M FUND INC, 497, 1999-05-03

M FUND INC
497, 1999-05-03

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<PAGE>
M FUND, INC.

PROSPECTUS

MAY 1, 1999

BRANDES INTERNATIONAL EQUITY FUND

TURNER CORE GROWTH FUND

FRONTIER CAPITAL APPRECIATION FUND

ENHANCED U.S. EQUITY FUND

[LOGO]

Neither the Securities and Exchange Commission nor any state securities
commission has approved any of M Fund's shares as an investment or determined
whether this prospectus is accurate or complete. Anyone who tells you otherwise
is committing a crime.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Information About the Funds............................................................ 3

Brandes International Equity Fund (formerly Edinburgh Overseas Equity Fund)............ 4

Turner Core Growth Fund................................................................ 7

Frontier Capital Appreciation Fund..................................................... 10

Enhanced U.S. Equity Fund.............................................................. 13

Investment Strategies and Risks........................................................ 15

The Funds' Management.................................................................. 20

Investing with M Fund.................................................................. 22

Distributions and Taxes................................................................ 24

Financial Highlights................................................................... 24
</TABLE>

2
<PAGE>
INFORMATION ABOUT THE FUNDS

M FUND

M Fund, Inc. (the Company) is a mutual fund group that currently offers
shares in four funds (Funds):

- Brandes International Equity Fund

- Turner Core Growth Fund

- Frontier Capital Appreciation Fund

- Enhanced U.S. Equity Fund

Each Fund is a separate and distinct investment portfolio. These Funds are
available through the purchase of variable life insurance and variable annuity
policies issued by certain insurance companies. Those insurance companies offer
other portfolios in addition to offering the Funds. Shares of the Funds may also
be sold to qualified pension and retirement plans.

This Prospectus should be read along with the prospectus for the applicable
insurance or annuity policies.

3
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND

THE FUND'S INVESTMENT GOAL

Q. What is the Brandes International Equity Fund's investment goal?

A. The Fund seeks long-term capital appreciation.

As with any mutual fund, there is no guarantee that the Fund will achieve
its goal.

ITS PRINCIPAL INVESTMENT STRATEGIES

Q. What is the Brandes International Equity Fund's principal investment
strategy?

A. The Fund invests mainly in equity securities of foreign issuers,
including common stocks, preferred stocks and securities that are
convertible into common stocks. The Fund focuses on stocks with
capitalizations of $1 billion or more.

The Fund's Sub-Adviser uses the Graham and Dodd "Value Investing" approach.
Following this philosophy, the Sub-Adviser views stocks as parts of businesses
which are for sale. The Sub-Adviser seeks to purchase a diversified group of
these businesses at prices which the Sub-Adviser believes are below their true
long-term value.

THE KEY RISKS

The Brandes International Equity Fund's share price will go up and down
which means you could lose money on your investment in the Fund. The Fund's
investment performance could be worse than other investments:

- If the stock market as a whole goes down.

- Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities.

- Because investments in foreign securities may lose value due to changes in
currency exchange rates and other factors.

- Because emerging market securities involve unique risks, such as exposure
to economies less diverse and mature than that of the U.S.

- Because economic or political changes may cause larger price changes in
emerging market securities than other foreign securities.

- Because the Fund may be more susceptible to economic, political or
regulatory changes in any single country or industry than more diversified
funds.

- If the stocks in the Fund's portfolio do not grow over the long term as
rapidly as expected.

An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.

You can find more information about securities in which the Fund may invest
and a more detailed description of risks under the heading Investment Strategies
and Risks later in this Prospectus.

THE FUND'S PERFORMANCE

The following information may give some indication of the risks of investing
in the Brandes International Equity Fund. It shows changes in the performance of
the Fund's shares from year to year since the Fund started.

The Fund's past performance does not necessarily indicate how it will
perform in the future.

4
<PAGE>
BRANDES INTERNATIONAL EQUITY FUND* PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
YEAR
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Total Return....................................................................... -0.63% 2.26% 15.37%
</TABLE>

* On July 1, 1998, the Fund replaced its previous Sub-Adviser, Edinburgh Fund
Managers plc with Brandes Investment Partners LP.

** The Fund started on January 4, 1996.

During the period shown in the bar chart, the highest quarterly return was
19.95% (for the quarter ended December 31, 1998) and the lowest quarterly return
was -14.31% (for the quarter ended September 30, 1998).

The performance information shown here does not reflect fees that are paid
by the separate accounts that invest in the Fund. Inclusion of those fees would
reduce the total return figures for all periods.

The table below shows how the Fund's average annual total returns for the
periods shown compare to those of the Morgan Stanley Capital
International--Europe, Australasia, Far East Index (MSCI EAFE Index). The MSCI
EAFE Index is an unmanaged arithmetic, market value-weighted average of the
performance of over 900 securities listed on the stock exchanges of the
following 20 countries: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. It includes the effect of reinvested dividends, net of foreign taxes
withheld, and is measured in U.S. dollars. The index is calculated on a total
return basis.

5
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR (1/4/96)
----------- -------------
<S> <C> <C>
Brandes International Equity Fund.......................................................... 15.37% 5.46%
----- ---
MSCI EAFE Index............................................................................ 20.09 8.98
----- ---
</TABLE>

6
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TURNER CORE GROWTH FUND

THE FUND'S INVESTMENT GOAL

Q. What is the Turner Core Growth Fund's investment goal?

A. The Fund seeks long-term capital appreciation.

As with any mutual fund, there is no guarantee that the Fund will achieve
its goal.

ITS PRINCIPAL INVESTMENT STRATEGIES

Q. What is the Turner Core Growth Fund's principal investment strategy?

A. The Fund invests mainly in common stocks of U.S. companies that show
strong earnings potential and also have reasonable valuations.

The Fund's Sub-Adviser uses a bottom-up approach to investing. A bottom-up
approach involves selecting individual stocks rather than focusing on industry
groups first and then selecting stocks within those groups. The Sub-Adviser's
style is based on the philosophy that earnings expectations have the largest
impact on a stock's price. The Sub-Adviser uses a computer ranking process to
select investments and to decide when to sell securities. Characteristics
analyzed include:

- growth: increasing earnings estimates and actual results

- value: price/earnings ratio to growth rate
market price to book value
dividend yield

Securities which rank in the top 35th percentile, according to factors which
the Sub-Adviser sets, qualify for purchase. Those which qualify for purchase are
further analyzed to determine earnings prospects and price and volume patterns
before a purchase is actually made. Securities in the portfolio that fall into
the 55th percentile or below may be sold in the near future.

THE KEY RISKS

The Turner Core Growth Fund's share price will fluctuate which means you
could lose money on your investment in the Fund. The Fund's investment
performance could be worse than other investments:

- If the stock market as a whole goes down.

- If the market continually values the stocks in the Fund's portfolio lower
than the Sub-Adviser believes they should be valued.

- If the earnings of the growth-oriented companies in which the Fund invests
do not grow as rapidly as expected.

- If the computer ranking model does not accurately screen stocks as
intended.

- If the value-oriented stocks in the Fund's portfolio are not undervalued
as expected.

An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.

7
<PAGE>
You can find more information about securities in which the Fund may invest
and a more detailed description of risks under the heading Investment Strategies
and Risks later in this Prospectus.

THE FUND'S PERFORMANCE

The following information may give some indication of the risks of investing
in the Turner Core Growth Fund. It shows changes in the performance of the
Fund's shares from year to year since the Fund started.

The Fund's past performance does not necessarily indicate how it will
perform in the future.

TURNER CORE GROWTH FUND PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
YEAR
-------------------------------
1996* 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Total Return...................................................................... 19.99% 28.32% 34.56%
</TABLE>

* The Fund started on January 4, 1996.

During the period shown in the bar chart, the highest quarterly return was
24.30% (for the quarter ended December 31, 1998) and the lowest quarterly return
was -10.20% (for the quarter ended September 30, 1998).

The table below shows how the Fund's average annual total returns for the
periods shown compare to those of the Wilshire 5000 Stock Index. The Wilshire
5000 Stock Index is an unmanaged capitalization-weighted stock index that
measures the performance of all U.S. based equity securities with readily
available price data.

8
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR (1/4/96)
----------- -------------
<S> <C> <C>
Turner Core Growth Fund.................................................................... 34.56% 27.57%
----- -----
Wilshire 5000 Stock Index.................................................................. 23.44 25.24
----- -----
</TABLE>

9
<PAGE>
FRONTIER CAPITAL APPRECIATION FUND

THE FUND'S INVESTMENT GOAL

Q. What is the Frontier Capital Appreciation Fund's investment goal?

A. The Fund seeks maximum capital appreciation.

As with any mutual fund, there is no guarantee that the Fund will achieve
its goal.

ITS PRINCIPAL INVESTMENT STRATEGIES

Q. What is the Frontier Capital Appreciation Fund's principal investment
strategy?

A. The Fund invests in common stock of U.S. companies of all sizes, with
emphasis on stocks of companies with capitalizations of less than $3
billion.

The Fund's Sub-Adviser seeks to invest in companies with unrecognized
earnings potential. Earnings per share, growth and price appreciation are
important factors. Wall Street analysts do not usually follow such mid-sized
companies widely, and institutional investors do not own a large percentage of
them. The investment process combines fundamental research with a valuation
model that screens for:

- dividend valuation

- equity valuation

- earnings growth

- earnings momentum

- unexpectedly high or low earnings

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

THE KEY RISKS

The Frontier Capital Appreciation Fund's share price will fluctuate which
means you could lose money on your investment in the Fund. The Fund's investment
performance could be worse than other investments:

- If the stock market as a whole goes down.

- If the valuation model does not screen stocks as expected.

- If earnings growth estimates of companies the Fund invests in are not
achieved.

- Because securities of smaller-cap companies may be more thinly traded and
may have more frequent and larger price changes than securities of larger
cap companies.

An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.

You can find more information about securities in which the Fund may invest
and a more detailed description of risks under the heading Investment Strategies
and Risks later in this Prospectus.

10
<PAGE>
THE FUND'S PERFORMANCE

The following information may provide some indication of the risks of
investing in the Frontier Capital Appreciation Fund. It shows changes in the
performance of the Fund's shares from year to year since the Fund started.

The Fund's past performance does not necessarily indicate how it will
perform in the future.

FRONTIER CAPITAL APPRECIATION FUND PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Fund started on January 4, 1996.

During the period shown in the bar chart, the highest quarterly return was
26.17% (for the quarter ended December 31, 1998) and the lowest quarterly return
was -21.00% (for the quarter ended September 30, 1998).

The table below shows how the Fund's average annual total returns for the
periods shown compare to those of the Russell 2500 Stock Index. The Russell 2500
Stock Index is an unmanaged capitalization-weighted stock index representing the
smallest 2500 stocks, by total market capitalization in the Russell 3000 Index.
The Russell 3000 Index is an unmanaged index that measures the performance of
the 3000 largest U.S. companies based on total market capitalization.

