SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
M FUND, INC.
(Name of Registrant/s as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- -----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
- ------------------------------------------------------------------------------
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -----------------------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------------------
(4) Date Filed:
- ----------------------------------------------------------------------------
<PAGE>
M FUND, INC.
RIVER PARK CENTER
205 S.E. SPOKANE STREET
Portland, Oregon 97202
February __, 2000
Dear Shareholder:
I am writing to request your approval of the three proposals included in
the attached Proxy Statement. Proposal One outlines a restructuring of
management fees to the current shareholders of the Brandes International Equity
Fund. The proposed change would allow Brandes Investment Partners, L.P., the
Sub-Adviser, to maintain one fee structure for similar accounts.
In addition to the above proposal, we are asking the current shareholders
of the Enhanced U.S. Equity Fund to approve changes in management, investment
strategy, and fee structure of the Fund. Proposals Two and Three in the attached
Proxy Statement discuss these changes.
The changes for both Funds are proposed based on a great deal of analysis
from M Fund, Inc. and the Board of Directors. The investment advisory fees,
investment performance and expense ratios of your fund have been carefully
reviewed and compared to similar funds in the investment universe. We believe
that the changes discussed in the attached Proxy Statement are necessary in
order for these funds to maintain and enhance the resources needed to compete
effectively with other funds in their peer group.
In order to consider these proposals, we have scheduled a Special Meeting
of the Shareholders of Brandes International Equity Fund and Enhanced U.S.
Equity Fund to be held on April 11, 2000 at 9:00 a.m., Pacific Time, at the
principal office of M Fund, Inc., River Park Center, 205 SE Spokane Street,
Portland, Oregon 97202. The proposals are discussed in more detail in the
attached Proxy Statement. The Board of Directors of M Fund, Inc. has unanimously
recommended that the shareholders of Brandes International Equity Fund and
Enhanced U.S. Equity Fund approve each of the proposals.
Whether or not you plan to attend personally and regardless of the number
of shares you own, it is important that your shares be represented. I ENCOURAGE
YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED FOR YOUR CONVENIENCE.
Sincerely,
/s/ Daniel F. Byrne
- -------------------
Daniel F. Byrne
President
<PAGE>
M FUND, INC.
RIVER PARK CENTER
205 S.E. SPOKANE STREET
PORTLAND, OREGON 97202
(888) 736-2878
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 11, 2000
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
Brandes International Equity Fund and Enhanced U.S. Equity Fund, investment
portfolios of M Fund, Inc. (the "Company"), will be held at the principal office
of the Company, River Park Center, 205 S.E. Spokane Street, Portland, Oregon
97202, on Tuesday, April 11, 2000, at 9:00 a.m., local time, for the purposes
listed below. The matters to be voted on by shareholders are as follows:
FOR SHAREHOLDERS OF BRANDES INTERNATIONAL EQUITY FUND ONLY:
1. To adopt an amended Investment Advisory Agreement between the Company
and M Financial Investment Advisers, Inc. (the "Adviser"), with respect
to Brandes International Equity Fund ("Proposal 1").
FOR SHAREHOLDERS OF ENHANCED U.S. EQUITY FUND ONLY:
2. To adopt an amended Investment Advisory Agreement between the Company
and the Adviser, with respect to Enhanced U.S. Equity Fund ("Proposal
2").
3. To change the fundamental investment policy of Enhanced U.S. Equity Fund
with regard to purchasing securities on margin ("Proposal 3").
The Board of Directors of the Company has fixed the close of business on
February 7, 2000, as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
David W. Schutt
Secretary
February __, 2000
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING,
PLEASE COMPLETE AND SIGN THE ENCLOSED VOTING INSTRUCTION/PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES. IF YOU DESIRE TO VOTE IN PERSON AT THE MEETING, YOU
MAY REVOKE YOUR VOTING INSTRUCTION/PROXY AT ANY TIME PRIOR TO THE MEETING.
<PAGE>
M FUND, INC.
RIVER PARK CENTER
205 S.E. SPOKANE STREET
PORTLAND, OREGON 97202
(888) 736-2878
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD Tuesday, April 11, 2000
This Proxy Statement (the "Statement") is being furnished by M Fund, Inc. (the
"Company") to shareholders of Brandes International Equity Fund and Enhanced
U.S. Equity Fund (each a "Fund," collectively the "Funds"). The Statement is
being sent in connection with the solicitation of proxies by and on behalf of
the Company's Board of Directors for use at the Special Meeting of Shareholders
(the "Meeting"), to be held at the principal office of the Company, River Park
Center, 205 S.E. Spokane Street, Portland, Oregon, on Tuesday, April 11, 2000,
at 9:00 a.m., Pacific time. This Statement is being mailed to shareholders of
the Funds on or about February 23, 2000.
As more fully described below, the Meeting has been called for the following
purposes:
FOR SHAREHOLDERS OF BRANDES INTERNATIONAL EQUITY FUND ONLY:
1. To adopt an amended Investment Advisory Agreement between the Company
and M Financial Investment Advisers, Inc. (the "Adviser"), with
respect to Brandes International Equity Fund ("Proposal 1").
FOR SHAREHOLDERS OF ENHANCED U.S. EQUITY FUND ONLY:
2. To adopt an amended Investment Advisory Agreement between the Company
and the Adviser, with respect to Enhanced U.S. Equity Fund ("Proposal
2").
3. To change the fundamental investment policy of Enhanced U.S. Equity
Fund with regard to purchasing securities on margin ("Proposal 3").
<PAGE>
THE PROPOSALS AFFECTING A PARTICULAR FUND ARE AS FOLLOWS:
Name of Fund Proposal Numbers
------------ ----------------
Brandes International Equity Fund 1
Enhanced U.S. Equity Fund 2 and 3
Proxy solicitations will be made, beginning on or about February 23, 2000,
primarily by mail, but proxy solicitations also may be made by telephone, fax or
e-mail. The costs of the proxy solicitation and expenses incurred in connection
with the preparation of this Statement and its enclosures will be paid by
Brandes Fund and Enhanced Fund.
The financial statements of the Company for the fiscal year ended December 31,
1999, are included in the Annual Report to Shareholders, which is available
without charge and upon request by calling the Company at (888) 736-2878.
PROXIES
Any shareholder giving a proxy has the power to revoke it prior to its exercise
by submission of a later dated proxy, by voting in person or by letter to the
Secretary of the Company.
In the event that a quorum is not present at the Meeting or in the event that a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR any such proposal in favor of such
an adjournment and will vote those proxies required to be voted AGAINST any such
proposal against such adjournment. A shareholder vote may be taken on one of the
proposals in this Statement prior to any such adjournment if sufficient votes
have been received for approval.
Under the By-laws of the Company, the presence in person or by proxy of the
shareholders holding one-third of the outstanding shares of a Fund or Funds, as
the case may be, entitled to be cast at the Meeting shall constitute a quorum.
If a proxy is received with no instructions indicated, then the votes
attributable to such proxy will be voted for the proposals.
