As filed with the Securities and Exchange Commission on August 21, 1996
Securities Act File No. 33-27352
Investment Company Act File No. 811-5780
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 15 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 18
ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
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James R. McInnis
-------------------------
President
Endeavor Series Trust
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625
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(Name and Address of Agent for Service)
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Copies to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W. Washington, D.C. 20036
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on ____________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on ____________ pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of Rule 485
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
_________________________________________
The Registrant hereby declares its intention to register an
indefinite number of shares of beneficial interest of its
Opportunity Value Portfolio and Enhanced Index Portfolio.
The Registrant has previously filed a declaration of
indefinite registration of shares of beneficial interest of
its TCW Money Market Portfolio (formerly, Money Market
Portfolio), TCW Managed Asset Allocation Portfolio (formerly,
Managed Asset Allocation Portfolio), T. Rowe Price
International Stock Portfolio (formerly, Global Growth
Portfolio), Value Equity Portfolio (formerly, Quest for Value
Equity Portfolio), Value Small Cap Portfolio (formerly, Quest
for Value Small Cap Portfolio), Dreyfus U.S. Government
Securities Portfolio (formerly, U.S. Government Securities
Portfolio), T. Rowe Price Equity Income Portfolio and T. Rowe
Price Growth Stock Portfolio pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, (the "1940 Act").
Registrant's Rule 24f-2 Notice, on behalf of its TCW Money
Market Portfolio, TCW Managed Asset Allocation Portfolio, T.
Rowe Price International Stock Portfolio, Value Equity
Portfolio, Value Small Cap Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price Equity Income Portfolio
and T. Rowe Price Growth Stock Portfolio for the fiscal year
ended December 31, 1995 was filed on February 28, 1996.<PAGE>
ENDEAVOR SERIES TRUST
Cross Reference Sheet
Pursuant to Rule 495(a)
Part A
Item Registration Statement
No. Caption Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial
Information Financial Highlights
4. General Description
of Registrant Cover Page; The Fund;
Investment Objectives and
Policies
5. Management of the Fund The Fund; Management of
the Fund; Additional
Information
5A. Management's Discussion
of Fund Performance Not Applicable
6. Capital Stock and Other
Securities The Fund; Dividends,
Distributions and Taxes;
Organization and
Capitalization of the
Fund; Additional
Information
7. Purchase of Securities
Being Offered Sale and Redemption of
Shares
8. Redemption or Repurchase Sale and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
PART B
Item Registration Statement Caption in Statement
No. Caption of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History Organization and
Capitalization of the Fund
13. Investment Objectives and
Policies Investment Objectives and
Policies
14. Management of the Fund Management of the Fund
15. Control Persons and
Principal Holders of
Securities Management of the Fund
16. Investment Advisory and
Other Services Management of the Fund
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and Other
Securities Organization and
Capitalization of the Fund
19. Purchase, Redemption and
Pricing of Securities
Being Offered Net Asset Value;
Redemption of Shares
20. Tax Status Taxes
21. Underwriters Management of the Fund
22. Calculation of
Performance Data Performance Information
23. Financial Statements Financial Statements
PART C
The information required to be included in Part C is
set forth under the appropriate Item, so numbered, in Part C
to this Post-Effective Amendment.
Prospectus
ENDEAVOR SERIES TRUST
Endeavor Series Trust (the "Fund") is a diversified,
open-end management investment company, that offers a
selection of managed investment portfolios, each with its own
investment objective designed to meet different investment
goals. There can be no assurance that these investment
objectives will be achieved.
This Prospectus describes the following ten portfolios
currently offered by the Fund (the "Portfolios").
* TCW Money Market Portfolio
* TCW Managed Asset Allocation Portfolio
* T. Rowe Price International Stock Portfolio
* Value Equity Portfolio
* Dreyfus Small Cap Value Portfolio
* Dreyfus U.S. Government Securities Portfolio
* T. Rowe Price Equity Income Portfolio
* T. Rowe Price Growth Stock Portfolio
* Opportunity Value Portfolio
* Enhanced Index Portfolio
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information
about the Fund and the Portfolios that a prospective investor
should know before investing. Please read the Prospectus and
retain it for future reference. Additional information
contained in a Statement of Additional Information also dated
November 4, 1996 has been filed with the Securities and
Exchange Commission and is available upon request without
charge by writing or calling the Fund at the address or
telephone number set forth on the back cover of this
Prospectus. The Statement of Additional Information is
incorporated by reference into this Prospectus.
The date of this Prospectus is November 4, 1996.
THE FUND
Endeavor Series Trust is a diversified, open-end
management investment company that offers a selection of
managed investment portfolios. Each portfolio constitutes a
separate mutual fund with its own investment objective and
policies. The Fund currently issues shares of ten portfolios.
The Trustees of the Fund may establish additional portfolios
at any time.
Shares of the Portfolios are issued and redeemed at their
net asset value without a sales load and are offered to
various separate accounts of PFL Life Insurance Company and
certain of its affiliates ("PFL") to fund various insurance
contracts, including variable life insurance policies (whether
scheduled premium, flexible premium or single premium
policies) or variable annuity contracts. These insurance
contracts are hereinafter referred to as the "Contracts." The
rights of PFL as the record holder for a separate account of
shares of the Portfolios are different from the rights of the
owner of a Contract. The terms "shareholder" or "shareholders"
in this Prospectus refer to PFL and not to any Contract owner.
The structure of the Fund permits Contract owners, within
the limitations described in the appropriate Contract, to
allocate the amounts held by PFL under the Contracts for
investment in the various portfolios of the Fund. See the
prospectus and other material accompanying this Prospectus for
a description of the Contracts, which portfolios of the Fund
are available to Contract owners, and the relationship between
increases or decreases in the net asset value of shares of the
portfolios (and any dividends and distributions on such
shares) and the benefits provided under the Contracts.
It is conceivable that in the future it may be
disadvantageous for scheduled premium variable life insurance
separate accounts, flexible and single premium variable life
insurance separate accounts, and variable annuity separate
accounts to invest simultaneously in the Fund due to tax or
other considerations. The Trustees of the Fund intend to
monitor events for the existence of any irreconcilable
material conflict between or among such accounts, and PFL will
take whatever remedial action may be necessary.
Investment Objectives
The Investment objectives of the Portfolios are as
follows:
TCW Money Market Portfolio (formerly, Money Market
Portfolio) - seeks current income, preservation of capital
and maintenance of liquidity through investment in short-term
money market securities. The Portfolio's shares are neither
insured by nor guaranteed by the U.S. government. The
Portfolio seeks to maintain a constant net asset value of
$1.00 per share although no assurances can be given that such
constant net asset value will be maintained.
TCW Managed Asset Allocation Portfolio (formerly, Managed
Asset Allocation Portfolio) - seeks high total return through
a managed asset allocation portfolio of equity, fixed income
and money market securities.
T. Rowe Price International Stock Portfolio - seeks
long-term growth of capital through investments primarily in
common stocks of established non-U.S. companies.
Value Equity Portfolio (formerly, Quest for Value Equity
Portfolio) - seeks long term capital appreciation through
investment in a diversified portfolio of equity securities
selected on the basis of a value oriented approach to
investing.
Dreyfus Small Cap Value Portfolio (formerly known as the
Value Small Cap Portfolio and prior to that the Quest for
Value Small Cap Portfolio) - seeks capital appreciation
through investment in a diversified portfolio of equity
securities of companies with a median market capitalization of
approximately $750 million, provided that under normal market
conditions at least 75% of the Portfolio's investments will be
in equity securities of companies with capitalizations at the
time of purchase between $150 million and $1.5 billion.
Dreyfus U.S. Government Securities Portfolio (formerly,
U.S. Government Securities Portfolio) - seeks as high a level
of total return as is consistent with prudent investment
strategies by investing under normal conditions at least 65%
of its assets in U.S. government debt obligations and
mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
T. Rowe Price Equity Income Portfolio - seeks to provide
substantial dividend income and also capital appreciation by
investing primarily in dividend-paying common stocks of
established companies.
T. Rowe Price Growth Stock Portfolio - seeks long-term
growth of capital and to increase dividend income through
investment primarily in common stocks of well-established
growth companies.
Opportunity Value Portfolio - seeks growth of capital
over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the percentages of
which will vary based upon the Portfolio Adviser's assessment
of relative values.
Enhanced Index Portfolio - seeks to earn a total return
modestly in excess of the total return performance of the S&P
500 Composite Stock Index (the "S&P 500 Index") while
maintaining a volatility of return similar to the S&P 500
Index.
FINANCIAL HIGHLIGHTS
The following tables are based on a Portfolio share
outstanding throughout each period and should be read in
conjunction with the financial statements and related notes
that also appear in the Fund's Annual Report dated December
31, 1995, and in the Fund's Semi-Annual Report dated June 30,
1996, each of which is incorporated by reference into the
Statement of Additional Information. The information
contained in the Fund's Annual Report has been audited by
Ernst & Young LLP, independent auditors, whose report appears
in the Annual Report. Additional information concerning the
performance of the Fund is included in the Annual Report and
in the Semi-Annual Report which may be obtained without charge
by writing the Fund at the address on the back cover of this
Prospectus.
TCW MONEY MARKET PORTFOLIO*
Six Months
Ended Year Year Year Year Period
6/30/96 Ended Ended Ended Ended Ended
(Unaudited) 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91*
Operating
Performance:
Net asset value,
beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment
income# 0.0238 0.0540 0.0337 0.0218 0.0287 0.0377
Distributions:
Dividends from
net
investment
income (0.0238) (0.0540) (0.0336) (0.0218) (0.0287) (0.0377)
Distributions
from net
realized
capital
gains ---- ---- (0.0001) ---- ---- ----
Total
distributions (0.0238) (0.0540) (0.0337) (0.0218) (0.0287) (0.0377)
Net asset
value,
end of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return++ 2.41% 5.54% 3.41% 2.19% 2.90% 3.84%
Ratios to
average net
assets/
supplemental
data:
Net assets, end
of period
(in 000's) $31,241 $27,551 $20,766 $12,836 $4,527 $1,907
Ratio of net
investment
income to
average net
assets 4.80%+ 5.37% 3.58% 2.19% 2.84% 5.02%+
Ratio of
operating
expenses to
average net
assets** 0.60%+ 0.60% 0.85% 0.99% 0.91% 0.00%+
* Effective May 1, 1996, the name of the Money Market Portfolio was
changed to TCW Money Market Portfolio. The Portfolio commenced
operations on April 8, 1991.
** Annualized operating expense ratios before waiver of fees and/or
reimbursement of expenses by investment manager for the years ended
December 31, 1993, December 31, 1992 and the period ended December
31, 1991 were 1.23%, 2.37% and 8.48%, respectively.
+ Annualized.
++ Total return represents the aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
# Net investment income/(loss) before fees waived and/or reimbursement
of expenses by investment manager for the years ended December 31,
1993, December 31, 1992 and the period ended December 31, 1991 were
$0.0195, $0.0140 and $(0.0259), respectively.
TCW MANAGED ASSET ALLOCATION PORTFOLIO*
Six Months
Ended Year Year Year Year Period
6/30/96 Ended Ended Ended Ended Ended
(Unaudited) 12/31/95 12/31/94+++ 12/31/93+++ 12/31/92+++ 12/31/91*
Operating
Performance:
Net asset value,
beginning of
period $16.28 $13.48 $14.30 $12.31 $11.37 $10.00
Net investment
income# 0.12 0.33 0.28 0.23 0.24 0.10
Net realized and
unrealized gain/
(loss)on
investments 1.30 2.72 (1.03) 1.84 0.77 1.27
Net increase/
(decrease)
in net assets
from investment
operations 1.42 3.05 (0.75) 2.07 1.01 1.37
Dividends from
net investment
income (0.32) (0.25) (0.07) (0.08) (0.07) ---
Net asset value,
end of period $17.38 $16.28 $13.48 $14.30 $12.31 $11.37
Total return++ 8.69% 22.91% (5.28)% 16.79% 9.01% 13.70%
Ratios to average
net assets/
supplemental
data:
Net assets, end
of period
(in 000's) $219,790 $198,876 $172,449 $96,657 $14,055 $4,247
Ratio of net
investment
income to
average net
assets 1.46%+ 2.12% 2.03% 1.71% 2.11% 4.54%+
Ratio of
operating
expenses to
average net
assets** 0.87%+ 0.84% 0.90% 1.12% 1.18% 0.00%+
Portfolio
turnover
rate 33% 93% 67% 67% 50% 61%
Average
commission rate
(per share of
security)(a) $0.0029 --- --- --- ---
* Effective May 1, 1996, the name of the Managed Asset Allocation
Portfolio was changed to TCW Managed Asset Allocation Portfolio.
The Portfolio commenced operations on April 8, 1991.
** Annualized operating expense ratios before waiver of fees and/or
reimbursement of expenses by investment manager for the year ended
December 31, 1992 and the period ended December 31, 1991 were 1.73%
and 5.18%, respectively.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data
for this period since use of the undistributed method does not
accord with results of operations.
# Net investment income/(loss) before fees waived and/or reimbursement
of expenses by investment manager for the year ended December 31,
1992 and the period ended December 31, 1991 were $0.18 and $(0.01),
respectively.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO*
Six Months
Ended Year Year Year Year Period
6/30/96 Ended Ended Ended Ended Ended
(Unaudited)+++ 12/31/95## 12/31/94 12/31/93+++ 12/31/92+++ 12/31/91*
Operating
Performance:
Net asset value,
beginning of
period $12.19 $11.31 $11.99 $10.12 $10.52 $10.00
Net investment
income/(loss)# 0.09 0.09 (0.02) (0.04) 0.00*** 0.06
Net realized and
unrealized
gain/(loss)on
investments 1.06 1.06 (0.66) 1.91 (0.38) 0.46
Net increase/
(decrease) in
net assets
from investment
operations 1.15 1.15 (0.68) 1.87 (0.38) 0.52
Distributions:
Dividends from
net investment
income (0.09) ---- ---- ---- (0.02) ----
Distributions
from net
realized gains 0.00*** (0.27) ---- ---- ---- ----
Total
Distributions (0.09) (0.27) ---- ---- (0.02) ----
Net asset value,
end of period $13.25 $12.19 $11.31 $11.99 $10.12 $10.52
Total return++ 9.45% 10.37% (5.67)% 18.48% (3.61)% 5.20%
Ratios to average
net assets/
supplemental
data:
Net assets, end
of period
(in 000's) $115,036 $92,352 $84,102 $52,777 $6,305 $3,200
Ratio of net
investment
income/(loss)
to average net
assets 1.34%+ 0.81% (0.16)% (0.31%) 0.01% 3.18%+
Ratio of
operating
expenses to
average net
assets** 1.21%+ 1.15% 1.16% 1.52% 1.43% 0.00%+
Portfolio
turnover
rate 7% 111% 88% 37% 34% 0%
Average
commission
rate (per
share of
security)(a) $.0014 --- --- --- ---
* Effective March 24, 1995, the name of the Global Growth Portfolio
was changed to T. Rowe Price International Stock Portfolio and the
investment objective was changed from investment on a global basis
to investment on an international basis (i.e., in non-U.S.
companies). The Portfolio commenced operations on April 8, 1991.
** Annualized operating expense ratios before waiver of fees and/or
reimbursement of expenses by investment manager for the year ended
December 31, 1992 and the period ended December 31, 1991 were 2.10%
and 6.83%, respectively.
*** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data
for this period since use of the undistributed method does not
accord with results of operations.
# Net investment loss before fees waived and/or reimbursement of
expenses by investment manager for the year ended December 31, 1992
and the period ended December 31, 1991 were $(0.07) and $(0.07),
respectively.
## Rowe Price-Fleming International, Inc. became the Portfolio's
Adviser effective January 3, 1995.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.<PAGE>
VALUE EQUITY PORTFOLIO*
Six Months
Ended Year Year Period
6/30/96 Ended Ended Ended
(Unaudited)+++ 12/31/95 12/31/94 12/31/93*+++
Operating Performance:
Net asset value, beginning
of period $14.23 $10.69 $10.28 $10.00
Net investment income# 0.10 0.15 0.09 0.05
Net realized and unrealized
gain on investments 1.59 3.52 0.33 0.23
Net increase in net assets
from investment operations 1.69 3.67 0.42 0.28
Distributions:
Dividends from net investment
income (0.13) (0.09) (0.01) ---
Distributions from net
realized gains (0.24) (0.04) --- ---
Total distributions (0.37) (0.13) (0.01) ---
Net asset value, end of
period $15.55 $14.23 $10.69 $10.28
Total return++ 11.89% 34.59% 4.09% 2.80%
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000's) $96,555 $68,630 $32,776 $11,178
Ratio of net investment
income to average
net assets 1.35%+ 1.56% 1.31% 0.84%+
Ratio of operating
expenses to average
net assets** 0.93%+ 0.86% 1.02% 1.30%+
Portfolio turnover rate 20% 28% 56% 1%
Average commission rate
(per share of security)(a) $0.0571 --- --- ---
* Effective May 1, 1996, the name of the Quest for Value Equity
Portfolio was changed to Value Equity Portfolio. The Portfolio
commenced operations on May 27, 1993.
** Annualized expense ratio before waiver of fees by investment manager
for the period ended December 31, 1993 was 2.10%.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data
for this period since use of the undistributed method did not accord
with results of operations.
# Net investment income before fees waived by investment manager for
the period ended December 31, 1993 was $0.00.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.
DREYFUS SMALL CAP VALUE PORTFOLIO*
Six Months
Ended Year Year Period
6/30/96 Ended Ended Ended
(Unaudited)+++ 12/31/95 12/31/94+++ 12/31/93*+++
Operating Performance:
Net asset value, beginning
of period $12.22 $10.98 $11.18 $10.00
Net investment income# 0.08 0.15 0.10 0.22
Net realized and unrealized
gain/(loss) on investments 1.02 1.36 (0.30) 0.96
Net increase/(decrease) in
net assets from investment
operations 1.10 1.51 (0.20) 1.18
Distributions:
Dividends from net
investment income (0.14) (0.10) --- ---
Distributions from net
realized gains (0.46) (0.17) --- ---
Total distributions (0.60) (0.27) --- ---
Net asset value, end of
period $12.72 $12.22 $10.98 $11.18
Total return++ 8.78% 14.05% (1.79)% 11.80%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $67,940 $52,597 $35,966 $12,699
Ratio of net investment
income to average
net assets 1.22%+ 1.56% 0.89% 3.98%+
Ratio of operating
expenses to average
net assets** 0.95%+ 0.87% 1.03% 1.30%+
Portfolio turnover rate 38% 75% 77% 41%
Average commission rate
(per share of security)(a) $0.0492 --- --- ---
* Effective October 29, 1996, the name of the Value Small Cap
Portfolio was changed to Dreyfus Small Cap Value Portfolio. On May
1, 1996, the name of the Quest for Value Small Cap Portfolio was
changed to Value Small Cap Portfolio. The Portfolio commenced
operations on May 4, 1993.
** Annualized operating expense ratio before waiver of fees by
investment manager for the period ended December 31, 1993 was 2.10%.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data
for this period since use of the undistributed method did not accord
with results of operations.
# Net investment income before fees waived by investment manager for
the period ended December 31, 1993 was $0.18.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.
DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO*
Six Months
Ended Year Period
6/30/96 Ended Ended
(Unaudited)+++ 12/31/95 12/31/94*+++
Operating performance:
Net asset value, beginning
of period.............. $11.39 $9.96 $10.00
Net investment income#... 0.30 0.30 0.24
Net realized and unrealized
gain/(loss)
on investments......... (0.60) 1.25 (0.28)
Net increase/(decrease) in
net assets
resulting from
investment operations... (0.30) 1.55 (0.04)
Distributions:
Dividends from net investment
income.................. (0.22) (0.12) ----
Distributions from net realized
gains................... (0.12) --- ----
Total distributions....... (0.34) (0.12) ----
Net asset value, end of period... $10.75 $11.39 $9.96
Total return++............ (2.54)% 15.64% (0.40)%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's).............. $19,569 $12,718 $3,505
Ratio of net investment
income to average
net assets............. 5.53%+ 5.58% 4.14%+
Ratio of operating expenses
to average
net assets**........... 0.80%+ 0.84% 0.78%+
Portfolio turnover rate... 143% 161% 100%
* Effective May 1, 1996, the name of the U.S. Government Securities
Portfolio was changed to Dreyfus U.S. Government Securities
Portfolio. The Portfolio commenced operations on May 13, 1994.
** Annualized operating expense ratio before waiver of fees and
reimbursement of expenses by investment manager for the period ended
December 31, 1994 was 1.83%.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method, which more appropriately presents the per share data
for this period since use of the undistributed method did not accord
with results of operations.
# Net investment income before fees waived and reimbursement of
expenses by investment manager for the period ended December 31,
1994 was $0.18.
T. Rowe Price Equity Income Portfolio
Six Months
Ended Year
6/30/96 Ended
Operating performance: (Unaudited)+++ 12/31/95*+++
Net asset value, beginning of year.............. $13.05 $10.00
Net investment income........................... 0.20 0.34
Net realized and unrealized gain on investments. 0.82 2.71
Net increase in net assets resulting from
investment operations......................... 1.02 3.05
Distributions:
Dividends from net investment income.............. (0.10) ---
Distributions from net realized gains............. (0.04) ---
Total distributions............................... (0.14) ---
Net asset value, end of year.................... $13.93 $13.05
Total return++.................................. 7.81% 30.50%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's).............. $45,764 $21,910
Ratio of net investment income to average net
assets........................................ 2.96%+ 3.24%+
Ratio of operating expenses to average net assets. 1.03%+ 1.15%+
Portfolio turnover rate......................... 9% 16%
Average commission rate (per share of security)(a).. $0.0278 ---
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method which more appropriately presents the per share data
for the period since use of the undistributed method did not accord
with results of operations.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.<PAGE>
T. Rowe Price Growth Stock Portfolio
Six Months
Ended Year
6/30/96 Ended
Operating performance: (Unaudited)+++ 12/31/95*+++
Net asset value, beginning of year.... $13.72 $10.00
Net investment income................. 0.09 0.08
Net realized and unrealized gain on
investments......................... 1.00 3.64
Net increase in net assets resulting
from investment operations.......... 1.09 3.72
Distributions:
Dividends from net investment income.. (0.01) ----
Distributions from net realized gains.. (0.24) ----
Total distributions.................... (0.25) ----
Net asset value, end of year........... $14.56 $13.72
Total return++......................... 7.94% 37.20%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)....... $39,539 $21,651
Ratio of net investment income to
average net assets..................... 1.24%+ 0.69%+
Ratio of operating expenses to average
net assets............................. 1.07%+ 1.26%+
Portfolio turnover rate.................. 31% 64%
Average commission rate (per share of
security)(a)........................... $0.0387 ---
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average
share method which more appropriately presents the per share data
for the period since use of the undistributed method did not accord
with results of operations.
(a) Average commission rate paid per share of securities purchased and
sold by the Portfolio.
____________________
Endeavor Investment Advisers (the "Manager") has agreed,
until terminated by the Manager, to assume expenses of the
Portfolios that exceed the rates stated below. This has the
effect of lowering each Portfolio's expense ratio and of
increasing returns otherwise available to investors at the
time such amounts are assumed. While this arrangement is in
effect, the Manager pays all expenses of the Portfolios to the
extent they exceed the following percentages of a Portfolio's
average net assets: TCW Money Market - .99%, TCW Managed Asset
Allocation - 1.25%, T. Rowe Price International Stock - 1.53%,
Value Equity - 1.30%, Dreyfus Small Cap Value -1.30%, Dreyfus
U.S. Government Securities - 1.00%, T. Rowe Price Equity
Income - 1.30%, T. Rowe Price Growth Stock - 1.30%,
Opportunity Value - 1.30% and Enhanced Index - 1.30%.
The offering of shares of the Opportunity Value Portfolio
and Enhanced Index Portfolio is expected to commence on or
about the date of this Prospectus. Accordingly, no comparable
data is available for shares of those Portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The following is a brief description of the investment
objectives and policies of the Portfolios. The investment
objective and the policies of each Portfolio other than those
listed under the caption "Investment Restrictions" in the
Statement of Additional Information are not fundamental
policies and may be changed by the Trustees of the Fund
without the approval of shareholders. Certain portfolio
investments and techniques discussed below are described in
greater detail in the Statement of Additional Information. Due
to the uncertainty inherent in all investments, there can be
no assurance that the
Portfolios will be able to achieve their respective investment
objectives.
TCW Money Market Portfolio
The investment objective of the TCW Money Market
Portfolio (formerly known as the Money Market Portfolio) is to
provide current income, preservation of capital and liquidity
through investment in short-term money market securities.
The Portfolio seeks to maintain a constant net asset
value of $1.00 per share. If the Trustees believe that the
extent of any deviation from a $1.00 price per share may
result in material dilution or other unfair results to
shareholders, they will take such steps as they consider
appropriate to eliminate or reduce these consequences to the
extent reasonably practicable. This may include selling
portfolio securities prior to maturity, shortening the average
maturity of the Portfolio, withholding or reducing dividends,
redeeming shares in kind, reducing the number of the
Portfolio's outstanding shares without monetary consideration,
or utilizing a net asset value per share determined by using
available market quotations.
The Portfolio expects to invest in the following types of
money market securities:
* securities issued or guaranteed as to principal and
interest by the U.S. government or by its agencies
or instrumentalities ("U.S. government securities");
* certificates of deposit, bankers' acceptances and
other obligations issued or guaranteed by bank
holding companies in the United States and their
subsidiaries;
* U.S. dollar denominated obligations ("Eurodollar
obligations") of bank holding companies in the
United States, their subsidiaries and their foreign
branches or of the International Bank for
Reconstruction and Development (also known as the
World Bank);
* commercial paper and other short-term obligations
of, and variable amount master demand notes and
variable rate notes issued by U.S. and foreign
corporations; and
* repurchase agreements (see "Investment Strategies").
Investment Criteria. With respect to investments in money
market securities, in accordance with applicable regulations
of the Securities and Exchange Commission, the Portfolio will:
~ invest only in high quality money market instruments that
present minimal credit risks;
~ invest only in money market instruments with remaining or
implied maturities of thirteen months or less; and
~ maintain an average dollar weighted maturity of the
Portfolio's investments of 90 days or less.
The Portfolio will invest only in high quality money
market instruments, i.e., securities which have been assigned
the highest quality ratings by nationally recognized
statistical rating organizations ("NRSROs") such as "A-1" by
Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("Standard & Poor's") or "Prime-1" by Moody's
Investors Service, Inc. ("Moody's"), or if not rated,
determined to be of comparable quality; provided, that up to
5% of the Portfolio's total assets may be invested in
instruments assigned the second highest quality ratings such
as "A-2" or "Prime-2", or if not rated, determined to be of
comparable quality. For a description of the NRSROs and their
ratings, see the Appendix attached to the Statement of
Additional Information.
The Portfolio may not invest in the securities of any one
issuer if, immediately after such investment, more than 5% of
the total assets of the Portfolio (taken at current value)
would be invested in the securities of such issuer; provided,
that this limitation does not apply to U.S. government
securities or to repurchase agreements secured by such
securities and that with respect to 25% of the Portfolio's
total assets more than 5% may be invested in securities of any
one issuer for three business days after the purchase thereof
if the securities have been assigned the highest quality
ratings by NRSROs, or if not rated, have been determined to be
of comparable quality. With respect to U.S. government
securities, the Portfolio will not invest more than 55% of its
assets in securities issued or guaranteed by the U.S. Treasury
or any single U.S. government agency or instrumentality. See
"Investment Restrictions" in the Statement of Additional
Information for a further description of the Portfolio's
investment criteria.
U.S. Government Securities. Securities issued or
guaranteed as to principal and interest by the U.S. government
or its agencies and instrumentalities include U.S. Treasury
obligations, consisting of bills, notes and bonds, which
principally differ in their interest rates, maturities and
times of issuance, and obligations issued or guaranteed by
agencies and instrumentalities which are supported by (i) the
full faith and credit of the U.S. Treasury (such as securities
of the Small Business Administration), (ii) the limited
authority of the issuer to borrow from the U.S. Treasury (such
as securities of the Student Loan Marketing Association) or
(iii) the authority of the U.S. government to purchase certain
obligations of the issuer (such as securities of the Federal
National Mortgage Association). No assurance can be given that
the U.S. government will provide financial support to U.S.
government agencies or instrumentalities as described in
clauses (ii) or (iii) above in the future, other than as set
forth above, since it is not obligated to do so by law.
Other Money Market Securities. Other money market
securities in which the Portfolio may invest include U.S.
dollar denominated instruments (such as bankers' acceptances,
commercial paper, certificates of deposit and Eurodollar
obligations) issued or guaranteed by bank holding companies in
the United States, their subsidiaries and their foreign
branches. These bank obligations may be general obligations of
the parent bank holding company or may be limited to the
issuing entity by the terms of the specific obligation or by
government regulation.
Obligations of the International Bank for Reconstruction
and Development (also known as the World Bank) are supported
by subscribed but unpaid commitments of its member countries.
There can be no assurance that these commitments will be
undertaken or complied with in the future.
The other money market securities in which the Portfolio
may invest also include certain variable and floating rate
instruments and participations in corporate loans to
corporations in whose commercial paper or other short-term
obligations the Portfolio may invest. Because the bank issuing
the participations does not guarantee them in any way, they
are subject to the credit risks generally associated with the
underlying corporate borrower. To the extent that the
Portfolio may be regarded as a creditor of the issuing bank
(rather than of the underlying corporate borrower under the
terms of the loan participation), the Portfolio may also be
subject to credit risks associated with the issuing bank. The
secondary market, if any, for these loan participations is
extremely limited and any such participations purchased by the
Portfolio will be regarded as illiquid.
Other money market securities in which the Portfolio may
invest also include bonds and notes with remaining maturities
of thirteen months or less, variable rate notes and variable
amount master demand notes. A variable amount master demand
note differs from ordinary commercial paper in that it is
issued pursuant to a written agreement between the issuer and
the holder, its amount may be increased from time to time by
the holder (subject to an agreed maximum) or decreased by the
holder or the issuer, it is payable on demand, the rate of
interest payable on it varies with an agreed formula and it is
typically not rated by a rating agency. Transfer of such notes
is usually restricted by the issuer, and there is no secondary
trading market for them. Any variable amount master demand
note purchased by the Portfolio will be regarded as an
illiquid security. See "Investment Restrictions" in the
Statement of Additional Information.
Foreign Securities. The Portfolio may invest up to 10% of
its total assets in the securities (payable in U.S. dollars)
of foreign issuers in developed countries and in the
securities of foreign branches of U.S. banks such as
negotiable certificates of deposit (Eurodollars). Because the
Portfolio may invest in foreign securities, investment in the
Portfolio involves investment risks that are different in some
respects from an investment in a fund which invests only in
debt obligations of U.S. domestic issuers. Such risks may
include adverse future political and economic developments,
the possible imposition of foreign withholding taxes on
interest income payable on the securities held in the
Portfolio, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or
the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest
on securities in the Portfolio. There may also be less
publicly available information about a foreign issuer than
about a domestic issuer and foreign issuers are not generally
subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to
those applicable to domestic issuers.
The Portfolio may employ certain investment strategies
which are described under the caption "Investment Strategies"
below and in the Statement of Additional Information.
TCW Managed Asset Allocation Portfolio
The investment objective of the TCW Managed Asset
Allocation Portfolio (formerly known as the Managed Asset
Allocation Portfolio) is to provide high total return through
a managed asset allocation portfolio of equity, fixed income
and money market securities. The Portfolio seeks to achieve
its objective by investing primarily in securities issued by
United States companies.
The composition of the Portfolio's investments will be
based on the determination by the Portfolio's Adviser (as
hereinafter defined) of the appropriate weighting for each
asset class and will be adjusted periodically. In making
adjustments to the asset allocation, the Portfolio's Adviser
will use its asset allocation model and will integrate its
view of the expected returns for each asset class, conditions
in the stock, bond and money markets, interest rate and
corporate earnings growth trends, and economic conditions.
