SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) [ ]
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PFL Endeavor Target Account
(Name of Registrant as Specified in Its Charter)
PFL Endeavor Target Account
(Name of Person 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0- 11(a)(2) and identify 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:
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PFL ENDEAVOR TARGET ACCOUNT
2101 East Coast Highway
Suite 300
Corona del Mar, California 92625
May 10, 1999
Dear Policy Holder:
As the owner of a variable annuity policy (the "Policy") issued by PFL
Life Insurance Company ("PFL Life"), you have the right to vote certain units of
the PFL Endeavor Target Account (the "Target Account") at a Special Meeting of
Unitholders to be held on July 2, 1999. Before the Special Meeting, I would like
your vote on several important proposals described in the accompanying Notice of
Special Meeting of Unitholders and Proxy Statement. You will be asked to vote on
four proposals regarding the Target Account:
1. Approval of a New Management Agreement
Currently, Endeavor Management Co. (the "Manager") manages each of the
four Subaccounts of the Target Account. AUSA Holding Company, an affiliate of
PFL Life Insurance Company, has agreed to acquire all of the outstanding common
stocks of the Manager. This acquisition, if consummated, will result in a
"change in control" of the Manager, which will terminate the existing management
agreement between the Target Account on behalf of each of the Subaccounts and
the Manager. The Board of Managers of the Target Account recommends that the
unitholders of each Subaccount approve a new management agreement with terms
substantially identical to those of the current management agreement.
2. New Advisory Agreements
The proposed change of control of the Manager will also terminate the
investment advisory agreements between the Manager and First Trust Advisors,
L.P. (the "Adviser"), which serves as the investment adviser to the Subaccounts
and is responsible for the day-to-day management of the Subaccounts' assets. The
Board of Managers recommends that the unitholders of each Subaccount approve a
new investment advisory agreement, with substantially identical terms to the
corresponding current investment advisory agreement, between the Manager and the
Adviser.
3. Election of Members of the Board of Managers
The Board of Managers proposes to elect members of the Board of
Managers of the Target Account.
4. Ratification of Auditors
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The Managers have selected Ernst & Young LLP as the Target Account's
independent auditors and recommend that unitholders ratify this selection.
The members of the Board of Managers have unanimously approved each of
the proposals and recommends that you vote FOR each proposal.
You may think that your vote is not important, but it is. Please take
the time to familiarize yourself with the Proposals and to sign and return your
proxy card(s) in the enclosed postage-paid envelope today. You may receive more
than one proxy card if you own Units in more than one Subaccount. Please sign
and return each card you receive. You may also vote by calling toll-free
1-888-221-0697, or via the Internet at www.proxyweb.com, if eligible.
Instructions on how to complete the proxy card , vote by telephone, or via the
Internet are included immediately after the Notice of Special Meeting.
If you have any questions about the proxy, please call our proxy
solicitor, Shareholder Communications Corporation, at 1-800-646-7628.
If we do not receive your completed proxy card(s) within several weeks,
you may be contacted by Shareholder Communications Corporation to remind you to
vote your Units.
Thank you for taking the time to participate in these important
matters.
Sincerely,
Vincent J. McGuinness, Jr.
President
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PFL ENDEAVOR TARGET ACCOUNT
2101 East Coast Highway
Suite 300
Corona del Mar, California 92625
The DowSM Target 10 (July Series)
The DowSM Target 5 (July Series)
The DowSM Target 10 (January Series)
The DowSM Target 5 (January Series)
NOTICE OF SPECIAL MEETING OF UNITHOLDERS To
be Held on July 2, 1999
To the Unitholders of the PFL Endeavor Target Account:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Unitholders of the
PFL Endeavor Target Account (the "Target Account"), a managed separate account
established under Iowa law by the PFL Life Insurance Company, will be held at
the Four Seasons Hotel, 690 Newport Center Drive, Newport Beach, California
92660 on July 2, 1999 at 11:00 a.m. Pacific Time and any adjournments thereof
(collectively, the "Special Meeting") for the following purposes:
1. To approve a new management agreement between the Target
Account and Endeavor Management Co.
2. To approve new investment advisory agreements between Endeavor
Management Co. and First Trust Advisors, L.P.
3. To elect members of the Board of Managers of the Target Account
4. To ratify the selection of Ernst & Young LLP as independent
auditors of the Target Account
5. To transact such other business as may properly come before
the Special Meeting or any adjournment thereof.
The Board of Managers has fixed the close of business on April 23, 1999
as the record date for determination of unitholders entitled to notice of and to
vote at the Special Meeting.
By order of the Board of Managers
Pamela Shelton
Secretary
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May 10, 1999
UNITHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR FOLLOW THE
INSTRUCTIONS IN THE MATERIALS RELATING TO TELEPHONIC OR INTERNET VOTING.
INSTRUCTIONS FOR THE PROPER EXECUTION OF THE PROXY CARD ARE SET FORTH ON THE
INSIDE COVER OF THIS NOTICE. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Target Account involved
in validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
<TABLE>
<CAPTION>
Registration Valid Signature
<S> <C> <C>
Corporate Accounts
(1) ABC Corp. . . . . . . . . . . . . . . . . . . . . . .ABC Corp.
(2) ABC Corp. . . . . . . . . . . . . . . . . . . . . . .John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer . . . . . . . . . . . . . . .John Doe
(4) ABC Corp. Profit Sharing Plan . . . . . . . . . . John Doe, Trustee
Trust Accounts
(1) ABC Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 . . . . . . . . . . . . . . . . . . . Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA . . . . . . . . . . John B. Smith
(2) Estate of John B. Smith . . . . . . . . . . . . . . . . John B. Smith, Jr., Executor
</TABLE>
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INSTRUCTIONS FOR TELEPHONE VOTING
To vote your proxy by telephone follow the four easy steps below. Or if you
prefer you may send back your signed proxy ballot in the postage paid envelope
provided.
1. Read the accompanying proxy information and ballot.
2. Identify the fourteen-digit "CONTROL NO." in the middle portion of your
ballot on the left hand side. This control number is the key to casting your
vote over the telephone.
3. Dial 1-888-221-0697.
4. Follow the simple recorded instructions.
INSTRUCTIONS FOR VOTING OVER THE INTERNET
To vote your proxy via the Internet follow the four easy steps below.
1. Read the accompanying proxy information and ballot.
2. Go to www.proxyweb.com.
3. Enter the fourteen-digit "CONTROL NO." from the upper left corner of your
proxy card.
4. Follow the simple online instructions.
If you hold your units through an intermediary, please refer to your proxy card
to determine if the intermediary permits you to vote via another Internet site,
and follow the instructions provided on the proxy card. You do not need to
return your proxy card if you vote via an Internet site.