RECORD DATE
The Board of Directors of the Company has fixed the close of business on
February 7, 2000 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Meeting and any
adjournment thereof. Only holders of record of shares at the close of business
on the Record Date are entitled to notice of and to vote at the Meeting and any
adjournment thereof. At the close of business on the Record Date, there were
outstanding __________ and __________ shares of Brandes International Equity
Fund ("Brandes Fund") and Enhanced U.S. Equity Fund ("Enhanced Fund"),
respectively.
2
<PAGE>
BACKGROUND INFORMATION
The Company is an open-end investment company consisting of four separate
diversified investment portfolios (the "Funds"). These Funds are available
through the purchase of variable life insurance and variable annuity policies
issued by certain insurance companies ("Participating Insurance Companies").
THIS STATEMENT IS ONLY BEING DISTRIBUTED TO OWNERS OF VARIABLE LIFE INSURANCE OR
VARIABLE ANNUITY POLICIES WITH CASH VALUE ALLOCATED TO BRANDES FUND OR ENHANCED
FUND.
This Meeting has been called to consider: (i) a proposal to adopt an amended
Investment Advisory Agreement between the Company and the Adviser with respect
to Brandes Fund that will increase the advisory fee rate; (ii) a proposal to
adopt an amended Investment Advisory Agreement between the Company and the
Adviser with respect to Enhanced Fund that will increase the advisory fee rate;
and (iii) a proposal to change the fundamental investment policy of Enhanced
Fund with regard to purchasing securities on margin.
PROPOSAL 1: FOR SHAREHOLDERS OF BRANDES INTERNATIONAL EQUITY FUND ONLY:
To approve a proposal to adopt an amended Investment Advisory
Agreement between the Company and the Adviser, with respect to Brandes
Fund.
PROPOSAL 2: FOR SHAREHOLDERS OF ENHANCED U.S. EQUITY FUND ONLY:
To approve a proposal to adopt an amended Investment Advisory
Agreement between the Company and the Adviser, with respect to Enhanced
U.S. Equity Fund.
INFORMATION ABOUT THE ADVISER AND INVESTMENT ADVISORY AGREEMENT
The Company is advised by M Financial Investment Advisers, Inc. (the "Adviser"),
located at River Park Center, 205 SE Spokane Street, Portland, Oregon 97202. The
Adviser was organized as a Colorado corporation on September 11, 1995, and is
wholly owned by M Financial Holdings Incorporated, which does business under the
name M Financial Group ("M Financial Group"), which is located at River Park
Center, 205 SE Spokane Street, Portland, Oregon 97202. The Adviser has retained
the services of four investment sub-advisers to provide day-to-day portfolio
management services to the four Funds of the Company. The Adviser pays a fee to
each sub-adviser for these services.
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 does
not manage any other mutual funds with investment objectives similar to those of
the Funds. The current Directors and Officers of the Adviser and their addresses
and principal occupations during the past five years are set forth below:
3
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH ADVISER ADDRESS PRINCIPAL OCCUPATION
- ------------------ ------- --------------------
<S> <C> <C>
William Landman CMS Companies Partner, CMS Companies
Director 1926 Arch Street
Philadelphia, Pennsylvania 19103
Harry Levitt Mullin Consulting, Inc. Principal, Mullin Consulting, Inc.
Director 644 South Figueroa Street
Los Angeles, California 90017
Malcolm Cowen, II Cornerstone Financial Consultants, Ltd. Managing Partner,
Director 227 W. Broad Street Cornerstone Financial Consultants, Ltd.
Bethlehem, Pennsylvania 18018
James Belk BCG Companies Managing Director, BCG Companies
Director 707 E. Main Street, Suite 1700
Richmond, Virginia 23219
James Cheney Evergreen Management, Inc. Principal, Evergreen Management, Inc.
Director 100 Tallan Building
2 Union Square
Chattanooga, Tennessee 37402
Michael Kiley Chamberlain Group Insurance Services, LLC President, Chamberlain Group Insurance Services, LLC
Director 2030 Main Street, Suite 1240
Irvine, California 97614
Daniel Byrne* M Financial Group Senior Vice President, Product Development & Sales,
President 205 SE Spokane Street M Financial Group
Portland, Oregon 97202
David Schutt** M Financial Group Director, Finance, M Financial Group
Secretary and 205 SE Spokane Street
Treasurer Portland, Oregon 97202
JoNell Hermanson*** M Financial Group Director, Product Development & Sales Support,
Marketing Officer 205 SE Spokane Street M Financial Group
Portland, Oregon 97202
</TABLE>
*Also President of the Company
**Also Secretary and Treasurer of the Company
***Also Compliance Officer of the Company
4
<PAGE>
As of December 31, 1999, the following individuals owned 10% or more of the
voting securities of M Financial Group, the parent company of the Adviser:
NAME ADDRESS PERCENT OWNERSHIP
- ---- ------- -----------------
Peter Mullin* Mullin Consulting, Inc. 24.08%
644 South Figueroa Street
Los Angeles, California 90017
Mark Solomon CMS Companies 13.05%
1926 Arch Street
Philadelphia, Pennsylvania 19103
*Mr. Mullin serves as a Director of the Company.
The existing Investment Advisory Agreement, first executed on December 5, 1995,
was initially approved for each Fund by the Board of Directors on November 20,
1995, and by the sole initial shareholder of the Funds on December 5, 1995.
Shareholders last approved the existing Investment Advisory Agreement on
December 19, 1997 at a Special Meeting of Shareholders, brought about by a
change in control of the Adviser. The Board of Directors last approved the
existing Investment Advisory Agreement on January 11, 2000. Under the terms of
the existing Investment Advisory Agreement, the Adviser renders investment
management services with respect to the Funds. Such services include the overall
business management and administrative services necessary for the Funds'
operations. For these services, the Adviser receives an advisory fee that is
based on the average daily net assets of each of the Funds. Such fee is
presently paid to the Adviser by the Funds on a quarterly basis.
The Adviser has retained investment sub-advisers to provide investment
management services to Brandes Fund and Enhanced Fund. The Adviser pays each
sub-adviser a fee for such services according to the terms of a sub-advisory
agreement. The Adviser has ultimate responsibility to oversee the sub-advisers
and to recommend their hiring, termination and replacement. Shareholders are not
being asked to approve the new sub-advisory agreements because 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
agreement without shareholder approval. Enhanced Fund is changing sub-advisers
to implement a new enhanced index investment strategy.
The amended Investment Advisory Agreement is substantially similar to the
existing Investment Advisory Agreement, with the exception of the effective date
and the fee increase. The advisory fee is being increased to compensate the
Adviser for a corresponding increase in the fee paid by the Adviser to Brandes
Fund's sub-adviser and Enhanced Fund's new sub-adviser. Under the amended
Investment Advisory Agreement the Adviser would receive on a quarterly basis an
advisory fee that is based on the average daily net assets of each of the Funds.
