M FUND INC, 497, 2000-05-05

M FUND INC
497, 2000-05-05

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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] M
---------
FINANCIAL
GROUP-TM-

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 ............................................ 16

Management of the Funds .................................................... 20

Investing with M Fund ...................................................... 23

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

Performance Information .................................................... 24

Financial Highlights ....................................................... 27

For More Information ....................................................... 31
</TABLE>

<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.

<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.

<PAGE>

BRANDES INTERNATIONAL EQUITY FUND* PERFORMANCE

[CHART]
<TABLE>
<CAPTION>
CALENDAR YEAR
----------------------------------------
<S> <C> <C> <C> <C>
1996** 1997 1998 1999
------ ----- ----- -----
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.

<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>

<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.

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.

<PAGE>

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

[GRAPH]

<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 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.

<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>

<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.

<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

[GRAPH]

<TABLE>
<CAPTION>
1996* 1997 1998 1999
<S> <C> <C> <C> <C>
Percentage 30.31% 22.13% 1.68% 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 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.

<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>

<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 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.

<PAGE>

- 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.

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

[GRAPH]

<TABLE>
<CAPTION>
1996** 1997 1998 1999
<S> <C> <C> <C> <C>
Percentage 23.67% 32.68% 23.69% 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
0.46% (for the quarter ended December 31, 1998) and the lowest quarterly return
as -12.96% (for the quarter ended September 30, 1998).

<PAGE>

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.

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>

<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.

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

<PAGE>

- 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

- 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 100 to 140 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

<PAGE>

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

- 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.

<PAGE>

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 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.

<PAGE>

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.

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

<PAGE>

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.

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.

<PAGE>

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 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.

<PAGE>

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.

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.

<PAGE>

- 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.

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.

PERFORMANCE INFORMATION

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.

24
<PAGE>

<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) M Fund, Inc. 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.

OTHER ACCOUNT PERFORMANCE INFORMATION

<TABLE>
<CAPTION>
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
International Equity
Composite -- -- 40.1 6.2 40.8 (3.1) 13.7 16.3 20.0 14.9 53.3 28.4 22.8 -- 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 23.4 23.6 26.0 27.1 -- 20.6

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 -- (3.4) 32.6 8.2 10.7 0.6 37.5 23.7 34.2 30.3 20.7 28.3 29.1 18.7 18.7

S&P 500 Index -- (3.1) 30.4 7.6 10.1 1.3 37.5 22.8 33.5 28.6 21.0 28.0 27.8 18.7 18.7
</TABLE>

* 3 year, 5 year, 10 year and Since Inception returns are average annualized
total returns.

** Inception dates for the Brandes International Equity Composite, Turner
Tax-Exempt Equity Composite, Frontier Capital Appreciation Composite and
Clifton Enhanced S&P Composite are 6/30/90, 3/31/90, 1/1/87 and 1/1/90,
respectively.

See accompanying Notes to M Fund and Other Account Performance Information.

25
<PAGE>

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 M Fund 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 4, 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.

26
<PAGE>

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.