The asset class weightings may theoretically range from
0% to 100%, although the Portfolio's Adviser expects these
extremes to be reached rarely, if at all, for any class. The
Portfolio will be "rebalanced" or checked for possible
reallocation monthly or more often if market conditions
demand. The Portfolio's Adviser generally expects the number
of asset shifts between asset classes to occur approximately
three or four times per year.
The equity portion of the Portfolio will be invested in a
diversified selection of equity securities of established
companies in sound financial condition. The equity securities
in which the Portfolio will be invested may include common
stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and warrants. The Portfolio's
Adviser will strive to achieve total returns from dividends
and capital gains in excess of those from broadly-based stock
market indices, but will not incur excessive risk of loss to
do so.
The fixed income portion of the Portfolio will be
invested in taxable securities including securities issued or
guaranteed by the U.S. government and its agencies or
instrumentalities, collateralized mortgage obligations that
are issued or guaranteed by the U.S. government or its
agencies or instrumentalities or that are collateralized by a
portfolio of mortgages or mortgage-related securities
guaranteed by such an agency or instrumentality and high grade
corporate and mortgage-backed bonds with maturities typically
ranging from 2 to 30 years. The weighted average maturity of
such investments will generally range from 3 to 10 years and
securities will, at time of purchase, have ratings within the
four highest rating categories established by Moody's,
Standard & Poor's, or a similar NRSRO or if not rated, be of
comparable quality as determined by the Portfolio's Adviser.
The NRSROs' descriptions of these bond ratings are set forth
in the Appendix to the Statement of Additional Information.
Securities rated in the fourth highest category may have
speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to
make principal and interest payments than in the case of
higher grade bonds. Like the three highest grades, however,
these securities are considered investment grade.
Mortgage-backed bonds have yield and maturity
characteristics corresponding to the underlying mortgage
loans. Thus, for example, unlike other bonds, which pay a
fixed rate of interest until maturity when the entire
principal amount comes due, payments on mortgage-backed bonds
include both interest and a partial repayment of principal.
Fluctuating prepayments of principal may result from the
refinancing or foreclosure of the underlying mortgage loans.
Although maturities of the underlying mortgage loans range up
to 30 years, such prepayments may shorten the effective
maturities. Because of the prepayment feature, mortgage-backed
bonds may be less effective than other types of securities as
a means of "locking in" attractive long-term interest rates.
This is caused by the need to reinvest repayments of principal
generally and the possibility of significant unscheduled
prepayments resulting from declines in mortgage interest
rates. As a result, mortgage-backed bonds may have less
potential for capital appreciation during periods of declining
interest rates than other investments of comparable
maturities, while having a comparable risk of decline during
periods of rising interest rates.
Foreign Securities. The Portfolio may invest up to 10%
of its total assets in equity securities (payable in U.S.
dollars) of foreign issuers in developed countries. Because
the Portfolio may invest in foreign securities, investment in
the Portfolio involves investment risks that are different in
some respects from an investment in a fund which invests only
in securities of U.S. domestic issuers. Such risks may
include adverse future political and economic developments,
the possible imposition of foreign withholding taxes on
interest income payable on the securities held in the
Portfolio, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or
the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest
on securities in the Portfolio. There may also be less
publicly available information about a foreign issuer than
about a domestic issuer and foreign issuers are not generally
subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to
those applicable to domestic issuers.
The cash portion of the Portfolio will be invested in the
same portfolio securities that are eligible for investment by
the TCW Money Market Portfolio described above. The Portfolio
may employ certain investment strategies which are discussed
under the caption "Investment Strategies" below and in the
Statement of Additional Information.
T. Rowe Price International Stock Portfolio
The T. Rowe Price International Stock Portfolio was
formerly known as the Global Growth Portfolio. Effective
March 24, 1995, the name of the Global Growth Portfolio was
changed to T. Rowe Price International Stock Portfolio and the
Portfolio's investment objective was changed from seeking
long-term capital appreciation through a policy of investing
in small capitalization common stocks and their convertible
equivalents on a global basis to the investment objective and
policies set forth below.
The investment objective of the T. Rowe Price
International Stock Portfolio is to seek long-term growth of
capital through investments primarily in common stocks of
established non-U.S. companies.
Over the last 30 years, many foreign economies have grown
faster than the United States' economy, and the return from
equity investments in these countries has often exceeded the
return on similar investments in the United States. Moreover,
there has normally been a wide and largely unrelated variation
in performance between international equity markets over this
period. Although there can be no assurance that these
conditions will continue, the Portfolio's Adviser, within the
framework of diversification, seeks to identify and invest in
companies participating in the faster growing foreign
economies and markets. The Adviser believes that investment
in foreign securities offers significant potential for long-term
capital appreciation and an opportunity to achieve
investment diversification.
The Adviser intends to invest substantially all of the
Portfolio's assets outside the United States and diversify
investments broadly among countries throughout the world -
developed, newly industrialized and emerging - by having at
least five different countries represented in the Portfolio.
The Portfolio may invest in countries of the Far East and
Europe as well as South Africa, Australia, Canada, and other
areas (including developing countries). Further, not more
than 20% of the Portfolio's net asset value will be invested
in securities of issuers located in any one country with the
exception of issuers located in Australia, Canada, France,
Japan, the United Kingdom or Germany (where the investment
limitation is 35%). In addition, the Adviser will consider
factors applicable to United States investors in making
investment decisions for the Portfolio.
In seeking its objective, the Portfolio invests primarily
in common stocks of established foreign companies which have,
in the Adviser's opinion, the potential for growth of capital.
However, the Portfolio may also invest in a variety of other
equity related securities such as preferred stocks, warrants
and convertible securities, as well as corporate and
governmental debt securities, when considered consistent with
the Portfolio's investment objective and program. The
Portfolio may also invest in investment funds which have been
authorized by the governments of certain countries
specifically to permit foreign investment in securities of
companies listed and traded on the stock exchanges in these
respective countries. The Portfolio's investment in these
funds is subject to the provisions of the Investment Company
Act of 1940 (the "1940 Act"). If the Portfolio invests in
such investment funds, the Portfolio's shareholders will bear
not only their proportionate share of the expenses of the
Portfolio (including operating expenses and the fees of the
investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium of
their net asset value. Under normal conditions, the
Portfolio's investments in securities other than common stocks
is limited to no more than 35% of its total assets.
In determining the appropriate distribution of
investments among various countries and geographic regions,
the Portfolio's Adviser ordinarily considers the following
factors: prospects for relative economic growth between
foreign countries; expected levels of inflation; government
policies influencing business conditions; the outlook for
currency relationships; and the range of individual investment
opportunities available to international investors.
In analyzing companies for investment, the Adviser
ordinarily looks for one or more of the following
characteristics: an above-average earnings growth per share;
high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial
strength; strong competitive advantages; effective research
and product development and marketing; efficient service;
pricing flexibility; strength of management; and general
operating characteristics which will enable the companies to
compete successfully in their market place. While current
dividend income is not a prerequisite in the selection of
portfolio companies, the companies in which the Portfolio
invests normally will have a record of paying dividends, and
will generally be expected to increase the amounts of such
dividends in future years as earnings increase. It is
expected that the Portfolio's investments will ordinarily be
traded on exchanges located at least in the respective
countries in which the various issuers of such securities are
principally based.
In the event that future economic or financial conditions
abroad adversely affect equity securities, or stocks are
considered overvalued, or the Portfolio's Adviser believes
that investing for defensive purposes is appropriate, or in
order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in U.S. government
securities, investment-grade debt obligations of U.S.
companies and high quality (within the two highest rating
categories assigned by a NRSRO) short-term debt securities
(with remaining maturities of one year or less) including
certificates of deposit, bankers' acceptances, commercial
paper, short-term corporate securities and repurchase
agreements.
The international objectives of the Portfolio allow
investors an opportunity to achieve potentially higher
returns, reflecting participation in countries and economies
with higher growth rates than those available domestically.
However, foreign investments involve certain risks that are
not present in domestic securities. Because the Portfolio
intends to purchase securities denominated in foreign
currencies, a change in the value of any such currency against
the U.S. dollar will result in a change in the U.S. dollar
value of the Portfolio's assets and the Portfolio's income. In
addition, although a portion of the Portfolio's investment
income may be received or realized in such currencies, the
Portfolio will be required to compute and distribute its
income in U.S. dollars. Therefore, if the exchange rate for
any such currency declines after the Portfolio's income has
been earned and computed in U.S. dollars but before conversion
and payment, the Portfolio could be required to liquidate
portfolio securities to make such distributions.
The values of foreign investments and the investment
income derived from them may also be affected unfavorably by
changes in currency exchange control regulations. Although the
Portfolio will invest only in securities denominated in
foreign currencies that are fully exchangeable into U.S.
dollars without legal restriction at the time of investment,
there can be no assurance that currency controls will not be
imposed subsequently. In addition, the values of foreign fixed
income investments will fluctuate in response to changes in
U.S. and foreign interest rates.
There may be less information publicly available about a
foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to
those in the United States. Foreign stock markets are
generally not as developed or efficient as, and may be more
volatile than, those in the United States. While growing in
volume, they usually have substantially less volume than U.S.
markets and the Portfolio's investment securities may be less
liquid and subject to more rapid and erratic price movements
than securities of comparable U.S. companies. Equity
securities may trade at price/earnings multiples higher than
comparable United States securities and such levels may not be
sustainable. There is generally less government supervision
and regulation of foreign stock exchanges, brokers and listed
companies than in the United States. Moreover, settlement
practices for transactions in foreign markets may differ from
those in United States markets. Such differences may include
delays beyond periods customary in the United States and
practices, such as delivery of securities prior to receipt of
payment, which increase the likelihood of a "failed
settlement." Failed settlements can result in losses to the
Portfolio. In less liquid and well developed stock markets,
such as those in some Asian and Latin American countries,
volatility may be heightened by actions of a few major
investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could
significantly affect stock prices and, therefore, share
prices.
Foreign brokerage commissions, custodial expenses and
other fees are also generally higher than for securities
traded in the United States. Consequently, the overall
expense ratios of international funds are usually somewhat
higher than those of typical domestic stock funds.
In addition, the economies, markets and political
structures of a number of the countries in which the Portfolio
can invest do not compare favorably with the United States and
other mature economies in terms of wealth and stability.
Therefore, investments in these countries may be riskier, and
will be subject to erratic and abrupt price movements. Some
economies are less well developed and less diverse (for
example, Latin America, Eastern Europe and certain Asian
countries), and more vulnerable to the ebb and flow of
international trade, trade barriers and other protectionist or
retaliatory measures (for example, Japan, southeast Asia and
Latin America). Some countries, particularly in Latin
America, are grappling with severe inflation and high levels
of national debt. Investments in countries that have recently
begun moving away from central planning and state-owned
industries toward free markets, such as the Eastern European
or Chinese economies, should be regarded as speculative.
Certain portfolio countries have histories of instability
and upheaval (Latin America) and internal politics that could
cause their governments to act in a detrimental or hostile
manner toward private enterprise or foreign investment. Any
such actions, for example, nationalizing an industry or
company, could have a severe and adverse effect on security
prices and impair the Portfolio's ability to repatriate
capital or income. The Portfolio's Adviser will not invest
the Portfolio's assets in countries where it believes such
events are likely to occur.
Income received by the Portfolio from sources within
foreign countries may be reduced by withholding and other
taxes imposed by such countries. Tax conventions between
certain countries and the United States may reduce or
eliminate such taxes. The Portfolio's Adviser will attempt to
minimize such taxes by timing of transactions and other
strategies, but there can be no assurance that such efforts
will be successful. Any such taxes paid by the Portfolio will
reduce its net income available for distribution to
shareholders.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Value Equity Portfolio
The investment objective of the Value Equity Portfolio
(formerly known as the Quest for Value Equity Portfolio) is
long-term capital appreciation through investment in
securities (primarily equity securities) of companies that are
believed by the Portfolio's Adviser to be undervalued in the
marketplace in relation to factors such as the companies'
assets or earnings.
It is the Portfolio Adviser's intention to invest in
securities which in its opinion possess one or more of the
following characteristics: undervalued assets, valuable
consumer or commercial franchises, securities valuation below
peer companies, substantial and growing cash flow and/or a
favorable price to book value relationship.
Investment policies aimed at achieving the Portfolio's
objective are set in a flexible framework of securities
selection which primarily includes equity securities, such as
common stocks, preferred stocks, convertible securities,
rights and warrants in proportions which vary from time to
time. Under normal circumstances at least 65% of the
Portfolio's assets will be invested in common stocks or
securities convertible into common stocks. The Portfolio will
invest primarily in stocks listed on the New York Stock
Exchange. In addition, it may also purchase securities listed
on other domestic securities exchanges or traded in the
domestic over-the-counter market and foreign securities that
are listed on a domestic or foreign securities exchange,
traded in the domestic or foreign over-the-counter markets or
represented by American Depositary Receipts.
In the event that future economic or financial conditions
adversely affect equity securities, or stocks are considered
overvalued, or the Portfolio's Adviser believes that investing
for defensive purposes is appropriate, or in order to meet
anticipated redemption requests, the Portfolio may invest part
or all of its assets in U.S. government securities and high
quality short-term debt securities (with remaining maturities
of one year or less) including certificates of deposit,
bankers' acceptances, commercial paper, short-term corporate
securities and repurchase agreements.
The Portfolio may invest in certain foreign securities
which may represent a greater degree of risk than investing in
domestic securities. These risks are discussed in the above
section of this Prospectus describing the T. Rowe Price
International Stock Portfolio.
It is the present intention of the Portfolio's Adviser to
invest no more than 5% of the Portfolio's net assets in bonds
rated below Baa3 by Moody's or BBB by Standard & Poor's
(commonly known as "junk bonds"). In the event that the
Portfolio's Adviser intends in the future to invest more than
5% of the Portfolio's net assets in junk bonds, appropriate
disclosures will be made to existing and prospective
shareholders. For information about the possible risks of
investing in junk bonds see "Investment Objective and Policies
- - Lower Rated Bonds" in the Statement of Additional
Information.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Dreyfus Small Cap Value Portfolio
The investment objective of the Dreyfus Small Cap Value
Portfolio (formerly known as the Value Small Cap Portfolio and
prior to that as the Quest for Value Small Cap Portfolio) is
to seek capital appreciation through investments in a
diversified portfolio of equity securities of companies with a
median market capitalization of approximately $750 million,
provided that under normal market conditions at least 75% of
the Portfolio's investments will be in equity securities of
companies with capitalizations at the time of purchase between
$150 million and $1.5 billion.
Small-capitalization companies are often under-priced for
the following reasons: (i) institutional investors, which
currently represent a majority of the trading volume in the
shares of publicly-traded companies, are often less interested
in such companies because in order to acquire an equity
position that is large enough to be meaningful to an
institutional investor, such an investor may be required to
buy a large percentage of the company's outstanding equity
securities and (ii) such companies may not be regularly
researched by stock analysts, thereby resulting in greater
discrepancies in valuation.
The Portfolio will invest in equity securities of
domestic and foreign (up to 5% of its total assets) issuers
which would be characterized as "value" companies according to
criteria established by the Portfolio's Adviser. To manage
the Portfolio, the Portfolio's Adviser classifies issuers as
"growth" or "value" companies. In general, the Portfolio's
Adviser believes that companies with relatively low price to
book ratios, low price to earnings ratios or higher than
average dividend payments in relation to price should be
classified as value companies. Alternatively, companies which
have above average earnings or sales growth and retention of
earnings and command higher price to earnings ratios fit the
more classic growth description.
While seeking desirable equity investments, the Portfolio
may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits,
bankers' acceptances, short-term investment grade corporate
bonds and other short-term debt instruments, and repurchase
agreements. Under normal market conditions, the Portfolio
does not expect to have a substantial portion of its assets
invested in money market instruments. However, when the
Portfolio's Adviser determines that adverse market conditions
exist, the Portfolio may adopt a temporary defensive posture
and invest all of its assets in money market instruments.
Equity securities consist of common stocks, preferred
stocks and securities convertible into common stocks.
Securities purchased by the Portfolio will be traded on the
New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options,
warrants, bonds, notes and debentures which are convertible
into or exchangeable for, or which grant a right to purchase
or sell, such securities. In addition, the Portfolio may
purchase securities issued by closed-end investment companies
and foreign securities that are listed on a domestic or
foreign securities exchange, traded in domestic or foreign
over-the-counter markets or represented by American Depositary
Receipts.
The Portfolio is expected to have greater risk exposure
and reward potential than a fund which invests primarily in
larger-capitalization companies. The trading volumes of
securities of smaller-capitalization companies are normally
less than those of larger-capitalization companies. This
often translates into greater price swings, both upward and
downward. Since trading volumes are lower, new demand for the
securities of such companies could result in
disproportionately large increases in the price of such
securities. The waiting period for the achievement of an
investor's objectives might be longer since these securities
are not closely monitored by research analysts and, thus, it
takes more time for investors to become aware of fundamental
changes or other factors which have motivated the Portfolio's
purchase. Small-capitalization companies often achieve higher
growth rates and experience higher failure rates than do
larger-capitalization companies.
The Portfolio may invest in certain foreign securities
which may represent a greater degree of risk than investing in
domestic securities. These risks are discussed in the above
section of this Prospectus describing the T. Rowe Price
International Stock Portfolio.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Dreyfus U.S. Government Securities Portfolio
The investment objective of the Dreyfus U.S. Government
Securities Portfolio (formerly known as the U.S. Government
Securities Portfolio) is to seek as high a level of total
return as is consistent with prudent investment strategies by
investing under normal conditions at least 65% of its assets
in U.S. government debt obligations and mortgage-backed
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities ("U.S. Government Securities").
The Portfolio expects to invest in the following types of
U.S. Government Securities:
* U.S. Treasury obligations;
* obligations issued or guaranteed by agencies or
instrumentalities of the U.S. government which are
backed by their own credit and may not be backed by
the full faith and credit of the U.S. government;
* mortgage-backed securities guaranteed by the
Government National Mortgage Association that are
supported by the full faith and credit of the U.S.
government and which are the "modified pass-through"
type of mortgage-backed security ("GNMA
Certificates"). Such securities entitle the holder
to receive all interest and principal payments due
whether or not payments are actually made on the
underlying mortgages;
* mortgage-backed securities guaranteed by agencies or
instrumentalities of the U.S. government which are
supported by their own credit but not the full faith
and credit of the U.S. government, such as the
Federal Home Loan Mortgage Corporation and the
Federal National Mortgage Association; and
* collateralized mortgage obligations issued by
private issuers for which the underlying mortgage-backed
securities serving as collateral are backed
(i) by the credit alone of the U.S. government
agency or instrumentality which issues or guarantees
the mortgage-backed securities, or (ii) by the full
faith and credit of the U.S. government.
Mortgage-Backed Securities. The mortgage-backed
securities in which the Portfolio invests represent
participation interests in pools of mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S.
government. However, the guarantee of these types of
securities runs only to the principal and interest payments
and not to the market value of such securities. In addition,
the guarantee only runs to the portfolio securities held by
the Portfolio and not the purchase of shares of the Portfolio.
Mortgage-backed securities are issued by lenders such as
mortgage bankers, commercial banks, and savings and loan
associations. Such securities differ from conventional debt
securities which provide for periodic payment of interest in
fixed amounts (usually semiannually) with principal payments
at maturity or specified call dates. Mortgage-backed
securities provide for monthly payments which are, in effect,
a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans. Principal prepayments
result from the sale of the underlying property or the
refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based on the
average life of the underlying pool of mortgage loans, which
is computed on the basis of the maturities of the underlying
instruments. The actual life of any particular pool may be
shortened by unscheduled or early payments of principal and
interest. The occurrence of prepayments is affected by a wide
range of economic, demographic and social factors and,
accordingly, it is not possible to accurately predict the
average life of a particular pool. For pools of fixed rate
30-year mortgages, it has been common practice to assume that
prepayments will result in a 12-year average life. The actual
prepayment experience of a pool of mortgage loans may cause
the yield realized by the Portfolio to differ from the yield
calculated on the basis of the average life of the pool. In
addition, if any of these mortgage-backed securities are
purchased at a premium, the premium may be lost in the event
of early prepayment which may result in a loss to the
Portfolio.
Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. Reinvestment by the
Portfolio of scheduled principal payments and unscheduled
prepayments may occur at higher or lower rates than the
original investment, thus affecting the yield of the
Portfolio. Monthly interest payments received by the
Portfolio have a compounding effect which will increase the
yield to shareholders as compared to debt obligations that pay
interest semiannually. Because of the reinvestment of
prepayments of principal at current rates, mortgage-backed
securities may be less effective than Treasury bonds of
similar maturity at maintaining yields during periods of
declining interest rates. Also, although the value of debt
securities may increase as interest rates decline, the value
of these pass-through type of securities may not increase as
much due to the prepayment feature.
Collateralized Mortgage Obligations. Collateralized
mortgage obligations ("CMOs"), which are debt obligations
collateralized by mortgage loans or mortgage pass-through
securities, provide the holder with a specified interest in
the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. Issuers of CMOs frequently elect
to be taxed as a pass-through entity known as real estate
mortgage investment conduits. CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate
and a final distribution date. The relative payment rights of
the various CMO classes may be structured in many ways. In
most cases, however, payments of principal are applied to the
CMO classes in the order of their respective stated
maturities, so that no principal payments will be made on a
CMO class until all other classes having an earlier stated
maturity date are paid in full. The classes may include
accrual certificates (also known as "Z-Bonds"), which only
accrue interest at a specified rate until other specified
classes have been retired and are converted thereafter to
interest-paying securities. They may also include planned
amortization classes which generally require, within certain
limits, that specified amounts of principal be applied on each
payment date, and generally exhibit less yield and market
volatility than other classes.
Stripped Mortgage-Backed Securities. The Portfolio may
also invest a portion of its assets in stripped mortgage-backed
securities ("SMBS"), which are derivative multi-class
mortgage securities. SMBS are usually structured with two
classes that receive different proportions of the interest and
principal distributions from a pool of mortgage assets. The
Portfolio will only invest in SMBS whose mortgage assets are
U.S. Government Securities.
A common type of SMBS will be structured so that one
class receives some of the interest and most of the principal
from the mortgage assets, while the other class receives most
of the interest and the remainder of the principal. In the
most extreme case, one class will receive all of the interest
(the interest-only or "IO" class) while the other class will
receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a
rapid rate of principal payments may have a material adverse
effect on the Portfolio's yield to maturity from these
securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the
Portfolio may fail to fully recoup its initial investment in
these securities even if the security is in one of the highest
rating categories.
The Portfolio may invest not more than 5% of its total
assets in CMOs deemed by its Adviser to be complex, such as
floating rate and inverse floating rate tranches and SMBS.
Non-Mortgage Asset Backed Securities. The Portfolio may
invest in non-mortgage backed securities including interests
in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables. Such
securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in
the underlying pools of assets.
Non-mortgage backed securities are not issued or
guaranteed by the U.S. government or its agencies or
instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit
issued by a financial institution (such as a bank or insurance
company) unaffiliated with the issuers of such securities. In
addition, such securities generally will have remaining
estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage backed securities raises
considerations peculiar to the financing of the instruments
underlying such securities. For example, most organizations
that issue asset backed securities relating to motor vehicle
installment purchase obligations perfect their interests in
their respective obligations only by filing a financing
statement and by having the servicer of the obligations, which
is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to
do so, there is a risk that such party could acquire an
interest in the obligations superior to that of holders of the
asset backed securities. Also, although most such obligations
grant a security interest in the motor vehicle being financed,
in most states the security interest in a motor vehicle must
be noted on the certificate of title to perfect such security
interest against competing claims of other parties. Due to
the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the
obligations underlying the asset backed securities, usually is
not amended to reflect the assignment of the seller's security
interest for the benefit of the holders of the asset backed
securities. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases,
be available to support payments on those securities. In
addition, various state and federal laws give the motor
vehicle owner the right to assert against the holder of the
owner's obligation certain defenses such owner would have
against the seller of the motor vehicle. The assertion of
such defenses could reduce payments on the related asset
backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection
of a number of state and federal consumer credit laws, many of
which give such holders the right to set off certain amounts
against balances owed on the credit card, thereby reducing the
amounts paid on such receivables. In addition, unlike most
other asset backed securities, credit card receivables are
unsecured obligations of the card holder.
U.S. Treasury Obligations. U.S. Treasury obligations
consist of bills, notes and bonds which principally differ in
their interest rates, maturities and times of issuance.
Obligations issued or guaranteed by agencies or
instrumentalities of the U.S. government are supported by (i)
the full faith and credit of the U.S. Treasury (such as
securities of the Small Business Administration), (ii) the
limited authority of the issuer to borrow from the U.S.
Treasury (such as securities of the Student Loan Marketing
Association) or (iii) the authority of the U.S. government to
purchase certain obligations of the issuer (such as securities
of the Federal National Mortgage Association). No assurance
can be given that the U.S. government will provide financial
support to U.S. government agencies or instrumentalities as
described in clauses (ii) or (iii) above in the future, other
than as set forth above, since it is not obligated to do so by
law. The Portfolio will not invest more than 55% of the value
of its assets in GNMA Certificates or in securities issued or
guaranteed by any other single U.S. government agency or
instrumentality.
Corporate and Other Obligations. In seeking to obtain
its investment objective, the Portfolio may also invest in a
broad range of debt securities, other than U.S. Government
Securities, with varying maturities such as corporate
convertible and non-convertible debt obligations such as fixed
and variable rate bonds. The weighted average maturity of
such investments will generally range from 2 to 10 years.
Debt securities may also include money market securities,
including bank certificates of deposit and time deposits,
bankers' acceptances, prime commercial paper, high-grade,
short-term corporate obligations, and repurchase agreements
with respect to these instruments.
Investment-grade debt securities are securities rated Baa
or higher by Moody's or BBB or higher by Standard & Poor's,
and unrated securities that are of equivalent quality in the
opinion of the Portfolio's Adviser. The rating services'
descriptions of these bond ratings are set forth in the
Appendix to the Statement of Additional Information.
Securities rated in the fourth highest category may have
speculative characteristics; changes in economic conditions
are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher
grade bonds. Like the three highest grades, however, these
securities are considered investment grade.
Lower-Rated Securities. The Portfolio may also invest a
portion of its assets, not to exceed 25%, in securities rated
below Baa by Moody's or BBB by Standard & Poor's (commonly
known as "junk bonds"), so long as they are consistent with
the Portfolio's objective of seeking as high a level of total
return as is consistent with prudent investment strategies.
Such securities may include bonds rated as low as C by Moody's
and by Standard & Poor's. See the Appendix to the Statement
of Additional Information. The Portfolio's Adviser
anticipates that a substantial portion of the Portfolio's
lower-rated securities will be in the higher end of these
ratings.
Lower-rated and comparable unrated securities
(collectively referred to in this discussion as "lower-rated
securities") will likely have some quality and protective
characteristics that, in the judgment of the rating
organization, are out-weighed by large uncertainties or major
risk exposures to adverse conditions; and are predominantly
speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of
the obligation.
While the market values of lower-rated securities tend to
react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of
certain lower-rated securities also tend to be more sensitive
to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, lower-rated
securities generally present a higher degree of credit
risk. Issuers of lower-rated securities are often highly
leveraged and may not have more traditional methods of
financing available to them so that their ability to service
their debt obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is
significantly greater because lower-rated securities generally
are unsecured and frequently are subordinated to the prior
payment of senior indebtedness. The Portfolio may incur
additional expenses to the extent that it is required to seek
recovery upon a default in the payment of principal or
interest on its portfolio holdings. The existence of limited
markets for lower-rated securities may diminish the
Portfolio's ability to obtain accurate market quotations for
purposes of valuing such securities and calculating its net
asset value For additional information about the possible
risks of investing in junk bonds, see "Investment Objectives
and Policies - Lower-Rated Bonds" in the Statement of
Additional Information.
Foreign Securities. The Portfolio may invest up to 15%
of its total assets in debt securities, including securities
denominated in foreign currencies of foreign issuers
(including foreign governments) in developed countries and
emerging markets. Because the Portfolio may invest in foreign
securities, investment in the Portfolio involves investment
risks that are different in some respects from an investment
in a fund which invests only in securities of U.S. domestic
issuers. Such risks may include adverse future political and
economic developments, the possible imposition of foreign
withholding taxes on interest income payable on the securities
held in the Portfolio, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of
principal and interest on securities in the Portfolio. There
may also be less publicly available information about a
foreign issuer than about a domestic issuer and foreign
issuers are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic
issuers.
The considerations described above generally are more of
a concern in developing countries inasmuch as their economic
systems are generally smaller and less diverse and mature and
their political systems less stable than those in developed
countries. The Portfolio seeks to mitigate the risks
associated with these considerations through diversification
and active portfolio management.
The Portfolio may invest up to 35% of its assets in U.S.
dollar-denominated obligations issued by foreign branches of
domestic banks ("Eurodollar" obligations) and domestic
branches of foreign banks ("Yankee dollar" obligations).
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
T. Rowe Price Equity Income Portfolio
The investment objective of the T. Rowe Price Equity
Income Portfolio is to seek to provide substantial dividend
income and also capital appreciation by investing primarily in
dividend-paying common stocks of established companies. In
pursuing its objective, the Portfolio emphasizes companies
with favorable prospects for increasing dividend income, and
secondarily, capital appreciation. Over time, the income
component (dividends and interest earned) of the Portfolio's
investments is expected to be a significant contributor to the
Portfolio's total return. The Portfolio's yield is expected
to be significantly above that of the S&P 500 Index. Total
return will consist primarily of dividend income and
secondarily of capital appreciation (or depreciation).
The investment program of the Portfolio is based on
several premises. First, the Portfolio's Adviser believes
that, over time, dividend income can account for a significant
component of the total return from equity investments.
Second, dividends are normally a more stable and predictable
source of return than capital appreciation. While the price
of a company's stock generally increases or decreases in
response to short-term earnings and market fluctuations, its
dividends are generally less volatile. Finally, the
Portfolio's Adviser believes that stocks which distribute a
high level of current income tend to have less price
volatility than those which pay below average dividends.
To achieve its objective, the Portfolio, under normal
circumstances, will invest at least 65% of its total assets in
income-producing common stocks, whose prospects for dividend
growth and capital appreciation are considered favorable by
its Adviser. To enhance capital appreciation potential, the
Portfolio also uses a "value" approach and invests in stocks
and other securities its Adviser believes are temporarily
undervalued by various measures, such as price/earnings
ratios. The Portfolio's investments will generally be made in
companies which share some of the following characteristics:
* established operating histories;
* above-average current dividend yields relative to
the S&P 500 Index;
* low price/earnings ratios relative to the S&P 500
Index;
* sound balance sheets and other financial
characteristics; and
* low stock price relative to company's underlying
value as measured by assets, earnings, cash flow or
business franchises.
Although the Portfolio will invest primarily in U.S.
common stocks, it may also purchase other types of securities,
for example, foreign securities, preferred stocks, convertible
securities and warrants, when considered consistent with the
Portfolio's investment objective and program.
In the event that future economic or financial conditions
adversely affect equity securities, or stocks are considered
overvalued, or the Portfolio's Adviser believes that investing
for defensive purposes is appropriate, or in order to meet
anticipated redemption requests, the Portfolio may invest part
or all of its assets in U.S. government securities and high
quality (within the two highest rating categories assigned by
a NRSRO) U.S. and foreign dollar-denominated money market
securities including certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities
and repurchase agreements.
The Portfolio may invest up to 25% of its total assets in
foreign securities. These include non-dollar denominated
securities traded outside the U.S. and dollar denominated
securities traded in the U.S. (such as American Depositary
Receipts). Such investments increase a portfolio's
diversification and may enhance return, but they may represent
a greater degree of risk than investing in domestic
securities. These risks are discussed in the above section of
this Prospectus describing the T. Rowe Price International
Stock Portfolio.