The following charts show the current level of the advisory and sub-advisory
fees and the proposed levels of each fee.
5
<PAGE>
<TABLE>
<CAPTION>
FUND CURRENT TOTAL ADVISORY FEES PROPOSED TOTAL ADVISORY FEES
- ---- --------------------------- -----------------------------
<S> <C> <C>
BRANDES FUND 1.05% on the first $10 million 1.10% on the first $10 million
0.90% on the next $15 million 0.95% on the next $10 million
0.75% on the next $75 million 0.75% on the next $30 million
0.60% on amounts above $100 million 0.65% on amounts over $50 million
ENHANCED FUND 0.55% on the first $25 million 0.40% on the first $25 million
0.45% on the next $75 million 0.35% on amounts over $25 million
0.30% on amounts above $100 million
FUND CURRENT SUB-ADVISORY FEES PROPOSED SUB-ADVISORY FEES
- ---- ------------------------- ---------------------------
BRANDES FUND 0.90% on the first $10 million 0.95% on the first $10 million
0.75% on the next $15 million 0.80% on the next $10 million
0.60% on the next $75 million 0.60% on the next $30 million
0.45% on amounts above $100 million 0.50% on amounts over $50 million
ENHANCED FUND 0.40% on the first $25 million 0.25% on the first $25 million
0.30% on the next $75 million 0.20% on amounts over $25 million
0.15% on amounts above $100 million
</TABLE>
For the year ended December 31, 1999, Brandes Fund paid $229,600 and Enhanced
Fund paid $100,618 as investment advisory fees to the Adviser. Had the proposed
fees been in effect in 1999, Brandes Fund would have paid $233,834 and Enhanced
Fund $72,850 as investment advisory fees to the Adviser. This would represent a
1.8% increase in advisory fees paid by Brandes Fund and a 28% decrease in
advisory fees paid by Enhanced Fund. Because Enhanced Fund's net asset level
during the fiscal year ended December 31, 1999 would not have triggered the
higher advisory fees as described above, the advisory fees paid by Enhanced Fund
would have decreased in 1999 had the proposed fees been in effect. At net asset
levels above $325 million, however, the dollar amount of advisory fees paid by
Enhanced Fund would increase. As of December 31, 1999, Enhanced Fund and Brandes
Fund had net assets of approximately $23 million and $48 million, respectively.
The existing Investment Advisory Agreement does not place limits on the
operating expenses of the Company or of any Fund. However, the Adviser has
voluntarily undertaken to pay any such expenses (but not including the advisory
fee, brokerage or other portfolio transaction expenses or expenses of
litigation, indemnification, taxes or other extraordinary expenses) to the
extent that such expenses, as accrued for each Fund, through December 31, 2000,
exceed 0.25% of that Fund's estimated average daily net assets on an annualized
basis. For the year ended December 31, 1999, the Adviser reimbursed Brandes Fund
$165,622 and Enhanced Fund $150,413 for operating expenses that exceeded the
voluntary expense limitation.
6
<PAGE>
The fee table below shows the current and the pro forma expenses of Brandes Fund
assuming approval of Proposal 1. The information in the fee table is based on
performance results for the fiscal year ended December 31, 1999, and on the
level of net assets at the end of that year. The fee table does not reflect
separate account expenses, including sales loads. The management fee of the Fund
is computed as a percentage of the average daily net assets of the Fund on an
annualized basis. A fee table for Enhanced Fund is not included because Enhanced
Fund's net asset level during the fiscal year ended December 31, 1999, would not
have triggered the higher advisory fees as outlined under Proposal 2.
BRANDES FUND (FISCAL YEAR ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES CURRENT FEES PROPOSED FEES
(expenses that are deducted from Fund assets) ------------ --------------
(as % of average net assets)
<S> <C> <C>
Management Fees 0.96 0.98
Distribution (Rule 12b-1) Fees None None
Other Expenses* 0.97 0.97
---- ----
Total Annual Fund Operating Expenses 1.93 1.95
---- ----
---- ----
</TABLE>
*Before reimbursement by the Adviser
EXAMPLE
The Example assumes that you invest $10,000 in Brandes Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
Current Fees Proposed Fees
------------ -------------
1 Year..................................$ 196 $ 198
3 Years................................. 606 612
5 Years................................. 1,042 1,052
10 Years.................................2,254 2,275
The amended Investment Advisory Agreement will become effective, subject to
shareholder approval, on May 1, 2000, and will thereafter be reviewed for
continuation on an annual basis by the Board of Directors. A copy of the amended
Investment Advisory Agreement is attached to this Statement as Exhibit A.
7
<PAGE>
PROPOSAL 1: BOARD OF DIRECTORS' EVALUATION
At a meeting held on January 11, 2000, the Board of Directors of the Company,
including a majority of the Independent Directors, unanimously approved, subject
to shareholder approval, an amended Investment Advisory Agreement with the
Adviser on behalf of Brandes Fund that would increase the advisory fees charged
to the Fund. The Board also approved an amended sub-advisory agreement that
would increase the fee paid by the Adviser to the sub-adviser. The Adviser
believes that the sub-advisory fee increase and corresponding advisory fee
increase are justified in part by the strong historical performance of Brandes
Fund and by the fact that since retaining the Fund's current sub-adviser in July
1998, the sub-adviser has charged lower advisory fees to the Fund than to its
other clients with comparable accounts. The Adviser also believes that the fee
increases are necessary in order for the Fund to maintain and enhance the
resources needed to allow it to continue to compete effectively with other funds
in its peer group.
In connection with its deliberations of the amended Investment Advisory
Agreement and sub-advisory agreement, the Board of Directors requested and was
provided with information that the Board considered sufficient to assist in its
evaluation. The materials furnished by the Adviser and sub-adviser included
information regarding the sub-adviser's investment personnel, investment
management capabilities, philosophy of management and the sub-adviser's level of
overall profitability in connection with its activities on behalf of the Fund.
Information was also provided regarding the fees and expenses of Brandes Fund
compared to a group of mutual funds identified by the Adviser as Brandes Fund's
comparison group, and the effect of the proposed fee increase on the expense
ratio of the Fund. The Directors considered the fact that under the proposed
sub-advisory agreement, the increase in fees paid to the sub-adviser over that
paid under the current sub-advisory agreement would be minimal. The Board also
considered that the fees paid to the sub-adviser under the current sub-advisory
agreement were less than the fees charged to the sub-adviser's other clients
with similar accounts. The Board was also furnished with information showing the
investment performance of Brandes Fund. This performance information showed
that, for the year ended December 31, 1999, Brandes Fund had returned 47.90% as
compared to 26.73% for the MSCI EAFE Index, the Fund's benchmark. The
information also showed that Brandes Fund had returned 51.97% as compared to
31.42% for the benchmark for the period July 1, 1998 through December 31, 1999,
the period during which the sub-adviser had managed the Fund.
After careful consideration and a thorough review of the Adviser's and
sub-adviser's level of service, experience and fees, the Board determined that
it was fair and reasonable to and in the best interest of Brandes Fund and its
shareholders to approve the amended Investment Advisory Agreement and
sub-advisory agreement.
