and any sub-advisers, shall
consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the
security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to execute a
particular transaction, the Adviser and any sub-adviser may
also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Portfolio and/or other accounts
over which the Adviser or sub-adviser or their affiliates may
exercise investment discretion. The Adviser is authorized (and
may authorize a sub-adviser), subject to the prior approval of
the Fund's Board of Directors, to pay to a broker or dealer
who provides such brokerage and research services a commission
for executing a portfolio transaction for any of the
Portfolios which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser or sub-adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in terms
of that particular transaction or in terms of the overall
responsibilities of the Adviser or sub-adviser to the
Portfolio. In addition, the Adviser is authorized (and may so
authorize any sub-adviser) to allocate purchase and sale
orders for Portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Adviser or sub-adviser) to take into account the sale of
variable contracts investing through separate accounts in the
Fund if the Adviser or sub-adviser believes that the quality
of the transaction and the commission are comparable to what
they would be with other qualified firms. In no instance,
however, will any Portfolio's securities be purchased from or
sold to the Adviser, any sub-adviser engaged with respect to
that Portfolio, or any affiliated person of the Fund, the
Adviser, or that Portfolio's sub-adviser, acting as principal
in the transaction, except to the extent permitted by the SEC
and the 1940 Act.
5. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser pursuant to this Agreement, the Fund shall pay to the Adviser,
and the Adviser agrees to accept as full compensation therefor, an
advisory fee for each Portfolio at the rates specified in Schedule A,
which is attached hereto and made a part of this Agreement. The Fee
shall be calculated by applying a daily rate, based on the annual
percentage
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rates as specified in Schedule A, to the average daily net assets of
each Portfolio and shall be paid to the Adviser monthly. The Adviser
may, in its discretion and from time to time, waive all or a portion of
its fee.
No Portfolio of the Fund shall be liable for the obligations of any
other Portfolio of the Fund. Without limiting the generality of the
foregoing, the Adviser shall look only to the assets of a particular
Portfolio for payment of fees for services rendered to that Portfolio.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
6. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by an applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified
for offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Fund or any
Portfolio which would result in the Fund's inability to qualify as a
regulated investment company under provisions of the Internal Revenue
Code. Payment of expenses by the Adviser pursuant to this Section 6
shall be settled on a monthly basis (subject to fiscal year-end
reconciliation, resulting perhaps in the Adviser's recovery of some
fees waived earlier in the fiscal year) by a waiver of the Adviser's
fees provided for hereunder, and such waiver shall be treated as a
reduction in the purchase price of the Adviser's services.
7. REPORTS. The Fund and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request. The Adviser further agrees to furnish to the Fund, if
applicable, the same such documents and information pertaining to any
sub-adviser as the Fund may reasonably request.
8. STATUS OF THE ADVISER. The services of the Adviser to the Fund are not
to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Fund are not impaired
thereby. The Adviser shall be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund. To the extent that the purchase or sale of
securities or other investments of any issuer may be deemed by the
Adviser to be suitable for two or more accounts managed by the Adviser,
the available securities or investments may be allocated in a manner
believed by the Adviser to be equitable to each account. It is
recognized that in some cases this may adversely affect the price paid
or received by the Fund or the size or position obtainable for or
disposed of by the Fund or any Portfolio.
9. CERTAIN RECORDS. The Adviser shall keep and maintain, or shall arrange
for the sub-adviser of a Portfolio to keep and maintain, all books and
records with respect to each Portfolio's portfolio transactions
required by Rule 31a-1 under the 1940 Act and shall render to the Board
of Directors of the Fund such periodic and special reports as the Board
of Directors may reasonably request. The Adviser shall also furnish to
the Fund any other information that is required to be filed by the Fund
with the SEC or sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other relief that the
Adviser or the Fund obtains from the SEC. The Adviser agrees that all
records that it (or any sub-adviser) maintains on behalf of the Fund
are the property of the Fund and the Adviser will surrender promptly to
the Fund any of such records upon the Fund's request; provided,
however, that the Adviser may retain a copy of such records. In
addition, for the duration of this Agreement, the Adviser shall
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to
this Agreement, and shall transfer said records to any successor
Adviser upon the termination of this Agreement (or, if there is no
successor Adviser, to the Fund).
