<PAGE>
As filed with the Securities and Exchange Commission on February 29, 2000
File Nos. 33-95472 and 811-9082
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
M FUND, INC.
(Exact Name of Registrant as Specified in Charter)
River Park Center
205 S.E. Spokane Street
Portland, Oregon 97202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (503) 232-6960
(Name and Address of Agent for Service)
<TABLE>
<S><C>
Copies to:
Daniel F. Byrne, President Cynthia Surprise Frederick R. Bellamy, Esquire
M Fund, Inc. Investors Bank & Trust Company Sutherland, Asbill & Brennan LLP
River Park Center 200 Clarendon Street 1275 Pennsylvania Avenue, N.W.
205 S.E. Spokane Street Boston, MA 02116 Washington, D.C. 20004-2404
Portland, Oregon 97202
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on May 1, 2000 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
M FUND, INC.
PROSPECTUS
MAY 1, 2000
BRANDES INTERNATIONAL EQUITY FUND
TURNER CORE GROWTH FUND
FRONTIER CAPITAL APPRECIATION FUND
CLIFTON ENHANCED U.S. EQUITY FUND
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
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 ..................................................... 4
Turner Core Growth Fund................................................................ 7
Frontier Capital Appreciation Fund..................................................... 10
Clifton Enhanced U.S. Equity Fund (formerly Enhanced U.S. Equity Fund)................. 13
Investment Strategies and Risks........................................................ 15
Management of the Funds................................................................ 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
- Clifton Enhanced U.S. Equity Fund (formerly 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 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
variable annuity policies and 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 may also invest in
emerging market securities.
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 highly
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>
<S> <C>
1996** -0.63%
1997 2.26%
1998 15.37%
1999 47.86%
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEAR
-----------------------------------------
1996 1997 1998 1999
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Total Return................................................... -0.63% 2.26% 15.37% 47.86%
</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
20.83% (for the quarter ended December 31, 1999) 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 insurance company 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:
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, 1999
<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR THREE YEARS (1/4/96)
----------- ------------- -------------
<S> <C> <C> <C>
Brandes International Equity Fund..................................................... 47.86% 20.38% 14.78%
------ ------ ------
MSCI EAFE Index....................................................................... 26.73 15.62 13.21
------ ------ ------
</TABLE>
6
<PAGE>
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. Examples of
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>
<S> <C>
1996* 19.99%
1997 28.32%
1998 34.56%
1999 40.11%
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEAR
------------------------------------------
1996* 1997 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total Return...................................................................... 19.99% 28.32% 34.56% 40.11%
</TABLE>
* The Fund started on January 4, 1996.
During the period shown in the bar chart, the highest quarterly return was
24.75% (for the quarter ended December 31, 1999) and the lowest quarterly return
was -10.20% (for the quarter ended September 30, 1998).
The performance information shown here does not reflect fees that are paid
by the insurance company 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 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 that are regularly traded on the New York Stock Exchange
(NYSE), the American Stock Exchange or the NASDAQ OTC markets.
8
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR THREE YEARS (1/4/96)
----------- ------------- ------------
<S> <C> <C> <C>
Turner Core Growth Fund.................................................................. 40.11% 34.24% 30.60%
------ ------ ------
Wilshire 5000 Stock Index................................................................ 23.56 26.04 24.89
------ ------ ------
</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 small to
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
<TABLE>
<S> <C>
1996* 30.31%
1997 22.13%
1998 1.68%
1999 44.17%
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEAR
------------------------------------------
1996* 1997 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total Return.......................................................... 30.31% 22.13% 1.68% 44.17%
</TABLE>
* 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 performance information shown here does not reflect fees that are paid
by the insurance company 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 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, 1999
<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR THREE YEARS (1/4/96)
----------- ------------- ------------
<S> <C> <C> <C>
Frontier Capital Appreciation Fund..................................................... 44.17% 21.43% 23.64%
------ ------ ------
Russell 2500 Stock Index............................................................... 24.13 15.72 16.59
------ ------ ------
</TABLE>
12
<PAGE>
CLIFTON ENHANCED U.S. EQUITY FUND (formerly Enhanced U.S. Equity Fund)
THE FUND'S INVESTMENT GOAL
Q. What is the Clifton 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 Clifton Enhanced U.S. Equity Fund's principal investment
strategy?
A. The Fund invests in futures contracts on the Standard & Poor's 500
Composite Stock Price Index (the S&P 500 or the Index) to have a 100%
exposure to the S&P 500 to try to earn a return equal to that of the
Index. These futures contracts do not require a cash outlay (although
certain margin requirements must be met) so all of the Fund's
assets will be invested in a "cash" portfolio of high quality debt
instruments designed to add a small incremental return above that of
the Index (and also to meet the margin requirements).
The Fund's Sub-Adviser uses a combination of the S&P 500 futures
contracts and the cash portfolio to create a synthetic enhanced S&P 500
product. The S&P 500 represents a sampling of the stocks of the largest U.S.
companies along with stocks of foreign companies that are publicly traded in
the United States. The Sub-Adviser closely monitors and manages the equity
portion of the Fund to maintain a 100% exposure to the S&P 500 Index. The
Sub-Adviser does not leverage the Fund's equity market exposure.
The cash (or fixed income) investments will consist primarily of:
(1) A "margin pool" of approximately 5 to 10% of the Fund's assets,
invested primarily in U.S. Treasury bills and short-term money market
instruments such as shares of a money market fund (to satisfy margin
requirement for the S&P 500 of futures contracts);
(2) A "liquidity pool" of approximately 40 to 70% of the Fund's assets,
invested primarily in high grade commercial paper, short-term investment
grade corporate bonds rated A or better, and short-term mortgage and other
asset-backed securities (this segment of the cash portfolio is designed
primarily for liquidity, and also for a small incremental return); and
(3) An "enhanced cash pool" of approximately 20 to 50% of the Fund's
assets, invested primarily in floating rate mortgage-backed securities,
corporate floating rate notes, other variable rate instruments, and market
neutral positions (this segment is designed primarily to enhance the overall
return of the Fund).
THE KEY RISKS
The Clifton 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 (as represented by the S&P 500) goes
down.
- If the debt or cash equivalent holdings are downgraded, or go into
default.
- If interest rates increase.
- Due to liquidity or other problems in the futures markets.
- Because of interest rate caps or unanticipated levels of prepayment
on the mortgages or other instruments underlying mortgage-backed or
asset-backed securities.
- If the portfolio manager's strategies (especially for the enhanced cash
pool) result in losses, instead of the anticipated incremental
enhancement of earnings.
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 Clifton 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 reflects results obtained using an investment
style that differs considerably from that used by the current portfolio
manager and does not necessarily indicate how the Fund will perform in the
future.
CLIFTON ENHANCED U.S. EQUITY FUND PERFORMANCE*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996** 23.67%
1997 32.68%
1998 23.69%
1999 26.07%
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEAR
-----------------------------------------
1996** 1997 1998 1999
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Total Return........................................................... 23.67% 32.68% 23.69% 26.07%
</TABLE>
* On May 1, 2000, the Fund replaced its previous Sub-Adviser, Franklin
Portfolio Associates LLC, with The Clifton Group. The Fund was previously
known as the Enhanced U.S. Equity Fund and changed its name to the Clifton
Enhanced U.S. Equity Fund effective May 1, 2000.
** 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 performance information shown here does not reflect fees that are paid
by the insurance company 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 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, 1999
<TABLE>
<CAPTION>
SINCE FUND
STARTED
ONE YEAR THREE YEARS (1/4/96)
----------- ------------- -------------
<S> <C> <C> <C>
Clifton Enhanced U.S. Equity Fund..................................................... 26.07% 27.42% 26.54%
------ ------ ------
S&P 500 Stock Index................................................................... 21.04 27.56 26.44
------ ------ ------
</TABLE>
15
<PAGE>
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 increase 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.
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 monitors 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.
16
<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, but are
not limited to 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. Portfolio exposure is generally limited
to a maximum of 2% in any single issue. However, the Fund may hold up to two
times the index weighting of those securities that comprise between 1% and 5%
of the S&P 500 Index, and up to 1 1/2 times the index weighting of those
securities that comprise more than 5% of the S&P 500 Index.
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
17
<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
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 U.S. 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
CLIFTON ENHANCED U.S. EQUITY FUND
The Fund will normally have a 100% exposure to the S&P 500 by investing in
S&P 500 futures contracts.
The Fund may also:
- invest in individual securities (common stock, equity linked notes,
index linked notes, preferred stock and convertible securities) as part
of the market neutral enhanced cash pool
- 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 or margin requirement purposes
- lend its securities
- purchase securities on margin (margin is only used to satisfy futures
contracts requirements)
- invest in options on securities, options on indexes, options on futures
contracts and sell covered call options (options and covered call sales
would be utilized to create market neutral positions in the enhanced cash
pool)
- purchase warrants
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
EQUITY SECURITIES. Equity securities include:
- common stocks
- preferred stocks
18
<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 U.S. 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
19
<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.
FUTURES CONTRACTS. There are several special risks involved with the
use of futures contracts. In particular, the variable degree of
correlation between price movements of futures contracts and price
movements in the related portfolio position of a Fund could create the
possibility that losses on the futures contract will be greater than
gains in the value of the Fund's position. The loss from investing in
futures transactions that are unhedged or uncovered, is potentially
unlimited. In addition, futures markets could be illiquid in some
circumstances and a Fund might not be able to close out certain positions
without incurring substantial losses.
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 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.
20
<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.
MANAGEMENT OF THE FUNDS
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, 1999, the Adviser had
approximately $172 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 supervises the Adviser's management of the Sub-Advisers. The
Company has received an Order from the Securities and Exchange Commission
(SEC) 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 Adviser's fee is
0.15% higher than what it pays the Sub-Advisers.
The fee paid to the Adviser by each Fund for the year ended December 31,
1999 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.............................................................. 0.96%
------
Turner Core Growth Fund........................................................................ 0.45%
------
Frontier Capital Appreciation Fund............................................................. 0.90%
------
Clifton Enhanced U.S. Equity Fund*............................................................. 0.55%
------
</TABLE>
* Prior to May 1, 2000, the Fund was managed by Franklin Portfolio Associates
LLC.
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, 2000.
21
<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 has been registered as an investment
adviser with the SEC since 1974. As of December 31, 1999, Brandes managed
approximately $41.5 billion of 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 has been registered as an investment adviser with the SEC
since 1990. As of December 31, 1999, Turner managed approximately $5.6
billion of assets.
A team of investment professionals comprising an investment committee
manages the Turner Fund. Robert E. Turner, John Hammerschmidt, Mark Turner
and Christopher K. McHugh are members of the committee. Robert E. Turner,
CFA, Chairman and Chief Investment Officer of Turner, is lead manager. Mr.
Turner founded Turner in 1990. Prior to 1990, he was Senior Investment
Manager with Meridian Investment Company. He has 19 years of investment
experience. John Hammerschmidt, Senior Equity Portfolio Manager of Turner,
joined Turner in 1992. Prior to 1992, he was Vice President in Government
Securities Trading at S.G. Warburg. He has 17 years investment experience.
Mark Turner, Vice Chairman of Turner, is co-manager of the Turner Fund. Mr.
Turner co-founded Turner in 1990. Prior to 1990, he was Vice President and
Senior Portfolio Manager with First Maryland Asset Management. He has 18
years of investment experience. Christopher K. McHugh, Senior Equity
Portfolio Manager of Turner, is co-manager of the Turner Fund. Mr. McHugh
joined Turner in 1990. Prior to 1990, he was a Performance Specialist with
Provident Capital Management. He has 14 years of investment experience.
FRONTIER CAPITAL MANAGEMENT COMPANY, LLC. (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 has been registered as an investment adviser with the
SEC since January 1981. As of December 31, 1999, Frontier managed
approximately $5 billion of assets.
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 seven years.
Prior to attending Harvard
22
<PAGE>
Business School, Mr. Cavarretta was employed as a Financial Analyst with General
Electric Company (1981-1986).
THE CLIFTON GROUP (CLIFTON)
309 Clifton Avenue, Minneapolis, Minnesota 55403
SUB-ADVISER TO THE CLIFTON ENHANCED U.S. EQUITY FUND
Effective May 1, 2000, Clifton became the Sub-Adviser to the Clifton
Enhanced U.S. Equity Fund. Clifton, founded in 1973, offers enhanced equity
and fixed income products and asset allocation overlay management strategies.
Clifton had $9.6 billion in assets under management as of December 31, 1999.
Clifton has significant expertise in the use of derivatives within its
investment products and risk management is a primary emphasis of all its
investment strategies. Clifton is an affiliate of Voyageur Asset Management
Holdings, LLC, a $21.4 billion investment management holding company.
Jack L. Hansen, CFA and Richard E. Ballsrud, CFA, share primary
responsibility for the day-to-day management of the Fund's investment
portfolio. Mr. Hansen is senior portfolio manager and a principal of Clifton.
His responsibilities include portfolio management, research and product
development. Since joining Clifton in 1985, Mr. Hansen has played a leading
role in the research and development of Clifton's enhanced equity index,
enhanced cash and risk management programs. Mr. Hansen earned a BS in finance
and economics from Marquette University and a MS in finance from the
University of Wisconsin, Madison. Mr. Ballsrud is senior portfolio manager
and a principal of Clifton. He is responsible for portfolio management and
the development and implementation of Clifton's fixed income and money market
investment strategies. Prior to joining Clifton in 1984, Mr. Ballsrud spent
ten years with two subsidiaries of The St. Paul Companies managing fixed
income, money market and convertible securities in life insurance, pension
and mutual fund portfolios. Mr. Ballsrud holds a BS in business
administration from Mankato State University and an MBA in finance from the
University of Minnesota.
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 will allow you to choose the Funds.
23
<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 variable 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 insurance company
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
as of the close of trading, normally 4:00 p.m. New York time, on each day
when the 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 of 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 latest closing values on that exchange prior to the
closing of the NYSE. 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 may 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.
24
<PAGE>
DISTRIBUTIONS AND TAXES
Each of the Funds intends to distribute to its shareholders substantially
all of its income and capital gains, if any, on an annual basis.
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.
OTHER ACCOUNT PERFORMANCE
Each of the Funds has investment objectives, policies and strategies that are
substantially similar to those employed by the Funds' Sub-Advisers with respect
to certain other accounts or other investment companies which they manage
("Other Accounts"). The performance information derived from these Other
Accounts may be relevant to prospective investors. The Funds' performance may
vary from the respective Other Account information because its investments will
vary from time to time and will not be identical to the past portfolio
investments of the Other Accounts.
The charts below show actual performance information for M Fund and
performance information derived from historical performance of the Other
Accounts of Brandes, Turner, Frontier and Clifton. The performance figures
for the Brandes International Equity Composite, the Frontier Capital
Appreciation Composite, the Turner Tax-Exempt Equity Composite and the
Clifton Enhanced S&P Composite represent the actual calendar year performance
results of the comparable Other Accounts net of M Fund management fees. The
performance of these Other Accounts is not M Fund performance and should not
be considered as an indication of the future performance of the respective
Funds.
These figures also do not reflect the deduction of any insurance fees or charges
that are imposed in connection with the sale of variable life insurance and
variable annuity policies by the Participating Insurance Companies. Investors
should refer to the separate account prospectus describing the life insurance
policies and variable annuity contracts for information pertaining to these
insurance fees and charges.
<TABLE>
<CAPTION>
M FUND PERFORMANCE 1996(1) 1997 1998 1999 SINCE INCEPTION
------------------ ---- ---- ---- ---- ---------------
<S> <C> <C> <C> <C> <C>
Brandes International Equity Fund(2) (0.63)% 2.26% 15.37% 47.86% 14.78%
Turner Core Growth Fund 19.99% 28.32% 34.56% 40.11% 30.60%
Frontier Capital Appreciation Fund 30.31% 22.13% 1.68% 44.17% 23.64%
Clifton Enhanced US Equity Fund(3) 23.67% 32.68% 23.69% 26.07% 26.54%
</TABLE>
1 FUND INCEPTION DATE WAS JANUARY 4, 1996. SINCE INCEPTION RETURNS ARE
AVERAGE ANNUAL TOTAL RETURNS.
2 BRANDES INVESTMENT PARTNERS, L.P. REPLACED EDINBURGH FUND MANAGERS PLC AS
THE SUB-ADVISER EFFECTIVE JULY 1, 1998.
3 THE CLIFTON GROUP REPLACED FRANKLIN PORTFOLIO ASSOCIATES LLC AS THE
SUB-ADVISER EFFECTIVE MAY 1, 2000.
<TABLE>
<CAPTION>
OTHER ACCOUNT PERFORMANCE INFORMATION
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 3 5 10 SINCE
YR* YR* YR* INCEPTION**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Brandes Investment
Partners / Brandes
Int'l. Equity Composite - - 40.2 6.3 40.9 -3.0 13.8 16.3 20.1 15.0 53.4 28.4 22.9 - 19.9
MSCI EAFE Index - - 12.1 -12.2 32.6 7.8 11.2 6.1 1.8 20.0 27.0 15.8 12.8 - 8.9
Turner Investment
Partners/
Turner Tax-Exempt Equity
Composite - - 50.4 12.2 15.3 -5.3 29.6 19.3 32.4 34.5 41.6 36.3 31.6 - 22.9
Wilshire 5000 Stock Index - - 34.2 9.0 11.3 -0.1 36.5 21.2 31.3
Frontier Capital
Management/
Frontier Capital
Appreciation Composite 31.9 0.2 27.9 22.2 28.0 3.3 31.7 30.7 19.2 -0.2 44.7 19.9 24.3 19.9 19.6
Russell 2500 Stock Index 19.4 -14.9 46.7 16.2 16.5 -1.1 31.7 19.1 24.4 0.4 24.2 15.7 19.4 15.1 14.3
The Clifton Group /
Clifton Enhanced S&P
Composite - -3.3 32.7 8.3 10.8 0.7 37.6 23.8 34.3 30.4 20.7
S&P 500 Index
</TABLE>
* 3yr, 5yr, 10yr and Since Inception returns are average annualized total
returns.
**Inception dates for the Brandes International Equity Composite and the Turner
Equity Composite are 6/30/90 and 3/31/90, respectively.
SEE ACCOMPANYING NOTES TO M FUND AND OTHER ACCOUNT PERFORMANCE INFORMATION.
Notes to M Fund and Other Account Performance Information
1. Returns for the M Fund are net of management fees and operating expenses.
Returns for the Brandes International Equity Composite, the Turner Tax-Exempt
Equity Composite, the Frontier Capital Appreciation Composite and the Clifton
Enhanced S&P Composite are net of the following management fees: 0.98%,
0.45%, 0.90% and 0.40% respectively. The operating expenses for all Other
Accounts, which may be different from those of M Fund, have been deducted
from the returns of the above referenced composites.
2. Returns of the Other Accounts are based on accounts managed using
substantially similar investment objectives, policies and strategies and are
based on the following: returns for Brandes Investment Partners' Other
Accounts are those of the manager's International Equity Composite; returns
for Turner Investment Partners' Other Accounts are those of the manager's
Turner Tax-Exempt Equity Composite; returns for Frontier Capital Management's
Other Accounts are those of the manager's Capital Appreciation Composite;
returns for The Clifton Group's Other Accounts are those of the manager's
Enhanced S&P Composite.
3. Returns of the Other Accounts are based on accounts with substantially higher
net assets than that of the Funds. The Funds commenced operations on January,
1996 and, therefore, are smaller than the managers' established accounts.
4. Returns for the Brandes International Equity Composite, the Turner Tax-
Exempt Equity Composite, the Frontier Capital Appreciation Composite and the
Clifton Enhanced S&P Composite are based on accounts that are not subject to
certain investment limitations, diversification requirements, and other
restrictions imposed by the Investment Company Act of 1940, as amended, (the
1940 Act) and the Internal Revenue Code of 1986, as amended (the Code),
which, if applicable, may have adversely affected the performance results.
5. The Morgan Stanley Capital International EAFE (MSCI EAFE) Index is an
unmanaged index consisting of more than 900 securities listed on exchanges in
European, Australasian and Far Eastern markets and includes dividends and
distributions, but does not reflect fees, brokerage commissions or other
expenses of investing. The Wilshire 5000 Equity Index is a capitalization
weighted stock index representing all domestic common stocks traded regularly on
the organized exchanges. The Wilshire 5000 Index is the broadest measure of the
aggregate domestic stock market. The Russell 2500 Index is a capitalization
weighted stock index representing the bottom 500 stocks in the Russell 1000
Index and all stocks in the Russell 2000. The S&P 500 Stock Index is a
capitalization weighted index of 500 large stocks, representing approximately
70% of the broad U.S. equity market. The stocks represent the largest companies
in 88 industries. The S&P 500 Index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
6. Performance returns for the Other Accounts may have been extracted from
performance information that has been prepared and presented in compliance with
the Association for Investment Management and Research (AIMR) Performance
Presentation Standards. Reports on such preparation and presentation are
available to the investor upon request.
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 each Fund's financial performance for the period of the Fund's
operation. 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). These total return figures do not reflect any
fees or charges deducted from the insurance company separate account or from
the variable annuity or life insurance policies, which, if reflected, would
result in lower total return figures.
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, 1999 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.
25
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY FUND
---------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 10.84 $ 9.96 $ 9.88 $10.00
------------ ------------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. 0.10 0.09 0.07 0.06
Net realized and unrealized gain
(loss) on investments............... 5.09 1.44 0.15 (0.12)
------------ ------------ ------ ------
Total from investment
operations........................ 5.19 1.53 0.22 (0.06)
------------ ------------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (0.09) (0.06) (0.07) (0.06)
In excess of net investment
income.............................. -- -- (0.03) --
From net realized capital gains....... (0.42) (0.53) -- --
In excess of net realized capital
gains............................... -- (0.06) -- --
Tax return of capital................. -- -- (0.04) --
------------ ------------ ------ ------
Total distributions................. (0.51) (0.65) (0.14) (0.06)
------------ ------------ ------ ------
NET ASSET VALUE, END OF PERIOD.......... $ 15.52 $ 10.84 $ 9.96 $ 9.88
------------ ------------ ------ ------
------------ ------------ ------ ------
TOTAL RETURN............................ 47.86% 15.37% 2.26% (0.63)*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $48,508 $12,383 $6,034 $3,177
Net expenses to average daily net
assets before interest expense**.... 1.24% 1.30% 1.30% 1.30%
Net expenses to average daily net
assets after interest expense**..... 1.24% 1.30% 1.30% 1.30%
Net investment income to average daily
net assets**........................ 1.31% 1.00% 0.83% 0.67%
Portfolio turnover rate............... 19% 116% 74% 65%
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**....................... 1.93% 3.57% 4.93% 7.28%
Net investment loss**............. 0.61% (1.27)% (2.80)% (5.31)%
<CAPTION>
TURNER CORE GROWTH FUND
--------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 17.84 $ 13.50 $11.60 $10.00
------------ ------------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. 0.02 0.02 0.04 0.06
Net realized and unrealized gain
(loss) on investments............... 6.92 4.64 3.22 1.94
------------ ------------ ------ ------
Total from investment
operations........................ 6.94 4.66 3.26 2.00
------------ ------------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (0.02) (0.03) (0.04) (0.06)
In excess of net investment
income.............................. -- -- -- --
From net realized capital gains....... (1.83) (0.29) (1.22) (0.34)
In excess of net realized capital
gains............................... -- -- (0.10) --
Tax return of capital................. -- -- -- --
------------ ------------ ------ ------
Total distributions................. (1.85) (0.32) (1.36) (0.40)
------------ ------------ ------ ------
NET ASSET VALUE, END OF PERIOD.......... $ 22.93 $ 17.84 $13.50 $11.60
------------ ------------ ------ ------
------------ ------------ ------ ------
TOTAL RETURN............................ 40.11% 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $52,926 $13,880 $3,820 $2,003
Net expenses to average daily net
assets before interest expense**.... 0.70% 0.70% 0.70% 0.70%
Net expenses to average daily net
assets after interest expense**..... 0.70% 0.70% 0.70% 0.78%
Net investment income to average daily
net assets**........................ 0.19% 0.31% 0.34% 0.55%
Portfolio turnover rate............... 286% 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**....................... 1.40% 3.42% 6.18% 8.43%
Net investment loss**............. (0.51)% (2.41)% (5.14)% (7.18)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
26
<PAGE>
M FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION FUND
-------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 15.09 $ 14.92 $ 12.52 $10.00
------------ ------------ ------------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).......... (0.09) (0.04) 0.00 0.00
Net realized and unrealized gain
(loss) on investments............... 6.74 0.29 2.76 3.03
------------ ------------ ------------ ------
Total from investment
operations........................ 6.65 0.25 2.76 3.03
------------ ------------ ------------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ -- -- -- --
In excess of net investment
income.............................. -- -- -- --
From net realized capital gains....... (0.62) (0.08) (0.36) (0.51)
In excess of net realized capital
gains............................... -- -- -- --
Tax return of capital................. -- -- -- --
------------ ------------ ------------ ------
Total distributions................. (0.62) (0.08) (0.36) (0.51)
------------ ------------ ------------ ------
NET ASSET VALUE, END OF PERIOD.......... $ 21.12 $ 15.09 $ 14.92 $12.52
------------ ------------ ------------ ------
------------ ------------ ------------ ------
TOTAL RETURN............................ 44.17% 1.68% 22.13% 30.31%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $47,919 $31,778 $16,628 $3,006
Net expenses to average daily net
assets before interest expense**.... 1.15% 1.15% 1.15% 1.15%
Net expenses to average daily net
assets after interest expense**..... 1.15% 1.15% 1.15% 1.20%
Net investment income (loss) to
average daily net assets**.......... (0.57)% (0.32)% (0.13)% (0.30)%
Portfolio turnover rate............... 75% 68% 61% 140%
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**....................... 1.47% 1.75% 2.86% 8.12%
Net investment loss**............. (0.90)% (0.92)% (1.84)% (7.27)%
</TABLE>
<TABLE>
<CAPTION>
CLIFTON ENHANCED U.S. EQUITY FUND+
-------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 18.07 $ 15.09 $11.85 $ 10.00
------------ ------------ ------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).......... 0.10 0.11 0.08 0.12
Net realized and unrealized gain
(loss) on investments............... 4.60 3.45 3.78 2.25
------------ ------------ ------ ------------
Total from investment
operations........................ 4.70 3.56 3.86 2.37
------------ ------------ ------ ------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (0.10) (0.10) (0.09) (0.12)
In excess of net investment
income.............................. -- (0.01) -- --
From net realized capital gains....... (1.70) (0.35) (0.53) (0.40)
In excess of net realized capital
gains............................... -- (0.12) -- --
Tax return of capital................. -- -- -- --
------------ ------------ ------ ------------
Total distributions................. (1.80) (0.58) (0.62) (0.52)
------------ ------------ ------ ------------
NET ASSET VALUE, END OF PERIOD.......... $ 20.97 $ 18.07 $15.09 $ 11.85
------------ ------------ ------ ------------
------------ ------------ ------ ------------
TOTAL RETURN............................ 26.07% 23.69% 32.68% 23.67%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $22,863 $15,082 $7,345 $ 1,582
Net expenses to average daily net
assets before interest expense**.... 0.80% 0.80% 0.80% 0.80%
Net expenses to average daily net
assets after interest expense**..... 0.80% 0.80% 0.80% 0.80%
Net investment income (loss) to
average daily net assets**.......... 0.56% 0.80% 1.17% 1.43%
Portfolio turnover rate............... 69% 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**....................... 1.63% 2.34% 5.41% 12.32%
Net investment loss**............. (0.26)% (0.74)% (3.44)% (10.09)%
</TABLE>
(a) Funds commenced operations on January 4, 1996
* Not annualized
** Annualized for periods less than one year
+ On May 1, 2000, the Fund replaced its previous Sub-Adviser, Franklin
Portfolio Associates LLC, with the Clifton Group. The Fund was previously
known as the Enhanced U.S. Equity Fund and changed its name to the Clifton
Enhanced U.S. Equity Fund effective May 1, 2000. The information shown in the
financial highlights is for the Enhanced U.S. Equity Fund.
27
<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 (202) 942-8090 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, or
by electronic request at the following E-mail address: [email protected].
M FUND, INC.