The Portfolio may invest in debt securities of any type
including municipal securities, without regard to quality or
rating. Such securities would be purchased in companies which
meet the investment criteria for the Portfolio. The price of
a bond fluctuates with changes in interest rates, rising when
interest rates fall and falling when interest rates rise. The
Portfolio, however, will not invest more than 10% of its total
assets in securities rated below Baa by Moody's or BBB by
Standard & Poor's (commonly known as "junk bonds"). Such
securities may include bonds rated as low as C by Moody's and
by Standard & Poor's. See the Appendix to the Statement of
Additional Information. Investments in non-investment grade
securities entail certain risks which are discussed in the
above section of this Prospectus describing the Dreyfus U.S.
Government Securities Portfolio under the heading "Lower-Rated
Securities."
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
T. Rowe Price Growth Stock Portfolio
The investment objectives of the T. Rowe Price Growth
Stock Portfolio are to seek long-term growth of capital and to
increase dividend income through investment primarily in
common stocks of well-established growth companies. A growth
company is defined by the Portfolio's Adviser as one which:
(1) has demonstrated historical growth of earnings faster than
the growth of inflation and the economy in general; and (2)
has indications of being able to continue this growth pattern
in the future. Total return will consist primarily of capital
appreciation or depreciation and secondarily of dividend
income.
More than fifty years ago, Thomas Rowe Price pioneered
the Growth Stock Theory of Investing. It is based on the
premise that inflation represents a more serious, long-term
threat to an investor's portfolio than stock market
fluctuations or recessions. Mr. Price believed that when a
company's earnings grow faster than both inflation and the
economy in general, the market will eventually reward its
long-term earnings growth with a higher stock price. In
addition, the company should be able to raise its dividend in
line with its growth in earnings.
Although corporate earnings can be expected to be lower
during periods of recession, it is the Portfolio Adviser's
opinion that, over the long term, the earnings of well-established
growth companies will not be affected adversely by
unfavorable economic conditions to the same extent as the
earnings of more cyclical companies. However, investors
should be aware that the Portfolio's share value may not
always reflect the long-term earnings trend of growth
companies.
The Portfolio will invest primarily in the common stock
of a diversified group of well-established growth companies.
While current dividend income is not a prerequisite in the
selection of a growth company, the companies in which the
Portfolio will invest normally have a record of paying
dividends and are generally expected to increase the amounts
of such dividends in future years as earnings increase.
Although the Portfolio will invest primarily in U.S.
common stocks, it may also purchase other types of securities,
for example, foreign securities, preferred stocks, convertible
securities and warrants, when considered consistent with the
Portfolio's investment objectives and program.
In the event that future economic or financial conditions
adversely affect equity securities, or stocks are considered
overvalued, or the Portfolio's Adviser believes that investing
for defensive purposes is appropriate, or in order to meet
anticipated redemption requests, the Portfolio may invest part
or all of its assets in U.S. government securities and high
quality (within the two highest rating categories assigned by
a NRSRO) U.S. and foreign dollar-denominated money market
securities including certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities
and repurchase agreements.
The Portfolio may invest up to 30% of its total assets in
foreign securities. These include non-dollar denominated
securities traded outside the U. S. and dollar denominated
securities traded in the U. S. (such as American Depositary
Receipts). Such investments increase a portfolio's
diversification and may enhance return, but they may represent
a greater degree of risk than investing in domestic
securities. These risks are discussed in the above section of
this Prospectus describing the T. Rowe Price International
Stock Portfolio.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Opportunity Value Portfolio
The investment objective of the Opportunity Value
Portfolio is to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds
and cash equivalents, the percentages of which will vary based
on the Portfolio Adviser's assessments of the relative outlook
for such investments. In seeking to achieve its investment
objective, the types of equity securities in which the
Portfolio may invest will be securities of companies that are
believed by the Portfolio's Adviser to be undervalued in the
marketplace in relation to factors such as the companies'
assets or earnings. It is the Adviser's intention to invest
in securities of companies which in its opinion possess one or
more of the following characteristics: undervalued assets,
valuable consumer or commercial franchises, securities
valuation below peer companies, substantial and growing cash
flow and/or a favorable price to book value relationship.
Investment policies aimed at achieving the Portfolio's
objective are set in a flexible framework of securities
selection which primarily includes equity securities, such as
common stocks, preferred stocks, convertible securities,
rights and warrants in proportions which vary from time to
time. The Portfolio will invest primarily in stocks listed on
the New York Stock Exchange. In addition, it may also
purchase securities of companies, including companies with
small market capitalizations, listed on other domestic
securities exchanges, securities traded in the domestic
over-the-counter market and foreign securities provided that they
are listed on a domestic or foreign securities exchange or
represented by American Depositary Receipts listed on a
domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Investing in foreign securities may present a greater
degree of risk than investing in domestic securities. These
risks are discussed in the above section of this Prospectus
describing the T. Rowe Price International Stock Portfolio.
Investing in the securities of small capitalization companies
involves greater risk exposure and reward potential than
investments in larger capitalization companies. These risks
are discussed in the above section of this Prospectus
describing the Dreyfus Small Cap Value Portfolio.
Debt securities are expected to be predominantly
investment grade intermediate to long-term U.S. Government and
corporate debt, although the Portfolio will also invest in
high quality short-term money market and cash equivalent
securities and may invest almost all of its assets in such
securities when the Portfolio's Adviser deems it advisable in
order to preserve capital. The Portfolio's debt securities
may also include mortgage-backed securities issued by the U.S.
Government, its agencies or instrumentalities and
collateralized mortgage obligations that are issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities or that are collateralized by a portfolio of
mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality.
The effective maturity of a mortgage-backed security may
be shortened by unscheduled or early payment of principal and
interest on the underlying mortgages, which may affect the
effective yield of such securities. The principal that is
returned may be invested in instruments having a higher or
lower yield than the prepaid instruments depending on then-current
market conditions.
Investment grade securities will, at the time of
purchase, have ratings within the four highest rating
categories established by Moody's, Standard & Poor's, or a
similar NRSRO or, if not rated, be of comparable quality as
determined by the Portfolio's Adviser. The NRSROs'
descriptions of these bond ratings are set forth in the
Appendix to the Statement of Additional Information.
Securities rated in the fourth highest category may have
speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to
make principal and interest payments than in the case of
higher grade bonds. Like the three highest grades, however,
these securities are considered investment grade.
It is the present intention of the Portfolio's Adviser to
invest no more than 5% of the Portfolio's net assets in bonds
rated below Baa3 by Moody's or BBB by Standard & Poor's
(commonly known as "junk bonds"). In the event that the
Portfolio's Adviser intends in the future to invest more than
5% of the Portfolio's net assets in junk bonds, appropriate
disclosures will be made to existing and prospective
shareholders. For information about the possible risks of
investing in junk bonds see "Investment Objectives and
Policies - Lower Rated Bonds" in the Statement of Additional
Information.
The allocation of the Portfolio's assets among the
different types of permitted investments will vary from time
to time based upon the Portfolio Adviser's evaluation of
economic and market trends and its perception of the relative
values available from such types of securities at any given
time. There is neither a minimum nor a maximum percentage of
the Portfolio's assets that may, at any given time, be
invested in any of the types of investments identified above.
Consequently, while the Portfolio will earn income to the
extent it is invested in bonds or cash equivalents, the
Portfolio does not have any specific income objective.
Although there is neither a minimum nor maximum percentage of
the Portfolio's assets that may, at any given time, be
invested in any of the types of investments identified above,
it is anticipated that most of the time the majority of the
Portfolio's assets will be invested in common stocks.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Enhanced Index Portfolio
The investment objective of the Enhanced Index Portfolio
is to earn a total return modestly in excess of the total
return performance of the S&P 500 Index while maintaining a
volatility of return similar to the Index. The Portfolio is
appropriate for investors who seek a modestly enhanced return
relative to that of large and medium sized U.S. companies
typically represented in the S&P 500 Index. The Portfolio
intends to invest in securities of approximately 300 issuers,
which securities are rated by the Portfolio's Adviser to have
high expected returns.
The Portfolio seeks to achieve its investment objective
through fundamental analysis, systematic stock valuation and
disciplined portfolio construction.
* Fundamental research: The Portfolio Adviser's
approximately 20 domestic equity analysts, each an
industry specialist with an average of approximately
13 years experience, follow over 700 predominantly
large- and medium-sized U.S. companies --
approximately 525 of which form the universe for the
Portfolio's investments. A substantial majority of
these companies are issuers of securities which are
included in the S&P 500 Index. Their research goal
is to forecast normalized, longer term earnings and
dividends for the companies that they cover.
* Systematic valuation: The analysts' forecasts are
converted into comparable expected returns by a
dividend discount model, which calculates those
expected returns by comparing a company's current
stock price with the "fair value" price forecasted
by its estimated long-term earnings power. Within
each sector, companies are ranked by their expected
return and grouped into quintiles; those with the
highest expected returns (Quintile 1) are deemed the
most undervalued relative to their long-term
earnings power, while those with the lowest expected
returns (Quintile 5) are deemed the most overvalued.
* Disciplined portfolio construction: A diversified
portfolio is constructed using disciplined buy and
sell rules. Portfolio sector weightings will
generally equal those of the S&P 500 Index. The
Portfolio will normally be principally comprised,
based on the dividend discount model, of stocks in
the first three Quintiles. Finally, the Portfolio
holds a large number of stocks to enhance its
diversification.
Under normal market circumstances, the Portfolio's
Adviser will invest at least 65% of its net assets in equity
securities consisting of common stocks and other securities
with equity characteristics such as trust interests, limited
partnership interests, preferred stocks, warrants, rights and
securities convertible into common stock. The Portfolio's
primary equity investments will be the common stock of large
and medium sized U.S. companies with market capitalizations
above $1 billion. Such securities will be listed on a
national securities exchange or traded in the over-the-counter
market. The Portfolio may invest in similar securities of
foreign corporations, provided that the securities of such
corporations are included in the S&P 500 Index.
The Portfolio intends to manage its portfolio actively in
pursuit of its investment objective. Since the Portfolio has
a long-term investment perspective, it does not intend to
respond to short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it
may take advantage of short term trading opportunities that
are consistent with its objective.
During ordinary market conditions, the Portfolio's
Adviser will keep the Portfolio as fully invested as
practicable in the equity securities described above. In the
event that future economic or financial conditions adversely
affect equity securities, or stocks are considered overvalued,
or the Portfolio's Adviser believes that investing for
defensive purposes is appropriate, or in order to meet
anticipated redemption requests, the Portfolio may invest part
or all of its assets in U.S. government securities and high
quality (within the two highest rating categories assigned by
a NRSRO) U.S. dollar-denominated money market securities
including certificates of deposit, bankers' acceptances,
commercial paper, short-term debt securities and repurchase
agreements.
Convertible bonds and other fixed income securities
(other than money market instruments) in which the Portfolio
may invest will, at the time of investment have ratings within
the four highest rating categories established by Moody's,
Standard & Poor's, or a similar NRSRO or, if not rated, be of
comparable quality as determined by the Portfolio's Adviser.
The NRSROs' descriptions of these bond ratings are set forth
in the Appendix to the Statement of Additional Information.
Securities rated in the fourth highest category may have
speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to
make principal and interest payments than in the case of
higher grade bonds. Like the three highest grades, however,
these securities are considered investment grade.
The Portfolio may invest in certain foreign securities
which may represent a greater degree of risk than investing in
domestic securities. These risks are discussed in the above
section of this Prospectus describing the T. Rowe Price
International Stock Portfolio.
The Portfolio may employ certain investment strategies
which are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.
Investment Strategies
In addition to making investments directly in securities,
the Portfolios (other than the TCW Money Market Portfolio) may
write covered call and put options and hedge their investments
by purchasing options and engaging in transactions in futures
contracts and related options. The Adviser to the TCW Managed
Asset Allocation Portfolio does not presently intend to
utilize futures contracts and related options but may do so in
the future. The Advisers to the Dreyfus Small Cap Value
Portfolio and the Opportunity Growth Portfolio do not
currently intend to write covered call and put options or
engage in transactions in futures contracts and related
options, but may do so in the future. The T. Rowe Price
International Stock, Dreyfus U.S. Government Securities, T.
Rowe Price Equity Income, T. Rowe Price Growth Stock,
Opportunity Value and Enhanced Index Portfolios may engage in
foreign currency exchange transactions to protect against
changes in future exchange rates. All Portfolios except the
TCW Money Market Portfolio may invest in American Depositary
Receipts and European Depositary Receipts. All Portfolios may
enter into repurchase agreements, may make forward commitments
to purchase securities, lend their portfolio securities and
borrow funds under certain limited circumstances. The T. Rowe
Price Equity Income, T. Rowe Price Growth Stock, T. Rowe Price
International Stock and Dreyfus U.S. Government Securities
Portfolios may invest in hybrid instruments. The investment
strategies referred to above and the risks related to them are
summarized below and certain of these strategies are described
in more detail in the Statement of Additional Information.
Options and Futures Transactions. A Portfolio (other than
the TCW Money Market Portfolio) may seek to increase the
current return on its investments by writing covered call or
covered put options. The Advisers to the Dreyfus Small Cap
Value Portfolio and the Opportunity Value Portfolio have no
present intention to engage in this strategy, but may do so in
the future.
In addition, a Portfolio (other than the TCW Money Market
Portfolio) may at times seek to hedge against either a decline
in the value of its portfolio securities or an increase in the
price of securities which its Adviser plans to purchase
through the writing and purchase of options on securities and
any index of securities in which the Portfolio may invest and
the purchase and sale of futures contracts and related
options. The Advisers to the TCW Managed Asset Allocation,
Dreyfus Small Cap Value and Opportunity Value Portfolios have
no present intention to use this strategy, but may do so in
the future.
The Adviser to the Dreyfus U.S. Government Securities
Portfolio does not presently intend to purchase or sell call
or put options but may enter into interest rate futures
contracts and write and purchase put and call options on such
futures contracts. The Portfolio may purchase and sell
interest rate futures contracts as a hedge against changes in
interest rates. A futures contract is an agreement between
two parties to buy and sell a security for a set price on a
future date. Futures contracts are traded on designated
"contracts markets" which, through their clearing
corporations, guarantee performance of the contracts.
Currently, there are futures contracts based on securities
such as long-term U.S. Treasury bonds, U.S. Treasury notes,
GNMA Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value
of outstanding debt securities declines (and vice versa).
Entering into a futures contract for the sale of securities
has an effect similar to the actual sale of securities,
although the sale of the futures contracts might be
accomplished more easily and quickly. For example, if the
Portfolio holds long-term U.S. Government Securities and the
Adviser anticipates a rise in long-term interest rates, it
could, in lieu of disposing of its portfolio securities, enter
into futures contracts for the sale of similar long-term
securities. If interest rates increased and the value of the
Portfolio's securities declined, the value of the Portfolio's
futures contracts would increase, thereby protecting the
Portfolio by preventing the net asset value from declining as
much as it otherwise would have. Similarly, entering into
futures contracts for the purchase of securities has an effect
similar to the actual purchase of the underlying securities,
but permits the continued holding of securities other than the
underlying securities. For example, if the Adviser expects
long-term interest rates to decline, the Portfolio might enter
into futures contracts for the purchase of long-term
securities, so that it could gain rapid market exposure that
may offset anticipated increases in the cost of securities it
intends to purchase, while continuing to hold higher-yielding
short-term securities or waiting for the long-term market to
stabilize.
A Portfolio (other than the TCW Money Market Portfolio)
also may purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume
a position in a futures contract (a long position if the
option is a call and a short position if the option is a put),
at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised,
delivery of the futures position is accompanied by cash
representing the difference between the current market price
of the futures contract and the exercise price of the option.
The Dreyfus U.S. Government Securities Portfolio may
purchase put options on interest rate futures contracts in
lieu of, and for the same purpose as, sale of a futures
contract. It also may purchase such put options in order to
hedge a long position in the underlying futures contract in
the same manner as it purchases "protective puts" on
securities. The purchase of call options on interest rate
futures contracts is intended to serve the same purpose as the
actual purchase of the futures contract, and the Portfolio
will set aside cash or cash equivalents sufficient to purchase
the amount of portfolio securities represented by the
underlying futures contracts.
A Portfolio may not purchase futures contracts or related
options if, immediately thereafter, more than 33 1/3% (25% for
the T. Rowe Price Equity Income Portfolio, the T. Rowe Price
Growth Stock Portfolio and the T. Rowe Price International
Stock Portfolio) of the Portfolio's total assets would be so
invested.
The Portfolios' Advisers generally expect that options
and futures transactions for the Portfolios will be conducted
on securities and other exchanges. In certain instances,
however, a Portfolio may purchase and sell options in the
over-the-counter market. The staff of the Securities and
Exchange Commission considers over-the-counter options to be
illiquid. A Portfolio's ability to terminate option positions
established in the over-the-counter market may be more limited
than in the case of exchange traded options and may also
involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to the
Portfolio. There can be no assurance that a Portfolio will be
able to effect closing transactions at any particular time or
at an acceptable price. The use of options and futures
involves the risk of imperfect correlation between movements
in options and futures prices and movements in the prices of
the securities that are being hedged. Expenses and losses
incurred as a result of these hedging strategies will reduce
the Portfolio's current return.
Foreign Currency Transactions. The Dreyfus U.S.
Government Securities, T. Rowe Price Equity Income, T. Rowe
Price Growth Stock, T. Rowe Price International Stock,
Opportunity Value and Enhanced Index Portfolios may purchase
foreign currency on a spot (or cash) basis, enter into
contracts to purchase or sell foreign currencies at a future
date ("forward contracts"), purchase and sell foreign currency
futures contracts, and purchase exchange traded and
over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. The Adviser to a
Portfolio may engage in these transactions to protect against
uncertainty in the level of future exchange rates in
connection with the purchase and sale of portfolio securities
("transaction hedging") and to protect the value of specific
portfolio positions ("position hedging").
Hedging transactions involve costs and may result in
losses. The Dreyfus U.S. Government Securities, T. Rowe Price
Equity Income, T. Rowe Price Growth Stock, T. Rowe Price
International Stock, Opportunity Value and Enhanced Index
Portfolios may write covered call options on foreign
currencies to offset some of the costs of hedging those
currencies. A Portfolio will engage in over-the-counter
transactions only when appropriate exchange traded
transactions are unavailable and when, in the opinion of the
Portfolio's Adviser, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties
likely to meet their contractual obligations. A Portfolio's
ability to engage in hedging and related option transactions
may be limited by tax considerations.
Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which
the Portfolio owns or intends to purchase or sell. They simply
establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques
tend to minimize the risk of loss due to a decline in the
value of the hedged currency, they tend to limit any potential
gain which might result from the increase in the value of such
currency.
Interest Rate Transactions. In order to attempt to
protect the value of its portfolio from interest rate
fluctuations, the Dreyfus U.S. Government Securities Portfolio
may enter into various hedging transactions, such as interest
rate swaps and the purchase or sale of interest rate caps and
floors. Interest rate swaps involve the exchange by the
Portfolio with another party of their respective commitments
to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount
from the party selling such interest rate cap. The purchase
of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate
floor. The Adviser to the Portfolio expects to enter into
these transactions on behalf of the Portfolio primarily to
preserve a return or spread on a particular investment or
portion of its portfolio or to protect against any increase in
the price of securities the Portfolio anticipates purchasing
at a later date. The Portfolio intends to use these
transactions as a hedge and not as a speculative investment.
The Portfolio will not sell interest rate caps or floors that
it does not own.
The Portfolio may enter into interest rate swaps, caps
and floors on either an asset-based or liability-based basis,
depending on whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps
on a net basis, i.e., the two payment streams are netted out,
with the Portfolio receiving or paying, as the case may be,
only the net amount of the two payments. Inasmuch as these
hedging transactions are entered into for good faith hedging
purposes, the Adviser to the Portfolio and the Fund believe
such obligations do not constitute senior securities and
accordingly, will not treat them as being subject to the
Portfolio's borrowing restrictions. The net amount of the
excess, if any, of the Portfolio's obligations over its
entitlement with respect to each interest rate swap will be
accrued on a daily basis and an amount of cash or liquid
securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated
account by the Portfolio's custodian. The Portfolio will not
enter into any interest rate swap, cap or floor transactions
unless the unsecured senior debt or the claims-paying ability
of the other party thereto is rated in the highest category of
at least one NRSRO at the time of entering into such
transaction. If there is a default by the other party to such
a securities transaction, the Portfolio will have contractual
remedies pursuant to the agreements related to the
transactions. The swap market has grown substantially in
recent years with a large number of banks and investment
banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the
swap market has become relatively liquid. Caps and floors are
more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less
liquid than swaps.
Dollar Roll Transactions. The Dreyfus U.S. Government
Securities Portfolio may enter into dollar roll transactions
with selected banks and broker-dealers. Dollar roll
transactions are comprised of the sale by the Portfolio of
mortgage-based securities, together with a commitment to
purchase similar, but not identical, securities at a future
date. In addition, the Portfolio is paid a fee as
consideration for entering into the commitment to purchase.
Dollar rolls may be renewed after cash settlement and
initially may involve only a firm commitment agreement by the
Portfolio to buy a security. If the broker-dealer to whom the
Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security may
be restricted; the value of the security may change adversely
over the term of the dollar roll; the security that the
Portfolio is required to repurchase may be worth less than the
security that the Portfolio originally held, and the return
earned by the Portfolio with the proceeds of a dollar roll may
not exceed transaction costs. Dollar roll transactions are
treated as borrowings for purposes of the 1940 Act, and the
aggregate of such transactions and all other borrowings of the
Portfolio (including reverse repurchase agreements) will be
subject to the requirement that the Portfolio maintain asset
coverage of 300% for all borrowings.
Reverse Repurchase Agreements. Each Portfolio is
permitted to enter into reverse repurchase agreements. In a
reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of
the agreement. For the purposes of the 1940 Act it is
considered a form of borrowing by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any
gains or losses of the Portfolio to be magnified.
Borrowings. A Portfolio other than the Dreyfus U.S.
Government Securities, T. Rowe Price Equity Income, T. Rowe
Price Growth Stock, T. Rowe Price International Stock,
Opportunity Value and Enhanced Index Portfolios may borrow
money for temporary purposes in amounts up to 5% of its total
assets. The Dreyfus U.S. Government Securities Portfolio may
borrow from banks and enter into reverse repurchase agreements
or dollar rolls transactions in an amount equal to up to 33
1/3% of the value of its net assets (computed at the time the
loan is made) to take advantage of investment opportunities
and for temporary, extraordinary or emergency purposes. The
Dreyfus U.S. Government Securities Portfolio may pledge up to
33 1/3% of its total assets to secure these borrowings. If
the Portfolio's asset coverage for borrowings falls below
300%, the Portfolio will take prompt action to reduce its
borrowings.
The T. Rowe Price Equity Income, T. Rowe Price Growth
Stock and T. Rowe Price International Stock Portfolios may
borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for other
purposes consistent with the Portfolio's investment objective
and program in an amount up to 33 1/3% of the Portfolio's net
assets. Each Portfolio may pledge up to 33 1/3% of its total
assets to secure these borrowings. These Portfolios may not
purchase additional securities when borrowings exceed 5% of
total assets.
The Opportunity Value and Enhanced Index Portfolios may
each borrow money from banks as a temporary measure for
extraordinary or emergency purposes in amounts up to 10% of
its total assets. Neither Portfolio may purchase additional
securities when borrowings exceed 5% of total assets.
As a matter of operating policy, each of the Dreyfus U.S.
Government Securities, T. Rowe Price Equity Income, T. Rowe
Price Growth Stock and T. Rowe Price International Stock
Portfolios will limit all borrowings to no more than 25% of
such Portfolio's net assets.
American and European Depositary Receipts. All Portfolios
except the TCW Money Market Portfolio may purchase foreign
securities in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") or other
securities convertible into securities of corporations in
which the Portfolios are permitted to invest pursuant to their
respective investment objectives and policies. These
securities may not necessarily be denominated in the same
currency into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company
which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe by
banks or depositories which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in
bearer form, are designed for use in European securities
markets.
Repurchase Agreements. All Portfolios may enter into
repurchase agreements with a bank, broker-dealer or other
financial institution as a means of earning a fixed rate of
return on its cash reserves for periods as short as overnight.
A repurchase agreement is a contract pursuant to which a
Portfolio, against receipt of securities of at least equal
value including accrued interest, agrees to advance a
specified sum to the financial institution which agrees to
reacquire the securities at a mutually agreed upon time
(usually one day) and price. Each repurchase agreement entered
into by a Portfolio will provide that the value of the
collateral underlying the repurchase agreement will always be
at least equal to the repurchase price, including any accrued
interest. The Portfolio's right to liquidate such securities
in the event of a default by the seller could involve certain
costs, losses or delays and, to the extent that proceeds from
any sale upon a default of the obligation to repurchase are
less than the repurchase price, the Portfolio could suffer a
loss.
Forward Commitments. Each Portfolio may make contracts to
purchase securities for a fixed price at a future date beyond
customary settlement time ("forward commitments") if it holds,
and maintains until the settlement date in a segregated
account, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or if it enters into
offsetting contracts for the forward sale of other securities
it owns. Forward commitments may be considered securities in
themselves and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in
value of the Portfolio's other assets. Where such purchases
are made through dealers, the Portfolio relies on the dealer
to consummate the sale. The dealer's failure to do so may
result in the loss to the Portfolio of an advantageous yield
or price.
Securities Loans. Each Portfolio may seek to obtain
additional income by making secured loans of its portfolio
securities with a value up to 33 1/3% of its total assets. All
securities loans will be made pursuant to agreements requiring
the loans to be continuously secured by collateral in cash or
high-grade debt obligations at least equal at all times to the
market value of the loaned securities. The borrower pays to
the Portfolio an amount equal to any dividends or interest
received on loaned securities. The Portfolio retains all or a
portion of the interest received on investment of cash
collateral or receives a fee from the borrower. Lending
portfolio securities involves risks of delay in recovery of
the loaned securities or in some cases loss of rights in the
collateral should the borrower fail financially.
Hybrid Instruments. The T. Rowe Price Equity Income, T.
Rowe Price Growth Stock and T. Rowe Price International Stock
Portfolios may invest up to 10% of their total assets, and the
Dreyfus U.S. Government Securities Portfolio may invest up to
5% of its total assets, in hybrid instruments. Hybrid
instruments have recently been developed and combine the
elements of futures contacts or options with those of debt,
preferred equity or a depository instrument. Often these
hybrid instruments are indexed to the price of a commodity,
particular currency, or a domestic or foreign debt or equity
securities index. Hybrid instruments may take a variety of
forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined
by reference to the value of a currency or commodity or
securities index at a future point in time, preferred stock
with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms
related to a particular commodity. Hybrid instruments may
bear interest or pay dividends at below market (or even
relatively nominal) rates. Under certain conditions, the
redemption value of such an instrument could be zero. Hybrid
instruments can have volatile prices and limited liquidity and
their use by a Portfolio may not be successful.
Fixed-Income Securities - Downgrades. If any security
invested in by any of the Portfolios loses its rating or has
its rating reduced after the Portfolio has purchased it,
unless required by law, the Portfolio is not required to sell
or otherwise dispose of the security, but may consider doing
so.
Illiquid Securities. Each Portfolio may invest up to 10%
(15% with respect to T. Rowe Price International Stock
Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Dreyfus Small Cap Value
Portfolio, Opportunity Value Portfolio and Enhanced Index
Portfolio) of its net assets in illiquid securities and other
securities which are not readily marketable, including non-negotiable
time deposits, certain restricted securities not
deemed by the Fund's Trustees to be liquid and repurchase
agreements with maturities longer than seven days. Securities
eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, which have been determined to be liquid, will not
be considered by the Portfolios' Advisers to be illiquid or
not readily marketable and, therefore, are not subject to the
aforementioned 10% or 15% limits. The inability of a
Portfolio to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the
Portfolio's ability to raise cash for redemptions or other
purposes. The liquidity of securities purchased by a
Portfolio which are eligible for resale pursuant to Rule 144A
will be monitored by the Portfolios' Advisers on an ongoing
basis, subject to the oversight of the Trustees. In the event
that such a security is deemed to be no longer liquid, a
Portfolio's holdings will be reviewed to determine what
action, if any, is required to ensure that the retention of
such security does not result in a Portfolio having more than
10% or 15%, as applicable, of its assets invested in illiquid
or not readily marketable securities.
MANAGEMENT OF THE FUND
The Trustees and officers of the Fund provide broad
supervision over the business and affairs of the Portfolios
and the Fund.
The Manager
The Fund is managed by Endeavor Investment Advisers ("the
Manager") which, subject to the supervision and direction of
the Trustees of the Fund, has overall responsibility for the
general management and administration of the Fund. The
Manager is a general partnership of which Endeavor Management
Co. is the managing partner. Endeavor Management Co., by whose
employees all management services performed under the
management agreement are rendered to the Fund, holds a 50.01%
interest in the Manager and AUSA Financial Markets, Inc., an
affiliate of PFL, holds the remaining 49.99% interest therein.
Vincent J. McGuinness, a Trustee of the Fund, together with
his family members and trusts for the benefit of his family
members, own all of Endeavor Management Co.'s outstanding
common stock. Mr. McGuinness is Chairman, Chief Executive
Officer and President of Endeavor Management Co.
The Manager is responsible for providing investment
management and administrative services to the Fund and in the
exercise of such responsibility selects the investment
advisers for the Fund's Portfolios (the "Advisers") and
monitors the Advisers' investment programs and results,
reviews brokerage matters, oversees compliance by the Fund
with various federal and state statutes, and carries out the
directives of the Trustees. The Manager is responsible for
providing the Fund with office space, office equipment, and
personnel necessary to operate and administer the Fund's
business, and also supervises the provision of services by
third parties such as the Fund's custodian and transfer agent.
Pursuant to an administration agreement, First Data Investor
Services Group, Inc. ("First Data") will assist the Manager in
the performance of its administrative responsibilities to the
Fund.
As compensation for these services the Fund pays the
Manager a monthly fee at the following annual rates of each
Portfolio's average daily net assets: TCW Money Market
Portfolio - .50%; TCW Managed Asset Allocation Portfolio -
.75%; T. Rowe Price International Stock Portfolio - .90%;
Value Equity Portfolio - .80%; Dreyfus Small Cap Value
Portfolio - .80%; Dreyfus U.S. Government Securities Portfolio
- - .65%; T. Rowe Price Equity Income Portfolio - .80%; T. Rowe
Price Growth Stock Portfolio - .80%; Opportunity Value
Portfolio - .80%; Enhanced Index Portfolio - .75%. The
management fees paid by the Portfolios (other than the TCW
Money Market Portfolio and Dreyfus U.S. Government Securities
Portfolio), although higher than the fees paid by most other
investment companies in general, are comparable to management
fees paid for similar services by many investment companies
with similar investment objectives and policies. From the
management fees, the Manager pays the expenses of providing
investment advisory services to the Portfolios, including the
fees of the Adviser of each Portfolio and the fees and
expenses of First Data pursuant to the administration
agreement.
In addition to the management fees, the Fund pays all
expenses not assumed by the Manager, including, without
limitation, expenses for legal, accounting and auditing
services, interest, taxes, costs of printing and distributing
reports to shareholders, proxy materials and prospectuses,
charges of its custodian, transfer agent and dividend
disbursing agent, registration fees, fees and expenses of the
Trustees who are not interested persons of the Fund,
insurance, brokerage costs, litigation, and other
extraordinary or nonrecurring expenses. All general Fund
expenses are allocated among and charged to the assets of the
Portfolios of the Fund on a basis that the Trustees deem fair
and equitable, which may be on the basis of relative net
assets of each Portfolio or the nature of the services
performed and relative applicability to each Portfolio.