10. LIMITATION OF LIABILITY OF THE ADVISER. The duties of the Adviser shall
be confined to those expressly set forth herein, and no implied duties
are assumed by or may be asserted against the Adviser hereunder. The
Adviser shall 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 carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless
A-4
disregard of its obligations and duties hereunder, except as may
otherwise be provided under provisions of applicable state law which
cannot be waived or modified hereby. (As used in this Section 10, the
term "Adviser" shall include not only the Adviser itself but also
shareholders, directors, officers, employees and other corporate agents
of the Adviser).
11. PERMISSIBLE INTERESTS. Directors, agents, and shareholders of the Fund
are or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise;
directors, partners, officers, agents, and shareholders of the Adviser
are or may be interested in the Fund as Directors, officers,
shareholders or otherwise; and the Adviser (or any successor) is or may
be interested in the Fund as a shareholder or otherwise subject to the
provisions of applicable law. All such interests shall be fully
disclosed between the parties on an ongoing basis and in the Fund's
Prospectus as required by law. In addition, brokerage transactions for
the Fund may be effected through affiliates of the Adviser or any
sub-adviser if approved by the Board of Directors, subject to the rules
and regulations of the SEC.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until one year from the date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of each Portfolio;
provided, however, that if the shareholders of any Portfolio fail to
approve the Agreement as provided herein, the Adviser may continue to
serve hereunder in the manner and to the extent permitted by the 1940
Act and rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty by vote of a majority of the
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days' nor more
than 60 days' written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days' written notice to
the Fund. This Agreement will automatically and immediately terminate
in the event of its assignment.
As used in this Section 12, the terms "assignment," "interested
persons," and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the 1940
Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the SEC.
13. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
14. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a recognized courier, addressed by the party giving
notice to the other party at the last address furnished by the other
party:
To the Adviser at: M Financial Investment Advisers, Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Fund at: M Fund, Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
A-5
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
17. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT
M FUND, INC. ADVISERS, INC.
By:__________________________________ By:_______________________________
Title:_________________________________ Title:______________________________
Attest:________________________________ Attest:_____________________________
Title:_________________________________ Title:______________________________
A-6
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
M FUND, INC.
AND
M FINANCIAL INVESTMENT ADVISERS, INC.
Pursuant to Section 5, the Fund shall pay the Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
----------------- ---------------------------
Edinburgh Overseas Equity Fund ............ 1.05% of first $ 10 million
0.90% of next $ 15 million
0.75% of 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% of first $ 25 million
0.45% of next $ 75 million
0.30% on amounts above
$100 million
A-7
EXHIBIT B
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
EDINBURGH OVERSEAS EQUITY FUND
THIS AGREEMENT made and entered into this 1st day of January, 1998, by
and between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Edinburgh
Fund Managers plc, a corporation organized and existing under the laws of the
United Kingdom (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Edinburgh Overseas Equity Fund
portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the instructions
and directions of the Adviser and of the Board of Directors of
the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for
B-1
the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting
the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio
and/or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser may exercise investment
discretion. The Sub-Adviser is authorized, subject to
compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are the property of the
Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the
termination of this Agreement (or, if there is no successor
Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
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Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principaloffice all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Adviser, its
clients or the Fund. The Sub-Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or
its affiliates that refer to the Adviser or its clients in any way
B-3
are consistent with those materials previously approved by the Adviser
as referenced in the first sentence of this paragraph. Sales literature
may be furnished to the Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related
expenses) arising from or in connection with the performance by the
Sub-Adviser of its duties under this Agreement. This provision shall
survive termination of this Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
its approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding voting securities of the Portfolio;
provided, however, that at any time the Adviser shall have obtained
exemptive relief from the SEC permitting it to engage a sub-adviser
without first obtaining approval of the Agreement from a majority of
the outstanding voting securities of the portfolio(s) involved, this
Agreement shall become effective upon its approval by the Fund's Board
of Directors. Any sub-adviser so selected and approved shall be without
the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act.