11
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR (1/4/96)
----------- -------------
<S> <C> <C>
Frontier Capital Appreciation Fund......................................................... 1.68% 17.46%
--- -----
Russell 2500 Stock Index................................................................... 0.38 14.11
--- -----
</TABLE>

12
<PAGE>
ENHANCED U.S. EQUITY FUND

THE FUND'S INVESTMENT GOAL

Q. What is the Enhanced U.S. Equity Fund's investment goal?

A. The Fund seeks above-market total return.

As with any mutual fund, there is no guarantee that the Fund will achieve
its goal.

ITS PRINCIPAL INVESTMENT STRATEGIES

Q. What is the Enhanced U.S. Equity Fund's principal investment strategy?

A. The Fund invests primarily in common stocks of U.S. companies which the
portfolio manager believes have the potential for higher rates of return
than the Standard & Poor's 500 Composite Stock Price Index (the S&P 500
or the Index) while having risks similar to those of the Index.

The Fund's Sub-Adviser uses a quantitative process to try to identify stocks
with the highest expected returns. The Sub-Adviser uses proprietary software to
select a portfolio of investments. The S&P 500 represents a sampling of the
stocks of the largest U.S. corporations along with stocks of certain foreign
corporations that are publicly-traded in the United States. The software divides
stocks in both the Fund and in the S&P 500 into 55 industry groups and 13
general risk categories and ranks them. Stocks are selected from the top
rankings in each group or category. Stocks are selected to reflect risk
characteristics similar to those of the S&P 500. The valuation models used to
rank stocks for the Fund focus on:

- fundamental earnings momentum

- relative value

- future cash flow

- certain other factors

Stocks which fall below the median ranking in the Sub-Adviser's process will
most likely be sold.

THE KEY RISKS

The Enhanced U.S. Equity Fund's share price will fluctuate which means you
could lose money on your investment in the Fund. The Fund's investment
performance could be worse than other investments:

- If the stock market as a whole goes down.

- If the valuation models or proprietary software do not screen stocks as
intended.

- Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors.

- If the stocks in the Fund's portfolio do not increase in value as rapidly
as expected.

- Because securities of small-cap companies may be more thinly traded and
may have more frequent and larger price changes than securities of larger
cap companies.

An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.

You can find more information about securities in which the Fund may invest
and a more detailed description of risks under the heading Investment Strategies
and Risks later in this Prospectus.

13
<PAGE>
THE FUND'S PERFORMANCE

The following information may give some indication of the risks of investing
in the Enhanced U.S. Equity Fund. It shows changes in the performance of the
Fund's shares from year to year since the Fund started.

The Fund's past performance does not necessarily indicate how it will
perform in the future.

ENHANCED U.S. EQUITY FUND PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Fund started on January 4, 1996.

During the period shown in the bar chart, the highest quarterly return was
20.46% (for the quarter ended December 31, 1998) and the lowest quarterly return
was -12.96% (for the quarter ended September 30, 1998).

The table below shows how the Fund's average annual total returns for the
periods shown compare to those of the S&P 500 Stock Index. The S&P 500 Stock
Index consists of 500 stocks chosen for market size, liquidity, and industry
group representation. It is an unmanaged market-value weighted index (stock
price times number of shares outstanding), with each stock's weight in the Index
proportionate to its market value.

14
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR (1/4/96)
----------- -------------
<S> <C> <C>
Enhanced U.S. Equity Fund.................................................................. 23.69% 26.69%
----- -----
S&P 500 Stock Index........................................................................ 28.57 28.19
----- -----
</TABLE>

INVESTMENT STRATEGIES AND RISKS

CAN A FUND DEPART FROM ITS NORMAL STRATEGIES?

Each Fund may depart from its normal strategies by taking temporary
defensive positions in response to adverse market, economic, political or other
conditions. During these times, a Fund may not achieve its investment goals.

DO THE FUNDS ENGAGE IN ACTIVE TRADING OF SECURITIES?

The Turner Core Growth Fund and the Frontier Capital Appreciation Fund may
engage in active and frequent trading to achieve their investment goals. This
high rate of portfolio turnover may cause the Fund to realize higher capital
gains than would otherwise be the case. Trading also increases transaction
costs, which would lower the Fund's performance.

CAN A FUND CHANGE ITS INVESTMENT GOAL?

A Fund's investment goal may be changed by a vote of the Company's board of
directors without shareholder approval. You would be notified at least 30 days
before any change took effect.

YEAR 2000 RISK

The Company's Adviser has implemented steps intended to assure that its
major computer systems and processes are capable of Year 2000 processing. It is
also examining the third parties on whom the Company relies for certain
administrative services, to assess their readiness. The Adviser is developing
contingency plans to assure that any problems in third-party systems will not
materially affect the Company's operations.

Issuers of securities (such as companies or governmental entities) in which
the Funds invest could also be affected by the Year 2000 issue, but at this time
the Funds cannot predict the degree of impact.

Computer systems failure of the Company's Adviser, a Sub-Adviser or any Fund
service provider could impair Fund services and have a negative impact on a
Fund's operations and returns.

CONFLICTS OF INTEREST

Certain conflicts of interest may exist between the interests of the
variable annuity contract owners, variable life insurance policy owners and plan
participants. The Company currently does not believe that ownership by each such
type of entity will cause any disadvantage to owners of any of such entities.
However, the Board of Directors will monitor the Funds to identify any conflicts
of interest which may cause such a disadvantage and which cannot be reconciled.
If such situations arise, the Board of Directors will decide at that time what
action should be taken in response to the conflicts.

15
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS

BRANDES INTERNATIONAL EQUITY FUND

The Brandes International Equity Fund will normally invest at least 65% of
its total assets in equity securities of issuers located in at least three
countries other than the United States. These countries may include: the nations
of Western Europe, North and South America, Australia, Africa and Asia.

Securities will generally be purchased in the form of common stock, American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or Global
Depositary Receipts (GDRs).

The Fund may invest in any single country or industry up to, at the time of
purchase, the greater of:

- 20% of its total assets, or

- 150% of the weighting of such country or industry as represented in the
Morgan Stanley Capital International--Europe, Australasia, Far East (MSCI
EAFE) Index

The Fund may also invest up to, at the time of purchase:

- 20% of its total assets in emerging market securities

- 5% of its total assets in securities of small capitalization companies
(those with market capitalizations of $1 billion or less)

The Fund may also:

- invest in recently organized companies

- participate in forward foreign currency exchange contracts for purposes of
settling trades

- lend portfolio securities

In seeking out foreign securities for purchase, the Sub-Adviser does not
attempt to match the security allocations of foreign stock market indices.
Therefore, the Fund's country weightings may differ significantly from country
weightings found in published foreign stock indices. For example, the
Sub-Adviser may choose not to invest the Fund's assets in a country whose stock
market, at any given time, may comprise a large portion of a published foreign
stock market index. At the same time, the Sub-Adviser may invest the Fund's
assets in countries whose representation in such an index may be small or
non-existent. The Sub-Adviser selects stocks for the Fund based on their
individual merits and not necessarily on their geographic locations.

TURNER CORE GROWTH FUND

Generally, the Turner Core Growth Fund will be fully invested and will
contain between 80 to 120 securities. Any one security will generally constitute
2% or less of the net asset value of the Fund, except for issues comprising more
than 1.7% of the S&P 500 Index, in which case the Fund may hold up to 130% of
the issues' index weighting.

The Fund may invest:

- up to 10% of the value of its total assets in securities of foreign
issuers that are listed on United States exchanges or are represented by
American Depository Receipts (ADRs)

- in companies with market capitalizations of $500 million or less

16
<PAGE>
- in recently organized companies

The Fund may also:

- keep a portion of assets in cash or cash equivalents pending investment or
for liquidity purposes

- lend its securities

The Fund may not invest in any foreign government securities.

FRONTIER CAPITAL APPRECIATION FUND

The Frontier Capital Appreciation Fund's portfolio is not restricted to any
one segment of the market; however, generally a majority of its portfolio will
consist of stocks of small- to medium-capitalization companies. The Fund's
portfolio will typically consist of 80 to 120 stocks.

The Fund may invest:

- up to 10% of the value of its total assets in securities of foreign
issuers that are listed on United States exchanges or are represented by
ADRs

- in companies with market capitalizations of $500 million or less

- in recently organized companies

The Fund may also:

- keep a portion of assets in cash or cash equivalents pending investment or
for liquidity purposes

- lend its securities

The Fund may not invest in any foreign government securities.

ENHANCED U.S. EQUITY FUND

The Fund will contain approximately 150 stocks. The Fund will normally
invest at least 65% of the value of its total assets in equity securities of
U.S. based companies.

The Fund may also:

- invest in companies with market capitalizations of $500 million or less

- invest in recently organized companies

- keep a portion of assets in cash or cash equivalents pending investment or
for liquidity purposes

- lend its securities

The Fund may not invest in any foreign government securities.

ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS

EQUITY SECURITIES. Equity securities include:

- common stocks

- preferred stocks

17
<PAGE>
- securities convertible into common stocks

AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY RECEIPTS (EDRS),
AND GLOBAL DEPOSITARY RECEIPTS (GDRS). ADRs, EDRs and GDRs are securities that
represent an ownership interest in a foreign security. They are generally issued
by a bank or trust company and may be sponsored or unsponsored. The issuers of
unsponsored ADRs, EDRs and GDRs are not required to disclose certain material
information to the holders of such securities.

FOREIGN COMPANIES. A foreign company is organized under the laws of a
foreign country and:

- Has the principal trading market for its stock in a foreign country.

- Derives at least 50% of its revenues or profits from operations in foreign
countries or has at least 50% of its assets located in foreign countries.

EMERGING MARKET SECURITIES. Emerging market securities are issued by a
company that:

- Is organized under the laws of an emerging market country (any country
other than Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Holland, Hong Kong, Italy, Japan, Luxemborg, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United
States).

- Has its principal trading market for its stock in an emerging market
country.

- Derives at least 50% of its revenues or profits from operations within
emerging market countries or has at least 50% of its assets located in
emerging market countries.

GENERAL RISKS OF INVESTING IN THE FUNDS

MARKET RISK. A Fund that invests in common stocks is subject to stock
market risk. Stock prices in general may decline over short or even extended
periods, regardless of the success or failure of a particular company's
operations. Stock markets tend to run in cycles, with periods when stock prices
generally go up and periods when they generally go down. Common stock prices
tend to go up and down more than those of bonds.

INTEREST RATE RISK. A Fund that invests in debt securities is subject to
the risk that the market value of the debt securities will decline because of
rising interest rates. The prices of debt securities are generally linked to the
prevailing market interest rates. In general, when interest rates rise, the
prices of debt securities fall, and when interest rates fall, the prices of debt
securities rise. The price volatility of a debt security also depends on its
maturity. Generally, the longer the maturity of a debt security the greater its
sensitivity to changes in interest rates. To compensate investors for this
higher risk, debt securities with longer maturities generally offer higher
yields than debt securities with shorter maturities.

CREDIT RISK. The debt securities in a Fund's portfolio are subject to
credit risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Securities rated in the lowest
category of investment grade securities (rated BBB by Standard & Poor's Rating
Service or Baa by Moody's Investor Service, Inc.) have some risky
characteristics and changes in economic conditions are more likely to cause
issuers of these securities to be unable to make payments.

