As filed with the Securities and Exchange Commission on December 19,
1997
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
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Pre-Effective Amendment No.
Post-Effective Amendment No. 21 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 24
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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Vincent J. McGuinness, Jr.
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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)
X 60 days after filing pursuant to paragraph (a)(1) on ____________
pursuant to paragraph (a)(1) 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.
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The Registrant hereby declares its intention to register an
indefinite number of shares of beneficial interest of its
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Select 50 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, Value Equity Portfolio), Dreyfus Small Cap Value Portfolio
(formerly, Value Small Cap Portfolio and before that, Quest for Value Small Cap
Portfolio), Dreyfus U.S. Government Securities Portfolio (formerly, U.S.
Government Securities Portfolio), T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Opportunity Value Portfolio and Enhanced Index
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, Dreyfus Small Cap Value
Portfolio, Dreyfus U.S. Government Securities Portfolio, T. Rowe Price Equity
Income Portfolio, T. Rowe Price Growth Stock Portfolio and Opportunity Value
Portfolio for the fiscal year ended December 31, 1996 was filed on February 27,
1997. The Registrant did not sell shares of beneficial interest for its Enhanced
Index Portfolio during the fiscal year ended December 31, 1996 pursuant to such
declaration and, therefore, did not file a Rule 24f-2 Notice for the fiscal year
ended December 31, 1996 pursuant to Rule 24f-2(b) of the 1940 Act.
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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 Objective 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
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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 Objective 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 Not
applicable.
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.
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ENDEAVOR SERIES TRUST
Part A: The Prospectus dated May 1, 1997 is incorporated by reference to
Post-Effective Amendment No. 17 as filed with the Securities and Exchange
Commission (the "SEC") on May 1, 1997 as Accession #0000908737-97-000174. The
Prospectus dated October 8, 1997 is incorporated by reference to the
Registrant's filing under Rule 497(e) with the SEC on October 8, 1997 as
Accession #0000908737-97-000376. The Prospectus Supplement dated October 28,
1997 is incorporated by reference to Post-Effective Amendment No. 20 as filed
with the SEC on October 28, 1997 as Accession #0000927405-97-000433.
Part B: The Statement of Additional Information dated May 1, 1997 is
incorporated by reference to Post-Effective Amendment No. 17 as filed with the
SEC on May 1, 1997 as Accession #0000908737-97-000174. The Statement of
Additional Information dated October 8, 1997 is incorporated by reference to the
Registrant's filing under Rule 497(e) with the SEC on October 8, 1997 as
Accession #0000908737-97-000376. The Statement of Additional Information
Supplement dated October 28, 1997 is incorporated by reference to Post-Effective
Amendment No. 20 as filed with the SEC on October 28, 1997 as Accession
#0000927405-97-000433.
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Subject to Completion
Preliminary Prospectus Dated December 19, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
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Prospectus
SELECT 50 PORTFOLIO
OF
ENDEAVORsm SERIES TRUST
The investment objective of the Select 50 Portfolio (the "Portfolio")
is to seek capital appreciation by investing in at least 50 different equity
securities of companies of all sizes throughout the world. Each of five teams
from different investment management disciplines of the Portfolio's investment
adviser selects 10 equity securities based on the potential for capital
appreciation.
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.
The Portfolio will accept orders for the purchase of its shares until
the earlier of February 24, 1998 or the receipt of up to $200 million; however,
the Portfolio may, with the agreement of the manager and investment adviser,
accept orders for the purchase of an additional $50 million of its shares
(collectively, the "maximum offering"). If by February 24, 1998 the maximum
offering has been sold, no additional shares will be sold except pursuant to the
reinvestment of dividends and to Endeavor variable annuity contract owners who
have existing interests in the Portfolio. If the maximum offering has not been
sold by February 24, 1998, additional shares of the Portfolio up to the maximum
offering will not be offered or sold until on or about May 1, 1998 other than
pursuant to the
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reinvestment of dividends and to contract owners with existing
interests in the 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 Portfolio that a prospective investor should know before investing. Please
read the Prospectus and retain it for future reference. Additional information
contained in a Preliminary Statement of Additional Information dated December
19, 1997 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 February , 1998.
Endeavorsm is a registered service mark of Endeavor Management Co.
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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 eleven portfolios, one of which is
described in this Prospectus. The Trustees of the Fund may establish additional
portfolios at any time.
Shares of the Portfolio are issued and redeemed at their net asset
value without a sales load and currently are offered only to various separate
accounts of PFL Life Insurance Company and certain of its affiliates
(collectively "PFL") to fund various insurance contracts, including variable
annuity contracts and variable life insurance policies (whether scheduled
premium, flexible premium or single premium policies). 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 Portfolio 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.
FINANCIAL HIGHLIGHTS
The sale of shares of the Portfolio is expected to commence on or about
the date of this Prospectus. Accordingly, no financial highlight data are
available for shares of the Portfolio.
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INVESTMENT OBJECTIVE AND POLICIES
Generally
The following is a brief description of the investment objective and
policies of the Portfolio. The investment objective and the policies of the
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
Portfolio will be able to achieve its investment objective.
The investment objective of the Portfolio is capital appreciation
which, under normal conditions, it seeks by investing at least 65% of its total
assets in at least 50 different equity securities of companies of all sizes
throughout the world. The Portfolio invests primarily in 10 equity securities
selected by each of the Portfolio Adviser's (as hereinafter defined) five
different equity disciplines teams. These five disciplines currently consist of
U.S. Growth Equity, U.S. Smaller-Capitalization Companies, U.S. Equity Income,
International Equity and Emerging Markets. Each team is allocated 20% of the
Portfolio's total assets. In the future, the number of the Adviser's equity
discipline teams may be more or less than five. See "Management of the Fund."
The Adviser's equity teams select those securities based on the potential for
capital appreciation.
The Portfolio generally invests the remaining 35% of its total assets in
the 50 or more different equity securities described above and may invest in
other equity and equity derivative securities the Adviser believes have the
potential for capital appreciation. These equity securities may include, but are
not limited to, common stock, preferred stock, convertible securities, joint
ventures, cooperatives, partnerships, private placements and unlisted
securities. Equity derivative securities include, among other things, options on
equity securities, warrants and futures contracts on equity securities.
With respect to 35% of its total assets, the Portfolio may invest in
debt securities, including up to 5% of its total assets in debt securities rated
below investment grade (commonly known as junk bonds). 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. Debt
securities, other than junk bonds, will, at the time of purchase have ratings
within the four highest rating categories
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established by a nationally recognized statistical rating organization ("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.
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 investment grade debt securities,
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities 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 substantially in securities denominated in one
or more foreign currencies. Under normal conditions, it invests in at least
three different countries which may include the U.S., but no country other than
the U.S. may represent more than 40% of its total assets. The Adviser uses
financial expertise and research capabilities in markets throughout the world in
attempting to identify those countries, currencies and companies in which the
Portfolio may invest. See "Foreign Investment Risks" and "Emerging Market Risks"
below.
U.S. Growth Equity
The Adviser's U.S. Growth Equity discipline ("Growth discipline")
targets primarily those domestic companies that have total market
capitalizations of $1 billion or more. The Growth discipline emphasizes
investments in common stock; however, other types of equity securities and
equity derivative securities may be purchased. Current income from dividends,
interest and other sources is only incidental.
The Growth discipline seeks growth at a reasonable value, identifying
companies with sound fundamental value and potential for substantial growth. The
Growth discipline selects its investments based on a combination of quantitative
screening techniques and fundamental analysis. A universe of investment
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candidates is initially identified by screening companies based on changes in
rates of growth and valuation ratios such as price- to-sales, price-to-earnings
and price-to-cash flows. Through this process, the Growth discipline seeks to
identify rapidly growing companies with reasonable valuations and accelerating
growth rates, or having low valuations and initial signs of growth. These
companies are then subjected to a rigorous fundamental analysis, focusing on
balance sheets and income statements; company visits and discussions with
management; contact with industry specialists and industry analysts; and review
of the competitive environments.
U.S. Smaller-Capitalization Companies
The Adviser's U.S. Smaller-Capitalization Companies discipline
("Smaller Cap discipline") focuses on domestic companies that have potential for
rapid growth and are smaller- capitalization companies, which the Adviser
currently considers to be companies having market capitalizations of less than
$1 billion. Currently, most of these companies have market capitalizations of
$600 million and less. Current income from dividends, interest and other sources
is only incidental.