8
<PAGE>
PROPOSAL 1: RECOMMENDATION AND REQUIRED VOTE
At the Meeting, shareholders of Brandes Fund will vote on Proposal 1. The
affirmative vote of the holders of a majority of the outstanding shares of a
Fund is required to approve this proposal with regard to that Fund. "Majority"
for this purpose under the 1940 Act means the lesser of (i) 67% of the shares
represented at the Meeting if more than 50% of such outstanding shares are
represented, or (ii) more than 50% of such outstanding shares. Where a
shareholder abstains, the shares represented will be counted as present and
entitled to vote on the matter for purposes of determining a quorum, but the
abstention will have the effect of a negative vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF BRANDES FUND APPROVE THE
AMENDED INVESTMENT ADVISORY AGREEMENT BETWEEN THE COMPANY AND THE ADVISER.
PROPOSAL 2: BACKGROUND
At meetings held in May 1999 and August 1999, the Board discussed the
advisability of changing the current investment strategy of the Enhanced Fund in
order to put the Fund in a better position to attract assets. At a meeting held
on January 11, 2000, the Board unanimously approved the use of a derivatives
based enhanced index strategy by the Fund in order to achieve its investment
goal. Under the new strategy, the Fund will invest in futures contracts on the
Standard & Poor's 500 Composite Stock Price Index (the "Index") to try to earn a
return equal to that of the Index. The portion of the Fund's portfolio not used
as collateral for the futures contracts will be managed in high-quality
short-term debt instruments designed to add a small incremental return above
that of the Index.
In connection with the change in investment strategy, the Adviser proposed a
change in the Fund's sub-adviser in order to retain a sub-adviser with the
demonstrated ability in managing the new enhanced index strategy. At a meeting
held on January 11, 2000, the Board of Directors of the Company, including a
majority of the Independent Directors, unanimously approved the selection of The
Clifton Group ("Clifton") as the new investment sub-adviser to Enhanced Fund.
Clifton, a Minnesota corporation organized on May 25, 1972, was registered with
the Commodity Futures Trading Commission as a commodity trading advisor in
October 1975 and with the SEC as a registered investment adviser in 1972.
Clifton is also a member of the National Futures Association, a self-regulatory
body for the futures industry. Prior to May 1, 1989, Clifton operated under the
name Kiene, Wooters & Associates. Clifton's principal business address is 309
Clifton Avenue, Minneapolis, Minnesota 55403. As of June 30, 1999, Clifton had
assets under management of $11.93 billion.
The current directors and officers of Clifton and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, the
principal business address of the individuals listed below is 309 Clifton
Avenue, Minneapolis, Minnesota 55403.
9
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ---- ---------------------
<S> <C>
Richard E. Ballsrud# Executive Vice President,
Director and Executive Vice President Director of Fixed Income Investments,
The Clifton Group, 2/84 to present.
Jack L. Hansen# Executive Vice President, Director of Equity Investments,
Director and Executive Vice President The Clifton Group, 6/85 to present.
Rosemary Janousek President and Director of Operations,
President and Director of Operations The Clifton Group, 4/78 to present.
Gerald A. Kraut+ Director, President and Chief Executive Officer,
Director, Chairman of the Board Dougherty Financial Group LLC, 7/97 to present;
and Executive Vice President Director, President, Chief Executive Officer and
Chairman of the Board, Dougherty Dawkins LLC, 4/97
to 7/97; Director, President, Chief Executive Officer
and Chairman of the Board, Dougherty Dawkins, Inc., 5/90 to 4/97.
Michelle M. Sandberg+ Director, Vice President and Treasurer,
Director and Treasurer Dougherty Financial Group LLC, 8/97 to present;
Vice President and Controller, Dougherty Financial Group, Inc.,
7/96 to 8/97; Controller, Dougherty Dawkins, Inc., 5/90 to 7/96.
Thomas J. Abood+ Senior Vice President, Secretary, General Counsel,
Director, Executive Vice President 7/95 to present, Director, 4/97 to present,
and Secretary Dougherty Financial Group LLC.
</TABLE>
+Principal business address is 90 South Seventh Street, Suite 4300, Minneapolis,
Minnesota 55402.
#Members of the Investment Committee, along with Thomas B. Lee,
Portfolio Manager.
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. The current principals and officers of Dougherty Financial Group LLC and
their principal occupations during the past five years are set forth below. The
business address of the individuals listed below is 90 South Seventh Street,
Suite 4300, Minneapolis, Minnesota 55402.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ---- --------------------
<S> <C>
Michael E. Dougherty* Director and Chairman, Dougherty Financial Group, Inc., 6/95 to
Member, Director and Chairman 4/97; Director, Chairman and Chief Executive Officer,
Dougherty Dawkins, Inc., 8/77 to 6/95.
James O. Pohlad* Vice President, Minnesota Twins Partnership, 9/94
Member to present; Executive Vice President,
Marquette Bancshares, Inc., 1/93 to present.
10
<PAGE>
Robert C. Pohlad* President, Pohlad Companies, 9/77 to present.
Member
William M. Pohlad* President, River Road Productions, Inc., 8/87
Member to present; Vice President,
Pohlad Companies, 2/79 to present.
John G. Taft Director and Chief Executive Officer, Dougherty Summit
Member Securities LLC, 9/97 to present; Director and
Chief Executive Officer, Dougherty Dawkins LLC,
7/97 to 9/97; Director and Chief Executive
Officer, Voyageur Asset Management LLC, 4/97
to 7/97; Director and Chief Executive Officer,
Voyageur Fund Managers, Inc., 7/91 to 4/97.
Gerald A. Kraut* Director, Chairman, President and Chief Executive Officer,
Member, Director, President Dougherty Dawkins LLC, 4/97 to 7/97;
and Chief Executive Officer Director, Chairman, President and Chief Executive Officer,
Dougherty Dawkins, Inc., 5/90 to 4/97.
Thomas J. Abood General Counsel, Dougherty Financial Group LLC, 7/95 to present;
Member, Director, Senior Vice President, Secretary, General Counsel,
Senior Vice President, Secretary Dougherty Financial Group Inc., 7/95 to 4/97.
Michelle M. Sandberg Vice President and Controller, Dougherty Financial
Director, Vice President Group, Inc., 7/96 to 8/97; Controller,
and Treasurer Dougherty Dawkins, Inc., 5/90 to 7/96.
</TABLE>
*Owns 10% or more of the outstanding voting securities of Dougherty Financial
Group LLC.
OTHER AFFILIATES. Segall Bryant & Hamill ("SBH"), a Minnesota partnership
registered under the Investment Advisers Act of 1940, as amended ("Advisers
Act"), is 50% owned by Voyageur Advisory Services LLC ("VAS"), which is owned by
Dougherty Financial Group LLC. Dougherty Financial Group LLC owns VAM Holdings
LLC, which in turn owns Clifton. SBH is a partnership between VAS and Ralph M.