The Advisers
Pursuant to an investment advisory agreement with the
Manager, the Adviser to a Portfolio furnishes continuously an
investment program for the Portfolio, makes investment
decisions on behalf of the Portfolio, places all orders for
the purchase and sale of investments for the Portfolio's
account with brokers or dealers selected by such Adviser and
may perform certain limited related administrative functions
in connection therewith. For its services, the Manager pays
the Adviser a fee based on a percentage of the average daily
net assets of the Portfolio. An Adviser may place portfolio
securities transactions with broker-dealers who furnish it
with certain services of value in advising the Portfolio and
other clients. In so doing, an Adviser may cause a Portfolio
to pay greater brokerage commissions than it might otherwise
pay. In seeking the most favorable price and execution
available, an Adviser may, if permitted by law, consider sales
of the Contracts as a factor in the selection of
broker-dealers. OpCap Advisors may select, under certain
circumstances, Oppenheimer & Co., Inc., one of its affiliates,
to execute transactions for the Value Equity and Opportunity
Value Portfolios. T. Rowe Price Associates, Inc. and Rowe
Price-Fleming International, Inc. may utilize certain brokers
indirectly related to them in the capacity as broker in
connection with the execution of transactions for the T. Rowe
Price Equity Income, T. Rowe Price Growth Stock and T. Rowe
Price International Stock Portfolios. J.P. Morgan Investment
Management Inc. may utilize certain brokers affiliated with it
in connection with the execution of transactions for the
Enhanced Index Portfolio. See the Statement of Additional
Information for a further discussion of Portfolio trading.
The Board of Trustees of the Fund has authorized the
Manager and the Advisers to enter into arrangements with
brokers who execute brokerage transactions for the Portfolios
whereby a portion of the commissions earned by such brokers
will be shared with a broker-dealer affiliate of the Manager.
The affiliated broker will act as an "introducing broker" in
the transaction. Subject to the requirements of applicable
law including seeking best price and execution of orders,
commissions paid to executing brokers will not exceed ordinary
and customary brokerage commissions.
The Board of Trustees has determined that the Fund's
brokerage commissions should be utilized for the Fund's
benefit to the extent possible. After reviewing various
alternatives, the Board concluded that commissions received by
the broker-dealer affiliate of the Manager can be used to
promote the distribution of the Fund's shares including
payments to broker-dealers who sell the Contracts, the costs
of training and educating such broker-dealers with respect to
the Contracts and other bona-fide distribution costs payable
to unaffiliated persons. Other than incidental costs related
to establishing the broker-dealer affiliate as an "introducing
broker", no portion of the commissions received by the broker-dealer
affiliate of the Manager will be retained for its or
any affiliate's benefit. On a quarterly basis, the Manager
will report to the Board of Trustees the aggregate commissions
received by its broker-dealer affiliate and the distribution
expenses paid from such commissions. The Board of Trustees
will periodically review the extent to which the foregoing
arrangement reduces distribution expenses currently being
incurred by the Manager or its affiliates on behalf of the
Fund. The Board of Trustees may determine from time to time
other appropriate uses for the Fund from the commissions it
pays to executing brokers.
TCW Funds Management, Inc. ("TCW") is the Adviser to the
TCW Money Market Portfolio and the TCW Managed Asset
Allocation Portfolio. As compensation for its services as
investment adviser, the Manager pays TCW a monthly fee at the
annual rate of .25% of the average daily net assets of the TCW
Money Market Portfolio (subject to reduction in certain
circumstances) and .375% of the average daily net assets of
the TCW Managed Asset Allocation Portfolio (subject to
reduction in certain circumstances). TCW is a wholly owned
subsidiary of The TCW Group, Inc., whose subsidiaries,
including Trust Company of the West and TCW Asset Management
Company, provide a variety of trust, investment management and
investment advisory services. TCW and its affiliates, which
as of December 31, 1995 had approximately $52 billion under
management or committed for management, provide investment
advisory services to a number of open-end and closed-end
investment companies.
James M. Goldberg, a Managing Director and Chairman of
the Fixed Income Policy Committee of TCW, is the portfolio
manager for the TCW Money Market Portfolio. Mr. Goldberg has
been with TCW since 1984. Investment decisions for the equity
portion of the TCW Managed Asset Allocation Portfolio are made
by Norman Ridley in consultation with Stefan D. Abrams. Mr.
Ridley is a Senior Vice President of TCW and has been with the
firm since 1985. Since 1992 Mr. Abrams has been a Managing
Director of TCW and is Director of Equity Strategy and Asset
Allocation. Investment decisions for the fixed income portion
of the TCW Managed Asset Allocation Portfolio are made by Mr.
Goldberg.
OpCap Advisors ("OpCap") (formerly known as Quest for
Value Advisors) is the Adviser to the Value Equity Portfolio
and the Opportunity Value Portfolio. As compensation for its
services as investment adviser, the Manager pays OpCap a
monthly fee at the annual rate of .40% of the average daily
net assets of each of the Value Equity and Opportunity Value
Portfolios, subject to reduction with respect to the
Opportunity Value Portfolio in certain circumstances.
OpCap is a majority-owned subsidiary of Oppenheimer
Capital, a general partnership which is registered as an
investment adviser under the Investment Advisers Act of 1940.
The employees of Oppenheimer Capital render all investment
management services performed under the Investment Advisory
Agreement to the Portfolios. Oppenheimer Financial Corp.
holds a 33% interest in Oppenheimer Capital. Oppenheimer
Capital, L.P., a Delaware limited partnership of which
Oppenheimer Financial Corp. is the sole general partner, owns
the remaining 67% interest of Oppenheimer Capital. The units
of Oppenheimer Capital, L.P. are traded on the New York Stock
Exchange. OpCap and its affiliates have operated as
investment advisers to both mutual funds and other clients
since 1968, and had approximately $37.3 billion under
management as of December 31, 1995.
Eileen Rominger, Managing Director of Oppenheimer
Capital, is the portfolio manager for the Value Equity
Portfolio. Ms. Rominger has been with Oppenheimer Capital
since 1981. Richard J. Glasebrook II, Managing Director of
Oppenheimer Capital, is the portfolio manager for the
Opportunity Value Portfolio. Mr. Glasebrook has been with
Oppenheimer Capital since 1990. Mr. Glasebrook was recently
named by Morningstar, Inc. (an independent service that
monitors the performance of registered investment companies)
as its 1995 Variable Fund Manager of the Year.
The Dreyfus Corporation ("Dreyfus") is the Adviser to the
Dreyfus U.S. Government Securities Portfolio and the Dreyfus
Small Cap Value Portfolio. Dreyfus, which was formed in 1947,
is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of December 31, 1995, Dreyfus managed or administered
approximately $80 billion in assets for more than 1.7 million
investor accounts nationwide. As compensation for its
services as investment adviser, the Manager pays Dreyfus a
monthly fee at the annual rate of .15% of the average daily
net assets of the Dreyfus U.S. Government Securities Portfolio
and .375% of the average daily net assets of the Dreyfus Small
Cap Value Portfolio.
Prior to September 16, 1996, OpCap was the Adviser to the
Dreyfus Small Cap Value Portfolio (formerly known as the Value
Small Cap Portfolio and the Quest for Value Small Cap
Portfolio). As compensation for its services as investment
adviser, the Manager paid OpCap a monthly fee at the annual
rate of .40% of the Portfolio's average daily net assets.
Mellon is a publicly-owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered
under the Federal Bank Holding Company Act of 1956, as
amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding
companies in the United States based on total assets.
Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE) National Association, Mellon Bank (MD),
The Boston Company, Inc., AFCO Credit Corporation and a number
of companies known as Mellon Financial Services Corporations.
Through its subsidiaries, including Dreyfus, Mellon managed
more than $233 billion in assets as of December 31, 1995,
including approximately $81 billion in proprietary mutual fund
assets. As of December 31, 1995, Mellon, through various
subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $786
billion in assets, including approximately $60 billion in
mutual fund assets.
Prior to May 1, 1996, The Boston Company Asset
Management, Inc. ("Boston Company"), an affiliate of Dreyfus,
was the Dreyfus U.S. Government Securities Portfolio's
Adviser. Boston Company is a wholly-owned subsidiary of The
Boston Company, Inc., which is an indirect wholly-owned
subsidiary of Mellon.
Andrew S. Windmueller, who has been employed by Dreyfus
since October, 1994 and by The Boston Company, Inc. since
1986, is the portfolio manager for the Dreyfus U.S. Government
Securities Portfolio. Mr. Windmueller is a member of the
Fixed Income Strategy Committee and the Head of Credit
Research of Boston Company and Vice President of Boston
Company.
The portfolio managers for the Dreyfus Small Cap Value
Portfolio are David L. Diamond and Peter I. Higgins. Mr.
Diamond has been employed by Boston Company since June, 1991
and by Dreyfus since October, 1994. Mr. Higgins has been
employed by The Boston Company, Inc. since August 1988, by
Boston Company since June, 1991 and by Dreyfus since February,
1996.
T. Rowe Price Associates, Inc. ("T. Rowe Price") is the
Adviser to the T. Rowe Price Equity Income Portfolio and the
T. Rowe Price Growth Stock Portfolio. As compensation for its
services as investment adviser, the Manager pays T. Rowe Price
a monthly fee at the annual rate of .40% of the daily net
assets of each of the T. Rowe Price Equity Income and T. Rowe
Price Growth Stock Portfolios. T. Rowe Price serves as
investment manager to a variety of individual and
institutional investor accounts, including limited and real
estate partnerships and other mutual funds.
Investment decisions with respect to the T. Rowe Price
Equity Income Portfolio are made by an Investment Advisory
Committee composed of the following members: Brian C. Rogers,
Chairman, Thomas H. Broadus, Jr., Richard P. Howard, and
William J. Stromberg. The Committee Chairman has day-to-day
responsibility for managing the Portfolio and works with the
Committee in developing and executing the Portfolio's
investment program. Mr. Rogers has been Chairman of the
Committee since 1993. He joined T. Rowe Price in 1982 and has
been managing investments since 1983.
Investment decisions with respect to the T. Rowe Price
Growth Stock Portfolio are made by an Investment Advisory
Committee composed of the following members: John D.
Gillespie, Chairman, James A.C. Kennedy and Brian C. Rogers.
The Committee Chairman has day-to-day responsibility for
managing the Portfolio and works with the Committee in
developing and executing the Portfolio's investment program.
Mr. Gillespie has been Chairman of the Committee since 1994.
He joined T. Rowe Price in 1986 and has been managing
investments since 1989.
Rowe Price-Fleming International, Inc. ("Price-Fleming")
is the Adviser to the T. Rowe Price International Stock
Portfolio (formerly the Global Growth Portfolio). As
compensation for its services as investment adviser, the
Manager pays Price-Fleming a monthly fee at an annual rate
based on the Portfolio's average daily net assets as follows:
.75% up to $20 million; .60% in excess of $20 million up to
$50 million; and .50% of assets in excess of $50 million. At
such time as the net assets of the Portfolio exceed $200
million, the fee shall be .50% of total average daily net
assets.
Prior to January 1, 1995, Ivory & Sime International,
Inc. ("I&S") and Ivory & Sime plc acted as adviser and sub-adviser,
respectively, for the Global Growth Portfolio. As
compensation for its services as investment adviser, the
Manager paid ISI a monthly fee at the annual rate of .45% of
the average daily net assets of the Portfolio up to $400
million and .30% of average daily net assets in excess of $400
million. As compensation for its services, Ivory & Sime plc
received from ISI 78% of the gross monthly fees paid by the
Manager to ISI.
Price-Fleming was incorporated in Maryland in 1979 as a
joint venture between T. Rowe Price and Robert Fleming
Holdings Limited ("Flemings"). Flemings is a diversified
investment organization which participates in a global network
of regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lampur, South Korea
and Taiwan.
T. Rowe Price was incorporated in Maryland in 1947 as
successor to the investment counseling business founded by the
late Thomas Rowe Price, Jr., in 1937. Flemings was
incorporated in 1974 in the United Kingdom as successor to the
business founded by Robert Fleming in 1873. As of December
31, 1995, T. Rowe Price and its affiliates managed more than
$70 billion of assets of which Price-Fleming managed the U.S.
equivalent of approximately $20 billion.
The common stock of Price-Fleming is 50% owned by a
wholly-owned subsidiary of T. Rowe Price, 25% by a subsidiary
of Fleming and 25% by Jardine Fleming Group Limited ("Jardine
Fleming"). (Half of Jardine Fleming is owned by Flemings and
half by Jardine Matheson Holdings Limited.) T. Rowe Price has
the right to elect a majority of the board of directors of
Price-Fleming, and Flemings has the right to elect the
remaining directors, one of whom will be nominated by Jardine
Fleming.
Investment decisions with respect to the T. Rowe Price
International Stock Portfolio are made by an investment
advisory group composed of the following members: Martin G.
Wade, Christopher D. Alderson, Peter B. Askew, Richard J.
Bruce, Mark J. T. Edwards, John R. Ford, Robert C. Howe, James
B. M. Seddon, Benedict R. F. Thomas and David J. L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 27 years
of experience with the Fleming Group in research, client
service and investment management. (Fleming Group includes
Flemings and/or Jardine Fleming). Christopher Alderson joined
Price-Fleming in 1988 and has 10 years of experience with the
Fleming Group in research and portfolio management. Peter
Askew joined Price-Fleming in 1988 and has 21 years of
experience managing multi-currency fixed income portfolios.
Richard Bruce joined Price-Fleming in 1991 and has eight years
of experience in investment management with the Fleming Group
in Tokyo. Mark Edwards joined Price-Fleming in 1986 and has
15 years of experience in financial analysis. John Ford
joined Price-Fleming in 1982 and has 16 years of experience
with Fleming Group in research and portfolio management.
Robert Howe joined Price Fleming in 1986 and has 15 years of
experience in economic research, company research and
portfolio management. James Seddon joined Price-Fleming in
1987 and has nine years of experience in investment
management. Benedict Thomas joined Price-Fleming in 1988 and
has seven years of portfolio management experience. David
Warren joined Price-Fleming in 1984 and has 16 years of
experience in equity research, fixed income research and
portfolio management.
J.P. Morgan Investment Management Inc. ("Morgan") is the
Adviser to the Enhanced Index Portfolio. As compensation for
its services as investment adviser the Manager pays Morgan a
monthly fee at the annual rate of .35% of the average daily
net assets of the Enhanced Index Portfolio.
Morgan is a wholly-owned subsidiary of J.P. Morgan and
Co. Incorporated, ("J.P. Morgan"), a bank holding company.
Through offices in New York City and abroad, J.P. Morgan,
through Morgan and other subsidiaries, including Morgan
Guaranty Trust Company of New York, offers a wide range of
services to governmental, institutional, corporate and
individual customers and acts as investment adviser to
individual and institutional clients with combined assets
under management (as of December 31, 1995) of over $179
billion (of which Morgan advises over $139 billion). J.P.
Morgan has a long history of service as adviser, underwriter
and lender to an extensive roster of major companies and as a
financial adviser to national governments. The firm, through
its predecessor firms, has been in business for over a century
and has been managing investments since 1913.
Investment decisions with respect to the Enhanced Index
Portfolio are made by an investment advisory group composed of
Frederic A. Nelson, III, James Wiess and Leon Roisenberg.
Mr. Nelson is a Managing Director of Morgan and is
responsible for the U.S. equity business, including active
equity and structured strategies. Mr. Nelson joined Morgan in
1994 after 14 years at Banker Trust Company where he was part
of the Global Investment Management Group. Mr. Wiess, a Vice
President of Morgan, is a portfolio manager in the Equity and
Balanced Accounts Group with responsibility for portfolio
rebalancing and product research and development in structured
equity strategies. Mr. Wiess joined Morgan in 1992 and from
1984 to 1991 was employed by Oppenheimer & Co. Mr. Roisenberg
joined Morgan in 1996 as a Vice President. From 1991 to 1996,
Mr. Roisenberg was a quantative analyst/portfolio manager at
Bankers Trust Company.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio intends to qualify each year as a
"regulated investment company" under the Internal Revenue
Code. By so qualifying, a Portfolio will not be subject to
federal income taxes to the extent that its net investment
income and net realized capital gains are distributed to
shareholders.
It is the intention of each Portfolio to distribute
substantially all its net investment income. Although the
Trustees of the Fund may decide to declare dividends at other
intervals, dividends from investment income of each Portfolio
are expected to be declared annually (except with respect to
the TCW Money Market Portfolio where dividends will be
declared daily and paid monthly) and will be distributed to
the various separate accounts of PFL and not to Contract
owners in the form of additional full and fractional shares of
the Portfolio and not in cash. The result is that the
investment performance of the Portfolios, including the effect
of dividends, is reflected in the cash value of the Contracts.
See the prospectus for the Contracts accompanying this
Prospectus.
All net realized long- or short-term capital gains of
each Portfolio, if any, will be declared and distributed at
least annually either during or after the close of the
Portfolio's fiscal year and will be reinvested in additional
full and fractional shares of the Portfolio. In certain
foreign countries, interest and dividends are subject to a tax
which is withheld by the issuer. U.S. income tax treaties with
certain countries reduce the rates of these withholding taxes.
The Fund intends to provide the documentation necessary to
achieve the lower treaty rate of withholding whenever
applicable or to seek refund of amounts withheld in excess of
the treaty rate.
For a discussion of the impact on Contract owners of
income taxes PFL may owe as a result of (i) its ownership of
shares of the Portfolios, (ii) its receipt of dividends and
distributions thereon, and (iii) its gains from the purchase
and sale thereof, reference should be made to the prospectus
for the Contracts accompanying this Prospectus.
SALE AND REDEMPTION OF SHARES
The Fund offers shares of each Portfolio continuously to
separate accounts of PFL and may at any time offer shares to
any other insurer approved by the Trustees.
AEGON USA Securities, Inc. ("AEGON Securities"), an
affiliate of PFL is the principal underwriter and distributor
of the Contracts. AEGON Securities places orders for the
purchase or redemption of shares of each Portfolio based on,
among other things, the amount of net Contract premiums or
purchase payments transferred to the separate accounts,
transfers to or from a separate account investment division,
policy loans, loan repayments, and benefit payments to be
effected on a given date pursuant to the terms of the
Contracts. Such orders are effected, without sales charge, at
the net asset value per share for each Portfolio determined as
of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., New York City time), on that same date.
The net asset value of the shares of each Portfolio for
the purpose of pricing orders for the purchase and redemption
of shares is determined as of the close of the New York Stock
Exchange, Monday through Friday, exclusive of national
business holidays. Net asset value per share is computed by
dividing the value of all assets of a Portfolio (including
accrued interest and dividends), less all liabilities of the
Portfolio (including accrued expenses and dividends payable),
by the number of outstanding shares of the Portfolio. The
assets of the TCW Money Market Portfolio are valued at
amortized cost and the assets of the other Portfolios are
valued on the basis of their market values or, in the absence
of a market value with respect to any portfolio securities, at
fair value as determined by or under the direction of the
Fund's Board of Trustees including the employment of an
independent pricing service, as described in the Statement of
Additional Information.
Shares of the Portfolios may be redeemed on any day on
which the Fund is open for business.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the "average
annual or cumulative total return" of the TCW Managed Asset
Allocation, Value Equity, Dreyfus Small Cap Value, Dreyfus
U.S. Government Securities, T. Rowe Price Equity Income, T.
Rowe Price Growth Stock, T. Rowe Price International Stock,
Opportunity Value, and Enhanced Index Portfolios or the
"yield" and "effective yield" of the TCW Money Market and
Dreyfus U.S. Government Securities Portfolios and may compare
the performance of the Portfolios with that of other mutual
funds with similar investment objectives as listed in rankings
prepared by Lipper Analytical Services, Inc., or similar
independent services monitoring mutual fund performance, and
with appropriate securities or other relevant indices. The
"average annual total return" of a Portfolio refers to the
average annual compounded rate of return over the stated
period that would equate an initial investment in that
Portfolio at the beginning of the period to its ending
redeemable value, assuming reinvestment of all dividends and
distributions and deduction of all recurring charges other
than charges and deductions which are, or may be, imposed
under the Contracts. Figures will be given for the recent
one, five and ten year periods and for the life of the
Portfolio if it has not been in existence for any such
periods. When considering "average annual total return"
figures for periods longer than one year, it is important to
note that a Portfolio's annual total return for any given year
might have been greater or less than its average for the
entire period. "Cumulative total return" represents the total
change in value of an investment in a Portfolio for a
specified period (again reflecting changes in Portfolio share
prices and assuming reinvestment of Portfolio distributions).
The TCW Money Market Portfolio's "yield" refers to the income
generated by an investment in the Portfolio over a seven-day
period (which period will be stated in the advertisement).
This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown
as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned
by an investment in the Portfolio is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed
reinvestment. The Dreyfus U.S. Government Securities Portfolio
may advertise its 30-day yield. Such yield refers to the
income that is generated over a stated 30-day (or one month)
period (which period will be stated in the advertisement),
divided by the net asset value per share on the last day of
the period. The income is annualized by assuming that the
income during the 30-day period remains the same each month
over one year and compounded semi-annually. The methods used
to calculate "average annual and cumulative total return" and
"yield" are described further in the Statement of Additional
Information.
The performance of each Portfolio will vary from time to
time in response to fluctuations in market conditions,
interest rates, the composition of the Portfolio's investments
and expenses. Consequently, a Portfolio's performance figures
are historical and should not be considered representative of
the performance of the Portfolio for any future period.
OpCap is the investment adviser of the Managed Portfolio
of the Accumulation Trust (formerly known as the Quest for
Value Accumulation Trust) (the "Accumulation Trust"), a
registered open-end investment company whose shares are sold
to certain variable accounts of life insurance companies. The
Managed Portfolio of the Accumulation Trust is substantially
similar to the Opportunity Value Portfolio in that it has the
same investment objective as the Opportunity Value Portfolio
and is managed using the same investment strategies and
techniques as contemplated for the Opportunity Value
Portfolio.
At December 31, 1995 and as of the date of this
Prospectus, the Opportunity Value Portfolio had not commenced
operations. Set forth below is certain performance
information regarding the Managed Portfolio of the
Accumulation Trust which has been obtained from OpCap, and is
set forth in the current prospectus and statement of
additional information of the Accumulation Trust. Investors
should not rely on the following financial information as an
indication of the future performance of the Opportunity Value
Portfolio.
Average Annual Total Return of Comparable Portfolio*(1)
For the Period
For the Year For the Five Years from Inception
Ended December Ended December to December 31,
31, 1995 31, 1995 1995(2)
Managed Portfolio
of Accumulation
Trust 45.55% 23.34% 19.74%
* On September 16, 1994, an investment company called Quest
for Value Accumulation Trust (the "Old Trust") was
effectively divided into two investment funds, the Old
Trust and the Accumulation Trust, at which time the
Accumulation Trust commenced operations. The total net
assets for the Managed Portfolio immediately after the
transaction was $682,601,380 with respect to the Old
Trust and $51,345,102 with respect to the Accumulation
Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed Portfolio
reflect the performance of the corresponding Portfolio of
the Old Trust.
(1) Reflects waiver of all or a portion of the advisory fees
and reimbursements of other expenses. Without such
waivers and reimbursements, the average annual total
return during the periods would have been lower.
(2) The Portfolio commenced operations on August 1, 1988.
Morgan is the investment manager of certain Private
Accounts. At December 31, 1995 and as of the date of this
Prospectus, the Enhanced Index Portfolio had not commenced
operations. However, these Private Accounts are substantially
similar to the Enhanced Index Portfolio in that they have the
same investment objectives as the Enhanced Index Portfolio and
are managed using the same investment strategies and
techniques as contemplated for the Enhanced Index Portfolio.
Investors should not rely on the following financial
information as an indication of the future performance of the
Enhanced Index Portfolio. The performance of the Enhanced
Index Portfolio may vary from the Private Account composite
information because the Portfolio will be actively managed and
its investments will vary from time to time and will not be
identical to the past portfolio investments of the Private
Accounts. Moreover, the Private Accounts are not registered
under the 1940 Act and therefore are not subject to certain
investment restrictions that are imposed by the 1940 Act,
which, if imposed, could have adversely affected the Private
Accounts' performances.
The chart below shows hypothetical performance
information derived from historical composite performance of
the Private Accounts included in the Structured Stock
Selection Composite. The hypothetical performance figures
represent the actual performance results of the composite of
comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the
Enhanced Index Portfolio. The actual Private Account
composite performance figures are time-weighted rates of
return which include all income and accrued income and
realized and unrealized gains or losses, but do not reflect
the deduction of investment advisory fees actually charged to
the Private Accounts.
Hypothetical Average Annual Total Return Information Derived
from Private Account Composite
For the For the Five For the Period
Year Ended Years Ended From Inception
December 31, December 31, (November 1, 1989)
1995 1995 to December 31, 1995
Structured
Stock
Selection
Composite 36.74% 16.77% 13.44%
__________________
The calculations of total return assume the reinvestment
of all dividends and capital gains distributions on the
reinvestment dates during the period and the deduction of all
recurring expenses that were charged to shareholder accounts.
The above tables do not reflect charges and deductions which
are, or may be, imposed under the Contracts.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund was established in November 1988 as a business
trust under Massachusetts law. The Fund has authorized an
unlimited number of shares of beneficial interest which may,
without shareholder approval, be divided into an unlimited
number of series. Shares of the Fund are presently divided
into ten series of shares, one for each of the Fund's ten
Portfolios. Shares are freely transferable, are entitled to
dividends as declared by the Trustees, and in liquidation are
entitled to receive the net assets of their respective
Portfolios, but not the net assets of the other Portfolios.
Fund shares are entitled to vote at any meeting of
shareholders. The Fund does not generally hold annual meetings
of shareholders and will do so only when required by law.
Matters submitted to a shareholder vote must be approved by
each portfolio of the Fund separately except (i) when required
by the 1940 Act, shares will be voted together as a single
class and (ii) when the Trustees have determined that the
matter does not affect all portfolios, then only shareholders
of the affected portfolio will be entitled to vote on the
matter.
Owners of the Contracts have certain voting interests in
respect of shares of the Portfolios. See "Voting Rights" in
the prospectus for the Contracts accompanying this Prospectus
for a description of the rights granted Contract owners to
instruct voting of shares.
ADDITIONAL INFORMATION
Transfer Agent and Custodian
All cash and securities of the Fund are held by Boston
Safe Deposit and Trust Company as custodian. First Data,
located at One Exchange Place, Boston, Massachusetts 02109,
serves as transfer agent for the Fund.
Independent Auditors
Ernst & Young LLP, located at 200 Clarendon Street,
Boston, Massachusetts, 02116, serves as the Fund's independent
auditors.
Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not
necessarily complete, and, in each instance, reference is made
to the copy of such contract or other document filed as an
exhibit to the registration statement of which this Prospectus
forms a part, each such statement being qualified in all
respects by such reference.
<PAGE>
TABLE OF CONTENTS
Page
The Fund
Financial Highlights
Investment Objectives and Policies
TCW Money Market Portfolio
TCW Managed Asset Allocation
Portfolio
T. Rowe Price International Stock
Portfolio
Value Equity Portfolio
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities
Portfolio
T. Rowe Price Equity Income
Portfolio
T. Rowe Price Growth Stock
Portfolio
Opportunity Value Portfolio
Enhanced Index Portfolio
Investment Strategies
Management of the Fund
The Manager
The Advisers
Dividends, Distributions and Taxes
Sale and Redemption of Shares
Performance Information
Organization and Capitalization
of the Fund
Additional Information
Transfer Agent and Custodian
Independent Auditors
--------------
No person has been authorized to give any
information or to make any representation not
contained in this Prospectus and, if given or
made, such information or representation must
not be relied upon as having been authorized.
This Prospectus does not constitute an
offering of any securities other than the
registered securities to which it relates or
an offer to any person in any state or
jurisdiction of the United States or any
country where such offer would be unlawful.
ENDEAVOR SERIES TRUST
2101 East Coast Highway,
Suite 300
Corona del Mar, California 92625
(714) 760-0505
Manager
Endeavor Investment Advisers
2101 East Coast Highway
Suite 300
Corona del Mar, California 92625
Investment Advisers
TCW Funds Management, Inc.
865 S. Figueroa Street
Los Angeles, California 90071
OpCap Advisors
One World Financial Center
New York, New York 10281
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Rowe Price-Fleming International,
Inc.
100 East Pratt Street
Baltimore, Maryland 21202
J.P. Morgan Investment
Management Inc.
522 Fifth Avenue
New York, New York 10036
Custodian
Boston Safe Deposit and Trust
Company
One Boston Place
Boston, Massachusetts 02108
STATEMENT OF ADDITIONAL INFORMATION
ENDEAVOR SERIES TRUST
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus for the TCW Money Market Portfolio (formerly, the
Money Market Portfolio), the TCW Managed Asset Allocation
Portfolio (formerly, the Managed Asset Allocation Portfolio),
the T. Rowe Price International Stock Portfolio (formerly, the
Global Growth Portfolio), the Value Equity Portfolio
(formerly, the Quest for Value Equity Portfolio), the Dreyfus
Small Cap Value Portfolio (formerly, the Quest for Value Small
Cap Portfolio and prior to that the Value Small Cap
Portfolio), the Dreyfus U.S. Government Securities Portfolio
(formerly, the U.S. Government Securities Portfolio), the T.
Rowe Price Equity Income Portfolio, the T. Rowe Price Growth
Stock Portfolio, the Opportunity Value Portfolio and the
Enhanced Index Portfolio of Endeavor Series Trust (the
"Fund"), dated November 4, 1996, which may be obtained by
writing the Fund at 2101 East Coast Highway, Suite 300, Corona
del Mar, California 92625 or by telephoning (714) 760-0505.
Unless otherwise defined herein, capitalized terms have the
meanings given to them in the Prospectus.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................ 3
Options and Futures Strategies............... 3
Foreign Currency Transactions................ 9
Repurchase Agreements........................ 13
Forward Commitments.......................... 14
Securities Loans............................. 14
Lower Rated Bonds ........................... 14
Interest Rate Transactions................... 16
Dollar Roll Transactions..................... 17
Portfolio Turnover........................... 18
Investment Restrictions........................... 19
Other Policies............................... 22
Performance Information........................... 23
Total Return................................. 23
Yield........................................ 26
Non-Standardized Performance................. 27
Portfolio Transactions............................ 27
Management of the Fund............................ 31
Trustees and Officers........................ 31
The Manager.................................. 37
The Advisers................................. 39
Redemption of Shares.............................. 42
Net Asset Value................................... 42
Taxes............................................. 45
Federal Income Taxes......................... 45
Organization and Capitalization of the Fund....... 46
Legal Matters..................................... 49
Custodian......................................... 49
Financial Statements.............................. 49
Appendix.......................................... A-1
______________________
No person has been authorized to give any information or
to make any representation not contained in this Statement of
Additional Information or in the Prospectus and, if given or
made, such information or representation must not be relied
upon as having been authorized. This Statement of Additional
Information does not constitute an offering of any securities
other than the registered securities to which it relates or an
offer to any person in any state or other jurisdiction of the
United States or any country where such offer would be
unlawful.
The date of this Statement of Additional Information is
November 4, 1996.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of
the investment objectives and policies of the Portfolios in
the Prospectus of the Fund. The Fund is managed by Endeavor
Investment Advisers. The Manager has selected TCW Funds
Management, Inc. as investment adviser for the TCW Money
Market Portfolio and the TCW Managed Asset Allocation
Portfolio, Rowe Price-Fleming International, Inc. as
investment adviser for the T. Rowe Price International Stock
Portfolio, OpCap Advisors (formerly, Quest for Value Advisors)
as investment adviser for the Value Equity Portfolio and
Opportunity Value Portfolio, The Dreyfus Corporation as
investment adviser for the Dreyfus U.S. Government Securities
Portfolio and Dreyfus Small Cap Value Portfolio, T. Rowe Price
Associates, Inc. as investment adviser for the T. Rowe Price
Equity Income Portfolio and T. Rowe Price Growth Stock
Portfolio and J.P. Morgan Investment Management Inc. as
investment adviser for the Enhanced Index Portfolio.
Options and Futures Strategies (All Portfolios except TCW
Money Market Portfolio)
A Portfolio may seek to increase the current return on
its investments by writing covered call or covered put
options. In addition, a Portfolio may at times seek to hedge
against either a decline in the value of its portfolio
securities or an increase in the price of securities which its
Adviser plans to purchase through the writing and purchase of
options including options on stock indices and the purchase
and sale of futures contracts and related options. A Portfolio
may utilize options or futures contracts and related options
for other than hedging purposes to the extent that the
aggregate initial margins and premiums do not exceed 5% of the
Portfolio's net asset value. The Adviser to the TCW Managed
Asset Allocation Portfolio does not presently intend to
utilize options or futures contracts and related options but
may do so in the future. The Advisers to the Dreyfus Small
Cap Value Portfolio and the Opportunity Growth Portfolio do
not currently intend to write covered put and call options or
engage in transactions in futures contracts and related
options, but may do so in the future. Expenses and losses
incurred as a result of such hedging strategies will reduce a
Portfolio's current return.