The Smaller Cap discipline seeks to identify potential rapid-growth
companies at the early stages of the companies' developments, such as at the
introduction of new products, favorable management changes, new marketing
opportunities or increased market share for existing product lines. Early
identification of potential investments is a key to this discipline. Emphasis is
placed on in-house research, which includes discussions with company management.
U.S. Equity Income
The Adviser's U.S. Equity Income discipline ("Equity Income
discipline") focuses on income-producing equity securities of domestic
companies, which include common stocks, preferred stocks and other securities,
and debt securities convertible into common stocks with the objective of
providing a significantly greater yield than the average yield offered by the
stocks of the Standard & Poor's 500 Composite Stock Index ("S&P 500") and a low
level of price volatility.
The Equity Income discipline emphasizes common stocks of U.S.
corporations having a total market capitalization of more than $1 billion that
regularly pay dividends, targeting companies with favorable long-term
fundamental characteristics with current yields at the upper end of their
historical ranges. The Equity Income discipline initially identifies a universe
of investment candidates by screening companies based on yield and targeting
companies with a minimum yield of 140% of the average yield of
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the S&P 500. This yield strategy is used to assist in identifying undervalued
securities. The companies are usually in the maturing stages of development or
operating in slower growth areas of the economy, and have conservative
accounting, strong cash flows to maintain dividends, low financial leverage and
market leadership. Investments in these companies are usually held for a period
of two to four years, resulting in relatively low turnover. A position in a
company will usually begin to be reduced as the price moves up and yield drops
to the lower end of its historical range. In addition, an investment in a
company will usually be sold or reduced when that company reduces or eliminates
its dividend, or upon a significant fundamental change impairing a company's
ability to pay dividends.
International Equity
The Adviser's International Equity discipline focuses on equity securities
of companies of any size outside the United States. The International Equity
discipline targets companies with potential for above-average, long-term growth
in sales and earnings on a sustained basis with securities reasonably priced at
the time of purchase, in the Adviser's opinion, compared with the potential for
capital appreciation. In evaluating investments, the Adviser considers a number
of factors, including a company's per-share sales and earnings growth, return on
capital, balance sheet, financial and accounting policies, overall financial
strength, industry sector, competitive advantages and disadvantages, research,
product development and marketing, new technologies or services, pricing
flexibility, quality of management, and general operating characteristics.
Emerging Markets
The Adviser's Emerging Markets discipline focuses on the equity
securities of emerging market companies. The Adviser currently regards the
following to be emerging market countries: Latin America (Argentina, Brazil,
Chile, Colombia, Costa Rica, Jamaica, Mexico, Peru, Trinidad and Tobago,
Uruguay, Venezuela); Asia (Bangladesh, China, India, Indonesia, Korea, Malaysia,
Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam);
southern and eastern Europe (Czech Republic, Greece, Hungary, Poland, Portugal,
Russia, Turkey); the Middle East (Israel, Jordan); and Africa (Egypt, Ghana,
Ivory Coast, Kenya, Morocco, Nigeria, South Africa, Tunisia, Zimbabwe). In the
future, the Portfolio may invest in other emerging market countries.
The Adviser uses its proprietary, quantitative asset allocation model.
The Emerging Markets discipline employs "bottom-up" fundamental industry
analysis and stock selection
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based on original research, publicly available information and
company visits.
Investments may be made in certain debt securities issued by the
governments of emerging market countries that are, or may be eligible for,
conversion into investments in emerging market companies under debt conversion
programs sponsored by such governments. If such securities are convertible to
equity investments, the Adviser deems them to be equity derivative securities.
Other Investment Companies
In connection with its investments in accordance with the various
investment disciplines, the Portfolio may invest up to 10% of its total assets
in shares of other investment companies investing exclusively in securities in
which it may otherwise invest. Because of restrictions on direct investment by
U.S. entities in certain countries, other investment companies may provide the
most practical or only way for the Portfolio to invest in certain markets. Such
investments may involve the payment of substantial premiums above the net asset
value of those investment companies' portfolio securities and are subject to
limitations under the Investment Company Act of 1940, as amended (the "1940
Act"). The Portfolio also may incur tax liability to the extent it invests in
the stock of a foreign issuer that is a "passive foreign investment company"
regardless of whether such "passive foreign investment company" makes
distributions to the Portfolio.
The Portfolio does not intend to invest in other investment companies
unless, in the Adviser's judgment, the potential benefits exceed associated
costs. As a shareholder in an investment company, the Portfolio bears its
ratable share of that investment company's expenses, including advisory and
administration fees. The Manager and the Adviser have agreed to waive their
respective own management and advisory fees with respect to the portion of the
Portfolio's assets invested in other open-end (but not closed-end) investment
companies.
Foreign Investment Risks
It is anticipated that approximately 40% of the Portfolio's investments
will be foreign securities. 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
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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
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international funds are usually somewhat higher than those of typical domestic
stock funds.
Emerging Market Risks
Investments in emerging market countries may be subject to potentially
higher risks than investments in developed countries. These risks include: (i)
volatile social, political and economic conditions; (ii) the small size of the
markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) the existence of national policies which may restrict the Portfolio's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain emerging market countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in certain emerging market countries may be
slowed or reversed by unanticipated political or social events in such
countries.
Certain emerging market countries have histories of instability and
upheaval (e.g., 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.
Risks of Small-Cap Companies
With respect to the Portfolio's investments in smaller- capitalization
companies, the Portfolio is expected to have greater risk exposure and reward
potential than a fund which invests only in larger-capitalization companies. The
trading
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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. 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 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 Portfolio
may write covered call and put options (although there is no current intention
to do so) and hedge its investments by purchasing options and engaging in
transactions in futures contracts and related options. The Portfolio may engage
in foreign currency exchange transactions in an attempt to protect against
changes in future exchange rates and may invest in American Depositary Receipts,
European Depositary Receipts and Global Depositary Receipts. The Portfolio may
enter into repurchase agreements, may make forward commitments to purchase
securities, lend its portfolio securities and borrow funds under certain limited
circumstances. 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. The Portfolio may seek to increase
the current return on its investments by writing covered call or covered put
options. In addition, the 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 Adviser to the Portfolio may also 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 an
attempted 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
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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,
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.
The 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 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
-15-
<PAGE>
amount of portfolio securities represented by the underlying
futures contracts.
The Portfolio may not purchase futures contracts or related options if,
immediately thereafter, more than 33 1/3% of the Portfolio's total assets would
be so invested.
The Portfolio's Adviser generally expects that options and futures
transactions for the Portfolio will be conducted on securities and other
exchanges. In certain instances, however, the 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. The 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 the 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. In many foreign countries, futures and options
markets do not exist or are not sufficiently developed to be effectively used by
the Portfolio.
Foreign Currency Transactions. The Portfolio 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 the Portfolio may engage in these
transactions in an attempt to protect against uncertainty in the level of future
exchange rates in connection with the purchase and sale of portfolio securities
("transaction hedging") and in an attempt to protect the value of specific
portfolio positions ("position hedging").
Hedging transactions involve costs and may result in losses. The
Portfolio may write covered call options on foreign currencies in an attempt to
offset some of the costs of hedging those currencies. The 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. The Portfolio's ability to engage in
-16-
<PAGE>
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.
Reverse Repurchase Agreements. The 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. The Portfolio may borrow money as a temporary measure for
emergency purposes or to facilitate redemption requests, in an amount up to 33
1/3% of the Portfolio's net assets. The Portfolio may pledge up to 33 1/3% of
its total assets to secure these borrowings. The Portfolio may not purchase
additional securities when borrowings exceed 10% of total assets.
American, European and Global Depositary Receipts. The Portfolio may
purchase foreign securities in the form of American Depositary Receipts,
European Depositary Receipts, Global Depositary Receipts or other securities
convertible into securities of corporations in which the Portfolio is permitted
to invest. These securities may not necessarily be denominated in the same
currency into which they may be converted. Depositary receipts are receipts
typically issued in connection with a U.S. or foreign bank or trust company and
evidence ownership of underlying securities issued by a foreign corporation.
Repurchase Agreements. The Portfolio 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 the 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
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<PAGE>
price. Each repurchase agreement entered into by the 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. 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. The 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 liquid assets 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. This 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. The 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 liquid
assets 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.