BRANDES INTERNATIONAL EQUITY FUND
TURNER CORE GROWTH FUND
FRONTIER CAPITAL APPRECIATION FUND
CLIFTON 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
Clifton Enhanced U.S. Equity Fund
(formerly Enhanced U.S. Equity Fund)
May 1, 2000
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 SAI 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
2
<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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
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, LLC
- -------------------------------------------------------------------------------
Clifton Enhanced U.S. Equity Fund The Clifton Group
- -------------------------------------------------------------------------------
</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 life
insurance policies (the "Policies") issued by the Participating Insurance
Companies. The Company may also offer its stock to variable annuity policies
and 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 Prospectus.
Terms appearing in this SAI that are defined in the Prospectus have the
same meaning in this SAI 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
in this SAI 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 companies organized
outside the United States or of companies whose securities are principally
traded outside the United States ("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
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 Clifton
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.
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,
5
<PAGE>
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
segregate cash or high quality, liquid securities 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 than 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.
6
<PAGE>
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 or unsponsored 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 20% of its total
assets, measured at the time of purchase, at cost 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
7
<PAGE>
return is earned on the assets. 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 Clifton Enhanced U.S. Equity Fund may invest in fixed-income
securities (the Brandes International Equity Fund, Clifton Enhanced U.S.
Equity Fund and 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, deferred interest bonds and
bank obligations (such as certificates of deposit and banker's acceptances).
U.S. GOVERNMENT SECURITIES. The Clifton 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.
FLOATING AND VARIABLE RATE OBLIGATIONS
The Clifton Enhanced Fund may invest in floating and variable rate
obligations, which are debt obligations with a floating or variable rate of
interest, i.e. the rate of interest varies with changes in specified market
rates or indices, such as the prime rate, or at specified intervals. Certain
floating or variable rate obligations may carry a demand feature that permits
the holder to tender them back to the issuer of the underlying instrument, or to
a third party, at par value prior to maturity.
RISKS RELATED TO FLOATING AND VARIABLE RATE OBLIGATIONS. While floating
and variable rate obligations provide a certain degree of protection against
rises in interest rates, an investment in these obligations will also
participate in any declines in interest rates as well. Certain types of floating
rate obligations may exhibit greater price volatility than a fixed rate
obligation of similar credit quality.
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED DEBT SECURITIES
The Clifton Enhanced Fund may invest in mortgage-backed debt
securities, which are secured or backed by mortgages or other mortgage-related
assets. Such securities may be issued by such entities as Government National
Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA"),
Federal Home Loan Mortgage Corporation ("FHLMC"), commercial banks, savings and
loan associations, mortgage banks, or by issuers that are affiliates of or
sponsored by such entities. Other asset-backed securities are secured or backed
by assets other than mortgage-related assets, such as automobile and credit card
receivables, and are issued by such institutions as finance companies, finance
subsidiaries of industrial companies, and investment banks. The Clifton Enhanced
Fund will purchase only asset-backed securities that Clifton determines to be
liquid. The Clifton Enhanced Fund will not purchase mortgage backed or
asset-backed securities that do not meet the above minimum credit standards.
An important feature of mortgage-and asset-backed securities is that
the principal amount is generally subject to partial or total prepayment at any
time because the underlying assets (i.e., loans) generally may be prepaid at any
time. If an asset-backed security is purchased at a premium to par, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Conversely, if an asset-backed security is
purchased at a discount, faster than expected prepayments will increase, while
slower than expected prepayments will decrease, yield to maturity. It should
also be noted that these securities may not have any security interest in the
underlying assets, and recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
RISKS RELATED TO MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES.
Prepayments on securitized assets such as mortgages, automobile loans and credit
card receivables ("Securitized Assets") generally increase with falling interest
rates and decrease with rising interest rates; furthermore, prepayment rates are
influenced by a variety of economic and social factors. In general, the
collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on the underlying
Securitized Assets may default in their payments creating delays or loss of
principal.
Non-mortgage asset-backed securities involve certain risks that are
not presented by mortgage-backed securities. Primarily, these securities do
not have the benefit of a security interest in assets underlying the related
mortgage collateral. Credit card receivables are generally unsecured and the
debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
Most issuers of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have an effective
security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
Some forms of asset-backed securities are relatively new forms of
investments. Although the Clifton Enhanced Fund will only invest in asset-backed
securities that Clifton believes are liquid, because the market experience in
certain of these securities is limited, the market's ability to sustain
liquidity through all phases of a market cycle may not have been tested.
ZERO COUPON AND DEFERRED INTEREST BONDS. Zero coupon and deferred interest bonds
are debt obligations that are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity or the first interest payment date at a
rate of interest reflecting the market rate of the security at the time of
issuance. While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds provide for a period of delay before the
regular payment of interest begins. Such investments benefit the issuer by
mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such
cash. Such investments may experience greater volatility in market value than
debt obligations that make regular payments of interest.
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 of 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 high quality,
liquid assets 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 or Clifton Enhanced U.S. 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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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 or Clifton
Enhanced U.S. 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 high
quality, liquid assets 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 and Clifton
Enhanced U.S. 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
or the Clifton Enhanced U.S. 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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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 that 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 or Clifton Enhanced
U.S. 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 and Clifton Enhanced U.S. 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 or Clifton Enhanced U.S. 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 the Sub-Adviser's 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 Funds to engage in options transactions only
with respect to an index which the Sub-Adviser believes includes a sufficient
number of stocks to minimize the likelihood of a trading halt in the index.
FUTURES CONTRACTS
The Clifton Enhanced U.S. Equity Fund and 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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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 Brandes International Equity 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 Brandes International Equity Fund will not purchase or sell futures
if, immediately thereafter, more than 25% of its net assets would be hedged.
In addition, the Brandes International Equity 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.
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 Fund 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
SEC, 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.
CONVERTIBLE SECURITIES
The Brandes International Equity Fund, the Frontier Capital Appreciation
Fund, and the Clifton 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
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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 Clifton 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.
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 Sub-Adviser to present minimum credit risks. The Adviser 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
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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.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand notes permit
the investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the Clifton Enhanced U.S. Equity Fund (as lender)
and the borrower. These notes are direct lending arrangements between lenders
and borrowers, and are generally not transferable, nor are they ordinarily
rated by either Moody's Investors Service, Inc., Standard & Poor's
Corporation, Fitch Investors Service, Inc., or Duff & Phelps Credit Rating Co.
OTHER INVESTMENT COMPANIES
Each of the Brandes International Equity Fund and Clifton Enhanced U.S.
Equity Fund reserves the right to invest up to 10% of their 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). Each 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. Each 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 such 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. For purposes of this
restriction, the deposit or payment of initial or variation margin in
connection with futures contracts, financial futures contracts or
related options, options on securities and options on securities
indexes by the Clifton Enhanced U.S. Equity Fund is not deemed to be a
purchase of securities on margin.
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.
government securities.
12. As to 75% of the value of its total assets, purchase the securities of
any one issuer (except U.S. Government securities) if, as a result
thereof, more than 5% of the value of the Fund's total assets would be
invested in securities of that issuer or if, as a result thereof, more
than 10% of the outstanding voting securities of that issuer would be
owned by the Fund.
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 and the Clifton Enhanced U.S. 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 (except for the Clifton Enhanced U.S. Equity Fund).
4. Purchase variable- or floating-rate demand instruments, which are debt
securities that include a variable or floating interest rate
adjustment feature (except for the Clifton Enhanced U.S. Equity Fund).
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 (except for the Clifton
Enhanced U.S. Equity Fund).
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
(except for the Clifton Enhanced U.S. Equity Fund).
8. Invest in options or futures (except for the Brandes International
Equity Fund and the Clifton Enhanced U.S. 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
(except for the Brandes International Equity Fund, which may invest
up to 20% of its total assets), 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 Clifton
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 Clifton 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 U.S.
exchanges or are represented by American Depository Receipts.
17
<PAGE>
15. The Brandes International Equity Fund, the Frontier Capital
Appreciation Fund, and the Clifton 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 and the Frontier Capital Appreciation 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, 1998 and 1999, the portfolio turnover rates for
the Funds were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fund Portfolio Turnover Rate Portfolio Turnover Rate
- ----------------------------------------------------------------------------------------------------------
1998 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brandes International Equity Fund (1) 116% 19%
Turner Core Growth Fund 242% 286%
Frontier Capital Appreciation Fund 68% 75%
Clifton Enhanced U.S. Equity Fund(2) 50% 69%
- ---------------------------------------------------------------------------
</TABLE>
(1) Brandes began to manage this Fund on July 1, 1998.
(2) Clifton began to manage this Fund on May 1, 2000.
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
Mullin Consulting Inc. Consulting, Inc. (insurance agency).
644 South Figueroa St.
Los Angeles, CA 90017
(Born: 1/14/41)
- ---------------------------------------------------------------------------------------------------------
Gerald Bidwell Director President and Chief Executive Officer, Bidwell &
209 SW Oak St. Co. (discount brokerage firm).
Portland, OR 97204
(Born: 6/6/42)
- ---------------------------------------------------------------------------------------------------------
Neil E. Goldschmidt Director President, Neil Goldschmidt, Inc. (law firm).
222 SW Columbia
Suite 1850
Portland, OR 97201
(Born: 6/16/40)
- ---------------------------------------------------------------------------------------------------------
Philip W. Halpern Director Vice President and Chief Investment Officer, The
1375 East 57th St. University of Chicago, since July 21, 1998.
Chicago, IL 60637 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.
- ---------------------------------------------------------------------------------------------------------
David W. Schutt* Secretary and Treasurer Secretary and Treasurer of M Life and Director
(Born: 7/4/55) of Finance for M Financial Group.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* "Interested Person" of the Company for purposes of the 1940 Act. The
address of Messrs. Byrne and Schutt 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 of the Board which he
attends.
Directors and officers, as a group, owned less than 1% of each Fund as of
December 31, 1999.
During the year ended December 31, 1999, the Directors of the Company
received the following compensation from the Company:
19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------
Gerald Bidwell $11,500 $0 $0 $11,500
Director
- ---------------------------------------------------------------------------------------------------------
Neil E. Goldschmidt $11,500 $0 $0 $11,500
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, administrator, 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 current 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 January 11, 2000. The current advisory
agreement is dated May 1, 2000. It will remain in effect for one year 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.
As compensation for its services, the Adviser receives a fee (paid by the Funds)
based on the average daily net assets of the applicable Fund at the following
annual rates:
FUND ADVISORY FEE
- ---- ------------
Brandes International Equity Fund 1.10% of first $10 million
0.95% of next $10 million
0.75% of next $30 million
0.65% on amounts above $50 million
Turner Core Growth Fund 0.45%
Frontier Capital Appreciation Fund 0.90%
Clifton Enhanced U.S. Equity Fund 0.40% of first $25 million
0.35% on amounts above $25 million
For the years ended December 31, 1999, December 31, 1998 and December 31,
1997 respectively, the Funds incurred the following amounts as investment
advisory fees payable to the Adviser: Brandes International Equity Fund,
$229,744, $92,933, and $51,064; Turner Core Growth Fund, $98,552, $28,917,
and $13,152; Frontier Capital Appreciation Fund, $321,001, $211,960, and
$79,263; Clifton Enhanced U.S. Equity Fund, $100,168, $58,138, and $18,371.
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 1999, 1998 and
1997, respectively, the Adviser paid the following amounts on behalf of each
Fund: Brandes International Equity Fund $165,622, $200,780 and $176,933; Turner
Core Growth Fund $153,568, $174,954 and $160,750; Frontier Capital Appreciation
Fund $115,238, $141,932 and $150,764; Clifton Enhanced U.S. Equity Fund
$150,413, $162,354 and $154,486. The Adviser has extended this same provision
through December 31, 2000.
21
<PAGE>
SUB-ADVISERS
The Adviser has retained the services of four Sub-Advisers to provide the
day-to-day portfolio management for the Funds.
Brandes Investment Partners, L.P., Sub-Adviser to the Brandes Fund, is located
at 12750 High Bluff Drive, San Diego, California. Brandes is a limited
partnership controlled by its managing partners, Charles H. Brandes, Glenn R.
Carlson, Jeffrey A. Busby, Brent V. Woods and Michael J. Bills.
Turner Investment Partners, Inc., Sub-Adviser to the Turner Fund, is located at
1235 Westlake Drive, Suite 350, Berwyn, Pennsylvania. Turner is 100%
employee-owned.
Frontier Capital Management Company LLC, Sub-Adviser to the Frontier Fund, is
located at 99 Summer Street, Boston, Massachusetts. Frontier is 30% owned by
Frontier management and 70% indirectly owned by Affiliated Managers Group, Inc.
("AMG"), an asset management holding company located at Two International Place,
23rd Floor, Boston, Massachusetts 02110. As of December 31, 1999, AMG had 15
affiliates that collectively manage approximately $87 billion in assets.
The Clifton Group, Sub-Adviser to the Clifton Fund, is located at 309 Clifton
Avenue, Minneapolis, Minnesota. Clifton is owned by its principals, Richard E.
Ballsrud, Jack L. Hansen, Rosemary Janousek and Thomas B. Lee, and by VAM
Holdings LLC, which owns 80% of Clifton. VAM Holdings LLC is, in turn, 100%
owned by Dougherty Financial Group LLC, which is located at 90 South Seventh
Street, Suite 4300, Minneapolis, Minnesota.
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:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
FUND SUB-ADVISORY FEE
- ---------------------------------------------------------------------------
<S> <C>
Brandes International Equity Fund 0.95% on the first $10 million
0.80% on the next $10 million
0.60% on the next $30 million
0.50% on amounts over $50 million
- ---------------------------------------------------------------------------
Turner Core Growth Fund 0.30%
- ---------------------------------------------------------------------------
Frontier Capital Appreciation Fund 0.75%
- ---------------------------------------------------------------------------
Clifton Enhanced U.S. Equity Fund 0.25% on the first $25 million
0.20% on amounts over $25 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, 1999, December 31, 1998 and December 31, 1997
respectively, the Adviser paid the Sub-Advisers the following sub-advisory fees:
Brandes International Equity Fund - $193,834, $79,813 and $43,770; Turner Core
Growth Fund - $65,702, $19,297 and $8,768; Frontier Capital Appreciation Fund -
$267,501, $176,737 and $66,054; Clifton Enhanced U.S. Equity Fund - $72,850,
$42,336 and $13,361.
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.
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.
The Clifton Group replaced Franklin Portfolio Associates LLC as the
Sub-Adviser to the Clifton Enhanced U.S. Equity Fund effective May 1, 2000. At
the same time, the Fund's name was changed from Enhanced U.S. Equity Fund to
Clifton Enhanced U.S. Equity 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.
22
<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.
ADMINISTRATOR
Pursuant to an Administration Agreement, Investors Bank provides certain
administrative services to the Company, such as calculating each Fund's
standardized performance information, preparing annual and semi annual
reports to shareholders and the SEC, preparing each Fund's tax returns,
monitoring compliance and performing other administrative duties.
For the year ended December 31, 1999, the Company paid Investors Bank the
following custody and administration fees: Brandes Fund, $151,496; Turner
Fund, $130,964; Frontier Fund, $125,443; Enhanced Fund, $117,252.
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, 1999, December 31, 1998 and December 31, 1997, respectively:
Brandes International Equity Fund - $64,215, $57,561 and $28,198; Turner Core
Growth Fund - $124,933, $36,874 and $12,649; Frontier Capital Appreciation
Fund - $92,560, $68,225 and $31,995; Clifton Enhanced U.S. Equity Fund -
$18,375, $11,294 and $4,552.
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 NYSE is closed, other than the customary weekends or
holidays, or when trading on the NYSE 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, 1999, the ownership of each Fund was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF OWNERSHIP
- -------------------------------------------------------------------------------------------------------------------------------
John Hancock Variable Pacific Life
M Life Insurance Co. Life Insurance Co. Insurance Co.
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Brandes International Equity Fund 7.1% 63.8% 29.1%
- -----------------------------------------------------------------------------------------------------------
Turner Core Growth Fund 5.5% 49.8% 44.7%
- -----------------------------------------------------------------------------------------------------------
Frontier Capital Appreciation Fund 4.9% 64.3% 30.8%
- -----------------------------------------------------------------------------------------------------------
Clifton Enhanced U.S. Equity Fund 11.2% 29.4% 59.4%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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 NYSE. Each
Fund will compute its net asset value once daily as of 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 NYSE;
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 NYSE 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
Internal Revenue 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.
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. 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
These total return figures do not reflect any fees or charges deducted
from the insurance company separate account or from the variable annuity or
life insurance policies, which, if reflected, would result in lower total
return figures.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Brandes International Turner Core Frontier Capital Clifton Enhanced U.S
Equity Fund** Growth Fund Appreciation Fund Equity Fund***
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the one year ended 12/31/99 47.86% 40.11% 44.17% 26.07%
- ---------------------------------------------------------------------------------------------------------------------
For the Period 1/4/96* to 12/31/99 14.78% 30.60% 23.64% 26.54%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Funds commenced operations on January 4, 1996.
**On July 1, 1998, Brandes Investment Partners replaced Edinburgh Fund Managers
as sub-adviser to the Fund.
***On May 1, 2000, The Clifton Group replaced Franklin Portfolio Associates as
sub-adviser to the Fund.
OTHER INFORMATION
CODES OF ETHICS
Rule 17j-1 of the Investment Company Act of 1940, as amended, addresses
conflicts of interest that arise from personal trading activities of investment
company personnel. The rule requires funds and their investment advisers and
principal underwriters to adopt a code of ethics and to report periodically to
the Board of Directors on issues raised under its code of ethics. To assure
compliance with these restrictions, the Company, the Adviser, the Sub-Advisers
and the Distributor each have adopted and agreed to be governed by a code of
ethics containing provisions reasonably necessary to prevent fraudulent,
deceptive or manipulative acts with regard to the personal securities
transactions of their employees. The codes of ethics of the Company, the
Adviser, the Sub-Advisers and the Distributor permit covered employees to
engage in personal securities transactions that avoid actual or potential
conflicts of interest with the Funds.
Information about these codes of ethics may be obtained by calling
the Commission's Public Reference Room at 1-202-942-8090. Copies of the codes
of ethics may also be obtained on the EDGAR Database on the SEC's Internet
site at http://www.sec.gov. Alternatively, this information may be obtained,
upon payment of a duplicating fee, by writing the Public Reference Section of
the SEC, Washington D.C. 20549-6009 or by electronic request at the following
e-mail address: [email protected].
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 by reference in
this SAI.
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
exhibits, 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
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.
29
<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
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation of M Fund, Inc.(1)
(b) By-Laws of M Fund, Inc.(1)
(c) Not applicable.
(d1) Investment Advisory Agreement between M Fund, Inc. and M Financial
Investment Advisers, Inc(6)
(d2) Investment Sub-Advisory Agreement between M Financial Investment Advisers,
Inc. and Brandes Investment Partners LP(6)
(d3) Investment Sub-Advisory Agreement between M Financial Investment Advisers,
Inc. and Turner Investment Partners, Inc.(4)
(d4) Investment Sub-Advisory Agreement between M Financial Investment Advisers,
Inc. and Frontier Capital Management Company, LLC(6)
(d5) Investment Sub-Advisory Agreement between M Financial Investment Advisers,
Inc. and The Clifton Group(6)
(e) Principal Underwriting Agreement between M Fund, Inc. and M Holdings
Securities, Inc.(5)
(f) Not applicable.
(g) Custodian Agreement between M Fund, Inc. and Investors Bank & Trust
Company(2)
(h1) Transfer Agency and Service Agreement between M Fund, Inc. and Investors
Bank & Trust Company(2)
(h2) Administration Agreement between M Fund, Inc. and Investors Bank & Trust
Company(2)
(i1) Opinion and consent of counsel as to the Legality of the Securities Being
Issued(2)
(i2) Consent of Sutherland, Asbill & Brennan LLP(4)
(j) Consent of PricewaterhouseCoopers LLP(6)
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
(n) Not applicable.
(p1) Code of Ethics of M Fund, Inc.(6)
(p2) Code of Ethics of M Financial Investment Advisers, Inc.(6)
(p3) Code of Ethics of M Holdings Securities, Inc.(6)
<PAGE>
(p4) Code of Ethics of Brandes Investment Partners, LP(6)
(p5) Code of Ethics of Turner Investment Partners, Inc.(6)
(p6) Code of Ethics of Frontier Capital Management Company LLC(6)
(p7) Code of Ethics of The Clifton Group(6)
(q) Powers of Attorney(2)
- -------------------------------------
(1)Incorporated herein by reference to Registrant's initial registration
statement filed with the SEC on August 7, 1995.
(2)Incorporated herein by reference to the Pre-Effective Amendment No. 1 to
Registrant's initial registration statement filed with the SEC on
December 21, 1995.
(3)Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's initial registration statement filed with the SEC on
February 26, 1997.
(4)Incorporated herein by reference to Post-Effective Amendment No. 4 to
Registrant's initial registration statement filed with the SEC on
February 27, 1998.
(5)Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's initial registration statement filed with the SEC on
February 26, 1999.
(6)Filed herein.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH M FUND, INC.
M Fund, Inc. does not concede that it is controlled by its investment
adviser. Nevertheless, in the event of such control, the following would be
under common control.
M Financial Investment Advisers, Inc. (the "Adviser"), M Holding
Securities, Inc. and M Life Insurance Company, each Colorado corporations, are
controlled by M Financial Holdings Incorporated, doing business as "M Financial
Group". See "MANAGEMENT - Investment Adviser" in Part A.
ITEM 25. INDEMNIFICATION.
Article X, "Indemnification", of the Articles of Incorporation of M Fund, Inc.
provides as follows:
The Corporation shall indemnify its officers and directors to
the fullest extent permitted by law.
Article VIII, "Indemnification", of the By-Laws of M Fund, Inc.
provides as follows:
Section 1. Every person who is or was a director, officer
or employee of the Corporation or of any other corporation which he or
she served at the request of the Corporation and in which the
Corporation owns or owned shares of capital stock or of which it is or
was a creditor shall have a right to be indemnified by the Corporation
to the full extent permitted by applicable law, against all liability,
judgments, fines, penalties, settlements and reasonable expenses
incurred by him in connection with or resulting from any threatened or
actual claim, action, suit or proceeding, whether criminal, civil, or
administrative, in which he or she may become involved as a party or
otherwise by reason of being or having been a director, officer or
employee, except as provided in Article VIII, Sections 2 and 3 of these
By-laws.
<PAGE>
Section 2. DISABLING CONDUCT. No such director, officer or
employee shall be indemnified for any liabilities or expenses arising
by reason of "disabling conduct", whether or not there is an
adjudication of liability. "Disabling conduct" means willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of office.
Whether any such liability arose out of disabling conduct
shall be determined: (a) by a final decision on the merits (including,
but not limited to, a dismissal for insufficient evidence of any
disabling conduct) by a court or other body, before whom the proceeding
was brought that the person to be indemnified ("indemnitee") was not
eligible for indemnity because the liability arose by reason of
disabling conduct; or (b) in the absence of such a decision, by a
reasonable determination, based upon a review of the facts, that such
person was not eligible for indemnity because the liability arose by
reason of disabling conduct, (i) by the vote of a majority of a quorum
of directors who are neither interested persons of the Corporation nor
parties to the action, suit, or proceeding in question ("disinterested,
non-party directors"), or (ii) by independent legal counsel in a
written opinion if a quorum of disinterested, non-party directors so
directs or if such quorum is not obtainable, or (iii) by majority vote
of the stockholders of the Corporation, or (iv) by any other reasonable
and fair means not inconsistent with any of the above.
The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that any liability or expense arose by reason of disabling
conduct.
Section 3. DIRECTORS' STANDARDS OF CONDUCT. No person who
is or was a director shall be indemnified under this Article VIII for
any liabilities or expenses incurred by reason of service in that
capacity if an act or omission of the director was material to the
matter giving rise to the threatened or actual claim, action, suit or
proceeding; and such act or omission constituted disabling conduct.
Section 4. EXPENSES PRIOR TO DETERMINATION. Any
liabilities or expenses of the type described in Article VIII, Section
1 may be paid by the Corporation in advance of the final disposition of
the claim, action, suit or proceeding, as authorized by the directors
in the specific case, (a) upon receipt of a written affirmation by the
indemnitee of his or her good faith belief that his or her conduct met
the standard of conduct necessary for indemnification as authorized by
this Article VIII, Section 2; (b) upon receipt of a written undertaking
by or on behalf of the indemnitee to repay the advance, unless it shall
be ultimately determined that such person is entitled to
indemnification; and (c) provided that (i) the indemnitee shall provide
security for that undertaking, or (ii) the Corporation shall be insured
against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of disinterested, non-party directors, or
independent legal counsel in a written opinion, shall determine, based
on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe the indemnitee ultimately
will be found entitled to indemnification.
A determination pursuant to subparagraph (c) (iii) of this
Article VIII, Section 40 shall not prevent the recovery from any
indemnitee of any amount advanced to such person as indemnification if
such person is subsequently determined not to be entitled to
indemnification; nor shall a determination pursuant to said
subparagraph prevent the payment of indemnification if such person is
subsequently found to be entitled to indemnification.
Section 5. Provisions Not Exclusive. The indemnification
provided by this Article VIII shall not be deemed exclusive of any
rights to which those seeking indemnification may be entitled under any
law, agreement, vote of stockholders, or otherwise.
<PAGE>
Section 6. GENERAL. No indemnification provided by this
Article shall be inconsistent with the 1940 Act or the Securities Act
of 1933. Any indemnification provided by this Article shall continue as
to a person who has ceased to be a director, officer, or employee, and
shall inure to the benefit of the heirs, executors and administrators
of such person. In addition, no amendment, modification or repeal of
this Article shall adversely affect any right or protection of an
indemnitee that exists at the time of such amendment, modification or
repeal.
* * *
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to Directors, officers and controlling
persons of M Fund, Inc. pursuant to the foregoing provisions, or otherwise, M
Fund, Inc. has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by M Fund, Inc. of expenses incurred or paid
by a Director, officer or controlling person of M Fund, Inc. in the successful
defense of any action, suit or proceeding) is asserted by such Director, officer
or controlling person in connection with the securities being registered, M
Fund, Inc. will, unless in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
Any other business, profession, vocation or employment of a substantial nature
in which each investment adviser of M Fund, Inc. and each director, officer or
partner of any such investment adviser, is or has been, at any time during the
past two fiscal years, engaged for his or her own account or in the capacity of
director, officer, employee, partner or trustee is described in each investment
adviser's Form ADV as currently on file with the SEC, the text of which is
hereby incorporated by reference.
INVESTMENT ADVISER FILE NO.
------------------ --------
M Financial Investment Advisers, Inc. 801-50553
Brandes Investment Partners LP 801-24896
Turner Investment Partners, Inc. 801-36220
Frontier Capital Management Company, LLC 801-15724
The Clifton Group 801-8809
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) 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").
(b) Set forth below are the names, principal business addresses and
positions of each director and officer of M Holdings Securities, Inc.
Unless otherwise noted, the principal business address of these
individuals is 205 SE Spokane Street, Portland, Oregon 97202. Unless
otherwise specified, none of the officers and directors of M Holdings
Securities, Inc. serve as officers and directors of the Funds.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME M HOLDINGS SECURITIES, INC. WITH M FUND, INC.
- ---- --------------------------- -----------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bridget McNamara Director and President None
- -------------------------------------------------------------------------------------------------------
Tom Spitzer Director None
- -------------------------------------------------------------------------------------------------------
Ron Stockfleth Director None
- -------------------------------------------------------------------------------------------------------
Connie Elmore Director None
- -------------------------------------------------------------------------------------------------------
Daniel Byrne Director President
- -------------------------------------------------------------------------------------------------------
David Schutt Treasurer and Secretary Treasurer and Secretary
- -------------------------------------------------------------------------------------------------------
JoNell Hermanson Compliance Officer Compliance Officer
- -------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder by M Fund,
Inc. will be maintained by the following offices of M Fund, Inc. or Investors
Bank & Trust Company:
M Fund, Inc. Investors Bank & Trust Company
River Park Center ATTN: Mutual Fund Administration
205 S.E. Spokane Street 200 Clarendon Street
Portland, Oregon 97202 Boston, Massachusetts 02116
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this amendment
to its Registration Statement (the "Registration Statement") to be signed on its
behalf by the undersigned, duly authorized, in the City of Portland, and State
of Oregon on the 29th day of February, 2000.
M FUND, INC.
By: /s/ Daniel F. Byrne
--------------------
Daniel F. Byrne,
President (Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on February 29, 2000.
