As filed with the Securities and Exchange Commission on July 18,
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
Pre-Effective Amendment No.
Post-Effective Amendment No. 18 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 21
ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
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James R. McInnis
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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) 60 days after filing pursuant to paragraph
(a)(1) on ____________ pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2) on pursuant to
paragraph (a)(2) of Rule 485 This post-effective amendment designates a
new effective date for a previously filed post-effective amendment.
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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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Montgomery 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 Financial Statements
PART C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Post-Effective
Amendment.
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Subject to Completion
Preliminary Prospectus Dated July 18, 1997
Prospectus
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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MONTGOMERY SELECT 50 PORTFOLIO
OF
ENDEAVORsm SERIES TRUST
The Investment objective of the Montgomery 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 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. Subsequent to the sale of $200 million or $250 million of the
Portfolio's shares, as the case may be, additional shares will not be sold
except pursuant to the reinvestment of dividends and to Endeavorsm variable
annuity contract owners who have 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.
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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 July 18,
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 , 1997.
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.
INVESTMENT OBJECTIVE AND POLICIES
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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 and Emerging Markets. 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 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
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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"
herein 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
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
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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 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.
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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
The Adviser's International discipline focuses on equity securities of
companies of any size outside the United States. The International 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 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
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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 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.
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The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Portfolio will invest only in securities
denominated in foreign currencies that are fully exchangeable into U.S. dollars
without legal restriction at the time of investment, there can be no assurance
that currency controls will not be imposed subsequently. In addition, the values
of foreign fixed income investments will fluctuate in response to changes in
U.S. and foreign interest rates.
There may be less information publicly available about a foreign issuer
than about a U.S. issuer, and foreign issuers are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Foreign stock markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets and the Portfolio's investment securities may be less liquid
and subject to more rapid and erratic price movements than securities of
comparable U.S. companies. Equity securities may trade at price/earnings
multiples higher than comparable United States securities and such levels may
not be sustainable. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in the
United States. Moreover, settlement practices for transactions in foreign
markets may differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and practices, such
as delivery of securities prior to receipt of payment, which increase the
likelihood of a "failed settlement." Failed settlements can result in losses to
the Portfolio. In less liquid and well developed stock markets, such as those in
some Asian and Latin American countries, volatility may be heightened by actions
of a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly affect
stock prices and, therefore, share prices.
Foreign brokerage commissions, custodial expenses and other fees are
also generally higher than for securities traded in the United States.
Consequently, the overall expense ratios of international funds are usually
somewhat higher than those of typical domestic stock funds.
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
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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 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.
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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 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
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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 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
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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 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.
<PAGE>
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
("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs") 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 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
<PAGE>
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 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
<PAGE>
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. 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,
<PAGE>
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 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 broker-dealers who furnish it with certain services of value in advising
the Portfolio and other clients. In so doing, the Adviser may cause a 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.
The Board of Trustees of the Fund has authorized the Manager and the
Adviser to enter into arrangements with brokers who execute brokerage
transactions for the Portfolio whereby a portion of the commissions earned by
such brokers will be shared with a non-affiliated broker-dealer acting as an
"introducing broker" in the transaction. Subject to the requirements of
applicable law including seeking best price and execution of orders, commissions
paid to executing brokers will not exceed ordinary and customary brokerage
commissions.
<PAGE>
The Board of Trustees has determined that the Fund's brokerage
commissions should be utilized for the Fund's benefit to the extent possible.
After reviewing various alternatives, the Board concluded that commissions
received by a non-affiliated broker-dealer can be used to promote the
distribution of the Fund's shares including the costs of training and educating
such broker-dealers with respect to the Contracts. Periodically, the Manager
will instruct the "introducing broker" to transmit funds in its possession to
third party broker-dealers to pay for such training and education costs. No
portion of the commissions received by the "introducing broker" will be paid to
the Manager or any of its affiliates. On a quarterly basis, the Manager will
report to the Board of Trustees the aggregate commissions received by its
broker-dealer affiliate and the distribution expenses paid from such
commissions. The Board of Trustees will periodically review whether the
foregoing arrangement reduces distribution expenses currently being incurred by
the Manager or its affiliates on behalf of the Fund. The Board of Trustees may
determine from time to time other appropriate uses for the Fund from the
commissions it pays to executing brokers.
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. Effective July , 1997, Montgomery became
a wholly-owned subsidiary of Commerzbank AG ("Commerzbank"). 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
<PAGE>
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.
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.
<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 aggregate amount of shares that will be initially sold 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. Once $200 million or $250 million, as the case may be, has been sold,
shares will only be sold, pursuant to the reinvestment of dividends and to
variable annuity contract owners who have previously allocated a portion of
their Contract premiums to 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.
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 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.
<PAGE>
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.
Montgomery is the investment adviser of the Montgomery Select 50 Fund,
a series of a registered open-end investment 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.
<PAGE>
Investors should not rely on the following financial information as an
indication of the future performance of the Portfolio.
Average Annual Total Return of Comparable Portfolio(1)
For the Period
For the Year from Inception
Ended June 30, to June 30,
1997 1997(2)
Montgomery Select
50 Fund 26.35% 37.24%
(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 tables do 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.
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.
<PAGE>
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, each such statement being qualified in all respects by such reference.