FOREIGN INVESTING. Investing in foreign securities poses unique risks such
as fluctuation in currency exchange rates, market illiquidity, price volatility,
high trading costs, difficulties in settlement, regulations

18
<PAGE>
on stock exchanges, limits on foreign ownership, possibility of expropriation or
nationalization, confiscatory taxation, less stringent accounting, reporting and
disclosure requirements, and other considerations. In the past, equity and debt
instruments of foreign markets have had more frequent and larger price changes
than those of U.S. markets.

EMERGING MARKETS RISK. Investments in a country that is still
relatively underdeveloped involves exposure to economic structures that are
generally less diverse and mature than in the U.S. and to political and
legal systems which may be less stable. In the past, markets of developing
countries have had more frequent and larger price changes than those of
developed countries.

POLITICAL RISK. Political risk includes a greater potential for
revolts, and the taking of assets by governments. For example, a Fund may
invest in Eastern Europe and former states of the Soviet Union. These
countries were under communist systems that took control of private
industry. This could occur again in this region or others in which a Fund
may invest, in which case the Fund may lose all or part of its investment in
that country's issuers.

CURRENCY EXCHANGE RISK. Investments that are denominated in currencies
other than the U.S. dollar are subject to currency exchange risk. Because
the value of the U.S. dollar against other currencies will vary, a decline
in the exchange rate would reduce the value of certain portfolio
investments. In addition, if the exchange rate for the currency in which a
Fund receives dividend or interest payments declines against the U.S. dollar
before such interest is paid as a dividend to the Fund's shareholders, the
Fund may have to sell portfolio securities to obtain sufficient cash to pay
the dividend.

SMALL COMPANY INVESTMENT RISK. Investing in securities of smaller,
lesser-known companies involves greater risks than investing in larger, more
mature, better known issuers. These increased risks include:

- an increased possibility of portfolio price volatility

- more volatile in price than the larger-capitalization stocks

- less certain growth prospects

- lower degree of liquidity in the markets for such stocks

- greater sensitivity of smaller companies to changing economic conditions

- greater business risks resulting from their limited product lines,
markets, distribution channels, and financial and managerial resources

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

RECENTLY ORGANIZED COMPANIES. Investments in recently organized
companies have the same risks as small company investments but to a greater
degree.

19
<PAGE>
ASSET GROWTH. The Funds' present asset size may not be sufficient to invest
in the number of different stocks indicated in the Investment Strategies and
Risks section of this Prospectus or to take advantage of certain investment
opportunities. The Funds also may not be as diversified as other mutual fund
portfolios. There is no certainty as to how rapidly a Fund's assets will
increase.

SECURITIES LENDING. The Funds may loan their securities to institutions,
such as broker-dealers, and must be secured by collateral at least equal to the
market value of the loaned securities. The collateral may be in the form of
cash, cash equivalents, or U.S. Government securities. A Fund may experience a
loss or delay in the recovery of its securities if the institution it loaned
securities to breaches its agreement with the Fund. A Fund will not loan more
than one-third of the value of its assets.

THE FUNDS' MANAGEMENT

INVESTMENT ADVISER

M Financial Investment Advisers, Inc., (the Adviser) located at River Park
Center, 205 SE Spokane Street, Portland, Oregon 97202, is the investment adviser
of the Company and its Funds. The Adviser has been registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the Advisers Act)
since November 1995. As of December 31, 1998, the Adviser had approximately $73
million in assets under management, all of which were the assets of the Company.

The Adviser began managing the Company at its commencement of operations
(January 4, 1996).

The Adviser is responsible for selecting Sub-Advisers who have shown good
investment performance in their areas of expertise. The Board of Directors of
the Company supervise the Adviser's management of the Sub-Advisers. The Company
has received an Order from the Securities and Exchange Commission that allows
the Adviser to change a Sub-Adviser, or change the terms of a sub-advisory
contract, without shareholder approval. The Adviser has the ultimate
responsibility to oversee the Sub-Advisers and to recommend their hiring,
termination, and replacement. The Adviser also supervises the various other
service providers to the Company, including the custodian, transfer agent,
administration agent, and accounting services agent. In addition, the Adviser
makes sure the Company complies with applicable legal requirements and also that
each Fund's investment objective, policies and restrictions are followed.

Each Fund pays the Adviser a fee for its services. Out of this fee, the
Adviser pays each Sub-Adviser a fee for its services.

The fee paid to the Adviser by each Fund is shown in the table below:

<TABLE>
<CAPTION>
FEE TO THE
ADVISER
(AS A % OF
AVERAGE
FUND DAILY NET ASSETS)
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Brandes International Equity Fund.............................................................. 1.05%
------
Turner Core Growth Fund........................................................................ 0.45%
------
Frontier Capital Appreciation Fund............................................................. 0.90%
------
Enhanced U.S. Equity Fund...................................................................... 0.55%
------
</TABLE>

The Adviser has agreed to pay any expenses (other than advisory fees,
brokerage or other portfolio transaction expenses or expenses for litigation,
indemnification, taxes or other expenses) exceeding 0.25% of that Fund's
annualized average daily net assets, as accrued for each Fund through December
31, 1999.

20
<PAGE>
SUB-ADVISERS

The Sub-Advisers make the day-to-day decisions regarding buying and selling
specific securities for a Fund. Each Sub-Adviser manages the investments held by
the Fund it serves according to the applicable investment goals and strategies.

BRANDES INVESTMENT PARTNERS, L. P. (BRANDES)
12750 High Bluff Drive, San Diego, California 92130

SUB-ADVISER TO THE BRANDES INTERNATIONAL EQUITY FUND

Effective July 1, 1998, Brandes became the Sub-Adviser to the Brandes
International Equity Fund. Brandes was registered as an investment adviser with
the Securities and Exchange Commission in 1974. As of December 31, 1998, Brandes
managed approximately $25 billion in assets.

The Brandes Fund is team-managed by an investment committee, whose members
are senior portfolio management professionals of the firm.

TURNER INVESTMENT PARTNERS, INC. (TURNER)
1235 Westlakes Drive, Suite 350, Berwyn, Pennsylvania 19312

SUB-ADVISER TO THE TURNER CORE GROWTH FUND

Turner has provided investment advisory services to investment companies
since 1992. Turner was registered as an investment adviser with the Securities
and Exchange Commission in 1990. At December 31, 1998, Turner managed
approximately $3.2 billion of assets.

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

FRONTIER CAPITAL MANAGEMENT COMPANY, INC. (FRONTIER)
99 Summer Street, Boston, Massachusetts 02110

SUB-ADVISER TO THE FRONTIER CAPITAL APPRECIATION FUND

Frontier's investment process combines its fundamental in-depth research
effort with a proprietary computer model to identify areas of investment
opportunity. Frontier was registered as an investment adviser with the
Securities and Exchange Commission in January 1981. As of December 31, 1998,
Frontier managed a total of $3.8 billion.

Michael A. Cavarretta, CFA, is the person primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Cavarretta holds a
B.S. degree from the University of Maine and an M.B.A. degree from Harvard
Business School. He joined Frontier in 1988 and has served as sole portfolio
manager for Frontier's capital appreciation portfolios for the past six years.
Prior to attending Harvard

21
<PAGE>
Business School, Mr. Cavarretta was employed as a Financial Analyst with General
Electric Company (1981-1986).

FRANKLIN PORTFOLIO ASSOCIATES LLC (FRANKLIN)
Two International Place, 22nd Floor, Boston, Massachusetts 02110

SUB-ADVISER TO THE ENHANCED U.S. EQUITY FUND

Franklin is a professional investment counseling firm which specializes in
the management of common stock portfolios through the use of quantitative
investment models. Franklin was registered as an investment adviser with the
Securities and Exchange Commission in April 1982. As of December 31, 1998,
Franklin provided investment advisory services with respect to approximately
$18.7 billion of client assets. Franklin employs proprietary computer models in
selecting individual equity securities and in structuring investment portfolios
for its clients, including the Fund.

John J. Nagorniak, CFA, President of Franklin, is the person primarily
responsible for the day-to-day management of the Fund's investment portfolio; he
oversees the application of Franklin's quantitative techniques to the Fund's
assets. Mr. Nagorniak and the other investment principals of Franklin are
responsible for the ongoing development and enhancement of Franklin's
quantitative investment techniques. Mr. Nagorniak is a graduate of Princeton
University and has received a M.S. degree from the Sloan School at the
Massachusetts Institute of Technology. Prior to joining Franklin, he was
associated with State Street Bank and Trust Company as Chief Investment Officer
(1979 to 1981). Prior to that, he was Director of Investment Management
Technology for John Hancock Mutual Life Insurance Company (1970 to 1979). He is
past President of the Investment Technology Association and has been on the
Council of that organization and the Council of the Quantitative Discussion
Group. Mr. Nagorniak is on the Board of Directors and is past President of the
Boston Security Analysts Society. He has over 25 years of investment experience.

SIMILAR FUNDS

The Funds are not available for purchase directly by the general public, and
are not the same as other mutual fund portfolios with very similar or nearly
identical names that are sold directly to the public. However, the investment
objectives and policies of certain Funds may be very similar to the investment
objectives and policies of other mutual fund portfolios that are managed by the
Sub-Advisers. Nevertheless, the investment performance and results of each Fund
may be lower, or higher, than the investment results of such other (publicly
available) portfolio. There can be no assurance, and no representation is made,
that the investment results of any of the Funds will be comparable to the
investment results of any other mutual fund portfolio, even if the other
portfolio is also managed by the Fund's Sub-Adviser, has the same investment
objectives and policies, and has a very similar name.

INVESTING WITH M FUND

CHOOSING THE APPROPRIATE FUNDS TO MATCH YOUR GOALS

Investing well requires a plan. We recommend that you meet with your
financial adviser to plan a strategy that will best meet your financial goals.
Your financial adviser can help you buy a variable annuity or variable life
insurance contract that would allow you to choose the Funds.

22
<PAGE>
PURCHASING SHARES

You cannot buy shares of the Funds directly. You can invest indirectly in
the Funds through your purchase of a variable annuity or variable life insurance
contract. You should read this Prospectus and the prospectus of the variable
annuity or variable life insurance contract carefully before you choose your
investment options.

The variable annuity and life insurance contracts are issued by separate
accounts of various insurance companies. The insurance companies buy Fund shares
for their separate accounts based on the instructions that they receive from the
contract owners.

SELLING SHARES

To meet various obligations under the contracts, the separate accounts may
sell Fund shares to generate cash. For example, a separate account may sell Fund
shares and use the proceeds to pay a contract owner who requested a partial
withdrawal or who canceled a contract. Proceeds from the sale are usually sent
to the separate account on the next business day. The Fund may suspend sales of
shares or postpone payment dates when the New York Stock Exchange (NYSE) is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as otherwise permitted by the SEC.