SIGNATURE TITLE
- --------- -----
/s/ David W. Schutt Secretary and Treasurer
- ------------------------ (Principal Financial and Accounting Officer)
David W. Schutt
*
- ------------------------
Peter W. Mullin Director
*
- ------------------------
Philip Halpern Director
*
- ------------------------
Neil Goldschmidt Director
*
- ------------------------
Gerald Bidwell Director
*Executed by /s/ Daniel F. Byrne
-----------------------
Daniel F. Byrne
on behalf of those indicated pursuant
to Powers of Attorney.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(d1) Investment Advisory Agreement between M Fund, Inc. and M
Financial Investment Advisers, Inc.
(d2 ) Investment Sub-Advisory Agreement between M Financial
Investment Advisers, Inc. and Brandes Investment Partners LP
(d4) Investment Sub-Advisory Agreement between M Financial
Investment Advisers, Inc. and Frontier Capital Management
Company, LLC
(d5) Investment Sub-Advisory Agreement between M Financial
Investment Advisers, Inc. and The Clifton Group
(j) Consent of PricewaterhouseCoopers LLP
(p1) Code of Ethics of M Fund, Inc.
(p2) Code of Ethics of M Financial Investment Advisers, Inc.
(p3) Code of Ethics of M Holdings Securities, Inc.
(p4) Code of Ethics of Brandes Investment Partners, LP
(p5) Code of Ethics of Turner Investment Partners, Inc.
(p6) Code of Ethics of Frontier Capital Management Company, LLC
(p7) Code of Ethics of The Clifton Group
<PAGE>
M FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made and entered into this ____ day of ____________,
2000, by and between M Fund, Inc., a corporation organized and existing under
the laws of the State of Maryland (the "Fund"), and M Financial Investment
Advisers, Inc., a corporation organized and existing under the laws of the State
of Colorado (the "Adviser").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several portfolios of shares, each having its own
investment policies; and
WHEREAS, the Adviser is duly registered as an investment adviser
pursuant to the Investment Adviser Act of 1940; and
WHEREAS, the Fund desires to retain the Adviser to render investment
management services with respect to its Brandes International Equity Fund,
Turner Core Growth Fund, Frontier Capital Appreciation Fund, and Clifton
Enhanced U.S. Equity Fund, and such other portfolios as the Fund and the Adviser
may agree upon (the "Portfolios"), and the Adviser is willing to render such
services. NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE ADVISER. The Fund employs the Adviser:
(a) to manage the investment and reinvestment of the assets;
(b) to hire, and thereafter supervise the investment activities
of, one or more sub-advisers deemed necessary to carry out the
investment program of any Portfolios of the Fund, pursuant to
a written sub-advisory agreement and subject to approval by:
(i) the Fund's Board of Directors;
(ii) the vote of a majority of Directors, who are not
parties to such sub-advisory agreement or
interested persons of any such party, cast in
person at a meeting called for the purpose of
voting on such approval; and
(iii) except as otherwise permitted under the terms of
any exemptive
- -
<PAGE>
relief obtained from the Securities and Exchange
Commission (the "SEC"), or by rule or regulation,
a majority of the outstanding voting securities of
any affected Portfolio(s);
(c) to continuously review, supervise and (except where delegated
to a sub-adviser) administer the investment program of the
Portfolios;
(d) to determine in its discretion (except where delegated to a
sub-adviser) the securities to be purchased or sold;
(e) to provide the administrator of the Fund (the "Administrator")
and the Fund with records concerning the Adviser's activities
which the Fund is required to maintain; and
(f) to render regular reports to the Administrator and to the
Fund's officers and Directors concerning the Adviser's
discharge of the foregoing responsibilities. The retention of
a sub-adviser by the Adviser shall not relieve the Adviser of
its responsibilities under this Agreement.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Directors of the Fund and in compliance
with such policies as the Directors may from time to time establish,
and in compliance with the objectives, policies, and restrictions for
each such Portfolio set forth in the Fund's prospectus and statement of
additional information, as amended from time to time (referred to
collectively as the "Prospectus"), and applicable laws and regulations.
The Fund will furnish the Adviser from time to time with copies of all
amendments or supplements to the Prospectus, if any.
The Adviser accepts such employment and agrees, at its own expense, to
render the investment advisory services and to furnish, for the use of
the Fund, office space and all necessary office facilities, equipment
and personnel (including any sub-advisers) for servicing the
investments of the Fund, maintaining its organization and assisting in
providing shareholder communications and information services and to
permit any of its officers and employees to serve, without
compensation, as Directors or officers of the Fund if elected to such
positions.
2. FEES AND EXPENSES.
(a) PAYABLE BY THE FUND. The Fund shall pay all of its expenses
other than those expressly stated to be payable by the
Adviser. The expenses payable by the Fund shall include,
without limitation:
- -
<PAGE>
(i) interest and taxes;
(ii) brokerage commissions and other costs in connection
with the purchase or sale of securities,
commodities, and other investments for the Fund;
(iii) fees and expenses of its Directors (other than
those who are "interested persons" of the Fund or
the Adviser);
(iv) legal and audit expenses;
(v) transfer agent expenses and expenses for servicing
shareholder accounts;
(vi) expenses of computing the net asset value of the
shares of the Fund and the amount of its dividends;
(vii) custodian fees and expenses;
(viii) fees and expenses related to the registration and
qualification of the Fund and its shares for
distribution under state and federal securities
laws;
(ix) expenses of printing and mailing reports, notices
and proxy materials to shareholders of the Fund;
(x) the cost of share certificates, if any;
(xi) reports, membership and dues in the Investment
Company Institute or any similar organization;
(xii) expenses of preparing and typesetting prospectuses;
(xiii) expenses of printing and mailing prospectuses sent
to existing shareholders;
(xiv) such nonrecurring expenses as may arise, including
expenses incurred in actions, suits or proceedings
to which the Fund is a party and the legal
obligation which the Fund may have to indemnify its
officers and Directors in respect thereto; and
(xv) such other expenses as the Directors may, from time
to time,
- -
<PAGE>
determine to be properly payable by the Fund.
(b) PAYABLE BY THE ADVISER. The Adviser shall pay the following:
(i) salaries and fees, if any, of all officers of the
Fund and of all Directors of the Fund who are
"interested persons" (as defined in the 1940 Act)
of the Fund or of the Adviser and of all personnel
of the Fund or Adviser performing services relating
to research, statistical and investment activities;
(ii) expenses of printing and distributing any
prospectuses or reports prepared for its use or the
use of the Fund in connection with the offering of
the shares of the Fund's common stock for sale to
the public;
(iii) expenses of preparing and typesetting any other
literature used by the Adviser in connection with
such offering;
(iv) the cost of any advertising employed in such
offering; and
(v) fees of any sub-adviser.
3. DELIVERY OF DOCUMENTS. The Fund has furnished Adviser with copies
properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws");
(c) Current Prospectus(es) of the Portfolios.
4. OTHER COVENANTS. The Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the SEC
and will in addition conduct its activities under this
Agreement in accordance with other applicable law; and
(b) (directly or indirectly through one or more sub-advisers)
place orders
- -
<PAGE>
pursuant to its investment determinations for the Portfolios
either directly with the issuer of the security or with any
broker or dealer. In executing Portfolio transactions and
selecting brokers or dealers, the Adviser (directly or
indirectly through one or more sub-advisers) will use its best
efforts to seek on behalf of the Portfolio the best overall
terms available. In assessing the best overall terms available
for any transaction, the Adviser, and any sub-advisers, shall
consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the
security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to execute a
particular transaction, the Adviser and any sub-adviser may
also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Portfolio and/or other accounts
over which the Adviser or sub-adviser or their affiliates may
exercise investment discretion. The Adviser is authorized (and
may authorize a sub-adviser), subject to the prior approval of
the Fund's Board of Directors, to pay to a broker or dealer
who provides such brokerage and research services a commission
for executing a portfolio transaction for any of the
Portfolios which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser or sub-adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in terms
of that particular transaction or in terms of the overall
responsibilities of the Adviser or sub-adviser to the
Portfolio. In addition, the Adviser is authorized (and may so
authorize any sub-adviser) to allocate purchase and sale
orders for Portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Adviser or sub-adviser) to take into account the sale of
variable contracts investing through separate accounts in the
Fund if the Adviser or sub-adviser believes that the quality
of the transaction and the commission are comparable to what
they would be with other qualified firms. In no instance,
however, will any Portfolio's securities be purchased from or
sold to the Adviser, any sub-adviser engaged with respect to
that Portfolio, or any affiliated person of the Fund, the
Adviser, or that Portfolio's sub-adviser, acting as principal
in the transaction, except to the extent permitted by the SEC
and the 1940 Act.
5. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser pursuant to this Agreement, the Fund shall pay to the Adviser,
and the Adviser
- -
<PAGE>
agrees to accept as full compensation therefor, an advisory fee for
each Portfolio at the rates specified in Schedule A, which is attached
hereto and made a part of this Agreement. The Fee shall be calculated
by applying a daily rate, based on the annual percentage rates as
specified in Schedule A, to the average daily net assets of each
Portfolio and shall be paid to the Adviser monthly. The Adviser may, in
its discretion and from time to time, waive all or a portion of its
fee.
No Portfolio of the Fund shall be liable for the obligations of any
other Portfolio of the Fund. Without limiting the generality of the
foregoing, the Adviser shall look only to the assets of a particular
Portfolio for payment of fees for services rendered to that Portfolio.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
6. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by an applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified
for offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Fund or any
Portfolio which would result in the Fund's inability to qualify as a
regulated investment company under provisions of the Internal Revenue
Code. Payment of expenses by the Adviser pursuant to this Section 6
shall be settled on a monthly basis (subject to fiscal year-end
reconciliation, resulting perhaps in the Adviser's recovery of some
fees waived earlier in the fiscal year) by a waiver of the Adviser's
fees provided for hereunder, and such waiver shall be treated as a
reduction in the purchase price of the Adviser's services.
7. REPORTS. The Fund and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request. The Adviser further agrees to furnish to the Fund, if
applicable, the same such documents and information pertaining to any
sub-adviser as the Fund may reasonably request.
8. STATUS OF THE ADVISER. The services of the Adviser to the Fund are not
to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Fund are not impaired
thereby. The Adviser shall be deemed to be an independent contractor
and shall, unless otherwise
- -
<PAGE>
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund. To the extent that the purchase or sale of securities or other
investments of any issuer may be deemed by the Adviser to be suitable
for two or more accounts managed by the Adviser, the available
securities or investments may be allocated in a manner believed by the
Adviser to be equitable to each account. It is recognized that in some
cases this may adversely affect the price paid or received by the Fund
or the size or position obtainable for or disposed of by the Fund or
any Portfolio.
9. CERTAIN RECORDS. The Adviser shall keep and maintain, or shall arrange
for the sub-adviser of a Portfolio to keep and maintain, all books and
records with respect to each Portfolio's portfolio transactions
required by Rule 31a-1 under the 1940 Act and shall render to the Board
of Directors of the Fund such periodic and special reports as the Board
of Directors may reasonably request. The Adviser shall also furnish to
the Fund any other information that is required to be filed by the Fund
with the SEC or sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other relief that the
Adviser or the Fund obtains from the SEC. The Adviser agrees that all
records that it (or any sub-adviser) maintains on behalf of the Fund
are the property of the Fund and the Adviser will surrender promptly to
the Fund any of such records upon the Fund's request; provided,
however, that the Adviser may retain a copy of such records. In
addition, for the duration of this Agreement, the Adviser shall
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to
this Agreement, and shall transfer said records to any successor
Adviser upon the termination of this Agreement (or, if there is no
successor Adviser, to the Fund).
10. LIMITATION OF LIABILITY OF THE ADVISER. The duties of the Adviser shall
be confined to those expressly set forth herein, and no implied duties
are assumed by or may be asserted against the Adviser hereunder. The
Adviser shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder, except as may otherwise be provided
under provisions of applicable state law which cannot be waived or
modified hereby. (As used in this Section 10, the term "Adviser" shall
include not only the Adviser itself but also shareholders, directors,
officers, employees and other corporate agents of the Adviser).
11. PERMISSIBLE INTERESTS. Directors, agents, and shareholders of the Fund
are or may be interested in the Adviser (or any successor thereof) as
directors,
- -
<PAGE>
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Adviser are or may be
interested in the Fund as Directors, officers, shareholders or
otherwise; and the Adviser (or any successor) is or may be interested
in the Fund as a shareholder or otherwise subject to the provisions of
applicable law. All such interests shall be fully disclosed between the
parties on an ongoing basis and in the Fund's Prospectus as required by
law. In addition, brokerage transactions for the Fund may be effected
through affiliates of the Adviser or any sub-adviser if approved by the
Board of Directors, subject to the rules and regulations of the SEC.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from the date
of execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of each Portfolio;
provided, however, that if the shareholders of any Portfolio fail to
approve the Agreement as provided herein, the Adviser may continue to
serve hereunder in the manner and to the extent permitted by the 1940
Act and rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty by vote of a majority of the
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days' nor more
than 60 days' written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days' written notice to
the Fund. This Agreement will automatically and immediately terminate
in the event of its assignment.
As used in this Section 12, the terms "assignment," "interested
persons," and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the 1940
Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the SEC.
13. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
14. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall
- -
<PAGE>
be deemed sufficient if delivered by hand, transmitted by electronic
facsimile, or mailed by registered, certified or overnight United
States mail, postage prepaid, or sent by overnight delivery with a
recognized courier, addressed by the party giving notice to the other
party at the last address furnished by the other party:
To the Adviser at: M Financial Investment Advisers,Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Fund at: M Fund, Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
17. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT
M FUND, INC. ADVISERS, INC.
<PAGE>
By:__________________________________
By:_______________________________
Title: President Title: President
Attest:________________________________
Attest:_____________________________
Title: Administrator, M Funds Title: Administrator, M Funds
- -
<PAGE>
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
M FUND, INC.
AND
M FINANCIAL INVESTMENT ADVISERS, INC.
Pursuant to Section 5, the Fund shall pay the Adviser compensation at an
effective annual rate as follows:
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
Brandes International Equity Fund 1.10% of first $ 10 million
0.95% of next $10 million
0.75% of next $30 million
0.65% on amounts above
$50 million
Turner Core Growth Fund 0.45%
Frontier Capital Appreciation Fund 0.90%
Clifton Enhanced U.S. Equity Fund 0.40% of first $ 25 million
0.35% on amounts above
$25 million
- -
<PAGE>
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
BRANDES INTERNATIONAL EQUITY FUND
THIS AGREEMENT made and entered into this 1ST day of May, 2000, by and
between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Brandes
Investment Partners, L.P., a corporation organized and existing under the laws
of Scotland (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is registered
as an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), and is a series fund with a number of
portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment Advisory
Agreement (the "Advisory Agreement") with the Fund, pursuant to which the
Adviser will act as investment adviser to the Brandes International Equity Fund
portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain the
Sub-Adviser to provide investment advisory services to the Adviser in connection
with the management of the Portfolio, and the Sub-Adviser is willing to render
such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser pursuant to
the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and the
Fund's Board of Directors, the Sub-Adviser shall manage the investment
operations of the Portfolio and the composition of the Portfolio, including
the purchase, retention and disposition of securities and other assets, in
accordance with the Portfolio's investment objectives, policies and
restrictions as stated in the Portfolio's prospectus and statement of
additional information, as currently in effect and as amended or
supplemented from time to time (referred to collectively as the
"Prospectus"), and subject to the following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Portfolio, and
what portion of the assets will be invested or held uninvested in
cash.
<PAGE>
(b) In the performance of its duties and obligations under this Agreement,
the Sub-Adviser shall act in conformity with the Fund's Articles of
Incorporation and Bylaws (as such terms are defined herein) and the
Prospectus and with the instructions and directions of the Adviser and
of the Board of Directors of the Fund and will conform to and comply
with the requirements of the 1940 Act, the Internal Revenue Code of
1986, and all other applicable federal and state laws and regulations,
as each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased or sold
by the Portfolio and will place orders with or through such persons,
brokers or dealers to carry out the policy with respect to brokerage
set forth in the Portfolio's Registration Statement (as defined
herein) and Prospectus or as the Board of Directors or the Adviser may
direct from time to time, in conformity with federal securities laws.
In executing Portfolio transactions and selecting brokers or dealers,
the Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the best
overall terms available for any transaction, the Sub-Adviser shall
consider all factors that it deems relevant, including the breadth of
the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In evaluating the best overall
terms available, and in selecting the broker-dealer to execute a
particular transaction, the Sub-Adviser may also consider the
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) provided to the
Portfolio and/or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser may exercise investment discretion. The
Sub-Adviser is authorized, subject to compliance with said Section
28(e), to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in good faith
that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer --
viewed in terms of that particular transaction or in terms of the
overall responsibilities of the Sub-Adviser to the Portfolio. In
addition, the Sub-Adviser is authorized to allocate purchase and sale
orders for the Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable contracts
investing through separate accounts in the Fund if the Sub-Adviser
believes that the quality of the transactions and the commission are
comparable to what they would be with other qualified firms. In no
instance, however, will any Portfolio's securities be purchased from
or sold to the Sub-Adviser, the Adviser, or any affiliated person of
either the Fund, the Sub-Adviser or the
-2-
<PAGE>
Adviser, acting as principal in the transaction, except to the extent
permitted by the Securities and Exchange Commission ("SEC") and the
1940 Act.
(d) The Sub-Adviser shall maintain all books and records with respect to
the Portfolio's portfolio transactions required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1
under the 1940 Act and shall render to the Adviser or Board of
Directors of the Fund such periodic and special reports as the Adviser
or Board of Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records required
to be maintained by the Sub-Adviser under this Agreement and shall
timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to
keep the other books and records of the Portfolio required by Rule
31a-1 under the 1940 Act. The Sub-Adviser shall also furnish to the
Adviser any other information that is required to be filed by the
Adviser or the Fund with the SEC or sent to shareholders under the
` 1940 Act (including the rules adopted thereunder) or any exemptive or
other relief that the Adviser or the Fund obtains from the SEC. The
Sub-Adviser agrees that all records that it maintains on behalf of the
Portfolio are the property of the Portfolio and the Sub-Adviser will
surrender promptly to the Portfolio any of such records upon the
Portfolio's request; provided, however, that the Sub-Adviser may
retain a copy of such records. In addition, for the duration of this
Agreement, the Sub-Adviser shall preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any such records as are required to
be maintained by it pursuant to this Agreement, and shall transfer
said records to any successor Sub-Adviser upon the termination of this
Agreement (or, if there is no successor Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on each
business day with information relating to all transactions concerning
the Portfolio's assets and shall provide the Adviser with such
information upon request of the Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its representatives,
and any third party retained thereby upon the Adviser's exercise of
its right, granted hereby, to compel an audit of the Portfolio's
financial records, examine records of the Portfolio's portfolio
transactions, and/or make a copy of such records.
(g) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser
shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the
Fund.
-3-
<PAGE>
(h) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitments under this Agreement.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers
or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Portfolio pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of its
duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the Secretary of
State of the State of Maryland (such Articles of Incorporation, as in
effect on the date of this Agreement and as amended from time to time,
are herein called the "Articles of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"Bylaws"); and
(c) Current Prospectus of the Portfolio.
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A, which is
attached hereto and made part of this Agreement. The fee shall be
calculated by applying a daily rate, based on the annual percentage rates
as specified in Schedule A, to the average daily net assets of the
Portfolio and shall be paid to the Sub-Adviser monthly. The Sub-Adviser
may, in its discretion and from time to time, waive all or a portion of its
fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not be
liable for any error of judgment or for any loss suffered by the Portfolio
or the Adviser in connection with performance of the Sub-Adviser's
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting
from willful misfeasance, bad faith or gross negligence on the
Sub-Adviser's part in the performance of its duties or from reckless
disregard of its obligations and duties under this Agreement, except as may
otherwise be provided under provisions of applicable state law which cannot
be waived or modified hereby.
-4-
<PAGE>
6. REPORTS. During the term of this Agreement, the Adviser agrees to furnish
the Sub-Adviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other materials prepared for
distribution to shareholders of the Portfolio, the Fund or the public that
refer to the Sub-Adviser or its clients in any way prior to the use thereof
and not to use such material if the Sub-Adviser reasonably objects to the
use thereof in a writing received by the Adviser within five business days
(or such other period as may be mutually agreed) after the Sub-Adviser's
receipt thereof. The Sub-Adviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the
Sub-Adviser, its services and its clients. The Adviser agrees to use its
reasonable best efforts to ensure that materials prepared by its employees
or agents or its affiliates that refer to the Sub-Adviser or its clients in
any way are consistent with those materials previously approved by the
Sub-Adviser as referenced in the first sentence of this paragraph. Sales
literature may be furnished to the Sub-Adviser by first class or overnight
mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish the
Adviser at its principal office all sales literature or other materials
prepared for distribution to shareholders of the Portfolio, the Fund or the
public that refer to the Adviser, its clients or the Fund in any way prior
to the use thereof and not to use such material if the Adviser reasonably
objects to the use thereof in a writing received by the Sub-Adviser within
five business days (or such other period as may be mutually agreed) after
the Adviser's receipt thereof. The Adviser's right to object to such
materials is limited to the portions of such materials that expressly
relate to the Adviser, its clients or the Fund. The Sub-Adviser agrees to
use its reasonable best efforts to ensure that materials prepared by its
employees or agents or its affiliates that refer to the Adviser or its
clients in any way are consistent with those materials previously approved
by the Adviser as referenced in the first sentence of this paragraph. Sales
literature may be furnished to the Adviser by first class or overnight
mail, facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
from or in connection with the performance by the Sub-Adviser of its duties
under this Agreement. This provision shall survive termination of this
Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon its
approval by the Fund's Board of Directors and by the vote of a majority of
the outstanding voting securities of the Portfolio; provided, however, that
at any time the Adviser shall have obtained exemptive relief from the SEC
permitting it to engage a sub-adviser without first obtaining approval of
the Agreement from a majority of the outstanding
-5-
<PAGE>
voting securities of the portfolio(s) involved, this Agreement shall become
effective upon its approval by the Fund's Board of Directors. Any
sub-adviser so selected and approved shall be without the protection
accorded by shareholder approval of an investment adviser's receipt of
compensation under Section 36(b) of the 1940 Act.
This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved
at least annually in conformance with the 1940 Act; provided, however, that
this Agreement may be terminated (a) by the Portfolio at any time, without
the payment of any penalty, by the vote of a majority of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of
the Portfolio, (b) by the Adviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party, or (c) the Sub-Adviser at any time, without the payment of
any penalty, on 90 days' written notice to the other party. This Agreement
shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement
with the Fund. As used in this Section 8, the terms "assignment" and "vote
of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the SEC under
the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of the
State of Maryland, without regard to conflicts of law principles; provided,
however, that nothing herein shall be construed as being inconsistent with
the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this Agreement
shall be deemed sufficient if delivered by hand, transmitted by electronic
facsimile, or mailed by registered, certified or overnight United States
mail, postage prepaid, or sent by overnight delivery with a nationally
recognized courier, addressed by the party giving notice to the other party
at the last address furnished by the other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
-6-
<PAGE>
To the Sub-Adviser at: BRANDES INVESTMENT PARTNERS, L.P.
12750 High Bluff Dr.
San Diego, CA 92130
Attn: Charles Brandes
Each such notice, advice or report shall be effective upon receipt or three
days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order
of the SEC, whether of special or general application, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT BRANDES INVESTMENT
ADVISERS, INC. PARTNERS, L.P.
By:______________________________ By: ____________________________________
Title: __________________________ Title:__________________________________
Attest:___________________________ Attest: ________________________________
Title:____________________________ Title:__________________________________
-8-
<PAGE>
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
BRANDES INVESTMENT PARTNERS, L.P.
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
Brandes International Equity Fund 0.95%on first $ 10 million
0.80% on next $10 million
0.60% on next $30 million
0.50% on amounts over $50 million
-9-
<PAGE>
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
FRONTIER CAPITAL APPRECIATION FUND
THIS AGREEMENT made and entered into this 14 day of January, 2000, by
and between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and Frontier
Capital Management Company, LLC, a limited liability company organized and
existing under the laws of the State of Delaware (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Frontier Capital Appreciation
Fund portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the
<PAGE>
instructions and directions of the Adviser and of the Board of
Directors of the Fund and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of
1986, and all other applicable federal and state laws and
regulations, as each is amended from time to time.
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for the specific transaction and
on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to execute a
particular transaction, the Sub-Adviser may also consider the
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided
to the Portfolio and/or other accounts over which the
Sub-Adviser or an affiliate of the Sub-Adviser may exercise
investment discretion. The Sub-Adviser is authorized, subject
to compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
-2-
<PAGE>
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are the property of the
Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the
termination of this Agreement (or, if there is no successor
Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
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<PAGE>
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Adviser, its
clients or the Fund. The Sub-Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or
its affiliates that refer to the Adviser or its clients in any way are
consistent with those materials previously approved by the Adviser as
referenced in the first
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<PAGE>
sentence of this paragraph. Sales literature may be furnished to the
Adviser by first class or overnight mail, facsimile transmission
equipment or hand delivery.
7. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related
expenses) arising from or in connection with the performance by the
Sub-Adviser of its duties under this Agreement. This provision shall
survive termination of this Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
the later to occur of (i) its execution and (ii) its approval by the
Fund's Board of Directors and by the vote of a majority of the
outstanding voting securities of the Portfolio; provided, however, that
at any time the Adviser shall have obtained exemptive relief from the
SEC permitting it to engage a sub-adviser without first obtaining
approval of the Agreement from a majority of the outstanding voting
securities of the portfolio(s) involved, this Agreement shall become
effective upon the later to occur of (i) its execution and (ii) its
approval by the Fund's Board of Directors. Any sub-adviser so selected
and approved shall be without the protection accorded by shareholder
approval of an investment adviser's receipt of compensation under
Section 36(b) of the 1940 Act.
This Agreement shall continue in effect continuously from the effective
date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
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<PAGE>
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: FRONTIER CAPITAL MANAGEMENT COMPANY, LLC
99 Summer Street
Boston, MA 02110
Attn: J. Kirk Smith, CFA
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT FRONTIER CAPITAL
ADVISERS, INC. MANAGEMENT COMPANY,
LLC
By:_____________________________ By:_______________________________
Title: President Title:____________________________
Attest:_________________________ Attest:___________________________
Title: Administrator, M Funds Title:____________________________
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<PAGE>
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
FRONTIER CAPITAL MANAGEMENT COMPANY, LLC
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
Frontier Capital Appreciation Fund 0.75%
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<PAGE>
M FUND, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
FOR THE
CLIFTON ENHANCED U.S. EQUITY FUND
THIS AGREEMENT made and entered into this 1st day of May, 2000, by and
between M Financial Investment Advisers, Inc., a corporation organized and
existing under the laws of the State of Colorado (the "Adviser"), and The
Clifton Group, a corporation organized and existing under the laws of the
Commonwealth of Minnesota (the "Sub-Adviser").
WHEREAS, M Fund, Inc., a Maryland corporation (the "Fund"), is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is a series fund with a
number of portfolios; and
WHEREAS, the Adviser has entered or will enter into an Investment
Advisory Agreement (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser will act as investment adviser to the Clifton Enhanced U.S. Equity
Fund portfolio of the Fund (the "Portfolio"), which is a series of the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is willing
to render such investment advisory services.
WHEREAS, the Sub-Adviser is registered as an investment adviser
pursuant to the Investment Adviser Act of 1940.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
the Fund's Board of Directors, the Sub-Adviser shall manage the
investment operations of the Portfolio and the composition of the
Portfolio, including the purchase, retention and disposition of
securities and other assets, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the
Portfolio's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the
following:
(a) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments
and securities will be purchased, retained or sold by the
Portfolio, and what portion of the assets will be invested or
held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and Bylaws (as such terms are
defined herein) and the Prospectus and with the instructions
and directions of the Adviser and of the Board of Directors of
the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations, as
each is amended from time to time.
<PAGE>
(c) The Sub-Adviser shall determine the securities to be purchased
or sold by the Portfolio and will place orders with or through
such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration
Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing
Portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for the specific transaction and
on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to execute a
particular transaction, the Sub-Adviser may also consider the
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided
to the Portfolio and/or other accounts over which the
Sub-Adviser or an affiliate of the Sub-Adviser may exercise
investment discretion. The Sub-Adviser is authorized, subject
to compliance with said Section 28(e), to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the
Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser is
authorized to allocate purchase and sale orders for the
Portfolio's portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the
Sub-Adviser) to take into account the sale of variable
contracts investing through separate accounts in the Fund if
the Sub-Adviser believes that the quality of the transactions
and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the
Sub-Adviser, the Adviser, or any affiliated person of either
the Fund, the Sub-Adviser or the Adviser, acting as principal
in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with
respect to the Portfolio's portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Adviser or Board of Directors of the Fund such
periodic and special reports as the Adviser or Board of
Directors may reasonably request.