<PAGE>
TABLE OF CONTENTS
Page
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
Dividends, Distributions and Taxes 20 Manager
Sale and Redemption of Shares 21
Performance Information 22 Endeavor Investment Advisers
Organization and Capitalization 2101 East Coast Highway
of the Fund 24 Suite 300
Additional Information 24 Corona del Mar, California 92625
Transfer Agent and Custodian 24
Independent Auditors 24 Investment Adviser
-------------- Montgomery Asset Management LLC
101 California Street
No person has been authorized to give any San Francisco, California 94111
information or to make any representation not
contained in this Prospectus and, if given or Custodian
made, such information or representation must
not be relied upon as having been authorized. Boston Safe Deposit and Trust
This Prospectus does not constitute an Company
offering of any securities other than the One Boston Place
registered securities to which it relates or Boston, Massachusetts 02108
an offer to any person in any state or
jurisdiction of the United States or any
country where such offer would be unlawful.
<PAGE>
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 any
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
Subject to Completion
Preliminary Statement of Additional Information
dated July 18, 1997
STATEMENT OF ADDITIONAL INFORMATION
ENDEAVORSM SERIES TRUST
This Statement of Additional Information is not
a prospectus and should be read in conjunction with the Prospectus dated May 1,
1997 for the TCW Money Market Portfolio (formerly, the Money Market Portfolio),
the TCW Managed Asset Allocation Portfolio (formerly, the Managed Asset
Allocation Portfolio), the T. Rowe Price International Stock Portfolio
(formerly, the Global Growth Portfolio), the Value Equity Portfolio (formerly,
the Quest for Value Equity Portfolio), the Dreyfus Small Cap Value Portfolio
(formerly, the Value Small Cap Portfolio and prior to that the Quest for Value
Small Cap Portfolio), the Dreyfus U.S. Government Securities Portfolio
(formerly, the U.S. Government Securities Portfolio), the T. Rowe Price Equity
Income Portfolio, the T. Rowe Price Growth Stock Portfolio, the Opportunity
Value Portfolio , the Enhanced Index Portfolio and the Preliminary Prospectus
dated July 18, 1997 for the Montgomery Select 50 Portfolio of Endeavor Series
Trust (the "Fund") (collectively 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.
<PAGE>
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
Interest Rate Transactions................... 16
Dollar Roll Transactions..................... 17
Portfolio Turnover........................... 18
Investment Restrictions........................... 19
Other Policies............................... 22
Performance Information........................... 24
Total Return................................. 24
Yield........................................ 27
Non-Standardized Performance................. 28
Portfolio Transactions............................ 28
Management of the Fund............................ 32
Trustees and Officers........................ 32
The Manager.................................. 39
The Advisers................................. 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
Financial Statements.............................. 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 May 1, 1997, as
supplemented on , 1997.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the investment
objectives and policies of the Portfolios in the Prospectus of the Fund. The
Fund is managed by Endeavor Investment Advisers. The Manager has selected TCW
Funds Management, Inc. as investment adviser for the TCW Money Market Portfolio
and the TCW Managed Asset Allocation Portfolio, Rowe Price-Fleming
International, Inc. as investment adviser for the T. Rowe Price International
Stock Portfolio, OpCap Advisors (formerly, Quest for Value Advisors) as
investment adviser for the Value Equity Portfolio and Opportunity Value
Portfolio, The Dreyfus Corporation as investment adviser for the Dreyfus U.S.
Government Securities Portfolio and Dreyfus Small Cap Value Portfolio, T. Rowe
Price Associates, Inc. as investment adviser for the T. Rowe Price Equity Income
Portfolio and T. Rowe Price Growth Stock Portfolio , J.P. Morgan Investment
Management Inc. as investment adviser for the Enhanced Index Portfolio and
Montgomery Asset Management LLC as investment adviser for the Montgomery Select
50 Portfolio.
Options and Futures Strategies (All Portfolios except TCW Money Market
Portfolio)
A Portfolio may seek to increase the current return on its investments
by writing covered call or covered put options. In addition, a Portfolio may at
times seek to hedge against either a decline in the value of its portfolio
securities or an increase in the price of securities which its Adviser plans to
purchase through the writing and purchase of options including options on stock
indices and the purchase and sale of futures contracts and related options. A
Portfolio may utilize options or futures contracts and related options for other
than hedging purposes to the extent that the aggregate initial margins and
premiums do not exceed 5% of the Portfolio's net asset value. The Adviser to the
TCW Managed Asset Allocation Portfolio does not presently intend to utilize
options or futures contracts and related options but may do so in the future.
The Advisers to the Dreyfus Small Cap Value Portfolio and the Opportunity Value
Portfolio do not currently intend to write covered put and call options or
engage in transactions in futures contracts and related options, but may do so
in the future. The Adviser to the Montgomery Select 50 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 a Portfolio's current return.
The ability of a Portfolio to engage in the options and futures
strategies described below will depend on the availability of liquid markets in
such instruments. Markets in
<PAGE>
options and futures with respect to stock indices and U.S. government securities
are relatively new and still developing. It is impossible to predict the amount
of trading interest that may exist in various types of options or futures.
Therefore no assurance can be given that a Portfolio will be able to utilize
these instruments effectively for the purposes stated below.
Writing Covered Options on Securities. A Portfolio may write covered
call options and covered put options on optionable securities of the types in
which it is permitted to invest from time to time as its Adviser determines is
appropriate in seeking to attain the Portfolio's investment objective. Call
options written by a Portfolio give the holder the right to buy the underlying
security from the Portfolio at a stated exercise price; put options give the
holder the right to sell the underlying security to the Portfolio at a stated
price.