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PFL ENDEAVOR TARGET ACCOUNT
The DowSM Target 10 (July Series)
The DowSM Target 5 (July Series)
The DowSM Target 10 (January Series)
The DowSM Target 5 (January Series)
2101 East Coast Highway
Suite 300
Corona del Mar, California 92625
SPECIAL MEETING OF UNITHOLDERS
July 2, 1999
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Managers of the PFL Endeavor Target Account (the
"Target Account") for each of the four Subaccounts (the "Subaccounts") of the
Target Account for use at a Special Meeting of Unitholders of the Target Account
to be held at 11:00 a.m. Pacific Time on July 2, 1999 at the Four Seasons Hotel,
690 Newport Center Drive, Newport Beach, California 92660, and any adjournments
thereof (collectively, the "Special Meeting"). A notice of the Special Meeting
and a proxy card accompany this Proxy Statement. This Proxy Statement and the
accompanying Notice of Special Meeting and proxy card(s) are first being mailed
to unitholders on or about May 17, 1999. In addition to solicitations of proxies
by mail, beginning on or about May 24, 1999, proxy solicitations may also be
made by telephone, e-mail or personal interviews conducted by officers of the
Target Account; regular employees of Endeavor Management Co., the Target
Account's manager (the "Manager"); Shareholder Communications Corporation, the
Target Account's proxy solicitor; or other representatives of the Target
Account. The Target Account has retained Shareholder Communications Corporation
as the Target Account's proxy solicitor for the Special Meeting of Unitholders.
The estimated cost of the proxy solicitation is approximately $5,000. The costs
of solicitation and the expenses incurred in connection with preparing this
Proxy Statement and its enclosures will be shared equally by the Target Account
and Endeavor Management Co. The Target Account's most recent annual report is
available upon request without charge by writing or calling the Target Account
at 2101 East Coast Highway, Suite 300, Corona del Mar, CA 92625 or
1-800-854-8393.
If the enclosed proxy is properly executed and returned in time to be
voted at the Special Meeting, the units ("Units") represented by the proxy will
be voted in accordance with the instructions marked therein. Unless instructions
to the contrary are marked on the proxy, it will be voted FOR the matters listed
in the accompanying Notice of Special Meeting of Unitholders. Any unitholder who
has given a proxy has the right to revoke it at any time prior
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to its exercise either by attending the Special Meeting and voting his or her
Units in person, or by submitting a letter of revocation or a later-dated proxy
to the Target Account at the above address prior to the date of the Special
Meeting.
If a quorum is not present at the Special Meeting, or if a quorum is
present but sufficient votes to approve each proposal are not received, the
persons named as proxies on the enclosed proxy card may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Special Meeting, the following factors may
be considered: the nature of the proposals that are the subject of the Special
Meeting, the percentage of votes actually cast, the percentage of negative votes
actually cast, the nature of any further solicitation and the information to be
provided to unitholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those Units
represented at the Special Meeting in person or by proxy. A unitholder vote may
be taken on one or more of the proposals in this Proxy Statement prior to any
such adjournment if sufficient votes have been received for approval. Under the
Target Account's Rules and Regulations, a quorum of unitholders is constituted
by the presence in person or by proxy of the holders of a majority of the
outstanding Units of the Target Account entitled to vote at the Special Meeting.
The Board of Managers has fixed the close of business on April 23, 1999
as the record date (the "Record Date") for the determination of unitholders of
the Target Account entitled to notice of and to vote at the Special Meeting. The
number of Units of each Subaccount outstanding on the Record Date is set forth
in Exhibit A.
As of April 23, 1999, the officers and the members of the Board of
Managers as a group beneficially owned less than 1% of the Units of each
Subaccount.
In order that your Units may be represented at the Special Meeting, you
are requested to:
-- indicate your instructions on the enclosed proxy card;
-- date and sign the proxy card;
-- mail the proxy card promptly in the enclosed envelope, which
requires no postage if mailed in the United States; and
-- allow sufficient time for the proxy card to be received on or
before 11:00 a.m. Pacific Time on July 2, 1999.
You may also vote by telephone or via the Internet. Instructions for
voting by telephone or via the Internet appear immediately after the Notice of
Special Meeting at the front of this proxy statement.
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PROPOSAL 1
TO APPROVE A NEW MANAGEMENT AGREEMENT BETWEEN THE TARGET ACCOUNT AND
ENDEAVOR MANAGEMENT CO.
SUMMARY OF THE PROPOSAL
The Manager currently provides investment advisory services to the four
Subaccounts of the Target Account under a management agreement dated June 15,
1998 (the "Current Management Agreement"). The Manager, 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625, has overall responsibility for the
general management and administration of each Subaccount. The Manager selects
the investment adviser for each Subaccount and monitors each investment
adviser's investment program. Out of the management fees it receives under the
Current Management Agreement, the Manager pays the fees of the investment
advisers.
On February 24, 1999, AUSA Holding Company ("AUSA"), an affiliate of
PFL Life Insurance Company ("PFL Life"), and the Manager entered into a
non-binding Letter of Intent pursuant to which 100% of the outstanding common
stocks of the Manager will be acquired by AUSA (the "Acquisition"). It is
anticipated that the parties will enter into a definitive Purchase and Sale
Agreement on or about May 15, 1999, and that the closing of the Acquisition will
occur on or about July 8, 1999. If no definitive Purchase and Sale Agreement is
entered into, the Acquisition will not occur. If a definitive Purchase and Sale
Agreement is entered into, it is anticipated that the closing of the Acquisition
will be subject to certain conditions. One of those conditions is approval by
unitholders of each Subaccount of the Target Account of a new management
agreement (the "New Management Agreement") between the Target Account, on behalf
of each Subaccount, and the Manager. The New Management Agreement is
substantially identical to the Target Account's Current Management Agreement
except for the dates of execution, effectiveness, and termination.
At a meeting of the Board of Managers of the Target Account held on
March 1, 1999, the members of the Board of Managers , including all Managers who
are not "interested persons" (the "Independent Managers") of the Target Account
or the Manager, unanimously voted to approve the New Management Agreement and to
recommend that unitholders of each Subaccount approve the New Management
Agreement.
Description of the Manager
The Manager is a California corporation. All of the outstanding common
stock of the Manager is currently owned by Vincent J. McGuinness, together with
his family members and trusts for the benefit of his family members. The
directors and principal executive officers of the Manager, along with the
principal occupation of each, are set forth in Exhibit C. The address of
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the Manager and each officer and director is 2101 East Coast Highway, Corona del
Mar, California 92625.
Description of AUSA
AUSA is a Maryland corporation incorporated in 1986 under the name
"Monumental Corporation." It became a wholly owned subsidiary of AEGON USA, Inc.
in 1988. AUSA is an affiliate of PFL Life through common indirect ownership
under AEGON USA, Inc. AUSA conducts substantially all of its operations through
subsidiary companies engaged in providing non-insurance financial services that
support the insurance operations of its affiliates. All of the outstanding stock
of AEGON USA, Inc. is indirectly owned by AEGON N.V. of the Netherlands.
1940 Act Considerations
Section 15(a) of the 1940 Act prohibits any person from serving as an
investment adviser to a registered investment company except pursuant to a
written contract that has been approved by the unitholders of the investment
company. Section 15(a) also provides that any such advisory contract must
terminate on its "assignment" and that a change in control of the investment
adviser constitutes an "assignment." Consequently, the consummation of the
Acquisition will cause the Current Management Agreement to terminate. In order
for the Manager to continue to serve as investment adviser to the Target
Account, unitholders of each Subaccount must approve the New Management
Agreement.