The Sub-Adviser shall keep the Portfolio's books and records
required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and
records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser shall also furnish to the Adviser any
other information that is required to be filed by the Adviser
or the Fund with the SEC or sent to shareholders under the
1940 Act (including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the Fund obtains
from the SEC. The Sub-Adviser agrees that all
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<PAGE>
records that it maintains on behalf of the Portfolio are the
property of the Portfolio and the Sub-Adviser will surrender
promptly to the Portfolio any of such records upon the
Portfolio's request; provided, however, that the Sub-Adviser
may retain a copy of such records. In addition, for the
duration of this Agreement, the Sub-Adviser shall preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it pursuant
to this Agreement, and shall transfer said records to any
successor Sub-Adviser upon the termination of this Agreement
(or, if there is no successor Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on
each business day with information relating to all
transactions concerning the Portfolio's assets and shall
provide the Adviser with such information upon request of the
Adviser.
(f) The Sub-Adviser shall cooperate with the Adviser, its
representatives, and any third party retained thereby upon the
Adviser's exercise of its right, granted hereby, to compel an
audit of the Portfolio's financial records, examine records of
the Portfolio's portfolio transactions, and/or make a copy of
such records.
(g) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to
others, as long as such services do not impair the services
rendered to the Adviser or the Fund.
(h) The Sub-Adviser shall promptly notify the Adviser of any
material financial condition affecting the Sub-Adviser that is
likely to impair the Sub-Adviser's ability to fulfill its
commitments under this Agreement.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Portfolio
pursuant to the Advisory Agreement and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Fund's Articles of Incorporation, as filed with the
Secretary of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and
as amended from time to time, are herein called the "Articles
of Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "Bylaws"); and
(c) Current Prospectus of the Portfolio.
(d) The Statement of Additional Information shall be provided to
FPA by the Adviser
-3-
<PAGE>
4. COMPENSATION OF THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rates specified in Schedule A,
which is attached hereto and made part of this Agreement. The fee shall
be calculated by applying a daily rate, based on the annual percentage
rates as specified in Schedule A, to the average daily net assets of
the Portfolio and shall be paid to the Sub-Adviser monthly. The
Sub-Adviser may, in its discretion and from time to time, waive all or
a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not
be liable for any error of judgment or for any loss suffered by the
Portfolio or the Adviser in connection with performance of the
Sub-Adviser's obligations under this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), or a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its
duties or from reckless disregard of its obligations and duties under
this Agreement, except as may otherwise be provided under provisions of
applicable state law which cannot be waived or modified hereby. This
provision shall survive termination of this Agreement.
Adviser shall reimburse, indemnify, and hold harmless Sub-Adviser,
individually and as sub-adviser, of and from any and all expenses,
losses, damages, liabilities, demands, charges, and claims of any kind
or nature (including attorneys' fees) whatsoever, arising from the
operations and management of the Portfolio except where such expense,
loss, damage, liability, demand, charge, or claim is the result of an
occurrence described in the foregoing paragraph for which the
Sub-Adviser is determined to be liable.
6. REPORTS. During the term of this Agreement, the Adviser agrees to
furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Sub-Adviser or its clients in
any way prior to the use thereof and not to use such material if the
Sub-Adviser reasonably objects to the use thereof in a writing received
by the Adviser within five business days (or such other period as may
be mutually agreed) after the Sub-Adviser's receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser,
its services and its clients. The Adviser agrees to use its reasonable
best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients
in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the first sentence of this paragraph.
Sales literature may be furnished to the Sub-Adviser by first class or
overnight mail, facsimile transmission equipment or hand delivery.
During the term of this Agreement, the Sub-Adviser agrees to furnish
the Adviser at its principal office all sales literature or other
materials prepared for distribution to shareholders of the Portfolio,
the Fund or the public that refer to the Adviser, its clients or the
Fund in any way prior to the use thereof and not to use such material
if the Adviser reasonably objects to the use thereof in a writing
received by the Sub-Adviser within five business days (or such other
period as may be mutually agreed) after the Adviser's receipt thereof.
The Adviser's right to object to such materials is limited to the
portions of such
-4-
<PAGE>
materials that expressly relate to the Adviser, its clients or the
Fund. The Sub-Adviser agrees to use its reasonable best efforts to
ensure that materials prepared by its employees or agents or its
affiliates that refer to the Adviser or its clients in any way are
consistent with those materials previously approved by the Adviser as
referenced in the first sentence of this paragraph. Sales literature
may be furnished to the Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
7. INDEMNIFICATION. Subject to the provisions of Section 5 hereof, the
Sub-Adviser shall indemnify and hold harmless the Adviser from and
against any and all claims, losses, liabilities or damages (including
reasonable attorney's fees and other related expenses) arising from or
in connection with the performance by the Sub-Adviser of its duties
under this Agreement. This provision shall survive termination of this
Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective upon
its approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding voting securities of the Portfolio;
provided, however, that at any time the Adviser shall have obtained
exemptive relief from the SEC permitting it to engage a sub-adviser
without first obtaining approval of the Agreement from a majority of
the outstanding voting securities of the portfolio(s) involved, this
Agreement shall become effective upon its approval by the Fund's Board
of Directors. Any sub-adviser so selected and approved shall be without
the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act,
until such shareholder approval is obtained.
This Agreement shall continue in effect for a period of one year from
the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however,
that this Agreement may be terminated (a) by the Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party, or (c) the Sub-Adviser
at any time, without the payment of any penalty, on 90 days' written
notice to the other party. This Agreement shall terminate automatically
and immediately in the event of its assignment, or in the event of a
termination of the Adviser's agreement with the Fund. As used in this
Section 8, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject
to such exceptions as may be granted by the SEC under the 1940 Act.
9. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the State of Maryland, without regard to conflicts of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
10. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their permitted successors.
11. NOTICE. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered by hand, transmitted
by electronic facsimile, or mailed by registered, certified or
overnight United States mail, postage prepaid, or sent by overnight
-5-
<PAGE>
delivery with a nationally recognized courier, addressed by the party
giving notice to the other party at the last address furnished by the
other party:
To the Adviser at: M FINANCIAL INVESTMENT ADVISERS, INC.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Sub-Adviser at: THE CLIFTON GROUP
309 Clifton Avenue
Minneapolis, Minnesota 55403
Attn: Jack L. Hansen
Each such notice, advice or report shall be effective upon receipt or
three days after mailing.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject
matter. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
13. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is altered by a rule, regulation or
order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
M FINANCIAL INVESTMENT THE CLIFTON GROUP
ADVISERS, INC.
By:______________________________ By: ____________________________________
Title: President Title:__________________________________
Attest:___________________________ Attest: ________________________________
Title: Administrator, M Funds Title:__________________________________
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<PAGE>
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
M FINANCIAL INVESTMENT ADVISERS, INC.
AND
THE CLIFTON GROUP
Pursuant to Section 4, the Adviser shall pay the Sub-Adviser compensation at an
effective annual rate as follows:
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
Clifton Enhanced U.S. 0.25% on first $ 25 million
Equity Fund 0.20% on amounts over $25 million
-7-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statement of M Fund, Inc. on Form N-1A (File No. 33-95472/811-9082)
Post-Effective Amendment No. 6, of our report dated February 10, 2000, on our
audits of the financial statements and financial highlights included in the
December 31, 1999 Annual Report of Brandes International Equity Fund, Turner
Core Growth Fund, Frontier Capital Appreciation Fund and Enhanced U.S. Equity
Fund (four series of M Fund, Inc.)
We further consent to the references to our Firm under the headings "Financial
Highlights" in the Prospectus and "Other Information" in the Statement of
Additional Information.
/s/ PricewaterhouseCoopers L.L.P.
---------------------------------
PricewaterhouseCoopers L.L.P.
Boston, Massachusetts
February 25, 2000
<PAGE>
CODE OF ETHICS
M FUND, INC.
SECTION I: STATEMENT OF PURPOSE AND APPLICABILITY
(A) COVERED ENTITIES AND THEIR RELATIONSHIPS
(1) THE FUND. M Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified, open-end, management investment company. The Fund
currently has four portfolios (the "Portfolios"): the Brandes
International Equity Fund, the Turner Core Growth Fund, the
Frontier Capital Appreciation Fund and the Franklin Enhanced U.S.
Equity Fund.
(2) INVESTMENT ADVISER. The current investment adviser is M Financial
Investment Advisers, Inc. (the "Adviser") and the current
subadvisers to the Portfolios of the Fund (the "Subadvisers") are
as follows:
FUND SUBADVISER
---- ----------
Brandes International Brandes Investment
Equity Fund Patners, L.P.
Turner Core Growth Fund Turner Investment
Partners, Inc.
Frontier Capital Frontier Capital
Appreciation Fund Management Company,
Inc.
Enhanced U.S. Franklin Portfolio
Equity Fund Associates Trust
<PAGE>
(B) STATEMENT OF PURPOSE
(1) INTRODUCTION. As a registered investment company, the Fund has a
fiduciary duty to its shareholders, a duty that is recognized
under the federal securities laws and regulations governing the
Fund's operations. In particular, the 1940 Act establishes as a
matter of federal law the fiduciary status of affiliates of an
investment company vis-a-vis such company and regulates and
controls the relationship between an investment company, its
officers and employees, its investment advisers, and officers and
employees of such advisers. The 1940 Act specifically prohibits
certain types of financial transactions involving, directly or
indirectly, both an investment company and its investment adviser
or officers or employees of such adviser unless prior approval is
obtained from the Securities and Exchange Commission (the "SEC").
An underlying policy of the 1940 Act is to prohibit any person
who is connected with an investment company or an investment
adviser of such company from deriving hidden profit from his or
her association with such company. The 1940 Act, among other
things, prohibits persons affiliated with an investment company
from engaging in practices that constitute fraud or deceit upon
the company or its shareholders, including the practice of its
directors, officers, or employees or of any investment manager,
investment adviser, or their employees trading privately (I.E.,
for their own accounts) in securities at a time when the
investment company is caused to trade in the same securities in
order to benefit these affiliated persons. Thus, the 1940 Act
requires investment company directors, officers, and employees as
well as investment managers and advisers, employees of investment
managers and advisers and other affiliates to serve the company
with undivided loyalty.
(2) CODE OF ETHICS. Rule 17j-1, promulgated by the SEC pursuant to
Section 17(j) of the 1940 Act, makes it unlawful for affiliated
persons of the Fund: (1) to employ any device, scheme or artifice
to defraud the Fund; (2) to make to the Fund any untrue statement
of a material fact or omit to state to the Fund a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading; (3) to
engage in any act, practice, or course of business that operates
or would operate as a fraud or deceit upon the Fund; or (4) to
engage in any manipulative practice with respect to the Fund.
Rule 17j-1 also requires registered investment companies and
their investment advisers (including subadvisers) and principal
underwriters to adopt written Codes of Ethics reasonably designed
to prevent their officers
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and directors, as well as any employees who participate in the
selection of a fund's portfolio securities or who have access to
information regarding a fund's impending purchases and sales of
portfolio securities, from engaging in conduct prohibited by the
rule as described in (1) - (4) above. Therefore, the Fund has
adopted the conduct standards contained in this Code of Ethics
("Code") for such individuals.
This Code is based upon the following general fiduciary
principles:
(a) the duty at all times to place the interests of shareholders
first;
(b) the requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as
to avoid any actual or potential conflict of interest or any
abuse of an individual's position of trust and
responsibility; and
(c) the fundamental standard that investment company personnel
should not take inappropriate advantage of their positions.
(3) SCOPE OF THE CODE. This Code constitutes the Code of Ethics of
the Fund. The Adviser and Subadvisers have adopted their own
Codes of Ethics and are subject to the securities transaction
reporting requirements set forth under such Codes of Ethics, not
the securities transaction reporting requirements set forth under
this Code. This Code covers the conduct (including the personal
securities transactions) of each officer and director of the
Fund, as well as of any employees of the Fund who participate in
the selection of the Fund's portfolio securities or who have
access to information regarding the Fund's impending purchases
and sales of portfolio securities.
SECTION II: DEFINITIONS
(A) ACCESS PERSON. "Access Person" means any director, officer, or
"Advisory Person" of the Fund.
(B) ADVISER. "Adviser" means the Adviser, each Subadviser listed in
Section I(A)(2) above, and any other individual or entity that may
from time to time serve as an investment adviser to the Fund or any
Portfolio thereof, as applicable.
(C) ADVISORY PERSON. "Advisory person" of the Fund means (1) any employee
of the Fund or of any company in a control relationship to the Fund,
who, in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of a security by the Fund, or whose
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functions relate to the making of any recommendations with respect to
such purchases or sales; (2) any director, officer, or employee of any
Adviser, or Subadviser or of any company in a control relationship
with such an entity, which director, officer, or employee, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of a security by the Fund, or whose functions relate to the making of
any recommendations with respect to such purchases or sales; and (3)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to
the purchase or sale of security.
A person does not become an "Advisory Person" simply by virtue of (1)
normally assisting in the preparation of public reports, or receiving
public reports, but not receiving information about current
recommendations or trading of securities; or (2) a single instance of
obtaining knowledge of current recommendations or trading activity; or
infrequently and inadvertently obtaining such knowledge.
(D) BEING CONSIDERED FOR PURCHASE OR SALE. A security is "being considered
for purchase or sale" when a recommendation to purchase or sell such
security has been made and communicated and, with respect to the
person making the recommendations when such person seriously considers
making such a recommendation.
(E) BENEFICIAL INTEREST. "Beneficial Interest" includes any entity,
person, trust, or account with respect to which an Access Person
exercises investment discretion or provides investment advice. A
beneficial interest shall be presumed to include all accounts in the
name of or for the benefit of the Access Person, his or her spouse,
dependent children, or any person living with him or her or to whom he
or she contributes economic support.
(F) BENEFICIAL OWNERSHIP. "Beneficial Ownership" shall be determined in
accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of
1934, except that the determination of direct or indirect Beneficial
Ownership shall apply to all securities, and not just EQUITY
securities, that an Access Person has or acquires. Rule 16a-1(a)(2)
provides that the term "beneficial owner" means any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, has or shares a direct or
indirect pecuniary interest in any equity security. Therefore, an
Access Person may be deemed to have Beneficial Ownership of securities
held by members of his or her immediate family sharing the same
household, or by certain partnerships, trusts, corporations, or other
arrangements.
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<PAGE>
(G) CONTROL. "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act. Generally, control means the power to
exercise a controlling influence on the management or policies of a
company, unless such power is solely the result of an official
position with such company.
(H) DESIGNATED OFFICER. "Designated Officer" shall mean the officer of the
Fund designated by the Board of Directors from time to time to be
responsible for management of compliance with this Code. The
Designated Officer may appoint a designee to carry out certain of his
or her functions pursuant to this Code.
(I) DISINTERESTED DIRECTOR. "Disinterested Director" means a director of
the Fund who is not an "interested person" of the Fund within the
meaning of Section 2(a)(19) of the 1940 Act.
(J) FUND. "Fund" means M Fund, Inc.
(K) PORTFOLIO MANAGER. "Portfolio Manager" means the person or persons
primarily responsible for the day-to-day management of a Portfolio.
(L) PURCHASE OR SALE OF A SECURITY. "Purchase or sale of a security"
includes, among other things, the writing of an option to purchase or
sell a security, or the use of a derivative product to take a position
in a security.
(M) SECURITY. "Security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include shares of
registered open-end investment companies (I.E., mutual funds),
securities issued by the Government of the United States, short term
debt securities that are "government securities" within the meaning of
Section 2(a)(16) of the 1940 Act, bankers' acceptances, bank
certificates of deposit, commercial paper, and such other money market
instruments as designated by the Board of Directors of the Fund.
(N) SUBADVISER. "Subadviser" shall mean each Subadviser listed in Section
I(A)(2) above, and any other individual or entity that may from time
to time serve as subadviser to the Fund or any Portfolio thereof, as
applicable.
SECTION III: STANDARDS OF CONDUCT
(A) GENERAL STANDARDS
(1) No Access Person shall engage, directly or indirectly, in any
business transaction or arrangement for personal profit that is
inconsistent with the best interests of the Fund or its
shareholders; nor shall he or she make use of any confidential
information gained by reason of his or her employment
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by or affiliation with the Fund or any Investment Adviser or
Subadviser or affiliates thereof in order to derive a personal
profit for himself or herself or for any Beneficial Interest, in
violation of the fiduciary duty owed by the Fund's affiliates to
the Fund or its shareholders.
(2) Any Access Person recommending or authorizing the purchase or
sale of a Security by the Fund shall, at the time of such
recommendation or authorization, disclose any Beneficial Interest
in or Beneficial Ownership of such Security or the issuer thereof
that he or she may have, including without limitation:
(a) his or her Beneficial Ownership of any Securities of such
issuer;
(b) any transaction he or she contemplates in such Securities;
(c) any position that he or she holds with such issuer; and
(d) any present or proposed business relationship that he or she
(or any Beneficial Interest of his or hers) may have with
the issuer or its affiliates.
(3) No Access Person shall dispense any information concerning
Securities holdings or Securities transactions of the Fund to
anyone outside the Fund, without obtaining prior written approval
from the Designated Officer, the equivalent officer of the
appropriate Investment Adviser or Subadviser, or such person or
persons as these individuals may designate to act on their
behalf. Notwithstanding the preceding sentence, such Access
Person may dispense such information without obtaining prior
written approval:
(a) when there is a public report containing the same
information;
(b) when such information is dispensed in accordance with
compliance procedures established to prevent conflicts of
interest between the Fund and its affiliates;
(c) when such information is reported to directors of the Fund;
or
(d) in the ordinary course of his or her duties on behalf of the
Fund.
(4) All personal Securities transactions should be conducted
consistent with this Code and in such a manner as to avoid actual
or potential conflicts of interest, the appearance of a conflict
of interest, or any abuse of an individual's position of trust
and responsibility within the Fund.
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<PAGE>
(B) PROHIBITED TRANSACTIONS
(1) GENERAL PROHIBITION. No Access Person shall purchase or sell,
directly or indirectly, any Security in which he or she has, or
by reason of such transaction acquires, any direct or indirect
Beneficial Ownership and which such Access Person knows or should
have known at the time of such purchase or sale:
(a) is being considered for purchase or sale by the Fund, or
(b) is being purchased or sold by the Fund.
(2) INITIAL PUBLIC OFFERINGS. No Advisory Person shall purchase,
directly or indirectly, any Securities in which he or she by
reason of such transaction acquires any direct or indirect
Beneficial Ownership in an initial public offering.
(3) PRIVATE PLACEMENTS. No Advisory Person shall purchase, directly
or indirectly, any Securities in which he or she by reason of
such transaction acquires any direct or indirect Beneficial
Ownership pursuant to a private placement or other private
offering of Securities, UNLESS such Advisory Person shall have
obtained prior written approval for such purpose from the
Designated Officer. In determining whether such prior approval
shall be granted, the Designated Officer shall take into account
whether the opportunity to purchase such Securities is being
offered to such Advisory Person because of his or her position
with the Fund, and whether the opportunity to purchase such
Securities should be reserved for the Fund. Advisory Persons who
purchase Securities pursuant to such prior approval shall
disclose that investment if they later become aware of or play a
part in the Fund's subsequent consideration of an investment in
the issuer of the Securities. In such circumstances, the Fund's
decision to purchase Securities of the issuer shall be subject to
an independent review by an Advisory Person with no personal
interest in the issuer.
(4) BLACKOUT PERIODS
(a) OPEN ORDER BLACKOUT PERIOD. No Advisory Person shall
purchase or sell, directly or indirectly, any Securities in
which he or she has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership on any
day during which the Fund has a pending "buy" or "sell"
order in that same Security until that order is executed or
withdrawn.
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(b) FIFTEEN DAY BLACKOUT PERIOD. No Portfolio Manager shall
purchase or sell, directly or indirectly, any Securities in
which he or she has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership within
seven days before and after the Fund trades in that
security.
(5) SHORT-TERM TRADING. No Advisory Person shall profit in the
purchase and sale, or sale and purchase, directly or indirectly,
of the same (or equivalent) Securities in which he or she has, or
by reason of such transaction acquires, any direct or indirect
Beneficial Ownership within 60 calendar days. Exceptions to this
short-term trading prohibition may be made on a case-by-case
basis with the prior written approval of the Designated Officer
when no abuse appears to be involved and the equities of the
situation strongly support such an exception.
(6) GIFTS. No Advisory Person may accept, directly or indirectly, any
gift, favor, or service of significant value from any person with
whom he or she transacts business on behalf of the Fund under
circumstances when to do so would conflict with the Fund's best
interests or would impair the ability of such person to be
completely disinterested when required, in the course of
business, to make judgments and/or recommendations on behalf of
the Fund.
(7) SERVICE AS DIRECTOR. No Advisory Person shall serve on the board
of directors of a publicly traded company without prior written
authorization of the Designated Officer based upon a
determination that the board service would be consistent with the
interests of the Fund and its shareholders.
With respect to individuals who are Access Persons solely because they are an
officer, director, partner, employee or control person of a Subadviser, the
references to the Fund in Section III (B) shall be deemed to refer only to the
Portfolio managed by that Subadviser.
(C) EXEMPTED TRANSACTIONS. The prohibitions of Sections III(A) and (B) of
this Code shall not apply to the following transactions, although the
reporting provisions of Section IV(B) of this Code, which requires
mandatory reporting of Securities transactions by certain Access
Persons, will continue to apply to such transactions where applicable:
(1) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
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<PAGE>
(2) Purchases or sales of Securities that are not eligible for
purchase or sale by the Fund.
(3) Purchases or sales that are non-volitional on the part of either
the Access Person or the Fund.
(4) Purchases that are part of an automatic dividend reinvestment
plan.
(5) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its Securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(6) Purchases or sales that receive the prior approval of the
Designated Officer because the Designated Officer has determined
that particular purchase or sale to be only remotely potentially
harmful to the Fund, because they would be very unlikely to
affect a highly institutional market, or because they clearly are
not related economically to the Securities to be purchased, sold,
or held by the Fund.
SECTION IV: PROCEDURES TO IMPLEMENT CODE OF ETHICS
The following procedures have been established to assist Access Persons in
avoiding a violation of this Code, and to assist the Fund in preventing,
detecting, and imposing sanctions for violations of this Code. Every Access
Person must follow these procedures. Anytime you have questions about these
procedures, you should contact the Designated Officer.
(A) PRE-CLEARANCE OF SECURITY TRANSACTIONS. No Advisory Person shall
purchase or sell, directly or indirectly, any Security in which he or
she has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership, unless such purchase or sale has been
pre-cleared by the Designated Officer. Such pre-clearance shall be
effective for five days.
(B) REPORTING REQUIREMENTS
(1) QUARTERLY REPORTS. Every Access Person, other than
(a) Disinterested Directors of the Fund, and
(b) Access Persons (i) who are not directors, officers, or
employees of the Fund, and (ii) who are covered by a Code of
Ethics comparable
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hereto and who provide reports (at least quarterly) of the
type specified in Section IV(D) below to an Adviser or
Subadviser,
shall provide to the Designated Officer reports containing the
information described below in Section IV(D) of this Code with
respect to transactions in any Security in which such Access
Person has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership in the security; PROVIDED,
HOWEVER, that an Access Person shall not be required to make a
report with respect to transactions effected for any account over
which such person does not have any direct or indirect influence.
(2) CONFIRMATIONS AND ACCOUNT STATEMENTS. Every Advisory Person shall
direct his or her broker to provide to the Designated Officer (1)
duplicate confirmations of all transactions in any Security in
which he or she has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership, and (2) copies of
periodic statements for all investment accounts in which they
have Beneficial Ownership.
(C) REPORTING BY DISINTERESTED DIRECTORS. Disinterested Directors of the
Fund shall file a report with the Designated Officer of the Fund in
accordance with the requirements set forth in Section IV(D) below with
respect to any transaction in a Security if such Director at the time
of that transaction knew or, in the ordinary course of fulfilling his
or her official duties as a director of the Fund, should have known
that, during the 15-day period immediately preceding or after the date
of the transaction by the Disinterested Director, such Security is or
was purchased or sold by the Fund or is or was being considered for
purchase or sale by the Fund, its Adviser or any Subadviser.
(D) INFORMATION REQUIRED BY REPORTS. The reports required under this
Section IV shall be made not later than 10 days after the end of each
calendar quarter, shall describe all transactions, if any, effected
during such quarter, and shall contain the following information:
(1) the date of the transaction, the title and number of shares, and
the principal amount of each Security involved;
(2) the nature of the transaction (I.E., purchase, sale or any other
type of acquisition or disposition);
(3) the price at which the transaction was effected;
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(4) the name of the broker, dealer or bank with or through whom the
transaction was effected; and
(5) if no Securities transactions were effected by the Access Person
during the calendar quarter, a statement to that effect.
(E) DISCLAIMER OF BENEFICIAL OWNERSHIP. Any report required under this
Section IV may contain a statement that the report shall not be
construed as an admission by the person submitting such duplicate
confirmation or account statement or making such report that he or she
has any direct or indirect beneficial ownership in the Security to
which the report relates.
(F) REVIEW OF REPORTS. The reports, duplicate confirmations, and account
statements required to be submitted under this Section IV shall be
delivered to the Designated Officer. The Designated Officer shall
review such reports, duplicate confirmations, and account statements
and maintain copies thereof as required by Rule 17j-1(d). Before
making any determination that a violation has been committed by any
Access Person, such Access Person shall be given an opportunity to
supply additional explanatory material.
(G) ACKNOWLEDGEMENT AND CERTIFICATION. Upon becoming an Access Person and
ANNUALLY thereafter, all Access Persons shall sign an acknowledgement
and certification of their receipt of and intent to comply with this
Code in the form attached hereto as Exhibit A and return it to the
Designated Officer.
(H) DISCLOSURE OF PERSONAL SECURITIES HOLDINGS AND ACCOUNT INFORMATION.
Upon becoming an Access Person and ANNUALLY thereafter, all Access
Persons shall provide a list of all Securities in which they have
Beneficial Ownership in the form attached hereto as Exhibit B and a
list of all securities accounts in which they have Beneficial
Ownership in the form attached hereto as Exhibit C. This list shall be
provided irrespective of any trading activity in any of the securities
or accounts.
(I) RECORDS. The Fund shall maintain records with respect to this Code in
the manner and to the extent set forth below, which records may be
maintained on microfilm under the conditions described in Rule
31a-2(f)(1) under the 1940 Act and shall be available for examination
by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other Code of Ethics of the Fund that
is, or at any time within the past five years has been, in effect
shall be preserved in an easily accessible place.
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(2) A record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs.
(3) A copy of each report made or duplicate confirmation or account
statement received pursuant to this Code shall be preserved for a
period of not less than five years from the end of the fiscal
year in which it is made, the first two years in an easily
accessible place.
(4) A list of all persons who are, or within the past five years have
been, required to submit duplicate confirmations or account
statements or to make reports pursuant to this Code shall be
maintained in an easily accessible place.
(J) CONFIDENTIALITY. All reports of Securities transactions, duplicate
confirmations, account statements, and any other information filed
with the Fund or furnished to any person pursuant to this Code shall
be treated as confidential, but are subject to review as provided
herein and by representatives of the Securities and Exchange
Commission.
(K) DUAL REPORTING OBLIGATIONS. Employees, officers and directors of the
Adviser or a Subadviser subject to substantially similar reporting
obligations set forth under the Adviser's or a Subadviser's Code of
Ethics are not subject to the reporting requirements set forth in this
Code.
SECTION V: SANCTIONS
Upon determination that a violation of this Code has occurred, the Board of
Directors of the Fund may impose such sanctions as it deems appropriate,
including, among other things, a letter of censure or suspension or
termination of the employment of the violator. All violations of this Code
and any sanctions imposed with respect thereto shall be periodically
reported to the Board of Directors of the Fund.
SECTION VI: MONITORING OF SERVICE PROVIDERS
(A) MONITORING. The Designated Officer of the Fund shall, prior to
effectiveness of this Code, and periodically thereafter as
appropriate, verify that the Adviser and each Subadviser has adopted a
Code of Ethics and that such Code of Ethics meets all applicable legal
requirements and is consistent with the goals and scope of this Code
of Ethics.