A Portfolio may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the Portfolio owns an option to sell the
underlying security subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all times while the
put option is outstanding. A call option is covered if the Portfolio owns or has
the right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security which the Portfolio owns or has the right to acquire. In the
case of a call written for cross-hedging purposes or a put option, the Portfolio
will maintain in a segregated account at the Fund's custodian bank cash or
short-term U.S. government securities with a value equal to or greater than the
Portfolio's obligation under the option. A Portfolio may also write combinations
of covered puts and covered calls on the same underlying security.
A Portfolio will receive a premium from writing an option, which
increases the Portfolio's return in the event the option expires unexercised or
is terminated at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option, and the volatility of the
market price of the underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
<PAGE>
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A Portfolio may terminate an option which it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Portfolio will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Portfolio.
Purchasing Put and Call Options on Securities. A Portfolio may purchase
put options to protect its portfolio holdings in an underlying security against
a decline in market value. This protection is provided during the life of the
put option since the Portfolio, as holder of the put, is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. For the purchase of a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options in this manner, any profit which the Portfolio might
otherwise have realized on the underlying security will be reduced by the
premium paid for the put option and by transaction costs.
A Portfolio may also purchase a call option to hedge against an increase
in price of a security that it intends to purchase. This protection is provided
during the life of the call option since the Portfolio, as holder of the call,
is able to buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. For the purchase of a call
option to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, any profit which the Portfolio
might have realized had it bought the underlying security at the time it
purchased the call option will be reduced by the premium paid for the call
option and by transaction costs.
No Portfolio intends to purchase put or call options if, as a result of
any such transaction, the aggregate cost of options held by the Portfolio at the
time of such transaction would exceed 5% of its total assets.
<PAGE>
Purchase and Sale of Options and Futures on Stock Indices. A Portfolio
may purchase and sell options on stock indices and stock index futures contracts
either as a hedge against movements in the equity markets or for other
investment purposes.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. Currently options traded include the Standard & Poor's 500
Composite Stock Price Index, the NYSE Composite Index, the AMEX Market Value
Index, the National Over-The-Counter Index, the Nikkei 225 Stock Average Index,
the Financial Times Stock Exchange 100 Index and other standard broadly based
stock market indices. Options are also traded in certain industry or market
segment indices such as the Pharmaceutical Index.
A stock index futures contract is an agreement in which one party agrees
to deliver to the other an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. No physical delivery of securities is made.
If a Portfolio's Adviser expects general stock market prices to rise, it
might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy for the Portfolio. If in fact the stock index does
rise, the price of the particular equity securities intended to be purchased may
also increase, but that increase would be offset in part by the increase in the
value of the Portfolio's index option or futures contract resulting from the
increase in the index. If, on the other hand, the Portfolio's Adviser expects
general stock market prices to decline, it might purchase a put option or sell a
futures contract on the index. If that index does in fact decline, the value of
some or all of the equity securities held by the Portfolio may also be expected
to decline, but that decrease
<PAGE>
would be offset in part by the increase in the value of the Portfolio's position
in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. A Portfolio may purchase and
sell interest rate futures contracts on U.S. Treasury bills, notes and bonds and
Government National Mortgage Association ("GNMA") certificates either for the
purpose of hedging its portfolio securities against the adverse effects of
anticipated movements in interest rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in anticipation
of a decline in interest rates when it is not fully invested. As such purchases
are made, it is expected that an equivalent amount of futures contracts will be
closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are traded in London at the London
International Financial Futures Exchange, in Paris, at the MATIF, and in Tokyo
at the Tokyo Stock Exchange.
<PAGE>
Options on Futures Contracts. A Portfolio may purchase and write call
and put options on stock index and interest rate futures contracts. A Portfolio
may use such options on futures contracts in connection with its hedging
strategies in lieu of purchasing and writing options directly on the underlying
securities or stock indices or purchasing or selling the underlying futures. For
example, a Portfolio may purchase put options or write call options on stock
index futures or interest rate futures, rather than selling futures contracts,
in anticipation of a decline in general stock market prices or rise in interest
rates, respectively, or purchase call options or write put options on stock
index or interest rate futures, rather than purchasing such futures, to hedge
against possible increases in the price of equity securities or debt securities,
respectively, which the Portfolio intends to purchase.
In connection with transactions in stock index options, stock index
futures, interest rate futures and related options on such futures, a Portfolio
will be required to deposit as "initial margin" an amount of cash and short-term
U.S. government securities. The current initial margin requirement per contract
is approximately 2% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract. Brokers may establish deposit
requirements higher than exchange minimums.
Limitations. A Portfolio will not purchase or sell futures contracts or
options on futures contracts or stock indices for non-hedging purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
or stock indices would exceed 5% of the net assets of the Portfolio unless the
transaction meets certain "bona fide hedging" criteria.
Risks of Options and Futures Strategies. The effective use of options
and futures strategies depends, among other things, on a Portfolio's ability to
terminate options and futures positions at times when its Adviser deems it
desirable to do so. Although a Portfolio will not enter into an option or
futures position unless its Adviser believes that a liquid market exists for
such option or future, there can be no assurance that a Portfolio will be able
to effect closing transactions at any particular time or at an acceptable price.
The Advisers generally expect that options and futures transactions for the
Portfolios will be conducted on recognized exchanges. In certain instances,
however, a Portfolio may purchase and sell options in the over-the-counter
market. The staff of the Securities and Exchange Commission considers
over-the-counter options to be illiquid. A Portfolio's ability to terminate
option positions
<PAGE>
established in the over-the-counter market may be more limited than in the case
of exchange traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Portfolio.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of the securities that are the subject of the hedge. The successful use of
these strategies also depends on the ability of a Portfolio's Adviser to
forecast correctly interest rate movements and general stock market price
movements. This risk increases as the composition of the securities held by the
Portfolio diverges from the composition of the relevant option or futures
contract.