The ability of a Portfolio to engage in the options and
futures strategies described below will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to stock indices and U.S.
government securities are relatively new and still developing.
It is impossible to predict the amount of trading interest
that may exist in various types of options or futures.
Therefore no assurance can be given that a Portfolio will be
able to utilize these instruments effectively for the purposes
stated below.
Writing Covered Options on Securities. A Portfolio may
write covered call options and covered put options on
optionable securities of the types in which it is permitted to
invest from time to time as its Adviser determines is
appropriate in seeking to attain the Portfolio's investment
objective. Call options written by a Portfolio give the holder
the right to buy the underlying security from the Portfolio at
a stated exercise price; put options give the holder the
right to sell the underlying security to the Portfolio at a
stated price.
A Portfolio may only write call options on a covered
basis or for cross-hedging purposes and will only write
covered put options. A put option would be considered
"covered" if the Portfolio owns an option to sell the
underlying security subject to the option having an exercise
price equal to or greater than the exercise price of the
"covered" option at all times while the put option is
outstanding. A call option is covered if the Portfolio owns
or has the right to acquire the underlying securities subject
to the call option (or comparable securities satisfying the
cover requirements of securities exchanges) at all times
during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a
hedge against another security which the Portfolio owns or has
the right to acquire. In the case of a call written for
cross-hedging purposes or a put option, the Portfolio will
maintain in a segregated account at the Fund's custodian bank
cash or short-term U.S. government securities with a value
equal to or greater than the Portfolio's obligation under the
option. A Portfolio may also write combinations of covered
puts and covered calls on the same underlying security.
A Portfolio will receive a premium from writing an
option, which increases the Portfolio's return in the event
the option expires unexercised or is terminated at a profit.
The amount of the premium will reflect, among other things,
the relationship of the market price of the underlying
security to the exercise price of the option, the term of the
option, and the volatility of the market price of the
underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the
market value of the underlying security above the exercise
price of the option. By writing a put option, a Portfolio will
assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then
current market price, resulting in a potential capital loss if
the purchase price exceeds the market price plus the amount of
the premium received.
A Portfolio may terminate an option which it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same
terms as the option written. The Portfolio will realize a
profit (or loss) from such transaction if the cost of such
transaction is less (or more) than the premium received from
the writing of the option. Because increases in the market
price of a call option will generally reflect increases in the
market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or
in part by unrealized appreciation of the underlying security
owned by the Portfolio.
Purchasing Put and Call Options on Securities. A
Portfolio may in the future purchase put options to protect
its portfolio holdings in an underlying security against a
decline in market value. This protection is provided during
the life of the put option since the Portfolio, as holder of
the put, is able to sell the underlying security at the
exercise price regardless of any decline in the underlying
security's market price. For the purchase of a put option to
be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in
this manner, any profit which the Portfolio might otherwise
have realized on the underlying security will be reduced by
the premium paid for the put option and by transaction costs.
A Portfolio may also in the future purchase a call option
to hedge against an increase in price of a security that it
intends to purchase. This protection is provided during the
life of the call option since the Portfolio, as holder of the
call, is able to buy the underlying security at the exercise
price regardless of any increase in the underlying security's
market price. For the purchase of a call option to be
profitable, the market price of the underlying security must
rise sufficiently above the exercise price to cover the
premium and transaction costs. By using call options in this
manner, any profit which the Portfolio might have realized had
it bought the underlying security at the time it purchased the
call option will be reduced by the premium paid for the call
option and by transaction costs.
No Portfolio intends to purchase put or call options if,
as a result of any such transaction, the aggregate cost of
options held by the Portfolio at the time of such transaction
would exceed 5% of its total assets.
Purchase and Sale of Options and Futures on Stock
Indices. A Portfolio may purchase and sell options on stock
indices and stock index futures contracts either as a hedge
against movements in the equity markets or for other
investment purposes.
Options on stock indices are similar to options on
specific securities except that, rather than the right to take
or make delivery of the specific security at a specific price,
an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the
closing level of that stock index is greater than, in the case
of a call, or less than, in the case of a put, the exercise
price of the option. This amount of cash is equal to such
difference between the closing price of the index and the
exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this
amount. Unlike options on specific securities, all settlements
of options on stock indices are in cash and gain or loss
depends on general movements in the stocks included in the
index rather than price movements in particular stocks.
Currently options traded include the Standard & Poor's 500
Composite Stock Price Index, the NYSE Composite Index, the
AMEX Market Value Index, the National Over-The-Counter Index,
the Nikkei 225 Stock Average Index, the Financial Times Stock
Exchange 100 Index and other standard broadly based stock
market indices. Options are also traded in certain industry or
market segment indices such as the Pharmaceutical Index.
A stock index futures contract is an agreement in which
one party agrees to deliver to the other an amount of cash
equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last
trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is
made.
If a Portfolio's Adviser expects general stock market
prices to rise, it might purchase a call option on a stock
index or a futures contract on that index as a hedge against
an increase in prices of particular equity securities it wants
ultimately to buy for the Portfolio. If in fact the stock
index does rise, the price of the particular equity securities
intended to be purchased may also increase, but that increase
would be offset in part by the increase in the value of the
Portfolio's index option or futures contract resulting from
the increase in the index. If, on the other hand, the
Portfolio's Adviser expects general stock market prices to
decline, it might purchase a put option or sell a futures
contract on the index. If that index does in fact decline, the
value of some or all of the equity securities held by the
Portfolio may also be expected to decline, but that decrease
would be offset in part by the increase in the value of the
Portfolio's position in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. A Portfolio
may purchase and sell interest rate futures contracts on U.S.
Treasury bills, notes and bonds and Government National
Mortgage Association ("GNMA") certificates either for the
purpose of hedging its portfolio securities against the
adverse effects of anticipated movements in interest rates or
for other investment purposes.
A Portfolio may sell interest rate futures contracts in
anticipation of an increase in the general level of interest
rates. Generally, as interest rates rise, the market value of
the securities held by a Portfolio will fall, thus reducing
the net asset value of the Portfolio. This interest rate risk
can be reduced without employing futures as a hedge by selling
such securities and either reinvesting the proceeds in
securities with shorter maturities or by holding assets in
cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions
and would typically reduce the Portfolio's average yield as a
result of the shortening of maturities.
The sale of interest rate futures contracts provides a
means of hedging against rising interest rates. As rates
increase, the value of a Portfolio's short position in the
futures contracts will also tend to increase thus offsetting
all or a portion of the depreciation in the market value of
the Portfolio's investments that are being hedged. While the
Portfolio will incur commission expenses in selling and
closing out futures positions (which is done by taking an
opposite position in the futures contract), commissions on
futures transactions are lower than transaction costs incurred
in the purchase and sale of portfolio securities.
A Portfolio may purchase interest rate futures contracts
in anticipation of a decline in interest rates when it is not
fully invested. As such purchases are made, it is expected
that an equivalent amount of futures contracts will be closed
out.
A Portfolio will enter into futures contracts which are
traded on national or foreign futures exchanges, and are
standardized as to maturity date and the underlying financial
instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"). Futures are
traded in London at the London International Financial Futures
Exchange, in Paris, at the MATIF, and in Tokyo at the Tokyo
Stock Exchange.
Options on Futures Contracts. A Portfolio may purchase
and write call and put options on stock index and interest
rate futures contracts. A Portfolio may use such options on
futures contracts in connection with its hedging strategies in
lieu of purchasing and writing options directly on the
underlying securities or stock indices or purchasing or
selling the underlying futures. For example, a Portfolio may
purchase put options or write call options on stock index
futures or interest rate futures, rather than selling futures
contracts, in anticipation of a decline in general stock
market prices or rise in interest rates, respectively, or
purchase call options or write put options on stock index or
interest rate futures, rather than purchasing such futures, to
hedge against possible increases in the price of equity
securities or debt securities, respectively, which the
Portfolio intends to purchase.
In connection with transactions in stock index options,
stock index futures, interest rate futures and related options
on such futures, a Portfolio will be required to deposit as
"initial margin" an amount of cash and short-term U.S.
government securities. The current initial margin requirement
per contract is approximately 2% of the contract amount.
Thereafter, subsequent payments (referred to as "variation
margin") are made to and from the broker to reflect changes in
the value of the futures contract. Brokers may establish
deposit requirements higher than exchange minimums.
Limitations. A Portfolio will not purchase or sell
futures contracts or options on futures contracts or stock
indices for non-hedging purposes if, as a result, the sum of
the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on
futures contracts or stock indices would exceed 5% of the net
assets of the Portfolio unless the transaction meets certain
"bona fide hedging" criteria.
Risks of Options and Futures Strategies. The effective
use of options and futures strategies depends, among other
things, on a Portfolio's ability to terminate options and
futures positions at times when its Adviser deems it desirable
to do so. Although a Portfolio will not enter into an option
or futures position unless its Adviser believes that a liquid
market exists for such option or future, there can be no
assurance that a Portfolio will be able to effect closing
transactions at any particular time or at an acceptable price.
The Advisers generally expect that options and futures
transactions for the Portfolios will be conducted on
recognized exchanges. In certain instances, however, a
Portfolio may purchase and sell options in the
over-the-counter market. The staff of the Securities and
Exchange Commission considers over-the-counter options to be
illiquid. A Portfolio's ability to terminate option positions
established in the over-the-counter market may be more limited
than in the case of exchange traded options and may also
involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to the
Portfolio.
The use of options and futures involves the risk of
imperfect correlation between movements in options and futures
prices and movements in the price of the securities that are
the subject of the hedge. The successful use of these
strategies also depends on the ability of a Portfolio's
Adviser to forecast correctly interest rate movements and
general stock market price movements. This risk increases as
the composition of the securities held by the Portfolio
diverges from the composition of the relevant option or
futures contract.
Foreign Currency Transactions (Dreyfus U.S. Government
Securities, T. Rowe Price Equity Income, T. Rowe Price Growth
Stock, T. Rowe Price International Stock, Opportunity Value
and Enhanced Index Portfolios)
Foreign Currency Exchange Transactions. The Dreyfus U.S.
Government Securities, T. Rowe Price Equity Income, T. Rowe
Price Growth Stock, T. Rowe Price International Stock,
Opportunity Value and Enhanced Index Portfolios may engage in
foreign currency exchange transactions to protect against
uncertainty in the level of future exchange rates. The Adviser
to a Portfolio may engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging"), and to protect
the value of specific portfolio positions ("position
hedging").
A Portfolio may engage in "transaction hedging" to
protect against a change in the foreign currency exchange rate
between the date on which the Portfolio contracts to purchase
or sell the security and the settlement date, or to "lock in"
the U.S. dollar equivalent of a dividend or interest payment
in a foreign currency. For that purpose, a Portfolio may
purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with the settlement
of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, a Portfolio may also enter into
contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign
currency futures contracts as a hedge against changes in
foreign currency exchange rates between the trade and
settlement dates on particular transactions and not for
speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time at
a rate or rates that may be higher or lower than the spot
rate. Foreign currency futures contracts are standardized
exchange-traded contracts and have margin requirements.
For transaction hedging purposes, a Portfolio may also
purchase exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies. A put option on a futures contract gives a
Portfolio the right to assume a short position in the futures
contract until expiration of the option. A put option on
currency gives a Portfolio the right to sell a currency at an
exercise price until the expiration of the option. A call
option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the
expiration of the option. A call option on currency gives a
Portfolio the right to purchase a currency at the exercise
price until the expiration of the option.
A Portfolio may engage in "position hedging" to protect
against a decline in the value relative to the U.S. dollar of
the currencies in which its portfolio securities are
denominated or quoted (or an increase in the value of currency
for securities which the Portfolio intends to buy, when it
holds cash reserves and short-term investments). For position
hedging purposes, a Portfolio may purchase or sell foreign
currency futures contracts and foreign currency forward
contracts, and may purchase put or call options on foreign
currency futures contracts and on foreign currencies on
exchanges or over-the-counter markets. In connection with
position hedging, a Portfolio may also purchase or sell
foreign currency on a spot basis.
The precise matching of the amounts of foreign currency
exchange transactions and the value of the portfolio
securities involved will not generally be possible since the
future value of such securities in foreign currencies will
change as a consequence of market movements in the value of
those securities between the dates the currency exchange
transactions are entered into and the dates they mature.
It is impossible to forecast with precision the market
value of portfolio securities at the expiration or maturity of
a forward or futures contract. Accordingly, it may be
necessary for a Portfolio to purchase additional foreign
currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities
being hedged is less than the amount of foreign currency the
Portfolio is obligated to deliver and if a decision is made to
sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the
sale of the portfolio security or securities if the market
value of such security or securities exceeds the amount of
foreign currency the Portfolio is obligated to deliver.
Hedging transactions involve costs and may result in
losses. A Portfolio may write covered call options on foreign
currencies to offset some of the costs of hedging those
currencies. A Portfolio will engage in over-the-counter
transactions only when appropriate exchange-traded
transactions are unavailable and when, in the opinion of the
Portfolio's Adviser, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties
likely to meet their contractual obligations. A Portfolio's
ability to engage in hedging and related option transactions
may be limited by tax considerations.
Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which
a Portfolio owns or intends to purchase or sell. They simply
establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques
tend to minimize the risk of loss due to a decline in the
value of the hedged currency, they tend to limit any potential
gain which might result from the increase in the value of such
currency.
Currency Forward and Futures Contracts. A forward foreign
currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract as agreed
by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has
the unilateral right to cancel the contract at maturity by
paying a specified fee. The contracts are traded in the
interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A foreign
currency futures contract is a standardized contract for the
future delivery of a specified amount of a foreign currency at
a future date at a price set at the time of the contract.
Foreign currency futures contracts traded in the United States
are designed by and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange. A Portfolio would
enter into foreign currency futures contracts solely for
hedging or other appropriate investment purposes as defined in
CFTC regulations.
Forward foreign currency exchange contracts differ from
foreign currency futures contracts in certain respects. For
example, the maturity date of a forward contract may be any
fixed number of days from the date of the contract agreed upon
by the parties, rather than a predetermined date in any given
month. Forward contracts may be in any amounts agreed upon by
the parties rather than predetermined amounts. Also, forward
foreign exchange contracts are traded directly between
currency traders so that no intermediary is required. A
forward contract generally requires no margin or other
deposit.
At the maturity of a forward or futures contract, a
Portfolio may either accept or make delivery of the currency
specified in the contract, or at or prior to maturity enter
into a closing transaction involving the purchase or sale of
an offsetting contract. Closing transactions with respect to
forward contracts are usually effected with the currency
trader who is a party to the original forward contract.
Closing transactions with respect to futures contracts are
effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for
closing out such contracts.
Positions in foreign currency futures contracts may be
closed out only on an exchange or board of trade which
provides a secondary market in such contracts. Although a
Portfolio intends to purchase or sell foreign currency futures
contracts only on exchanges or boards of trade where there
appears to be an active secondary market, there can be no
assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to
close a futures position and, in the event of adverse price
movements, a Portfolio would continue to be required to make
daily cash payments of variation margin.
Foreign Currency Options. Options on foreign currencies
operate similarly to options on securities, and are traded
primarily in the over-the-counter market, although options on
foreign currencies have recently been listed on several
exchanges. Such options will be purchased or written only when
a Portfolio's Adviser believes that a liquid secondary market
exists for such options. There can be no assurance that a
liquid secondary market will exist for a particular option at
any specific time. Options on foreign currencies are affected
by all of those factors which influence foreign exchange rates
and investments generally.
The value of a foreign currency option is dependent upon
the value of the foreign currency and the U.S. dollar, and may
have no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency
options, investors
may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information
for foreign currencies and there is no regulatory requirement
that quotations available through dealers or other market
sources be firm or revised on a timely basis. Available
quotation information is generally representative of very
large transactions in the interbank market and thus may not
reflect relatively smaller transactions (less than $1 million)
where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the
markets for the underlying currencies remain open, significant
price and rate movements may take place in the underlying
markets that cannot be reflected in the options markets.
Foreign Currency Conversion. Although foreign exchange
dealers do not charge a fee for currency conversion, they do
realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser
rate of exchange should a Portfolio desire to resell that
currency to the dealer.
Repurchase Agreements (All Portfolios)
Each of the Portfolios may enter into repurchase
agreements with a bank, broker-dealer, or other financial
institution but no Portfolio may invest more than 10% (15%
with respect to each of the T. Rowe Price Equity Income, T.
Rowe Price Growth Stock, T. Rowe Price International Stock,
Dreyfus Small Cap Value, Opportunity Value and Enhanced Index
Portfolios) of its net assets in repurchase agreements having
maturities of greater than seven days. A Portfolio may enter
into repurchase agreements, provided the Fund's custodian
always has possession of securities serving as collateral
whose market value at least equals the amount of the
repurchase obligation. To minimize the risk of loss a
Portfolio will enter into repurchase agreements only with
financial institutions which are considered by its Adviser to
be creditworthy under guidelines adopted by the Trustees of
the Fund. If an institution enters an insolvency proceeding,
the resulting delay in liquidation of the securities serving
as collateral could cause a Portfolio some loss, as well as
legal expense, if the value of the securities declines prior
to liquidation.
Forward Commitments (All Portfolios)
Each of the Portfolios may enter into forward commitments
to purchase securities. An amount of cash or short-term U.S.
government securities equal to the Portfolio's commitment will
be deposited in a segregated account at the Fund's custodian
bank to secure the Portfolio's obligation. Although a
Portfolio will generally enter into forward commitments to
purchase securities with the intention of actually acquiring
the securities for its portfolio (or for delivery pursuant to
options contracts it has entered into), the Portfolio may
dispose of a security prior to settlement if its Adviser deems
it advisable to do so. The Portfolio may realize short-term
gains or losses in connection with such sales.
Securities Loans (All Portfolios)
Each of the Portfolios may pay reasonable finders',
administrative and custodial fees in connection with loans of
its portfolio securities. Although voting rights or the right
to consent accompanying loaned securities pass to the
borrower, a Portfolio retains the right to call the loan at
any time on reasonable notice, and will do so in order that
the securities may be voted by the Portfolio with respect to
matters materially affecting the investment. A Portfolio may
also call a loan in order to sell the securities involved.
Loans of portfolio securities will only be made to borrowers
considered by a Portfolio's Adviser to be creditworthy under
guidelines adopted by the Trustees of the Fund.
Lower Rated Bonds (Value Equity, Dreyfus U.S. Government
Securities, Opportunity Value and T. Rowe Price Equity Income
Portfolios)
The Value Equity Portfolio and Opportunity Value
Portfolio may invest up to 5% of their assets, the T. Rowe
Price Equity Income Portfolio may invest up to 10% of its
assets, and the Dreyfus U.S. Government Securities Portfolio
may invest up to 25% of its assets in bonds rated below Baa3
by Moody's Investors Service Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("Standard & Poor's") (commonly known as "junk
bonds"). Securities rated less than Baa by Moody's or BBB by
Standard & Poor's are classified as non-investment grade
securities and are considered speculative by those rating
agencies. It is each Portfolio Adviser's policy not to rely
exclusively on ratings issued by credit rating agencies but to
supplement such ratings with the Adviser's own independent and
ongoing review of credit quality. Junk bonds may be issued as
a consequence of corporate restructurings, such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or
similar events or by smaller or highly leveraged companies.
When economic conditions appear to be deteriorating, junk
bonds may decline in market value due to investors' heightened
concern over credit quality, regardless of prevailing interest
rates. Although the growth of the high yield securities
market in the 1980s had paralleled a long economic expansion,
recently many issuers have been affected by adverse economic
and market conditions. It should be recognized that an
economic downturn or increase in interest rates is likely to
have a negative effect on (i) the high yield bond market, (ii)
the value of high yield securities and (iii) the ability of
the securities' issuers to service their principal and
interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk
bonds, especially during periods of deteriorating economic
conditions, may be less liquid than the market for investment
grade bonds. In periods of reduced market liquidity, junk
bond prices may become more volatile and may experience sudden
and substantial price declines. Also, there may be
significant disparities in the prices quoted for junk bonds by
various dealers. Under such conditions, a Portfolio may find
it difficult to value its junk bonds accurately. Under such
conditions, a Portfolio may have to use subjective rather than
objective criteria to value its junk bond investments
accurately and rely more heavily on the judgment of the Fund's
Board of Trustees. Prices for junk bonds also may be affected
by legislative and regulatory developments. For example, new
federal rules require that savings and loans gradually reduce
their holdings of high-yield securities. Also, from time to
time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or
to regulate corporate restructurings such as takeovers,
mergers or leveraged buyouts. Such legislation, if enacted,
could depress the prices of outstanding junk bonds.
Interest Rate Transactions (Dreyfus U.S. Government Securities
Portfolio)
Among the strategic transactions into which the Dreyfus
U.S. Government Securities Portfolio may enter are interest
rate swaps and the purchase or sale of related caps and
floors. The Portfolio expects to enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management
technique or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later
date. The Portfolio intends to use these transactions as
hedges and not as speculative investments and will not sell
interest rate caps or floors where it does not own securities
or other instruments providing the income stream the Portfolio
may be obligated to pay. Interest rate swaps involve the
exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency
swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the
values of the reference indices. The purchase of a cap
entitles the purchaser, to the extent that a specific index
exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling
such cap. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls
below a predetermined interest rate or amount.
The Portfolio will usually enter into swaps on a net
basis, i.e., the two payment streams are netted out in a cash
settlement on the payment date or dates specified in the
instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments.
Inasmuch as these swaps, caps and floors are entered into for
good faith hedging purposes, the Adviser to the Portfolio and
the Fund believe such obligations do not constitute senior
securities under the Investment Company Act of 1940 (the "1940
Act") and, accordingly, will not treat them as being subject
to its borrowing restrictions. The Portfolio will not enter
into any swap, cap and floor transaction unless, at the time
of entering into such transaction, the unsecured long-term
debt of the counterparty, combined with any credit
enhancements, is rated at least "A" by Standard & Poor's or
Moody's or has an equivalent rating from a nationally
recognized statistical rating organization ("NRSRO") or is
determined to be of equivalent credit quality by the Adviser.
For a description of the NRSROs and their ratings, see the
Appendix. If there is a default by the counterparty, the
Portfolio may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps
and floors are more recent innovations for which standardized
documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
With respect to swaps, the Portfolio will accrue the net
amount of the excess, if any, of its obligations over its
entitlements with respect to each swap on a daily basis and
will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps
and floors require segregation of assets with a value equal to
the Portfolio's net obligations, if any.
Dollar Roll Transactions (Dreyfus U.S. Government Securities
Portfolio)
The Dreyfus U.S. Government Securities Portfolio may
enter into "dollar roll" transactions, which consist of the
sale by the Portfolio to a bank or broker-dealer (the
"counterparty") of GNMA certificates or other mortgage-backed
securities together with a commitment to purchase from the
counterparty similar, but not identical, securities at a
future date. The counterparty receives all principal and
interest payments, including prepayments, made on the security
while it is the holder. The Portfolio receives a fee from the
counterparty as consideration for entering into the commitment
to purchase. Dollar rolls may be renewed over a period of
several months with a different repurchase price and a cash
settlement made at each renewal without physical delivery of
securities. Moreover, the transaction may be preceded by a
firm commitment agreement pursuant to which the Portfolio
agrees to buy a security on a future date.
The Portfolio will not use such transactions for
leveraging purposes and, accordingly, will segregate cash,
U.S. government securities or other high grade debt
obligations in an amount sufficient to meet its purchase
obligations under the transactions. The Portfolio will also
maintain asset coverage of at least 300% for all outstanding
firm commitments, dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the 1940 Act as
borrowings of the Portfolio because they involve the sale of a
security coupled with an agreement to repurchase. Like all
borrowings, a dollar roll involves costs to the Portfolio.
For example, while the Portfolio receives a fee as
consideration for agreeing to repurchase the security, the
Portfolio forgoes the right to receive all principal and
interest payments while the counterparty holds the security.
These payments to the counterparty may exceed the fee received
by the Portfolio, thereby effectively charging the Portfolio
interest on its borrowing. Further, although the Portfolio
can estimate the amount of expected principal prepayment over
the term of the dollar roll, a variation in the actual amount
of prepayment could increase or decrease the cost of the
Portfolio's borrowing.
The entry into dollar rolls involves potential risks of
loss that are different from those related to the securities
underlying the transactions. For example, if the counterparty
becomes insolvent, the Portfolio's right to purchase from the
counterparty might be restricted. Additionally, the value of
such securities may change adversely before the Portfolio is
able to purchase them. Similarly, the Portfolio may be
required to purchase securities in connection with a dollar
roll at a higher price than may otherwise be available on the
open market. Since, as noted above, the counterparty is
required to deliver a similar, but not identical, security to
the Portfolio, the security that the Portfolio is required to
buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the
Portfolio's use of the cash that it receives from a dollar
roll will provide a return that exceeds borrowing costs.
Portfolio Turnover
While it is impossible to predict portfolio turnover
rates, the Advisers to the Portfolios other than the Dreyfus
U.S. Government Securities Portfolio, Dreyfus Small Cap Value
Portfolio and the TCW Money Market Portfolio anticipate that
portfolio turnover will generally not exceed 100% per year.
The Adviser to the Dreyfus U.S. Government Securities
Portfolio anticipates that portfolio turnover will generally
not exceed 100% per year, exclusive of dollar roll
transactions. The Adviser to the Dreyfus Small Cap Value
Portfolio anticipates that the Portfolio's portfolio turnover
rate may exceed 175%. With respect to the TCW Money Market
Portfolio, although the Portfolio intends normally to hold its
investments to maturity, the short maturities of these
investments are expected by the Portfolio's Adviser to result
in a relatively high rate of portfolio turnover. Higher
portfolio turnover rates usually generate additional brokerage
commissions and expenses.
For the fiscal year ended December 31, 1995, the
portfolio turnover rate for the T. Rowe Price International
Stock Portfolio was 111% as compared with a turnover rate of
88% for the fiscal year ended December 31, 1994. The increase
in portfolio turnover rate was in connection with the change
of the Portfolio's investment objective from investment on a
global basis to investment on an international basis (i.e., in
non-U.S. companies).
For the fiscal year ended December 31, 1995, the
portfolio turnover rate for the Dreyfus U.S. Government
Securities Portfolio was 161% as compared with a turnover rate
of 100% for the period ended December 31, 1994. The increase
in portfolio turnover rate was due to an increased number of
market-related investment opportunities for the Portfolio.
INVESTMENT RESTRICTIONS
Except for restriction numbers 2, 3, 4, 11 and 12 with
respect to the T. Rowe Price Equity Income, T. Rowe Price
Growth Stock, Opportunity Value and Enhanced Index Portfolios
and restriction number 11 with respect to the T. Rowe Price
International Stock and Dreyfus Small Cap Value Portfolios
(which restrictions are not fundamental policies), the
following investment restrictions (numbers 1 through 12) are
fundamental policies, which may not be changed without the
approval of a majority of the outstanding shares of the
Portfolio, and apply to each of the Portfolios except as
otherwise indicated. As provided in the 1940 Act, a vote of a
majority of the outstanding shares necessary to amend a
fundamental policy means the affirmative vote of the lesser of
(1) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the
Portfolio are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Portfolio.
A Portfolio may not:
1. Borrow money or issue senior securities (as defined in
the 1940 Act), provided that a Portfolio may borrow amounts
not exceeding 5% of the value of its total assets (not
including the amount borrowed) for temporary purposes, except
that the Dreyfus U.S. Government Securities Portfolio may
borrow from banks or through reverse repurchase agreements or
dollar roll transactions in an amount equal to up to 33 1/3%
of the value of its total assets (calculated when the loan is
made) for temporary, extraordinary or emergency purposes and
to take advantage of investment opportunities and may pledge
up to 33 1/3% of the value of its total assets to secure those
borrowings; except that the T. Rowe Price Equity Income
Portfolio, the T. Rowe Price Growth Stock Portfolio and T.
Rowe Price International Stock Portfolio may (i) borrow for
non-leveraging, temporary or emergency purposes and (ii)
engage in reverse repurchase agreements and make other
investments or engage in other transactions, which may involve
a borrowing, in a manner consistent with each Portfolio's
investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the
value of each Portfolios's total assets (including the amount
borrowed) less liabilities (other than borrowings) and may
pledge up to 33 1/3% of the value of its total assets to
secure those borrowings; except that the Opportunity Value
Portfolio may borrow money from banks or through reverse
repurchase agreements for temporary or emergency purposes in
amounts up to 10% of its total assets; and except that the
Enhanced Index Portfolio may borrow money from banks for
temporary or emergency purposes or through reverse repurchase
agreements in amounts up to 10% of its total assets.
2. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure borrowings permitted by restriction 1
above. Collateral arrangements with respect to margin for
futures contracts and options are not deemed to be pledges or
other encumbrances for purposes of this restriction.
3. Purchase securities on margin, except a Portfolio may
obtain such short-term credits as may be necessary for the
clearance of securities transactions and may make margin
deposits in connection with transactions in options, futures
contracts and options on such contracts.
4. Make short sales of securities or maintain a short
position for the account of the Portfolio, unless at all times
when a short position is open the Portfolio owns an equal
amount of such securities or owns securities which, without
payment of any further consideration, are convertible or
exchangeable for securities of the same issue as, and in equal
amounts to, the securities sold short.
5. Underwrite securities issued by other persons, except to
the extent that in connection with the disposition of its
portfolio investments it may be deemed to be an underwriter
under federal securities laws.
6. Purchase or sell real estate, although a Portfolio may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate and
securities representing interests in real estate.
7. Purchase or sell commodities or commodity contracts,
except that all Portfolios other than the TCW Money Market
Portfolio may purchase or sell financial futures contracts and
related options. For purposes of this restriction, currency
contracts or hybrid investments shall not be considered
commodities.
8. Make loans, except by purchase of debt obligations in
which the Portfolio may invest consistently with its
investment policies, by entering into repurchase agreements or
through the lending of its portfolio securities.
9. Invest in the securities of any issuer if, immediately
after such investment, more than 5% of the total assets of the
Portfolio (taken at current value) would be invested in the
securities of such issuer or acquire more than 10% of the
outstanding voting securities of any issuer, provided that
this limitation does not apply to obligations issued or
guaranteed as to principal and interest by the U.S. government
or its agencies and instrumentalities or to repurchase
agreements secured by such obligations and that up to 25% of
the Portfolio's total assets (taken at current value) may be
invested without regard to this limitation.
10. Invest more than 25% of the value of its total assets in
any one industry, provided that this limitation does not apply
to obligations issued or guaranteed as to interest and
principal by the U.S. government, its agencies and
instrumentalities, and repurchase agreements secured by such
obligations, and in the case of the TCW Money Market Portfolio
obligations of domestic branches of United States banks.
11. Invest more than 10% (15% with respect to the T. Rowe
Price Equity Income Portfolio, the T. Rowe Price Growth Stock
Portfolio, the T. Rowe Price International Stock Portfolio,
Dreyfus Small Cap Value Portfolio, Opportunity Value Portfolio
and Enhanced Index Portfolio) of its assets (taken at current
value at the time of each purchase) in illiquid securities
including repurchase agreements maturing in more than seven
days.
12. Purchase securities of any issuer for the purpose of
exercising control or management.
All percentage limitations on investments will apply at
the time of the making of an investment and shall not be
considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of such investment.