Segall and C. Alfred Bryant, both former investment managers with Stein Roe and
Farnham, an investment adviser based in Chicago, Illinois. VAM Holdings LLC also
owns Voyageur Asset Management LLC, which is registered under the Advisers Act.
Dougherty Financial Group LLC owns substantially all of Dougherty Summit
Securities LLC, an NASD-registered broker-dealer. Dougherty Summit Securities
LLC will not be used to execute transactions for Clifton's clients unless the
resulting transaction provides the best combination of net price and execution.
Dougherty Summit Securities LLC is also registered as an investment adviser.
SIMILAR INVESTMENT ACCOUNT
Clifton advises the following account with an investment objective similar to
that of Enhanced Fund:
11
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS AS OF ANNUALIZED COMPENSATION RATE
FUND DECEMBER 31, 1999 AS A % OF NET ASSETS
- ---- ----------------- ----------------------------
<S> <C> <C>
Enhanced S&P $193.5 million 0.30% on the first $25 million
Composite Index 0.20% on amounts above $25 million
</TABLE>
Under the proposed sub-advisory arrangements with Clifton, at asset levels above
$325 million the fees paid to Clifton will be higher than the fees paid under
the current sub-adviser and consequently the Adviser, with the unanimous support
of the Board of Directors, proposes to increase the advisory fees to cover the
sub-adviser's fee increase. The Adviser believes that the sub-advisory fee
increase and corresponding advisory fee increase are justified by the need to
retain a new sub-adviser with expertise in the new enhanced index strategy to be
employed by the Enhanced Fund. At a meeting held on January 11, 2000, the Board
of Directors of the Company, including a majority of the Independent Directors,
unanimously approved, subject to shareholder approval, an amended Investment
Advisory Agreement with the Adviser on behalf of Enhanced Fund that would
increase the advisory fees charged to the Fund.
PROPOSAL 2: BOARD OF DIRECTORS' EVALUATION
In approving the amended Investment Advisory Agreement and the new sub-advisory
agreement, the Board of Directors considered discussions during the course of
several prior Board meetings concerning the merits of implementing a new
investment strategy. At the January 11, 2000 Board meeting, the Directors
thoroughly reviewed materials furnished by the Adviser and by an investment
management consultant regarding Clifton, including Clifton's investment
personnel, investment management experience with enhanced index strategies,
philosophy of management and investment performance. The Board also requested
and received information concerning the effect of the proposed fee increase on
the expense ratio of the Fund and the fees and expenses of Enhanced Fund
compared to a group of mutual funds identified by the Adviser as Enhanced Fund's
comparison group. The Board found particularly significant the demonstrated
ability of Clifton to outperform its benchmark using the enhanced index strategy
proposed for Enhanced Fund. The Directors also found significant the fact that
at asset levels below $325 million the amount of sub-advisory fees paid under
the proposed sub-advisory agreement would actually decrease. Considering the
expertise of Clifton, the Directors believed that the proposed new advisory fees
were reasonable.
After careful consideration and a thorough review of the Adviser's and Clifton's
level of service, experience and fees, the Board determined that it was fair and
reasonable to and in the best interest of the Fund and its shareholders to
approve the amended Investment Advisory Agreement.
PROPOSAL 2: RECOMMENDATION AND REQUIRED VOTE
At the Meeting, shareholders of Enhanced Fund will vote on Proposal 2. The
affirmative vote of the holders of a majority of the outstanding shares of a
Fund is required to approve this proposal with regard to that Fund. "Majority"
for this purpose under the 1940 Act means the lesser of (i) 67% of the shares
represented at the Meeting if more than 50% of such outstanding shares are
represented, or (ii) more than 50% of such outstanding shares. Where a
shareholder abstains, the shares represented will be counted as present and
entitled to vote on the matter for purposes of determining a quorum, but the
abstention will have the effect of a negative vote on the proposal.
12
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF ENHANCED FUND APPROVE THE
AMENDED INVESTMENT ADVISORY AGREEMENT BETWEEN THE COMPANY AND THE ADVISER.
PROPOSAL 3: FOR SHAREHOLDERS OF ENHANCED U.S. EQUITY FUND ONLY:
To approve a change to the fundamental investment policy of Enhanced
Fund with regard to purchasing securities on margin.
The Fund's current investment restriction dealing with purchasing securities on
margin is fundamental and may not be changed without the approval of
shareholders. The current policy states:
None of the Funds may:
...
2. Purchase securities on margin, except for such
short-term credits as are necessary for the clearance
of transactions.
In order to allow Enhanced Fund to invest in futures contracts on the Index, the
Adviser is requesting and the Board of Directors is recommending that the policy
be changed. If approved by shareholders, the Fund's restriction will be changed
to add the following clarifying statement:
None of the Funds may:
...
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 is not deemed to be a
purchase of securities on margin.
13
<PAGE>
Purchasing securities on margin and making margin payments in connection with
the purchase and sale of futures contracts are two very different concepts. The
purchase of securities on margin involves the purchase of securities with money
borrowed from a broker. The payment of initial and variation margin in
connection with the purchase and sale of futures contracts does not involve the
use of borrowed money. Initial margin is a good faith deposit made with a broker
to secure the obligation under a futures contract. Variation margin is an amount
of money credited to or assessed against a party to an established futures
contract at least daily to reflect changes in the value of the contract.
Clarifying that initial and variation margin payments related to the purchase
and sale of futures contracts are not considered to be purchasing securities on
margin would permit Enhanced Fund to purchase and sell futures contracts. If
this proposal is approved by shareholders, Enhanced Fund intends to adopt a new
principal investment strategy, which has been approved by the Board of
Directors. Under this new strategy, Enhanced Fund would invest primarily in
futures contracts on the Index, backed by a portfolio of high-quality short-term
debt instruments.
PROPOSAL 3: BOARD OF DIRECTORS' EVALUATION
At a meeting held on January 11, 2000, the Board of Directors of the Company,
including a majority of the Independent Directors, unanimously approved a
proposal amending the fundamental investment policy of Enhanced Fund with regard
to purchasing securities on margin. The Board of Directors believes that the
proposed revised policy, which will allow Enhanced Fund to invest in futures
contracts on the Index, is in the best interests of the Fund and its
shareholders.
PROPOSAL 3: RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the shareholders of the Enhanced Fund will vote on Proposal 3.
The affirmative vote of the holders of a majority of the outstanding shares of
the Fund is required to approve this proposal. "Majority" for this purpose under
the 1940 Act means the lesser of (i) 67% of the shares represented at the
Meeting if more than 50% of such outstanding shares are represented, or (ii)
more than 50% of such outstanding shares. Where a shareholder abstains, the
shares represented will be counted as present and entitled to vote on the matter
for purposes of determining a quorum, but the abstention will have the effect of
a negative vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF ENHANCED FUND APPROVE THE
MODIFICATION OF ENHANCED FUND'S FUNDAMENTAL POLICY WITH REGARD TO PURCHASING
SECURITIES ON MARGIN.