Foreign Currency Transactions (Dreyfus U.S. Government
Securities, T. Rowe Price Equity Income, T. Rowe Price Growth
Stock, T. Rowe Price International Stock, Opportunity Value
, Enhanced Index and Montgomery Select 50 Portfolios)
Foreign Currency Exchange Transactions. The Dreyfus U.S. Government
Securities, T. Rowe Price Equity Income, T. Rowe Price Growth Stock, T. Rowe
Price International Stock, Opportunity Value , Enhanced Index and Montgomery
Select 50 Portfolios may engage in foreign currency exchange transactions to
protect against uncertainty in the level of future exchange rates. The Adviser
to a Portfolio may engage in foreign currency exchange transactions in
connection with the purchase and sale of portfolio securities ("transaction
hedging"), and to protect the value of specific portfolio positions ("position
hedging").
A Portfolio may engage in "transaction hedging" to protect against a
change in the foreign currency exchange rate between the date on which the
Portfolio contracts to purchase or sell the security and the settlement date, or
to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. For that purpose, a Portfolio may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, a Portfolio may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts as a hedge against changes
in foreign currency exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a future time at
<PAGE>
a rate or rates that may be higher or lower than the spot rate. Foreign currency
futures contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, a Portfolio may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives a Portfolio the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives a Portfolio the right to purchase a
currency at the exercise price until the expiration of the option.
A Portfolio may engage in "position hedging" to protect against a
decline in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the value of
currency for securities which the Portfolio intends to buy, when it holds cash
reserves and short-term investments). For position hedging purposes, a Portfolio
may purchase or sell foreign currency futures contracts and foreign currency
forward contracts, and may purchase put or call options on foreign currency
futures contracts and on foreign currencies on exchanges or over-the-counter
markets. In connection with position hedging, a Portfolio may also purchase or
sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Portfolio is obligated to deliver and if
a decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market
<PAGE>
value of such security or securities exceeds the amount of foreign currency the
Portfolio is obligated to deliver.
Hedging transactions involve costs and may result in losses. A Portfolio
may write covered call options on foreign currencies to offset some of the costs
of hedging those currencies. A Portfolio will engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in the opinion of the Portfolio's Adviser, the pricing mechanism and
liquidity are satisfactory and the participants are responsible parties likely
to meet their contractual obligations. A Portfolio's ability to engage in
hedging and related option transactions may be limited by tax considerations.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange. A Portfolio
would enter into foreign currency futures contracts solely for hedging or other
appropriate investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of a
forward contract may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in any given month.
Forward contracts may be in any amounts agreed upon by
<PAGE>
the parties rather than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no intermediary
is required. A forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although a Portfolio intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments of variation margin.
Foreign Currency Options. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when a Portfolio's Adviser believes that a liquid secondary market exists for
such options. There can be no assurance that a liquid secondary market will
exist for a particular option at any specific time. Options on foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million)
<PAGE>
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should a
Portfolio desire to resell that currency to the dealer.
Repurchase Agreements (All Portfolios)
Each of the Portfolios may enter into repurchase agreements with a bank,
broker-dealer, or other financial institution but no Portfolio may invest more
than 15% (10% with respect to each of the TCW Money Market, TCW Managed Asset
Allocation, Value Equity and Dreyfus U.S. Government Securities Portfolios) of
its net assets in repurchase agreements having maturities of greater than seven
days. A Portfolio may enter into repurchase agreements, provided the Fund's
custodian always has possession of securities serving as collateral whose market
value at least equals the amount of the repurchase obligation. To minimize the
risk of loss a Portfolio will enter into repurchase agreements only with
financial institutions which are considered by its Adviser to be creditworthy
under guidelines adopted by the Trustees of the Fund. If an institution enters
an insolvency proceeding, the resulting delay in liquidation of the securities
serving as collateral could cause a Portfolio some loss, as well as legal
expense, if the value of the securities declines prior to liquidation.
<PAGE>
Forward Commitments (All Portfolios)
Each of the Portfolios 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 custodian
bank to secure the Portfolio's obligation. Although a Portfolio will generally
enter into forward commitments to purchase securities with the intention of
actually acquiring the securities for its portfolio (or for delivery pursuant to
options contracts it has entered into), the Portfolio may dispose of a security
prior to settlement if its Adviser deems it advisable to do so. The Portfolio
may realize short-term gains or losses in connection with such sales.
Securities Loans (All Portfolios)
Each of the Portfolios may pay reasonable finders', administrative and
custodial fees in connection with loans of its portfolio securities. Although
voting rights or the right to consent accompanying loaned securities pass to the
borrower, a Portfolio retains the right to call the loan at any time on
reasonable notice, and will do so in order that the securities may be voted by
the Portfolio with respect to matters materially affecting the investment. A
Portfolio may also call a loan in order to sell the securities involved. Loans
of portfolio securities will only be made to borrowers considered by a
Portfolio's Adviser to be creditworthy under guidelines adopted by the Trustees
of the Fund.