Other Policies
The TCW Money Market Portfolio may not invest in the
securities of any one issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio
(taken at current value) would be invested in the securities
of such issuer, provided that this limitation does not apply
to obligations issued or guaranteed as to principal and
interest by the U.S. government or its agencies and
instrumentalities or to repurchase agreements secured by such
obligations and that with respect to 25% of the Portfolio's
total assets more than 5% may be invested in securities of any
one issuer for three business days after the purchase thereof
if the securities have been assigned the highest quality
rating by NRSROs, or if not rated, have been determined to be
of comparable quality. These limitations apply to time
deposits, including certificates of deposit, bankers'
acceptances, letters of credit and similar instruments; they
do not apply to demand deposit accounts. For a description of
the NRSROs' ratings, see the Appendix.
In addition, the TCW Money Market Portfolio may not
purchase any security that matures more than thirteen months
(397 days) from the date of purchase or which has an implied
maturity of more than thirteen months (397 days) except as
provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be
deemed to be the period remaining until the date noted on the
face of the instrument as the date on which the principal
amount must be paid, or in the case of an instrument called
for redemption, the date on which the redemption payment must
be made, except that:
1. An instrument that is issued or guaranteed by the U.S.
government or any agency thereof which has a variable rate of
interest readjusted no less frequently than every 25 months
(762 days) may be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest
rate.
2. A variable rate instrument, the principal amount of which
is scheduled on the face of the instrument to be paid in
thirteen months (397 days) or less, may be deemed to have a
maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand
feature may be deemed to have a maturity equal to the longer
of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal
amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand
feature may be deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through
demand.
5. A repurchase agreement may be deemed to have a maturity
equal to the period remaining until the date on which the
repurchase of the underlying securities is scheduled to occur,
or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the
repurchase of the securities.
6. A portfolio lending agreement may be treated as having a
maturity equal to the period remaining until the date on which
the loaned securities are scheduled to be returned, or where
no date is specified, but the agreement is subject to demand,
the notice period applicable to a demand for the return of the
loaned securities.
Each of the Value Equity and Dreyfus Small Cap Value
Portfolios may not invest more than 5% of the value of its
total assets in warrants not listed on either the New York or
American Stock Exchange. Each of the T. Rowe Price Equity
Income, T. Rowe Price Growth Stock, T. Rowe Price
International Stock, Opportunity Value and Enhanced Index
Portfolios will not invest in warrants if, as a result
thereof, more than 2% of the value of the total assets of the
Portfolio would be invested in warrants which are not listed
on the New York Stock Exchange, the American Stock Exchange,
or a recognized foreign exchange, or more than 5% of the value
of the total assets of the Portfolio would be invested in
warrants whether or not so listed. However, the acquisition
of warrants attached to other securities is not subject to
this restriction.
PERFORMANCE INFORMATION
Total return and yield will be computed as described
below.
Total Return
Each Portfolio's "average annual total return" figures
described and shown in the Prospectus are computed according
to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5, or 10 years (or other)
periods at the end of the 1, 5, or 10 years (or other) periods
(or fractional portion thereof)
The table below shows the average annual total return for
the TCW Managed Asset Allocation, Value Equity, Dreyfus Small
Cap Value, Dreyfus U.S. Government Securities, T. Rowe Price
Equity Income and T. Rowe Price Growth Stock Portfolios for
the specific periods.
With respect to the T. Rowe Price International Stock
Portfolio which commenced operation April 8, 1991, effective
January 1, 1995, the Portfolio's Adviser was changed to Rowe
Price-Fleming International, Inc. ("Price-Fleming"). Prior to
March 24, 1995, the Portfolio was known as the Global Growth
Portfolio. Subsequent to such time, the Portfolio's
investment objective was changed from investments in small
capitalization companies on a global basis to investments in a
broad range of established companies on an international basis
(i.e., non-U.S. companies). Because of the change of the
Portfolio's Adviser, performance information for the period
from inception to December 31, 1995 is not presented. Such
information is not reflective of Price- Fleming's ability to
manage the Portfolio. Information with respect to the
Portfolio's per share income and capital changes from
inception through December 31, 1995 is set forth in the
Prospectus. Average annual total return information for the
period from inception to December 31, 1994 is available upon
written request to the Fund.
For Period
For the One For the Five From Incep-
Year Period Year Period tion (1) to
Ended June 30, Ended June 30, June 30,
1996 1996 1996
TCW Managed Asset
Allocation(2).. 16.10%/16.10%* 12.67%/12.82%* 12.27%/11.96%*
T. Rowe Price
International
Stock.......... 17.55%/17.55%* N/A 17.32%/17.32%*
Value Equity(3)... 24.01%/24.01%* N/A 16.67%/16.52%*
Dreyfus Small
Cap Value(4)... 16.91%/16.91%* N/A 10.29%/10.18%*
T. Rowe Price
Equity Income(5) 25.28%/25.28%* N/A 25.71%/25.71%*
T. Rowe Price Growth
Stock(5)........ 21.29%/21.29%* N/A 30.11%/30.11%*
Dreyfus U.S.
Government
Securities(6).. 2.88%/2.88%* N/A 5.57%/15.37%*
________________________
* The figure shows what the Portfolio's performance would
have been in the absence of fee waivers and/or
reimbursement of other expenses.
(1) With respect to T. Rowe Price International Stock
Portfolio, period commenced on January 1, 1995.
(2) The Portfolio commenced operations on April 8, 1991.
(3) The Portfolio commenced operations on May 27, 1993.
(4) The Portfolio commenced operations on May 4, 1993.
(5) The Portfolio commenced operations on January 3, 1995.
(6) The Portfolio commenced operations on May 13, 1994.
The calculations of total return assume the reinvestment
of all dividends and capital gains distributions on the
reinvestment dates during the period and the deduction of all
recurring expenses that were charged to shareholders accounts.
The above table does not reflect charges and deductions which
are, or may be, imposed under the Contracts.
The performance of each Portfolio will vary from time to
time in response to fluctuations in market conditions,
interest rates, the composition of the Portfolio's investments
and expenses. Consequently, a Portfolio's performance figures
are historical and should not be considered representative of
the performance of the Portfolio for any future period.
Yield
From time to time, the Fund may quote the TCW Money
Market Portfolio's and the Dreyfus U.S. Government Securities
Portfolio's yield and effective yield in advertisements or in
reports or other communications to shareholders. Yield
quotations are expressed in annualized terms and may be quoted
on a compounded basis.
The annualized current yield for the TCW Money Market
Portfolio is computed by: (a) determining the net change in
the value of a hypothetical pre-existing account in the
Portfolio having a balance of one share at the beginning of a
seven calendar day period for which yield is to be quoted;
(b) dividing the net change by the value of the account at the
beginning of the period to obtain the base period return; and
(c) annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with
dividends declared on the original share and any such
additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. In
addition, the TCW Money Market Portfolio may calculate a
compound effective annualized yield by adding 1 to the base
period return (calculated as described above), raising the sum
to a power equal to 365/7 and subtracting 1.
The Dreyfus U.S. Government Securities Portfolio's 30-day
yield will be calculated according to a formula prescribed by
the Securities and Exchange Commission. The formula can be
expressed as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursement)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the net asset value per share on the last day
of the period
For the purpose of determining the interest earned (variable
"a" in the formula) on debt obligations that were purchased by
the Portfolio at a discount or premium, the formula generally
calls for amortization of the discount or premium; the
amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.
Yield information is useful in reviewing a Portfolio's
performance, but because yields fluctuate, such information
cannot necessarily be used to compare an investment in a
Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time.
Shareholders should remember that yield is a function of the
kind and quality of the instruments in the Portfolios'
investment portfolios, portfolio maturity, operating expenses
and market conditions.
It should be recognized that in periods of declining
interest rates the yields will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest
rates the yields will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a
Portfolio from the continuous sale of its shares will likely
be invested in instruments producing lower yields than the
balance of the Portfolio's investments, thereby reducing the
current yield of the Portfolio. In periods of rising interest
rates, the opposite can be expected to occur.
Non-Standardized Performance
In addition to the performance information described
above, the Fund may provide total return information with
respect to the Portfolios for designated periods, such as for
the most recent six months or most recent twelve months. This
total return information is computed as described under "Total
Return" above except that no annualization is made.
PORTFOLIO TRANSACTIONS
Subject to the supervision and control of the Manager and
the Trustees of the Fund, each Portfolio's Adviser is
responsible for decisions to buy and sell securities for its
account and for the placement of its portfolio business and
the negotiation of commissions, if any, paid on such
transactions. Brokerage commissions are paid on transactions
in equity securities traded on a securities exchange and on
options, futures contracts and options thereon. Fixed income
securities and certain equity securities in which the
Portfolios invest are traded in the over-the-counter market.
These securities are generally traded on a net basis with
dealers acting as principal for their own account without a
stated commission, although prices of such securities usually
include a profit to the dealer. In over-the-counter
transactions, orders are placed directly with a principal
market maker unless a better price and execution can be
obtained by using a broker. In underwritten offerings,
securities are usually purchased at a fixed price which
includes an amount of compensation to the underwriter
generally referred to as the underwriter's concession or
discount. Certain money market securities may be purchased
directly from an issuer, in which case no commissions or
discounts are paid. U.S. government securities are generally
purchased from underwriters or dealers, although certain
newly-issued U.S. government securities may be purchased
directly from the U.S. Treasury or from the issuing agency or
instrumentality. Each Portfolio's Adviser is responsible for
effecting its portfolio transactions and will do so in a
manner deemed fair and reasonable to the Portfolio and not
according to any formula. The primary consideration in all
portfolio transactions will be prompt execution of orders in
an efficient manner at a favorable price. In selecting
broker-dealers and negotiating commissions, an Adviser
considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition.
When more than one firm is believed to meet these criteria,
preference may be given to brokers that provide the Portfolios
or their Advisers with brokerage and research services within
the meaning of Section 28(e) of the Securities Exchange Act of
1934. Each Portfolio's Adviser is of the opinion that, because
this material must be analyzed and reviewed, its receipt and
use does not tend to reduce expenses but may benefit the
Portfolio by supplementing the Adviser's research. In seeking
the most favorable price and execution available, an Adviser
may, if permitted by law, consider sales of the Contracts as
described in the Prospectus a factor in the selection of
broker-dealers.
The Board of Trustees of the Fund has authorized the
Manager and the Advisers to enter into arrangements with
brokers who execute brokerage transactions for the Portfolios
whereby a portion of the commissions earned by such brokers
will be shared with a broker-dealer affiliate of the Manager.
The affiliated broker will act as an "introducing broker" in
the transaction. Subject to the requirements of applicable
law including seeking best price and execution of orders,
commissions paid to executing brokers will not exceed ordinary
and customary brokerage commissions.
The Board of Trustees has determined that the Fund's
brokerage commissions should be utilized for the Fund's
benefit to the extent possible. After reviewing various
alternatives, the Board concluded that commissions received by
the broker-dealer affiliate of the Manager can be used to
promote the distribution of the Fund's shares including
payments to broker-dealers who sell the Contracts, the costs
of training and educating such broker-dealers with respect to
the Contracts and other bona-fide distribution costs payable
to unaffiliated persons. Other than incidental costs related
to establishing the broker-dealer affiliate as an "introducing
broker", no portion of the commissions received by the broker-dealer
affiliate of the Manager will be retained for its or
any affiliate's benefit. On a quarterly basis, the Manager
will report to the Board of Trustees the aggregate commissions
received by its broker-dealer affiliate and the distribution
expenses paid from such commissions. The Board of Trustees
will periodically review the extent to which the foregoing
arrangement reduces distribution expenses currently being
incurred by the Manager or its affiliates on behalf of the
Fund. The Board of Trustees may determine from time to time
other appropriate uses for the Fund from the commissions it
pays to executing brokers.
An Adviser may effect portfolio transactions for other
investment companies and advisory accounts. Research services
furnished by broker-dealers through which a Portfolio effects
its securities transactions may be used by the Portfolio's
Adviser in servicing all of its accounts; not all such
services may be used in connection with the Portfolio. In the
opinion of each Adviser, it is not possible to measure
separately the benefits from research services to each of its
accounts, including a Portfolio. Whenever concurrent decisions
are made to purchase or sell securities by a Portfolio and
another account, the Portfolio's Adviser will attempt to
allocate equitably portfolio transactions among the Portfolio
and other accounts. In making such allocations between the
Portfolio and other accounts, the main factors to be
considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size
of investment commitments generally held, and the opinions of
the persons responsible for recommending investments to the
Portfolio and the other accounts. In some cases this procedure
could have an adverse effect on a Portfolio. In the opinion of
each Adviser, however, the results of such procedures will, on
the whole, be in the best interest of each of the accounts.
The Adviser to the Value Equity and Opportunity Value
Portfolios may execute brokerage transactions through
Oppenheimer & Co. Inc. ("Opco"), an affiliated broker-dealer
of the Adviser, acting as agent in accordance with procedures
established by the Fund's Board of Trustees, but will not
purchase any securities from or sell any securities to Opco
acting as principal for its own account.
The Adviser to the T. Rowe Price International Stock, T.
Rowe Price Equity Income and T. Rowe Price Growth Stock
Portfolios may execute portfolio transactions through certain
affiliates of Robert Fleming Holdings Limited and Jardine
Fleming Group Limited, persons indirectly related to the
Adviser, acting as agent in accordance with procedures
established by the Fund's Board of Trustees, but will not
purchase any securities from or sell any securities to any
such affiliate acting as principal for its own account.
The Adviser to the Enhanced Index Portfolio may execute
portfolio transactions through certain of its affiliated
brokers, acting as agent in accordance with procedures
established by the Fund's Board of Trustees, but will not
purchase any securities from or sell any securities to any
such affiliate acting as principal for its own account.
For the year ended December 31, 1993, the TCW Money
Market Portfolio did not pay any brokerage commissions, while
the TCW Managed Asset Allocation Portfolio and T. Rowe Price
International Stock Portfolio (formerly, the Global Growth
Portfolio) paid $84,401 and $199,921, respectively, in
brokerage commissions. For the fiscal period ended December
31, 1993, the Value Equity Portfolio and Value Small Cap
Portfolio paid $11,051 and $23,537, respectively in brokerage
commissions, of which $7,758 (70%) with respect to the Value
Equity Portfolio and $17,401 (74%) with respect to the Value
Small Cap Portfolio was paid to Opco. For the year ended
December 31, 1994, the TCW Money Market Portfolio did not pay
any brokerage commissions, while the TCW Managed Asset
Allocation Portfolio and T. Rowe Price International Stock
Portfolio paid $175,548 and $554,048, respectively, in
brokerage commissions. For the year ended December 31, 1994,
the Value Equity Portfolio and Value Small Cap Portfolio paid
$58,472 and $100,262, respectively, in brokerage commissions,
of which $32,796 (78.29%) with respect to the Value Equity
Portfolio and $58,028 (72.78%) with respect to the Value Small
Cap Portfolio was paid to Opco. For the fiscal period ended
December 31, 1994, the Dreyfus U.S. Government Securities
Portfolio paid no brokerage commissions. For the year ended
December 31, 1995, the TCW Money Market Portfolio and the
Dreyfus U.S. Government Securities Portfolio did not pay any
brokerage commissions, while the TCW Managed Asset Allocation
Portfolio paid $187,103 in brokerage commissions. For the
year ended December 31, 1995, the T. Rowe Price International
Stock Portfolio, the Value Equity Portfolio and the Value
Small Cap Portfolio paid $395,753, $57,800, and $101,885,
respectively, in brokerage commissions of which $33,338
(8.42%), $15,101 (3.82%) and $673 (.17%) with respect to the
T. Rowe Price International Stock Portfolio was paid to Robert
Fleming Holdings Limited and Jardine Fleming Group Limited,
Ord Minnett and OpCo, respectively, $29,271 (50.64%) with
respect to the Value Equity Portfolio and $36,216 (35.55%)
with respect to the Value Small Cap Portfolio was paid to
OpCo. For the fiscal period ended December 31, 1995, the T.
Rowe Price Equity Income Portfolio and the T. Rowe Price
Growth Stock Portfolio paid $18,059 and $39,447, respectively
in brokerage commissions of which $10 (0.06%) with respect to
the T. Rowe Price Equity Income Portfolio was paid to OpCo and
$536 (1.36%), $507 (1.29%) and $23 (0.06%) with respect to the
T. Rowe Price Growth Stock Portfolio was paid to Boston Safe
Deposit and Trust Company, Jardine Fleming Group Limited and
OpCo, respectively.
MANAGEMENT OF THE FUND
Trustees and Officers
The Trustees and executive officers of the Trust, their ages
and their principal occupations during the past five years are
set forth below. Unless otherwise indicated, the business
address of each is 2101 East Coast Highway, Suite 300, Corona
del Mar, California 92625.
Name, Age and Address
Position(s)
Held with
Registrant
Principal
Occupation(s)
During Past
5 Years
James R. McInnis (48)
President
President of Endeavor
Group (broker-dealer)
since June, 1991;
President of McGuinness &
Associates (insurance
marketing) from March,
1983 to June, 1991.
*Vincent J. McGuinness (61)
Trustee
Chairman, Chief Executive
Officer and Director of
McGuinness & Associates,
Endeavor Group, VJM
Corporation (oil and gas),
McGuinness Group
(insurance marketing) and
until January, 1994 Swift
Energy Marketing Company
and since September, 1988
Endeavor Management Co.;
President of VJM
Corporation, Endeavor
Management Co. and, since
February, 1996, McGuinness
& Associates.
Timothy A. Devine (61)
2200 S. Fairview
Santa Ana, California
92704
Trustee
Prior to September, 1993,
President and Chief
Executive Officer, Devine
Properties, Inc. Since
September, 1993, Vice
President, Plant Control,
Inc. (landscape
contracting and
maintenance).
Thomas J. Hawekotte (61)
1200 Lake Shore Drive
Chicago, Illinois 60610
Trustee
President, Thomas J.
Hawekotte, P.C. (law
practice).<PAGE>
Steven L. Klosterman (44)
462 Stevens Avenue
Suite 206
Solana Beach, California
92075
Trustee
Since July, 1995,
President of Klosterman
Capital Corporation
(investment adviser);
Investment Counselor,
Robert J. Metcalf &
Associates, Inc.
(investment adviser) from
August, 1990 to June,
1995.
*Halbert D. Lindquist (49)
1650 E. Fort Lowell Road
Tucson, Arizona 85719-2324
Trustee
President, Lindquist
Enterprises, Inc.
(financial services) and
since December, 1987
Tucson Asset Management,
Inc. (financial services),
and since November, 1987,
Presidio Government
Securities, Incorporated
(broker-dealer).
R. Daniel Olmstead, Jr. (64)
2885 N. River Road
St. Anthony, Idaho 83445
Trustee
Rancher since December,
1989.
Norman Ridley (50)
865 S. Figueroa Street
Suite 1800
Los Angeles, California
90017
Vice
President
Since 1985, Senior Vice
President, TCW Asset
Management Company and
Trust Company of the West. <PAGE>
Ronald E. Robison (57)
865 S. Figueroa Street
Suite 1800
Los Angeles, California
90017
Vice
President
Since November, 1987,
Managing Director and
Chief Operating Officer,
TCW Funds Management Inc.;
since March, 1990,
Managing Director, Trust
Company of the West and
TCW Asset Management
Company.
James M. Goldberg (50)
865 S. Figueroa Street
Suite 1800
Los Angeles, California
90017
Vice
President
Since June, 1984, Managing
Director, TCW Asset
Management Company and
Trust Company of the West
and since January, 1987
Managing Director, TCW
Funds Management, Inc.
Eileen Rominger (41)
One World Financial Center
New York, New York 10281
Vice
President
Since May, 1994, Managing
Director, Oppenheimer
Capital, prior thereto
Senior Vice President,
Oppenheimer Capital;
Portfolio Manager,
Oppenheimer Quest Value
Fund, Inc., OCC
Accumulation Trust,
Enterprise Accumulation
Trust and Penn Series
Fund, open-end investment
companies.<PAGE>
Alan J. Schryer (38)
Chief
Financial
Officer
(Treasurer)
Since August, 1994,
Controller and since
November, 1994 Chief
Financial Officer of
Endeavor Group, VJM
Corporation, McGuinness
Group and Endeavor
Management Co. and
Director, Endeavor
Management Co.; from
February, 1992 to August,
1994, Sole Proprietor,
A.J. Schryer Companies
(real estate finance); and
from August, 1987 to
January, 1992, Controller
and Vice President of IDM
Securities Corporation
(broker-dealer).
Pamela A. Shelton (47)
Secretary
Since October, 1993,
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 and
Endeavor Management Co.;
from July, 1992 to
October, 1993,
Administrative Secretary,
Mayor and City Council,
City of Laguna Niguel,
California; and from
November, 1986 to July,
1992, Executive Secretary
to Chairman of the Board
and Chief Executive
Officer of, and from
October, 1990 to July,
1992, Secretary of
McGuinness & Associates,
Endeavor Group, VJM
Corporation, McGuinness
Group, Endeavor Management
Co. and Swift Energy
Marketing Company.
* An "interested person" of the Fund as defined in the 1940
Act.
No remuneration will be paid by the Fund to any Trustee
or officer of the Fund who is affiliated with the Manager or
the Advisers. Each Trustee who is not an affiliated person of
the Fund will be reimbursed for out-of-pocket expenses and
receives an annual fee of $2,500 and $500 for attendance at
each regularly scheduled Trustees' meeting. Set forth below
for each of the Trustees of the Fund is the aggregate
compensation paid to such Trustees for the fiscal year ended
December 31, 1995.
COMPENSATION TABLE
Total
Compensation
From Fund
Aggregate and Fund
Name of Compensation Complex
Person From Fund Paid to Trustees
Vincent J. McGuinness $ - $ -
Timothy A. Devine 4,500 4,500
Thomas J. Hawekotte 4,500 4,500
Steven L. Klosterman 4,500 4,500
Halbert D. Lindquist 4,500 4,500
R. Daniel Olmstead 4,500 4,500
The Agreement and Declaration of Trust of the Fund
provides that the Fund will indemnify its Trustees and
officers against liabilities and expenses incurred in
connection with litigation in which they may be involved
because of their offices with the Fund, except if it is
determined in the manner specified in the Agreement and
Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best
interests of the Fund or that such indemnification would
relieve any officer or Trustee of any liability to the Fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties. The
Fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
As of the date of this Statement of Additional
Information, the officers and Trustees of the Fund as a group
owned less than 1% of the outstanding shares of the Fund.
The Manager
The Management Agreement between the Fund and the Manager
with respect to the TCW Money Market, TCW Managed Asset
Allocation and T. Rowe Price International Stock Portfolios
was approved by the Trustees of the Fund (including all of the
Trustees who are not "interested persons" of the Manager) on
July 20, 1992, and by the shareholders of the Fund on November
23, 1992. With respect to the Value Equity and Dreyfus Small
Cap Value Portfolios, the Management Agreement was approved by
the Trustees of the Fund (including all of the Trustees who
are not "interested persons" of the Manager) on April 19, 1993
and by PFL Life Insurance Company, the sole shareholder of the
Value Equity and Dreyfus Small Cap Value Portfolios, on April
19, 1993. With respect to the Dreyfus U.S. Government
Securities Portfolio, the Management Agreement was approved by
the Trustees of the Fund (including all of the Trustees who
are not "interested persons" of the Manager) on January 24,
1994 and by PFL Life Insurance Company, the sole shareholder
of the Dreyfus U.S. Government Securities Portfolio, on March
7, 1994. With respect to the T. Rowe Price Equity Income and
T. Rowe Price Growth Stock Portfolios, the Management
Agreement was approved by the Trustees of the Fund (including
all of the Trustees who are not "interested persons" of the
Manager) on October 24, 1994 and by PFL Life Insurance
Company, the sole shareholder of the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock Portfolios, on November
1, 1994. With respect to the Opportunity Value and Enhanced
Index Portfolios, the Management Agreement was approved by the
Trustees of the Fund (including all of the Trustees who are
not "interested persons" of the Manager)on August 13, 1996 and
by PFL Life Insurance Company, the sole shareholder of the
Opportunity Value and Enhanced Index Portfolios on
, 1996. See "Organization and Capitalization of the Fund."
The Management Agreement will continue in force for two years
from its date, November 23, 1992 with respect to the TCW Money
Market, TCW Managed Asset Allocation and T. Rowe Price
International Stock Portfolios, April 19, 1993 with respect to
the Value Equity and Dreyfus Small Cap Value Portfolios, March
25, 1994 with respect to the Dreyfus U.S. Government
Securities Portfolio, December 28, 1994 with respect to the T.
Rowe Price Equity Income and T. Rowe Price Growth Stock
Portfolios and , 1996 with respect to the
Opportunity Value and Enhanced Index Portfolios, and from year
to year thereafter, but only so long as its continuation as to
each Portfolio is specifically approved at least annually (i)
by the Trustees or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
the Portfolio, and (ii) by the vote of a majority of the
Trustees who are not parties to the Management Agreement or
"interested persons" (as defined in the 1940 Act) of any such
party, by votes cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement
provides that it shall terminate automatically if assigned,
and that it may be terminated as to any Portfolio without
penalty by the Trustees of the Fund or by vote of a majority
of the outstanding voting securities (as defined in the 1940
Act) of the Portfolio upon 60 days' prior written notice to
the Manager, or by the Manager upon 90 days' prior written
notice to the Fund, or upon such shorter notice as may be
mutually agreed upon. In the event the Manager ceases to be
the Manager of the Fund, the right of the Fund to use the
identifying name of "Endeavor" may be withdrawn.
The Advisers
The Investment Advisory Agreements between the Manager
and TCW Funds Management, Inc. were approved by the Trustees
of the Fund (including all the Trustees who are not
"interested persons" of the Manager or of the Adviser) on July
20, 1992, and by the shareholders of the Fund on November 23,
1992. The Investment Advisory Agreements between the Manager
and OpCap Advisors (formerly known as Quest for Value
Advisors) were approved by the Trustees of the Fund (including
all of the Trustees who are not "interested persons" of the
Manager or of the Adviser) on April 19, 1993 with respect to
the Value Equity Portfolio and August 13, 1996 with respect to
the Opportunity Value Portfolio and by PFL Life Insurance
Company as sole shareholder of the Value Equity and
Opportunity Value Portfolios on April 19, 1993 and ,
1996, respectively. The Investment Advisory Agreement between
the Manager and The Boston Company Asset Management, Inc. was
approved by the Trustees of the Fund (including all of the
Trustees who are not "interested persons" of the Manager or of
the Adviser) on January 24, 1994 and by PFL Life Insurance
Company as sole shareholder of the Dreyfus U.S. Government
Securities Portfolio on March 7, 1994. The Investment
Advisory Agreement was transferred to The Dreyfus Corporation
effective May 1, 1996. The Investment Advisory Agreements
between the Manager and T. Rowe Price Associates, Inc. were
approved by the Trustees of the Fund (including all of the
Trustees who are not "interested persons" of the Manager or of
the Adviser) on October 24, 1994 and by PFL Life Insurance
Company as sole shareholder of the T. Rowe Price Equity Income
and T. Rowe Price Growth Stock Portfolios on November 1, 1994.
The Investment Advisory Agreement between the Manager and J.P.
Morgan Investment Management Inc. was approved by the Trustees
of the Fund (including all of the Trustees who are not
"interested persons" of the Manager or of the Adviser) on
August 13, 1996 and by PFL Life Insurance Company as sole
shareholder of the Enhanced Index Portfolio on ,
1996. Effective January 1, 1995, Price-Fleming became the
Adviser of the T. Rowe Price International Stock Portfolio.
The Investment Advisory Agreement with Price-Fleming for the
T. Rowe Price International Stock Portfolio was approved by
the Trustees of the Fund (including all of the Trustees who
are not "interested persons" of the Manager or of the Adviser)
on December 19, 1994 and by shareholders of the Portfolio on
March 24, 1995. Effective September 16, 1996, The Dreyfus
Corporation became the Adviser of the Dreyfus Small Cap Value
Portfolio. The Investment Advisory Agreement with The Dreyfus
Corporation was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested
persons" of the Manager or of the Adviser) on August 13, 1996
and by the shareholders of the Portfolio on , 1996. See
"Organization and Capitalization of the Fund."
Each agreement will continue in force for two years from
its date, November 23, 1992 with respect to the TCW Money
Market and TCW Managed Asset Allocation Portfolios, April 19,
1993 with respect to the Value Equity Portfolio, March 25,
1994 with respect to the Dreyfus U.S. Government Securities
Portfolio, December 28, 1994 with respect to the T. Rowe Price
Equity Income and T. Rowe Price Growth Stock Portfolios,
January 1, 1995 with respect to the T. Rowe Price
International Stock Portfolio, September 16, 1996 with respect
to the Dreyfus Small Cap Value Portfolio and , 1996
with respect to the Opportunity Value and Enhanced Index
Portfolios, and from year to year thereafter, but only so long
as its continuation as to a Portfolio is specifically approved
at least annually (i) by the Trustees or by the vote of a
majority of the outstanding voting securities (as defined in
the 1940 Act) of the Portfolio, and (ii) by the vote of a
majority of the Trustees who are not parties to the agreement
or interested persons (as defined in the 1940 Act) of any such
party, by votes cast in person at a meeting called for the
purpose of voting on such approval. Each Investment Advisory
Agreement provides that it shall terminate automatically if
assigned or if the Management Agreement with respect to the
related Portfolio terminates, and that it may be terminated as
to a Portfolio without penalty by the Manager, by the Trustees
of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Portfolio on
not less than 60 days' prior written notice to the Adviser or
by the Adviser on not less than 150 days' (90 days with
respect to the Enhanced Index Portfolio) prior written notice
to the Manager, or upon such shorter notice as may be mutually
agreed upon.
The following table shows the fees paid by each of the
Portfolios and any fee waivers or reimbursements during the
fiscal years ended December 31, 1993, December 31, 1994 and
December 31, 1995.
1995*
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
TCW Money Market
Portfolio........$ 117,465 $ --- ---
TCW Managed Asset
Allocation
Portfolio.........$ 1,388,652 --- ---
T. Rowe Price
International
Stock Portfolio... 759,830 --- ---
Value Equity
Portfolio......... 395,205 --- ---
Dreyfus Small Cap
Value Portfolio... 339,672 --- ---
Dreyfus U.S.
Government
Securities
Portfolio......... 42,531 --- ---
T. Rowe Price
Equity Income
Portfolio......... 70,664 --- ---
T. Rowe Price
Growth Stock
Portfolio......... 75,681 --- ---
1994
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
TCW Money Market
Portfolio........$ 111,100 $--- $ ---
TCW Managed Asset
Allocation
Portfolio....... 1,151,688 --- ---
T. Rowe Price
International
Stock Portfolio. 696,732 --- ---
Value Equity
Portfolio....... 191,316 --- ---
Dreyfus Small
Cap Value
Portfolio....... 214,198 --- ---
Dreyfus U.S.
Government
Securities
Portfolio**..... 8,087 8,087 4,955
1993***
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
TCW Money Market
Portfolio....... $ 23,471 $ 21,640 ---
TCW Managed Asset
Allocation
Portfolio....... 305,989 --- ---
T. Rowe Price
International
Stock Portfolio. 211,211 --- ---
Value Equity
Portfolio....... --- 18,606 ---
Dreyfus Small
Cap Value
Portfolio....... --- 17,970 ---
______________________
* The information presented for the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock Portfolios is for
the period January 3, 1995 (commencement of operations)
ended December 31, 1995.
** The information presented with respect to the Dreyfus
U.S. Government Securities Portfolio is for the period
May 13, 1994 (commencement of operations) ended
December 31, 1994.
*** The information presented with respect to the Value
Equity Portfolio is for the period May 27, 1993
(commencement of operations) ended December 31, 1993
and with respect to the Dreyfus Small Cap Value
Portfolio, is for the period May 4, 1993 (commencement
of operations) ended December 31, 1993.
___________________________
Each Investment Advisory Agreement provides that the
Adviser shall not be subject to any liability to the Fund or
the Manager for any act or omission in the course of or
connected with rendering services thereunder in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties on the part of the Adviser.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone
the date of payment on shares of the Portfolios for more than
seven days during any period (1) when the New York Stock
Exchange is closed or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission, (2) when
an emergency exists, as defined by the Securities and Exchange
Commission, which makes it not reasonably practicable for a
Portfolio to dispose of securities owned by it or fairly to
determine the value of its assets, or (3) as the Securities
and Exchange Commission may otherwise permit.