ADDITIONAL INFORMATION
SECURITY OWNERSHIP. As of the Record Date, the ownership of each Fund by
Participating Insurance Companies and by M Life Insurance Company ("M Life") was
as follows:
14
<PAGE>
<TABLE>
<CAPTION>
John Hancock
M Life Variable Life Pacific Life
Name of Fund Insurance Co.* Insurance Co.# Insurance Co.+
- ------------ -------------- -------------- --------------
<S> <C> <C> <C>
Brandes Fund ____% ___% ___%
____ shares ____ shares ____ shares
Enhanced Fund ___% ___% ___%
____ shares ____ shares ____ shares
</TABLE>
*M Life, an affiliate of the Adviser, provided seed capital to each Fund. M Life
will vote its shares for the Proposals. The principal business address of M Life
is 205 SE Spokane Street, Portland, Oregon 97202.
#The principal business address of John Hancock Variable Life Insurance Company
is 200 Clarendon Street, Boston, Massachusetts 02116.
+The principal business address of Pacific Life Insurance Company is 700 Newport
Center Drive, Newport Beach, California 92660.
The Directors and officers of the Company as a whole own less than 1% of the
assets of each of the Funds.
To the best knowledge of the Company, the names and addresses of the contract
owners who can give voting instructions with respect to 5% or more of the
outstanding shares of each Fund as of the Record Date are set forth below:
VOTING POWER OF CERTAIN CONTRACT OWNERS
BRANDES FUND
NAME AND ADDRESS PERCENT VOTING POWER
---------------- --------------------
[Rabbi Trust %
c/o Wachovia Bank on behalf of
JH Networking Insurance Agency
200 Clarendon Street
Boston, Massachusetts 02116]
ENHANCED FUND
NAME AND ADDRESS PERCENT VOTING POWER
---------------- --------------------
[Portland General Corporation %
One World Trade Center
121 S.W. Salmon Street
Portland, Oregon 97204]
15
<PAGE>
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 and is registered with the SEC as a
broker-dealer and is a member of the NASD. The principal executive offices of
the Distributor are located at River Park Center, 205 SE Spokane Street,
Portland, Oregon 97202.
ADMINISTRATOR. Pursuant to an Administration Agreement dated December 4, 1995,
Investors Bank & Trust Company ("Investors Bank") provides certain
administrative services to the Company, such as calculating each Fund's
standardized performance information, preparing annual and semiannual reports to
shareholders and the SEC, preparing each Fund's tax returns, monitoring
compliance and performing other administrative duties. Investors Bank's
principal business address is 200 Clarendon Street, Boston, Massachusetts 02116.
SHAREHOLDER PROPOSALS
The Company must receive proposals of shareholders that are intended to be
presented at a future shareholder meeting a reasonable time prior to the
Company's solicitation of proxies relating to such future meeting. Timely
submission of such proposals does not guarantee their inclusion. The Company is
a Maryland corporation, and as such it is not required to hold, and has no
intention of holding, annual meetings, although the Company may hold special
shareholder meetings.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other matters to be
considered at the Meeting other than those referred to above. If any other
matters are properly presented to the Meeting, it is the intention of proxy
holders to vote such proxies on such matters in accordance with their judgment.
By Order of the Board of Directors
David W. Schutt
Secretary
February __, 2000
Portland, Oregon
16
<PAGE>
EXHIBIT A
M FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made and entered into this ____ day of ____________, 2000,
by and between M Fund, Inc., a corporation organized and existing under the laws
of the State of Maryland (the "Fund"), and M Financial Investment Advisers,
Inc., a corporation organized and existing under the laws of the State of
Colorado (the "Adviser").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several portfolios of shares, each having its own investment
policies; and
WHEREAS, the Adviser is duly registered as an investment adviser pursuant
to the Investment Adviser Act of 1940; and
WHEREAS, the Fund desires to retain the Adviser to render investment
management services with respect to its Brandes International Equity Fund,
Turner Core Growth Fund, Frontier Capital Appreciation Fund, and Clifton
Enhanced U.S. Equity Fund, and such other portfolios as the Fund and the Adviser
may agree upon (the "Portfolios"), and the Adviser is willing to render such
services. NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF THE ADVISER. The Fund employs the Adviser:
(a) to manage the investment and reinvestment of the assets;
(b) to hire, and thereafter supervise the investment activities of, one or
more sub-advisers deemed necessary to carry out the investment program
of any Portfolios of the Fund, pursuant to a written sub-advisory
agreement and subject to approval by:
(i) the Fund's Board of Directors;
(ii) the vote of a majority of Directors, who are not parties to such
sub-advisory agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on
such approval; and
(iii)except as otherwise permitted under the terms of any exemptive
relief obtained from the Securities and Exchange Commission (the
"SEC"), or by rule or regulation, a majority of the outstanding
voting securities of any affected Portfolio(s);
<PAGE>
(c) to continuously review, supervise and (except where delegated to a
sub-adviser) administer the investment program of the Portfolios;
(d) to determine in its discretion (except where delegated to a
sub-adviser) the securities to be purchased or sold;
(e) to provide the administrator of the Fund (the "Administrator") and the
Fund with records concerning the Adviser's activities which the Fund
is required to maintain; and
(f) to render regular reports to the Administrator and to the Fund's
officers and Directors concerning the Adviser's discharge of the
foregoing responsibilities. The retention of a sub-adviser by the
Adviser shall not relieve the Adviser of its responsibilities under
this Agreement.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Directors of the Fund and in compliance with
such policies as the Directors may from time to time establish, and in
compliance with the objectives, policies, and restrictions for each such
Portfolio set forth in the Fund's prospectus and statement of additional
information, as amended from time to time (referred to collectively as the
"Prospectus"), and applicable laws and regulations. The Fund will furnish
the Adviser from time to time with copies of all amendments or supplements
to the Prospectus, if any.
The Adviser accepts such employment and agrees, at its own expense, to
render the investment advisory services and to furnish, for the use of the
Fund, office space and all necessary office facilities, equipment and
personnel (including any sub-advisers) for servicing the investments of the
Fund, maintaining its organization and assisting in providing shareholder
communications and information services and to permit any of its officers
and employees to serve, without compensation, as Directors or officers of
the Fund if elected to such positions.