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(B) ANNUAL REPORTING. Each Adviser and Subadviser shall report to the
Board of Directors of the Fund on an annual basis with respect to the
administration and enforcement of its Code of Ethics. Such report
shall include a certification that such Code of Ethics is being
appropriately administered and enforced in accordance with the terms
thereof. Such report shall include information with respect to any
violations of such Code of Ethics that could potentially affect the
Fund as well as the action taken with respect to any such violation.
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EXHIBIT A
ACKNOWLEDGEMENT AND CERTIFICATION
I acknowledge receipt of the Code of Ethics of M Fund, Inc. I have
read and understand such Code of Ethics and agree to be governed by it at all
times. Further, if I have been subject to the Code of Ethics during the
preceding year, I certify that I have complied with the requirements of the Code
of Ethics and have disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the requirements of the Code of
Ethics.
--------------------------
(signature)
--------------------------
(please print name)
Date: _____________
<PAGE>
EXHIBIT B
PERSONAL SECURITIES OWNERSHIP INFORMATION
Name ____________________________ Date _________________
NAME OF ISSUER DESCRIPTION OF SECURITIES
- -------------- -------------------------
I certify that the foregoing is a complete and accurate list of all securities
in which I have any Beneficial Ownership.
----------------------------
Signature
<PAGE>
EXHIBIT C
PERSONAL SECURITIES ACCOUNT INFORMATION
Name ____________________________ Date _________________
SECURITIES FIRM
NAME AND ADDRESS ACCOUNT NUMBER ACCOUNT NAME(s)
- ---------------- -------------- ---------------
I certify that the foregoing is a complete and accurate list of all securities
accounts in which I have any Beneficial Ownership.
-----------------------------
Signature
<PAGE>
CODE OF ETHICS
M FINANCIAL INVESTMENT ADVISERS, INC.
SECTION I: STATEMENT OF PURPOSE AND APPLICABILITY
(A) COVERED ENTITY
THE ADVISER. M Financial Investment Advisers, Inc. the Adviser") is
registered under the Investment Advisers Act of 1940 as an investment
adviser. The Adviser currently serves as investment adviser to M Fund,
Inc.
(B) STATEMENT OF PURPOSE
(1) INTRODUCTION. As a registered investment adviser, the Adviser has
a fiduciary duty to its advisory clients including any investment
company and investment company shareholders, a duty that is
recognized under the federal securities laws and regulations
governing the investment company operations. In particular, the
Investment Company Act of 1940 (the "1940 Act") establishes as a
matter of federal law the fiduciary status of affiliates of an
investment company vis-a-vis such company and regulates and
controls the relationship between an investment company, its
officers and employees, its investment advisers, and officers and
employees of such advisers. The 1940 Act specifically prohibits
certain types of financial transactions involving, directly or
indirectly, both an investment company and its investment adviser
or officers or employees of such adviser unless prior approval is
obtained from the Securities and Exchange Commission (the "SEC").
An underlying policy of the 1940 Act is to prohibit any person
who is connected with an investment company or an investment
adviser of such company from deriving hidden profit from his or
her association with such company. The 1940 Act, among other
things, prohibits persons affiliated with an investment adviser
from engaging in practices that constitute fraud or deceit upon
an investment company or its shareholders, including the practice
of any
<PAGE>
investment manager, investment adviser, or their employees
trading privately (I.E., for their own accounts) in securities at
a time when the investment company is caused to trade in the same
securities in order to benefit these affiliated persons. Thus,
the 1940 Act requires investment managers and advisers, employees
of investment managers and advisers and other affiliates to serve
the investment company with undivided loyalty.
(2) CODE OF ETHICS. Rule 17j-1, promulgated by the SEC pursuant to
Section 17(j) of the 1940 Act, makes it unlawful for affiliated
persons of the Adviser: (1) to employ any device, scheme or
artifice to defraud a registered investment company; (2) to make
to a registered investment company any untrue statement of a
material fact or omit to state to a registered investment company
a material fact necessary in order to make the statements made,
in light of the circumstances under which they are made, not
misleading; (3) to engage in any act, practice, or course of
business that operates or would operate as a fraud or deceit upon
a registered investment company; or (4) to engage in any
manipulative practice with respect to a registered investment
company.
Rule 17j-1 also requires registered investment companies and
their investment advisers (including subadvisers) and principal
underwriters to adopt written Codes of Ethics reasonably designed
to prevent their officers and directors, as well as any employees
who participate in the selection of a registered investment
company's portfolio securities or who have access to information
regarding a registered investment company's impending purchases
and sales of portfolio securities, from engaging in conduct
prohibited by the rule as described in (1) - (4) above.
Therefore, the Adviser has adopted the conduct standards
contained in this Code of Ethics ("Code") for its officers,
directors and certain employees.
This Code is based upon the following general fiduciary
principles:
(a) the duty at all times to place the interests of the
investment company and its shareholders first;
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(b) the requirement that all personal securities transactions be
conducted consistent with the Code and in such a manner as
to avoid any actual or potential conflict of interest or any
abuse of an individual's position of trust and
responsibility; and
(c) the fundamental standard that the Adviser's personnel should
not take inappropriate advantage of their positions.
(3) SCOPE OF THE CODE. This Code constitutes the Code of Ethics of
the Adviser. This Code covers the conduct (including the personal
securities transactions) of each officer and director of the
Adviser, as well as of any employees of the Adviser who
participate in the selection of portfolio securities for or who
have access to information regarding a registered investment
company's impending purchases and sales of portfolio securities.
SECTION II: DEFINITIONS
(A) ACCESS PERSON. "Access Person" means any director, officer, or
"Advisory Person" of the Adviser.
(B) ADVISER. "Adviser" means M Financial Investment Advisers, Inc.
(C) ADVISORY PERSON. "Advisory person" of the Adviser means (1) any
director, officer, or employee of the Adviser, or of any company in a
control relationship with the Adviser, which director, officer, or
employee, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding the purchase
or sale of securities by registered investment companies advised by
the Adviser, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (2) any
natural person in a control relationship to the Adviser who obtains
information concerning recommendations made by the Adviser with regard
to the purchase or sale of securities.
A person does not become an "Advisory Person" simply by virtue of (1)
normally assisting in the preparation of public reports, or receiving
public reports, but not receiving information about current
recommendations or trading of securities; or (2) a single instance of
obtaining knowledge of current recommendations or trading activity; or
infrequently and inadvertently obtaining such knowledge.
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<PAGE>
(D) BEING CONSIDERED FOR PURCHASE OR SALE. A security is "being considered
for purchase or sale" when a recommendation to purchase or sell such
security has been made and communicated and, with respect to the
person making the recommendations when such person seriously considers
making such a recommendation.
(E) BENEFICIAL INTEREST. "Beneficial Interest" includes any entity,
person, trust, or account with respect to which an Access Person
exercises investment discretion or provides investment advice. A
beneficial interest shall be presumed to include all accounts in the
name of or for the benefit of the Access Person, his or her spouse,
dependent children, or any person living with him or her or to whom he
or she contributes economic support.
(F) BENEFICIAL OWNERSHIP. "Beneficial Ownership" shall be determined in
accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of
1934, except that the determination of direct or indirect Beneficial
Ownership shall apply to all securities, and not just EQUITY
securities, that an Access Person has or acquires. Rule 16a-1(a)(2)
provides that the term "beneficial owner" means any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, has or shares a direct or
indirect pecuniary interest in any equity security. Therefore, an
Access Person may be deemed to have Beneficial Ownership of securities
held by members of his or her immediate family sharing the same
household, or by certain partnerships, trusts, corporations, or other
arrangements.
(G) CONTROL. "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act. Generally, control means the power to
exercise a controlling influence on the management or policies of a
company, unless such power is solely the result of an official
position with such company.
(H) DESIGNATED OFFICER. "Designated Officer" shall mean the officer of the
Adviser designated by the Board of Directors from time to time to be
responsible for management of compliance with this Code. The
Designated Officer may appoint a designee to carry out certain of his
or her functions pursuant to this Code.
(I) INVESTMENT COMPANY. "Investment Company" means a company registered as
such under the Investment Company Act of 1940 and for which the
Adviser is the investment Adviser.
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(J) PORTFOLIO MANAGER. "Portfolio Manager" means the person or persons
primarily responsible for the day-to-day management of the Investment
Company's Portfolio(s).
(K) PURCHASE OR SALE OF A SECURITY. "Purchase or sale of a security"
includes, among other things, the writing of an option to purchase or
sell a security, or the use of a derivative product to take a position
in a security.
(L) SECURITY. "Security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include shares of
registered open-end investment companies (I.E., mutual funds),
securities issued by the Government of the United States, short term
debt securities that are "government securities" within the meaning of
Section 2(a)(16) of the 1940 Act, bankers' acceptances, bank
certificates of deposit, commercial paper, and such other money market
instruments as designated by the Board of Directors of the Adviser.
(M) SUBADVISER. "Subadviser" shall mean any individual or entity that may
from time to time serve as subadviser to the Investment Company or any
Portfolio thereof, as applicable.
SECTION III: STANDARDS OF CONDUCT
(A) GENERAL STANDARDS
(1) No Access Person shall engage, directly or indirectly, in any
business transaction or arrangement for personal profit that is
inconsistent with the best interests of the Investment Company or
its shareholders; nor shall he or she make use of any
confidential information gained by reason of his or her
employment by or affiliation with the Adviser or any affiliates
of the Investment Company in order to derive a personal profit
for himself or herself or for any Beneficial Interest, in
violation of the fiduciary duty owed to the Investment Company or
its shareholders.
(2) Any Access Person recommending or authorizing the purchase or
sale of a Security by the Investment Company shall, at the time
of such recommendation or authorization, disclose any Beneficial
Interest in or Beneficial Ownership of such Security or the
issuer thereof that he or she may have, including without
limitation:
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(a) his or her Beneficial Ownership of any Securities of such
issuer;
(b) any transaction he or she contemplates in such Securities;
(c) any position that he or she holds with such issuer; and
(d) any present or proposed business relationship that he or she
(or any Beneficial Interest of his or hers) may have with
the issuer or its affiliates.
(3) No Access Person shall dispense any information concerning
Securities holdings or Securities transactions of the Investment
Company to anyone outside the Investment Company, without
obtaining prior written approval from the Designated Officer, the
equivalent officer of the Investment Company or the applicable
Subadviser, or such person or persons as these entities or
individuals may designate to act on their behalf. Notwithstanding
the preceding sentence, such Access Person may dispense such
information without obtaining prior written approval:
(a) when there is a public report containing the same
information;
(b) when such information is dispensed in accordance with
compliance procedures established to prevent conflicts of
interest between the Adviser and the Investment Company;
(c) when such information is reported to directors of the
Investment Company and the directors of the Adviser; or
(d) in the ordinary course of his or her duties on behalf of the
Investment Company.
(4) All personal Securities transactions should be conducted
consistent with this Code and in such a manner as to avoid actual
or potential conflicts of interest, the appearance of a conflict
of interest, or any abuse of an individual's position of trust
and responsibility within the Adviser.
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(B) PROHIBITED TRANSACTIONS
(1) GENERAL PROHIBITION. No Access Person shall purchase or sell,
directly or indirectly, any Security in which he or she has, or
by reason of such transaction acquires, any direct or indirect
Beneficial Ownership and which such Access Person knows or should
have known at the time of such purchase or sale:
(a) is being considered for purchase or sale by the Investment
Company, or
(b) is being purchased or sold by the Investment Company.
(2) INITIAL PUBLIC OFFERINGS. No Advisory Person shall purchase,
directly or indirectly, any Securities in which he or she by
reason of such transaction acquires any direct or indirect
Beneficial Ownership in an initial public offering.
(3) PRIVATE PLACEMENTS. No Advisory Person shall purchase, directly
or indirectly, any Securities in which he or she by reason of
such transaction acquires any direct or indirect Beneficial
Ownership pursuant to a private placement or other private
offering of Securities, UNLESS such Advisory Person shall have
obtained prior written approval for such purpose from the
Designated Officer. In determining whether such prior approval
shall be granted, the Designated Officer shall take into account
whether the opportunity to purchase such Securities is being
offered to such Advisory Person because of his or her position
with the Adviser, and whether the opportunity to purchase such
Securities should be reserved for the Investment Company.
Advisory Persons who purchase Securities pursuant to such prior
approval shall disclose that investment if they later become
aware of or play a part in the Investment Company's subsequent
consideration of an investment in the issuer of the Securities.
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(4) BLACKOUT PERIODS
(a) OPEN ORDER BLACKOUT PERIOD. No Advisory Person shall
purchase or sell, directly or indirectly, any Securities in
which he or she has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership on any
day during which the Investment Company has a pending "buy"
or "sell" order in that same Security until that order is
executed or withdrawn.
(b) FIFTEEN DAY BLACKOUT PERIOD. No Portfolio Manager shall
purchase or sell, directly or indirectly, any Securities in
which he or she has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership within
seven days before and after the Investment Company trades in
that security.
(5) SHORT-TERM TRADING. No Advisory Person shall profit in the
purchase and sale, or sale and purchase, directly or indirectly,
of the same (or equivalent) Securities in which he or she has, or
by reason of such transaction acquires, any direct or indirect
Beneficial Ownership within 60 calendar days. Exceptions to this
short-term trading prohibition may be made on a case-by-case
basis with the prior written approval of the Designated Officer
when no abuse appears to be involved and the equities of the
situation strongly support such an exception.
(6) GIFTS. No Advisory Person may accept, directly or indirectly, any
gift, favor, or service of significant value from any person with
whom he or she transacts business on behalf of the Adviser under
circumstances when to do so would conflict with the Investment
Company's best interests or would impair the ability of such
person to be completely disinterested when required, in the
course of business, to make judgments and/or recommendations to
the Investment Company.
(7) SERVICE AS DIRECTOR. No Advisory Person shall serve on the board
of directors of a publicly traded company without prior written
authorization of the Designated Officer based upon a
determination that the board service would be consistent with the
interests of the Adviser, the Investment Company and their
shareholders.
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(C) EXEMPTED TRANSACTIONS. The prohibitions of Sections III(A) and (B) of
this Code shall not apply to the following transactions, although the
reporting provisions of Section IV(B) of this Code, which requires
mandatory reporting of Securities transactions by certain Access
Persons, will continue to apply to such transactions where applicable:
(1) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
(2) Purchases or sales of Securities that are not eligible for
purchase or sale by the Investment Company.
(3) Purchases or sales that are non-volitional on the part of either
the Access Person or the Investment Company.
(4) Purchases that are part of an automatic dividend reinvestment
plan.
(5) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its Securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(6) Purchases or sales that receive the prior approval of the
Designated Officer because the Designated Officer has determined
that particular purchase or sale to be only remotely potentially
harmful to the Investment Company, because they would be very
unlikely to affect a highly institutional market, or because they
clearly are not related economically to the Securities to be
purchased, sold, or held by the Investment Company.
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SECTION IV: PROCEDURES TO IMPLEMENT CODE OF ETHICS
The following procedures have been established to assist Advisory and
Access Persons in avoiding a violation of this Code, and to assist the
Adviser in preventing, detecting, and imposing sanctions for violations of
this Code. Every Advisory and Access Person must follow these procedures if
applicable. Anytime you have questions about these procedures, you should
contact the Designated Officer.
(A) PRE-CLEARANCE OF SECURITY TRANSACTIONS. No Advisory Person shall
purchase or sell, directly or indirectly, any Security in which he or
she has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership, unless such purchase or sale has been
pre-cleared by the Designated Officer. Such pre-clearance shall be
effective for five days.
(B) REPORTING REQUIREMENTS
(1) QUARTERLY REPORTS. Every Access Person shall provide to the
Designated Officer reports containing the information described
below in Section IV(C) of this Code with respect to transactions
in any Security in which such Access Person has, or by reason of
such transaction acquires, any direct or indirect Beneficial
Ownership in the security; PROVIDED, HOWEVER, that an Access
Person shall not be required to make a report with respect to
transactions effected for any account over which such person does
not have any direct or indirect influence.
(2) CONFIRMATIONS AND ACCOUNT STATEMENTS. Every Advisory Person shall
direct his or her broker to provide to the Designated Officer (1)
duplicate confirmations of all transactions in any Security in
which he or she has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership, and (2) copies of
periodic statements for all investment accounts in which they
have Beneficial Ownership.
Notwithstanding Section IV (B) of this Code, an Access Person or
an Advisory Person, where applicable, need not make a report
where the report would duplicate information recorded pursuant to
Rules 204-2(a)(12) or 204-2(a)(13) under the Investment Advisers
Act of 1940.
(C) INFORMATION REQUIRED BY REPORTS. The reports required under this
Section IV shall be made not later than 10
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days after the end of each calendar quarter, shall describe all
transactions, if any, effected during such quarter, and shall contain
the following information:
(1) the date of the transaction, the title and number of shares, and
the principal amount of each Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the
transaction was effected; and
(5) if no Securities transactions were effected by the Access Person
during the calendar quarter, a statement to that effect.
(D) DISCLAIMER OF BENEFICIAL OWNERSHIP. Any report required under this
Section IV may contain a statement that the report shall not be
construed as an admission by the person submitting such duplicate
confirmation or account statement or making such report that he or she
has any direct or indirect beneficial ownership in the Security to
which the report relates.
(E) REVIEW OF REPORTS. The reports, duplicate confirmations, and account
statements required to be submitted under this Section IV shall be
delivered to the Designated Officer. The Designated Officer shall
review such reports, duplicate confirmations, and account statements
and maintain copies thereof as required by Rule 17j-1(d). Before
making any determination that a violation has been committed by any
Access Person, such Access Person shall be given an opportunity to
supply additional explanatory material.
(F) ACKNOWLEDGEMENT AND CERTIFICATION. Upon becoming an Access Person and
ANNUALLY thereafter, all Access Persons shall sign an acknowledgement
and certification of their receipt of and intent to comply with this
Code in the form attached hereto as Exhibit A and return it to the
Designated Officer.
(G) DISCLOSURE OF PERSONAL SECURITIES HOLDINGS AND ACCOUNT INFORMATION.
Upon becoming an Access Person and ANNUALLY thereafter, all Access
Persons shall provide a list of all Securities in which they have
Beneficial Ownership in the form attached hereto as Exhibit B and a
list of all securities accounts in which they have
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Beneficial Ownership in the form attached hereto as Exhibit C. This
list shall be provided irrespective of any trading activity in any of
the securities or accounts.
(H) RECORDS. The Adviser shall maintain records with respect to this Code
in the manner and to the extent set forth below, which records may be
maintained on microfilm under the conditions described in Rule
31a-2(f)(1) under the 1940 Act and shall be available for examination
by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other Code of Ethics of the Adviser
that is, or at any time within the past five years has been, in
effect shall be preserved in an easily accessible place.
(2) A record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs.
(3) A copy of each report made or duplicate confirmation or account
statement received pursuant to this Code shall be preserved for a
period of not less than five years from the end of the fiscal
year in which it is made, the first two years in an easily
accessible place.
(4) A list of all persons who are, or within the past five years have
been, required to submit duplicate confirmations or account
statements or to make reports pursuant to this Code shall be
maintained in an easily accessible place.
(I) CONFIDENTIALITY. All reports of Securities transactions, duplicate
confirmations, account statements, and any other information filed
with the Adviser or furnished to any person pursuant to this Code
shall be treated as confidential, but are subject to review as
provided herein and by representatives of the Securities and Exchange
Commission.
SECTION V: SANCTIONS
Upon determination that a violation of this Code has occurred, the Adviser
may impose such sanctions as it deems appropriate, including, among other
things, a letter of censure or suspension or termination of the employment
of the violator. All violations of this Code and any sanctions
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imposed with respect thereto shall be periodically reported to the Board of
Directors of the Investment Company with respect to whose securities the
violation occurred.
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EXHIBIT A
ACKNOWLEDGEMENT AND CERTIFICATION
I acknowledge receipt of the Code of Ethics of
M Financial Investment Advisers, Inc. I have read and understand such Code of
Ethics and agree to be governed by it at all times. Further, if I have been
subject to the Code of Ethics during the preceding year, I certify that I have
complied with the requirements of the Code of Ethics and have disclosed or
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of the Code of Ethics.
--------------------------
(signature)
--------------------------
(please print name)
Date: _____________
<PAGE>
EXHIBIT B
PERSONAL SECURITIES OWNERSHIP INFORMATION
Name ____________________________ Date _________________
NAME OF ISSUER DESCRIPTION OF SECURITIES
- -------------- -------------------------
I certify that the foregoing is a complete and accurate list of all securities
in which I have any Beneficial Ownership.
----------------------------
Signature
<PAGE>
EXHIBIT C
PERSONAL SECURITIES ACCOUNT INFORMATION
Name ____________________________ Date _________________
SECURITIES FIRM
NAME AND ADDRESS ACCOUNT NUMBER ACCOUNT NAME(s)
- ---------------- -------------- ---------------
I certify that the foregoing is a complete and accurate list of all securities
accounts in which I have any Beneficial Ownership.
-----------------------------
Signature
<PAGE>
CODE OF ETHICS
M HOLDING SECURITIES, INC.
MARCH, 1998
SECTION 1: STATEMENT OF PURPOSE AND APPLICABILITY
(A) COVERED ENTITY
THE PRINCIPAL UNDERWRITER. M Holding Securities, Inc., which
currently serves as principal underwriter to M Fund, Inc.
(B) STATEMENT OF PURPOSE
(1) INTRODUCTION. The principal underwriter of an investment
company has a fiduciary duty to the company and its
shareholders, a duty that is recognized under the federal
securities laws and regulations governing the investment
company operations. In particular, the Investment Company Act
of 1940 (the "1940 Act") establishes as a matter of federal
law the fiduciary status of affiliates of an investment
company vis-a-vis such company and regulates and controls the
relationship between an investment company, its officers and
employees, its principal underwriter, and officers and
employees of such principal underwriter. The 1940 Act
specifically prohibits certain types of financial transactions
involving, directly or indirectly, both an investment company
and its principal underwriter or officers or employees of such
principal underwriter unless prior approval is obtained from
the Securities and Exchange Commission (the "SEC").
An underlying policy of the 1940 Act is to prohibit any person
who is connected with an investment company or its principal
underwriter from deriving hidden profit from his or her
association with such company. The 1940 Act, among other
things, prohibits persons affiliated with a principal
underwriter from engaging in practices that constitute fraud
or deceit upon an investment company or its shareholders,
including the practice of any principal underwriter or its
employees trading privately (i.e., for their own accounts) in
securities at a time when the investment company is caused to
trade in the same securities in order to benefit these
affiliated persons. Thus, the 1940 Act requires principal
underwriters, employees of principal underwriters and other
affiliates to serve the investment company with undivided
loyalty.
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(2) CODE OF ETHICS. Rule 17j-1, promulgated by the SEC pursuant to
Section 170) of the 1940 Act, makes it unlawful for a
principal underwriter or affiliated persons thereof: (1) to
employ any device, scheme or artifice to defraud a registered
investment company; (2) to make to a registered investment
company any untrue statement of a material fact or omit to
state to a registered investment company a material fact
necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
(3) to engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon a
registered investment company; or (4) to engage in any
manipulative practice with respect to a registered investment
company.
Rule 17j-1 also requires registered investment companies, and
principal underwriters affiliated with the investment company
or its investment adviser, to adopt written Codes of Ethics
reasonably designed to prevent their officers, directors and
general partners, who participate in the selection of a
registered investment company's portfolio securities or who
have access to information regarding a registered investment
company's impending purchases and sales of portfolio
securities, from engaging in conduct prohibited by the rule as
described in (1) - (4) above. Therefore, the Principal
Underwriter has adopted the conduct standards contained in
this Code of Ethics ("Code") for its offcers, directors and
general partners.
This Code is based upon the following general fiduciary
principles:
(a) the duty at all times to place the interests of the
investment company and its shareholders first;
(b) the requirement that all personal securities
transactions be conducted consistent with the Code
and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an
individual's position of trust and responsibility;
and
(c) the fundamental standard that the Principal
Underwriter's personnel should not take inappropriate
advantage of their positions.
(3) SCOPE OF THE CODE. This Code constitutes the Code of Ethics of
the Principal Underwriter. This Code covers the conduct
(including the personal securities transactions) of each
officer, director and general partner of the Principal
Underwriter who participates in the selection of portfolio
securities for or who have access to information regarding a
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registered investment company's impending purchases and sales
of portfolio securities.
SECTION II: DEFINITIONS
(A) ACCESS PERSON. "Access Person" means any general partner,
director, or officer of the Principal Underwriter.
(B) ADVISER. "Adviser" shall mean any individual or entity that
may from time to time serve as investment adviser to the
Investment Company or any portfolio thereof, as applicable.
(C) ADVISORY PERSON. "Advisory person" means (1) any director,
officer, or employee of the Investment Company or of the
Adviser, or of any company in a control relationship with the
Investment Company or the Adviser, which director, officer, or
employee, in connection with his or her regular functions or
duties, makes, participates in, or obtains information
regarding the purchase or sale of securities by the Investment
Company or the Adviser, or whose functions relate to the
making of any recommendations with respect to such purchases
or sales; and (2) any natural person in a control relationship
to the Investment Company or the Adviser who obtains
information concerning recommendations made by the Adviser, or
any director, officer or employee of the Investment Company
with regard to the purchase or sale of securities.
A person does not become an "Advisory Person" simply by virtue
of (1) normally assisting in the preparation of public
reports, or receiving public reports, but not receiving
information about current recommendations or trading of
securities; or (2) a single instance of obtaining knowledge of
current recommendations or trading activity; or infrequently
and inadvertently obtaining such knowledge.
(D) BEING CONSIDERED FOR PURCHASE OR SALE. A security is "being
considered for purchase or sale" when a recommendation to
purchase or sell such security has been made and communicated
and, with respect to the person making the recommendations
when such person seriously considers making such a
recommendation.
(E) BENEFICIAL INTEREST. "Beneficial Interest" includes any
interest in an entity, person, trust, or account with respect
to which an Access Person exercises investment discretion or
provides investment advice. Beneficial interest shall be
presumed to include an interest in all accounts in the name
of or for the benefit of the Access Person, his or her
spouse, dependent children, or any person living with him or
her or to whom he or she contributes economic support.
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(F) BENEFICIAL OWNERSHIP. "Beneficial Ownership" shall be
determined in accordance with Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934, except that the determination
of direct or indirect Beneficial Ownership shall apply to all
securities, and not just a ui securities, that an Access
Person has or acquires. Rule 16a-1(a)(2) provides that the
term "beneficial owner" means any person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares a direct or indirect
pecuniary interest in any equity security. Therefore, an
Access Person may be deemed to have Beneficial Ownership of
securities held by members of his or her immediate family
sharing the same household, or by certain partnerships,
trusts, corporations, or other arrangements.
(G) CONTROL. "Control" shall have the same meaning as that set
forth in Section 2(a)(9) of the 1940 Act. Generally, control
means the power to exercise a controlling influence on the
management or policies of a company, unless such power is
solely the result of an official position with such company.
(H) DESIGNATED OFFICER. "Designated Officer" shall mean the
officer of the Principal Underwriter designated by its Board
of Directors from time to time to be responsible for
management of compliance with this Code. The Designated
Officer may appoint a designee to carry out certain of his or
her functions pursuant to this Code.
(I) Investment Company. "Investment Company" means a company
registered as such under the Investment Company Act of 1940
and for which the Principal Underwriter is the principal
underwriter; including, specifically, M Fund, Inc.
(J) PRINCIPAL UNDERWRITER. "Principal Underwriter" means M Holding
Securities, Inc.
(K) PURCHASE OR SALE OF A SECURITY. "Purchase or sale of a
security" includes, among other things, the writing of an
option to purchase or sell a security, or the use of a
derivative product to take a position in a security.
(L) SECURITY. "Security" shall have the meaning set forth in
Section 2(a)(36) of the 1940 Act, except that it shall not
include (1) shares of registered open-end investment companies
(Le., mutual funds), (2) securities issued by the Government
of the United States, (3) short term debt securities that are
"government securities" within the meaning of Section 2(a)(16)
of the 1940 Act, (4) bankers' acceptances, bank certificates
of deposit, commercial paper, and (S) such other money market
instruments as designated by the Board of Directors of the
Principal Underwriter.
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(M) SUBADVISER. "Subadviser" shall mean any individual-or entity
that may from time to time serve as subadviser to the
Investment Company or any portfolio thereof, as applicable.