If approved by the unitholders of each Subaccount, the New Management
Agreement will be executed and become effective on the Closing Date of the
Acquisition (currently scheduled for July 8, 1999).
Summary of the Current Management Agreement and the New Management Agreement
A copy of the Current Management Agreement marked to indicate the
changes between the Current Management Agreement and the New Management
Agreement is attached to this Proxy Statement as Exhibit B. The following
description of the Agreements is only a summary. You should refer to Exhibit B
for the complete Current and New Management Agreements. Both the Current
Management Agreement and the New Management Agreement provide that the Manager
has overall supervisory responsibility for the general management and investment
of each Subaccount's assets and has full investment discretion with respect to
the assets of any Subaccount not then being managed by an adviser. The Manager
is expressly authorized to delegate day-to-day investment management of a
Subaccount's assets to another investment adviser. The Manager has entered into
two investment advisory agreements, each dated June 15, 1998 (the "Current
Investment Advisory Agreements"), with First Trust Advisors, L.P. (the
"Adviser"). Pursuant to the Current Investment Advisory Agreements, the Adviser
provides investment advisory services for each Subaccount.
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Both the Current Management Agreement and the New Management Agreement
provide that the Manager is responsible for providing the Target Account with
office facilities, statistical and research data, data processing services,
clerical, accounting and bookkeeping services and for preparation of unitholder
reports, tax returns, and other government filings. The Manager is authorized to
hire third parties to provide any of these services.
Both the Current Management Agreement and the New Management Agreement
provide that the Manager will be paid a fee with respect to each Subaccount
based on that Subaccount's average daily net assets. The amount of the
management fee for each existing Subaccount is 0.75% of the Subaccount's average
daily net assets under both the Current Management Agreement and the New
Management Agreement. The aggregate amount of compensation paid to the Manager
by each Subaccount during the Target Account's fiscal year ended December 31,
1998 is set forth below.
<TABLE>
<CAPTION>
Subaccount Aggregate Management Fee Payable During Fiscal Year
Ended December 31, 1998
<S> <C>
Dow Target 10 Subaccount (July Series) $17,9281
Dow Target 5 Subaccount (July Series) $24,0542
Dow Target 10 Subaccount (January Series)3 0
Dow Target 5 Subaccount (January Series)3 0
</TABLE>
1 Of this amount, $14,920 was waived by the Manager. 2 Of this amount, $11,453
was waived by the Manager. 3 Commenced operations January 4, 1999.
Both the Current Management Agreement and the New Management Agreement
provide that the Target Account is responsible for all expenses other than those
expressly assumed by the Manager. The Target Account is responsible for, among
other things, (1) the Manager's fees; (2) fees charged by a third party
administrator; (3) legal and audit expenses; (4) fees for registration of Target
Account Units; (5) fees of the Target Account's transfer agent, registrar,
custodian, dividend disbursing agent, and unitholder servicing agent; (6) taxes;
(7) brokerage and other transaction expenses; (8) interest expenses; (9)
expenses of unitholders and Managers meetings; (10) printing of prospectuses;
(11) mailing of prospectuses to existing Target Account unitholders; (12)
insurance premiums; (13) charges of an independent pricing service; (14)
expenses related to the purchase and redemption of Target Account Units; and
(15) nonrecurring expenses, such as the cost of litigation.
Both the Current Management Agreement and the New Management Agreement
provide that the Manager is not liable for its acts or omissions under the
agreement, but that the Manager is not protected against liability arising out
of its own willful misfeasance, bad faith, or gross negligence in the
performance of its duties.
Each of the Current Management Agreement and the New Management
Agreement provides (1) that it will continue in effect with respect to each
Subaccount for a period of two
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years from its effective date and thereafter from year to year if approved at
least annually by a majority vote of the Units of the Subaccount or a majority
of the Board of Managers and by a majority of the Independent Managers; (2) that
it may be terminated as to any Subaccount, without penalty, by the Board of
Managers or by the vote of a majority of the outstanding Units of a Subaccount
upon 60 days' prior written notice; (3) that it may be terminated by the Manager
on 90 days' prior written notice to the Target Account; and (4) that it will
terminate automatically in the event of its "assignment" as such term is defined
in the Investment Company Act of 1940 (the "1940 Act").
Brokerage Allocation
The Adviser invests all assets of the Subaccounts in common stock and
incurs brokerage costs in connection with these transactions.
Allocations of transactions by the Subaccounts, including their
frequency, to various dealers is determined by the Adviser in its best judgment
and in a manner deemed to be in the best interest of the investors in the
Subaccounts rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price.
Purchases and sales of securities may be principal transactions; that is,
securities may be purchased directly from the issuer or from an underwriter or
market maker for the securities. Any transactions for which the Subaccounts pay
a brokerage commission will be effected at the best price and execution
available. Purchases from underwriters of securities include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and the asked price.
Brokerage may be allocated based on the sale of insurance policies for which
allocations are made to the Subaccounts by dealers or activities in support of
sales of the policies. The Target Account has adopted a Brokerage Enhancement
Plan, in accordance with Rule 12b-1 under the 1940 Act, whereby all or a portion
of certain brokerage commission paid by the Subaccounts may be allocated or
credited to Endeavor Group, a registered broker-dealer that is an affiliate of
the Manager, or other entities marketing the policies, to help to finance sales
activities.
For the year ended December 31, 1998, the Dow Target 10 Subaccount
(July Series), the Dow Target 5 Subaccount (July Series) paid brokerage
commissions of $4,915 and $7,714, respectively . The Dow Target 10 Subaccount
(January Series) and the Dow Target 5 Subaccount (January Series) did not
commence operations until January 4, 1999. None of the Subaccounts paid any
compensation to any affiliated broker of the Manager or the Adviser during the
year ended December 31, 1998.
Brokerage Enhancement Plan
The Target Account has adopted, in accordance with the substantive
provisions of Rule 12b-1 under the 1940 Act, a Brokerage Enhancement Plan (the
"Plan") for each of its Subaccounts. The Plan uses available brokerage
commissions to promote the sale and distribution of each Subaccount's Units.
Under the Plan, the Target Account is using recaptured commissions to pay for
distribution expenses. Except for recaptured commissions, unlike asset
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based charges imposed by many mutual funds for sales expenses, the Subaccounts
do not incur any asset based or additional fees or charges under the Plan.
Under the Plan, the Manager is authorized to direct investment advisers
to use certain broker-dealers for securities transactions. (The duty of best
price and execution still applies to these transactions.) These broker-dealers
have agreed to give a percentage of their commission from the sale and purchase
of securities to Endeavor Group, 2101 East Coast Highway, Suite 300, Corona del
Mar, California 92625, the distributor of the Target Account's Units.
Endeavor Group will not make any profit from participating in the Plan.