Lower Rated Bonds (Value Equity, Dreyfus U.S. Government Securities,
Opportunity Value , T. Rowe Price Equity Income and Montgomery Select 50
Portfolios)
The Value Equity , Opportunity Value and Montgomery Select 50 Portfolios
may invest up to 5% of their assets, the T. Rowe Price Equity Income Portfolio
may invest up to 10% of its assets, and the Dreyfus U.S. Government Securities
Portfolio may invest up to 25% of its assets in bonds rated below Baa3 by
Moody's Investors Service Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Service, a division of McGraw-Hill Companies, Inc. ("Standard & Poor's")
(commonly known as "junk bonds"). Securities rated less than Baa by Moody's or
BBB by Standard & Poor's are classified as non-investment grade securities and
are considered speculative by those rating agencies. It is each Portfolio
Adviser's policy not to rely exclusively on ratings issued by credit rating
agencies but to supplement such ratings with the Adviser's own independent and
ongoing review of credit quality. Junk bonds may be issued as a consequence of
corporate restructurings, such as leveraged buyouts, mergers, acquisitions, debt
recapitalizations, or similar
<PAGE>
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 deteriorating economic conditions, may be less liquid than the
market for investment grade bonds. In periods of reduced market liquidity, junk
bond prices may become more volatile and may experience sudden and substantial
price declines. Also, there may be significant disparities in the prices quoted
for junk bonds by various dealers. Under such conditions, a Portfolio may find
it difficult to value its junk bonds accurately. Under such conditions, a
Portfolio may have to use subjective rather than objective criteria to value its
junk bond investments accurately and rely more heavily on the judgment of the
Fund's Board of Trustees. Prices for junk bonds also may be affected by
legislative and regulatory developments. For example, 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.
Interest Rate Transactions (Dreyfus U.S. Government Securities
Portfolio)
Among the strategic transactions into which the Dreyfus U.S. Government
Securities Portfolio may enter are interest rate swaps and the purchase or sale
of related caps and floors. The Portfolio expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolio
intends to use these transactions as hedges and not as speculative investments
and will not sell interest rate caps or floors where it does not own securities
or other instruments providing the income stream the Portfolio may be obligated
to pay. Interest rate swaps involve the exchange by the Portfolio with another
party of their
<PAGE>
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser, to the extent that a specific index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such cap. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount.
The Portfolio will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps and floors are entered into for good faith hedging purposes, the
Adviser to the Portfolio and the Fund believe such obligations do not constitute
senior securities under the Investment Company Act of 1940 (the "1940 Act") and,
accordingly, will not treat them as being subject to its borrowing restrictions.
The Portfolio will not enter into any swap, cap and floor transaction unless, at
the time of entering into such transaction, the unsecured long-term debt of the
counterparty, combined with any credit enhancements, is rated at least "A" by
Standard & Poor's or Moody's or has an equivalent rating from a nationally
recognized statistical rating organization ("NRSRO") or is determined to be of
equivalent credit quality by the Adviser. For a description of the NRSROs and
their ratings, see the Appendix. If there is a default by the counterparty, the
Portfolio may have contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
With respect to swaps, the Portfolio will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps and floors require
segregation of assets with a value equal to the Portfolio's net obligations, if
any.
<PAGE>
Dollar Roll Transactions (Dreyfus U.S. Government Securities
Portfolio)
The Dreyfus U.S. Government Securities Portfolio may enter into "dollar
roll" transactions, which consist of the sale by the Portfolio to a bank or
broker-dealer (the "counterparty") of GNMA certificates or other mortgage-backed
securities together with a commitment to purchase from the counterparty similar,
but not identical, securities at a future date. The counterparty receives all
principal and interest payments, including prepayments, made on the security
while it is the holder. The Portfolio receives a fee from the counterparty as
consideration for entering into the commitment to purchase. Dollar rolls may be
renewed over a period of several months with a different repurchase price and a
cash settlement made at each renewal without physical delivery of securities.
Moreover, the transaction may be preceded by a firm commitment agreement
pursuant to which the Portfolio agrees to buy a security on a future date.
The Portfolio will not use such transactions for leveraging purposes
and, accordingly, will segregate cash, U.S. government securities or other
liquid assets in an amount sufficient to meet its purchase obligations under the
transactions. The Portfolio will also maintain asset coverage of at least 300%
for all outstanding firm commitments, dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the 1940 Act as borrowings of
the Portfolio because they involve the sale of a security coupled with an
agreement to repurchase. Like all borrowings, a dollar roll involves costs to
the Portfolio. For example, while the Portfolio receives a fee as consideration
for agreeing to repurchase the security, the Portfolio forgoes the right to
receive all principal and interest payments while the counterparty holds the
security. These payments to the counterparty may exceed the fee received by the
Portfolio, thereby effectively charging the Portfolio interest on its borrowing.
Further, although the Portfolio can estimate the amount of expected principal
prepayment over the term of the dollar roll, a variation in the actual amount of
prepayment could increase or decrease the cost of the Portfolio's borrowing.
The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Portfolio's right to
purchase from the counterparty might be restricted. Additionally, the value of
such securities may change adversely before the Portfolio is able to purchase
them. Similarly, the Portfolio may be required to purchase securities in
connection with a dollar
<PAGE>
roll at a higher price than may otherwise be available on the open market.
Since, as noted above, the counterparty is required to deliver a similar, but
not identical, security to the Portfolio, the security that the Portfolio is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Portfolio's use of the
cash that it receives from a dollar roll will provide a return that exceeds
borrowing costs.
Portfolio Turnover
While it is impossible to predict portfolio turnover rates, the Advisers
to the Portfolios other than the Dreyfus U.S. Government Securities Portfolio,
Dreyfus Small Cap Value Portfolio and the TCW Money Market Portfolio anticipate
that portfolio turnover will generally not exceed 100% per year. The Adviser to
the Montgomery Select 50 Portfolio anticipates that portfolio turnover will
generally not exceed 150% per year. The Adviser to the Dreyfus U.S. Government
Securities Portfolio anticipates that portfolio turnover may exceed 200% per
year, exclusive of dollar roll transactions. The Adviser to the Dreyfus Small
Cap Value Portfolio anticipates that the Portfolio's portfolio turnover rate
will generally not exceed 175%. With respect to the TCW Money Market Portfolio,
although the Portfolio intends normally to hold its investments to maturity, the
short maturities of these investments are expected by the Portfolio's Adviser to
result in a relatively high rate of portfolio turnover. Higher portfolio
turnover rates usually generate additional brokerage commissions and expenses.