Fixed-Income Securities - Downgrades. If any security invested in by
the Portfolio 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. The Portfolio may invest up to 15% 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
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<PAGE>
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 Portfolio's Adviser to be illiquid or not readily marketable
and, therefore, are not subject to the aforementioned 15% limit. The inability
of the 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
the Portfolio which are eligible for resale pursuant to Rule 144A will be
monitored by the Portfolio's Adviser 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, the 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 the Portfolio having more than 15% 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 Portfolio 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 an investment adviser for each of the Fund's portfolios (the "Adviser")
and monitors the Adviser's investment program and results, reviews brokerage
matters, oversees compliance by the Fund with various federal and state
statutes, and carries out the directives of the Trustees.
-19-
<PAGE>
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. ("FDISG") assists 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 based on an annual rate of 1.10% of the Portfolio's average daily net
assets. The management fee, although higher than the fees paid by most other
investment companies in general, is believed to be comparable to management fees
paid for similar services by many investment companies with similar investment
objectives and policies. From the management fee, the Manager pays the expenses
of providing investment advisory services to the Portfolio, including the fees
of the Portfolio's Adviser and the fees and expenses of FDISG 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 affiliated persons of the
Manager or an Adviser, 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 Manager has agreed to limit the Portfolio's
total operating expenses during its first year of operations to an annual rate
of 1.50% of the Portfolio's average daily net assets.
The Adviser
Pursuant to an investment advisory agreement with the Manager, the
Adviser to the 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 the 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. The Adviser may place portfolio securities transactions
with
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<PAGE>
broker-dealers who furnish it with certain services of value in advising the
Portfolio and other clients. In so doing, the Adviser may cause the Portfolio to
pay greater brokerage commissions than it might otherwise pay. In seeking the
most favorable price and execution available, the Adviser may, if permitted by
law, consider sales of the Contracts as a factor in the selection of
broker-dealers. See the Statement of Additional Information for a further
discussion of Portfolio trading.
Montgomery Asset Management LLC ("Montgomery") is the Adviser to the
Portfolio. As compensation for its services as investment adviser the Manager
pays Montgomery a monthly fee at the annual rate of .70% of the average daily
net assets of the Portfolio. Montgomery is a Delaware limited liability company,
and, with its predecessor, has provided investment advisory services since 1990
to mutual funds and private accounts. As of June 30, 1997, Montgomery and its
affiliates had more than $ 8 billion of assets under management including more
than $4 billion in mutual fund assets. Montgomery is a wholly-owned subsidiary
of Commerzbank AG ("Commerzbank").
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<PAGE>
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion. Commerzbank and its affiliates had
over $79 billion in assets under management as of June 30, 1997. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
Investment decisions with respect to the Portfolio are made by the
Adviser's equity investment management teams. Kevin T. Hamilton, chairman of the
Adviser's Investment Oversight Committee and a managing director, is responsible
for coordinating and implementing the investment decisions of the Adviser's
equity teams. From 1985 until joining the Adviser in 1991, Mr. Hamilton was a
senior vice president responsible for investment oversight at Analytic
Investment Management in Irvine, California.
Brokerage Enhancement Plan
The Board of Trustees of the Fund, including all of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Fund, the Manager
or Endeavor Group (the "Distributor") (hereinafter referred to as "Independent
Trustees"), have voted to adopt a Brokerage Enhancement Plan (the "Plan") for
the purpose of utilizing the Fund's brokerage commissions, to the extent
available, to promote the sale and distribution of the Fund's shares. Neither
the Fund nor any series of the Fund, including the Portfolio, would incur any
new fees or charges. As part of the Plan, the Fund and the Distributor would
enter into a Distribution Agreement. Under the Distribution Agreement, the
Distributor would become the principal underwriter of the Fund, with
responsibility for promoting sales of shares of each series.
The Distributor, however, would not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
would be authorized to direct that the adviser of each series effect brokerage
transactions in portfolio securities through certain broker-dealers, consistent
with each adviser's obligations to achieve best price and execution. It is
anticipated that these broker-dealers will agree that a percentage of the
commissions will be directed to the Distributor, as an introducing broker. The
Distributor will use a small part of these directed commissions to defray
incidental costs associated with becoming and acting as an introducing broker.
The remainder of the commissions received by the Distributor will be used to
finance activities principally intended to result in the sale of shares of the
series. It is anticipated that these activities will include: holding or
participating in seminars and sales meetings designed to promote the sale of
Fund shares; paying marketing fees requested by broker-dealers who sell
Contracts; training sales personnel;
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<PAGE>
compensating broker-dealers and/or their registered representatives in
connection with the allocation of cash values and premiums of the Contracts to
the Fund; printing and mailing Fund prospectuses, statements of additional
information, and shareholder reports for existing and prospective Contract
holders; and creating and mailing advertisements and sales literature.
The Distributor will be obligated to use all of the funds directed to
it for distribution expenses, except for a small amount to be used to defray the
incidental costs associated with becoming and acting as an introducing
broker-dealer. Accordingly, the Distributor will not make any profit from the
operation of the Plan.
Both the Plan and the Distribution Agreement provide (A) that they will be
subject to annual approval by the Trustees and the Independent Trustees; (B)
that any person authorized to make payments under the Plan or Distribution
Agreement must provide the Trustees a quarterly written report of payments made
and the purpose of the payments; (C) that the Plan may be terminated at any time
by the vote of a majority of the Independent Trustees; (D) that the Distribution
Agreement may be terminated without penalty at any time by a vote of a majority
of the Independent Trustees or, as to a series, by vote of a majority of the
outstanding securities of a series on not more than 60 days' written notice; and
(E) that the Distribution Agreement terminates if it is assigned. The Plan may
not be amended to increase materially the amount to be spent for distribution
without shareholder approval, and all material Plan amendments must be approved
by a vote of the Independent Trustees. In addition, the selection and nomination
of the Independent Trustees must be committed to the Independent Trustees.
PFL, as the initial shareholder of the Portfolio, has approved the
Plan. The Plan will be submitted to the shareholders of the Fund's other series
at a meeting to be held on February 23, 1998. If approved by the shareholders of
the Fund's other series, it is anticipated that the Plan and Endeavor Group's
position as Distributor of the Fund will be implemented on or about May 1, 1998.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code. By so qualifying, the 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.
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<PAGE>
It is the intention of the 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 the
Portfolio are expected to be declared annually 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 Portfolio, 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 Portfolio, (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.
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<PAGE>
SALE AND REDEMPTION OF SHARES
The Fund continuously offers shares of the Portfolio only to separate
accounts of PFL, but may at any time offer shares to a separate account of any
other insurer approved by the Trustees. The Trustees have determined that the
maximum offering will not exceed $200 million; however, the Portfolio may, with
the agreement of the Manager and the Adviser, accept orders for the purchase of
an additional $50 million of its shares. The Portfolio will accept orders for
the purchase of its shares until the earlier of February 24, 1998 or the receipt
of the maximum offering. If by February 24, 1998 the maximum offering has been
sold, no additional shares will be sold except pursuant to the reinvestment of
dividends and to Endeavor variable annuity contract owners who have existing
interests in the Portfolio. If the maximum offering has not been sold by
February 24, 1998, additional shares of the Portfolio up to the maximum offering
will not be offered or sold until on or about May 1,1998 other than pursuant to
the reinvestment of dividends and to Contract owners with existing interests in
the Portfolio.
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 the 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 the
Portfolio determined as of the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., New York City time), as of that same date.
Endeavor Group, an affiliate of the Manager, whose office is located at
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625, will serve
as the Distributor for the Fund commencing on or about May 1, 1998.
The net asset value of the shares of the 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 the Portfolio (including accrued interest and
dividends), less all liabilities of the Portfolio (including accrued expenses
and dividends payable), by the number of
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<PAGE>
outstanding shares of the Portfolio. The assets of the Portfolio 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 Portfolio 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 Portfolio and may compare the performance of the
Portfolio 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 the
Portfolio refers to the average annual compounded rate of return over the stated
period that would equate an initial investment in the 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 the 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 the Portfolio for a specified period (again reflecting changes in
Portfolio share prices and assuming reinvestment of Portfolio distributions).
The methods used to calculate "average annual and cumulative total return" are
described further in the Statement of Additional Information.
The performance of the 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, the Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
Prior Performance of Comparable Fund
Montgomery is the investment adviser of the Montgomery Select 50 Fund, a
series of a registered open-end investment
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<PAGE>
company whose shares are sold to the public. The Montgomery Select 50 Fund is
substantially similar to the Portfolio in that it has the same investment
objective as the Portfolio and is managed by the same investment personnel using
the same investment strategies and techniques as contemplated for the Portfolio.