PRICING OF FUND SHARES

Each Fund's share price, also called net asset value (NAV), is determined at
the close of trading, normally 4:00 p.m. New York time, on each day when the New
York Stock Exchange (NYSE) is open. The NYSE is scheduled to be open Monday
through Friday throughout the year, except for certain federal and other
holidays. The Fund calculates the NAV by dividing the total value of its net
assets by the number its shares outstanding.

The value of each Fund's securities and assets, except certain short-term
debt securities, is based on their market values. Certain exceptions follow:

- Short-term debt securities that mature in 60 days or less are valued by
the amortized cost method, which approximates market value.

- Investments for which market quotations are not readily available are
valued at their fair value as determined by the Board of Directors, or
under their supervision.

- Securities mainly traded on a non-U.S. exchange are generally valued
according to the preceding closing values on that exchange. However, if an
event which may change the value of a security occurs after the time that
the closing value on the non-U.S. exchange was determined, the Board of
Directors might decide to value the security based on fair value. This may
cause the value of the security on the books of the fund to be
significantly different from the closing value on the non-U.S. exchange
and may affect the calculation of a Fund's NAV.

- Because portfolio securities that are primarily listed on non-U.S.
exchanges may trade on weekends or other days when a Fund does not price
its shares, a Fund's NAV may change on days when shareholders will not be
able to buy or sell shares.

23
<PAGE>
DISTRIBUTIONS AND TAXES

Each of the Funds intends to distribute to its shareholders substantially
all of its income and capital gains.

TAX INFORMATION

Because you do not own shares of the Funds directly, your tax situation is
not likely to be affected by a Fund's distributions. The separate accounts in
which you own a variable annuity or variable life insurance contract, as the
owner of the Fund's shares, may be affected. Please refer to the prospectus for
the variable annuity or variable life insurance contract for tax information
regarding those products.

FINANCIAL HIGHLIGHTS

The following selected financial highlights are derived from the Company's
audited financial statements included in the Company's Annual Report to
Shareholders. The financial highlights tables are intended to help you
understand the Funds' financial performance for the past three fiscal years.
Certain information reflects results for a single Fund share. The total returns
in the table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions).

The Company's financial statements and report of PricewaterhouseCoopers LLP,
independent accountants, included in the Annual Report to Shareholders for the
Company's fiscal year ended December 31, 1998 are incorporated by reference into
the Statement of Additional Information. The following data should be read in
conjunction with such financial statements, related notes, and other financial
information contained in the Annual Report. The Annual Report contains
additional performance information about the Funds and is available without
charge and upon request by calling (888) 736-2878.

24
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY FUND TURNER CORE GROWTH FUND
------------------------------------------ ------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996(a) 1998 1997 1996(a)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 9.96 $ 9.88 $10.00 $ 13.50 $11.60 $10.00
------------ ------ ------ ------------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. 0.09 0.07 0.06 0.02 0.04 0.06
Net realized and unrealized gain
(loss) on investments............... 1.44 0.15 (0.12) 4.64 3.22 1.94
------------ ------ ------ ------------ ------ ------
Total from investment
operations........................ 1.53 0.22 (0.06) 4.66 3.26 2.00
------------ ------ ------ ------------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (0.06) (0.07) (0.06) (0.03) (0.04) (0.06)
In excess of net investment
income.............................. -- (0.03) -- -- -- --
From net realized capital gains....... (0.53) -- -- (0.29) (1.22) (0.34)
In excess of net realized capital
gains............................... (0.06) -- -- -- (0.10) --
Tax return of capital................. -- (0.04) -- -- -- --
------------ ------ ------ ------------ ------ ------
Total distributions................. (0.65) (0.14) (0.06) (0.32) (1.36) (0.40)
------------ ------ ------ ------------ ------ ------
NET ASSET VALUE, END OF PERIOD.......... $ 10.84 $ 9.96 $ 9.88 $ 17.84 $13.50 $11.60
------------ ------ ------ ------------ ------ ------
------------ ------ ------ ------------ ------ ------
TOTAL RETURN............................ 15.37% 2.26% (0.63)* 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $12,383 $6,034 $3,177 $13,880 $3,820 $2,003
Net expenses to average daily net
assets before interest expense**.... 1.30% 1.30% 1.30% 0.70% 0.70% 0.70%
Net expenses to average daily net
assets after interest expense**..... 1.30% 1.30% 1.30% 0.70% 0.70% 0.78%
Net investment income to average daily
net assets**........................ 1.00% 0.83% 0.67% 0.31% 0.34% 0.55%
Portfolio turnover rate............... 116% 74% 65% 242% 206% 258%
Without the reimbursement of expenses
by the adviser, the ratio of net
expenses and net investment loss to
average net assets would have been:
Expenses before interest
expense**+...................... 3.57% 4.93% 7.28% 3.42% 6.18% 8.43%
Net investment loss**+............ (1.27)% (2.80)% (5.31)% (2.41)% (5.14)% (7.18)%
</TABLE>

(a) Funds commenced operations on January 4, 1996

* Not annualized

** Annualized for periods less than one year

+ Prior year ratios have been restated to conform with current year reporting
practices.

25
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION FUND ENHANCED U.S. EQUITY FUND
------------------------------------------ ------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996(a) 1998 1997 1996(a)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 14.92 $ 12.52 $10.00 $ 15.09 $11.85 $ 10.00
------------ ------------ ------ ------------ ------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).......... (0.04) 0.00 0.00 0.11 0.08 0.12
Net realized and unrealized gain
(loss) on investments............... 0.29 2.76 3.03 3.45 3.78 2.25
------------ ------------ ------ ------------ ------ ------------
Total from investment
operations........................ 0.25 2.76 3.03 3.56 3.86 2.37
------------ ------------ ------ ------------ ------ ------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ -- -- -- (0.10) (0.09) (0.12)
In excess of net investment
income.............................. -- -- -- (0.01) -- --
From net realized capital gains....... (0.08) (0.36) (0.51) (0.35) (0.53) (0.40)
In excess of net realized capital
gains............................... -- -- -- (0.12) -- --
Tax return of capital................. -- -- -- -- -- --
------------ ------------ ------ ------------ ------ ------------
Total distributions................. (0.08) (0.36) (0.51) (0.58) (0.62) (0.52)
------------ ------------ ------ ------------ ------ ------------
NET ASSET VALUE, END OF PERIOD.......... $ 15.09 $ 14.92 $12.52 $ 18.07 $15.09 $ 11.85
------------ ------------ ------ ------------ ------ ------------
------------ ------------ ------ ------------ ------ ------------
TOTAL RETURN............................ 1.68% 22.13% 30.31%* 23.69% 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $31,778 $16,628 $3,006 $15,082 $7,345 $ 1,582
Net expenses to average daily net
assets before interest expense**.... 1.15% 1.15% 1.15% 0.80% 0.80% 0.80%
Net expenses to average daily net
assets after interest expense**..... 1.15% 1.15% 1.20% 0.80% 0.80% 0.80%
Net investment income (loss) to
average daily net assets**.......... (0.32)% (0.13)% (0.30)% 0.80% 1.17% 1.43%
Portfolio turnover rate............... 68% 61% 140% 50% 52% 79%
Without the reimbursement of expenses
by the adviser, the ratio of net
expenses and net investment loss to
average net assets would have been:
Expenses before interest
expense**+...................... 1.75% 2.86% 8.12% 2.34% 5.41% 12.32%
Net investment loss**+............ (0.92)% (1.84)% (7.27)% (0.74)% (3.44)% (10.09)%
</TABLE>

(a) Funds commenced operations on January 4, 1996

* Not annualized

** Annualized for periods less than one year

+ Prior year ratios have been restated to conform with current year reporting
practices.

26
<PAGE>
FOR MORE INFORMATION

For investors who want more information about the Funds, the following
documents are available free upon request.

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is legally a part of this prospectus.

ANNUAL/SEMI-ANNUAL REPORTS: The Company's annual and semi-annual reports
provide additional information about the Funds' investments. In the annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the
Company's last fiscal year.

You can get free copies of the SAI, the reports, other information and
answers to your questions about the Funds by contacting your financial adviser,
or by writing to or calling the Company at:

M Fund, Inc.
205 SE Spokane Street
Portland, Oregon 97202
(888) 736-2878

You can review and copy the SAI, the reports, and other information at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. Call 1-800-SEC-0330 for information on the operation of the Public
Reference Room.

You can also view the SAI, the reports and other information on the
Commission's Internet website at http://www.sec.gov. You can request copies of
this material for a fee by writing to: Public Reference Section/U.S. Securities
and Exchange Commission/450 Fifth Street, N.W./Washington, D.C. 20549-6009.

M FUND, INC.
BRANDES INTERNATIONAL EQUITY FUND
TURNER CORE GROWTH FUND
FRONTIER CAPITAL APPRECIATION FUND
ENHANCED U.S. EQUITY FUND

Investment Company Act file no. 811-9082

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
___________________________________

M FUND, INC.

Brandes International Equity Fund
Turner Core Growth Fund
Frontier Capital Appreciation Fund
Enhanced U.S. Equity Fund

May 1, 1999

This Statement of Additional Information ("SAI") is not a prospectus. Much of
the information contained in this SAI expands upon information discussed in the
prospectus for M Fund, Inc. (the "Company") and should, therefore, be read in
conjunction with the prospectus for the Company. To obtain a copy of the
Prospectus with the same date as this SAI, write to the Company at River Park
Center, 205 S.E. Spokane Street, Portland, Oregon 97202, Attn: M Fund
Administration, or call (888) 736-2878.

Financial statements are incorporated by reference into this Statement of
Additional Information from the Company's most recent annual report.

<PAGE>

TABLE OF CONTENTS
PAGE

The Company and the Funds....................................................3

Investment Strategies and Risks..............................................4

Fund Policies...............................................................15

Management of the Funds.....................................................19

Investment Advisory and Other Services......................................20

Brokerage Allocation and Other Practices....................................23

Capital Stock and Other Securities..........................................24

Purchase, Redemption and Pricing of Shares..................................25

Tax Information.............................................................26

Performance Information.....................................................27

Other Information...........................................................29

Appendix A -- Description of Corporate Bond Ratings....................A - 1
Appendix B -- Description of Commercial Paper Ratings..................B - 1

<PAGE>

THE COMPANY AND THE FUNDS

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

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

- -------------------------------------------------------------------------------
FUND SUB-ADVISER
- -------------------------------------------------------------------------------
<S> <C>
Brandes International Equity Fund Brandes Investment Partners LP
- -------------------------------------------------------------------------------
Turner Core Growth Fund Turner Investment Partners, Inc.
- -------------------------------------------------------------------------------
Frontier Capital Appreciation Fund Frontier Capital Management Company, Inc.
- -------------------------------------------------------------------------------
Enhanced U.S. Equity Fund Franklin Portfolio Associates LLC
- -------------------------------------------------------------------------------
</TABLE>

The Company currently offers one or more classes of its stock to separate
accounts of certain insurance companies (the "Participating Insurance
Companies") as the underlying funding vehicles for certain variable annuity and
variable life insurance policies (the "Policies") issued by the Participating
Insurance Companies. The Company may also offer its stock to qualified pension
and retirement plans. The Company does not offer its stock directly to the
general public. Each such separate account has a separate prospectus, which
accompanies the prospectus for the Company (the "Prospectus"), describing that
separate account and the Policies. The prospectus for that separate account and
the Policies, should be read in conjunction with the Company's prospectus.