It is obligated to use money given to it under the Plan for distribution
expenses (other than a minimal amount to defray its legal and administrative
costs). The rest will be spent on activities that are meant to result in the
sale of the Subaccounts' Units, including:
- holding or participating in seminars and sales meetings promoting
the sale of the Subaccounts' Units
- paying marketing fees requested by broker-dealers who sell
policies
- training sales personnel
- compensating broker-dealers and/or registered representatives in
connection with the allocation of cash values and premiums of the
policies to the Target Account
- printing and mailing Target Account prospectuses, statements of
additional information, and shareholder reports to prospective
policy holders
- creating and mailing advertising and sales literature
Distribution Plan
AFSG Securities Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA
52499, an affiliate of PFL Life, is the principal underwriter of the policies
for which allocations are made to the Subaccounts and may enter into agreements
with broker-dealers for the distribution of the policies.
The Target Account has adopted a distribution plan in accordance with
Rule 12b-1 under the 1940 Act for the distribution financing charge (the
"Distribution Plan"). The distribution financing charge is a daily charge for
the first ten years of a policy equal to an effective rate of 0.25% of the
Target Account's net assets. The Distribution Plan has been approved by a
majority of the Independent Managers of the Target Account. The Distribution
Plan is designed to partially compensate PFL Life for the cost of distributing
the policies. Charges under the Distribution Plan will be used to support
marketing efforts, training of representatives and reimbursements of expenses
incurred by broker-dealers who sell the policies, and will be based on a
percentage of the daily net assets of the Target Account. The distribution plan
with respect
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to any Subaccount may be terminated at any time by a vote of a majority of the
Independent Managers, or by a vote of the majority of its outstanding Units.
Other Information
The Current Management Agreement was approved by the Board of Managers
of the Target Account (including all of the Independent Managers) on February
23, 1998, and by PFL Life, as the initial unitholder of the Subaccounts, on June
30, 1998.
On November 17, 1998, the Board of Managers, including all of the
Independent Managers present, approved a Transfer and Assumption of Management
Agreement, pursuant to which Endeavor Management Co. assumed the
responsibilities of Endeavor Investment Advisers effective December 31, 1998.
This change reflected the fact that Endeavor Investment Advisers, a California
general partnership, was dissolved effective December 31, 1998. Endeavor
Management Co. had been the managing general partner and the holder of a
majority of the partnership interests of Endeavor Investment Advisers.
Recommendation of the Board of Managers
The Board of Managers of the Target Account met on March 1, 1999 to
consider the Acquisition and its anticipated effects on the Manager and the
investment management and other services provided to the Target Account by the
Manager. At this meeting, the Board of Managers, including all of the
Independent Managers, voted unanimously to approve the New Management Agreement
and to recommend approval of the New Management Agreement by the unitholders of
each Subaccount.
The Board of Managers believes that the terms and conditions of the New
Management Agreement are fair to, and in the best interests of, each Subaccount
and its unitholders. The Board of Managers considered a number of factors,
including: (1) the fact that the terms of the Current Management Agreement and
of the New Management Agreement are substantially identical; (2) the
representation by AUSA and PFL Life and the senior management of the Manager
that it was anticipated that no material changes would be made to the senior
management of the Manager; (3) the additional financial, managerial, and
marketing resources that AEGON USA, Inc. and PFL Life would be able to provide
to the Manager; (4) the reputation of AEGON USA, Inc. and PFL Life; (5) the
agreement by AEGON USA, Inc. that it would not seek to impose any "unfair
burden," as defined in the 1940 Act, on the Subaccounts for two years following
the closing of the Acquisition; and (6) such other factors as the Board of
Managers deemed relevant.
REQUIRED VOTE
Approval of the New Management Agreement with respect to a Subaccount
requires the affirmative vote of a majority of the outstanding voting securities
of that Subaccount. Under the 1940 Act, a majority of a Subaccount's outstanding
voting securities is defined as the lesser of (1) 67% of the outstanding Units
represented at a meeting at which more than 50% of the
8
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Subaccount's outstanding Units are present in person or represented by proxy or
(2) more than 50% of the Subaccount's outstanding voting securities (a "Majority
Vote"). If the New Management Agreement is not approved by the unitholders of
all of the Subaccounts, it is expected that the Acquisition of the Manager will
not occur, and the Manager will continue to serve under the Current Management
Agreement.
THE BOARD OF MANAGERS, INCLUDING ALL OF THE INDEPENDENT
MANAGERS, RECOMMENDS THAT THE UNITHOLDERS VOTE "FOR" THE NEW
MANAGEMENT AGREEMENT.
PROPOSAL 2
TO APPROVE OR DISAPPROVE NEW INVESTMENT ADVISORY
AGREEMENTS WITH THE ADVISER
SUMMARY OF PROPOSAL
As discussed above under Proposal 1, the Manager has entered into the
two Current Investment Advisory Agreements with the Adviser to provide
investment advisory services for each of the Subaccounts, subject to the
Manager's overall supervision. The two Current Investment Advisory Agreements
are identical in all respects, except that one applies to the two Dow Target 10
Series, and the other applies to the two Dow Target 5 Series. As required by
Section 15(a) of the 1940 Act, the Current Investment Advisory Agreements each
provides, in substance, that it will terminate upon any "assignment," as defined
in the 1940 Act.
The proposed Acquisition described under Proposal 1 constitutes an
"assignment" of the Current Investment Advisory Agreements. Accordingly,
consummation of the Acquisition will result in the termination of the Current
Investment Advisory Agreements. Therefore, in order to permit the Adviser to
continue to provide investment advisory services to the Subaccounts, it is
necessary that the unitholders of each Subaccount approve a new investment
advisory agreement (the "New Investment Advisory Agreements") to become
effective on the Closing Date of the Acquisition (currently scheduled for July
8, 1999).
Based on an analysis of factors described below, the Board of Managers
has unanimously approved the Manager's execution of the New Investment Advisory
Agreements. At a meeting held March 1, 1999, the Managers , including all of the
Independent Managers, voted unanimously to approve the New Investment Advisory
Agreement for each Subaccount and to recommend to unitholders of each Subaccount
that they approve the New Investment Advisory Agreement. The New Investment
Advisory Agreements are each identical to the corresponding Current Investment
Advisory Agreement except for the dates of execution and termination.
Information About the Adviser
9
<PAGE>
The Adviser is registered as an investment adviser with the Securities
and Exchange Commission (the "SEC") under the Investment Advisers Act of 1940.
The Adviser's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Adviser is an Illinois limited partnership formed in 1991 with one limited
partner, Grace Partners of Dupage L.P., and one general partner, Nike Securities
Corporation. Grace Partners of Dupage L.P. is a limited partnership with one
general partner, Nike Securities Corporation, and a number of limited partners
(none of whom have more than a 25% interest). Nike Securities Corporation is an
Illinois corporation controlled by Robert Donald Van Kampen.
The Adviser is also the portfolio supervisor of certain unit investment
trusts sponsored by Nike Securities L.P. ("Nike Securities") which are
substantially similar to the Target Account Subaccounts in that they have the
same investment objectives as the Target Account Subaccounts but have a life of
approximately one year. Nike Securities specializes in the underwriting, trading
and distribution of unit investment trusts and other securities. Nike
Securities, an Illinois limited partnership formed in 1991, acts as sponsor for
successive series of The First Trust Combined Series, The First Trust Special
Situations Trust, the First Trust Insured Corporate Trust, The First Trust of
Insured Municipal Bonds and the First Trust GNMA. First Trust introduced the
first insured unit investment trust in 1974, and to date more than $11 billion
in First Trust unit investment trusts have been deposited.