SECTION III: STANDARDS OF CONDUCT
(A) GENERAL STANDARDS
(1) No Access Person shall engage, directly or
indirectly, in any business transaction or
arrangement for personal profit that is inconsistent
with the best interests of the Investment Company or
its shareholders; nor shall he or she make use of any
confidential information gained by reason of his or
her employment by or affiliation with the Principal
Underwriter, the Adviser or any affiliates of the
Investment Company in order to derive a personal
profit for himself or herself or for any entity in
which he or she has a Beneficial Interest, in
violation of the fiduciary duty owed to the
Investment Company or its shareholders.
(2) Any Access Person recommending or authorizing the
purchase or sale of a security by the Investment
Company shall, at the time of such recommendation or
authorization, disclose any Beneficial Interest in or
Beneficial ownership of such Security or the issuer
thereof that he or she may have, including without
limitation:
(a) his or her Beneficial Ownership of any
Securities of such issuer;
(b) any transaction he or she contemplates in such
Securities;
(c) any position that he or she holds with such
issuer; and
(d) any present or proposed business relationship
that he or she (or any entity, person, trust or
account in which he or she has a Beneficial
Interest) may have with the issuer or its
affiliates.
(3) No Access Person shall dispense any information
concerning Securities holdings or Securities
transactions of the Investment Company to anyone
outside the Investment Company, without obtaining
prior written approval from the Designated Officer,
the equivalent officer of the Investment Company, the
Adviser, or the applicable Subadviser, or such person
or persons as these entities or individuals may
designate to act on their behalf. Notwithstanding the
preceding sentence, such Access Person may dispense
such information without obtaining prior written
approval:
(a) when there is a public report containing the
same information;
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(b) when such information is dispensed in accordance
with compliance procedures established to
prevent conflicts of interest between the
Principal Underwriter and the Investment
Company;
(c) when such information is reported to directors
of the Investment Company and the directors of
the Principal Underwriter; or
(d) in the ordinary course of his or her duties on
behalf of the Investment Company.
(4) All personal Securities transactions should be
conducted consistent with this Code and in such a
manner as to avoid actual or potential conflicts of
interest, the appearance of a conflict of interest,
or any abuse of an individual's position of trust and
responsibility within the Principal Underwriter.
(B) PROHIBITED TRANSACTIONS. No Access Person shall purchase or
sell, directly or indirectly, any Security in which he or she
has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership and which such Access Person
knows or should have known at the time of such purchase or
sale:
(1) is being considered for purchase or sale by the
Investment Company;
(2) is being purchased or sold by the Investment Company;
or
(3) that the Adviser, any Subadviser or any Advisory
Person of the Investment Company, the Adviser or any
Subadviser is actively considering recommending to
the Investment Company for purchase or sale.
(C) EXEMPTED TRANSACTIONS. The prohibitions of Sections III(A) and
(B) of THIS CODE SHALL not apply to the following
transactions, although the reporting provisions of Section
IV(B) of this Code, which requires mandatory reporting of
Securities transactions by certain Access Persons, will
continue to apply to such transactions where applicable:
(1) Purchases or sales effected in any account over which
the Access Person has no direct or indirect influence
or control.
(2) Purchases or sales of Securities that are not
eligible for purchase or sale by the Investment
Company.
(3) Purchases or sales that are non-volitional on the
part of either the Access Person or the Investment
Company.
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<PAGE>
(3) Purchases that are part of an automatic dividend
reinvestment plan.
(5) Purchases effected upon the exercise of rights issued
by an issuer Pro rata to all holders of a class of
its Securities, to the extent such rights were
acquired from such issuer, and sales of such rights
so acquired.
(6) Purchases or sales that receive the prior approval of
the Designated Officer because the Designated Officer
has determined that particular purchase or sale to be
only remotely potentially harmful to the Investment
Company, because they would be very unlikely to
affect a highly institutional market, or because they
clearly are not related economically to the
Securities to be purchased, sold, or held by the
Investment Company.
SECTION IV: PROCEDURES TO IMPLEMENT CODE OF ETHICS
The following procedures have been established to assist Access
Persons in avoiding a violation of this Code, and to assist the
Principal Underwriter in preventing, detecting, and imposing
sanctions for violations of this Code. Every Access Person must
follow these procedures if applicable. Anytime you have questions
about these procedures, you should contact the Designated Officer.
(A) REPORTING REQUIREMENTS
(1) QUARTERLY REPORTS. Every Access Person shall provide
to the Designated Officer reports containing the
information described below in Section IV(C) of this
Code with respect to transactions in any Security in
which such Access Person has, or by reason of such
transaction acquires, any direct or indirect
Beneficial Ownership in the security; PROVIDED,
HOWEVER, that an Access Person shall not be required
to make a report with respect to transactions
effected for any account over which such person does
not have any direct or indirect influence. An Access
Person may satisfy the reporting requirements of this
Section N, by submitting to the Designated Officer a
copy of a report which such Access Person provides to
the Investment Company, the Adviser or a Subadviser
to satisfy the reporting requirements of a code of
ethics adopted pursuant to Rule 17j-l; PROVIDED,
HOWEVER, that the information contained in such
report also satisfies the requirements contained
herein.
(B) INFORMATION REQUIRED BY REPORTS. The reports required under
this Section IV shall be made not later than 10 days after the
end of each calendar quarter, shall describe all transactions,
if any, effected during such quarter, and shall contain the
following information:
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<PAGE>
(1) the date of the transaction, the title and number of
shares, and the principal amount of each Security
involved;
(2) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition)
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or
through whom the transaction was effected; and
(5) if no Securities transactions were effected by the
Access Person during the calendar quarter, a
statement to that effect.
(C) DISCLAIMER OF BENEFICIAL OWNERSHIP. Any report required under
this Section IV may contain a statement that the report shall
not be construed as an admission by the person submitting such
duplicate confirmation or account statement or making such
report that he or she has any direct or indirect beneficial
ownership in the Security to which the report relates.
(D) REVIEW OF REPORTS. The reports, duplicate confirmations, and
account statements required to be submitted under this Section
IV shall be delivered to the Designated Officer. The
Designated Officer shall review such reports, duplicate
confirmations, and account statements and maintain copies
thereof as required by Rule 17j-1(d). Before making any
determination that a violation has been committed by any
Access Person, such Access Person shall be given an
opportunity to supply additional explanatory material.
(E) ACKNOWLEDGMENT AND CERTIFICATION. Upon becoming an Access
Person and ANNUALLY thereafter, all Access Persons shall sign
an acknowledgment and certification of their receipt of and
intent to comply with this Code in the form attached hereto as
Exhibit A and return it to the Designated Officer.
(F) DISCLOSURE OF PERSONAL SECURITIES HOLDINGS AND ACCOUNT
INFORMATION. Upon becoming an Access Person, all Access
Persons shall provide a list of all Securities in which they
have Beneficial Ownership in the form attached hereto as
Exhibit B and a list of all securities accounts in which they
have Beneficial Ownership in the form attached hereto as
Exhibit C. This list shall be provided irrespective of any
trading activity in any of the securities or accounts.
(G) RECORDS. The Principal Underwriter shall maintain records with
respect to this Code in the manner and to the extent set forth
below, which records may be maintained on microfilm under the
conditions described in Rule 31 a-2(f)(1) under
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<PAGE>
the 1940 Act and shall be available for examination by
representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other Code of Ethics of
the Principal Underwriter that is, or at any time
within the past five years has been, in effect shall
be preserved in an easily accessible place.
(2) A record of any violation of this Code and of any
action taken as a result of such violation shall be
preserved in an easily accessible place for a period
of not less than five years following the end of the
fiscal year in which the violation occurs.
(3) A copy of each report made or duplicate confirmation
or account statement received pursuant to this Code
shall be preserved for a period of not less than five
years from the end of the fiscal year in which it is
made, the first two years in an easily accessible
place.
(4) A list of all persons who are, or within the past
five years have been, required to submit duplicate
confirmations or account statements or to make
reports pursuant to this Code shall be maintained in
an easily accessible place.
(H) CONFIDENTIALITY. All reports of Securities transactions,
duplicate confirmations, account statements, and any other
information filed with the Principal Underwriter or furnished
to any person pursuant to this Code shall be treated as
confidential, but are subject to review as provided herein and
by representatives of the Securities and Exchange Commission.
SECTION V: SANCTIONS
Upon determination that a violation of this Code has occurred, the
Principal Underwriter may impose such sanctions as it deems
appropriate, including, among other things, a letter of censure or
suspension or termination of the employment of the violator. All
violations of this Code and any sanctions imposed with respect
thereto shall be periodically reported to the Board of Directors of
the Investment Company with respect to whose securities the violation
occurred.
<PAGE>
BRANDES INVESTMENT PARTNERS, L.P.
CODE OF ETHICS
APRIL 1, 19971
A. PREAMBLE.
This Code of Ethics is being adopted to effectuate the purposes and objectives
of Sections 204A and Section 206 of the Investment Advisers Act of 1940 ( the
"Advisers Act") and Rule 204-2 under the Advisers Act and Rule 17j-1 of the
Investment Company Act of 1940. Section 204A of the Advisers Act requires the
establishment and enforcement of policies and procedures reasonably designed to
prevent the misuse of material, nonpublic information by investment advisers.
Rule 204-2 imposes record keeping requirements with respect to personal
securities transactions of certain persons employed by investment advisers.
Section 206 of the Advisers Act makes it unlawful, among other things, for an
investment adviser "to employ any device, scheme or artifice to defraud any
client or prospective clients; to engage in any transaction, practice or course
of business which operates or would operate as a fraud or deceit upon any client
or prospective client; ...or to engage in any act, practice, or course of
business which is fraudulent, deceptive or manipulative."
Rule 17j-1 makes it unlawful for any employee of Brandes Investment Partners,
L.P., or its subsidiaries (all such entities hereafter referred to as "Brandes")
in connection with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired, as defined in this section, by such
registered investment company (1) to employ any device, scheme or artifice to
defraud such registered investment company; (2) to make to such registered
investment company any untrue statement of a material fact or omit to state to
such registered investment company a material fact necessary in order to make
the statements made, in light of the circumstances under which they are made,
not misleading; (3) to engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such registered
investment company; or (4) to engage in any manipulative practice with respect
to such registered investment company.
For purposes of Rule 17j-1, "security held or to be acquired" by a registered
investment company means any security which, within the most recent 15 days, (i)
is or has been held by such company, or (ii) is being or has been considered by
such company or its investment adviser for purchase by such company.
Brandes owes its clients the highest duty of trust and fair dealing. A
fiduciary, Brandes places clients' interests ahead of its own and holds the
fundamental principle that Brandes personnel should not take inappropriate
advantage of their positions.
<PAGE>
Brandes has certain responsibilities to its clients. These include assuring that
accounts are managed in a suitable manner, providing regular communications
regarding the progress of accounts, providing accurate performance numbers and
refraining from certain practices. These practices include over-trading the
account, purchasing inappropriate issues for the account, making guarantees
about future performance, making unauthorized transactions and borrowing
clients' funds or securities. Brandes maintains trading authorization only and
does not have custody of clients' funds or securities.
Brandes recognizes that its own long-term interests lie in strict adherence to
ethical treatment of its clients, thereby maintaining its reputation for honest
and fair dealing. Employees are expected to act in accordance with this basic
tenet.
While many firms forbid their employees to make investments on behalf of their
own personal accounts, Brandes believes this is an unnecessarily punitive
measure. Brandes permits its employees to trade their own accounts when the
trades are done in such a manner as to avoid conflicts of interest with clients'
transactions. Brandes regularly monitors its employees' trading activity to
assure compliance with the firm's policy.
This Code contains provisions reasonably necessary to prevent persons from
engaging in acts in violation of the law and rules and to assure that Brandes'
clients' interests are considered first. This Code also establishes procedures
reasonably necessary to prevent violations of this Code.
Each shareholder, officer, partner and employee of the administrator for Brandes
Investment Trust (the "Fund"), Investment Company Administration Corporation
(the "Administrator"), is exempt from the reporting and other requirements of
this Code of Ethics, but is required to comply with the reporting and other
requirements of the Administrator's or the Fund's code of ethics, as applicable.
B. PERSONAL TRADES POLICY
DEFINITIONS.
1. Directed Trade.
A directed trade is one for a specific security which the employee must
initiate.
2. Employee-related account.
<PAGE>
An "employee-related account" refers to an account for any of the
following persons:
a. the employee;
b. the employee's spouse;
c. the employee's minor child or children;
d. any other relative of the employee or employee's spouse, sharing
the same home as the employee;
e. any other person whose account is managed, controlled or
influenced by or through the employee, or to whom the employee
gives advice with regard to the acquisition or disposition of
securities, other than a Brandes client; examples of such accounts
are accounts where the employee is acting as trustee, executor,
pledgee, agent or in any similar capacity;
f. any other account in which the employee has a beneficial ownership
interest; such beneficial interest (unless otherwise exempted) may
arise where an employee has a beneficial interest in securities
under a trust, will, partnership or other arrangement, or through
a closely held corporation or investment club.
3. Security.
"Security" shall have the meaning set forth in Section 202(a)(18) of the
Advisers Act.
C. PROHIBITED TRANSACTIONS.
1. No employee shall violate Section 206 of the Advisers Act or rule 17j-1
of the Investment Company Act.
2. No Brandes employee shall receive during any calendar year any gift or
other consideration in merchandise, services or otherwise having a value
of more that $250 from any single person, firm, corporation, association
or other entity that does, or is seeking to do, business with or on
behalf of the Firm. Employees receiving gifts from such sources of over
$50 during any calendar year must report them promptly to the Compliance
Department.
3. No employee shall give or offer to give anything of value to any person
for the purpose of influencing the price of any security.
<PAGE>
4. No employee shall serve on a Board of Directors of any public company
without the prior approval of the majority of the voting members of the
Investment Committee.
5. No employee shall purchase any securities in an initial public offering
unless a waiver has been granted by any two of the following: Charles H.
Brandes, Glenn R. Carlson, Jeffrey A. Busby. Any person authorized to
purchase securities in an initial public offering shall disclose that
investment when s/he plays a part in any subsequent consideration by
Brandes of an investment in the issuer of such securities.
6. No employee shall purchase any securities in a private placement without
prior written approval of any two of the following: Charles H. Brandes,
Glenn R. Carlson, Jeffrey A. Busby.
7. No employee-related account may sell a security purchased within the
previous 60 calendar days, except a security held for at least 30 days
may be sold at a loss. Trades made in violation of this prohibition
should be canceled to an error account, if possible.
8. No employee-related account shall purchase or sell any securities on the
"Watch List." The Watch List is comprised of securities Brandes is
closely observing and anticipating imminent action in on behalf of
clients' accounts.
D. EXEMPTED TRANSACTIONS.
1. The prohibitions of Sections C7 shall not apply to:
a. Sales of U.S. government securities; and
b. Withdrawals from open-end mutual funds, if the employee or
employee-related account owns less than 5% of the outstanding
shares of such fund;
2. The prohibitions of Sections C8 shall not apply to:
a. Purchases which are part of an automatic dividend reinvestment plan;
<PAGE>
b. Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities and sales of
such rights so acquired; and
c. Any other purchases or sales as described at Section E, INFRA.
<PAGE>
E. THE WATCH LIST
THE WATCH LIST IS COMPRISED OF SECURITIES BRANDES IS CLOSELY OBSERVING AND
ANTICIPATING IMMINENT ACTION IN ON BEHALF OF CLIENTS' ACCOUNTS AND,
THEREFORE, SECURITIES IN WHICH EMPLOYEES ARE GENERALLY PROHIBITED FROM
TRADING.
I. CONSTRUCTION PROCEDURES
1. Investment Committee designates a Watch List control person charged
with creating the weekly Watch List ("Control Person").
2. On each business day immediately preceding the regular weekly
Investment Committee meeting, the Control Person circulates the
previous week's Watch List to all members of the Portfolio Management
Department asking them each to (a) add the name of each and every
security for which such person is preparing a formal recommendation(1)
where it is expected that such recommendation will be presented for
Investment Committee consideration within the next two weeks; and (b)
delete from the Watch List any and all securities of which such person
is aware that its consideration for investment purposes has been
indefinitely suspended(2) or terminated for any reason whatsoever.
Members of the Portfolio Management Department will have their
responses sent back to the Control Person prior to the Investment
Committee meeting. The Control Person revises the Watch List
accordingly.
3. On each business day immediately preceding the regular weekly
Investment Committee meeting, the Control Person circulates the
previous week's Watch List to a representative of the Trading
Department asking him to (a) delete from the Watch List any and all
securities in which system-wide trading has been completed for clients'
accounts as directed by the Investment Committee; (b) add to the Watch
List those securities which are the subject of any current and open
- ------------------------------------
(1) The term "formal recommendation" here is shorthand to mean those
activities engaged in by the PM department that are necessary and proximate to
presenting a security for the Investment Committee's consideration. At this
point in the process we should strive to identify and isolate only those
securities which WILL or ARE SCHEDULED TO be brought to the Investment
Committee's attention for definite action within the next two weeks. Securities
that are scheduled to be merely reviewed by or discussed with the Investment
Committee but are not in a price range which a member of the PM staff believes
would result in any action by the Investment Committee need not be included on
the Watch List.
(2) Indefinitely suspended, at a minimum, should refer to the case where
any definitive decision regarding the purchase or sale of a security is unlikely
to occur for more than a two-week period.
<PAGE>
firm-wide re-balancing or other activity in clients' accounts(3); and
(c) delete from the Watch List any securities which were the subject
of any firm-wide re-balancing or other activity in clients' accounts
and in which trading has been completed with respect to such
securities in such accounts over the past week. The representative of
the Trading department will have his/her response sent back to the
Control Person prior to the Investment Committee meeting. The Control
Person revises the Watch List accordingly.
4. At the conclusion of the Investment Committee meeting, the Control
Person shall delete from the Watch List any and all securities which
were presented to the Investment Committee in the form of a
recommendation for purchase or sale on behalf of clients' accounts and
with respect to which a final decision not to purchase or sell,
respectively, was made by the Investment Committee. Presumably, the
Control Person will not need to add to the Watch List any of the
securities which the Investment Committee voted to purchase or sell on
behalf of clients' accounts since these securities have been on the
Watch List for at least two weeks at this point. All securities
selected by the Investment Committee for purchase or sale activity at
the Tuesday meeting will be placed on the Watch List and will remain
on the Watch List until the Trading Department has indicated that
trading in such securities has been completed for clients' accounts.
5. On the business day immediately following the Investment Committee's
meeting, the Control Person updates the Watch List according to the
foregoing and circulates it to appropriate employees of the firm.
II. SPECIAL SITUATIONS
1. At any time it is concluded (outside of a regularly scheduled
Investment Committee meeting) that Brandes will engage in transactions
in a particular security for client accounts, a voting member of the
Investment Committee will instruct the Control Person to add such
security to the Watch List. Such security will remain on the Watch
List until the Trading Department has indicated that trading in such
security has been completed for clients' accounts.
2. Blanket Prohibitions: In the interest of facilitating the
"pre-clearance" of employee trading as required herein, any blanket
prohibition regarding certain categories or types of securities in
which employees are prohibited from
(3) "Other activity in clients' accounts" should not be interpreted to mean
purchase or sale activity in connection with account opening transactions on
behalf of new wrap or non-institutional separate account clients to the firm.
The focus here should be on identifying securities in which purchase or sale
activity was or will be conducted for clients across the board in any given
investment product offered by Brandes. Securities to be purchased in connection
with account opening activities for institutional clients should be on the Watch
List in advance of such transactions given the potential impact that such
trading could have on the market for those securities.
<PAGE>
effectuating any personal transactions should contain a level of
specificity that minimizes interpretive variance among those charged
with approving employee trades. The Investment Committee, the Trading
Department and the Legal Department should arrive at a clear and exact
understanding regarding the terms of the application of any blanket
prohibition prior to the effectiveness of such prohibition.
F. COMPLIANCE PROCEDURES.
1. PRE-CLEARANCE FOR 24 HOURS ONLY.
All employee-related accounts shall receive prior written approval from
the Trading Strategist or the Compliance Officer before purchasing or
selling any securities except U.S. government securities; shares of
registered open-end mutual funds; securities in employee-related
accounts managed by, and maintained by the firm; securities itemized at
Section D2 (a) and (b). In the absence of these individuals, or if they
are the persons requesting approval, the Trading Strategist's designate
or a Managing Partner may give the approval. Such approval shall be for
a 24-hour period only. If an employee-related account is unable to
complete the approved transaction within a 24-hour period, the
employee-related account must receive another approval from the
individuals named above before purchasing or selling securities. If an
employee places a "limit order" on the transaction and the order is not
completed during the day on which the approval is given, the remaining
order must be re-approved by either the Trading Strategist or by the
Legal/Compliance Department.
When requesting approval of a transaction for an employee-related
account, the employee shall disclose to the person to whom s/he is
requesting approval of any conflict of interest of which the employee
is aware concerning the proposed transaction, such as the existence of
any economic relationship between the transaction which is the subject
of the pre-clearance request and securities held or to be acquired by
any Brandes client including any mutual fund portfolio managed by
Brandes.
Certain employee-related accounts may be released from the obligation
to pre-clear and report personal trades. This exemption will apply to
employee-related accounts where total investment discretion is with a
non-employee third-party where such third-party does not confer with
the employee regarding trades in such account. This exemption must be
obtained in writing from the Compliance Department.
2. DISCLOSURE OF PERSONAL HOLDINGS AND EMPLOYEE REPORTING REQUIREMENTS.
<PAGE>
a. Upon employment at Brandes, employees are required to disclose
interests in any corporation of which they are an officer or director
or which they, or a family member, hold 5% or more of the outstanding
stock. They are also required to disclose any outside business
ventures.
b. Each employee shall arrange to have duplicate confirms or statements
forwarded to the Compliance Manager for each employee-related brokerage
account.
c. Each employee shall complete a Personal Securities Transaction
Quarterly Report for each calendar quarter even if the employee does
not have any personal securities transactions to report and submit the
Report to the Compliance Department no later than 10 days after the end
of each calendar quarter.
d. Quarterly, the Compliance Officer will review employee-related
transactions, the Personal Securities Transaction Quarterly Reports
from each employee, and report the findings to the Chief Compliance
Officer.
e. If an employee-related account of a person attending an Investment
Committee meeting or if a member of the Investment Committee holds a
security, or a security economically related thereto, being considered
for purchase or sale by Brandes client accounts, such person shall
disclose to the Investment Committee his holdings of the security at
the first occasion upon which the employee becomes aware that Brandes
is considering the security for purchase for its clients including any
mutual fund portfolio managed by Brandes.
3. ANNUAL CERTIFICATION OF COMPLIANCE.
Each employee shall certify annually that: (a) s/he has read and
understands the Code of Ethics and recognizes s/he is subject thereto;
(b) s/he has complied with the requirements of the Code of Ethics; (c)
s/he has reported all personal securities transactions required to be
reported pursuant to the requirements of the Code of Ethics; and (d)
other than as disclosed on the annual certification, s/he has no
knowledge of the existence of any personal conflict of interest which
may involve Brandes clients, such as any economic relationship between
his/her transactions and securities held or to be acquired by Brandes
clients including any mutual fund portfolio managed by Brandes.
G. REPORTS.
1. The Compliance Department shall submit an annual report on compliance
with the Code of Ethics to Brandes' Managing Partners.
<PAGE>
2. The Compliance Department shall submit a quarterly report on compliance
with the Code of Ethics to the General Council and Chief Compliance
Officer.
3. The Compliance Department or anyone who becomes aware of an apparent
violation of the Code of Ethics shall promptly report such apparent
violation to the Chief Compliance Officer.
4. The Chief Compliance Officer shall review each report of an apparent
violation and make a written determination of whether the apparent
violation could reasonably be found to have resulted in a fraud, deceit
or manipulative practice in violation of Section 206 of the Advisers
Act or Rule 17j-1 of the Investment Company Act. The written
determination shall include the Chief Compliance Officer's reasons for
his decision. If the Chief Compliance Officer finds a violation, he
shall report such violation to Brandes' Managing Partners.
5. Brandes' Managing Partners shall review the report of a violation from
the Chief Compliance Officer and determine what sanctions, if any,
should be imposed.
H. SANCTIONS.
The sanctions for violation of the Code of Ethics may include a letter
of censure, temporary suspension of employment, termination of
employment, disgorgement of any ill-gotten profits, and/or any other
sanction deemed appropriate by Brandes' Managing Partners.
I. RETENTION OF RECORDS.
This Code of Ethics, a copy of each report made by an employee
hereunder, each report made by the Compliance Department, each
determination by the Chief Compliance Officer and any action taken as a
result of a violation, shall be maintained by Brandes.
<PAGE>
I. POLICY STATEMENT ON INSIDER TRADING.
Every officer, partner and employee is responsible for knowing and abiding by
the terms of this policy statement.
Brandes Investment Partners, L.P., forbids any trading on behalf of
employee-related accounts (see the personal Trades Policy for a definition) or
clients accounts (such as mutual funds and private accounts managed by Brandes)
on material nonpublic information, or communicating material nonpublic
information to others in violation of the law. This conduct is referred to as
"insider trading." Brandes' policy applies to every officer, partner and
employee and extends to activities within as well as outside of their duties at
Brandes. Any questions regarding Brandes' policy and procedure should be
referred to General Counsel.
The term "insider trading" is not defined in the federal securities laws, but
generally is used to refer to the use of material nonpublic information to trade
in securities (whether or not one is an "insider") or the communication of such
material nonpublic information to others. Although United States law governs
insider trading, this law applies to information about foreign companies as well
as domestic companies. Thus, if an employee receives nonpublic material
information about a foreign company, the employee is prohibited from trading for
accounts based on that information and from communicating such information to
others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
1. trading by an insider, while in possession of material
nonpublic information;
2. trading by a non-insider, while in possession of material
nonpublic information, where the information either was
disclosed to the non-insider in violation of an insider's duty
to keep it confidential or was misappropriated;
3. communicating material nonpublic information to others;
The elements of insider trading and the penalties for such unlawful conduct are
discussed below.
WHO IS AN "INSIDER"?
The concept of "insider" is broad. It includes officers, directors and employees
of a company. In addition, a person can be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information solely for the company's
purposes. A temporary insider can
<PAGE>
include, among others, a company's attorney, accountants, consultants, bank
lending officers and the employees of such organizations. In addition, Brandes
may become a temporary insider of a company it advises or for which it performs
other services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed nonpublic information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
WHAT IS "MATERIAL INFORMATION"?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" is defined generally as
information which a reasonable investor would consider substantially important
in making his or her investment decisions, or information that is reasonably
certain to have a substantial effect on the price of a company's securities.
Information that officers, directors and employees should consider material
includes, but is not limited to: dividend changes, earnings estimates, changes
in previously released estimates, significant merger or acquisition proposals or
agreements, major litigation, liquidation problems and extraordinary management
developments.
Material information does not have to relate to a company's business. For
example, not yet released news items which might have a significant effect on
prices have been found to be material information.
No simple "bright line" test exists to determine when information is material;
assessments of materiality involve a highly fact-specific inquiry. For this
reason, you should direct any questions about whether information is material to
the General Counsel, or his designated representative, in the legal department.
WHAT IS "NONPUBLIC INFORMATION"?
Information is nonpublic until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The
Wall Street Journal, or other publications of general circulation would be
considered public.
BASES FOR LIABILITY
FIDUCIARY DUTY
In 1980, the Supreme Court found that there is no general duty to disclose
before trading on material nonpublic information, but that such a duty arises
only where there is a fiduciary relationship. That is, there must be a
relationship between the parties to the
<PAGE>
transaction such that one party has a right to expect that the other party will
disclose any material nonpublic information or refrain from trading.
Non-insiders can acquire the fiduciary duties of insiders by entering into a
confidential relationship with the company through which they gain information
(e.g. attorneys, accountants), or they can acquire a fiduciary duty to the
company's shareholders as "tippees" if they are aware or should have been aware
that they have been given confidential information by an insider who has
violated his fiduciary duty to the company's shareholders.
However, in the "tippee" situation, a breach of duty occurs only if the insider
personally benefits, directly or indirectly, from the disclosure. The benefit
does not have to be pecuniary, but can be a gift, reputational benefit that will
translate into future earnings or even evidence of a relationship that suggests
a quid pro quo.
MISAPPROPRIATION
Another basis for insider trading liability is trading which occurs on material
nonpublic information that was stolen or misappropriated from any other person.
It should be noted that "misappropriation" can be used to include a variety of
individuals not previously thought to be encompassed under the fiduciary duty.