The value of the shares on redemption may be more or less
than the shareholder's cost, depending upon the market value
of the portfolio securities at the time of redemption.
NET ASSET VALUE
The net asset value per share of each Portfolio is
determined as of the close of regular trading of the New York
Stock Exchange (currently 4:00 p.m., New York City time),
Monday through Friday, exclusive of national business
holidays. The Fund will be closed on the following national
business holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Portfolio securities for
which the primary market is on a domestic or foreign exchange
or which are traded over-the-counter and quoted on the NASDAQ
System will be valued at the last sale price on the day of
valuation or, if there was no sale that day, at the last
reported bid price, using prices as of the close of trading.
Portfolio securities not quoted on the NASDAQ System that are
actively traded in the over-the-counter market, including
listed securities for which the primary market is believed to
be over-the-counter, will be valued at the most recently
quoted bid price provided by the principal market makers.
In the case of any securities which are not actively
traded, reliable market quotations may not be considered to be
readily available. These investments are stated at fair value
as determined under the direction of the Trustees. Such fair
value is expected to be determined by utilizing information
furnished by a pricing service which determines valuations for
normal, institutional-size trading units of such securities
using methods based on market transactions for comparable
securities and various relationships between securities which
are generally recognized by institutional traders.
If any securities held by a Portfolio are restricted as
to resale, their fair value will be determined following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the
Portfolio could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of
time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However,
consideration is generally given to the financial position of
the issuer and other fundamental analytical data relating to
the investment and to the nature of the restrictions on
disposition of the securities (including any registration
expenses that might be borne by the Portfolio in connection
with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the
market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation),
the size of the holding, the prices of any recent transactions
or offers with respect to such securities and any available
analysts' reports regarding the issuer.
Notwithstanding the foregoing, short-term debt securities
with maturities of 60 days or less will be valued at amortized
cost.
The TCW Money Market Portfolio's investment policies and
method of securities valuation are intended to permit the
Portfolio generally to maintain a constant net asset value of
$1.00 per share by computing the net asset value per share to
the nearest $.01 per share. The Portfolio is permitted to use
the amortized cost method of valuation for its portfolio
securities pursuant to regulations of the Securities and
Exchange Commission. This method may result in periods during
which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold
the instrument. The net asset value per share would be subject
to fluctuation upon any significant changes in the value of
the Portfolio's securities. The value of debt securities, such
as those in the Portfolio, usually reflects yields generally
available on securities of similar yield, quality and
duration. When such yields decline, the value of a portfolio
holding such securities can be expected to decline. Although
the Portfolio seeks to maintain the net asset value per share
of the Portfolio at $1.00, there can be no assurance that net
asset value will not vary.
The Trustees of the Fund have undertaken to establish
procedures reasonably designed, taking into account current
market conditions and the Portfolio's investment objective, to
stabilize the net asset value per share for purposes of sales
and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem
appropriate, of the extent, if any, to which the net asset
value per share calculated by using available market
quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are
required to promptly consider what action, if any, should be
initiated.
With respect to the Portfolios other than the TCW Money
Market Portfolio, foreign securities traded outside the United
States are generally valued as of the time their trading is
complete, which is usually different from the close of the New
York Stock Exchange. Occasionally, events affecting the value
of such securities may occur between such times and the close
of the New York Stock Exchange that will not be reflected in
the computation of the Portfolio's net asset value. If events
materially affecting the value of such securities occur during
such period, these securities will be valued at their fair
value according to procedures decided upon in good faith by
the Fund's Board of Trustees. All securities and other assets
of a Portfolio initially expressed in foreign currencies will
be converted to U.S. dollar values at the mean of the bid and
offer prices of such currencies against U.S. dollars last
quoted on a valuation date by any recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a
"regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). By so qualifying, a
Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital
gains are distributed.
In order to so qualify, a Portfolio must, among other
things, (1) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition
of stocks or securities or foreign currencies, or other income
(including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of
investing in such stocks or securities; (2) derive less than
30% of its gross income in each taxable year from the sale or
other disposition of stocks or securities held less than three
months (the Portfolio's transactions in future transactions,
straddles and options may be restricted in order to comply
with this requirement); and (3) diversify its holdings so
that, at the end of each quarter of the Portfolio's taxable
year, (a) at least 50% of the market value of the Portfolio's
assets is represented by cash, government securities and other
securities limited in respect of any one issuer to 5% of the
value of the Portfolio's assets and to not more than 10% of
the voting securities of such issuer, and (b) not more than
25% of the value of its assets is invested in securities of
any one issuer (other than government securities).
As a regulated investment company, a Portfolio will not
be subject to federal income tax on net investment income and
capital gains (short- and long-term), if any, that it
distributes to its shareholders if at least 90% of its net
investment income and net short-term capital gains for the
taxable year are distributed, but will be subject to tax at
regular corporate rates on any income or gains that are not
distributed. In general, dividends will be treated as paid
when actually distributed, except that dividends declared in
October, November or December and made payable to shareholders
of record in such a month will be treated as having been paid
by the Portfolio (and received by shareholders) on December
31, provided the dividend is paid in the following January.
Each Portfolio intends to satisfy the distribution requirement
in each taxable year.
The Portfolios will not be subject to the 4% federal
excise tax imposed on registered investment companies that do
not distribute all of their income and gains each calendar
year because such tax does not apply to a registered
investment company whose only shareholders are segregated
asset accounts of life insurance companies held in connection
with variable annuity and/or variable life insurance policies.
The Fund intends to comply with section 817(h) of the
Code and the regulations issued thereunder. As required by
regulations under that section, the only shareholders of the
Fund and its Portfolios will be life insurance company
segregated asset accounts (also referred to as separate
accounts) that fund variable life insurance or annuity
contracts and the general account of PFL Life Insurance
Company which provided the initial capital for the Portfolios
of the Fund. See the prospectus or other material for the
Contracts for additional discussion of the taxation of
segregated asset accounts and of the owner of the particular
Contract described therein.
Section 817(h) of the Code and Treasury Department
regulations thereunder impose certain diversification
requirements on the segregated asset accounts investing in the
Portfolios of the Fund. These requirements, which are in
addition to the diversification requirements applicable to the
Fund under the 1940 Act and under the regulated investment
company provisions of the Code, may limit the types and
amounts of securities in which the Portfolios may invest.
Failure to meet the requirements of section 817(h) could
result in current taxation of the owner of the Contract on the
income of the Contract.
The Fund may therefore find it necessary to take action
to ensure that a Contract continues to qualify as a Contract
under federal tax laws. The Fund, for example, may be required
to alter the investment objectives of a Portfolio or
substitute the shares of one Portfolio for those of another.
No such change of investment objectives or substitution of
securities will take place without notice to the shareholders
of the affected Portfolio and the approval of a majority of
such shareholders and without prior approval of the Securities
and Exchange Commission, to the extent legally required.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund is a Massachusetts business trust organized on
November 18, 1988. A copy of the Fund's Agreement and
Declaration of Trust, as amended, which is governed by
Massachusetts law, is on file with the Secretary of State of
The Commonwealth of Massachusetts.
The Trustees of the Fund have authority to issue an
unlimited number of shares of beneficial interest without par
value of one or more series. Currently, the Trustees have
established and designated ten series. Each series of shares
represents the beneficial interest in a separate Portfolio of
assets of the Fund, which is separately managed and has its
own investment objective and policies. The Trustees of the
Fund have authority, without the necessity of a shareholder
vote, to establish additional portfolios and series of shares.
The shares outstanding are, and those offered hereby when
issued will be, fully paid and nonassessable by the Fund. The
shares have no preemptive, conversion or subscription rights
and are fully transferable.
The assets received from the sale of shares of a
Portfolio, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, constitute
the underlying assets of the Portfolio. The underlying assets
of a Portfolio are required to be segregated on the Fund's
books of account and are to be charged with the expenses with
respect to that Portfolio. Any general expenses of the Fund
not readily attributable to a Portfolio will be allocated by
or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into
consideration, among other things, the nature and type of
expense and the relative sizes of the Portfolio and the other
Portfolios.
Each share has one vote, with fractional shares voting
proportionately. Shareholders of a Portfolio are not entitled
to vote on any matter that requires a separate vote of the
shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not
require the Fund to hold annual meetings of shareholders.
Thus, there will ordinarily
be no annual shareholder meetings, unless otherwise required
by the 1940 Act. The Trustees of the Fund may appoint their
successors until fewer than a majority of the Trustees have
been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the
Agreement and Declaration of Trust, any Trustee may be removed
by vote of two-thirds of the outstanding shares of the Fund,
and holders of 10% or more of the outstanding shares can
require the Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. If
ten or more shareholders who have been such for at least six
months and who hold in the aggregate shares with a net asset
value of at least $25,000 inform the Trustees that they wish
to communicate with other shareholders, the Trustees either
will give such shareholders access to the shareholder lists or
will inform them of the cost involved if the Fund forwards
materials to the shareholders on their behalf. If the Trustees
object to mailing such materials, they must inform the
Securities and Exchange Commission and thereafter comply with
the requirements of the 1940 Act.
PFL will vote shares of the Fund as described under the
caption "Voting Rights" in the prospectus or other material
for the Contracts which accompanies the Prospectus.
As of July 31, 1996, the PFL Endeavor Variable Annuity
Account owned of record the following percentages of the
outstanding shares of each Portfolio: 78.92% of the TCW Money
Market Portfolio; 95.83% of the TCW Managed Asset Allocation
Portfolio; 92.12% of the T. Rowe Price International Stock
Portfolio; 88.27% of the Value Equity Portfolio; 90.56% of the
Dreyfus Small Cap Value Portfolio; 76.04% of the Dreyfus U.S.
Government Securities Portfolio; 83.67% of the T. Rowe Price
Equity Income Portfolio; and 82.17% of the T. Rowe Price
Growth Stock Portfolio. As of July 31, 1996, the PFL Endeavor
Platinum Variable Annuity Account owned of record the
following percentages of the outstanding shares of each
Portfolio: 19.25% of the TCW Money Market Portfolio; 3.50% of
the TCW Managed Asset Allocation Portfolio; 6.36% of the T.
Rowe Price International Stock Portfolio; 9.95% of the Value
Equity Portfolio; 7.67% of the Dreyfus Small Cap Value
Portfolio; 21.55% of the Dreyfus U.S. Government Securities
Portfolio; 13.69% of the T. Rowe Price Equity Income
Portfolio; and 15.61% of the T. Rowe Price Growth Stock
Portfolio. As of July 31, 1996, the AUSA Endeavor Variable
Annuity Account owned of record the following percentages of
the outstanding shares of each Portfolio: 1.83% of the TCW
Money Market Portfolio; .67% of the TCW Managed Asset
Allocation Portfolio; 1.51% of the T. Rowe Price International
Stock Portfolio; 1.78% of the Value Equity Portfolio; 1.78% of
the Dreyfus Small Cap Value Portfolio; 2.40% of the Dreyfus
U.S. Government Securities Portfolio; 2.65% of the T. Rowe
Price Equity Income Portfolio; and 2.22% of the T. Rowe Price
Growth Stock Portfolio.
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Fund. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts
and obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Fund or the
Trustees. The Agreement and Declaration of Trust provides for
indemnification out of Fund property for all loss and expense
of any shareholders held personally liable for obligations of
the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its
obligations. The likelihood of such circumstances is remote.
LEGAL MATTERS
Certain legal matters are passed on for the Fund by
Sullivan & Worcester LLP of Washington, D.C.
CUSTODIAN
Boston Safe Deposit and Trust Company, located at One
Boston Place, Boston, Massachusetts 02108, serves as the
custodian of the Fund. Under the Custody Agreement, Boston
Safe holds the Portfolios' securities and keeps all necessary
records and documents.
FINANCIAL STATEMENTS
The financial statements of the TCW Money Market
Portfolio, TCW Managed Asset Allocation Portfolio, T. Rowe
Price International Stock Portfolio, Value Equity Portfolio,
Dreyfus Small Cap Value Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price Equity Income Portfolio
and T. Rowe Price Growth Stock Portfolio for the fiscal year
ended December 31, 1995, including notes to the financial
statements and supplementary information and the Independent
Auditors' Report, and for the six month period ended June 30,
1996 (unaudited) are included in the Fund's Annual Report to
shareholders and Semi-Annual Report to shareholders,
respectively. Copies of the Annual Report and Semi-Annual
Report accompany this Statement of Additional Information.
The financial statements included in the Annual Report are
incorporated herein by reference.
APPENDIX
SECURITIES RATINGS
Standard & Poor's Bond Ratings
A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect
to a specific obligation. Debt rated "AAA" has the highest
rating assigned by Standard & Poor's. Capacity to pay interest
and repay principal is extremely strong. Debt rated "AA" has a
very strong capacity to pay interest and to repay principal
and differs from the highest rated issues only in small
degree. Debt rated "A" has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt of a higher rated category. Debt
rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and to repay principal for debt in
this category than for higher rated categories. Bonds rated
"BB", "B", "CCC" and "CC" are regarded, on balance, as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance
with the terms of the obligation. "BB" indicates the lowest
degree of speculation and "CC" the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
The ratings from "AA" to "B" may be modified by the addition
of a plus or minus sign to show relative standing within the
major rating categories.
Moody's Bond Ratings
Bonds rated "Aaa" by Moody's are judged to be of the best
quality and to carry the smallest degree of investment risk.
Bonds rated "Aa" are judged to be of high quality by all
standards. Bonds rated "A" possess many favorable investment
attributes and are to be considered as higher medium grade
obligations. Bonds rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured and have speculative characteristics as well.
Bonds are rated "Ba", "B", "Caa", "Ca", "C" when protection of
interest and principal payments is questionable. A "Ba" rating
indicates some speculative elements while "Ca" represents a
high degree of speculation and "C" represents the lowest rated
class of bonds. "Caa", "Ca" and "C" bonds may be in default.
Moody's applies numerical modifiers "1", "2" and "3" in each
generic rating classification from "Aa" to "B" in its
corporate bond rating system. The modifier "1" indicates that
the security ranks in the higher end of its generic rating
category; the modifier "2" indicates a mid-range ranking; and
the modifier "3" indicates that the issue ranks at the lower
end of its generic rating category.
Standard & Poor's Commercial Paper Ratings
"A" is the highest commercial paper rating category
utilized by Standard & Poor's, which uses the numbers "1+",
"1", "2" and "3" to denote relative strength within its "A"
classification. Commercial paper issuers rated "A" by Standard
& Poor's have the following characteristics. Liquidity ratios
are better than industry average. Long-term debt rating is "A"
or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an
upward trend. Typically, the issuer is a strong company in a
well-established industry and has superior management. Issues
rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by
changing conditions or short-term adversities. The rating "C"
is assigned to short-term debt obligations with a doubtful
capacity for repayment. An issue rated "D" is either in
default or is expected to be in default upon maturity.
Moody's Commercial Paper Ratings
"Prime-1" is the highest commercial paper rating assigned
by Moody's, which uses the numbers "1", "2" and "3" to denote
relative strength within its highest classification of Prime.
Commercial paper issuers rated Prime by Moody's have the
following characteristics. Their short-term debt obligations
carry the smallest degree of investment risk. Margins of
support for current indebtedness are large or stable with cash
flow and asset protection well assured. Current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer terms, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
IBCA Limited/IBCA Inc. Commercial Paper Ratings. Short-term
obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc., are obligations supported
by the highest capacity for timely repayment. Obligations
rated A-1 have a very strong capacity for timely repayment.
Obligations rated A-2 have a strong capacity for timely
repayment, although
such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
Fitch Investors Services, Inc. Commercial Paper Ratings. Fitch
Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance
for timely payment. The rating F-1 reflects an assurance of
timely payment only slightly less in degree than issues rated
F-1+, while the rating F-2 indicates a satisfactory degree of
assurance for timely payment, although the margin of safety
is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. Commercial Paper Ratings. Duff & Phelps
Inc. employs the designation of Duff 1 with respect to top
grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term
liquidity is clearly outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations. Duff 1-
indicates high certainty of timely payment. Duff 2 indicates
good certainty of timely payment: liquidity factors and
company fundamentals are sound.
Thomson BankWatch, Inc. ("BankWatch") Commercial Paper
Ratings. BankWatch will assign both short-term debt ratings
and issuer ratings to the issuers it rates. BankWatch will
assign a short-term rating ("TBW-1", "TBW-2", "TBW-3", or
"TBW-4") to each class of debt (e.g., commercial paper or
non-convertible debt), having a maturity of one-year or less,
issued by a holding company structure or an entity within the
holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A",
"A/B", "B", "B/C", "C", "C/D", "D", "D/E", and "E") to each
issuer that it rates.
Various of the NRSROs utilize rankings within rating
categories indicated by a + or -. The Portfolios, in
accordance with industry practice, recognize such rankings
within categories as graduations, viewing for example Standard
& Poor's rating of A-1+ and A-1 as being in Standard & Poor's
highest rating category.
<PAGE>
This Part C, Item 24 (b) is to be used in future Edgar filings
when incorporating exhibits by reference. These exhibits have
already been filed electronically with SEC.
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
Financial Highlights for the TCW
Money Market Portfolio, TCW Managed
Asset Allocation Portfolio, Value
Equity Portfolio, Value Small Cap
Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price
International Stock Portfolio, T.
Rowe Price Equity Income Portfolio
and T. Rowe Price Growth Stock
Portfolio for the period ended
December 31, 1995 (Audited) and the
six month period ended June 30,
1996 (Unaudited).
Included in Part B:
The following audited Financial
Statements for the TCW Money Market
Portfolio, TCW Managed Asset
Allocation Portfolio, Value Equity
Portfolio, Value Small Cap
Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price
International Stock Portfolio, T.
Rowe Price Equity Income Portfolio
and T. Rowe Price Growth Stock
Portfolio for the year ended
December 31, 1995 are incorporated
into the Statement of Additional
Information of the Registrant by
reference to the Registrant's
Annual Report for the fiscal year
ended December 31, 1995:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The following unaudited Financial
Statements for the TCW Money Market
Portfolio, TCW Managed Asset
Allocation Portfolio, Value Equity
Portfolio, Value Small Cap
Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price
International Stock Portfolio, T.
Rowe Price Equity Income Portfolio
and T. Rowe Price Growth Stock
Portfolio for the period ended June
30, 1996 are incorporated into the
Statement of Additional Information
of the Registrant by reference to
the Registrant's Semi-Annual
Report:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors is
filed herein.
(b) Exhibits:
All references are to the Registrant's
registration statement on Form N-1A as
filed with the SEC on March 7, 1989,
File Nos. 33-27352 and 811-5780 (the
"Registration Statement").
Exhibit No. Description of Exhibits
(1)(a) Agreement and Declaration of
Trust is incorporated by
reference to Post-Effective
Amendment No. 14 to the
Registration Statement as filed
with the SEC on April 29, 1996
("Post-Effective Amendment No.
14").
(1)(b) Amendment No. 1 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(c) Amendment No. 2 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(d) Amendment No. 3 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(e) Amendment No. 4 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No. 14
(1)(f) Amendment No. 5 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(g) Amendment No. 6 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(h) Amendment No. 7 to Agreement
and Declaration of Trust is
filed herein.
(2) Amended and Restated By-Laws
are incorporated by reference
to Post-Effective Amendment No.
14.
(3) Not Applicable.
(4)(a) Specimen certificate for shares
of beneficial interest of the
Domestic Money Market Portfolio
(now known as TCW Money Market
Portfolio) is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(b) Deleted
(4)(c) Specimen certificate for shares
of beneficial interest of the
Domestic Managed Asset
Allocation Portfolio (now known
as TCW Managed Asset Allocation
Portfolio) is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(d) Deleted
(4)(e) Specimen certificate for shares
of beneficial interest of the
Global Growth Portfolio (now
known as T. Rowe Price
International Stock Portfolio)
is incorporated by reference to
Post-Effective Amendment No.
14.
(4)(f) Specimen certificate for shares
of beneficial interest of the
Quest for Value Equity
Portfolio (now known as Value
Equity Portfolio) is
incorporated by reference to
Post-Effective Amendment No.
14.
(4)(g) Specimen certificate for shares
of beneficial interest of the
Quest for Value Small Cap
Portfolio (now known as Value
Small Cap Portfolio) is
incorporated by reference to
Post-Effective Amendment No.
14.
(4)(h) Specimen certificate for shares
of beneficial interest of the
U.S. Government Securities
Portfolio (now known as Dreyfus
U.S. Government Securities
Portfolio) is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(i) Specimen certificate for shares
of beneficial interest of the
T. Rowe Price Equity Income
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(j) Specimen certificate for shares
of beneficial interest of the
T. Rowe Price Growth Stock
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(k) Specimen certificate for shares
of beneficial interest of the
Opportunity Value Portfolio is
filed herein.
(4)(l) Specimen certificate for shares
of beneficial interest of the
Enhanced Index Portfolio is
filed herein.
(5)(a) Management Agreement dated
November 23, 1992 between
Registrant and Endeavor
Investment Advisers is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(a)(1) Supplement dated April 29, 1993
to Management Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Quest for Value
Equity Portfolio and Quest for
Value Small Cap Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(a)(2) Supplement dated March 25, 1994
to Management Agreement between
Registrant and Endeavor
Investment Advisers with
respect to U.S. Government
Securities Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(a)(3) Supplement dated December 28,
1994 to Management Agreement
between Registrant and Endeavor
Investment Advisers with
respect to the T. Rowe Price
Equity Income Portfolio and T.
Rowe Price Growth Stock
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(5)(a)(4) Form of Supplement to
Management Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Opportunity Value
Portfolio and Enhanced Index
Portfolio is filed herein.
(5)(b) Investment Advisory Agreement
between TCW Funds Management,
Inc. and Endeavor Investment
Advisers with respect to the
Money Market Portfolio and
Managed Asset Allocation
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(5)(c) Deleted
(5)(d) Deleted
(5)(e) Deleted
(5)(f) Investment Advisory Agreement
between Quest for Value
Advisors and Endeavor
Investment Advisers with
respect to Quest for Value
Equity Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(g) Investment Advisory Agreement
between The Boston Company
Asset Management, Inc. and
Endeavor Investment Advisers
with respect to the U.S.
Government Securities Portfolio
is incorporated by reference to
Post-Effective Amendment No.
14.
(5)(g)(1) Transfer and Assumption of
Investment Advisory Agreement
among The Boston Company Asset
Management, Inc., The Dreyfus
Corporation, Endeavor
Investment Advisers and
Registrant with respect to the
Dreyfus U.S. Government
Securities Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(h) Investment Advisory Agreement
between T. Rowe Price
Associates, Inc. and Endeavor
Investment Advisers with
respect to the T. Rowe Price
Equity Income Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(i) Investment Advisory Agreement
between T. Rowe Price
Associates, Inc. and Endeavor
Investment Advisers with
respect to the T. Rowe Price
Growth Stock Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(j) Investment Advisory Agreement
between Rowe Price-Fleming,
International, Inc. and
Endeavor Investment Advisers
with respect to the Global
Growth Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(k) Form of Investment Advisory
Agreement between The Dreyfus
Corporation and Endeavor
Investment Advisers with
respect to the Dreyfus Small
Cap Value Portfolio is filed
herein.
(5)(l) Form of Investment Advisory
Agreement between OpCap
Advisors and Endeavor
Investment Advisers with
respect to the Opportunity
Value Portfolio is filed
herein.
(5)(m) Form of Investment Advisory
Agreement between J.P. Morgan
Investment Management Inc. and
Endeavor Investment Advisers
with respect to the Enhanced
Index Portfolio is filed
herein.
(6) Participation Agreement between
Registrant, Endeavor Management
Co. and PFL Life Insurance
Company is incorporated by
reference to Post-Effective
Amendment No. 14.
(7) Not Applicable.
(8)(a) Custody Agreement between
Registrant and Boston Safe
Deposit and Trust Company is
incorporated by reference to
Post-Effective Amendment No.
14.
(8)(b) Supplement dated April 19, 1993
to Custody Agreement between
Registrant and Boston Safe
Deposit and Trust Company with
respect to the Quest for Value
Equity Portfolio and Quest for
Value Small Cap Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(8)(c) Supplement dated December 30,
1994 to Custody Agreement
between Registrant and Boston
Safe Deposit and Trust Company
with respect to the T. Rowe
Price Equity Income Portfolio
and T. Rowe Price Growth Stock
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(8)(d) Supplement dated March 25, 1994
to Custody Agreement between
Registrant and Boston Safe
Deposit and Trust Company with
respect to the U.S. Government
Securities Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(8)(e) Form of Supplement to Custody
Agreement between Registrant
and Boston Safe Deposit and
Trust Company with respect to
the Opportunity Value Portfolio
and Enhanced Index Portfolio is
filed herein.
(9)(a) Transfer Agency and Registrar
Agreement between Registrant
and The Shareholder Services
Group, Inc. (currently known as
First Data Investor Services
Group, Inc.) is incorporated by
reference to Post-Effective
Amendment No. 14.
(9)(b) License Agreement between
Endeavor Management Co. and
Registrant is incorporated by
reference to Post-Effective
Amendment No. 14.
(9)(b)(1) Amendment to License Agreement
between Endeavor Management Co.
and Registrant is incorporated
by reference to Post-Effective
Amendment No. 14.
(9)(c) Administration Agreement
between Endeavor Management Co.
and The Boston Company
Advisors, Inc. is incorporated
by reference to Post-Effective
Amendment No. 14.
(9)(c)(1) Supplement dated April 19, 1993
to Administration Agreement
between Endeavor Investment
Advisers and The Boston Company
Advisors, Inc., with respect to
the Quest for Value Equity
Portfolio and Quest for Value
Small Cap Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(9)(c)(2) Consent to Assignment of
Administration Agreement dated
May 4, 1994 between Endeavor
Investment Advisers and The
Boston Company Advisors, Inc.
to The Shareholder Services
Group, Inc. is incorporated by
reference to Post-Effective
Amendment No. 14.
(9)(c)(3) Supplement dated October 24,
1994 to Administration
Agreement between Endeavor
Investment Advisers and The
Shareholder Services Group,
Inc. (currently known as First
Data Investor Services Group,
Inc.) with respect to the T.
Rowe Price Equity Income
Portfolio and T. Rowe Price
Growth Stock Portfolio is
incorporated by reference to
Post-Effective Amendment No.
14.
(9)(c)(4) Supplement dated March 25, 1994
to Administration Agreement
between Endeavor Investment
Advisers and The Boston Company
Advisors, inc. with respect to
the U.S. Government Securities
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(9)(c)(5) Form of Supplement dated July
1, 1996 to Administration
Agreement between Endeavor
Investment Advisors and First
Data Investor Services Group,
Inc. is filed herein.
(10) Not Applicable.
(11) Consent of Independent Auditors
is filed herein.
(12) Not Applicable.
(13) Subscription Agreement between
Registrant and PFL Life
Insurance Company is
incorporated by reference to
Post-Effective Amendment No.
14.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(17) Financial Data Schedules are
incorporated by reference to
Post-Effective Amendment No.
14.
(18) Not Applicable.
(19) Powers of Attorney are
incorporated by reference to
Post-Effective Amendment No.
14.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of the effective date of this Post-Effective
Amendment, PFL Life Insurance Company's separate accounts, PFL
Endeavor Variable Annuity Account and PFL Endeavor Platinum
Variable Annuity Account, and AUSA Life Insurance Company's
separate account, AUSA Endeavor Variable Annuity Account, held
all the outstanding shares of the Registrant. PFL Life
Insurance Company, a stock life insurance company organized
under the laws of the State of Iowa, and AUSA Life Insurance
Company, a stock life insurance company organized under the
laws of the State of New York, are each wholly-owned indirect
subsidiaries of AEGON USA, Inc., an Iowa corporation. All of
the stock of AEGON USA, Inc. is indirectly owned by AEGON n.v.
of The Netherlands.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Set forth below are the number of record holders, as of
July 31, 1996, of the shares of beneficial interest of the
Registrant.
Number of
Record
Title of Class Holders
Shares of Beneficial Interest of the
TCW Money Market Portfolio. . . . . . . . . . . . .3
Shares of Beneficial Interest of the
TCW Managed Asset Allocation
Portfolio. . . .3
Shares of Beneficial Interest of the
Value Equity Portfolio. . . . . . . . . . . . . . .3
Shares of Beneficial Interest of the
Value Small Cap Portfolio . . . . . . . . . . . . .3
Shares of Beneficial Interest of the
Dreyfus U.S. Government Securities
Portfolio. . . .3
Shares of Beneficial Interest of the
T. Rowe Price International Stock
Portfolio. . . .3
Shares of Beneficial Interest of the
T. Rowe Price Equity Income Portfolio . . . . . . .3
Shares of Beneficial Interest of the
T. Rowe Price Growth Stock Portfolio. . . . . . . .3
Shares of Beneficial Interest of the
Opportunity Value Portfolio . . . . . . . . . . . .0
Shares of Beneficial Interest of the
Enhanced Index Portfolio. . . . . . . . . . . . . .0
Item 27. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as
filed as Exhibits 1(a) - 1(h) hereto;
Amended and Restated By-Laws as filed as Exhibit 2
hereto; and
Participation Agreement between Registrant, Endeavor
Management Co. and PFL Life Insurance Company as
filed as Exhibit 6 hereto.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended (the "Act") may be
permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Act, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by any such Trustee, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant, its Trustees and officers, Endeavor
Investment Advisers (the "Manager"), and persons affiliated
with them are insured under a policy of insurance maintained
by the Registrant and the Manager within the limits and
subject to the limitations of the policy, against certain
expenses in connection with the defense of actions suits or
proceedings, and certain liabilities that might me imposed as
a result of such actions, suits or proceedings, to which they
are parties by reason of being or having been such Trustees or
officers. The policy expressly excludes coverage for any
Trustee or officer whose personal dishonesty, fraudulent
breach of trust, lack of good faith, or intention to deceive
or defraud has been finally adjudicated or may be established
or who willfully fails to act prudently.
Item 28. (a) Business and Other Connections of the
Investment Adviser
Investment Adviser - Endeavor Investment Advisers
The Manager is a registered investment adviser
providing investment management and administrative services to
the Registrant.
The list required by this Item 28 of partners and
their officers and directors of the Manager together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers
and directors during the past two years is incorporated by
reference to Schedule B and D of Form ADV filed by the Manager
pursuant to the Investment Advisers Act of 1940 (SEC No.
801-41827).
Item 28. (a) Business and Other Connections of Investment
Adviser
Investment Adviser - TCW Funds Management, Inc.
TCW Funds Management, Inc. ("TCW") is a wholly owned
subsidiary of The TCW Group, Inc. whose direct and indirect
subsidiaries, including Trust Company of the West and TCW
Asset Management Company, provide a variety of trust
investment management and investment advisory services.
The list required by this Item 28 of officers and
directors of TCW, together with information as to any other
business, profession, vocation or employment of a substantial
nature engaged in by such officers and directors during the
past two years is incorporated by reference to Schedules A and
D of Form ADV filed by TCW pursuant to the Investment Advisers
Act of 1940 (SEC file No. 801-29075).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - OpCap Advisors
OpCap Advisors ("OpCap") (formerly known as Quest
for Value Advisors) is a subsidiary of Oppenheimer Capital, a
registered investment adviser, which provides a variety of
investment management services for clients. OpCap manages
registered investment companies other than certain Portfolios
of the Registrant.
The list required by this Item 28 of the officers
and directors of OpCap, together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to
Schedules D and F of Form ADV filed by OpCap pursuant to the
Investment Advisers Act of 1940 (SEC file No. 801-27180).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") is a wholly
owned subsidiary of Mellon Bank, N.A. Dreyfus is a registered
investment adviser founded in 1947 providing a variety of
investment management services for clients.
The list required by this Item 28 of the officers
and directors of Dreyfus, together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by Dreyfus pursuant to the
Investment Advisers Act of 1940 (SEC file No. 801-8147).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price")
serves as investment manager to a variety of individual and
institutional investors, including limited and real estate
partnerships and other mutual funds.