This Agreement shall continue in effect for a period of one year from
the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: EDINBURGH FUND MANAGERS PLC
NationsBank Plaza
600 Peachtree Street
Suite 3820
Atlanta, GA 30308
Attn: Gloria E. Carlson
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
B-4
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT EDINBURGH FUND
ADVISERS, INC. MANAGERS PLC
By:______________________________ By: ____________________________________
Title: ____________________________ Title:___________________________________
Attest:___________________________ Attest: ________________________________
Title:____________________________ Title:__________________________________
B-5
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
EDINBURGH FUND MANAGERS PLC
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
----------------- ---------------------------
Edinburgh Overseas Equity Fund 0.90% on first $ 10 million
0.75% on next $ 15 million
0.60% on next $ 75 million
0.45% on amounts over $100 million
B-6
EXHIBIT C
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
For The
TURNER CORE GROWTH FUND
THIS AGREEMENT made and entered into this 1st day of January, 1998, by
and between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Turner
Investment Partners, Inc., a corporation organized and existing under the laws
of the Commonwealth of Pennsylvania (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Turner Core Growth Fund
portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the instructions
and directions of the Adviser and of the Board of Directors of
the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for
C-1
the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting
the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio
and/or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser may exercise investment
discretion. The Sub-Adviser is authorized, subject to
compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are the property of the
Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the
termination of this Agreement (or, if there is no successor
Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
C-2
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Adviser, its
clients or the Fund. The Sub-Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or
its affiliates that refer to the Adviser or its clients in any way
C-3
are consistent with those materials previously approved by the Adviser
as referenced in the first sentence of this paragraph. Sales literature
may be furnished to the Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related
expenses) arising from or in connection with the performance by the
Sub-Adviser of its duties under this Agreement. This provision shall
survive termination of this Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
its approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding voting securities of the Portfolio;
provided, however, that at any time the Adviser shall have obtained
exemptive relief from the SEC permitting it to engage a sub-adviser
without first obtaining approval of the Agreement from a majority of
the outstanding voting securities of the portfolio(s) involved, this
Agreement shall become effective upon its approval by the Fund's Board
of Directors. Any sub-adviser so selected and approved shall be without
the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act.
This Agreement shall continue in effect for a period of one year from
the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: TURNER INVESTMENT PARTNERS, INC.
1235 Westlakes Drive
Suite 350 Berwyn, PA 19312
Attn:
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
C-4
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT TURNER INVESTMENT
ADVISERS, INC. PARTNERS, INC.
By:____________________________ By: ___________________________________
Title: ________________________ Title:_________________________________
Attest:________________________ Attest: _______________________________
Title:_________________________ Title:_________________________________
C-5
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
TURNER INVESTMENT PARTNERS, INC.
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
----------------- ---------------------------
Turner Core Growth Fund ................. 0.30%
C-6
EXHIBIT D
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
FRONTIER CAPITAL APPRECIATION FUND
THIS AGREEMENT made and entered into this 1st day of January, 1998, by
and between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Frontier
Capital Management Company, Inc., a corporation organized and existing under the
laws of the Commonwealth of Massachusetts (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Frontier Capital Appreciation
Fund portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the instructions
and directions of the Adviser and of the Board of Directors of
the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for
D-1
the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting
the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio
and/or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser may exercise investment
discretion. The Sub-Adviser is authorized, subject to
compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are the property of the
Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the
termination of this Agreement (or, if there is no successor
Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
D-2
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Adviser, its
clients or the Fund. The Sub-Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or
its affiliates that refer to the Adviser or its clients in any way
D-3
are consistent with those materials previously approved by the Adviser
as referenced in the first sentence of this paragraph. Sales literature
may be furnished to the Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related
expenses) arising from or in connection with the performance by the
Sub-Adviser of its duties under this Agreement. This provision shall
survive termination of this Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
its approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding voting securities of the Portfolio;
provided, however, that at any time the Adviser shall have obtained
exemptive relief from the SEC permitting it to engage a sub-adviser
without first obtaining approval of the Agreement from a majority of
the outstanding voting securities of the portfolio(s) involved, this
Agreement shall become effective upon its approval by the Fund's Board
of Directors. Any sub-adviser so selected and approved shall be without
the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act.