At June 30, 1997 and as of the date of this Prospectus, the Portfolio
had not commenced operations. Set forth below is certain performance information
regarding the Montgomery Select 50 Fund which has been obtained from Montgomery,
and is set forth in the current prospectus and statement of additional
information for the Montgomery Select 50 Fund. Investors should not rely on the
following financial information as an indication of the future performance of
the Portfolio.
<TABLE>
<CAPTION>
Average Annual Total Return of Comparable Fund (1)
For the Period
For the Year from Inception
Ended June 30, to June 30,
1997 1997(2)
-------------- --------
<S> <C> <C>
Montgomery Select
50 Fund 26.35% 37.24%
</TABLE>
(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 Montgomery Select 50 Fund commenced operations on October 2, 1995.
------------------
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 table does not reflect charges and deductions which are, or
may be, imposed under the Contracts. For a description of such charges and
deductions, see the prospectus accompanying this Prospectus which describes the
Contracts.
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<PAGE>
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 eleven
series of shares, one for each of the Fund's eleven portfolios, including the
one Portfolio offered by this Prospectus. 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 Portfolio. 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. FDISG, located at 4400 Computer Drive, Westborough,
Massachusetts 01581, 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,
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<PAGE>
each such statement being qualified in all respects by such
reference.
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
The Fund 3 ENDEAVOR SERIES TRUST
Financial Highlights 3
Investment Objective and Policies 4 2101 East Coast Highway,
Investment Strategies 11 Suite 300
Management of the Fund 17 Corona del Mar, California 92625
The Manager 17 (800) 854-8393
The Adviser 18
Brokerage Enhancement Plan 19 Manager
Dividends, Distributions and Taxes 20
Sale and Redemption of Shares 21 Endeavor Investment Advisers
Performance Information 22 2101 East Coast Highway
Prior Performance of Comparable Fund 24 Suite 300
Organization and Capitalization Corona del Mar, California 92625
of the Fund 24
Additional Information 24 Investment Adviser
Transfer Agent and Custodian 24
Independent Auditors 24 Montgomery Asset Management LLC
101 California Street
-------------- San Francisco, California 94111
No person has been authorized to give any Custodian
information or to make any representation not
contained in this Prospectus and, if given or Boston Safe Deposit and Trust
made, such information or representation must Company
not be relied upon as having been authorized. One Boston Place
This Prospectus does not constitute an Boston, Massachusetts 02108
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.
</TABLE>
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<PAGE>
Subject to Completion
Preliminary Statement of Additional Information
dated December 19, 1997
STATEMENT OF ADDITIONAL INFORMATION
SELECT 50 PORTFOLIO
OF
ENDEAVORSM SERIES TRUST
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Preliminary Prospectus dated December 19, 1997
for the Select 50 Portfolio (the "Portfolio") of Endeavor Series Trust (the
"Fund") (the "Prospectus"), which may be obtained by writing the Fund at 2101
East Coast Highway, Suite 300, Corona del Mar, California 92625 or by
telephoning (800) 854-8393. Unless otherwise defined herein, capitalized terms
have the meanings given to them in the Prospectus.
EndeavorSM is a registered service mark of Endeavor Management Co.
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TABLE OF CONTENTS
Page
Investment Objectives and Policies................ 3
Options and Futures Strategies............... 3
Foreign Currency Transactions................ 9
Repurchase Agreements........................ 14
Forward Commitments.......................... 14
Securities Loans............................. 14
Lower Rated Bonds ........................... 15
Portfolio Turnover........................... 18
Investment Restrictions........................... 19
Other Policies............................... 22
Performance Information........................... 24
Total Return................................. 24
Non-Standardized Performance................. 28
Portfolio Transactions............................ 28
Management of the Fund............................ 32
Trustees and Officers........................ 32
The Manager.................................. 39
The
Adviser.................................. 41
Redemption of Shares.............................. 46
Net Asset Value................................... 46
Taxes............................................. 49
Federal Income Taxes......................... 49
Organization and Capitalization of the Fund....... 50
Legal Matters..................................... 53
Custodian......................................... 53
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 February ___,
1997.
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INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the investment
objective and policies of the Portfolio in the Prospectus of the Fund. The Fund
is managed by Endeavor Investment Advisers. The Manager has selected Montgomery
Asset Management LLC as investment adviser for the
Portfolio.
Options and Futures Strategies
The Portfolio may seek to increase the current return on its investments by
writing covered call or covered put options. In addition, the 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. The
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
Portfolio does not currently intend to write covered put and call options, but
may do so in the future. Expenses and losses incurred as a result of such
hedging strategies will reduce the Portfolio's current return.
The ability of the 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. The Portfolio may write covered
call options and covered put options on optionable securities of the types in
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which it is permitted to invest from time to time as the Adviser determines is
appropriate in seeking to attain the Portfolio's investment objective. Call
options written by the 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.
The 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.
The 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, the 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, the 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.
The 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. The Portfolio may
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
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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.
The Portfolio may also 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.
The Portfolio does not intend 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. The 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
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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 the 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. The 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.
The 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 the 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 the 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.
The 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.
The 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
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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. The Portfolio may purchase and write call
and put options on stock index and interest rate futures contracts. The
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, the 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, the
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. The 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 the Portfolio's ability
to terminate options and futures positions at times when its Adviser deems it
desirable to do so. Although the 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 the Portfolio will be able
to effect closing transactions at any particular time or at an acceptable price.
The Adviser generally expects that options and futures transactions for the
Portfolio will be conducted on recognized exchanges. In certain instances,
however, the 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. The 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
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the securities that are the subject of the hedge. The successful use of these
strategies also depends on the ability of the 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 Exchange Transactions. The Portfolio may engage in
foreign currency exchange transactions to protect against uncertainty in the
level of future exchange rates. The Adviser to the 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").
The 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, the 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, the 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, the 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 the Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the 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 the Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives the Portfolio the right to purchase a
currency at the exercise price until the expiration of the option.
The 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
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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, the
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, the 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 the 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. The
Portfolio may write covered call options on foreign currencies to offset some of
the costs of hedging those currencies. The 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. The 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.
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
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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. The
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 the 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, the 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 the 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
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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 the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
Repurchase Agreements
The Portfolio may enter into repurchase agreements with a bank, broker-dealer,
or other financial institution but may not invest more than 15% of its net
assets in repurchase agreements having maturities of greater than seven days.
The 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 the 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 the Portfolio some loss, as well as legal
expense, if the value of the securities declines prior to liquidation.
Forward Commitments
The Portfolio may enter into forward commitments to purchase securities. An
amount of cash or other liquid assets equal to the Portfolio's commitment will
be deposited in a segregated account at the Fund's
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custodian bank to secure the Portfolio's obligation. Although the 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
The Portfolio 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, the
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. The 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 the Portfolio's Adviser
to be creditworthy under guidelines adopted by the Trustees of the Fund.
Lower Rated Bonds
The Portfolio may invest up to 5% 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 the 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, in the past 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
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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, the Portfolio may find it
difficult to value its junk bonds accurately. Under such conditions, the
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, recent 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.
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Portfolio Turnover
While it is impossible to predict portfolio turnover rates, the Adviser
to the Portfolio anticipates that portfolio turnover will generally not exceed
150% per year. Higher portfolio turnover rates usually generate additional
brokerage commissions and expenses.
INVESTMENT RESTRICTIONS
Except for restriction numbers 2, 3, 4, 11 and 12 with respect to the
Portfolio (which restrictions are not fundamental policies),
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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 . 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.
The Portfolio may not:
1. Borrow money or issue senior securities (as defined in the 1940 Act),
provided that the 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 Portfolio may borrow money from banks for temporary or emergency
purposes, or pursuant to reverse repurchase agreements in an amount up to 33
1/3% of the value of its total assets, provided that immediately after such
borrowings there is asset coverage of at least 300% of all borrowings.
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 the 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
-46-
<PAGE>
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 the 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 the
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 .
11. Invest more than 15% of its net 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 partially or completely as a
result of such investment.
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<PAGE>
Other Policies
The
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<PAGE>
Portfolio will not invest in warrants if, as a result thereof, the Portfolio
will have more than 5% of the value of its total assets invested in warrants;
provided that this restriction does not apply to warrants acquired as a result
of the purchase of another security.
PERFORMANCE INFORMATION
Total return and yield will be computed as described below.
Total Return
The 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)
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<PAGE>
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. Total return calculations for the Portfolio will not
reflect charges and deductions which are, or may be, imposed under the
Contracts.
The performance of the 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, the Portfolio's performance
figures are historical and should not be considered representative of the
performance of the Portfolio for any future period.