The list required by this Item 28 of officers and
directors of T. Rowe Price together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by T. Rowe Price pursuant
to the Investment Advisers Act of 1940 (SEC file No. 801-856).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - Rowe Price-Fleming
International, Inc.
Rowe Price-Fleming International, Inc. ("Price-Fleming")
is a joint venture between T. Rowe Price and Robert
Fleming Holdings Limited ("Flemings"). Flemings is a
diversified investment organization which participates in a
global network of regional investment offices in New York,
London, Zurich, Geneva, Tokyo, Hong Kong, Manila, Kuala
Lumpur, South Africa and Taiwan.
The list required by this Item 28 of officers and
directors of Price-Fleming, together with information as to
any other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by Price-Fleming pursuant
to the Investment Advisers Act of 1940 (SEC file No.
801-14714).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - J.P. Morgan Investment
Management Inc.
J.P. Morgan Investment Management Inc. ("Morgan")
manages employee benefit funds of corporations, labor unions
and state and local governments and the accounts of other
institutional investors, including investment companies.
The list required by this Item 28 of officers and
directors of Morgan, together with information as to any other
business, profession, vocation or employment of a substantial
nature engaged in by such officers and directors during the
past two years is incorporated by reference to Schedules A and
D of Form ADV filed by Morgan pursuant to the Investment
Advisers Act of 1940 (SEC file No. 801-21011).
Item 29 Principal Underwriter
(a) Inapplicable
(b) Inapplicable
Item 30 Location of Accounts and Records
The Registrant maintains the records required by
Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3
inclusive thereunder at its principal office, located at 2101
East Coast Highway, Suite 300, Corona del Mar, California
92625 as well as at the offices of its investment advisers and
administrator: TCW Funds Management, Inc., 865 S. Figueroa
Street, Los Angeles, California 90071; OpCap Advisors, c/o
Oppenheimer Capital, One World Financial Center, New York, New
York 10281; The Dreyfus Corporation, 200 Park Avenue, New
York, New York 10166; T. Rowe Price Associates, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202; Rowe Price-Fleming
International, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202; J.P. Morgan Investment Management Inc., 522
Fifth Avenue, New York, New York 10036 and First Data Investor
Services Group, Inc. ("First Data") (formerly, The Shareholder
Services Group, Inc.), located at 53 State Street, One
Exchange Place, Boston, Massachusetts 02109. Certain records,
including records relating to the Registrant's shareholders
and the physical possession of its securities, may be
maintained pursuant to Rule 31a-3 at the main office of the
Registrant's transfer agent and dividend disbursing agent,
First Data and the Registrant's custodian, Boston Safe Deposit
and Trust Company, located at One Boston Place, Boston,
Massachusetts 02108.
Item 31 Management Services
None
Item 32 Undertakings
(a) Inapplicable
(b) The Registrant undertakes to file a post-effective
amendment, using financial statments for its
Opportunity Value Portfolio and Enhanced Index Portfolio,
which financial statements need not be certified, within four
to six months from the commencement of operations of each
Portfolio.
(c) The Registrant will furnish each person to whom
a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, and the Investment Company Act of 1940, as amended, the
Registrant, ENDEAVOR SERIES TRUST, has duly caused this
Post-Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Corona del Mar, State of
California on the 20th day of August, 1996.
ENDEAVOR SERIES TRUST
Registrant
By: /s/James R. McInnis*
James R. McInnis
President
Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment to its Registration
Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
Signature Title Date
/s/James R. McInnis* President August 20, 1996
James R. McInnis (Principal executive
officer)
/s/Alan J. Schryer* Chief Financial Officer August 20, 1996
Alan J. Schryer (Treasurer) (principal
financial and accounting
officer)
/s/Vincent J. McGuinness* Trustee August 20, 1996
Vincent J. McGuinness
/s/Timothy A. Devine* Trustee August 20, 1996
Timothy A. Devine
/s/Thomas J. Hawekotte* Trustee August 20, 1996
Thomas J. Hawekotte
/s/Steven L. Klosterman* Trustee August 20, 1996
Steven L. Klosterman
/s/Halbert D. Lindquist* Trustee August 20, 1996
Halbert D. Lindquist
/s/R. Daniel Olmstead* Trustee August 20, 1996
R. Daniel Olmstead
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
ENDEAVOR SERIES TRUST
AMENDMENT NO. 7 TO AGREEMENT AND
DECLARATION OF TRUST
Change of Name of a Series of the Trust from the Value Small
Cap Portfolio to the Dreyfus Small Cap Value Portfolio
The undersigned, Assistant Secretary of Endeavor Series
Trust (the "Trust"), does hereby certify that pursuant to
Article VIII, Section 8.3 of the Trust's Agreement and
Declaration of Trust (the "Declaration of Trust") dated
November 18, 1988, as amended, the following votes were duly
adopted by at least a majority of the Trustees of the Trust at
a meeting held on August 13, 1996.
VOTED: That the name of the Trust's Value Small Cap
Portfolio (the "Portfolio"), previously established
and designated in accordance with Article III of the
Declaration of Trust, be changed to Dreyfus Small
Cap Value Portfolio, effective upon approval by the
Portfolio's shareholders of an advisory agreement
between Endeavor Investment Advisers and The Dreyfus
Corporation at a Special Meeting of Shareholders to
be held on or about October 29, 1996; and further
VOTED: That the proper officers of the Trust be, and each
hereby is, authorized and empowered to execute all
instruments and documents and to take all actions,
including the filing of an Amendment to the Trust's
Declaration of Trust with the Secretary of State of
the Commonwealth of Massachusetts and the Clerk of
the City of Boston, Massachusetts, as they or any
one of them in his or her sole discretion deems
necessary or appropriate to carry out the intents
and purposes of the foregoing vote.
IN WITNESS WHEREOF, the undersigned has hereunto set her
hand this 16th day of August, 1996.
/s/Gail Hanson
Gail Hanson
Assistant Secretary
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" and "Independent Auditors" in the
Endeavor Series Trust Prospectus and "Financial Statements" in
the Endeavor Series Trust Statement of Additional Information,
and to the incorporation by reference, in Post-Effective
Amendment Number 15 to the Registration Statement (Form N-1A
No. 33-27352) of Endeavor Series Trust, of our report dated
February 9, 1996 on Endeavor Series Trust.
ERNST & YOUNG LLP
Boston, Massachusetts
August 21, 1996
SUPPLEMENT TO CUSTODY AGREEMENT
, 1996
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
Ladies and Gentlemen:
ENDEAVOR SERIES TRUST, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts
(the "Trust"), hereby supplements its agreement with BOSTON
SAFE DEPOSIT AND TRUST COMPANY, a trust company organized
under the laws of the Commonwealth of Massachusetts (the
"Custodian"), as follows:
1. Compensation. Pursuant to Section 3(b) of the
Custody Agreement dated March 28, 1991 (the "Agreement"), the
Trust and the Custodian hereby agree that the Opportunity
Value Portfolio and the Enhanced Index Portfolio (the
"Portfolios"), two new portfolio series of the Trust, created
and designated in accordance with the Trust's Agreement and
Declaration of Trust, shall be, considered Portfolios of the
Trust under the terms of the Agreement, and that the Domestic
and Global Fee Schedules currently in effect, and as may be
amended from time to time, under the Agreement shall apply to
the Portfolios, as of the date and year first written above.
2. Limitation of Liability. The term "Endeavor Series
Trust" means and refers to the Trustees from time to time
serving under the Agreement and Declaration of Trust dated
November 18, 1988, as the same may subsequently thereto have
been, or subsequently hereto be, amended. It is expressly
agreed that the obligations of the Trust hereunder shall not
be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but
bind only the trust property of the Trust, as provided in the
Agreement and Declaration of Trust. The execution and
delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in
its Agreement and Declaration of Trust.
If the foregoing is acceptable to you, kindly indicate
your acceptance by signing and returning the enclosed copy of
this Supplement.
Very truly yours,
ENDEAVOR SERIES TRUST
By:_________________________
JAMES R. MCINNIS
Title: PRESIDENT
Accepted and Agreed to:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
Title: Senior Vice President
This Specimen Certificate is in landscape position.
################################################################
# #
# NUMBER The Commonwealth of Massachusetts SHARES #
# #
# -0- (There is a picture of the Capitol -0- #
# and an eagle between two pillars here) #
# #
# #
# ENDEAVOR SERIES TRUST #
# #
# Opportunity Value Portfolio #
# #
# no par value #
# #
# #
#This Certifies that -Specimen- of is the owner of #
- -0- Shares in the Opportunity Value Portfolio of Endeavor Series
Trust, created by a Declaration of Trust dated November 18, 1988
and recorded with the Secretary of State of The Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and
subject to the provisions of this Trust, are transferable by
assignment endorsed thereon, and, the surrender of this
certificate. #
# #
#IN WITNESS WHEREOF, the Trustees hereunto set their hands and #
have caused their seal to be affixed hereto this day of #
A.D. 19 . #
# #
# #
# #
#President (There is a Seal Here) Chief Financial Officer#
# (Treasurer) #
# #
# #
# #
# #
################################################################
This Side of The Certificate is in Landscape Position.
#################################################################
# #
# | ENDEAVOR SERIES TRUST | #
# | | #
# | Opportunity Value | #
# | Portfolio | #
# | | #
# | (There is a Torch of | #
# | Fire Here) | #
# | | #
# | Certificate | #
# | for | #
# | | #
# | -0- | #
# | | #
# | ISSUED TO | #
# | | #
# | | #
# | Specimen | #
# | | #
# | DATED | #
# | | #
#-------------------| |------------------#
# #
# #
# #
# #
# (The following Text is Enclosed in the Border #
# to the Left of the Above Text Reading #
# in the Opposite Direction) #
# #
# For Value Received, hereby sell, assign and #
transfer unto Shares of the #
Capital represented by the within Certificate, and do hereby #
irrevocably constitute and appoint Attorney to#
transfer the said Shares on the books of the within named #
Organization with full power of substitution in the premises. #
# #
# Dated 19 . #
# #
# In presence of #
# #
#################################################################
This Specimen Certificate is in landscape position.
################################################################
# #
# NUMBER The Commonwealth of Massachusetts SHARES #
# #
# -0- (There is a picture of the Capitol -0- #
# and an eagle between two pillars here) #
# #
# #
# ENDEAVOR SERIES TRUST #
# #
# Enhanced Index Portfolio #
# #
# no par value #
# #
# #
#This Certifies that -Specimen- of is the owner of #
-0- Shares in the Enhanced Index Portfolio of Endeavor Series
Trust, created by a Declaration of Trust dated November 18, 1988
and recorded with the Secretary of State of The Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and
subject to the provisions of this Trust, are transferable by
assignment endorsed thereon, and, the surrender of this
certificate. #
# #
#IN WITNESS WHEREOF, the Trustees hereunto set their hands and #
have caused their seal to be affixed hereto this day of #
A.D. 19 . #
# #
# #
# #
#President (There is a Seal Here) Chief Financial Officer#
# (Treasurer) #
# #
# #
# #
# #
################################################################
This Side of The Certificate is in Landscape Position.
#################################################################
# #
# | ENDEAVOR SERIES TRUST | #
# | | #
# | Enhanced Index | #
# | Portfolio | #
# | | #
# | (There is a Torch of | #
# | Fire Here) | #
# | | #
# | Certificate | #
# | for | #
# | | #
# | -0- | #
# | | #
# | ISSUED TO | #
# | | #
# | | #
# | Specimen | #
# | | #
# | DATED | #
# | | #
#-------------------| |------------------#
# #
# #
# #
# #
# (The following Text is Enclosed in the Border #
# to the Left of the Above Text Reading #
# in the Opposite Direction) #
# #
# For Value Received, hereby sell, assign and #
transfer unto Shares of the #
Capital represented by the within Certificate, and do hereby #
irrevocably constitute and appoint Attorney to#
transfer the said Shares on the books of the within named #
Organization with full power of substitution in the premises. #
# #
# Dated 19 . #
# #
# In presence of #
# #
# #
#################################################################
AMENDMENT NO. 3 TO ADMINISTRATION AGREEMENT
As of July 1, 1996, FIRST DATA INVESTOR SERVICES GROUP,
INC., a Massachusetts corporation ("FDISG") and ENDEAVOR
INVESTMENT ADVISERS, a California general partnership (the
"Company"), hereby amend the Administration Agreement dated
March 28, 1991 (the "Agreement") as follows:
In consideration for the services which FDISG shall
perform for the Company and the Company's TCW Money Market
Portfolio, TCW Managed Asset Allocation Portfolio, T. Rowe
Price International Stock Portfolio, Value Equity Portfolio,
Value Small Cap Portfolio, Dreyfus U.S. Government Securities
Portfolio, T. Rowe Price Equity Income Portfolio and T. Rowe
Price Growth Stock Portfolio (collectively, the "Existing
Portfolios") and other series of the Endeavor Series Trust
which may become subject to the Agreement ("New Portfolios"),
pursuant to the Agreement, the Company hereby agrees to pay
FDISG for the one year period commencing July 1, 1996 as
follows:
Existing Portfolios (based on aggregate assets):
10 basis points on first $600 million
6 basis points on next $400 million
1 basis points on excess
New Portfolios:
Each New Portoflio with assets less than $40 million will
have a minimum annual charge of $40,000. Once assets in a New
Portfolio are $40 million, such Portfolio will become an
Existing Portfolio and its assets will be aggregated with
those of the Existing Portfolios for purposes of determining
the fee for services as set forth above.
FDISG agrees to waive 50% of its administration fee during the
first year of operation of a New Portfolio if 50% or more of
the management fee of the Company is being waived. If less
than 50% of the management fee is being waived, FDISG will
waive its fees at the same rate.
Out of Pocket Expenses:
Such fees do not include out-of-pocket disbursements of FDISG
for which FDISG shall be entitled to bill separately. Out-of-pocket
disbursements shall include, but shall not be limited
to the items specified in Schedule A to the Agreement, which
Schedule may be modified by FDISG upon not less than thirty
days' prior written notice to the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their duly
authorized officers as of the date first written above.
FIRST DATA INVESTOR SERVICES GROUP,
INC.
By: ______________________________
Title: ___________________________
ENDEAVOR INVESTMENT ADVISERS
By: ______________________________
Title: ___________________________
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this th day of , 1996, by and
between J.P. Morgan Investment Management Inc., a Delaware
corporation (the "Adviser"), and Endeavor Investment Advisers,
a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as
investment manager and administrator of Endeavor Series Trust
(the "Trust"), a Massachusetts business trust which has filed
a registration statement under the Investment Company Act of
1940, as amended (the "1940 Act") and the Securities Act of
1933 (the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the Enhanced Index
Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the
services of an investment adviser to assist the Manager in
performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment
Advisers Act of 1940, as amended, and is engaged in the
business of rendering investment advisory services to
investment companies and desires to provide such services to
the Manager;
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby
employs the Adviser to manage the investment and reinvestment
of the assets of the Portfolio, subject to the control and
direction of the Trust's Board of Trustees, for the period and
on the terms hereinafter set forth. The Adviser hereby
accepts such employment and agrees during such period to
render the services and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall
for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Manager, the Portfolio or the Trust
in any way.
2. Obligations of and Services to be Provided by the
Adviser. The Adviser undertakes to provide the following
services and to assume the following obligations:
a. The Adviser shall manage the investment and
reinvestment of the portfolio assets of the Portfolio, all
without prior consultation with the Manager, subject to and in
accordance with the respective investment objectives and
policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, and any written instructions which
the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. The Manager has
delivered copies of the Trust's Declaration of Trust, as
amended to date (the "Charter Document") to the Adviser. The
Manager agrees, on an ongoing basis, to provide the Adviser as
promptly as practicable copies of all amendments to the
Registration Statement and Charter Document and supplements to
the Prospectus. In pursuance of the foregoing, the Adviser
shall make all determinations with respect to the purchase and
sale of portfolio securities and shall take such action
necessary to implement the same. The Adviser shall render
regular reports to the Trust's Board of Trustees and the
Manager concerning the investment activities of the Portfolio.
The Manager agrees to cause to be delivered to a person
designated in writing for such purpose by the Adviser within
three days after the end of each month a written report dated
the date of its delivery (the "Report") with respect to the
Portfolio's compliance for its current fiscal year wth the
short-three test set forth in Section 851(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")(the
"short-three test"). The Report shall include in chart form
the Portfolio's gross income (within the meaning of Section
851 of the Code) from the beginning of the current fiscal year
to the date of the Report and its cumulative income and gains
described in Section 851(b(3) of the Code for such period. If
the Report is not timely delivered, the Adviser shall be
permitted to rely on the most recent Report delivered to it.
The Manager agrees that its Adviser may rely on the Report
without independent verification of its accuracy.
b. To the extent provided in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, the Adviser shall, in the name of
the Portfolio, place orders for the execution of portfolio
transactions with or through such brokers, dealers or banks as
it may select including affiliates of the Adviser and,
complying with Section 28(e) of the Securities Exchange Act of
1934, may pay a commission on transactions in excess of the
amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for
the execution of the portfolio transactions of the Portfolio,
the Adviser shall create and maintain all necessary records
pertaining to the purchase and sale of securities by the
Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act.
All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any
person retained by the Trust. Where applicable, such records
shall be maintained by the Adviser for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement. The Adviser will not
bear any other expenses in the operation of the Portfolio.
3. Compensation of the Adviser. In consideration of
services rendered pursuant to this Agreement, the Manager will
pay the Adviser a fee at the annual rate of the value of the
Portfolio's average daily net assets set forth in Schedule A
hereto. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the
Adviser 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 Adviser, the value of the
Portfolio's net assets shall be computed at the times and in
the manner specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the
Adviser hereunder are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others and
to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of
the Adviser or its parent, J.P. Morgan & Co., Incorporated, in
any prospectus, sales literature or other material relating to
the Trust in any manner not approved prior thereto by the
Adviser; provided, however, that the Adviser shall approve all
uses of its name which merely refer in accurate terms to its
appointment hereunder with no more prominence than other
relationships described in the materials and all uses of its
name and that of its parent which are required by the SEC or a
state securities commission. The Adviser shall not use the
name of the Trust or the Manager in any material relating to
the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate
terms to the appointment of the Adviser hereunder or which are
required by the SEC or a state securities commission; and,
provided further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors,
officers and employees of the Adviser may serve as directors,
trustees, partners, officers and employees of other
corporations, business trusts, partnerships or other entities
(including other investment companies) and that such other
entities may include the name "J.P. Morgan" as part of their
name, and that the Adviser or its affiliates may enter into
investment advisory, administration or other agreements with
such other entities.
6. Liability of the Adviser; Indemnification of the
Adviser. Absent willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties
hereunder on the part of the Adviser (each such act or
omission shall be referred to as "Disqualifying Conduct"), the
Adviser shall not be liable for any act or omission in the
course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding
or sale of any security. Nothing herein shall constitute a
waiver of any rights or remedies which the Trust may have
under any federal or state securities laws.
The Manager agrees to indemnify and hold harmless the
Adviser from and against any and all claims, losses,
liabilities or damages (including reasonable attorneys' fees
and other related expenses), howsoever arising, from or in
connection with this Agreement or the performance by the
Adviser of its duties hereunder; provided, however, that
nothing contained herein shall require that the Adviser be
indemnified for Disqualifying Conduct.
7. Limitation of Trust's Liability. The Adviser
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Agreement and Declaration of Trust. The Adviser agrees that
any of the Trust's obligations shall be limited to the assets
of the Portfolio and that the Adviser shall not seek
satisfaction of any such obligation from the shareholders of
the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement
shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of two years from the date
hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as
each such continuance as to the Portfolio is specifically
approved at least annually by vote of the holders of a
majority of the outstanding voting securities of the Portfolio
or by vote of a majority of the Trust's Board of Trustees; and
further provided that such continuance is also approved
annually by the vote of a majority of the Trustees 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. This Agreement may be terminated as
to the Portfolio at any time, without payment of any penalty,
by the Trust's Board of Trustees, by the Manager, or by a vote
of the majority of the outstanding voting securities of the
Portfolio upon 60 days' prior written notice to the Adviser,
or by the Adviser upon 90 days' prior written notice to the
Manager, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and
immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust, provided
that the Adviser receives prior written notice of the
termination of the Management Agreement. 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. This Agreement may be
amended at any time by the Adviser and the Manager, subject to
approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of
the Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and
advice furnished by either party to this Agreement to the
other shall be treated as confidential and shall not be
disclosed to third parties except as required by law.
10. 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.
11. 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 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.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY:
Authorized Officer
J.P. MORGAN INVESTMENT MANAGEMENT INC.
BY:
Authorized Officer
SCHEDULE A
Enhanced Index
Portfolio .35% of average daily net
assets
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this th day of , 1996, by and
between OpCap Advisors, a Delaware general partnership (the
"Adviser"), and Endeavor Investment Advisers, a California
general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as
investment manager and administrator of Endeavor Series Trust
(the "Trust"), a Massachusetts business trust which has filed
a registration statement under the Investment Company Act of
1940, as amended (the "1940 Act") and the Securities Act of
1933 (the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the Opportunity Value
Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the
services, information, advice, assistance and facilities of an
investment adviser to assist the Manager in performing
services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment
Advisers Act of 1940, as amended, and is engaged in the
business of rendering investment advisory services to
investment companies and desires to provide such services to
the Manager;
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby
employs the Adviser to manage the investment and reinvestment
of the assets of the Portfolio, subject to the control and
direction of the Trust's Board of Trustees, for the period and
on the terms hereinafter set forth. The Adviser hereby
accepts such employment and agrees during such period to
render the services and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall
for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Manager, the Portfolio or the Trust
in any way.
2. Obligations of and Services to be Provided by the
Adviser. The Adviser undertakes to provide the following
services and to assume the following obligations:
a. The Adviser shall manage the investment and
reinvestment of the portfolio assets of the Portfolio, all
without prior consultation with the Manager, subject to and in
accordance with the respective investment objectives and
policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, and any written instructions which
the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the
foregoing, the Adviser shall make all determinations with
respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of
Trustees and the Manager concerning the investment activities
of the Portfolio.
b. To the extent provided in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, the Adviser shall, in the name of
the Portfolio, place orders for the execution of portfolio
transactions with or through such brokers, dealers or banks as
it may select including affiliates of the Adviser and,
complying with Section 28(e) of the Securities Exchange Act of
1934, may pay a commission on transactions in excess of the
amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for
the execution of the portfolio transactions of the Portfolio,
the Adviser shall create and maintain all necessary records
pertaining to the purchase and sale of securities by the
Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act.
All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any
person retained by the Trust. Where applicable, such records
shall be maintained by the Adviser for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of
services rendered pursuant to this Agreement, the Manager will
pay the Adviser a fee at the annual rate of the value of the
Portfolio's average daily net assets set forth in Schedule A
hereto. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the
Adviser 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 Adviser, the value of the
Portfolio's net assets shall be computed at the times and in
the manner specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the
Adviser hereunder are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others and
to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of
the Adviser or its parent, Oppenheimer Capital, in any
prospectus, sales literature or other material relating to the
Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of
its name and that of its parent which merely refer in accurate
terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and, provided,
further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or
the Manager in any material relating to the Adviser in any
manner not approved prior thereto by the Manager; provided,
however, that the Manager shall approve all uses of its or the
Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by
the SEC or a state securities commission; and, provided
further, that in no event shall such approval be unreasonably
withheld.
6. Liability of the Adviser. Absent willful
misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of
the Adviser, the Adviser shall not be liable for any act or
omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security. Nothing herein
shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Agreement and Declaration of Trust. The Adviser agrees that
any of the Trust's obligations shall be limited to the assets
of the Portfolio and that the Adviser shall not seek
satisfaction of any such obligation from the shareholders of
the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement
shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of two years from the date
hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as
each such continuance as to the Portfolio is specifically
approved at least annually by vote of the holders of a
majority of the outstanding voting securities of the Portfolio
or by vote of a majority of the Trust's Board of Trustees; and
further provided that such continuance is also approved
annually by the vote of a majority of the Trustees 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. This Agreement may be terminated as
to the Portfolio at any time, without payment of any penalty,
by the Trust's Board of Trustees, by the Manager, or by a vote
of the majority of the outstanding voting securities of the
Portfolio upon 60 days' prior written notice to the Adviser,
or by the Adviser upon 150 days' prior written notice to the
Manager, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and
immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust. 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. This
Agreement may be amended at any time by the Adviser and the
Manager, subject to approval by the Trust's Board of Trustees
and, if required by applicable SEC rules and regulations, a
vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and
advice furnished by either party to this Agreement to the
other shall be treated as confidential and shall not be
disclosed to third parties except as required by law.
10. 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.
11. 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 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.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY: ________________________________
Authorized Officer
OPCAP ADVISORS
BY: ________________________________
Authorized Officer
SCHEDULE A
Opportunity Value
Portfolio .40% of average daily net
assets; provided, however
that no fee shall be
payable to the Adviser
until the earlier of the
events specified in (a) or
(b) below:
(a) The net assets of the
Portfolio equal or exceed
$25,000,000;
(b) The Adviser notifies
the Manager that after a
specified date, which date
shall not be earlier than
6 months from the date of
this Investment Advisory
Agreement, the .40% fee
will be due and payable.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 16th day of September, 1996, by and
between The Dreyfus Corporation, a New York corporation (the
"Adviser"), and Endeavor Investment Advisers, a California
general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as
investment manager and administrator of Endeavor Series Trust
(the "Trust"), a Massachusetts business trust which has filed
a registration statement under the Investment Company Act of
1940, as amended (the "1940 Act") and the Securities Act of
1933 (the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the Value Small Cap
Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the
services, information, advice, assistance and facilities of an
investment adviser to assist the Manager in performing
services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment
Advisers Act of 1940, as amended, and is engaged in the
business of rendering investment advisory services to
investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby
employs the Adviser to manage the investment and reinvestment
of the assets of the Portfolio, subject to the control and
direction of the Trust's Board of Trustees, for the period and
on the terms hereinafter set forth. The Adviser hereby
accepts such employment and agrees during such period to
render the services and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall
for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Manager, the Portfolio or the Trust
in any way.
2. Obligations of and Services to be Provided by the
Adviser. The Adviser undertakes to provide the following
services and to assume the following obligations:
a. The Adviser shall manage the investment and
reinvestment of the portfolio assets of the Portfolio, all
without prior consultation with the Manager, subject to and in
accordance with the respective investment objectives and
policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, and any written instructions which
the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the
foregoing, the Adviser shall make all determinations with
respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of
Trustees and the Manager concerning the investment activities
of the Portfolio.
b. To the extent provided in the Trust's
Registration Statement, as such Registration Statement may be
amended from time to time, the Adviser shall, in the name of
the Portfolio, place orders for the execution of portfolio
transactions with or through such brokers, dealers or banks as
it may select including affiliates of the Adviser and,
complying with Section 28(e) of the Securities Exchange Act of
1934, may pay a commission on transactions in excess of the
amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for
the execution of the portfolio transactions of the Portfolio,
the Adviser shall create and maintain all necessary records
pertaining to the purchase and sale of securities by the
Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act.
All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any
person retained by the Trust. Where applicable, such records
shall be maintained by the Adviser for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of
services rendered pursuant to this Agreement, the Manager will
pay the Adviser a fee at the annual rate of the value of the
Portfolio's average daily net assets set forth in Schedule A
hereto. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the
Adviser 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 Adviser, the value of the
Portfolio's net assets shall be computed at the times and in
the manner specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the
Adviser hereunder are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others and
to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Adviser hereby consents to the
name of the Portfolio being changed, effective upon
shareholder approval, to "Dreyfus Small Cap Value Portfolio."
The Manager shall not use the name of the Adviser or its
parent in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto
by the Adviser; provided, however, that the Adviser shall
approve all uses of its name and that of its parent which
merely refer in accurate terms to its appointment hereunder or
which are required by the SEC or a state securities
commission; and, provided, further, that in no event shall
such approval be unreasonably withheld. The Adviser shall not
use the name of the Trust or the Manager in any material
relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager
shall approve all uses of its or the Trust's name which merely
refer in accurate terms to the appointment of the Adviser
hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event
shall such approval be unreasonably withheld.
The Manager recognizes that from time to time directors,
officers and employees of the Adviser may serve as directors,
trustees, partners, officers and employees of other
corporations, business trusts, partnerships or other entities
(including other investment companies) and that such other
entities may include the name "Dreyfus" as part of their name,
and that the Adviser or its affiliates may enter into
investment advisory, administration or other agreements with
such other entities. If the Adviser ceases to act as the
Portfolio's investment adviser pursuant to this Agreement, the
Manager agrees that, at the Adviser's request, it will cause
the Trust to take all necessary action to change the name of
the Portfolio to a name not including "Dreyfus" in any form or
combination of words.
6. Liability of the Adviser. Absent willful
misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of
the Adviser, the Adviser shall not be liable for any act or
omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security. Nothing herein
shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Agreement and Declaration of Trust. The Adviser agrees that
any of the Trust's obligations shall be limited to the assets
of the Portfolio and that the Adviser shall not seek
satisfaction of any such obligation from the shareholders of
the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement
shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of two years from the date
hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as
each such continuance as to the Portfolio is specifically
approved at least annually by vote of the holders of a
majority of the outstanding voting securities of the Portfolio
or by vote of a majority of the Trust's Board of Trustees; and
further provided that such continuance is also approved
annually by the vote of a majority of the Trustees 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. This Agreement may be terminated as
to the Portfolio at any time, without payment of any penalty,
by the Trust's Board of Trustees, by the Manager, or by a vote
of the majority of the outstanding voting securities of the
Portfolio upon 60 days' prior written notice to the Adviser,
or by the Adviser upon 150 days' prior written notice to the
Manager, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and
immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust. 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. This
Agreement may be amended at any time by the Adviser and the
Manager, subject to approval by the Trust's Board of Trustees
and, if required by applicable SEC rules and regulations, a
vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and
advice furnished by either party to this Agreement to the
other shall be treated as confidential and shall not be
disclosed to third parties except as required by law.
10. 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.
11. 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 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.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY: ________________________________
Authorized Officer
THE DREYFUS CORPORATION
BY: ________________________________
Authorized Officer
SCHEDULE A
Value Small Cap
Portfolio .375% of average daily
net assets.
SUPPLEMENT TO MANAGEMENT AGREEMENT
OPPORTUNITY VALUE PORTFOLIO
ENHANCED INDEX PORTFOLIO
Date: , 1996
Endeavor Management Co.
Managing Partner
Endeavor Investment Advisers
Suite 300
2101 East Coast Highway
Corona del Mar, California 92625
Ladies and Gentlemen:
Endeavor Series Trust (the "Trust"), a Massachusetts
business trust created pursuant to an Agreement and
Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts, herewith supplements its
Management Agreement (the "Agreement") dated November 23, 1992
with Endeavor Investment Advisers, a California general
partnership (the "Manager"), as follows:
1. Investment Description; Appointment. Pursuant to
Section 1 of the Agreement the Trust hereby notifies the
Manager that it has established two additional investment
portfolios (the "New Investment Portfolios"), namely
OPPORTUNITY VALUE PORTFOLIO and the ENHANCED INDEX PORTFOLIO
and that the New Investment Portfolios should be included as
"Portfolios" as that term is defined in the Agreement.
2. Limitation of Liability. A copy of the Declaration
of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this Agreement is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the
obligations of this Agreement are not binding upon the
Trustees or holders of shares of the Trust individually but
are binding only upon the assets and property of the Trust.
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,
ENDEAVOR SERIES TRUST
By: ____________________________
Authorized Officer
Accepted:
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing Partner
By: _________________________________
Authorized Officer
AMENDMENT TO
SCHEDULE A
OPPORTUNITY VALUE PORTFOLIO .80% of average daily net
assets
ENHANCED INDEX PORTFOLIO .75% of average daily net
assets
ENDEAVOR INVESTMENT ADVISERS ENDEAVOR SERIES TRUST
By: Endeavor Management Co.,
Managing Partner
By: ________________________ By: ______________________
Date: , 1996 Date: , 1996