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

3
<PAGE>

INVESTMENT STRATEGIES AND RISKS

INVESTMENTS

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

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

FOREIGN INVESTMENTS

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

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

RISKS RELATED TO FOREIGN INVESTMENTS. Investments in the securities of
companies organized outside the United States or of companies whose securities
are principally traded outside the United States ("foreign issuers"), or
investments in securities denominated or quoted in a currency other than the
U.S. dollar ("non-dollar securities"), may present potential benefits and risks
not associated with investments solely in securities of domestic issuers or U.S.
dollar-denominated securities. Each of the Funds may invest in securities of
foreign issuers. The Frontier Capital Appreciation Fund and the Turner Core
Growth Fund may invest up to 10% of the value of their total assets in
securities of foreign issuers that are listed on United States exchanges or are
represented by American Depository Receipts ("ADRs"). The Brandes International
Equity Fund also may invest in non-dollar securities. (However, the Brandes
International Equity Fund may not invest in Canadian government securities, and
the Enhanced U.S. Equity Fund, the Turner Core Growth Fund and the Frontier
Capital Appreciation Fund may not invest in any foreign government securities.)
Benefits of investing in foreign issuers or non-dollar securities may include
the opportunity to invest in foreign issuers that appear, in the opinion of the
Sub-Adviser, to offer better opportunity for long-term capital appreciation or
current earnings than investments in domestic issuers, the opportunity to invest
in foreign countries with economic policies or business cycles different from
those of the United States, and the opportunity to

4
<PAGE>

reduce fluctuations in portfolio value by taking advantage of foreign securities
markets that do not necessarily move in a manner parallel to U.S. markets.

Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar-denominated securities or in securities of domestic issuers. Such
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws or restrictions applicable to such investments and in exchange control
regulations (e.g., currency blockage). For example, a decline in the exchange
rate would reduce the value of certain portfolio investments. In addition, if
the exchange rate for the currency in which a Fund receives dividend or interest
payments declines against the U.S. dollar before such interest is paid as a
dividend to the Fund's shareholders, the Fund may have to sell portfolio
securities to obtain sufficient cash to pay the dividend. The Brandes
International Equity Fund may engage in forward foreign currency exchange
contracts to hedge its foreign currency exposure; however, such investments also
entail certain risks (described herein). Some foreign stock markets may have
substantially less volume than, for example, the New York Stock Exchange, and
securities of some foreign issuers may be less liquid than securities of
comparable domestic issuers. Commissions and dealer mark-ups on transactions in
foreign investments may be higher than for similar transactions in the United
States. In addition, clearance and settlement procedures may be different in
foreign countries and, in certain markets, on certain occasions, such procedures
have been unable to keep pace with the volume of securities transactions, thus
making it difficult to conduct such transactions. For example, delays in
settlement could result in temporary periods when a portion of the assets of a
Fund are uninvested and no return is earned thereon. The inability of a Fund to
make intended investments due to settlement problems could cause it to miss
attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Fund due to subsequent declines in value of the portfolio
investment or, if the Fund has entered into a contract to sell the investment,
could result in possible liability to the purchaser.

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of funds or other assets of a Fund, or
political or social instability or diplomatic developments which could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the United States economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.

Many securities of foreign issuers are represented by ADRs, which represent
the right to receive securities of foreign issuers deposited in a domestic bank
or foreign correspondent bank. Prices of ADRs are quoted in U.S. dollars.
Additional information regarding ADRs and other aspects of foreign securities
can be found in the Statement of Additional Information.

FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because the Funds may be
exposed to currency exposure independent of their securities positions, the
value of the assets of the Funds invested in foreign issuers as measured in U.S.
dollars will be affected by changes in foreign currency exchange rates. To the
extent that a Fund's assets consist of investments denominated in a particular
currency, the Fund's exposure to adverse developments affecting the value of
such currency will increase.

Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, a Fund's net asset value to fluctuate as
well. Currency exchange rates generally are determined by the forces of supply
and demand in the foreign exchange markets and the relative merits of
investments in different countries,

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actual or anticipated changes in interest rates and other complex factors, as
seen from an international perspective. Currency exchange rates also can be
affected unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the U.S. or abroad. To the extent that a substantial portion of
a Fund's total assets, adjusted to reflect the Fund's net position after giving
effect to currency transactions, is denominated in the currencies of foreign
countries, the Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.

The Brandes International Equity Fund in its sole discretion may, but is
not obligated under any circumstances to, enter into forward foreign currency
exchange contracts for hedging purposes in order to protect against anticipated
changes in future foreign currency exchange rates solely for the purpose of
settling trades. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. The market in forward foreign
currency exchange contracts offers less protection against defaults by the other
party to such instruments than is available for currency instruments traded on
an exchange. A forward contract generally has no deposit requirement, and no
commissions are generally charged at any stage for trades.

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

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

Upon instructions from the Sub-Adviser, the Fund's custodian will place
cash or liquid securities into a segregated account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
forward foreign currency exchange contracts requiring the Fund to purchase
foreign currencies or forward contracts entered into for non-hedging purposes.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will equal the amount of the Fund's commitments
with respect to such contracts. The segregated account will be marked-to-market
on a daily basis. Although the contracts are not presently regulated by the
Commodity Futures Trading Commission ("CFTC"), the CFTC may in the future assert
authority to regulate these contracts. In such event, the Fund's ability to
utilize forward foreign currency exchange contracts may be restricted.

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

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Forward contracts are subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward foreign currency
exchange contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive the Fund of unrealized profits, transaction costs
or expected benefits of a currency hedge or force the Fund to cover its purchase
or sale commitments, if any, at the current market price. The Fund will not
enter into such transactions unless the credit quality of the unsecured senior
debt or the claims-paying ability of the counterparty is considered to be
investment grade by the Sub-Adviser.

INVESTMENTS IN ADRS, EDRS, IDRS, AND GDRS. Many securities of foreign
issuers are represented by American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), International Depository Receipts ("IDRs"), and
Global Depository Receipts ("GDRs"). Each of the Funds may invest in ADRs.

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

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

EMERGING MARKET SECURITIES

The Brandes International Equity Fund may invest up to 25% of its total
assets in countries or regions with relatively low gross national product per
capita compared to the world's major economies, and in countries or regions with
the potential for rapid economic growth (emerging markets). Emerging markets
will include any country: (i) having an "emerging stock market" as defined by
the International Finance Corporation; (ii) with low-to-middle income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the Adviser to be an emerging market as defined above. The Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
or (iv) companies traded in any market that derives 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market.

RISKS RELATED TO EMERGING MARKET SECURITIES. The risks of investing in
foreign securities may be intensified in the case of investments in emerging
markets. Securities of many issuers in emerging markets may be less liquid and
more volatile than securities of comparable domestic issuers. Emerging markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when a
portion of the assets of the Fund is uninvested and no

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<PAGE>

return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. Certain
markets may require payment for securities before delivery.

Securities prices in emerging markets can be significantly more volatile
than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions on repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible at
times. Securities of issuers located in countries with emerging markets may
have limited marketability and may be subject to more abrupt or erratic price
movements.

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

FIXED-INCOME SECURITIES

The Enhanced U.S. Equity Fund may invest in fixed-income securities (the
Frontier Capital Appreciation Fund may invest in convertible securities; see
discussion below). Fixed-income securities tend to decrease in value when
prevailing interest rates rise and increase in value when prevailing interest
rates fall. Because the value of a Fund's investments in fixed-income
securities is interest rate sensitive, its performance may be affected by the
Sub-Adviser's ability to anticipate and respond to fluctuations in market
interest rates. Fixed-income securities include U.S. Government securities,
debt obligations of states or municipalities or state or municipal government
agencies or instrumentalities, corporate debt obligations, preferred stock, zero
coupon bonds and deferred interest bonds.

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

Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are considered to include
(a) securities for which the payment of principal and interest is backed by a
guarantee of or an irrevocable letter of credit issued by the U.S. Government,
its agencies, authorities or instrumentalities and (b) participation in loans
made to foreign governments or their agencies that are so guaranteed.

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The secondary market for certain of these participations is limited. Such
participations may therefore be regarded as illiquid.

INVESTING IN SMALL-CAPITALIZATION COMPANIES

All of the Funds may invest in small-capitalization companies. Investing
in securities of smaller, lesser-known companies involves greater risks than
investing in larger, more mature, better known issuers, including an increased
possibility of portfolio price volatility. Historically, small-capitalization
stocks and stocks of recently organized companies, in which all of the Funds may
also invest, have been more volatile in price than the larger-capitalization
stocks (such as those included in the S&P 500). Among the reasons for the
greater price volatility of the stocks of these smaller companies are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of smaller companies to
changing economic conditions. For example, such companies may be subject to
greater business risks resulting from their limited product lines, markets,
distribution channels, and financial and managerial resources.

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

RISKS RELATED TO SMALL-CAPITALIZATION COMPANIES. Small capitalization
companies have historically offered greater growth potential than larger ones,
but they are often overlooked by investors. However, small capitalization
companies often have limited product lines, markets or financial resources and
may be dependent on one person or a few key persons for management. The
securities of such companies may be subject to more volatile market movements
than securities or larger, more established companies, both because the
securities typically are traded in lower value and because the issuers typically
are more subject to changes in earnings and prospects.

WHEN-ISSUED SECURITIES

The Brandes International Equity Fund may from time to time purchase
securities on a "when-issued" basis. The price of such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase; during the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. To the extent
that assets of the Fund are held in cash pending the settlement of a purchase of
securities, the Fund would earn no income. While when-issued securities may be
sold prior to the settlement date, the Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The market value of
the when-issued securities may be more or less than the purchase price. Brandes
does not believe that the Fund's net asset value or income will be adversely
affected by the purchase of securities on a when-issued basis. The Fund will
establish a segregated account with the Custodian in which it will maintain cash
or liquid assets such as U.S. government securities or other high-grade debt
obligations equal in value to commitments for when-issued securities. Such
segregated securities either will mature or, if necessary, be sold on or before
the settlement date.

PUT AND CALL OPTIONS

PURCHASING OPTIONS. By purchasing a put option, the Brandes International
Equity Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed "strike" price. In return for this right,

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<PAGE>

the Fund pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts. The
Fund may terminate its position in a put option it has purchased by selling the
option, by allowing it to expire or by exercising the option. If the option is
allowed to expire, the Fund will lose the entire premium it paid. If the Fund
exercises the option, it completes the sale of the underlying instrument at the
strike price. The Fund also may terminate a put option position by closing it
out in the secondary market at its current price (I.E., by selling an option of
the same series as the option purchased), if a liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).

The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to
suffer a loss if the underlying prices do not rise sufficiently to offset the
cost of the option.