For the fiscal year ended December 31, 1996, the portfolio turnover rate
for the Dreyfus Small Cap Value Portfolio was 171% as compared with a turnover
rate of 75% for the fiscal year ended December 31, 1995. The increase in
portfolio turnover rate was in connection with the change of the Portfolio's
investment adviser in September, 1996.
For the fiscal year ended December 31, 1996, the portfolio turnover rate
for the Dreyfus U.S. Government Securities Portfolio was 222% as compared with a
turnover rate of 161% for the period ended December 31, 1995. The increase in
portfolio turnover rate was due to an increased number of market-related
investment opportunities for the Portfolio.
INVESTMENT RESTRICTIONS
Except for restriction numbers 2, 3, 4, 11 and 12 with respect to the T.
Rowe Price Equity Income, T. Rowe Price Growth Stock, Opportunity Value ,
Enhanced Index and Montgomery Select 50 Portfolios and restriction number 11
with respect to the T. Rowe Price International Stock and Dreyfus Small Cap
Value Portfolios (which restrictions are not
<PAGE>
fundamental policies), the following investment restrictions (numbers 1 through
12) are fundamental policies, which may not be changed without the approval of a
majority of the outstanding shares of the Portfolio, and apply to each of the
Portfolios except as otherwise indicated. As provided in the 1940 Act, a vote of
a majority of the outstanding shares necessary to amend a fundamental policy
means the affirmative vote of the lesser of (1) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Portfolio are present or represented by proxy, or (2) more than 50% of
the outstanding shares of the Portfolio.
A Portfolio may not:
1. Borrow money or issue senior securities (as defined in the 1940 Act),
provided that a Portfolio may borrow amounts not exceeding 5% of the value of
its total assets (not including the amount borrowed) for temporary purposes;
except that the Dreyfus U.S. Government Securities Portfolio may borrow from
banks or through reverse repurchase agreements or dollar roll transactions in an
amount equal to up to 33 1/3% of the value of its total assets (calculated when
the loan is made) for temporary, extraordinary or emergency purposes and to take
advantage of investment opportunities and may pledge up to 33 1/3% of the value
of its total assets to secure those borrowings; except that the T. Rowe Price
Equity Income Portfolio, the T. Rowe Price Growth Stock Portfolio and T. Rowe
Price International Stock Portfolio may (i) borrow for non-leveraging, temporary
or emergency purposes and (ii) engage in reverse repurchase agreements and make
other investments or engage in other transactions, which may involve a
borrowing, in a manner consistent with each Portfolio's investment objective and
program, provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of each Portfolios's total assets (including the amount borrowed)
less liabilities (other than borrowings) and may pledge up to 33 1/3% of the
value of its total assets to secure those borrowings; except that the
Opportunity Value Portfolio and the Enhanced Index Portfolio may borrow money
from banks or through reverse repurchase agreements for temporary or emergency
purposes in amounts up to 10% of each Portfolio's total assets; and except that
the Montgomery Select 50 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
<PAGE>
futures contracts and options are not deemed to be pledges or other encumbrances
for purposes of this restriction.
3. Purchase securities on margin, except a Portfolio may obtain such
short-term credits as may be necessary for the clearance of securities
transactions and may make margin deposits in connection with transactions in
options, futures contracts and options on such contracts.
4. Make short sales of securities or maintain a short position for the account
of the Portfolio, unless at all times when a short position is open the
Portfolio owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible or exchangeable
for securities of the same issue as, and in equal amounts to, the securities
sold short.
5. Underwrite securities issued by other persons, except to the extent that
in connection with the disposition of its portfolio investments it may be deemed
to be an underwriter under federal securities laws.
6. Purchase or sell real estate, although a Portfolio may purchase securities
of issuers which deal in real estate, securities which are secured by interests
in real estate and securities representing interests in real estate.
7. Purchase or sell commodities or commodity contracts, except that all
Portfolios other than the TCW Money Market Portfolio may purchase or sell
financial futures contracts and related options. For purposes of this
restriction, currency contracts or hybrid investments shall not be considered
commodities.
8. Make loans, except by purchase of debt obligations in which the Portfolio
may invest consistently with its investment policies, by entering into
repurchase agreements or through the lending of its portfolio securities.
9. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio (taken at current
value) would be invested in the securities of such issuer or acquire more than
10% of the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to principal
and interest by the U.S. government or its agencies and instrumentalities or to
repurchase agreements secured by such obligations and that up to 25% of the
Portfolio's total assets (taken at current value) may be invested without regard
to this limitation.
10. Invest more than 25% of the value of its total assets in
any one industry, provided that this limitation does not apply
<PAGE>
to obligations issued or guaranteed as to interest and principal by the U.S.
government, its agencies and instrumentalities, and repurchase agreements
secured by such obligations, and in the case of the TCW Money Market Portfolio
obligations of domestic branches of United States banks.
11. Invest more than 15% (10% with respect to the TCW Money Market Portfolio,
TCW Managed Asset Allocation Portfolio and Dreyfus U.S. Government Securities
Portfolio) 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.