27
<PAGE>

M FUND, INC.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY FUND TURNER CORE GROWTH FUND
--------------------------------------- ---------------------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1997 1996(a) 1999 1998 1997 1996(a)
------- ------- ------- ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 10.84 $ 9.96 $ 9.88 $10.00 $ 17.84 $ 13.50 $11.60 $10.00
------- ------- ------- ------ ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.10 0.09 0.07 0.06 0.02 0.02 0.04 0.06
Net realized and unrealized gain
(loss) on investments ...................... 5.09 1.44 0.15 (0.12) 6.92 4.64 3.22 1.94
------- ------- ------- ------ ------- ------- ------ ------
Total from investment operations ........... 5.19 1.53 0.22 (0.06) 6.94 4.66 3.26 2.00
------- ------- ------- ------ ------- ------- ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................... (0.09) (0.06) (0.07) (0.06) (0.02) (0.03) (0.04) (0.06)
In excess of net investment income ........... -- -- (0.03) -- -- -- -- --
From net realized capital gains .............. (0.42) (0.53) -- -- (1.83) (0.29) (1.22) (0.34)
In excess of net realized capital gains ...... -- (0.06) -- -- -- -- (0.10) --
Tax return of capital ........................ -- -- (0.04) -- -- -- -- --
------- ------- ------- ------ ------- ------- ------ ------
Total distributions ........................ (0.51) (0.65) (0.14) (0.06) (1.85) (0.32) (1.36) (0.40)
------- ------- ------- ------ ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD ................. $ 15.52 $ 10.84 $ 9.96 $ 9.88 $ 22.93 $ 17.84 $13.50 $11.60
------- ------- ------- ------ ------- ------- ------ ------
------- ------- ------- ------ ------- ------- ------ ------
TOTAL RETURN ................................... 47.86% 15.37% 2.26% (0.63)* 40.11% 34.56% 28.32% 19.99%*
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............ $48,508 $12,383 $6,034 $3,177 $52,926 $13,880 $3,820 $2,003
Net expenses to average daily net
assets before interest expense** ........... 1.24% 1.30% 1.30% 1.30% 0.70% 0.70% 0.70% 0.70%
Net expenses to average daily net
assets after interest expense** ............ 1.24% 1.30% 1.30% 1.30% 0.70% 0.70% 0.70% 0.78%
Net investment income to
average daily net assets** ................. 1.31% 1.00% 0.83% 0.67% 0.19% 0.31% 0.34% 0.55%
Portfolio turnover rate ...................... 19% 116% 74% 65% 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** .............................. 1.93% 3.57% 4.93% 7.28% 1.40% 3.42% 6.18% 8.43%
Net investment loss** .................... 0.61% (1.27)% (2.80)% (5.31)% (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

28
<PAGE>

M FUND, INC.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION FUND CLIFTON ENHANCED U.S. EQUITY FUND+
--------------------------------------- ---------------------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1997 1996(a) 1999 1998 1997 1996(a)
------- ------- ------- ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD............ $ 15.09 $ 14.92 $ 12.52 $10.00 $ 18.07 $ 15.09 $11.85 $10.00
------- ------- ------- ------ ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................. (0.09) (0.04) 0.00 0.00 0.10 0.11 0.08 0.12
Net realized and unrealized gain
(loss) on investments....................... 6.74 0.29 2.76 3.03 4.60 3.45 3.78 2.25
------- ------- ------- ------ ------- ------- ------ ------
Total from investment operations............ 6.65 0.25 2.76 3.03 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............... (0.62) (0.08) (0.36) (0.51) (1.70) (0.35) (0.53) (0.40)
In excess of net realized capital gains....... -- -- -- -- -- (0.12) -- --
Tax return of capital......................... -- -- -- -- -- -- -- --
------- ------- ------- ------ ------- ------- ------ ------
Total distributions......................... (0.62) (0.08) (0.36) (0.51) (1.80) (0.58) (0.62) (0.52)
------- ------- ------- ------ ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.................. $ 21.12 $ 15.09 $ 14.92 $12.52 $ 20.97 $ 18.07 $15.09 $11.85
------- ------- ------- ------ ------- ------- ------ ------
------- ------- ------- ------ ------- ------- ------ ------
TOTAL RETURN.................................... 44.17% 1.68% 22.13% 30.31%* 26.07% 23.69% 32.68% 23.67%*
Ratios/Supplemental Data:
Net assets, end of period (000's)............. $47,919 $31,778 $16,628 $3,006 $22,863 $15,082 $7,345 $1,582
Net expenses to average daily net
assets before interest expense**............ 1.15% 1.15% 1.15% 1.15% 0.80% 0.80% 0.80% 0.80%
Net expenses to average daily net
assets after interest expense**............. 1.15% 1.15% 1.15% 1.20% 0.80% 0.80% 0.80% 0.80%
Net investment income (loss) to
average daily net assets**.................. (0.57)% (0.32)% (0.13)% (0.30)% 0.56% 0.80% 1.17% 1.43%
Portfolio turnover rate....................... 75% 68% 61% 140% 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**............................... 1.47% 1.75% 2.86% 8.12% 1.63% 2.34% 5.41% 12.32%
Net investment loss**..................... (0.90)% (0.92)% (1.84)% (7.27)% (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.

29
<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....................................................... 14

Management of the Funds............................................. 17

Investment Advisory and Other Services.............................. 19

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

Capital Stock and Other Securities.................................. 23

Purchase, Redemption and Pricing of Shares.......................... 24

Tax Information..................................................... 25

Performance Information............................................. 26

Other Information................................................... 28

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:

- --------------------------------------------------------------------------------
FUND SUB-ADVISER
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------

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 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.

4
<PAGE>

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 is 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, 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.