WRITING OPTIONS. When the Brandes International Equity Fund writes a call
option, it takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the Fund assumes the
obligation to sell or deliver the option's underlying instrument, in return for
the strike price, upon exercise of the option. The Fund may seek to terminate
its position in a call option it writes before exercise by closing out the
option in the secondary market at its current price (I.E., by buying an option
of the same series as the option written). If the secondary market is not
liquid for a call option the Fund has written, however, the Fund must continue
to be prepared to deliver the underlying instrument in return for the strike
price while the option is outstanding, regardless of price changes, and must
continue to segregate assets to cover its position. The Fund will establish a
segregated account with the Custodian in which it will maintain the security
underlying the option written, or securities convertible into that security, or
cash or liquid assets such as U.S. Government securities or other high-grade
debt obligations equal in value to commitments for options written.

Writing a call generally is a profitable strategy if the price of the
underlying security remains the same or falls. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in the underlying price
increases.

COMBINED POSITIONS. The Brandes International Equity Fund may purchase and
write options in combination with each other to adjust the risk and return
characteristics of the overall position. For example, the Fund may write a put
option and purchase a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.

CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options contracts, it is likely that the standardized
contracts available will not match the Brandes International Equity Fund's
current or anticipated investments exactly. The Fund may invest in options
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests.

Options prices also can diverge from the prices of their underlying
instruments, even if the underlying instruments match the Fund's investments
well. Options prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
the security prices the same way. Imperfect correlation also may

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<PAGE>

result from differing levels of demand in the options markets and the securities
markets, structural differences in how options are traded, or imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or sell
options with a greater or lesser value than the securities it wishes to hedge or
intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options positions are
poorly correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.

LIQUIDITY OF OPTIONS. There is no assurance a liquid secondary market will
exist for any particular options contract at any particular time. Options may
have relatively low trading volume and liquidity if their strike prices are not
too close to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options contracts, and may halt
trading if a contract's price moves upward or downward more than the limit in a
given day. On volatile trading days when the price fluctuation limit is reached
or a trading halt is imposed, it may be impossible for the Brandes International
Equity Fund to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the Fund to continue to hold a position
until delivery or expiration regardless of changes in its value. As a result,
the Fund's access to other assets held to cover its options positions also could
be impaired.

OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and strike
price, the terms of over-the-counter options, I.E., options not traded on
exchanges ("OTC options"), generally are established through negotiation with
the other party to the option contract. While this type of arrangement allows
the Brandes International Equity Fund greater flexibility to tailor an option to
its needs, OTC options generally involve greater credit risk than
exchange-traded options, which are guaranteed by the clearing organizations of
the exchanges where they are traded. OTC options are considered to be illiquid,
since these options generally can be closed out only by negotiation with the
other party to the option.

STOCK INDEX OPTIONS. The distinctive characteristics of options on stock
indices create certain risks that are not present with stock options generally.
Because the value of an index option depends on movements in the level of the
index rather than the price of a particular stock, whether the Brandes
International Equity Fund will realize a gain or loss on an options transaction
depends on movements in the level of stock prices generally rather than
movements in the price of a particular stock. Accordingly, successful use of
options on a stock index will be subject to Brandes' ability to predict
correctly movements in the direction of the stock market generally. Index
prices may be distorted if trading in certain stocks included in the index is
interrupted. Trading of index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this were to occur, the Fund would not be able to
close out positions it holds. It is the policy of the Fund to engage in options
transactions only with respect to an index which Brandes believes includes a
sufficient number of stocks to minimize the likelihood of a trading halt in the
index.

FUTURES CONTRACTS

The Brandes International Equity Fund may buy and sell stock index futures
contracts. Such a futures contract is an agreement between two parties to buy
and sell an index for a set price on a future date. Futures contracts are
traded on designated "contract markets" which, through their clearing
corporations, guarantee performance of the contracts. A stock index futures
contract does not require the physical delivery of securities, but merely
provides for profits and losses resulting from changes in the market value of
the contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's
expiration date, a final cash settlement occurs. Changes in the market value of
a particular stock index futures contract reflects changes in the specified
index of equity securities on which the future is based.

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<PAGE>

There are several risks in connection with the use of futures contracts.
In the event of an imperfect correlation between the index and the portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of unlimited loss. Further,
unanticipated changes in stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures on stock
indexes.

In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.

Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.

The Fund will engage in futures transactions only as a hedge against the
risk of unexpected changes in the values of securities held or intended to be
held by the Fund. As a general rule, the Fund will not purchase or sell
futures if, immediately thereafter, more than 25% of its net assets would be
hedged. In addition, the Fund will not purchase or sell futures or related
options if, immediately thereafter, the amount of margin deposits on the
Fund's existing futures positions would exceed 5% of the market value of the
Fund's net assets.

ASSET GROWTH

Each Fund's present asset size may not be sufficient to invest in the
number of different stocks indicated above or to take advantage of certain
investment opportunities, and they may not be as diversified as other mutual
fund portfolios. There is no certainty as to how rapidly a Fund's assets will
increase.

SECURITIES LENDING

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

RESTRICTED AND ILLIQUID SECURITIES

The Brandes International Equity Fund and the Turner Core Growth
Fund may purchase limited amounts of illiquid securities (i.e., securities
which may not be sold or disposed of in the ordinary course of business
within seven days at approximately the price at which the Company has valued
the investment). The Brandes International Equity Fund and the Frontier
Capital Appreciation Fund may purchase certain restricted securities (i.e.,
securities which are not registered under the Securities Act of 1933, as
amended (the "1933 Act")) but that can be sold to "qualified institutional
buyers" in accordance with the requirements stated in Rule 144A under the
1933 Act ("Rule 144A Securities"). A Rule 144A Security may be considered
illiquid. Investments in illiquid securities and restricted securities are
not anticipated to exceed, in the aggregate, 5% of a Fund's assets, but see
non-fundamental investment restrictions 12 and 13, respectively, below.

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

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

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

RISKS RELATED TO RULE 144A SECURITIES. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933
("restricted securities"), securities which are otherwise not readily marketable
such as over-the-counter, or dealer traded, options, and repurchase agreements
having a maturity of more than seven days. Mutual funds do not typically hold a
significant amount of restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities,
and the Fund might not be able to dispose of such securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions. The Fund might also have to register such restricted securities in
order to dispose of them, resulting in additional expense and delay.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act of 1933,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accord with Rule 144A promulgated by the Securities and Exchange Commission,
the Directors may determine that such securities, up to a limit of 5% of the
Fund's total net assets, are not illiquid notwithstanding their legal or
contractual restrictions on resale.

13
<PAGE>

CONVERTIBLE SECURITIES

The Brandes International Equity Fund, the Frontier Capital Appreciation
Fund, and the Enhanced U.S. Equity Fund may invest in convertible securities.
Convertible securities may include corporate notes or preferred stock but
more commonly are long-term debt obligations of the issuer convertible at a
stated exchange rate into common stock of the issuer. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates
decline. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality. However, when the
market price of the common stock underlying a convertible security exceeds
the conversion price, the price of the convertible security tends to reflect
the value of the underlying common stock. As the market price of the
underlying common stock declines, the convertible security tends to trade
increasingly on a yield basis, and thus may not depreciate to the same extent
as the underlying common stock. Convertible securities generally rank senior
to common stock in an issuer's capital structure and are consequently of
higher quality and entail less risk of declines in market value than the
issuer's common stock. However, the extent to which such common-stock-like
risk is reduced for the holder of a convertible security is inversely related
to the amount by which the convertible security's market price exceeds its
value as a fixed-income security. The Brandes International Equity Fund may
only purchase convertible securities rated investment grade at the time of
purchase by S&P or Moody's or if not so rated, considered by the Fund's
Sub-Adviser to be of equivalent investment quality.

WARRANTS AND RIGHTS

The Brandes International Equity Fund, the Frontier Capital Appreciation
Fund, and the Enhanced U.S. Equity Fund each may invest in warrants or rights
which entitle the holder to buy equity securities at a specific price for a
specific period of time but will do so only if such equity securities are
deemed appropriate by the Sub-Adviser for investment by the Fund. Warrants
and rights have no voting rights, receive no dividends and have no rights
with respect to the assets of the issuer.

REPURCHASE AGREEMENTS

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

RISKS RELATING TO REPURCHASE AGREEMENTS. Although repurchase agreements
carry certain risks not associated with direct investments in securities, the
Fund intends to enter into repurchase agreements only with banks and dealers
believed by the Adviser to present minimum credit risks in accordance with
guidelines established by the Board of Directors. Brandes will review and
monitor the creditworthiness of such institutions under the Board's general
supervision. To the extent that the proceeds from any sale of collateral upon a
default in the obligation to repurchase were less than the repurchase price, the
purchaser would suffer a loss. If the other party

14
<PAGE>

to the repurchase agreement petitions for bankruptcy or otherwise becomes
subject to bankruptcy or other liquidation proceedings, there might be
restrictions on the purchaser's ability to sell the collateral and the purchaser
could suffer a loss. However, with respect to financial institutions whose
bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy Code,
the Fund intends to comply with provisions under such Code that would allow it
immediately to resell the collateral.

OTHER INVESTMENT COMPANIES

The Brandes International Equity Fund reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies including money market funds, business development
companies, and small business investment companies (although it is anticipated
that such investments will not exceed 5% of total assets). The Fund may not
invest more than 5% of its total assets in the securities of any one investment
company nor in more than 3% of the voting securities of any other investment
company. The Fund will indirectly bear its proportionate share of any advisory
fees paid by investment companies in which it invests in addition to the
management fee paid by the Fund.

FUND POLICIES

FUNDAMENTAL RESTRICTIONS

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

None of the Funds may:

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

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

15
<PAGE>

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

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

5. Invest in commodities.

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

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

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

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

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

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

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

NON-FUNDAMENTAL RESTRICTIONS

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

None of the Funds may:

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

2. Write call or put options (except for the Brandes International Equity
Fund).

16
<PAGE>

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

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

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

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

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

8. Invest in options or futures (except for the Brandes International
Equity Fund).

9. Invest in when-issued securities (or delayed-delivery or forward
commitment contracts)(except for the Brandes International Equity
Fund).

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

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

FUND-SPECIFIC RESTRICTIONS:

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

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

14. Each of the Frontier Capital Appreciation Fund and the Turner Core
Growth Fund may invest no more than 10% of the value of their total
assets in securities of foreign issuers that are listed on United
States exchanges or are represented by American Depository Receipts.

17
<PAGE>

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

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

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

INTERPRETIVE RULES

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

TEMPORARY DEFENSIVE POSITIONS

Each fund may, for temporary defensive purposes, invest in any type of
securities which the Sub-Adviser believes to be more conservative than the
securities in which the Fund normally invests.

PORTFOLIO TURNOVER

The portfolio turnover rate is calculated for each Fund by dividing the lesser
of the dollar amount of sales or purchases of portfolio securities by the
average monthly value of that Fund's portfolio securities, excluding securities
having a maturity at the date of purchase of one year or less. For each of the
fiscal years ended December 31, 1997 and 1998, the portfolio turnover rates for
the Funds were as follows:

- ----------------------------------------------------------------------------------------------------------------
Fund Portfolio Turnover Rate Portfolio Turnover Rate
- ----------------------------------------------------------------------------------------------------------------
1997 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brandes International Equity Fund (1) 74% 116%
Turner Core Growth Fund 206% 242%
Frontier Capital Appreciation Fund 61% 68%
Enhanced U.S. Equity Fund 52% 50%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Brandes began to manage this Fund on July 1, 1998.