This Agreement shall continue in effect for a period of one year from
the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: FRONTIER CAPITAL MANAGEMENT COMPANY, INC.
99 Summer Street
Boston, MA 02110
Attn: J. Kirk Smith, CFA
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
D-4
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT FRONTIER CAPITAL
ADVISERS, INC. MANAGEMENT COMPANY
INC.
By:_____________________________ By:_______________________________
Title:__________________________ Title:____________________________
Attest:_________________________ Attest:___________________________
Title:__________________________ Title:____________________________
D-5
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
FRONTIER CAPITAL MANAGEMENT COMPANY, INC.
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
----------------- ---------------------------
Frontier Capital Appreciation Fund ................ 0.75%
D-6
EXHIBIT E
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
ENHANCED U.S. EQUITY FUND
THIS AGREEMENT made and entered into this 1st day of January, 1998, by
and between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Franklin
Portfolio Associates LLC, a Massachusetts business trust organized and existing
under the laws of the Commonwealth of Massachusetts (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Enhanced U.S. Equity Fund
portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the instructions
and directions of the Adviser and of the Board of Directors of
the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for
E-1
the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting
the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio
and/or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser may exercise investment
discretion. The Sub-Adviser is authorized, subject to
compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are the property of the
Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the
termination of this Agreement (or, if there is no successor
Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
E-2
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
(d) The Statement of Additional Information shall be provided to
FPA by the Adviser
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby.
Adviser shall reimburse, indemnify, and hold harmless Sub-Adviser,
individually and as sub-adviser, of and from any and all expenses,
losses, damages, liabilities, demands, charges, and claims of any kind
or nature (including attorneys' fees) whatsoever, arising from the
operations and management of the Portfolio except where such expense,
loss, damage, liability, demand, charge, or claim is the result of an
occurrence described in the foregoing paragraph for which the
Sub-Adviser is determined to be liable.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
E-3
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Adviser, its
clients or the Fund. The Sub-Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or
its affiliates that refer to the Adviser or its clients in any way are
consistent with those materials previously approved by the Adviser as
referenced in the first sentence of this paragraph. Sales literature
may be furnished to the Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. Subject to the provisions of Section 5 hereof, the
Sub-Adviser shall indemnify and hold harmless the Adviser from and
against any and all claims, losses, liabilities or damages (including
reasonable attorney's fees and other related expenses) arising from or
in connection with the performance by the Sub-Adviser of its duties
under this Agreement. This provision shall survive termination of this
Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
its approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding voting securities of the Portfolio;
provided, however, that at any time the Adviser shall have obtained
exemptive relief from the SEC permitting it to engage a sub-adviser
without first obtaining approval of the Agreement from a majority of
the outstanding voting securities of the portfolio(s) involved, this
Agreement shall become effective upon its approval by the Fund's Board
of Directors. Any sub-adviser so selected and approved shall be without
the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act.
This Agreement shall continue in effect for a period of one year from
the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
E-4
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: FRANKLIN PORTFOLIO ASSOCIATES LLC
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Hank Murphy
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT FRANKLIN PORTFOLIO
ADVISERS, INC. ASSOCIATES LLC
By:______________________________ By: ____________________________________
Title: ____________________________ Title:__________________________________
Attest:___________________________ Attest: ________________________________
Title:____________________________ Title:__________________________________
E-5
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
FRANKLIN PORTFOLIO ASSOCIATES LLC
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
----------------- ---------------------------
Enhanced U.S. ............ 0.40% on first $ 25 million
Equity Fund .............. 0.30% on next $ 75 million
0.15% on amounts over $100 million
E-6
VOTING INSTRUCTION / PROXY
M FUND, INC.