5
<PAGE>

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.

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.

6
<PAGE>

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 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).

7
<PAGE>

<PAGE>

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.

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.

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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.

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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, 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.

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<PAGE>

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 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.

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<PAGE>

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.

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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<PAGE>

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 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.

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<PAGE>

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 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.

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<PAGE>

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.

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).

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<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.

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.

16
<PAGE>

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:

----------------------------------------------------------------------
1998 PORTFOLIO 1999 PORTFOLIO
FUND TURNOVER RATE TURNOVER RATE
----------------------------------------------------------------------
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%
----------------------------------------------------------------------

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

(2) 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.

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.

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.

17
<PAGE>

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>
- ------------------------------------------------------------------------------------------------------------
NAME, ADDRESS, AND AGE POSITION(S) HELD WITH THE COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5
YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter W. Mullin* Director Chairman and Chief Executive Officer,
Mullin Consulting Inc Mullin Consulting, Inc. (insurance
644 South Figueroa St. agency).
Los Angeles, CA 90017
(Born: 1/14/41)
- ------------------------------------------------------------------------------------------------------------
Gerald Bidwell Director President and Chief Executive
209 SW Oak St. Officer, Bidwell & Co. (discount
Portland, OR 97204 brokerage firm).
(Born: 6/6/42)
- ------------------------------------------------------------------------------------------------------------
Neil E. Goldschmidt Director President, Neil Goldschmidt, Inc.
222 SW Columbia (law firm).
Suite 1850
Portland, OR 97201
(Born: 6/16/40)
- ------------------------------------------------------------------------------------------------------------
Philip W. Halpern Director Vice President and Chief Investment
375 East 57th St. Officer, The University of Chicago,
Chicago, IL 60637 since July 21, 1998. Treasurer and
(Born: 7/19/54) Chief Investment Officer, California
Institute of Technology, September
1996 to July 1998. Formerly, Chief
Investment Officer, Washington State
Investment Board.
- ------------------------------------------------------------------------------------------------------------
Daniel F. Byrne* President Senior Vice President, Product
(Born: 10/27/56) Development and Sales Support, M
Financial Group.
- ------------------------------------------------------------------------------------------------------------
David W. Schutt* Secretary and Treasurer Secretary and Treasurer of M Life and
(Born: 7/4/55) Director 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:

18
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NAME OF PERSON, POSITION AGGREGATE PENSION OR RETIREMENT TOTAL ESTIMATED COMPENSATION FROM THE
COMPENSATION FROM THE BENEFITS ACCRUED AS ANNUAL BENEFITS UPON COMPANY AND FUND
COMPANY PART OF THE COMPANY'S RETIREMENT COMPLEX PAID TO
EXPENSES 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.

19
<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.

20
<PAGE>

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.

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:

--------------------------------------------------------------------------
FUND SUB-ADVISORY FEE
--------------------------------------------------------------------------
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
--------------------------------------------------------------------------

21
<PAGE>

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.

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.

22
<PAGE>

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.

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.

23
<PAGE>

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.

At December 31, 1999, the ownership of each Fund was as follows:

PERCENTAGE OF OWNERSHIP
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------------
JOHN HANCOCK VARIABLE LIFE
M LIFE INSURANCE CO. INSURANCE CO. PACIFIC LIFE INSURANCE CO.

- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brandes International Equity 7.1% 63.8% 29.1%
Fund
- -------------------------------------------------------------------------------------------------------------------------
Turner Core Growth Fund 5.5% 49.8% 44.7%
- -------------------------------------------------------------------------------------------------------------------------
Frontier Capital Appreciation 4.9% 64.3% 30.8%
Fund
- -------------------------------------------------------------------------------------------------------------------------
Clifton Enhanced U.S. Equity 11.2% 29.4% 59.4%
Fund
- -------------------------------------------------------------------------------------------------------------------------
</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:

24
<PAGE>

(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;

(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.

25
<PAGE>

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 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 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.

26
<PAGE>

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,
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.

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.

AVERAGE ANNUAL TOTAL RETURN
<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
period ended 47.86% 40.11% 44.17% 26.07%
12/31/99
- ------------------------------------------------------------------------------------------------------------------------
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.

27
<PAGE>

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.

28
<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.

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

- --------

(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-1
<PAGE>

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.

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.

A-2
<PAGE>

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

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

N.R.: Not rated.

A-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