2. FEES AND EXPENSES.
(a) PAYABLE BY THE FUND. The Fund shall pay all of its expenses other than
those expressly stated to be payable by the Adviser. The expenses
payable by the Fund shall include, without limitation:
(i) interest and taxes;
(ii) brokerage commissions and other costs in connection with the
purchase or sale of securities, commodities, and other
investments for the Fund;
2
<PAGE>
(iii)fees and expenses of its Directors (other than those who are
"interested persons" of the Fund or the Adviser); (iv) legal and
audit expenses;
(v) transfer agent expenses and expenses for servicing shareholder
accounts;
(vi) expenses of computing the net asset value of the shares of the
Fund and the amount of its dividends;
(vii) custodian fees and expenses;
(viii) fees and expenses related to the registration and qualification
of the Fund and its shares for distribution under state and
federal securities laws;
(ix) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund;
(x) the cost of share certificates, if any;
(xi) reports, membership and dues in the Investment Company Institute
or any similar organization;
(xii) expenses of preparing and typesetting prospectuses;
(xiii) expenses of printing and mailing prospectuses sent to existing
shareholders;
(xiv)such nonrecurring expenses as may arise, including expenses
incurred in actions, suits or proceedings to which the Fund is a
party and the legal obligation which the Fund may have to
indemnify its officers and Directors in respect thereto; and
(xv) such other expenses as the Directors may, from time to time,
determine to be properly payable by the Fund.
(b) PAYABLE BY THE ADVISER. The Adviser shall pay the following:
(i) salaries and fees, if any, of all officers of the Fund and of all
Directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of the Fund or of the Adviser and of all personnel
of the Fund or Adviser performing services relating to research,
statistical and investment activities;
3
<PAGE>
(ii) expenses of printing and distributing any prospectuses or reports
prepared for its use or the use of the Fund in connection with
the offering of the shares of the Fund's common stock for sale to
the public;
(iii)expenses of preparing and typesetting any other literature used
by the Adviser in connection with such offering;
(iv) the cost of any advertising employed in such offering; and
(v) fees of any sub-adviser.
3. DELIVERY OF DOCUMENTS. The Fund has furnished Adviser with copies
properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, as filed with the Secretary
of State of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this agreement and as
amended from time to time, are herein called the "Articles of
Incorporation");
(b) Bylaws of the Fund (such Bylaws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"Bylaws");
(c) Current Prospectus(es) of the Portfolios.
4. OTHER COVENANTS. The Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the SEC and
will in addition conduct its activities under this Agreement in
accordance with other applicable law; and
4
<PAGE>
(b) (directly or indirectly through one or more sub-advisers) place
orders pursuant to its investment determinations for the
Portfolios either directly with the issuer of the security or
with any broker or dealer. In executing Portfolio transactions
and selecting brokers or dealers, the Adviser (directly or
indirectly through one or more sub-advisers) will use its best
efforts to seek on behalf of the Portfolio the best overall terms
available. In assessing the best overall terms available for any
transaction, the Adviser, and any sub-advisers, shall consider
all factors that it deems relevant, including the breadth of the
market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer
to execute a particular transaction, the Adviser and any
sub-adviser may also consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Adviser or sub-adviser or their
affiliates may exercise investment discretion. The Adviser is
authorized (and may authorize a sub-adviser), subject to the
prior approval of the Fund's Board of Directors, to pay to a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for
any of the Portfolios which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Adviser or
sub-adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in terms of
that particular transaction or in terms of the overall
responsibilities of the Adviser or sub-adviser to the Portfolio.
In addition, the Adviser is authorized (and may so authorize any
sub-adviser) to allocate purchase and sale orders for Portfolio
securities to brokers or dealers (including brokers and dealers
that are affiliated with the Adviser or sub-adviser) to take into
account the sale of variable contracts investing through separate
accounts in the Fund if the Adviser or sub-adviser believes that
the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance,
however, will any Portfolio's securities be purchased from or
sold to the Adviser, any sub-adviser engaged with respect to that
Portfolio, or any affiliated person of the Fund, the Adviser, or
that Portfolio's sub-adviser, acting as principal in the
transaction, except to the extent permitted by the SEC and the
1940 Act.
5. COMPENSATION OF THE ADVISER. For the services to be rendered by the Adviser
pursuant to this Agreement, the Fund shall pay to the Adviser, and the
Adviser agrees to accept as full compensation therefor, an advisory fee for
each Portfolio at the rates specified in Schedule A, which is attached
hereto and made a part of this Agreement. The Fee shall be calculated by
applying a daily rate, based on the annual percentage rates as specified in
Schedule A, to the average daily net assets of each Portfolio and shall be
paid to the Adviser monthly. The Adviser may, in its discretion and from
time to time, waive all or a portion of its fee.
No Portfolio of the Fund shall be liable for the obligations of any other
Portfolio of the Fund. Without limiting the generality of the foregoing,
the Adviser shall look only to the assets of a particular Portfolio for
payment of fees for services rendered to that Portfolio. All rights of
compensation under this Agreement for services performed as of the
termination date shall survive the termination of this Agreement.
5
<PAGE>
6. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by an applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified for
offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Fund or any Portfolio
which would result in the Fund's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment
of expenses by the Adviser pursuant to this Section 6 shall be settled on a
monthly basis (subject to fiscal year-end reconciliation, resulting perhaps
in the Adviser's recovery of some fees waived earlier in the fiscal year)
by a waiver of the Adviser's fees provided for hereunder, and such waiver
shall be treated as a reduction in the purchase price of the Adviser's
services.
7. REPORTS. The Fund and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request. The Adviser further agrees to furnish to the Fund, if applicable,
the same such documents and information pertaining to any sub-adviser as
the Fund may reasonably request.
8. STATUS OF THE ADVISER. The services of the Adviser to the Fund are not to
be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Fund are not impaired
thereby. The Adviser shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed an agent
of the Fund. To the extent that the purchase or sale of securities or other
investments of any issuer may be deemed by the Adviser to be suitable for
two or more accounts managed by the Adviser, the available securities or
investments may be allocated in a manner believed by the Adviser to be
equitable to each account. It is recognized that in some cases this may
adversely affect the price paid or received by the Fund or the size or
position obtainable for or disposed of by the Fund or any Portfolio.
6
<PAGE>
9. CERTAIN RECORDS. The Adviser shall keep and maintain, or shall arrange for
the sub-adviser of a Portfolio to keep and maintain, all books and records
with respect to each Portfolio's portfolio transactions required by Rule
31a-1 under the 1940 Act and shall render to the Board of Directors of the
Fund such periodic and special reports as the Board of Directors may
reasonably request. The Adviser shall also furnish to the Fund any other
information that is required to be filed by the Fund with the SEC or sent
to shareholders under the 1940 Act (including the rules adopted thereunder)
or any exemptive or other relief that the Adviser or the Fund obtains from
the SEC. The Adviser agrees that all records that it (or any sub-adviser)
maintains on behalf of the Fund are the property of the Fund and the
Adviser will surrender promptly to the Fund any of such records upon the
Fund's request; provided, however, that the Adviser may retain a copy of
such records. In addition, for the duration of this Agreement, the Adviser
shall preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to this
Agreement, and shall transfer said records to any successor Adviser upon
the termination of this Agreement (or, if there is no successor Adviser, to
the Fund).
10. LIMITATION OF LIABILITY OF THE ADVISER. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby. (As used in this Section 10,
the term "Adviser" shall include not only the Adviser itself but also
shareholders, directors, officers, employees and other corporate agents of
the Adviser).