THIS SOLICITATION IS MADE ON BEHALF OF THE DIRECTORS OF
M FUND, INC.
The undersigned appoints Daniel Byrne, David Schutt and Anna Nye and
each of them, with full power of substitution, as attorneys and proxies of the
undersigned, and does thereby request that the votes attributable to the
undersigned be cast at the Special Meeting of Shareholders of M Fund, Inc. (the
"Company"), to be held at 9:00 a.m., local time, on December 19, 1997, at the
principal office of the Company, River Park Center, 205 S.E. Spokane Street,
Portland, Oregon, and at any adjournment thereof. If a proxy is not received
from a particular shareholder, then the votes attributable to him or her will be
allocated in the same ratio as votes for which instructions have been received.
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS VOTING INSTRUCTION/PROXY WILL BE VOTED AS
DIRECTED BELOW, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSALS
BELOW.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSALS AND
THE ELECTION OF THE NOMINEES AS DIRECTORS. PLEASE VOTE BY CHECKING YOUR
RESPONSE.
<TABLE>
FOR APPROVAL BY THE SHAREHOLDERS OF THE COMPANY:
<S> <C> <C> <C> <C>
1. Approval of New Investment Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ]
M Financial Investment Advisers, Inc. (the "Adviser").
FOR APPROVAL BY THE SHAREHOLDERS OF THE EDINBURGH OVERSEAS EQUITY FUND:
2. Approval of New Investment Sub-Advisory Agreement FOR[ ] AGAINST[ ] ABSTAIN[ ]
between the Adviser and Edinburgh.
FOR APPROVAL BY THE SHAREHOLDERS OF THE TURNER CORE GROWTH FUND:
3. Approval of New Investment Sub-Advisory Agreement FOR[ ] AGAINST[ ] ABSTAIN[ ]
between the Adviser and Turner.
FOR APPROVAL BY THE SHAREHOLDERS OF THE FRONTIER CAPITAL APPRECIATION FUND:
4. Approval of New Investment Sub-Advisory Agreement FOR[ ] AGAINST[ ] ABSTAIN[ ]
between the Adviser and Frontier.
FOR APPROVAL BY THE SHAREHOLDERS OF THE ENHANCED U.S. EQUITY FUND:
5. Approval of New Investment Sub-Advisory Agreement FOR[ ] AGAINST[ ] ABSTAIN[ ]
between the Adviser and Franklin.
FOR APPROVAL BY THE SHAREHOLDERS OF THE COMPANY:
6. Election of Directors FOR [ ] WITHHOLD AUTHORITY [ ]
all nominees to vote for all nominees
listed below listed below
Peter W. Mullin (except as
David M. Spungen marked to
Gerald Bidwell the contrary
Neil E. Goldschmidt below)
Philip W. Halpern
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL,
WRITE HIS NAME ON THE LINE BELOW.)
- -------------------------------------------------------------------------------
FOR APPROVAL BY THE SHAREHOLDERS OF THE COMPANY:
<TABLE>
<S> <C> <C> <C> <C>
7. Ratification of Coopers & Lybrand L.L.P. as independent FOR[ ] AGAINST[ ] ABSTAIN[ ]
accountants for the Company.
</TABLE>
TOTAL SHARES ATTRIBUTABLE TO THE UNDERSIGNED: ________
<TABLE>
<S> <C>
NOTE: THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF THE NOTICE OF
PLEASE VOTE, DATE, SIGN, AND RETURN THIS FORM IN THE ANY PROXY HERETOFORE GIVEN WITH RESPECT TO
ENCLOSED SELF-ADDRESSED ENVELOPE. ALL PERSONS THE VOTES COVERED BY THIS PROXY.
DESIGNATED ON THE ACCOUNT MUST SIGN THIS FORM.
PLEASE INDICATE TITLE IF SIGNING IN AN OFFICIAL CAPACITY.
Dated: ____________________________, 1997 _________________________________
Signature
-----------------------------------
Signature If Jointly Held or Title If Required
</TABLE>