Other Policies
The TCW Money Market Portfolio may not invest in the securities of any
one issuer if, immediately after such investment, more than 5% of the total
assets of the Portfolio (taken at current value) would be invested in the
securities of such issuer, provided that this limitation does not apply to
obligations issued or guaranteed as to principal and interest by the U.S.
government or its agencies and instrumentalities or to repurchase agreements
secured by such obligations and that with respect to 25% of the Portfolio's
total assets more than 5% may be invested in securities of any one issuer for
three business days after the purchase thereof if the securities have been
assigned the highest quality rating by NRSROs, or if not rated, have been
determined to be of comparable quality. These limitations apply to time
deposits, including certificates of deposit, bankers' acceptances, letters of
credit and similar instruments; they do not apply to demand deposit accounts.
For a description of the NRSROs' ratings, see the Appendix.
In addition, the TCW Money Market Portfolio may not purchase any
security that matures more than thirteen months (397 days) from the date of
purchase or which has an implied maturity of more than thirteen months (397
days) except as provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be
<PAGE>
deemed to be the period remaining until the date noted on the face of the
instrument as the date on which the principal amount must be paid, or in the
case of an instrument called for redemption, the date on which the redemption
payment must be made, except that:
1. An instrument that is issued or guaranteed by the U.S. government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than every 25 months (762 days) may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
2. A variable rate instrument, the principal amount of which is scheduled on
the face of the instrument to be paid in thirteen months (397 days) or less, may
be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
5. A repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities is
scheduled to occur, or where no date is specified, but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.
6. A portfolio lending agreement may be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
Each of the Value Equity and Dreyfus Small Cap Value Portfolios may not
invest more than 5% of the value of its total assets in warrants not listed on
either the New York or American Stock Exchange. Each of the Opportunity Value
and Enhanced Index Portfolios will not invest in warrants if, as a result
thereof, more than 2% of the value of the total assets of the Portfolio would be
invested in warrants which are not listed on the New York Stock Exchange, the
American Stock Exchange, or a recognized foreign exchange, or more than 5% of
<PAGE>
the value of the total assets of the Portfolio would be invested in warrants
whether or not so listed. However, the acquisition of warrants attached to other
securities is not subject to this restriction. Each of the T. Rowe Price Equity
Income, T. Rowe Price Growth Stock , T. Rowe Price International Stock and
Montgomery Select 50 Portfolios 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
Each Portfolio's "average annual total return" figures described and
shown in the Prospectus are computed according to a formula prescribed by the
Securities and Exchange Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5, or 10 years (or other) periods at the end of
the 1, 5, or 10 years (or other) periods (or fractional portion thereof)
The table below shows the average annual total return for the TCW Managed
Asset Allocation, Value Equity, Dreyfus Small Cap Value, Dreyfus U.S. Government
Securities, T. Rowe Price Equity Income, T. Rowe Price Growth Stock and
Opportunity Value Portfolios for the specific periods.
With respect to the T. Rowe Price International Stock Portfolio which
commenced operation April 8, 1991, effective January 1, 1995, the Portfolio's
Adviser was changed to Rowe Price-Fleming International, Inc. ("Price-Fleming").
Prior to March 24, 1995, the Portfolio was known as the Global Growth Portfolio.
Subsequent to such time, the Portfolio's investment objective was changed from
investments in small capitalization companies on a global basis to investments
in a broad range of established companies on an international basis (i.e.,
non-U.S. companies). Because of the change of the
<PAGE>
Portfolio's Adviser, performance information for the period from inception to
December 31, 1995 is not presented. Such information is not reflective of Price-
Fleming's ability to manage the Portfolio. Information with respect to the
Portfolio's per share income and capital changes from inception through December
31, 1996 is set forth in the Prospectus. Average annual total return information
for the period from inception to December 31, 1994 is available upon written
request to the Fund.
<PAGE>
For Period
For the One For the Five From Incep-
Year Period Year Period tion (1) to
Ended December Ended December December 31,
31, 1996 31, 1996 1996
TCW Managed Asset
Allocation(2)...... 17.82%/17.82%* 12.66%/12.39%* 12.72%/12.41%*
T. Rowe Price
International
Stock.............. 15.23%/15.23%* N/A 12.77%/12.77%*
Value Equity(3)....... 23.84%/23.84%* N/A 17.46%/17.29%*
Dreyfus Small
Cap Value(4)....... 25.63%/25.63%* N/A 13.19%/13.07%*
T. Rowe Price
Equity Income(5)... 19.88%/19.88%* N/A 25.19%/25.19%*
T. Rowe Price Growth
Stock(5)............ 20.77%/20.77%* N/A 28.85%/28.85%*
Dreyfus U.S.
Government
Securities(6)...... 1.81%/1.81%* N/A 6.23%/6.08%*
Opportunity Value(7).. N/A N/A .60%/.20%*
- ------------------------
* The figure shows what the Portfolio's performance would have been in
the absence of fee waivers and/or reimbursement of other expenses, if
any.
(1) With respect to T. Rowe Price International Stock Portfolio, period
commenced on January 1, 1995.
(2) The Portfolio commenced operations on April 8, 1991.
(3) The Portfolio commenced operations on May 27, 1993.
(4) The Portfolio commenced operations on May 4, 1993.
(5) The Portfolio commenced operations on January 3, 1995.
(6) The Portfolio commenced operations on May 13, 1994.
(7) The Portfolio commenced operations on November 18, 1996.
The calculations of total return assume the reinvestment of all
dividends and capital gains distributions on the reinvestment dates during the
period and the deduction of all recurring expenses that were charged to
shareholders accounts. The above table does not reflect charges and deductions
which are, or may be, imposed under the Contracts.