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

18
<PAGE>

MANAGEMENT OF THE FUNDS

BOARD OF DIRECTORS

Overall responsibility for management and supervision of the Company rests
with the Board of Directors. The Directors approve all significant agreements
between the Company and the persons and companies that furnish services to the
Company.

MANAGEMENT INFORMATION

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

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------

Position(s) Principal Occupation(s)
Name, Address, and Age Held with the Company During Past 5 Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter W. Mullin* Director Chairman and Chief Executive Officer, Mullin
(Born: 1/14/41) Consulting, Inc., Insurance Agency
- ---------------------------------------------------------------------------------------------------------
David M. Spungen* Director Director of CMS Capital Management, a division
(Born: 10/26/61) of CMS Investment Resources, Inc.
- ---------------------------------------------------------------------------------------------------------
Gerald Bidwell Director President and Chief Executive Officer, Bidwell &
209 SW Oak St. Co., a discount brokerage firm.
Portland, OR 97204
(Born: 6/6/42)
- ---------------------------------------------------------------------------------------------------------
Neil E. Goldschmidt Director President, Neil Goldschmidt, Inc., law office.
222 SW Columbia
Suite 1850
Portland, OR 97201
(Born: 6/16/40)
- ---------------------------------------------------------------------------------------------------------
Philip W. Halpern Director Vice President and Chief Investment Officer, The
1400 Fones Road S.E. University of Chicago, since July 21, 1998.
Olympia, Washington 98501 Treasurer and Chief Investment Officer, California
(Born: 7/19/54) Institute of Technology, September 1996 to July 1998.
Formerly, Chief Investment Officer, Washington State
Investment Board.
- ---------------------------------------------------------------------------------------------------------
Daniel F. Byrne* President Senior Vice President, Product Development and
(Born: 10/27/56) Sales Support, of M Financial Group, since 1992.
- ---------------------------------------------------------------------------------------------------------
David W. Schutt* Secretary and Treasurer Secretary and Treasurer of M Life and Director
(Born: 7/4/55) of Finance for M Financial Group, since 1992.
- ---------------------------------------------------------------------------------------------------------
</TABLE>

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

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

Each non-interested Director receives as compensation an annual retainer of
$10,000 plus $500 per meeting of the Board or a committee thereof which he
attends.

Directors and Officers, as a group, owned less than 1% of each Fund as of
December 31, 1998.

During the year ended December 31, 1998, the Directors of the Company
received the following compensation from the Company:

19
<PAGE>

- ---------------------------------------------------------------------------------------------------------
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from the Company
Compensation the Company's Benefits upon and Fund Complex
Name of Person, Position from the Company Expenses 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 $11,500 $0 $0 $11,500
Director
- ---------------------------------------------------------------------------------------------------------
Neil E. Goldschmidt $11,000 $0 $0 $11,000
Director
- ---------------------------------------------------------------------------------------------------------
Philip W. Halpern $11,500 $0 $0 $11,500
Director
- ---------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER

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

The Adviser is controlled by M Financial Holdings Incorporated, which does
business under the name M Financial Group ("M Financial Group"). M Financial
Group is engaged in providing product development and marketing support services
for participating insurance agents, who, collectively, own a majority of the
outstanding stock of M Financial Group. M Financial Group receives from
insurance carriers compensation based, in part, upon the volume of insurance
premiums generated by its participating agents.

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

INVESTMENT ADVISORY AGREEMENT

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

20
<PAGE>

The investment advisory agreement provides that the Adviser may render
similar services to others (although there is no current intent for the Adviser
to do so) so long as the services that it provides to the Company are not
impaired thereby. The investment advisory agreement also provides that the
Adviser will not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
management of the Company, except for (i) willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of reckless
disregard of its duties or obligations under the investment advisory agreement,
and (ii) to the extent specified in Section 36(b) of the 1940 Act concerning
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation.

The investment advisory agreement was initially approved for each Fund by
the Board of Directors, including a majority of the Directors who are not
parties to the investment advisory agreement or "interested persons" (as such
term is defined in the 1940 Act) of any party thereto (the "non-interested
Directors"), on November 20, 1995 and re-approved in connection with a change of
control of the Adviser on October 16, 1997. The current advisory agreement is
dated January 3, 1998. It will remain in effect for two years from its
effective date and from year to year thereafter, provided such continuance is
specifically approved as to each Fund at least annually by (a) the vote of a
majority of the outstanding voting securities of that Fund or by the Board of
Directors, and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Fund at any time by the Board of Directors or by vote of a majority of
the votes attributable to outstanding voting securities of the applicable Fund
(a) without penalty and (b) on 60 days' written notice to the Adviser. The
agreement is also terminable by the Adviser on 90 days' written notice to the
Company. For the years ended December 31, 1998 and December 31, 1997 and the
period January 4, 1996 (commencement of operations) to December 31, 1996,
respectively, the Funds incurred the following amounts as investment advisory
fees payable to the Adviser: Brandes International Equity Fund, $92,933,
$51,064 and $25,922; Turner Core Growth Fund, $28,917, $13,152 and $8,040;
Frontier Capital Appreciation Fund, $211,960, $79,263 and $17,411; Enhanced U.S.
Equity Fund, $58,138, $18,371 and $6,289.

EXPENSES OF THE COMPANY

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

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

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, exceed 0.25% of the
Fund's estimated average daily net assets on an annual basis. In 1998, 1997 and
1996, respectively, the Adviser paid the following amounts on behalf of each
Fund: Brandes International Equity Fund $200,780, $176,933 and $146,502; Turner
Core Growth Fund $174,954, $160,750 and $137,012; Frontier Capital Appreciation
Fund $141,932, $150,764 and $133,645; Enhanced U.S. Equity Fund $162,354,
$154,486 and $130,220. The Adviser has extended this same provision through
December 31, 1999.

<PAGE>

SUB-ADVISERS

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 at
the following annual rates:

- -------------------------------------------------------------------------
FUND SUB-ADVISORY FEE
- -------------------------------------------------------------------------
<S> <C>
Brandes International Equity Fund 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 over $100 million
- -------------------------------------------------------------------------
Turner Core Growth Fund 0.30%
- -------------------------------------------------------------------------
Frontier Capital Appreciation Fund 0.75%
- -------------------------------------------------------------------------
Enhanced U.S. Equity Fund 0.40% on the first $25 million
0.30% on the next $75 million
0.15% on amounts above $100 million
- -------------------------------------------------------------------------
</TABLE>

Since they are paid by the Adviser, the sub-advisory fees form a portion
of, and are not in addition to, the Advisory fees described in the
Prospectus. For the years ended December 31, 1998 and December 31, 1997 and
the period January 4, 1996 (commencement of operations) to December 31, 1996,
respectively, the Adviser paid the Sub-Advisers the following sub-advisory
fees: Brandes International Equity Fund - $79,813, $43,770 and $22,219,
Turner Core Growth Fund - $19,297, $8,768 and $5,360; Frontier Capital
Appreciation Fund -$176,737, $66,054 and $14,509, Enhanced U.S. Equity Fund -
$42,336, $13,361 and $4,573.

Brandes Investment Partners, L.P. replaced Edinburgh Fund Managers plc as
the Sub-Adviser to the Brandes International Equity Fund effective July 1, 1998.
At the same time, the Fund's name was changed from Edinburgh Overseas Equity
Fund to Brandes International Equity Fund.

CHANGE OF SUB-ADVISERS. The Company and the Adviser have received an
exemptive order from the SEC that permits the Adviser, with the approval of the
Company's Board of Directors, to retain a different Sub-Adviser for a Fund
without submitting the investment sub-advisory agreements to a vote of the
Fund's shareholders. The Company will notify shareholders in the event of any
change in the identity of the Sub-Adviser of a Fund.

DISTRIBUTOR

M Holdings Securities, Inc. acts as the distributor (the "Distributor") for
each of the Funds. The Distributor is a wholly-owned subsidiary of M Financial
Group. The principal executive offices of the Distributor are located at River
Park Center, 205 SE Spokane Street, Portland, Oregon 97202. The Distributor is
registered with the SEC as a broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers ("NASD").

CUSTODIAN AND TRANSFER AGENT

Pursuant to a custodian agreement and a transfer agency and service
agreement with the Company, Investors Bank & Trust Company ("Investors Bank"),
200 Clarendon Street, Boston, MA 02116, holds the cash and portfolio securities
of the Company as custodian and acts as the Company's transfer agent.

<PAGE>

Investors Bank is responsible for holding all securities and cash of each
Fund, receiving and paying for securities purchased, delivering against payment
securities sold, and receiving and collecting income from investments, making
all payments covering expenses of the Company, all as directed by persons
authorized by the Company. Investors Bank does not exercise any supervisory
function in such matters as the purchase and sale of portfolio securities,
payment of dividends, or payment of expenses of the Funds or the Company.
Portfolio securities of the Funds purchased domestically are maintained in the
custody of Investors Bank and may be entered into the Federal Reserve,
Depository Trust Company, or Participant's Trust Company book entry systems.
Pursuant to the custodian agreement, portfolio securities purchased outside the
United States will be maintained in the custody of various other custodians or
subcustodians, including foreign banks and foreign securities depositories, as
are approved by the Board of Directors, in accordance with regulations under the
1940 Act.

LEGAL COUNSEL

Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2415, has provided advice to the Company with respect to
certain matters relating to federal securities laws.

BROKERAGE ALLOCATION AND OTHER PRACTICES

The Sub-Advisers are responsible for decisions to buy and sell securities
for the Funds, the selection of brokers and dealers to effect the transactions
and the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law,
affiliates of the Adviser or the Sub-Advisers. Purchases and sales of certain
portfolio securities on behalf of a Fund are frequently placed by a Sub-Adviser
with the issuer or a primary or secondary market-maker for these securities on
a net basis, without any brokerage commission being paid by the Fund. Trading
does, however, involve transaction costs. Transactions with dealers serving
as market-makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made which will include an underwriting
fee paid to the underwriter.

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

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

23
<PAGE>

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

The Funds paid the following brokerage commissions for the years ended
December 31, 1998 and December 31, 1997, and the period January 4, 1996
(commencement of operations) to December 31, 1996, respectively: Brandes
International Equity Fund - $57,561, $28,198 and $26,916; Turner Core Growth
Fund - $36,874, $12,649 and $12,272; Frontier Capital Appreciation Fund -
$68,225, $31,995 and $12,880; Enhanced U.S. Equity Fund - $11,294, $4,552 and
$1,461.

CAPITAL STOCK AND OTHER SECURITIES

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

Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared for the respective class and, upon
liquidation or dissolution, in net assets allocated to such class remaining
after satisfaction of outstanding liabilities. The shares of each class, when
issued, will be fully paid and nonassessable and have no preemptive or
conversion rights.