No member of the Board of Managers or officer of the Target Account is
an officer, employee, director or security holder of the Adviser or has any
other material direct or indirect interest in the Adviser or in its parents or
affiliates.
Evaluation by the Board of Managers
The Board of Managers requested, received and considered such
information as they deemed reasonably necessary to enable them to evaluate the
New Investment Advisory Agreements. On March 1, 1999, the Board of Managers,
including all of the Independent Managers, voted unanimously to approve the New
Investment Advisory Agreements and to submit the proposed New Investment
Advisory Agreements to the unitholders of each Subaccount.
The material factors considered by the Managers were: the nature and
quality of services rendered by the Adviser; the Adviser's performance under the
Current Investment Advisory Agreements; the performance of similar funds advised
by the Adviser; the amount of advisory fees to be paid; the Adviser's financial
strength and insurance coverage; the Adviser's investment advisory experience
and reputation; the Adviser's code of ethics and compliance controls; and
administrative support services. The Managers also considered the fact that
there were no material differences between the terms of the New Investment
Advisory Agreements and the terms of the Current Investment Advisory Agreements.
The factor that the Board of Managers considered most significant was
that the Subaccounts would continue to receive the benefit of advisory services
from the same Adviser as under the Current Investment Advisory Agreements, at no
increase in the advisory fee to be paid
10
<PAGE>
for such services. The Board of Managers was also satisfied that the Adviser (1)
was knowledgeable and experienced in the operations of the relevant financial
markets and in the laws that are applicable to such operations insofar as they
might affect a Subaccount, and (2) had the personnel, financial resources and
standing in the financial community to enable it to discharge its duties under
the New Investment Advisory Agreements adequately. The Board of Managers
determined that the Subaccounts would receive the benefit of maintaining
uninterrupted advisory services of the same quality, scope and cost as the
Subaccounts received before the Acquisition.
After careful consideration, the Board of Managers believe that the
best interests of the unitholders of the Subaccounts would be served if the New
Investment Advisory Agreements are approved.
Terms of the Current Investment Advisory Agreements and the New Investment
Advisory Agreements
The New Investment Advisory Agreements, like the Current Investment
Advisory Agreements, each provides in substance (1) that the Manager will pay
the Adviser the same fee as paid under the corresponding Current Investment
Advisory Agreement; (2) that it will continue for a period of two years from its
effective date and thereafter from year to year if approved at least annually by
a Majority Vote of the outstanding Units of the Subaccount or by a majority of
the Board of Managers and a majority of the Independent Managers; (3) that it
may be terminated, without penalty, by the Manager, by the Board of Managers or
by Majority Vote of the outstanding Units of the Subaccount upon 60 days' prior
written notice; (4) that it may be terminated by the Adviser on 90 days' prior
written notice to the Manager; and (5) that it will terminate automatically in
the event of its "assignment" as such term is defined in the 1940 Act. Both the
Current Investment Advisory Agreements and New Investment Advisory Agreements
provide that the Adviser is not liable to the Target Account or to the Manager
for any act or omissions under the Agreements, but that the Adviser is not
protected against liability arising out of its own willful misfeasance, bad
faith, gross negligence or reckless disregard in the performance of its duties.
Brokerage Allocation
The Adviser will have the same duties and responsibilities as under the
Current Investment Advisory Agreements with respect to the allocation of
principal business and portfolio brokerage (see "Proposal 1 - Brokerage
Allocation" above).
REQUIRED VOTE
Approval of the New Investment Advisory Agreements with respect to a
Subaccount requires a Majority Vote of the unitholders of that Subaccount. If a
New Investment Advisory Agreement is not approved by the unitholders of a
Subaccount, the Managers will consider other possible courses of action which
are in the best interests of unitholders. If unitholders of a
11
<PAGE>
Subaccount approve a New Investment Advisory Agreement, but do not approve the
New Management Agreement (Proposal 1), the Current Management Agreement and the
Current
Investment Advisory Agreement will remain in effect.
THE BOARD OF MANAGERS, INCLUDING ALL OF THE INDEPENDENT
MANAGERS, RECOMMENDS THAT THE UNITHOLDERS OF EACH SUBACCOUNT
VOTE "FOR" THE NEW INVESTMENT ADVISORY AGREEMENT FOR THAT
SUBACCOUNT.
PROPOSAL 3
TO ELECT MANAGERS OF THE TARGET ACCOUNT
The Board of Managers recommend that unitholders elect the following
individuals as members of the Board of Managers. The following table provides
information concerning each of the eight nominees. Proxies cannot be voted for
more than eight persons.
Members of the Board of Managers
12
<PAGE>
Name, Age, Office
with the Target Account and
Address
<TABLE>
<CAPTION>
Principal Occupation(s) Units
During Past 5 Years Beneficially Owned,
------------------- Directly or Indirectly, on
December 31, 1998
<S> <C> <C>
13
<PAGE>
*Vincent J. McGuinness Chairman, Chief Executive Officer and -0-
Age 64 Director of McGuinness & Associates,
Manager Endeavor Group, VJM Corporation, until
2101 East Cost Highway July 1996, McGuinness Group (insurance
Suite 300 marketing) and since September 1988,
Corona del Mar, California Endeavor Management Co.; President of
92625 VJM Corporation and until October 1998,
Endeavor Management Co. and, since
February 1996, McGuinness & Associates;
Trustee, Endeavor Series Trust.
Timothy A. Devine Vice President, Plant Control, Inc. -0-
Age 63 (landscape contracting and maintenance);
Manager Trustee, Endeavor Series Trust.
1424 Dolphin Terrace
Corona del Mar, California
92625
Thomas J. Hawekotte President, Thomas J. Hawekotte, P.C. (law -0-
Age 63 practice); Trustee, Endeavor Series Trust.
Manager
6007 North Sheridan Road
Chicago, Illinois 60660
Steven L. Klosterman Since July 1995, President of Klosterman -0-
Age 47 Capital Corporation (investment adviser);
Manager Investment Counselor, Robert J. Metcalf &
5973 Avenida Encinas Associates, Inc. (investment adviser) from
Suite 300 August 1990 to June 1995; Trustee,
Carlsbad, California 92008 Endeavor Series Trust.
14
<PAGE>
Halbert D. Lindquist President, Lindquist, Stephenson & White, -0-
Age 52 Inc. (investment adviser) and since
Manager December 1987 Tucson Asset
1650 E. Fort Lowell Road Management, Inc. (commodity trading
Tucson, Arizona 85719-2324 adviser), and since November 1987,
Presidio Government Securities,
Incorporated (broker-dealer), and since
January 1998, Chief Investment Officer of
Blackstone Alternative Asset
Management; Trustee, Endeavor Series
Trust.