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<PAGE>
Non-Standardized Performance
In addition to the performance information described above, the Fund may
provide total return information with respect to the Portfolio 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, the 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. The Portfolio's Adviser is responsible
for effecting its portfolio transactions and will do so in a manner deemed fair
and reasonable to
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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,
the 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 Portfolio or its Adviser with brokerage and research services within
the meaning of Section 28(e) of the Securities Exchange Act of 1934. The
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, the 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
Adviser may effect portfolio transactions for other investment companies and
advisory accounts. Research services furnished by broker-dealers through which
the 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 the Adviser, it is not possible
to measure separately the benefits from research services to each of its
accounts, including the Portfolio. Whenever concurrent decisions are made to
purchase or sell securities by the 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
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<PAGE>
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 the
Portfolio. In the opinion of the Adviser, however, the results of such
procedures will, on the whole, be in the best interest of each of the accounts.
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<PAGE>
For a discussion regarding the use of the Fund's brokerage commissions to
promote the distribution of the Fund's shares, see the section of the Prospectus
titled "Management of the Fund -Brokerage Enhancement Plan."
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.
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<PAGE>
<TABLE>
<CAPTION>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
<S> <C> <C>
From July, 1997 to
**Vincent J. McGuinness, Jr. President, November, 1997, Executive
(32) Trustee Vice President
Administration of the
Registrant; from September,
1996 to June, 1997, Chief
Financial Officer (Treasurer)
of Registrant; from January,
1997 to December, 1997,
Executive Vice-President of
Operations and since December,
1997, Chief Operating Officer
of Endeavor Group; from
September, 1996 to June, 1997,
Chief Financial Officer, since
May, 1996, Director and since
June, 1997 Executive Vice
President - Administration of
Endeavor Management Co.; since
August, 1996, Chief Financial
Officer of VJM Corporation;
from May, 1996 to January, 1997,
Executive Vice President and
Director of Sales, Western
Division of Endeavor Group; since
May, 1996, Chief Financial
Officer of McGuinness & Associates;
from July, 1993 to August, 1995
Rocky Mountain Regional
Marketing Director for
Endeavor Group. MBA
graduate student from
September, 1991 to May, 1993.
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<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
*Vincent J. McGuinness (62) Trustee Chairman, Chief Executive
Officer and Director of
McGuinness & Associates,
Endeavor Group, VJM
Corporation (oil and gas),
until July, 1996
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 (62) Trustee Prior to September, 1993,
1424 Dolphin Terrace President and Chief
Corona del Mar, California Executive Officer, Devine
92625 Properties, Inc. Since
September, 1993, Vice
President, Plant Control,
Inc. (landscape
contracting and
maintenance).
Thomas J. Hawekotte (62) Trustee President, Thomas J.
1200 Lake Shore Drive Hawekotte, P.C. (law
Chicago, Illinois 60610 practice).
Steven L. Klosterman Trustee Since July, 1995,
(46) President of Klosterman
5973 Capital Corporation
Avenida Encinas #300 (investment adviser);
Investment Counselor,
Carlsbad, Robert J. Metcalf &
California 92008 Associates, Inc.
(investment adviser) from
August, 1990 to June,
1995.
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<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
*Halbert D. Lindquist (51)
1650 E. Fort Lowell Road Trustee President, Lindquist
Tucson, Arizona 85719-2324 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. Trustee Rancher until January,
(66) 1997. Since January,
2661 Point Del Mar 1997, real estate
Corona Del Mar, California consultant.
92625
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<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Trustee Since 1972, Chairman and
Chief Executive Officer of
Jameson, Eaton & Wood
(investment adviser) and
since 1979, President of
Ivory & Sime
International, Inc.
(investment adviser)
Keith H. Wood (62) 39 Main Street
Chatham, New Jersey 07928
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<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Michael J. Roland (39) Chief Since June, 1996, Chief
Financial Financial Officer of
Officer Endeavor Group and
(Treasurer) Endeavor Management Co;
from January, 1995 to
April, 1997, Senior Vice
President, Treasurer and
Chief Financial Officer
of Pilgrim America Group,
Pilgrim America Investments,
Inc., Pilgrim America
Securities and of each
of the funds in the
Pilgrim America Group
of Funds; from July,
1994 to December, 1994,
partner at the consulting
firm of Corporate Savings
Group; from March, 1992
to June, 1994, Vice
President of PIMCO
Advisors, LP and of the
PIMCO Institutional Funds.
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<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Pamela A. Shelton (48)
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 (until
July, 1996) and Endeavor
Management Co.; from July,
1992 to October, 1993,
Administrative Secretary,
Mayor and City Council,
City of Laguna Niguel,
California
</TABLE>
* An "interested person" of the Fund as defined in the 1940 Act.
** Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
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 Manager or the Adviser will be reimbursed for
out-of-pocket expenses and currently receives an annual fee of $7,500 and $500
for attendance at each Trustees' Board or committee 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, 1996.
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<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total
Compensation
From Fund
Aggregate and Fund
Name of Compensation Complex
Person From Fund Paid to Trustees
<S> <C> <C>
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 3,500 3,500
R. Daniel Olmstead 4,500 4,500
Keith H. Wood - -
Vincent J. McGuinness,
Jr. - -
</TABLE>
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 Portfolio was approved by the Trustees of the Fund (including all of the
Trustees who are not "interested persons"
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<PAGE>
of the Manager) on August 4, 1997 and by PFL Life Insurance Company, the sole
shareholder of the Portfolio, on December 22, 1998. See "Organization and
Capitalization of the Fund."
The Management Agreement will continue in force for two years from its
date, January 30, 1998, and from year to year thereafter, but only so long as
its continuation is specifically approved at least annually (i) by the Trustees
or by the vote of a majority of the outstanding voting securities 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" 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 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 Adviser
The Investment Advisory Agreement between the Manager and Montgomery
Asset Management LLC 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 4, 1997 and by PFL Life Insurance Company as sole shareholder of the
Portfolio on December 22, 1997.
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<PAGE>
See "Organization and Capitalization of the Fund."
The agreement will continue in force for two years from its date,
-64-
<PAGE>
January 30, 1998, and from year to year thereafter, but only so long as its
continuation is specifically approved at least annually (i) by the Trustees or
by the vote of a majority of the outstanding voting securities of the Portfolio,
and (ii) by the vote of a majority of the Trustees who are not parties to the
agreement or "interested persons" of any such party, by votes cast in person at
a meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement provides that it shall terminate automatically if assigned or
if the Management Agreement with respect to the Portfolio terminates, and that
it may be terminated as to the Portfolio without penalty by the Manager, by the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio on not less than 90 days' prior written notice to
the Adviser or by the Adviser on not less than 150 days' prior written notice to
the Manager, or upon such shorter notice as may be mutually agreed upon.
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<PAGE>
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<PAGE>
The 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 Portfolio 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 the 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, Martin Luther King, Jr. 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
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<PAGE>
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 the 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.
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<PAGE>
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 the 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
The 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, the 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, the 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;
and (2) 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).
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<PAGE>
As a regulated investment company, the 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. The Portfolio intends to satisfy the distribution requirement in each
taxable year.
The Portfolio 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 Portfolio 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 Portfolio. 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 Portfolio. 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 Portfolio 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 the Portfolio
or substitute the shares of the Portfolio for those of another series of the
Fund. 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.
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<PAGE>
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 eleven series, one of
which is described in this Statement of Additional Information. 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 the 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 the Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to the Portfolio.
Any general expenses of the Fund not readily attributable to the 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 series of the Fund.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of the Portfolio are not entitled to vote on any matter that
requires a separate vote of the shares of another series of the Fund 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.
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<PAGE>
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.
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 Portfolio's securities and keeps all
necessary records and documents.
-72-
<PAGE>
-73-
<PAGE>
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
A-1
<PAGE>
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 Service L.P. Commercial Paper Ratings. Fitch Investors Service
L.P. 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
A-2
<PAGE>
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.
A-3
<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: None
(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.
-4-
<PAGE>
(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 incorporated by reference to Post-
Effective Amendment No. 16 to the Registration
Statement as filed with the SEC on February 14,
1997 ("Post-Effective Amendment No. 16").
(1)(i) Amendment No. 8 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.
-5-
<PAGE>
(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 Dreyfus Small Cap Value
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
incorporated by reference to Post-Effective
Amendment No. 15 as filed with the SEC on August
21, 1996 ("Post-Effective Amendment No. 15").