11. PERMISSIBLE INTERESTS. Directors, agents, and shareholders of the Fund are
or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Fund as Directors, officers, shareholders or otherwise;
and the Adviser (or any successor) is or may be interested in the Fund as a
shareholder or otherwise subject to the provisions of applicable law. All
such interests shall be fully disclosed between the parties on an ongoing
basis and in the Fund's Prospectus as required by law. In addition,
brokerage transactions for the Fund may be effected through affiliates of
the Adviser or any sub-adviser if approved by the Board of Directors,
subject to the rules and regulations of the SEC.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from the date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those Directors of the Fund who are not parties
to this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by
the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each Portfolio; provided, however, that if
the shareholders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and to
the extent permitted by the 1940 Act and rules and regulations thereunder.
7
<PAGE>
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Directors of the
Fund or by vote of a majority of the outstanding voting securities of the
Portfolio on not less than 30 days' nor more than 60 days' written notice
to the Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days' written notice to the Fund. This Agreement will
automatically and immediately terminate in the event of its assignment.
As used in this Section 12, the terms "assignment," "interested persons,"
and a "vote of a majority of the outstanding voting securities" shall have
the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
SEC.
13. GOVERNING LAW. This Agreement shall be governed by the internal laws of the
State of Maryland, without regard to conflicts of law principles; provided,
however, that nothing herein shall be construed as being inconsistent with
the 1940 Act.
14. NOTICE. Any notice, advice or report to be given pursuant to this Agreement
shall be deemed sufficient if delivered by hand, transmitted by electronic
facsimile, or mailed by registered, certified or overnight United States
mail, postage prepaid, or sent by overnight delivery with a recognized
courier, addressed by the party giving notice to the other party at the
last address furnished by the other party:
To the Adviser at: M Financial Investment Advisers, Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
To the Fund at: M Fund, Inc.
River Park Center
205 S.E. Spokane Street
Portland, OR 97202
Attn: President
Each such notice, advice or report shall be effective upon receipt or three
days after mailing.
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
8
<PAGE>
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
17. 1940 ACT. Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order
of the SEC, whether of special or general application, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first
written above.
M FINANCIAL INVESTMENT
M FUND, INC. ADVISERS, INC.
By:__________________________________ By:_______________________________
Title: President Title: President
Attest:________________________________ Attest:_____________________________
Title: Administrator, M Funds Title: Administrator, M Funds
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SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
M FUND, INC.
AND
M FINANCIAL INVESTMENT ADVISERS, INC.
Pursuant to Section 5, the Fund shall pay the Adviser compensation at an
effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
Brandes International Equity Fund 1.10% of first $ 10 million
0.95% of next $10 million
0.75% of next $30 million
0.65% on amounts above
$50 million
Turner Core Growth Fund 0.45%
Frontier Capital Appreciation Fund 0.90%
Clifton Enhanced U.S. Equity Fund 0.40% of first $ 25 million
0.35% on amounts above
$25 million
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M FUND, INC.
THIS SOLICITATION IS MADE ON BEHALF OF THE DIRECTORS OF M FUND, INC.
The undersigned appoints Daniel Byrne and David Schutt, and each of them, with
full power of substitution, as attorneys and proxies of the undersigned, and
does thereby request that the votes attributable to the undersigned be cast at
the Special Meeting of Shareholders of M Fund, Inc. (the "Company"), to be held
at 9:00 a.m., local time, on April 11, 2000, at the principal office of the
Company, River Park Center, 205 S.E. Spokane Street, Portland, Oregon, and at
any adjournment thereof.
- -------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS VOTING INSTRUCTION/PROXY WILL BE VOTED AS
DIRECTED BELOW, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSAL
BELOW. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL.
PLEASE VOTE BY CHECKING YOUR RESPONSE.
FOR APPROVAL BY SHAREHOLDERS OF BRANDES INTERNATIONAL EQUITY FUND:
Approval of amended Investment FOR [] AGAINST [] ABSTAIN []
Advisory Agreement between the
Company and the Adviser.
[LABEL AFFIXED HERE]
CONTRACT NUMBER: ___________
TOTAL SHARES ATTRIBUTABLE TO THE UNDERSIGNED: ________
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<S> <C>
NOTE: THE UNDERSIGNED HEREBY
PLEASE VOTE, DATE, SIGN, AND RETURN THIS FORM IN THE ACKNOWLEDGES RECEIPT OF THE NOTICE OF
ENCLOSED SELF-ADDRESSED ENVELOPE. ALL PERSONS ANY PROXY HERETOFORE GIVEN WITH RESPECT TO
DESIGNATED ON THE CONTRACT MUST SIGN THIS FORM. THE VOTES COVERED BY THIS PROXY.
PLEASE INDICATE TITLE IF SIGNING IN AN OFFICIAL CAPACITY.
_________________________________
Dated: ____________________________ Signature
___________________________________
Signature If Jointly Held or Title If Required
</TABLE>
<PAGE>
M FUND, INC.
THIS SOLICITATION IS MADE ON BEHALF OF THE DIRECTORS OF M FUND, INC.
The undersigned appoints Daniel Byrne and David Schutt and each of them, with
full power of substitution, as attorneys and proxies of the undersigned, and
does thereby request that the votes attributable to the undersigned be cast at
the Special Meeting of Shareholders of M Fund, Inc. (the "Company"), to be held
at 9:00 a.m., local time, on April 11, 2000, at the principal office of the
Company, River Park Center, 205 S.E. Spokane Street, Portland, Oregon, and at
any adjournment thereof.
- -------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS VOTING INSTRUCTION/PROXY WILL BE VOTED AS
DIRECTED BELOW, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSALS
BELOW. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
PROPOSALS. PLEASE VOTE BY CHECKING YOUR RESPONSE.
FOR APPROVAL BY SHAREHOLDERS OF ENHANCED U.S. EQUITY FUND:
1. Approval of amended Investment FOR [] AGAINST [] ABSTAIN []
Advisory Agreement between the
Company and the Adviser.
2. Approval of change of fundamental FOR [] AGAINST [] ABSTAIN []
investment policy of the Enhanced
Fund with regard to purchasing
securities on margin.
[LABEL AFFIXED HERE]
CONTRACT NUMBER: ___________
TOTAL SHARES ATTRIBUTABLE TO THE UNDERSIGNED: ________
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<S> <C>
PLEASE VOTE, DATE, SIGN, AND RETURN THIS FORM IN THE NOTE: THE UNDERSIGNED HEREBY
ENCLOSED SELF-ADDRESSED ENVELOPE. ALL PERSONS ACKNOWLEDGES RECEIPT OF THE NOTICE OF
DESIGNATED ON THE CONTRACT MUST SIGN THIS FORM. ANY PROXY HERETOFORE GIVEN WITH RESPECT TO
PLEASE INDICATE TITLE IF SIGNING IN AN OFFICIAL CAPACITY. THE VOTES COVERED BY THIS PROXY.
Dated: ____________________________ _________________________________
Signature
___________________________________
Signature If Jointly Held or Title If Required
</TABLE>