Keith H. Wood Since 1972, Chairman and Chief Executive -0-
Age 62 Officer of Jamison, Eaton & Wood
Manager (investment adviser) and from 1978 to
39 Main Street December 1997, President of Ivory &
Chatham, New Jersey 07928 Sime International, Inc. (investment
adviser); Trustee, Endeavor Series Trust.
Peter F. Muratore From June 1989 to March 1998, President -0-
Age 66 of OCC Distributors (broker-dealer), a
Manager subsidiary of Oppenheimer Capital.
Too Far Trustee, Endeavor Series Trust.
Posthouse Road
Morristown, New Jersey
07960
* William L. Busler President, PFL Life Insurance Company. -0-
Age 52
Manager
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
</TABLE>
* An "interested person" of the Target Account as defined in the 1940 Act.
Officers of the Trust
The following table provides information concerning each officer of the
Target Account who served during all or part of the last fiscal year of the
Target Account.
15
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Occupation Office Age Officer Since
----------------------------- ------ --- -------------
<S> <C> <C> <C> <C>
Vincent J. McGuinness, Jr.+ President, Chief Financial 34 February 1998
Officer (Treasurer)
From
February 1997 to December 1997,
Executive Vice-President, Chief
of Operations, since March 1997,
Director, since December 1997,
Chief Operating Officer, and
since June 1998, Chief Financial
Officer of Endeavor Group; from
September 1996 to June 1997, and
since June 1998, Chief Financial
Officer, since May 1996, Director
and from June 1997 to October
1998, Executive Vice President
- -Administration, and since October
1998, President of Endeavor Management
Co.; since August 1996, Chief Financial
Officer of VJM Corporation; from May
1996 to January 1997, Executive Vice
President and Director of Sales, Western
Division of Endeavor Group; since May
1996, Chief Financial Officer of
McGuinness & Associates; from July 1993
to August 1995, Rocky Mountain Regional
Marketing Director; President, Chief
Financial Officer, and Trustee of
Endeavor Series Trust.
16
<PAGE>
P. Michael Pond Executive Vice-President- 45 November 1998
Since November 1998, Executive Administration and
Vice- President - Administration and Compliance
Compliance of Endeavor Group and
Endeavor Management Co. and Chief
Investment Officer of Endeavor
Management Co.; from November
1991 to November 1996, Chairman and
President of The Preferred Group of
Mutual Funds; from October 1989 to
December 1996, President of
Caterpillar Securities Inc. and
Caterpillar Investment Manager Ltd.
Pamela A. Shelton Secretary 49 February 1998
Executive Secretary to Chairman of the
Board and Chief Executive Officer
of, and since April 1996, Secretary
of, McGuinness & Associates, Endeavor
Group, VJM Corporation, McGuinness
Group (until July 1996) and Endeavor
Management Co.; Secretary, Endeavor
Series Trust.
</TABLE>
+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
No remuneration will be paid by the Target Account to any member of the Board of
Managers or officer of the Target Account who is affiliated with the Manager or
the Adviser. Each member of the Board of Managers who is not an affiliated
person of the Manager or the Adviser will be reimbursed for out-of-pocket
expenses and currently receives an annual fee of $1,000 and $100 for attendance
at each Managers' Board or committee meeting. Set forth below for each of
members of the Board of Managers is the aggregate compensation paid to such
Manager for the fiscal year ended December 31, 1998.
17
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total
Compensation
From the Target Account
Aggregate and Fund
Name of Compensation Complex
Person From the Target Account Paid to Managers
<S> <C> <C>
Timothy A. Devine $2,643 $15,018
Thomas J. Hawekotte $2,640 $15,015
Steven L. Klosterman $2,640 $15,015
Halbert D. Lindquist $ 350 $8,225
R. Daniel Olmstead* $ 700 $13,075
Keith H. Wood $ 700 $13,075
Peter F. Muratore $ 700 $6,700
</TABLE>
- ---------------
* Former Manager - retired as of December 31, 1998.
The Rules and Regulations of the Target Account provide that the Target
Account will indemnify members of the Board of Managers and officers against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Target Account, except if it
is determined in the manner specified in the Rules and Regulations that they
have not acted in good faith in the reasonable belief that their actions were in
the best interests of the Target Account or that such indemnification would
relieve any officer or member of the Board of Managers of any liability to the
Target Account or its unitholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties. The Target Account, at its
expense, provides liability insurance for the benefit of the members of the
Board of Managers and officers.
The Target Account has an audit committee consisting of Messrs. Devine,
Hawekotte, Klosterman, Lindquist, Muratore, and Wood. During the Target
Account's fiscal year ended December 31, 1998 there were no meetings of the
audit committee and four meetings of the Board of Managers. Each Manager except
Mr. Lindquist attended at least 75 percent of the Board of Managers meetings
held while he was a Manager.
REQUIRED VOTE
Election of the listed nominees for the Board of Managers requires the
affirmative vote of the holders of the majority of the Units of the Target
Account present or represented by proxy at the Special Meeting. For this
purpose, Units of all Subaccounts are treated as a single class.
THE BOARD OF MANAGERS, INCLUDING ALL THE INDEPENDENT
MANAGERS, RECOMMENDS THAT UNITHOLDERS VOTE "FOR" EACH OF THE
EIGHT NOMINEES.
18
<PAGE>
PROPOSAL 4
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF THE TARGET ACCOUNT
At a meeting held on March 1, 1999, the Board of Managers selected
Ernst & Young LLP as independent auditors of the Target Account for the fiscal
year ending December 31, 1999. The Board of Managers recommends that unitholders
of the Target Account ratify the selection of Ernst & Young LLP. The Target
Account has been advised by Ernst & Young LLP that at December 31, 1998 neither
the firm nor any of its partners had any direct or indirect financial interest
in the Target Account. A representative of Ernst & Young LLP will be available
at the meeting to answer questions concerning the Target Account's financial
statements and will have an opportunity to make a statement if he or she chooses
to do so.
REQUIRED VOTE
Ratification of the selection of Ernst & Young LLP as independent
auditors of the Target Account requires the affirmative vote of the holders of a
majority of the Target Account's outstanding Units present or represented by
proxy at the Special Meeting. For this purpose, Units of all Subaccounts are
treated as a single class.
THE BOARD OF MANAGERS, INCLUDING ALL THE INDEPENDENT MANAGERS,
RECOMMENDS THAT UNITHOLDERS VOTE "FOR" RATIFYING THE SELECTION OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS OF THE TARGET ACCOUNT.
OTHER MATTERS
Submission of Unitholders' Proposals
The Target Account is not generally required to hold annual or special
meetings of unitholders. Unitholders wishing to submit proposals for inclusion
in a proxy statement for a subsequent unitholders' meeting should send their
written proposals to the Assistant Secretary of the Target Account, c/o First
Data Investor Services Group, Inc., Mail Zone BOS610, 101 Federal Street,
Boston, MA 02111.
Unitholders' Request for Special Meeting
Unitholders holding at least 10% of the Target Account's outstanding
voting securities (as defined in the 1940 Act) may require the calling of a
meeting of the Target Account's unitholders for the purpose of voting on the
removal of any Board member. Meetings of the Target Account's unitholders for
any other purpose will also be called by the Board of Managers when requested in
writing by unitholders holding at least 10% of the Units then outstanding or, if
the Board members shall fail to call or give notice of any meeting of
unitholders for a period of 30
19
<PAGE>
days after such application, unitholders holding at least 10% of the Units then
outstanding may call and give notice of such meeting.