(4)(l) Specimen certificate for shares of beneficial
interest of the Enhanced Index Portfolio is
incorporated by reference to Post-Effective
Amendment No. 15.
(4)(m) Specimen certificate for shares of beneficial
interest of the
Select 50 Portfolio (formerly
known as Montgomery Select 50 Portfolio) is
incorporated by reference to Post-Effective
Amendment No. 18 as filed with the SEC on July
18, 1997 ("Post-Effective Amendment No. 18").
(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.
-6-
<PAGE>
(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) Supplement to Management Agreement between
Registrant and Endeavor Investment Advisers with
respect to Opportunity Value Portfolio and
Enhanced Index Portfolio is incorporated by
reference to Post-Effective Amendment No. 16.
(5)(a)(5) Form of Supplement to Management Agreement
between Registrant and Endeavor Investment
Advisers with respect to
Select 50 Portfolio
(formerly known as Montgomery Select 50
Portfolio) is incorporated by reference to Post-
Effective Amendment No. 18.
(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
-7-
<PAGE>
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) Investment Advisory Agreement between The
Dreyfus Corporation and Endeavor Investment
Advisers with respect to the Dreyfus Small Cap
Value Portfolio is incorporated by reference to
Post-Effective Amendment No. 16.
(5)(l) Investment Advisory Agreement between OpCap
Advisors and Endeavor Investment Advisers with
respect to the Opportunity Value Portfolio is
incorporated by reference to Post-Effective
Amendment No. 16.
(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 incorporated by
reference to Post-Effective Amendment No. 15.
(5)(n) Form of Investment Advisory Agreement between
Montgomery Asset Management LLC and Endeavor
Investment Advisers with respect to the
Select 50 Portfolio (formerly known as
Montgomery Select 50 Portfolio) is incorporated
by reference to Post-Effective Amendment No. 18.
(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-
<PAGE>
(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) Supplement dated November 4, 1996 to Custody
Agreement between Registrant and Boston Safe
Deposit and Trust Company with respect to the
Opportunity Value Portfolio and Enhanced Index
Portfolio is incorporated by reference to Post-
Effective Amendment No. 16.
(8)(f) Form of Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and Trust
Company with respect to the Select 50
Portfolio (formerly known as Montgomery Select
50 Portfolio) is incorporated by reference to
Post-Effective Amendment No. 18.
(9)(a) Transfer Agency and Registrar Agreement between
Registrant and The Shareholder Services Group,
Inc. (now 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
-9-
<PAGE>
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. (currently known as First Data
Investor 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) Supplement dated July 1, 1996 to Administration
Agreement between Endeavor Investment Advisors
and First Data Investor Services Group, Inc. is
incorporated by reference to Post-Effective
Amendment No. 16.
(9)(c)(6) Form of Amended and Restated Administration
Agreement dated as of July 1, 1997 between
Endeavor Investment Advisers and First Data
Investor Services Group, Inc.
is incorporated by reference to Post-
Effective Amendment No. 20 as filed with the SEC
on October 28, 1997 ("Post-Effective Amendment
No. 20").
(10) Not Applicable.
(11)
Not Applicable.
(12) Not Applicable.
-10-
<PAGE>
(13) Subscription Agreement between Registrant and
PFL Life Insurance Company is incorporated by
reference to Post-Effective Amendment No. 14.
(14) Not Applicable.
(15)(a) Brokerage Enhance Plan is filed
herein.
(15)(b) Form of Distribution Agreement
between the Registrant and
Endeavor Group is filed herein.
(16) Not Applicable.
(17) Not Applicable.
(18) Not Applicable.
(19) Powers of Attorney are incorporated by reference
to Post-Effective Amendment Nos. 14 , 16, 18
and 20.
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 November 30,
1997, of the shares of beneficial interest of the Registrant.
-11-
<PAGE>
<TABLE>
<CAPTION>
Number of
Record
Title of Class Holders
<S> <C>
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...................................................3
Shares of Beneficial Interest of the
Enhanced Index Portfolio. . . . . . ..........................................3
Shares of Beneficial Interest of the
Select 50 Portfolio................................................0
</TABLE>
Item 27. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as filed as Exhibits
1(a) - 1(i) 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.
-12-
<PAGE>
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 File 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
-13-
<PAGE>
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") is an indirect subsidiary of PIMCO
Advisors L.P., 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
----------------------------------------------------
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<PAGE>
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 28 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Montgomery Asset Management LLC
Montgomery Asset Management LLC ("Montgomery") serves as
investment manager to a variety of individual and institutional investors,
including limited partnerships and other mutual funds.
The list required by this Item 28 of officers and directors of
Montgomery 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 B
and D of Form ADV filed by Montgomery pursuant to the Investment Advisers Act of
1940 (SEC file No. 801-36790).
Item 29 Principal Underwriter
(a) Inapplicable
(b) Inapplicable
Item 30 Location of Accounts and Records
--------------------------------
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<PAGE>
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; Montgomery Asset Management, LLC,
101 California Street, San Francisco, California 94111 and First Data Investor
Services Group, Inc. ("FDISG") (formerly, The Shareholder Services Group, Inc.),
a subsidiary of First Data Corporation, 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, FDISG 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 statements for its Select 50 Portfolio, which
financial statements need not be certified, within four to six months from the
commencement of operations of the 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.
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<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 19th day
of December, 1997.
ENDEAVOR SERIES TRUST
Registrant
By: /s/Vincent J. McGuinness,
Jr.
Vincent J. McGuinness, Jr.
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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Vincent J. McGuinness, Jr.* President December 19, 1997
- ------------------------------
Vincent J. McGuinness,
Jr.
(Principal executive
officer)
/s/Michael J. Roland* Chief Financial December 19, 1997
- ---------------------
Michael J. Roland Officer
(Treasurer) (principal
financial and
accounting officer)
/s/Vincent J. McGuinness* Trustee December 19, 1997
- -------------------------
Vincent J. McGuinness
/s/Timothy A. Devine* Trustee December 19, 1997
- ---------------------
Timothy A. Devine
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<PAGE>
Signature Title Date
- --------- ----- ----
/s/Thomas J. Hawekotte* Trustee December 19, 1997
- -----------------------
Thomas J. Hawekotte
/s/Steven L. Klosterman* Trustee December 19, 1997
- ------------------------
Steven L. Klosterman
/s/Halbert D. Lindquist* Trustee December 19, 1997
- ------------------------
Halbert D. Lindquist
/s/R. Daniel Olmstead* Trustee December 19, 1997
- ----------------------
R. Daniel Olmstead
/s/Keith H. Wood* Trustee December 19, 1997
Keith H. Wood
</TABLE>
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
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<PAGE>
ENDEAVOR SERIES TRUST
AMENDMENT NO. 9 TO AGREEMENT AND
DECLARATION OF TRUST
Change of Name of a Series of the Trust from the
Montgomery Select 50 Portfolio to the Select 50 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 November 17, 1997.
VOTED: That the name of the Trust's Montgomery Select 50
Portfolio (the "Portfolio"), previously established and
designated in accordance with Article III of the
Declaration of Trust, be changed to Select 50
Portfolio, effective November 17, 1997; 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 17th
day of November, 1997.
Gail Hanson
Assistant Secretary
<PAGE>
BROKERAGE ENHANCEMENT PLAN
OF
ENDEAVOR SERIES TRUST
Section 1. Endeavor Series Trust (the "Trust") is an open-end management
investment company formed under the laws of the Commonwealth of Massachusetts,
the shares of beneficial interest ("Shares") of the portfolios of which may from
time to time be offered to life insurance companies (each, a "Life Company") for
allocation to certain of their separate accounts established for the purpose of
funding variable annuity contracts and variable life policies (collectively
referred to herein as "Variable Contracts"). Section 2. The Trust currently
offers shares of beneficial interest in eleven portfolio series, the TCW Money
Market Portfolio, the TCW Managed Asset Allocation Portfolio, the Value Equity
Portfolio, the Opportunity Value Portfolio, the Dreyfus Small Cap Value
Portfolio, the Dreyfus U.S. Government Securities Portfolio, the T. Rowe Price
International Stock Portfolio, the T. Rowe Price Growth Stock Portfolio, the T.