PENALTIES FOR INSIDER TRADING
Penalties for trading on or communicating material nonpublic information are
severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
* civil injunctions
* treble damages
* disgorgement of profits
* jail sentences
* fines for the person who committed the violation
of up to three times the profit gained or losses
avoided, whether or not the person actually benefited;
* fines for the employer or other controlling person of
$1,000,000 or three times the amount of the profit
gained or loss avoided, whichever is greater.
In addition, any violation of this policy statement can be expected to result in
serious sanctions by Brandes, including termination.
IDENTIFYING INSIDE INFORMATION
<PAGE>
Before recommending or executing any trade for yourself or others, including
client accounts, you must determine whether you have access to material
nonpublic information. If you think that you might have access to material
nonpublic information, you should take the following steps:
a. Report the information and proposed trade immediately to the General
Counsel, or his designate.
b. Do not purchase or sell the securities on behalf of yourself or
others, including employee-related accounts and client accounts.
c. Do not communicate the information inside or outside Brandes, other
than to Brandes' attorneys.
d. After the General Counsel, or his designate, has reviewed the issue,
the firm will determine whether the information is material and
nonpublic and, if so, what action the firm should take.
You should consult with General Counsel, or his designate, or Brandes' outside
counsel before taking any action.
CONTACTS WITH PUBLIC COMPANIES
Contacts with public companies represent an important part of Brandes' research
efforts. Brandes may make investment decisions on the basis of the firm's
conclusions formed through such contacts and analysis of publicly available
information. Difficult legal issues arise, however, when, in the course of these
contacts, a Brandes employee becomes aware of material nonpublic information.
This could happen, for example, if a company's Chief Financial Officer
prematurely discloses quarterly results to an analyst or an investor relations
representative makes a selective disclosure of adverse news to a handful of
investors. In such situations, Brandes must make a judgment as to its further
conduct. To protect yourself, your clients and Brandes, you should contact
immediately General Counsel, or his designate, if you believe that you may have
received material nonpublic information.
TENDER OFFERS
Tender offers represent a particular concern in the law of insider trading for
two reasons. First, tender offer activity often produces extraordinary gyrations
in the price of the target company's securities. Trading during this time period
is more likely to attract regulatory attention (and produces a disproportionate
percentage of insider trading cases). Second, the SEC has adopted a rule which
expressly forbids trading and "tipping" while in possession of material
nonpublic information regarding a tender offer received from the tender offerer,
the target company or anyone acting on behalf of either. Brandes
<PAGE>
employees should exercise particular caution any time they become aware of
nonpublic information relating to a tender offer.
<PAGE>
SUPERVISORY PROCEDURES
The role of General Counsel is critical to the implementation and maintenance of
Brandes' policy and procedures against insider trading. Supervisory procedures
can be divided into two classifications - prevention of insider trading and
detection of insider trading.
PREVENTION OF INSIDER TRADING
To prevent insider trading, General Counsel should:
1. provide, on a regular basis, an educational program to familiarize
officers, partners and employees with Brandes' policy and procedures;
2. answer questions regarding Brandes' policy and procedures;
3. resolve issues of whether information received by an officer, partner or
employee of Brandes is material and nonpublic;
4. regularly review and update Brandes' policy and procedures;
5. implement measures to prevent dissemination of material nonpublic
information, or restrict trading of the securities involved, when it has
been determined that an officer, partner or employee of Brandes has
material nonpublic information;
6. provide that all employees obtain approval from the trading department at
Brandes prior to trades as described in the Code of Ethics. This is an area
of great concern to the SEC and Brandes.
SPECIAL REPORTS TO COUNSEL
Promptly upon learning of a potential violation of this policy statement,
General Counsel should prepare a written report to Brandes' outside counsel
providing full details, which may include:
1. the name of particular securities involved, if any;
2. the date General Counsel learned of the potential violation and began
investigating;
3. the accounts and individuals involved;
4. actions taken as a result of the investigation, if any; and
<PAGE>
5. recommendations for further action;
DETECTION OF INSIDER TRADING
To detect insider trading General Counsel should:
1. review the trading activity reports filed by each officer, partner and
employee;
2. review the trading activity of accounts managed by Brandes
3. review trading activity of Brandes' own account;
<PAGE>
BRANDES INVESTMENT PARTNERS, L.P.
ANNUAL CERTIFICATION FORM
CODE OF ETHICS
To the Compliance Department of Brandes Investment Partners, L.P., I hereby
certify that:
1. I have read and understand the Code of Ethics and recognize that I am
subject thereto;
2. I have complied with the requirements of the Code of Ethics;
3. I have reported all personal securities transactions required to be
reported pursuant to the requirements of the Code of Ethics;
4. Except as noted on disclosure document, I have no knowledge of the
existence of any personal conflict of interest relationship which may
involve Brandes clients, such as any economic relationship between my
transactions and securities held or to be acquired by Brandes clients
including the Brandes Investment Trust.
Date: Signature:
----------------------- ---------------------------
Printed Name:
---------------------------
Title:
---------------------------
FOR COMPLIANCE USE ONLY
DATE INITIALS
- -------------------------------------------
CM
Review
- -------------------------------------------
Input
Data
- -------------------------------------------
Employee Record
- -------------------------------------------
<PAGE>
DISCLOSURE OF HOLDINGS
(This section to be filled out by members of Investment Committee [all pms,
apms, rms, managing partners and institutional group, or personnel with
subsidiaries filling comparable positions], all Trading and Compliance
personnel.)
Date:
---------------------------
Name:
---------------------------
If all of your securities holdings are directed by Brandes, please so note and
disregard the remainder of the form. Otherwise, please disclose all securities
holdings, whether public or private.
Name of brokerage account(s) and account number(s):
Where account is custodied:
List any securities privately held:
All employees filling out this disclosure are reminded that copies of all
brokerage statements generated on the accounts listed above must be forwarded to
Compliance. If you would like to set up an automatic interested party mailing,
please contact compliance personnel for information.
<PAGE>
QUESTIONNAIRE
(This form is to be completed by all employees.)
Date:
---------------------------
Name:
---------------------------
1. List any corporation, public or private, for profit or not for profit, of
which you, or a member of your immediate family, are an officer or
director or hold 5% or more of its outstanding stock. Briefly describe the
business.
2. List any partnership of which you are either a general or limited partner
and briefly describe for each its business activities and your status as a
general or limited partner.
3. List any joint venture or any other businesses in which you participate,
other than your employment with Brandes.
4. List any trustee or executor relationships you have, other than those
pertaining to your immediate family.
5. List any investment clubs of which you are a member.
<PAGE>
TOPICS REQUIRING REGISTRATION
(This form is to be completed by all employees.)
The following topics may require registration before they can be discussed. They
should be avoided by unlicensed personnel.
Performance
Specific Stocks or Bonds
Buying/Selling
Outlook
Markets (Foreign or US)
Fees (our own or broker's)
Account Size
Related Accounts, (how we trade, process, etc.)
Management Style
Any Recent Publications
Any discussion about other clients, accounts, etc.
Printed information may be forwarded about these topics by unregistered
personnel in response to unsolicited requests, but other reports and in-depth
conversations or explanations may be provided only by registered persons.
If these topics come up in a conversation and you are not licensed, DO NOT
attempt to address them even if you think you know the answer, but pass person
to a licensed employee - all Portfolio Managers, Associate Portfolio Mangers,
Managing Directors, Regional Managers and the Institutional Group are licensed.
Violations to this policy may result in disciplinary action.
I have read and understand the above policy.
- ---------------------------------------- ----------------------
Signature Date
- ---------------------------------------
Printed Name
<PAGE>
GIFT REPORTING
This form is required for all employees who receive any gift as explained in the
Code of Ethics of $50 or more.
Date:
---------------------------
Name:
---------------------------
Description of Gift (date, outside party(ies) involved, approx. value):
<PAGE>
PERSONAL TRADING POLICY/CODE OF ETHICS
NOVEMBER 22, 1999
A. Personal investments: An employee should consider himself the
beneficial owner of those securities held by him, his spouse, his
minor children, a relative who shares his house, or persons by reason
of any contract, arrangement, understanding or relationship that
provides him with sole or shared voting or investment power.
B. Employees are barred from purchasing any securities (to include Common
Stock and related Options, Convertible securities, Options, or Futures
on Indexes) in which the firm has either a long or short position. If
an employee owns a position in any security, he must get written
pre-clearance from the Chairman or President to add to or sell the
position. ALL SECURITY TRANSACTIONS (BUY OR SELL) REQUIRE WRITTEN
CLEARANCE IN ADVANCE. Approval is good for 48 hours; if a trade has
not been executed, subsequent approvals are necessary until the trade
is executed.
C. Employees may not purchase initial public offerings. Private
placements/Limited partnerships require pre-clearance. Mutual Fund
holdings are excluded from pre-clearance and reporting. IRA's, and
Rollover IRA's that are self-directed (i.e. stocks or bonds, not
mutual funds), and ESOP's (Employee stock ownership plans) require
pre-clearance.
D. 48-hour blackout period: individuals may not purchase/sell securities
(or similar securities) with in the 24 hours prior or following client
transactions. Proprietary partnerships may purchase the same or
similar securities within the black out period, if the partnership
trades with the block or after other clients. Where it is beneficial
to client accounts, they should be blocked with the partnership
account. The Exception committee (the Chairman, President, Chief
Operating Officer, and Director of Compliance) must approve
exceptions.
E. Short Term Trading Rule - Employees may not take profits in any
security in less than 60 days (includes Options, Convertibles and
Futures). If an individual must trade with in this period, the
Exception committee must approve it. The proprietary partnerships may
take profits in less than 60 days. The closing of positions at a loss
is not prohibited. Options that are out of the money may be exercised
in less than 60 days.
F. Reporting: Consistent with the requirements of the Investment Advisers
Act of 1940 Rule 204-2 (a)(2) and (a)(3) and with the provisions of
Rule 17j-1 of the Investment Company Act of 1940 all employees must
submit duplicate statements/disclosures within 10 days following the
calendar quarter. Brokerage, IRA's, Rollover IRA's (which are
self-directed), ESOP's, private placement and limited partnerships
must all be reported as personal trading.
G. Violation of the Personal Investments/Code of Ethics policy may result
in disciplinary action, up to and including termination of employment.
<PAGE>
FRONTIER CAPITAL MANAGEMENT COMPANY, LLC
INDIVIDUAL CODE OF ETHICS
As an employee and/or member of the Management Committee of FCMC (an "employee")
the undersigned agrees to abide by the following Code of Ethics in regard to
personal securities transactions. You will please note that we are extending the
code to include any trading done by your spouse or for your minor children. Such
trades must abide by the procedures below including pre-clearance and post
quarterly reporting. You should also recognize that violations of the code are
viewed as unacceptable by the management of FCMC, and may result in forfeiture
of related profits, monetary penalties, or loss of position. We encourage you to
seek guidance before entering into any ambiguous transactions.
1. In general personal transactions will in no way conflict with the best
interest of the firm's clients. It is expected at all times that
responsibility to the client will receive priority over personal interest.
2. An employee must have pre-clearance to trade in any covered security (as
that term is defined in Rule 17j-1 under the Investment Company Act of
1940, as amended (the "Act")). First, the trade must be cleared by the
trading desk. If it is determined that the covered security is owned by a
FCMC client, clearance then is sought by the responsible portfolio manager.
If the covered security is not owned, clearance should be sought by the
portfolio manager who would normally trade in stocks of that capitalization
size. If the covered security is appropriate for more than one manager, an
attempt should be made to seek approval from them as well. Trade approvals
are good for two business days, and then must be renewed. Once a trade is
approved the clearance slip should be given to FCMC's Compliance Officer.
3. At no time can an employee trade in a stock where there is an active order
on the trading desk.
4. Employees cannot purchase IPOS or `hot' secondary offerings.
5. Employees who buy private placements must discuss such transactions and
obtain pre-clearance before committing to them. It should be recognized
that private placements have led to compliance problems at other investment
firms. In particular serious problems can occur if the company does come
public and Frontier wishes to become a shareholder, or the private
placement itself is offered by a brokerage firm that services Frontier.
CODE OF ETHICS
<PAGE>
6. Employees (and their spouses) are required to sign the attached form which
directs your broker to send us a duplicate confirm of all equity trades you
make. We will need one form for each broker.
7. Within 10 days of becoming an employee of FCMC, the employee and his/her
spouse will fill out and return to FCMC's Compliance Officer an initial
holdings report as required pursuant to Rule 17j-1(d)(1)(i) under the Act.
8. Within 10 days of the close of the calendar quarter the employee and his
spouse will fill out and return to FCMC's Compliance Officer a quarterly
transaction report as required pursuant to Rule 17j-1(d)(1)(ii) under the
Act.
9. Within 30 days of the close of each calendar year, the employee and his/her
spouse will fill out and return to FCMC's Compliance Officer an annual
holdings report as required pursuant to Rule 17-j(d)(1)(iii) under the Act.
10. Personal transactions in companies with a market value less than $2 billion
or where the employees total position is greater than $200,000 must abide
by the following rules. If the transactor is an analyst with research
responsibility for the stock, he must receive prior clearance from all
portfolio managers who own the stock. If the transactor is a portfolio
manager who owns the stock in his portfolios, above transactions that are
purchases are prohibited if a full position has not been bought for the
client; similarly transactions that are sales are prohibited until the
client's position is sold.
11. Portfolio managers will also adhere to special blackout rules on personal
transactions. In the case where the manager has purchased or sold a stock
personally, he will have to wait ten business days before buying for the
client. In the case where the manager has sold the client's position, he
must wait ten days before buying the stock personally. The intent of this
rule is to eliminate any appearance of front-running or misuse of the
client's market power. I would remind affected managers that exceptions can
be granted by the Compliance Officer.
12. At all times all personal conduct in the stock market will abide by federal
and state securities laws.
13. Employees wishing to become directors of for-profit organizations must seek
permission from the Management Committee.
14. The compliance committee that can clear transactions includes: Messrs.
Wimberly, Duncan, Cavarretta, Higgins, and Ms. Fey.
CODE OF ETHICS
<PAGE>
15. The Management Committee reserves the right to modify the above rules in
exceptional circumstances.
--------------------------- ---------------------------
Signature Date
CODE OF ETHICS
<PAGE>
CODE OF ETHICS
THE CLIFTON GROUP INVESTMENT MANAGEMENT
COMPANY
309 CLIFTON AVENUE
MINNEAPOLIS, MINNESOTA 55403
CODE OF ETHICS -JUNE 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
EXECUTIVE SUMMARY.................................................... 1
SECTION I. PURPOSE AND DESIGN.................................................... 3
SECTION II. RESTRICTIONS.......................................................... 4
SECTION III. REPORTING REQUIREMENTS................................................ 7
SECTION IV. OTHER POLICIES........................................................ 10
SECTION V. SUPERVISORY PROCEDURES................................................ 11
SECTION VI. ENFORCEMENT AND SANCTIONS............................................. 12
SECTION VII. MISCELLANEOUS PROVISIONS.............................................. 16
SECTION VIII. DEFINITIONS........................................................... 17
EXHIBIT A-1........................................................... 24
Voyageur Pre-Clearance Form
EXHIBIT A-2........................................................... 25
Clifton Pre-Clearance Form
EXHIBIT A-3........................................................... 26
SBH Pre-Clearance Form
EXHIBIT A-4........................................................... 27
DSA Pre-Clearance Form
EXHIBIT B............................................................. 28
Quarterly Transaction Report
SEGALL BRYANT ADDENDUM................................................ 29
</TABLE>
CODE OF ETHICS - APRIL 1999
<PAGE>
As most recently approved on:
April 1, 1999
CODE OF ETHICS
FOR
DOUGHERTY FINANCIAL GROUP LLC
AND AFFILIATES
EXECUTIVE SUMMARY
<TABLE>
<CAPTION>
ADMINISTRATION ALL EMPLOYEES ACCESS PERSONS ADVISORY PERSONS
- ------------- ------------- -------------- -----------------
<S> <C> <C> <C>
Must obtain pre-approval of X X
transactions
Disallowed personal transactions X
seven days prior to or after a fund or
managed account transaction in that
same security except as allowed by
the de minimis exemption
Must receive approval of Chief X X
Executive Officer to purchase
private placements
Prohibited from purchasing initial X X X
public offerings
Must submit quarterly report of X X
transactions
Prohibited from buying or selling a X X
security the same day a fund or
managed account is buying/selling
or contemplating buying/selling that
same security except as allowed by
the de minimis exemption
Notify Compliance before opening X X X
brokerage accounts
Have duplicate confirmations and X X X
statements sent to Compliance
Must report outside business X X X
activities
Must report related persons in X X X
</TABLE>
CODE OF ETHICS - APRIL 1999 -1-
<PAGE>
<TABLE>
<CAPTION>
ADMINISTRATION ALL EMPLOYEES ACCESS PERSONS ADVISORY PERSONS
- ------------- ------------- -------------- -----------------
<S> <C> <C> <C>
securities business
Prohibition on insider trading X X X
Prohibited from accepting gifts X X X
deemed excessive
Prohibited from serving as director X X
of public company without approval
of Chief Executive Officer
Prohibited from using the same X
broker for their personal account as
they use for accounts they manage.
</TABLE>
CODE OF ETHICS - APRIL 1999 -2-
<PAGE>
I. PURPOSE AND DESIGN
This Code of Ethics ("Code") is adopted by Dougherty Financial Group LLC
("DFG"), Voyageur Asset Management LLC ("Voyageur"), Segall Bryant & Hamill
("SBH"), The Clifton Group Investment Management Company ("Clifton") and
Dougherty Summit Advisors LLC ("DSA"), (all preceding companies and affiliates
shall hereinafter be referred to all-inclusively as "The Companies") in an
effort to prevent violations of the 1940 Act and the Rules and Regulations
thereunder. Capitalized terms used and not otherwise defined herein have the
meaning set forth in Article VIII hereof.
This Code is designed to:
1. prevent investment activities by persons with access to certain
information that might be harmful to Clients or that might enable
such persons to illicitly profit from their relationship with
Clients;
2. summarize the written policies and procedures designed to prevent
the misuse of material, non-public information in violation of the
1934 Act, the Advisers Act, or the Rules and Regulations thereunder,
as required by Section 15(f) of the 1934 Act and Section 204A of the
Advisers Act;
3. put our customers' interests first. The Companies seek to foster a
reputation for integrity and professionalism. That reputation is a
vital business asset. The confidence and trust placed in us by
investors is something we value and endeavor to protect;
4. ensure that all personal securities transactions by employees are
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or appearance of
conflict or any abuse of an individual's position of trust and
responsibility.
CODE OF ETHICS - APRIL 1999 -3-
<PAGE>
Each employee must read and retain a copy of this Code and will be asked
to sign an acknowledgment form. Direct any questions to the Chief Executive
Officer and his/her designee. Each employee will be required to acknowledge
compliance with the Code on an annual basis.
CODE OF ETHICS - APRIL 1999 -4-
<PAGE>
II. RESTRICTIONS
A. NON-PUBLIC INFORMATION.
1. All employees shall use due care to ensure that material, non-public
information remains secure and shall not divulge to any person any
material, non-public information, except in the performance of
his/her duties. For example, files containing material, non-public
information should be restricted. If an Insider learns of any
material, non-public information, such information shall not be
divulged to any other person, except in the performance of his/her
duties. Conversations containing such information should be
conducted in private, not by analogue cellular phone, so as to avoid
potential interception.
2. No Insider shall engage in Insider Trading, on behalf of
himself/herself or others.
3. No employee shall divulge to any person contemplated or completed
securities transactions of a Client, except in the performance of
his/her duties, unless such information previously has become a
matter of public knowledge. If you think you might have access to
material, non-public information, you should direct that to the
Chief Executive Officer or his/her designee.
B. SECTION 17(d) LIMITATIONS. No Affiliated Person of The Companies
acting as principal shall effect any transaction in which a Fund, or
a company controlled by a Fund, is a joint or a joint and several
participants with such person, SBH or Clifton, or Affiliated Person,
in contravention of such rules and regulations as the Securities and
Exchange Commission may prescribe under Section 17(d) of the 1940
Act for the purpose of limiting or preventing participation by the
Funds or controlled companies on a basis different from or less
advantageous than that of such other participant.
C. PRESCRIBED ACTIVITIES UNDER RULE 17j-l(a). Rule 17j-l(a) under the
1940 Act provides: It shall be unlawful for any Affiliated Person of
or principal underwriter for a registered investment company, or any
Affiliated Person of an investment adviser of or principal
underwriter for a registered investment company in connection with
the purchase or sale,
CODE OF ETHICS - APRIL 1999 -5-
<PAGE>
directly, or indirectly, by such person of a security held or to be
acquired, as defined in this section, by such registered investment
company -
1. To employ any device, scheme or artifice to defraud such registered
investment company;
2. To make to such registered investment company any untrue statement
of a material fact or omit to state to such registered investment
company a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading;
3. To engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon any such registered
investment company; or
4. To engage in any manipulative practice with respect to such
registered investment company.
Any violation of Rule 17j-l(a) shall be deemed to be a violation of the
Code.
D. COVENANT TO EXERCISE BEST JUDGMENT. An Access/Advisory Person shall act on
his/her best judgment in effecting, or failing to effect, any Fund
transaction and such Access/Advisory Person shall not take into
consideration his/her personal financial situation in connection with
decisions regarding Fund Portfolio transactions.
E. PRECLEARANCE. All Access and Advisory Persons must have all equity,
municipal bond, and corporate transactions (including limit orders), and
securities transactions where the underlying security is an equity,
municipal, or corporate (i.e. option, future, warrant) pre-approved with
the designated person(s) prior to any transaction for any accounts they
exercise discretion over (see attached form Exhibit A). Action must be
taken within five (5) business days or another preclearance will be
required. Transactions in government securities do not require
preclearance. (Please see attached addendum for Segall Bryant & Hamill.)
F. LIMITATIONS ON INITIAL AND SUBSEQUENT TRANSACTIONS.
CODE OF ETHICS - APRIL 1999 -6-
<PAGE>
1. A portfolio manager, or any member of his/her immediate family,
shall not purchase/sell securities of an issuer for their personal
account within seven (7) calendar days prior to or after a managed
account they manage purchases/sells that issuer's same security.
There is a DE MINIMIS exception for transactions involving a small
number of shares of companies with very large market capitalization
and high average daily trading volume. However, each trade should be
analyzed to help ensure a client trade is not disallowed because of
this rule to ensure client's interests are considered.
2. Access and Advisory Persons or any member of their immediate family,
shall not purchase or sell a security on the same day there is a
pending transaction in a managed account. After a managed account
has made an initial purchase of Securities of an issuer, an Access
and Advisory Person of the Companies, or any member of his/her
immediate family, shall not purchase or sell Securities of such
issuer if the managed account is contemplating an additional
purchase or a partial sale of such issuer's Securities, unless the
trade meets the de minimis exception. However, in this case the
portfolio managers employee/immediate family trades must be executed
after their own client trades. If a manager violates this policy
they may be disallowed from doing de minimis trades in their
personal accounts for 5 days.
G. PERSONAL DEALING WITH CUSTOMERS. Employees are prohibited from personally
selling or purchasing securities directly or indirectly to or from a
client account.
CODE OF ETHICS - APRIL 1999 -7-
<PAGE>
III. REPORTING REQUIREMENTS
A. QUARTERLY REPORT. The Companies jointly undertake to take all reasonable
and necessary steps to ensure that material, non-public information is
never disseminated or made available to any persons other than Access and
Advisory Persons. Therefore, only Access and Advisory Persons need to
submit quarterly reports hereunder. Not later than ten (10) days after the
end of each calendar quarter, each Access and Advisory Person shall submit
a report which includes the following information with respect to
transactions during calendar quarter in any Security in which such Access
and Advisory Person has, or by reason of such transaction acquired, any
direct or indirect beneficial ownership in the Security. Security includes
all securities listed under Section VIII.R. including government
securities, etc. even if not specifically included.
1. The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
2. The nature of the transaction (ie., purchase, sale, gift or any
other type of acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer, or bank with or through whom the
transaction was effected.
If no transactions have occurred during the period, the report shall so
indicate. (A sample is attached as Exhibit B.)
B. LIMITATION ON REPORTING REQUIREMENTS. Notwithstanding the provisions
of Section III.A., no Access Person shall be required to make a
report:
1. With transactions effected for any account over which such person
does not have any direct influence or control; or
2. If such person is not an "interested person" of a Client as defined
in Section 2(a)(19) of the 1940 act and would be required to make
such a report solely by
CODE OF ETHICS - APRIL 1999 -8-
<PAGE>
reason of being a director of a Fund, except where such director
knows or, in the ordinary course of fulfilling his/her official
duties as a Director of a Fund, should have known that during the
15-day period immediately preceding or after the date of the
transaction in a security by the director, such Security is or was
purchased or sold by a Fund or such purchase or sale by a Fund is or
was considered by such Fund or the Companies. It is a disinterested
director's actual or imputed knowledge at the time of HIS or HER
securities transaction which triggers the reporting obligation.
Therefore, a disinterested director need only report a securities
transaction when, AT THE TIME OF THAT TRANSACTION, he or she knows,
or should have known, of the investment company's trading activity
or consideration of trading activity.
3. Where a report made to the Companies would duplicate information
recorded pursuant to Rules 204-2(a)(12) Or 204-2(a)(13) under the
Advisers Act.
C. REPORTS OF VIOLATIONS. In addition to the quarterly reports required
under this Code, Access and Advisory Persons shall report promptly
any transaction which is, or might appear to be, in violation of
this code. Such reports shall contain the information required in
quarterly reports filed pursuant to Section III.A.
D. FILING OF REPORTS. All reports prepared pursuant to this Code shall
be filed with the Chief Executive Officer of the Companies or
his/her designee.
E. CERTIFICATION TO GENERAL COUNSEL OF FUNDS. Prior to February 1 of
each year, the Companies shall prepare and deliver to the General
Counsel a report which shall describe in detail violations of this
code for the prior calendar year, unless such violations have
previously been reported to the General Counsel.
F. DISSEMINATION OF REPORTS. The General Counsel shall have the right
at any time to receive copies of any reports submitted pursuant to
this Code. Such General Counsel shall keep all reports confidential
except as disclosure thereof to the Boards of Directors
CODE OF ETHICS - APRIL 1999 -9-
<PAGE>
of The Companies, or other appropriate persons as may be reasonably
necessary to accomplish the purposes of this Code.
G. OUTSIDE BROKERAGE ACCOUNTS. All employees are required to have
duplicate confirmations and statements from outside investment
accounts sent to the Companies' Compliance Department. It is
prohibited for portfolio managers to transact for their personal
account using a broker they use for fund or managed account
transactions. This includes any account in which they have
beneficial ownership. Employees are also required annually to
disclose personal securities holdings if there are holdings other
than those reflected on a traditional broker/dealer account (i.e.
private placements, securities held in bank safe deposit boxes).
H. INITIAL PUBLIC OFFERINGS (IPOS). Employees and their immediate
family members are prohibited from purchasing IPOs of all securities
(I.E. MUNICIPALS AND EQUITIES).
I. PRIVATE PLACEMENTS. Access and Advisory Persons are prohibited from
purchasing private placements without express PRIOR APPROVAL of the
Chief Executive Officer or his/her designee.
J. RELATED PERSONS IN SECURITIES BUSINESS. All employees are required
to report to the Compliance Department related persons, either by
lineage or marriage, employed in the securities business, namely:
spouse, parent, children, or siblings.
CODE OF ETHICS - APRIL 1999 -10-
<PAGE>
IV. OTHER POLICIES
A. GIFTS. Access and Advisory Persons and employees are not to accept
gifts or gratuities from broker/dealers or vendors deemed excessive
(over $100 or frequent in nature) which could impair or give the
appearance of impropriety regarding their fiduciary responsibility
to our clients.
B. SERVICE AS A DIRECTOR. Access and Advisory Persons are prohibited
from serving on the boards of directors of publicly traded
companies, absent prior authorization based upon a determination
that the board service would be consistent with the interests of
clients, including a Fund and its shareholders. Investment personnel
serving as directors normally should be isolated from those making
investment decisions through "Chinese Wall" or other procedures.
C. OUTSIDE BUSINESS ACTIVITIES. Employees are required to notify the
Compliance Department in writing of any outside business activities,
whether or not they are securities related. The Compliance Officer
will consult with senior management regarding the allowance of such
activity. Examples include being a board member of a non-profit
organization, cosmetics sales agent, etc.