Other Matters to Come Before the Meeting
The Board of Managers does not intend to present any other business at
the Special Meeting other than as described in this Proxy Statement, nor is the
Board aware that any unitholder intends to do so. If, however, any other matters
are properly brought before the Special Meeting, the persons named in the
accompanying proxy card will vote thereon in accordance with their judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. UNITHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED
TO COMPLETE, SIGN, DATE, AND RETURN THE PROXY AS SOON AS POSSIBLE
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
May 10, 1999
20
<PAGE>
EXHIBIT A
INFORMATION CONCERNING UNITS
OUTSTANDING AS OF APRIL 23, 1999
Name of Subaccount Number of Units Outstanding
The DowSM Target 10 (July Series) 11,437,440.884
--------------
The DowSM Target 5 (July Series) 14,725,199.144
- -------------------------------- --------------
The DowSM Target 10 (January Series) 4,753,268.019
- ------------------------------------ ---------------
The DowSM Target 5 (January Series) 4,754,115.068
- ----------------------------------- ---------------
-1-
<PAGE>
EXHIBIT B
UNDERLINED LANGUAGE WILL BE ADDED
[BRACKETED] LANGUAGE WILL BE DELETED
MANAGEMENT AGREEMENT
[June 15, 1998]
July 8, 1999
Endeavor Management Co. [,Managing Partner
Endeavor Investment Advisers]
Suite 300
2101 East Coast Highway
Corona del Mar, CA 92625
Dear Sirs:
PFL Endeavor Target Account (the "Account"), a managed separate account
created under the laws of the State of Iowa, herewith confirms its agreement
with Endeavor Management Co. [Investment Advisers], a California corporation
[general partnership,] (the "Manager") as follows:
1. Investment Description; Appointment
The Account desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the limitations specified in
its Rules and Regulations as amended from time to time, and in its registration
statement filed with the Securities and Exchange Commission ("SEC") on Form N-3,
as amended from time to time (the "Registration Statement"), and in such manner
and to such extent as may from time to time be approved by the Board of Managers
of the Account. The Account is currently divided into four [two] subaccounts:
[DJIA] The Dow Target 10 [Subaccount] (July Series), The Dow [and DJIA] Target 5
[Subaccount] (July Series), The Dow Target 10 (January Series), and The Dow
Target 5 (January Series). The Account may in the future be divided into
additional subaccounts. Such existing and future subaccounts are hereinafter
referred to as the "Subaccounts." Copies of the Registration Statement and the
Accounts' Rules and Regulations have been or will be submitted to the Manager.
The Account desires to employ the Manager to act as its investment manager. The
Account acknowledges and agrees that the Manager intends to appoint a person to
act as investment adviser ("Adviser") to render investment advice to each of the
Subaccounts. Such Adviser shall make all determinations with respect to the
Subaccount's assets for which it has responsibility. The Manager accepts this
appointment and agrees to furnish the services for the compensation set forth
below.
-1-
<PAGE>
2. Services as Investment Manager
(a) Subject to the supervision and direction of the Board of Managers of
the Account, the Manager will have (i) overall supervisory responsibility for
the general management and investment of the Subaccounts' assets, and (ii) full
investment discretion to make all determinations with respect to the investment
of a Subaccount's assets not then managed by an Adviser. In connection with its
responsibilities set forth under (i) above, the Account acknowledges and agrees
that the Manager will select an Adviser to render investment advice to each of
the Subaccounts. Each such Adviser shall make all determinations with respect to
the Subaccount's assets for which it has responsibility. In addition, the
Manager will conduct a program of evaluations of the Advisers' performance,
review the activities of the Advisers for compliance with the Subaccounts'
investment objectives and policies and will keep the Account informed of
developments materially affecting the Subaccounts and shall, on its own
initiative, furnish, or cause the Adviser to furnish, to the Account from time
to time whatever information the Manager believes appropriate for this purpose.
(b) The Manager will also furnish to the Account, at its own expense and
without renumeration from or other cost to the Account, the following:
(i) Office Space. The Manager will provide office space in the
offices of the Manager or in such other place as may be agreed upon by the
parties hereto from time to time, and all necessary office facilities and
equipment;
(ii) Personnel. The Manager will provide necessary executive and
other personnel, including personnel for the performance of clerical and other
office functions, exclusive of those functions: (A) related to and to be
performed under the Account's contract or contracts for administration,
custodial, accounting, bookkeeping, transfer or similar services by the entity
selected to perform such services; and (B) related to the investment advisory
services to be provided by the Adviser pursuant to an investment advisory
agreement; and
(iii) Preparation of Prospectus and Other Documents. The Manager
will provide other information and services, other than services of outside
counsel or independent accountants or investment advisory services to be
provided by the Adviser under an investment advisory agreement, required in
connection with the preparation of all registration statements and prospectuses,
prospectus supplements, statements of additional information, all annual,
semiannual, and periodic reports to policy owners of the Account, regulatory
authorities, or others, and all notices and proxy solicitation materials,
furnished to policy owners of the Account or regulatory authorities, and all tax
returns.
(c) The records relating to the services provided under the Agreement
shall be the property of the Account and shall be under its control; however,
the Account shall furnish to the Manager such records and permit it to retain
such records (either in original or in duplicate form) as it shall reasonably
require an order to carry out its duties or to satisfy applicable regulatory
-2-
<PAGE>
requirements. In the event of the termination of this Agreement, such records
shall promptly be returned to the Account by the Manager free from any claim or
retention of rights therein.
(d) The services of the Manager to the Account hereunder are not to be
deemed exclusive, and the Manager shall be free to render similar services to
others and to engage in other activities, so long as the services rendered to
the Account are not impaired.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Account will pay the Manager a fee at the respective annual rates of the value
of each Subaccount's average daily net asset set forth in Schedule A hereto as
such schedule may be amended from time to time. Such fees shall be accrued daily
and paid monthly as soon as practicable after the end of each month. If the
Manager shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Manager, the value of the Subaccounts' net assets shall be computed at the
times and in the manner specified in the Registration Statement.
4. Expenses
The Account shall pay all expenses other than those expressly assumed by
the Manager herein, which expenses payable by the Account shall include, but are
not limited to:
a. Fees to the Manager;
b. Legal and audit expenses;
c. Fees and expenses related to the registration and qualification of the
Account and its Units for distribution under federal and state securities laws;
d. Expenses of the Account's transfer agent, custodian and administrator;
e. Salaries, fees and expenses of members of the Board of Managers and
executive officers of the Account who are not "affiliated persons" of the
Manager or the Advisers within the meaning of the 1940 Act;
f. Taxes (including the expenses related to preparation of tax returns) and
corporate or other fees levied against the Account;
g. Brokerage commissions and other expenses associated with the purchase
and sale of portfolio securities for the Account;
h. Expenses, including interest, of borrowing money;
-3-
<PAGE>
i. Expenses incidental to meetings of the Account's policy owners, Board of
Managers and the maintenance of the Account's organizational existence;
j. Expenses of preparing, printing and mailing notices, proxy material,
reports to regulatory bodies and reports to policy owners of the Account;
k. Expenses of preparing and typesetting of prospectuses of the Account;
l. Expenses of printing and distributing prospectuses to policy owners of
the Account;
m. Association membership dues;
n. Premiums for fidelity insurance, directors and officers liability
insurance and other coverage;
o. Charges of an independent pricing service to value the Subaccount's
assets;
p. Expenses related to the purchase or redemption of the Account's units;
and
q. Such nonrecurring expenses as may arise, including those associated
with actions, suits, or proceedings to which the Account is a party and arising
from any legal obligation which the Account may have to indemnify its officers
and members of the Board of Managers with respect thereto.