Rowe Price Equity Income Portfolio, the Enhanced Index Portfolio and the
Montgomery Select 50 Portfolio (the "Existing Funds" - such series, together
with all other series subsequently established by the Trust, being referred to
herein collectively as the "Funds"). Section 3. In order to provide for the
implementation of the payments provided for pursuant to this Brokerage
Enhancement Plan (the "Plan"), the Trust may enter into a Distribution Agreement
(the "Agreement") with Endeavor Group pursuant to which Endeavor Group will
serve as the distributor of the Trust's Shares, and pursuant to which each Fund
participating in this Plan will authorize payments to Endeavor Group, as
provided in Section 4 hereof, for various costs incurred or paid by Endeavor
Group in connection with the distribution of Shares of that Fund. Such
Agreement, or any modification thereof, shall become effective with respect to
the Shares of any Fund in compliance with Section 12(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), and Rule 12b-1 thereunder as
the same may be amended from time to time.
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<PAGE>
Section 4. The Trust may expend amounts consisting solely of that portion of
brokerage commissions paid by the Funds in connection with their portfolio
transactions and made available to Endeavor Group or other introducing brokers
by broker-dealers executing such portfolio transactions for the benefit of the
Funds to finance activities principally intended to result in the sale of Shares
of the Funds. Expenses permitted to be paid pursuant to this Plan shall include,
but not necessarily be limited to, the following costs:
A. printing and mailing of Trust prospectuses, statements of additional
information, any supplements thereto and shareholder reports for existing and
prospective Variable Contract owners;
B. development, preparation, printing and mailing of Trust
advertisements, sale literature and other promotional materials describing
and/or relating to the Funds and including materials intended for use within the
Life Company, or for broker-dealer only use or retail use;
C. holding or participating in seminars and sales meetings designed to
promote the distribution of Trust Shares;
D. marketing fees requested by broker-dealers who sell Variable Contracts;
E. obtaining information and providing explanations to Variable Contract
owners regarding Trust investment objectives and policies and other information
about the Trust and the Funds, including the performance of the Funds;
F. training sales personnel regarding sales of Variable Contracts and
underlying Shares of the Trust;
G. compensating broker-dealers and/or their registered representatives in
connection with the allocation of cash values and premiums of the Variable
Contracts to the Trust;
H. personal service and/or maintenance of Variable Contract owner accounts
with respect to Trust Shares attributable to such accounts; and
I. financing any other activity that the Trust's Board of Trustees
determines is primarily intended to result in the sale of Shares.
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<PAGE>
Section 5. This Plan shall not take effect with respect to any Existing Fund
until it has been approved by votes of a majority of (a) the outstanding Shares
of such Fund, (b) the Trustees of the Trust, and (c) those Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of this Plan
or any agreements of the Trust related hereto or any other person related to
this Plan ("Disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on this Plan. As additional series of the Trust are
established, this Plan shall become effective with respect to each such Fund
upon the initial public offering of such new Fund's shares, provided that this
Plan with respect to such Fund has been approved by votes of a majority of both
(a) the Trustees of the Trust and (b) the Disinterested Trustees cast in person
at a meeting called for the purpose of voting on such approval and by the
initial shareholder of the Fund so long as such initial shareholder's approval
is required under the 1940 Act and the rules thereunder. In addition, any
agreement related to this Plan and entered into by any Fund in connection
therewith shall not take effect until it has been approved by votes of a
majority of (a) the Board of Trustees of the Trust, and (b) the Disinterested
Trustees of the Trust. Section 6. Unless sooner terminated pursuant to Section
8, this Plan shall continue in effect for a period of one year from the date it
takes effect and thereafter shall continue in effect so long as such continuance
is specifically approved annually by votes of a majority of both (a) the Board
of Trustees of the Trust and (b) the Disinterested Trustees of the Trust, cast
in person at a meeting called for the purpose of voting on this Plan. Section 7.
Any person authorized to direct the disposition of monies paid or payable
pursuant to this Plan or any related agreement shall provide to the Trust's
Board of Trustees and the Board shall review at least quarterly a written report
of the amounts so expended and the purposes for which such expenditures were
made. Section 8. This Plan may be terminated at any time with respect to any
Fund by vote of a majority of the Disinterested Trustees, or by vote of a
majority of the Shares of the Fund.
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<PAGE>
Section 9. Any agreement of the Trust, with respect to any Fund, related to this
Plan shall be in writing and shall provide:
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<PAGE>
A. That such agreement may be terminated with respect to a Fund at any
time without payment of any penalty, by vote of a majority of the Disinterested
Trustees or by a vote of a majority of the outstanding Shares of such Fund on
not more than sixty days' written notice to any other party to the agreement;
and
B. That such agreement shall terminate automatically in the event of
its assignment. Section 10. This Plan may not be amended in any material
respect, including, but not limited to, changing the sources of monies from
which distribution expenses are paid provided for in Section 3 with respect to a
Fund unless such amendment is approved by a vote of at least a majority (as
defined in the 1940 Act) of the outstanding Shares of such Fund, and no material
amendment to this Plan shall be made unless approved by votes of a majority of
(a) the Board of Trustees of the Trust, and (b) the Disinterested Trustees, cast
in person at a meeting called for the purpose of voting on such amendment.
Section 11. While this Plan is in effect with respect to any Fund, the selection
and nomination of the Disinterested Trustees of the Trust shall be committed to
the discretion of the existing Disinterested Trustees of the Trust.
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<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this day of , 1997, between Endeavor Series Trust, a
Massachusetts business trust, (the "Trust"), and Endeavor Group, a California
corporation (the "Distributor") each with offices at 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.
WHEREAS, the Trust is a registered open-end management investment
company, which currently offers shares of its common stock in eleven series,
each as set forth on Schedule A hereto (the "Existing Funds"), and the Trust may
offer shares of one or more additional Funds in the future;
WHEREAS, the Trust was originally organized to act as the funding
vehicle for certain individual variable life insurance policies and individual
and group variable annuity contracts offered by PFL Life Insurance Company
("PFL") or life insurance companies affiliated with PFL through separate
accounts of such life insurance companies; and
WHEREAS, in the future, the Trust may also offer its shares to life
insurance companies unaffiliated with PFL (together with PFL and its affiliated
life insurance companies, the "Life Companies") as a funding vehicle for
variable life insurance policies and variable annuity contracts (together with
the variable life insurance policies and variable annuity contracts offered by
PFL and its affiliated life insurance companies, (collectively referred to
herein as "Variable Contracts"), and/or to qualified pension and retirement
plans (the "Qualified Plans"); and
WHEREAS, from time to time, the Trust may enter into sales agreements
with Life Companies that have or will establish one or more separate accounts to
offer Variable Contracts, pursuant to which one or more Funds of the Trust
serves as the underlying funding vehicle for such Variable Contracts; and, under
certain circumstances, may enter into sales agreements with the Qualified Plans;
and
WHEREAS, it is contemplated that, in addition to entering into sales
agreements with Life Companies and/or Qualified Plans, the Distributor shall
engage in certain promotional and sales efforts on behalf of the Trust, as
described in the Brokerage Enhancement Plan pursuant to Rule 12b-1 adopted by
the Trust.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. (a) The Trust proposes to issue and sell shares of common stock of
the Fund (the "Shares") to separate accounts of Life Companies and to the
Qualified Plans as may be permitted by applicable law and subject to the Trust's
obtaining any necessary regulatory approvals. The Trust hereby appoints the
Distributor as agent to sell the Shares and the Distributor hereby accepts such
appointment. The Shares will
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<PAGE>
be distributed under such terms as are set by the Trust and will be sold to the
separate accounts and the Qualified Plans permitted to buy the Shares as
specified by the Trust's Board of Trustees.
(b) In the event that the Trust from time to time designates
one or more Funds in addition to the Existing Funds ("Additional Funds"), it
shall notify the Distributor. If the Distributor is willing to perform services
hereunder for the Additional Funds, it shall so notify the Trust. Thereafter,
the Trust and the Distributor shall mutually agree to amend Schedule A to this
Agreement in writing to add the Additional Funds and the Additional Funds shall
be subject to this Agreement, subject to the approval of the Board of Trustees
as set forth in Section 7.(a) below.
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value as described in the Trust's
prospectus, and (ii) the Trust shall receive 100% of such net asset value.
(b) The Shares will be sold in accordance with any sales
agreements between the Trust and Life Companies and, where applicable, the Trust
and Qualified Plans. The Existing Funds and all Additional Funds subject to this
Agreement are referred to collectively as "Funds."
3. (a) All sales literature and advertisements used by the Distributor
in connection with sales of Shares shall be subject to approval by the Trust.