CODE OF ETHICS - APRIL 1999 -11-
<PAGE>
V. SUPERVISORY PROCEDURES
The following supervisory procedures shall be implemented:
A. PREVENTION OF INSIDER TRADING. To prevent Insider Trading, the Chief
Executive Officer of the Companies or his/her designee, shall:
1. take appropriate measures to familiarize Access and Advisory Persons
with the Code via training;
2. answer questions regarding the Code;
3. resolve issues of whether information received by an Insider is
material and/or non-public; and
4. review and update the Code as necessary.
5. a. strive for a physical separation of the trading and research
departments from those departments in possession of the
sensitive information;
b. take steps to restrict access to the information including
computer passwords and the use of code names; and
c. supervise any inter-department communication of the material,
non-public information.
B. DETECTION OF INSIDER TRADING. To detect Insider Trading, the Chief
Executive Officer of the Companies or his/her designee(s), shall:
1. review the trading activity reports filed by each Access and
Advisory Person; and
2. review the trading activity of Voyageur, SBH and Clifton, as
applicable.
CODE OF ETHICS - APRIL 1999 -12-
<PAGE>
VI. ENFORCEMENT AND SANCTIONS
A. GENERAL. Any Affiliated Person of the Companies who is found to have
violated any provision of this Code including filing false or incomplete
or untimely reports may be permanently dismissed, reduced in salary or
position, temporarily suspended from employment, or sanctioned in such
other manner as may be determined by the Boards of Directors of Voyageur,
SBH, Clifton or DSS in their discretion. In determining sanctions to be
imposed for violations of this Code, the Board of Directors may consider
any factors deemed relevant, including without limitation:
1. the degree of willfulness of violation;
2. the severity of the violation;
3. the extent, if any, to which the violator profited or benefited from
the violation;
4. the adverse effect, if any, on the Client(s);
5. the market value and liquidity of the class of Securities involved
in the violation;
6. the prior violations of the Code, if any, by the violator;
7. the circumstances of discovery of the violation; and
8. if the violation involved the purchase or sale of Securities in
violation of this Code, (a) the price at which the purchase or sale
was made and (b) the violator's justification for making the
purchase or sale, including the violator's tax situation, the extent
of the appreciation or depreciation of the Securities involved, and
the period the Securities have been held.
B. VIOLATIONS OF SECTION II.F REGARDING INVESTMENT COMPANIES:
1. At its election, a Fund may choose to treat a transaction prohibited
under Section II.F of this Code as having been made for its account.
Such an election may be made only by a majority vote of the
directors of the Fund who are not Affiliated Persons of the
Companies. Notice of an election under this Paragraph B.1 shall
CODE OF ETHICS - APRIL 1999 -13-
<PAGE>
not be effective unless given to the Companies within sixty (60)
days after the Fund is notified of such transaction. In the event of
a violation involving more than one Fund, recovery shall be
allocated among the affected Funds in proportion to the relative net
asset values of the Funds as of the date of the violation. A
violator shall be obligated to pay the Fund any sums due to said
Fund pursuant to Paragraph B.2 below due to a violation by a member
of the immediate family of such violator.
2. If Securities purchased in violation of Section II.F. of this Code
have been sold by the violator in a bona fide sale, the Fund shall
be entitled to recover the profit made by the violator. If such
Securities are still owned by the violator, or have been disposed of
by such violator other than by a bone fide sale at the time notice
of election is given by the Fund, the Fund shall be entitled to
recover the difference between the cost of such Securities to the
violator and the fair market value of such Securities on the date
the Fund acquired such Securities. If the violation consists of a
sale of Securities in violation of Section II.F. of this Code, the
Fund shall be entitled to recover the difference between the net
sale price per share received by the violator and the net sale price
per share received by the Fund, multiplied by the number of shares
sold by the violator. Each violation shall be treated individually,
and no offsetting or netting of violations shall by permitted.
3. Knowledge on the part of the General counsel of a Fund of a
transaction in violation of Section II.F. of this Code shall be
deemed to be notice to the Fund under Paragraph VI.B.1 above.
Knowledge on the part of a director or officer of a Fund who is an
Affiliated Person of the Companies of a transaction in violation of
this Code shall not be deemed to be notice under Paragraph VI.B.1.
4. If the Board of Directors of a Fund determines that a violation of
this Code has caused financial detriment to such Fund, upon
reasonable notice to the Companies, the Companies shall use its best
efforts, including such legal action as
CODE OF ETHICS - APRIL 1999 -14-
<PAGE>
may be required, to cause a person who has violated this Code
to deliver to the Fund such Securities, or to pay to the Fund
such sums, as the Fund shall declare to be due under this
Section VI.B., provided that:
a. The Companies shall not be required to bring legal
action if the amount recoverable would not be expected
to exceed $2,500;
b. In lieu of bringing a legal action against the violator,
the Companies may elect to pay to the Fund such sums as
the Fund shall declare to be due under this Section; and
c. The Companies shall have no obligation to bring any
legal action if the violator was not an Affiliated
Person of The Companies.
In lieu of the steps described in this Section VI(B) regarding the Funds,
if one of the Companies is serving as an investment sub-adviser to the
Fund, the Fund may elect to apply the terms of the Code of Ethics of its
Investment Adviser.
C. RIGHTS OF ALLEGED VIOLATOR. A person charged with a violation of this Code
shall have the opportunity to appear before the Board of Directors as may
have authority to impose sanctions pursuant to this Code, at which time
such person shall have the opportunity, orally or in writing, to deny any
and all charges, set forth mitigating circumstances, and set forth reasons
why the sanctions for any violations should not be severe.
D. NOTIFICATION TO GENERAL COUNSEL OF FUNDS. The General Counsel of the Fund
involved shall be advised promptly of the initiation and outcome of any
enforcement actions hereunder.
E. DELEGATION OF DUTIES. The Board of Directors may delegate its enforcement
duties under this Article to a special committee of the Board of Directors
comprised of at least three persons; provided, however, that no director
shall serve on such committee or participate in the deliberations of the
Board of Directors hereunder who is charged with a violation of this Code.
CODE OF ETHICS - APRIL 1999 -15-
<PAGE>
F. NON-EXCLUSIVITY OF SANCTIONS. The imposition of sanctions hereunder by the
Board of Directors of Voyageur, SBH and Clifton shall not preclude the
imposition of additional sanctions by the Boards of Directors of the Funds
and shall not be deemed a waiver of any rights by the Funds. In addition
to sanctions which may be imposed by the Boards of Directors of Voyageur,
SBH and Clifton persons who violate this Code may be subject to various
penalties and sanctions including, for example, (i) injunctions; (ii)
treble damages, (iii) disgorgement of profits; (iv) fines to the person
who committed the violation of up to three times the profit gained or loss
avoided, whether or not the person actually benefited; and (v) jail
sentences.
The Code of Ethics adopted by the Companies is designed to promote the
highest standards of conduct. The Code of Ethics gives the Companies
responsibility for determining sanctions in circumstances where the
violation relates to the conduct of an employee of the Companies. The Code
of Ethics identifies a number of factors for consideration in determining
sanctions including the degree of willfulness of the violation; the
severity of the violation and the adverse effect, if any, of the
violation. The Code of Ethics permits the Companies to consider mitigating
or exculpatory factors regarding such violations.
G. POTENTIAL FINES. The following are potential penalties for violation of
the Code of Ethics.
<TABLE>
<CAPTION>
NATURE OF VIOLATION PENALTY
<S> <C>
Late quarterly report filing; or First Violation: written warning
Failure to notify Compliance of new Second: $100.00
brokerage account Third: $200.00
Thereafter: Disciplinary action
Failure to obtain pre-clearance or pre- First Violation(1): written warning
clearance obtained after trade date Second: $250.00(2)
Third: $500.00(2)
Thereafter: Disciplinary action
</TABLE>
- --------------------------
(1)The penalties described herein are in addition to the option of
disgorgement described in the Code of Ethics.
(2)The penalties described in this section are $750.00 and $1,500.00 for
Second and Thrid Violations of Portfolio Managers.
CODE OF ETHICS - APRIL 1999 -16-
<PAGE>
Manager fails to put their trade last 5 day suspension of trading
VII. MISCELLANEOUS PROVISIONS
A. IDENTIFICATION OF ACCESS AND ADVISORY PERSONS. DFG shall, on behalf of
Voyageur, SBH, and Clifton, identify all Access and Advisory Persons who
are under a duty to make reports under Section IV.A. and shall inform such
persons of such duty.
B. MAINTENANCE OF RECORDS. DFG shall, on behalf of Voyaguer, SBH, and Clifton
maintain and make available records as required by Rule 17j-l(d).
C. EFFECTIVE DATE. The effective date of this Code shall be April 1, 1999.
CODE OF ETHICS - APRIL 1999 -17-
<PAGE>
VIII. DEFINITIONS
A. "ACCESS PERSON" means any director, officer, general partner, or Advisory
Person of "The Companies," any director or officer who in the ordinary
course of his/her business makes, participates in, or obtains information
regarding the purchase or sale of securities for a Fund or whose functions
or duties as part of the ordinary course of his/her business relate to the
making of any recommendation to a Fund regarding the purchase or sale of
securities, i.e. analysts, portfolio managers. Those individuals deemed to
be Access Persons will receive such notice. Any individuals who do not
receive such notice but consider themselves Access Persons should contact
the Chief Executive Officer or his/her designee.
B. "ADVISERS ACT" means the Investment Advisers Act of 1940, 15 U.S.C.
(section) 80b-1 to 80b-21.
C. "ADVISORY PERSON" means:
1. Any employee of the Companies (or of any company in a control
relationship to the Companies) who, in connection with his/her
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security, or whose
functions or duties relate to the making of any recommendations with
respect to such purchases or sales; and
2. Any natural person in a control relationship to the Companies who
obtains information concerning recommendations made with regard to
the purchase or sale of a security. This does not include those
individuals who prepare or review public reports and who do not
receive information about current recommendations.
D. "NATURAL PERSON VERSUS PERSON". A natural person is as an individual. A
person can be as an entity such as a corporation, partnership, or
individual person.
E. "AFFILIATED PERSON" of another person means:
CODE OF ETHICS - APRIL 1999 -18-
<PAGE>
1. Any person directly or indirectly owning, controlling, or holding
with power to vote, five percent (5%) or more of the outstanding
voting securities of such other person;
2. Any person, five percent (5%) or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held
with power to vote, by such other person;
3. Any person directly or indirectly controlling, controlled by, or
under common control with, such other person;
4. Any officer, director, partner, co-partner, or employee of such
other person;
5. If such other person is as an investment company, and investment
adviser thereof or any member of as an advisory board thereof; and
6. If such other person is as an unincorporated investment company not
having a board of directors, the depositor thereof.
F. "ASSOCIATED PERSON" means any partner, officer, director, or branch
manager of The Companies (or any person occupying a similar status or
performing similar functions); any person directly or indirectly
controlling, controlled by, or under common control with The Companies; or
any employee of The Companies.
G. "BENEFICIAL OWNERSHIP" means the opportunity to profit directly or
indirectly from a transaction. For example, a partnership, trust,
corporation, investment club, contract arrangement, and understanding or a
relationship.
H. "BOARD OF DIRECTORS" means the board of directors of a corporation or
persons performing similar functions with respect to any organization,
whether incorporated or unincorporated.
I. "CONTROL" shall have the meaning as that set forth in Section 2(a)(9) of
the 1940 Act (power to exercise a controlling influence over the
management or policies of a company unless such power is solely the result
of as an official position with such company.)
CODE OF ETHICS - APRIL 1999 -19-
<PAGE>
J. "DE MINIMIS EXCEPTION" is a transaction which is less than one percent
(1%) of the daily trading volume of that security using a previous 5 day
average.
K. "INSIDER" means Voyageur, SBH, or Clifton or as an Associated Person of
Voyageur, SBH, or Clifton or other affiliates, or any Affiliated Person
thereof, and as a result is given access to material, non-public
information. Examples of such Insiders include accountants, consultants,
advisers, attorneys, bank lending officers, and the employees of such
organizations.
L. "INSIDER TRADING" means the use of material, non-public information to
trade in a Security (whether or not one is as an Insider) or the
communication of material, non-public information to others.
Given the potential liability related to the Insider Training and
Securities Fraud Enforcement Act of 1988, it is critical that all
employees be familiar with this act. The act is very vague. This was done
specifically to allow regulators flexibility in dealing with potential
abusers.
It is unlawful for any person to misuse, directly or indirectly, any
material, non-public information (see definition below). Personnel in
possession of such information may not be:
a. purchasing or selling such securities for their own accounts, for
accounts in which they have a beneficial interest, or over which
they have the power, directly or indirectly, to make investment
decisions (i.e. managed accounts);
b. issuing research reports, recommendations or comments which could be
construed as recommendations; or
c. disclosing such information or any conclusions based thereon to any
other person. As an offhand comment to a friend may be used
unbeknownst to you by your friend to trade in securities and could
result in substantial civil and criminal liability to you.
CODE OF ETHICS - APRIL 1999 -20-
<PAGE>
Individuals needing this information to carry out professional
responsibilities (i.e., compliance officer, legal counsel) must also treat
this information confidentially.
PENALTIES
The penalties for insider trading are severe, for both the individual and
the controlling persons (supervisors who may be held liable). The penalty
which may be imposed on the person who committed a violation may be up to
three times the profit gained or loss avoided by the transaction. The
maximum jail term is ten years per violation. The penalty which may be
imposed on the controlling person may be up to the greater of $1,000,000
or three times the profit gained or loss avoided. The maximum criminal
fines are $1,000,000 per violation for individuals and $2,500,000 per
violation for non-natural persons.
M. "INTERESTED PERSONS".
"Interested person" of another person means:
1. any Affiliated Person of such company,
2. any member of the immediate family of any natural person who is as
an Affiliated Person of such company.
3. any interested person of any investment adviser of or principal
underwriter for such company,
4. any person or partner or employee of any person who at any time
since the beginning of the last two completed fiscal years of such
company has acted as legal counsel for such company,
5. any broker or dealer registered under the Securities Exchange Act of
1934 or any Affiliated Person of such a broker or dealer, and
6. any natural person whom the Commission by order shall have
determined to be as an interested person by reason of having had, at
any time since the beginning of
CODE OF ETHICS - APRIL 1999 -21-
<PAGE>
the last two completed fiscal years of such company, a material
business or professional relationship with such company or with the
principal executive officer of such company or with any other
investment company having the same investment adviser or principal
underwriter or with the principal executive officer of such other
investment company:
Provided that no person shall be deemed to be as an interested
person of as an investment company solely by reason of (aa) his/her
being a member of its board of directors or advisory board or as an
owner of its securities, or (bb) his/her membership in the immediate
family of any person specified in clause (aa) of this provision.
N. "MATERIAL NON-PUBLIC INFORMATION" is any information which has not been
made public and which a reasonable investor might consider important in
making as an investment decision. Examples of the types of information
that are likely to be deemed "material" include, but are not limited to:
1. a. Dividend increases or decreases;
b. Earnings estimates or material changes in previously released
earnings estimates;
c. Significant expansion or curtailment of operations;
d. Significant increases or declines in revenue;
e. Significant merger or acquisition proposals or agreements
including tender offers;
f. Significant new products or discoveries;
g. Extraordinary borrowings;
h. Major litigation;
i. Liquidity problems;
CODE OF ETHICS - APRIL 1999 -22-
<PAGE>
j. Extraordinary management developments;
k. Purchase and sale of substantial assets;
l. A valuable employee leaving or becoming seriously ill; and
m. Change in pension plans (i.e. removal of assets from as an
over-funded plan, or as an increase or decrease in future
contributions).
2. For "non-public information" to be made public, it must be
generally available through non-disclosure in a national
business or financial wire service (i.e. Dow Jones or
Reuter's), a national news service (AP or UPI), a national
newspaper (i.e., WALL STREET JOURNAL), or public disseminated
disclosure document (prospectus or proxy).
O. "MEMBER OF IMMEDIATE FAMILY" of a person includes such person's spouse,
children under the age of twenty-five (25) years residing with such
person, and any trust or estate in which such person or any other member
of his/her immediate family has a substantial beneficial interest, or
controls the investment decision, unless such person or any other member
of his/her immediate family cannot control or participate in the
investment decisions of such trust or estate.
P. A "MANAGED ACCOUNT" is as an account where continuous advice is given to a
client or investments are made for a client based on the clients'
individual needs. This service is provided to clients on both a
discretionary and non-discretionary basis. The adviser offers this service
to individuals, trusts, estates, corporations, pension and profit-sharing
plans and investment companies. Account supervision is guided by the
stated objectives of the client (i.e., maximum capital appreciation,
growth, income or growth and income).
Q. "PURCHASE OR SALE OF A SECURITY" includes inter alia, the writing of as an
option to purchase or sell a Security.
R. "SECURITY" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act. "Security" means any note, stock, treasury stock bond,
debenture, evidence of
CODE OF ETHICS - APRIL 1999 -23-
<PAGE>
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas or other mineral rights, any
put, call, straddle, option, or privilege on any security (including a
certificate of deposit) or on any group or index of securities (including
any interest therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national securities
exchange relating to foreign currency, or in general, any interest or
instrument commonly known as a "security," or any certificate of interest
or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing. It shall NOT include securities issued by the government of the
United States, bankers' acceptances, bank certificates of deposit,
commercial paper, shares of registered open-end investment companies, or
other securities which may not be purchased by the Fund or Funds of which
a person is as an Access and Advisory Person because of investment
limitations set forth in Registration Statements filed with the Securities
and Exchange Commission; however, that for purposes of the reporting
requirements of Article IV, "Security" shall include securities issued by
the Funds, and for purposes of the Insider Trading prohibition of Section
II.A., "Security" shall include all securities set forth in Section
2(a)(36) of the 1940 Act.
S. "SECURITY BEING CONSIDERED FOR PURCHASE OR SALE" means that a
recommendation to purchase or sell a security has been made and
communicated in writing or orally and, with respect to the person making
the recommendation, that such person seriously considers making such a
recommendation.
T. "1934 ACT" means the Securities Exchange Act of 1934, 15 U.S.C. (section)
78a to 78kk.
U. "1940 ACT" means the Investment Company Act of 1940, 15 U.S.C. (section)
80a-1 to 80a-64.
CODE OF ETHICS - APRIL 1999 -24-
<PAGE>
Exhibit A-1 - Voyageur
P R E C L E A R A N C E F O R M
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
APPROVERS
EQUITIES
Primary: / / Jim King Secondary: / / Pat Coleman Private Placements:
/ / Mike Lee / / Frank Tonnemaker / / Frank Tonnemaker
/ / Suzanne Weber (Chicago) / / John Taft / / John Taft
/ / David Cox (Chicago)
/ / Nancy Scinto (Chicago)
MUNICIPALS
Primary: / / Steve Eldredge Secondary: / / Frank Tonnemaker / / David Cox (Chicago)
/ / Pat Coleman / / John Taft / / Nancy Scinto (Chicago)
/ / Suzanne Weber (Chicago)
You must also obtain preclearance from an appropriate approver for corporates,
warrants, rights, options, futures, closed-end mutual funds, gifts given and
private placements. Preapproval is not required for government securities
transactions or open-end mutual funds.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAILS
---------------------------------- -------------------------------- ------------
Signature of Access or Advisory Person Print Name Date
I would like to: / / Purchase units of the following security:
------
/ / Sell
-----------------------------------------------
Expected Trade Date:
---------------
I will use the following broker/dealer:
------------------------------------------------------
/ / This is a limit order. (If not exercised within 5 days, a new preclearance
form must be filed.)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
APPROVAL
You: / / Can / / Cannot effect this transaction.
(Add comments or conditions below, if any) Reason (if denied):
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
---------------------------------------- ---------------
Approval Date
If an equity trade (Mpls.), must be signed by Jim King or Mike Lee. In their
absence, anyone else signing acknowledges that they have checked with Steve
Potvin and Jim King, Mike Lee or Steve Potvin.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Please note:
/X/ Please make a copy for your files.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CODE OF ETHICS - APRIL 1999 -25-
<PAGE>
- --------------------------------------------------------------------------------
/X/ It is your responsibility to send this form to the Compliance Department
as quickly as possible after approval is received.
- --------------------------------------------------------------------------------
(10/99)
CODE OF ETHICS - APRIL 1999 -26-
<PAGE>
Exhibit A-2 - Clifton
P R E C L E A R A N C E F O R M
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPROVERS
/ / ROSEMARY JANOUSEK PRIVATE PLACEMENTS:
/ / RICK BALLSRUD / / ROSEMARY JANOUSEK
/ / JACK HANSEN
/ / TOM LEE
YOU MUST ALSO OBTAIN PRECLEARANCE FROM AN APPROPRIATE APPROVER FOR CORPORATES,
WARRANTS, RIGHTS, OPTIONS, FUTURES, CLOSED-END MUTUAL FUNDS, GIFTS GIVEN AND
PRIVATE PLACEMENTS. PREAPPROVAL IS NOT REQUIRED FOR GOVERNMENT SECURITIES
TRANSACTIONS OR OPEN-END MUTUAL FUNDS.
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAILS
-------------------------------------- ----------------------------- -------------
SIGNATURE OF ACCESS OR ADVISORY PERSON PRINT NAME DATE
I would like to: / / Purchase units of the following security:
------ -----------------------
/ / Sell
-----------------------------------------------
Expected Trade Date:
---------------
I will use the following broker/dealer:
------------------------------------------------------
/ / This is a limit order. (If not exercised within 5 days, a new preclearance form must be filed.)
- -----------------------------------------------------------------------------------------------------------------------------------
APPROVAL
You: / / Can (Add comments or conditions below, if any)
/ / Cannot effect this transaction. Reason (if denied):
------------------------------------------------------------------------------
------------------------------------------------------------------------------
---------------------------------------- ---------------
Approval Date
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE NOTE:
/X/ PLEASE MAKE A COPY FOR YOUR FILES.
/X/ IT IS THE RESPONSIBILITY OF THE ACCESS OR ADVISORY PERSON TO SEND THIS
FORM TO THE COMPLIANCE DEPARTMENT AFTER APPROVAL IS RECEIVED.
- -----------------------------------------------------------------------------------------------------------------------------------
(4/99)
</TABLE>
CODE OF ETHICS - APRIL 1999 -27-
<PAGE>
Exhibit A-3 - SBH
P R E C L E A R A N C E F O R M
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
APPROVERS
/ / JOHN GARNISH PRIVATE PLACEMENTS:
/ / CHERYL WOODCOCK / / C. ALFRED BRYANT
/ / GREG HOSBEIN / / RALPH SEGALL
YOU MUST ALSO OBTAIN PRECLEARANCE FROM AN APPROPRIATE APPROVER FOR CORPORATES,
WARRANTS, RIGHTS, OPTIONS, FUTURES, CLOSED-END MUTUAL FUNDS AND GIFTS GIVEN AND
PRIVATE PLACEMENTS. PREAPPROVAL IS NOT REQUIRED FOR GOVERNMENT SECURITIES
TRANSACTIONS OR OPEN-END MUTUAL FUNDS.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAILS
---------------------------------- --------------------------- ------------
SIGNATURE OF ACCESS OR ADVISORY PERSON PRINT NAME DATE
I would like to: / / Purchase units of the following security:
------ -----------------------
/ / Sell
-----------------------------------------------
Expected Trade Date:
---------------
I will use the following broker/dealer:
-------------------------------------------------------
/ / This is a limit order. (If not exercised within 5 days, a new preclearance form must be filed.)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
APPROVAL
You: / / Can (Add comments or conditions below, if any)
/ / Cannot effect this transaction. Reason (if denied):
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
---------------------------------------- ---------------
Approval Date
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE NOTE:
/X/ PLEASE MAKE A COPY FOR YOUR FILES.
/X/ IT IS THE RESPONSIBILITY OF THE ACCESS OR ADVISORY PERSON TO SEND THIS
FORM TO THE COMPLIANCE DEPARTMENT AFTER APPROVAL IS RECEIVED.
- -----------------------------------------------------------------------------------------------------------------------------------
(04/99)
</TABLE>
CODE OF ETHICS - APRIL 1999 -28-
<PAGE>
Exhibit A-4 - DSA
P R E C L E A R A N C E F O R M
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
APPROVERS
/ / GERRY KRAUT PRIVATE PLACEMENTS:
/ / MARC KOZBERG / / GERRY KRAUT
/ / JIM POTTER
YOU MUST ALSO OBTAIN PRECLEARANCE FROM AN APPROPRIATE APPROVER FOR CORPORATES,
WARRANTS, RIGHTS, OPTIONS, FUTURES, CLOSED-END MUTUAL FUNDS AND GIFTS GIVEN AND
PRIVATE PLACEMENTS. PREAPPROVAL IS NOT REQUIRED FOR GOVERNMENT SECURITIES
TRANSACTIONS OR OPEN-END MUTUAL FUNDS. MARC KOZBERG AND JIM POTTER ARE REQUIRED
TO PRE-CLEAR TRANSACTIONS THROUGH GERRY KRAUT (IN GERRY'S ABSENCE MARC AND JIM
MAY PRECLEAR THROUGH EACH OTHER).
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAILS
---------------------------------- --------------------------- ------------
SIGNATURE OF ACCESS OR ADVISORY PERSON PRINT NAME DATE
I would like to: / / Purchase units of the following security:
------ -----------------------
/ / Sell
------------------------------------------------------
Expected Trade Date:
---------------
I will use the following broker/dealer:
------------------------------------------------------
/ / This is a limit order. (If not exercised within 5 days, a new preclearance form must be filed.)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
APPROVAL
You: / / Can (Add comments or conditions below, if any)
/ / Cannot effect this transaction. Reason (if denied):
-------------------------------------------------------------------------
-------------------------------------------------------------------------
---------------------------------------- ---------------
Approval Date
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE NOTE:
/X/ PLEASE MAKE A COPY FOR YOUR FILES.
/X/ IT IS THE RESPONSIBILITY OF THE ACCESS OR ADVISORY PERSON TO SEND THIS
FORM TO THE COMPLIANCE DEPARTMENT AFTER APPROVAL IS RECEIVED.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(10/99)
</TABLE>
CODE OF ETHICS - APRIL 1999 -29-
<PAGE>
Exhibit B
REPORT PURSUANT TO SECTION III OF THE CODE OF ETHICS
FOR DOUGHERTY FINANCIAL GROUP LLC AND ITS AFFILIATES
QUARTER ENDED
-----------------------------
Instructions:
1. Not later than ten (10) days after the end of each calendar quarter, each
Person shall submit this Report, as provided by the Code of Ethics (the
"Code"). The Code should be reviewed before completing the Report; terms
defined in the Code have the same meanings in this Report.
2. If no reportable transactions have occurred during the period, put an "X"
in the following box / / and skip to the signature line.
3. This Report may contain a statement that it shall not be construed as an
admission by the person making the Report that he has any direct or
indirect beneficial ownership in the Security to which the Report relates.
4. If you must file this Report, and transactions have occurred during the
period, set forth the following information with respect to the
transactions.
<TABLE>
<S> <C> <C> <C> <C> <C>
NATURE OF PRICE PER SHARE/ INSTITUTION
TRANSACTION UNIT AT WHICH THROUGH WHICH
NAME OF NUMBER OF (i.e. Buy, TRANSACTION TRANSACTION TRANSACTION
ISSUER/TITLE SHARES/UNITS SELL OTHER DATE WAS EFFECTED WAS EFFECTED
- ----------------- ------------ ---------- ----------- ---------------- -------------
</TABLE>
(If you need additional space, please attach additional pages.)
5. Questions regarding the completion of this Report may be directed to
either Pamela K. Ziermann at (612) 376-4021 or Thomas J. Abood at (612)
376-7118.
The answers to the foregoing are true and correct to the best of my information
and belief.
Dated
---------------- ---------------------------------
Signature of Person Filing Report
---------------------------------
Printed Name
CODE OF ETHICS - APRIL 1999 -30-
<PAGE>
SEGALL BRYANT & HAMILL
ADDENDUM TO CODE OF ETHICS
GENERAL RULES
(1) All transactions in bonds, common stocks, convertible securities, stock
options and stock index options are to be executed through SBH'S Trading
Department. (Specific brokers may be designated if you so choose.)
(2) All employees must have as an account(s) on the client accounting system.
This account should consist of all securities in which the employee has a
controlling interest, regardless of the name under which the securities
are held. Securities held under the name of as an officer's spouse, minor
children, or other dependents residing in the same household should always
be recorded on the client accounting system. Rare exceptions to this rule
may occur in such securities. These exceptions must be approved in advance
by the Compliance Department.
(3) If a trade is not done through the SBH trading desk, a pre-clearance form
must be used before the trade is executed.
CODE OF ETHICS - APRIL 1999 -31-