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

Under normal circumstances, subject to the reservation of rights explained
above, the Company will redeem shares of the Funds in cash within seven days.
However, the right of a shareholder to redeem shares and the date of payment by
the Company may be suspended for more than seven days for any period during
which the New York Stock Exchange is closed, other than the customary weekends
or holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for a Fund to dispose of securities owned by it or
fairly to determine the value of its net assets; or for such other period as the
SEC may by order permit for the protection of shareholders.

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

24
<PAGE>

At December 31, 1998, the ownership of each Fund was as follows:

- -------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF OWNERSHIP
- -------------------------------------------------------------------------------------------------------------------------------
John Hancock Variable Pacific Life New York
M Life Insurance Co. Life Insurance Co. Insurance Co. Life Insurance Co.*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Brandes International Equity Fund 19.0% 66.1% 14.9% --
- -------------------------------------------------------------------------------------------------------------------------------
Turner Core Growth Fund 14.9% 58.5% 26.5% 0.1%
- -------------------------------------------------------------------------------------------------------------------------------
Frontier Capital Appreciation Fund 5.1% 62.2% 32.4% 0.3%
- -------------------------------------------------------------------------------------------------------------------------------
Enhanced U.S. Equity Fund 13.5% 16.3% 69.7% 0.5%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* After December 31, 1998, New York Life Insurance Co. will no longer purchase
shares of the Funds.

The addresses of each of the 5% owners of the Funds' shares are as follows:

M Life Insurance Co., 205 SE Spokane Street, Portland, OR 97202
John Hancock Variable Life Insurance Company, 200 Clarendon Street,
Boston, MA 02116
Pacific Life Insurance Co., 700 Newport Center Drive, Newport Beach, CA 92660

PURCHASE, REDEMPTION AND PRICING OF SHARES

DETERMINATION OF NET ASSET VALUE

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

Portfolio assets of the Funds are valued as follows:

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

(b) over-the-counter securities not quoted on Nasdaq are valued at the
last sale price on the valuation day or, if no sale occurs, at the
mean between the last bid and asked prices;

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

25
<PAGE>

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

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

Portfolio securities traded on more than one U.S. national securities
exchange or foreign securities exchange are valued at the last sale price on
each business day at the close of the exchange representing the principal market
for such securities. The value of all assets and liabilities expressed in
foreign currencies will be converted into U.S. dollar values at the mean between
the buying and selling rates of such currencies against U.S. dollars last quoted
by any major bank. If such quotations are not available, the rate of exchange
will be determined in good faith by or under procedures established by the Board
of Directors.

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

Under the amortized cost method of valuation, securities are valued at cost
on the date of their acquisition, and thereafter a constant accretion of any
discount or amortization of any premium to maturity is assumed, regardless of
the impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation, it may result in periods in
which value as determined by amortized cost is higher or lower than the price a
Fund would receive if it sold the security. During such periods, the quoted
yield to investors may differ somewhat from that obtained by a similar fund or
portfolio which uses available market quotations to value all of its portfolio
securities.

TAX INFORMATION

Each Fund intends to qualify each year under subchapter M of the Internal
Revenue Code. If a Fund fails to so qualify it may be required to pay certain
taxes.

SOURCES OF GROSS INCOME. To qualify for treatment as a regulated investment
company, a Fund must, among other things, derive its income from certain
sources. Specifically, in each taxable year, a Fund must generally derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of securities or
foreign currencies, or other income derived with respect to its business of
investing in securities or currencies. For purposes of this test, gross income
generally is determined without regard to losses from the sale or other
disposition of stock or securities or other Fund assets.

DIVERSIFICATION OF ASSETS. To qualify for treatment as a regulated investment
company, a Fund must also satisfy certain requirements with respect to the
diversification of its assets. A Fund must have, at the close of each quarter
of the taxable year, at least 50% of the value of its total assets invested in
cash, cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities which, in respect of any one issuer,
do not represent more than 5% of the value of the assets of the Fund nor more
than 10% of the voting

26
<PAGE>

securities of that issuer. In addition, at those times, not more than 25% of
the value of the Fund's assets may be invested in securities (other than U.S.
Government securities or the securities of other regulated investment companies)
of any one issuer, or of two or more issuers which the Fund controls and which
are engaged in the same or similar trades or businesses or related trades or
businesses. A Fund's investments in U.S. Government securities are not subject
to these limitations. The foregoing diversification requirements are in
addition to those imposed by the 1940 Act.

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

PERFORMANCE INFORMATION

Performance figures for one or more of the Funds will not be disseminated
directly to the public by the Company unless accompanied by appropriate
disclosure regarding the performance of the separate accounts offered by the
Participating Insurance Companies.

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

Average annual total return for a specified period is derived by
calculating the actual dollar amount of the investment return on a $1,000
investment in a Fund made at the beginning of the period, and then calculating
the annual compounded rate of return which would produce that amount, assuming a
redemption at the end of the period according to the following formula:

n
P (1 + T) = ERV

Where P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the stated period of a
hypothetical $1,000 payment made at the beginning of the
stated period

This calculation assumes a complete redemption of the investment. It also
assumes that all dividends and distributions are reinvested at net asset value
on the reinvestment dates during the period.

The Company also may from time to time quote or otherwise use year-by-year
total return, cumulative total return and yield information for the Funds in
advertisements, shareholder reports, and sales literature. Year-by-year total
return and cumulative total return for a specified period are each derived by
calculating the percentage rate required to make a $1,000 investment in a Fund
(assuming all distributions are reinvested) at the beginning of such period
equal to the actual total value of such investment at the end of such period.

Yield is computed by dividing net investment income earned during a recent
30-day period by the product of the average daily number of shares outstanding
and entitled to receive dividends during the period and the price per share on
the last day of the relevant period. The results are compounded on a
bond-equivalent (semiannual) basis and then annualized. Net investment income
per share is equal to the dividends and interest earned during the

27
<PAGE>

period, reduced by accrued expenses for the period. The calculation of net
investment income for these purposes may differ from the net investment income
determined for accounting purposes. Performance data for the Funds will not
reflect charges deducted under a policy through which it is purchased. If
policy charges were taken into account, such performance data would reflect
lower returns.

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

In addition, the Company may from time to time publish the performance of
its Funds relative to certain performance rankings and indices. From time to
time the Company may publish an indication of the Funds' past performance as
measured by independent sources such as (but not limited to) Lipper Analytical
Services, Weisenberger Investment Companies Service, Donoghue's Money Fund
Report, Barron's, Business Week, Changing Times, Financial World, Forbes,
Fortune, Money, Personal Investor, Sylvia Porter's Personal Finance and The Wall
Street Journal. The Company may also advertise information which has been
provided to the NASD for publication in regional and local newspapers. In
addition, the Company may from time to time advertise its performance relative
to certain indices and benchmark investments, including (but not limited to):
(a) the Lipper Analytical Services, Inc. Mutual Fund Performance Analysis,
Fixed-Income Analysis and Mutual Fund Indices (which measure total return and
average current yield for the mutual fund industry and rank mutual fund
performance); (b) the CDA Mutual Fund Report published by CDA Investment
Technologies, Inc. (which analyzes price, risk and various measures of return
for the mutual fund industry); (c) the Consumer Price Index published by the
U.S. Bureau of Labor Statistics (which measures changes in the price of goods
and services); (d) Stocks, Bonds, Bills and Inflation published by Ibbotson
Associates (which provides historical performance figures for stocks, government
securities and inflation); (e) the Hambrecht & Quist Growth Stock Index; (f) the
Nasdaq OTC Composite Prime Return; (g) the Russell Midcap Index; (h) the Russell
2000 Index - Total Return; (i) the ValueLine Composite-Price Return; (j) the
Wilshire 4500 Index; (k) the Salomon Brothers' World Bond Index (which measures
the total return in U.S. dollar terms of government bonds, Eurobonds and foreign
bonds of ten countries, with all such bonds having a minimum maturity of five
years); (l) the Shearson Lehman Brothers Aggregate Bond Index or its component
indices (the Aggregate Bond Index measures the performance of Treasury, U.S.
Government agencies, mortgage and Yankee bonds); (m) the S&P Bond indices (which
measure yield and price of corporate, municipal and U.S. Government bonds); (n)
the J.P. Morgan Global Government Bond Index; (o) Donoghue's Money Market Fund
Report (which provides industry averages of 7-day annualized and compounded
yields of taxable, tax-free and U.S. Government money market funds); (p) other
taxable investments including certificates of deposit, money market deposit
accounts, checking accounts, savings accounts, money market mutual funds and
repurchase agreements; (q) historical investment data supplied by the research
departments of Goldman Sachs, Lehman Brothers, CS First Boston, Morgan Stanley
(including EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin & Jenrette
or other providers of such data; (r) the FT-Actuaries Europe and Pacific Index;
(s) mutual fund performance indices published by Variable Annuity Research &
Data Service; (t) S&P 500 Index; and (u) mutual fund performance indices
published by Morningstar, Inc. The composition of the investments in such
indices and the characteristics of such benchmark investments are not identical
to, and in some cases are very different from, those of a Fund's portfolio.
These indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Company to calculate a Fund's performance figures.

The Company may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish the Sub-Advisers'
views as to markets, the rationale for a Fund's investments and discussions of a
Fund's current asset allocation.

From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Fund. Such advertisements or information may include symbols,

28
<PAGE>

headlines or other material which highlight or summarize the information
discussed in more detail in the communication.

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

AVERAGE ANNUAL TOTAL RETURN

- --------------------------------------------------------------------------------------------------------------
Brandes International Turner Core Frontier Capital Enhanced U.S
Equity Fund* Growth Fund Appreciation Fund Equity Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the one year ended 12/31/98 15.37% 34.56% 1.68% 23.69%
- --------------------------------------------------------------------------------------------------------------
For the Period 1/4/96* to 12/31/98 5.46% 27.57% 17.46% 26.69%
- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Funds commenced operations on January 4, 1996.

OTHER INFORMATION

FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP acts as the Company's independent public
accountants. The Financial Statements for the Funds, which are contained in the
Company's Annual Report to Shareholders, are incorporated herein by reference.

COMPANY NAME

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

OTHER INFORMATION

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

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

29
<PAGE>

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

30
<PAGE>

APPENDIX A

DESCRIPTION OF CORPORATE BOND RATINGS 1/

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS

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

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

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

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

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

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

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

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

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

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

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

A-1

<PAGE>

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

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

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

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

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

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

DESCRIPTION OF STANDARD & POOR'S RATING SERVICE'S CORPORATE BOND RATINGS

INVESTMENT GRADE

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

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

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

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

SPECULATIVE GRADE

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

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

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

A-2
<PAGE>

CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.

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

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

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

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

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

N.R.: Not rated.
_______________________

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

A-3
<PAGE>

APPENDIX B

DESCRIPTION OF COMMERCIAL PAPER RATINGS

COMMERCIAL PAPER - MOODY'S INVESTORS SERVICE. INC.

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

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

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

COMMERCIAL PAPER - STANDARD & POOR'S RATINGS SERVICE

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

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

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

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

B-1