5. Standard of Care
The Manager shall exercise its best judgment in rendering the services
hereunder. The Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Account in connection with the matters to
which this Agreement relates, provided that nothing herein shall be deemed to
protect or purport to protect the Manager against liability to the Account or to
the policy owners of the Account to which the Manager would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Manager's reckless disregard
of its obligations and duties under this Agreement. Any person, even though an
officer, director, employee or agent of the Manager, who may be or become an
officer, member of the Board of Managers, employee or agent of the Account,
shall be deemed, when rendering services to the Account to be rendering such
services to or to be acting solely for the Account and not as an officer,
director, employee or agent, or one under the control or direction of the
Manager, even though paid by it.
6. Term
This Agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of two years from the date hereof and
indefinitely thereafter provided that its
-4-
<PAGE>
continuance after such two year period as to each Subaccount shall be
specifically approved at least annually by vote of a majority of the outstanding
voting securities of such Subaccount or by vote of a majority of the Account's
Board of Managers; and further provided that such continuance is also approved
annually by the vote of a majority of the Board of Managers who are not parties
to this Agreement or interested persons of the Account or the Manager, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated as to any Subaccount at any time, without payment of
any penalty, by the Account's Board of Managers or by a vote of a majority of
the outstanding voting securities of such Subaccount upon 60 days' prior written
notice to the Manager, or by the Manager upon 90 days' prior written notice to
the Account, or upon such shorter notice as may be mutually agreed upon. This
Agreement may be amended at any time by the Manager and the Account, subject to
approval by the Account's Board of Managers and, if required by applicable SEC
rules and regulations, a vote of a majority of the Account's outstanding voting
securities. This Agreement shall terminate automatically and immediately in the
event of its assignment. The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act.
7. Limitation of Account's Liability
The Manager agrees that the Account's obligations hereunder in any case
shall be limited to the Account and to its assets and that the Manager shall not
seek satisfaction of any such obligation from the policy owners of the Account
nor from any member of its Board of Managers, officer, employee or agent of the
Account.
8. Force Majeure
The Manager shall not be liable for delays or errors occurring by reason
of circumstances beyond its control, including but not limited to acts of civil
or military authority, national emergencies, work stoppages, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control, the
Manager shall take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto.
9. 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.
10. Miscellaneous
This Agreement constitutes the full and complete agreement of the parties
hereto with respect to the subject matter hereof. Each party agrees to perform
such further actions and execute such further documents as are necessary to
effectuate the purposes hereof. This
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Agreement shall be construed and enforced in accordance with and governed by the
laws of the State of California. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed in
several counterparts, all of which together shall for all purposes constitute
one Agreement, binding on all the parties.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PFL ENDEAVOR TARGET ACCOUNT
By [Signature omitted]
Accepted:
ENDEAVOR MANAGEMENT CO. [INVESTMENT ADVISERS]
By: [Signature omitted]
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
<S> <C>
The Dow [DJIA] Target 10 [Subaccount] (July Series) 0.75% of average daily net assets
- ------- -------------
The Dow [DJIA] Target 5 [Subaccount] (July Series) 0.75% of average daily net assets
- ------- -------------
The Dow Target 10 (January Series) 0.75% of average daily net assets
- ---------------------------------- ---------------------------------
The Dow Target 5 (January Series) 0.75% of average daily net assets
- --------------------------------- ---------------------------------
</TABLE>
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<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
Directors and Officers of Endeavor Management Co.
<S> <C>
Vincent J. McGuinness Director, Chairman and CEO
Vincent J. McGuinness, Jr. Director, Chief Operating Officer,
and Chief Financial Officer
P. Michael Pond Executive Vice President - Administration
and Compliance and Chief Investment
Officer
Pamela A. Shelton Secretary
</TABLE>
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<PAGE>
PFL ENDEAVOR TARGET ACCOUNT
The DowSM Target 10 (July Series)
The DowSM Target 5 (July Series)
The DowSM Target 10 (January Series)
The DowSM Target 5 (January Series)
THIS SOLICITATION IS BEING MADE ON BEHALF OF
THE BOARD OF MANAGERS.
The undersigned contract owner, annuitant or participant, by completing this
form, does hereby appoint PFL Life Insurance Company attorney and proxy for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all units of beneficial
interest which the undersigned is entitled to vote at a Special Meeting of
Unitholders to be held at 11:00 a.m. Pacific Time on July 2, 1999 at the Four
Seasons Hotel, 690 Newport Center Drive, Newport Beach, California 92660 and at
any adjournments thereof.
The interest represented by this proxy will be voted as directed on the reverse
side, or if no direction is indicated, will be voted FOR the proposals . If a
proxy is not received from a particular contract owner, participant or
annuitant, then votes attributable to that interest will be allocated in the
same ratio as votes for which instructions have been received.
The undersigned, by completing this form, does hereby request that the proxy be
authorized to exercise its discretion in voting upon such other business as may
properly come before the
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<PAGE>
meeting. The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and Proxy Statement, and revokes any proxy heretofore given with respect
to the votes covered by this proxy.
PLEASE VOTE, DATE, SIGN EXACTLY AS YOUR NAME APPEARS AT
LEFT AND RETURN THIS FORM IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE .
Dated_______________ , 1999 ______________________________
Please vote by filling in the appropriate box(es) below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal 1. To approve a new management agreement FOR AGAINST ABSTAIN
--- ------- -------
between the Target Account and Endeavor
Management Co.
Proposal 2. To approve a new investment advisory FOR AGAINST ABSTAIN
--- ------- -------
agreement between Endeavor Management
Co. and First Trust Advisors, L.P.
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Proposal 3. To elect 8 members of the Board of FOR WITHHELD
Managers of the Target Account to serve
until the next meeting or until their
successors are elected and qualified.
(01) Timothy A. Devine, (02) Steven C. Klosterman,
(03) Keith H. Wood, (04) Vincent J. McGuinness,
(05) Thomas J. Hawekotte, (06) Halbert D. Lindquist,
(07) Peter F. Muratore, (08) William Busler
INSTRUCTION: To withhold authority to vote for any
individual nominee, write the nominee's name on the
space provided below.
- --------------------------------------
Proposal 4. To ratify the selection of Ernst & Young FOR AGAINST ABSTAIN
LLP as independent auditors of the Target
Account.
</TABLE>
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