The Trust authorizes the Distributor, in connection with the sales or arranging
for the sale of Shares, to provide only such information and to make only such
statements or representations as are contained in the Trust's then-current
Prospectus or in sales literature or advertisements approved by the Trust or in
such financial and other statements which are furnished in writing to the
Distributor pursuant to the next paragraph. The Trust shall not be responsible
in any way for any information provided or statements or representations made by
the Distributor or its representatives or agents other than the information,
statements and representations described in the preceding sentence. The
Distributor shall review all materials submitted to it by Life Companies and
Qualified Plans that describe the Trust, the Shares or the Trust's investment
manager and investment advisers. The Distributor shall not be responsible for
any information provided or statements or representations made by Life Companies
or Qualified Plans, representatives or agents of Life Companies or Qualified
Plans, or any other persons or entities other than the Distributor's
representatives or agents.
(b) The Trust shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all financial statements and a signed copy of each report prepared by its
independent certified public accountants, and shall cooperate fully in the
efforts of the Distributor to sell the Shares and in the performance by the
Distributor of all its duties under this Agreement.
4. (a) The Trust will pay or cause to be paid:
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<PAGE>
(i) registration fees for registering its shares
under the Securities Act of 1933 (the "1933 Act") as
required;
(ii) the expenses, including counsel fees, of
preparing registration statements and such other
documents as the Trust believes are necessary for
registering the Shares with the Securities and
Exchange Commission (the "SEC") and such states as
are deemed necessary or appropriate;
(iii) expenses incident to preparing amendments to
registration statements of the Trust under the 1933
Act and the Investment Company Act of 1940, as
amended (the "1940 Act");
(iv) expenses for preparing and setting in type all
prospectuses and the expense of supplying them to the
then existing shareholders or beneficial owners of
Shares (including owners of Variable Contracts whose
Contracts use one or more Funds as their funding
vehicle); and
(v) expenses incident to the issuance of its Shares
such as the cost of stock certificates, if any, taxes
and fees of the transfer agent for establishing
shareholder record accounts and confirmations.
(b) The Distributor shall pay all of its own costs and
expenses connected with the offer and sale of Shares
("Distribution Expenses"), except that certain
Distribution Expenses may be reimbursed to the
Distributor as provided in Section 5 hereof.
5. (a) Pursuant to a Brokerage Enhancement Plan (the "Plan") adopted by
the Board of Trustees of the Trust in accordance with Section 12(b) of the 1940
Act, Rule 12b-1 and other rules and regulations promulgated thereunder, as the
same may be, from time to time, issued or amended, the Trust, on behalf of a
Fund that has approved the Plan pursuant to Section 5 thereof, may reimburse the
Distributor, for Distribution Expenses as described in Section 5(b) hereof.
Reimbursements shall be payable only from brokerage commissions paid by the Fund
in connection with its portfolio transactions which have been made available for
use by the Fund as described in the Plan. Reimbursements to the Distributor
shall be payable on a monthly basis. Such reimbursement may be made only for the
one year period commencing on the date hereof and for each twelve month period
(or portion thereof) thereafter, in which the Plan is in effect for that Fund.
(b) Distribution Expenses reimbursable hereunder shall
include, but not necessarily be limited to, the following costs:
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<PAGE>
(i) printing and mailing of Trust prospectuses,
statements of additional information, any supplements
thereto and shareholder reports for existing and
prospective Variable Contract owners;
(ii) development, preparation, printing and mailing
of Trust advertisements, sale literature and other
promotional materials describing and/or relating to
the Funds and including materials intended for use
within the Life Company, or for broker-dealer only
use or retail use;
(iii) holding or participating in seminars and sales
meetings designed to promote the distribution of
Trust Shares;
(iv) marketing fees requested by broker-dealers who
sell Variable Contracts;
(v) obtaining information and providing explanations
to Variable Contract owners regarding Trust
investment objectives and policies and other
information about the Trust and the Funds, including
the performance of the Funds;
(vi) training sales personnel regarding sales of
Variable Contracts and underlying Shares of the
Trust;
(vii) compensating broker-dealers and/or their
registered representatives in connection with the
allocation of cash values and premiums of the
Variable Contracts to the Trust;
(viii) personal service and/or maintenance of
Variable Contract owner accounts with respect to
Trust Shares attributable to such accounts; and
(ix) financing any other activity that the Trust's
Board of Trustees determines is primarily intended to
result in the sale of Shares.
(c) The Distributor shall submit annual reimbursable
Distribution Expense budgets to the Board of Trustees of the Trust. As soon as
practicable after the end of each calendar quarter, the Distributor shall submit
to the Board of Trustees for ratification reports of Distribution Expenses
reimbursed as to each Fund for that quarter. The Board of Trustees will consider
each report at its next regular meeting after such report is submitted, and the
Distributor shall only retain those reimbursements that are approved by the
Board of Trustees, including a majority of the "Disinterested Trustees" (as that
term is defined in Section 7 hereof).
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<PAGE>
6. (a) The Trust shall maintain a currently effective Registration
Statement on Form N-1A and shall file with the SEC such reports and other
documents as may be required under the 1933 Act and the 1940 Act or by the rule
and regulations of the SEC thereunder.
(b) The Trust represents and warrants that its Registration
Statement, post-effective amendments, Prospectus and Statement of Additional
Information (excluding statements based upon written information furnished by
the Distributor expressly for inclusion therein) shall not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that all statements or information furnished to the Distributor, pursuant to
Section 3(b) hereof shall be true and correct in all material respects.
7. (a) This Agreement shall take effect on the date set forth above,
provided it has been approved by a vote of the majority of Trustees of the Trust
and those Trustees of the Trust who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or this Agreement (the "Disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on this Agreement. This Agreement shall
remain in full force and effect until , 1998, and may be continued for twelve
month periods (or portions thereof) thereafter; provided that such continuance
shall be specifically approved annually by a majority of the Board of Trustees
of the Trust and by a majority of the Disinterested Trustees. This Agreement may
be amended, with respect to any Fund, with the approval of a majority of the
Board of Trustees and by a majority of the Disinterested Trustees.
(b) This Agreement, with respect to any Fund, may be
terminated, at any time without payment of any penalty, by vote of a majority of
the Disinterested Trustees or by vote of a majority of the outstanding voting
securities of that Fund, or may be terminated by the Distributor, in either case
on not more than 60 days' written notice delivered personally by registered
mail, postage prepaid, to the other party.
(c) This Agreement shall automatically terminate in the event
of its assignment.
(d) The terms "interested persons," "assignment" and "vote of
a majority of the outstanding voting securities" as used herein shall have the
meanings given to them in the 1940 Act.
8. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties ("disabling conduct") hereunder
on the part of the Distributor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Distributor or retained by it to perform or assist in the performance of its
obligations under this Agreement) the Distributor shall not be subject to
liability to the Trust or to any shareholder of the Funds
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<PAGE>
of the Trust for any act or omission in the course of, or connected with,
rendering services hereunder, or for any loss suffered by any of them in
connection with the matters to which this Agreement relates.
9. (a) The Trust shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the meaning of Section
15 of the Securities Act against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in
connection therewith), which the Distributor or such controlling person may
incur under the Securities Act or under common law or otherwise, arising out of
or based upon any untrue statement, or alleged untrue statement, of a material
fact contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Trust in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Trust or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Trust to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the
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<PAGE>
Distributor of the commencement of any litigation or proceeding against it or
any of its officers or directors in connection with the issuance or sale of any
of the Shares.
(b) The Distributor shall indemnify and hold harmless the
Trust and each of its trustees and officers and each person, if any, who
controls the Trust against any loss, liability, claim, damage or expense
described in the foregoing indemnity contained in paragraph 4.1, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement, as from time
to time amended, or the annual or interim reports to shareholders. In case any
action shall be brought against the Trust or any persons so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Trust, and the Trust
and each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of paragraph 4.1.
10. This Agreement is made by the Trust, on behalf of each Fund,
pursuant to authority granted by the Board of Trustees, and the obligations
created hereby are not binding on any of the Trustees or shareholders of the
Trust individually, but bind only the property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their duly authorized officers and under their respective
seals on the day and year first above written.
ENDEAVOR SERIES TRUST
Attest:
By:
Secretary James R. McInnis, President
ENDEAVOR GROUP
Attest:
By:
Secretary Vincent J. McGuinness,
Chief Executive Officer
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<PAGE>
SCHEDULE A
As of , 1997, the Distributor shall act as distributor for shares of the
following Funds of Endeavor Series Trust:
TCW Money Market Portfolio
TCW Managed Asset Allocation Portfolio
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Value Equity Portfolio
Opportunity Value Portfolio
Enhanced Index Portfolio
Select 50 Portfolio
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