The performance of each Portfolio will vary from time to time in
response to fluctuations in market conditions,
<PAGE>
interest rates, the composition of the Portfolio's investments and expenses.
Consequently, a Portfolio's performance figures are historical and should not be
considered representative of the performance of the Portfolio for any future
period.
Yield
From time to time, the Fund may quote the TCW Money Market Portfolio's
and the Dreyfus U.S. Government Securities Portfolio's yield and effective yield
in advertisements or in reports or other communications to shareholders. Yield
quotations are expressed in annualized terms and may be quoted on a compounded
basis.
The annualized current yield for the TCW Money Market Portfolio is
computed by: (a) determining the net change in the value of a hypothetical
pre-existing account in the Portfolio having a balance of one share at the
beginning of a seven calendar day period for which yield is to be quoted; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares, but does not
include realized gains and losses or unrealized appreciation and depreciation.
In addition, the TCW Money Market Portfolio may calculate a compound effective
annualized yield by adding 1 to the base period return (calculated as described
above), raising the sum to a power equal to 365/7 and subtracting 1.
The Dreyfus U.S. Government Securities Portfolio's 30-day yield will be
calculated according to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursement)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the net asset value per share on the last day
of the period
<PAGE>
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
Yield information is useful in reviewing a Portfolio's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Portfolios'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a
Portfolio from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Portfolio's
investments, thereby reducing the current yield of the Portfolio. In periods of
rising interest rates, the opposite can be expected to occur.
Non-Standardized Performance
In addition to the performance information described above, the Fund
may provide total return information with respect to the Portfolios for
designated periods, such as for the most recent six months or most recent twelve
months. This total return information is computed as described under "Total
Return" above except that no annualization is made.
PORTFOLIO TRANSACTIONS
Subject to the supervision and control of the Manager and the Trustees
of the Fund, each Portfolio's Adviser is responsible for decisions to buy and
sell securities for its account and for the placement of its portfolio business
and the negotiation of commissions, if any, paid on such transactions. Brokerage
commissions are paid on transactions in equity securities traded on a securities
exchange and on options, futures contracts and options thereon. Fixed income
securities and certain equity securities in which the Portfolios invest are
traded in the over-the-counter market. These securities are generally traded on
a net basis with dealers acting as principal for their own account without a
stated commission, although prices of such securities usually
<PAGE>
include a profit to the dealer. In over-the-counter transactions, orders are
placed directly with a principal market maker unless a better price and
execution can be obtained by using a broker. In underwritten offerings,
securities are usually purchased at a fixed price which includes an amount of
compensation to the underwriter generally referred to as the underwriter's
concession or discount. Certain money market securities may be purchased
directly from an issuer, in which case no commissions or discounts are paid.
U.S. government securities are generally purchased from underwriters or dealers,
although certain newly-issued U.S. government securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
Each Portfolio's Adviser is responsible for effecting its portfolio transactions
and will do so in a manner deemed fair and reasonable to the Portfolio and not
according to any formula. The primary consideration in all portfolio
transactions will be prompt execution of orders in an efficient manner at a
favorable price. In selecting broker-dealers and negotiating commissions, an
Adviser considers the firm's reliability, the quality of its execution services
on a continuing basis and its financial condition. When more than one firm is
believed to meet these criteria, preference may be given to brokers that provide
the Portfolios or their Advisers with brokerage and research services within the
meaning of Section 28(e) of the Securities Exchange Act of 1934. Each
Portfolio's Adviser is of the opinion that, because this material must be
analyzed and reviewed, its receipt and use does not tend to reduce expenses but
may benefit the Portfolio by supplementing the Adviser's research. In seeking
the most favorable price and execution available, an Adviser may, if permitted
by law, consider sales of the Contracts as described in the Prospectus a factor
in the selection of broker-dealers.
The Board of Trustees of the Fund has authorized the Manager and the
Advisers to enter into arrangements with brokers who execute brokerage
transactions for the Portfolios whereby a portion of the commissions earned by
such brokers will be shared with a non-affiliated broker-dealer acting as an
"introducing broker" in the transaction. Subject to the requirements of
applicable law including seeking best price and execution of orders, commissions
paid to executing brokers will not exceed ordinary and customary brokerage
commissions.
The Board of Trustees has determined that the Fund's brokerage
commissions should be utilized for the Fund's benefit to the extent possible.
After reviewing various alternatives, the Board concluded that commissions
received by a non-affiliated broker-dealer can be used to promote the
distribution of the Fund's shares including
<PAGE>
the costs of training and educating such broker-dealers with respect to the
Contracts . Periodically, the Manager will instruct the "introducing broker" to
transmit funds in its possession to third party broker-dealers to pay for such
training and education costs. No portion of the commissions received by the
"introducing broker" will be paid to the Manager or any of its affiliates. On a
quarterly basis, the Manager will report to the Board of Trustees the aggregate
commissions received by the "introducing broker" and the distribution expenses
paid from such commissions. The Board of Trustees will periodically review
whether the foregoing arrangement reduces distribution expenses currently being
incurred by the Manager or its affiliates on behalf of the Fund. The Board of
Trustees may determine from time to time other appropriate uses for the Fund
from the commissions it pays to executing brokers.
An Adviser may effect portfolio transactions for other investment
companies and advisory accounts. Research services furnished by broker-dealers
through which a Portfolio effects its securities transactions may be used by the
Portfolio's Adviser in servicing all of its accounts; not all such services may
be used in connection with the Portfolio. In the opinion of each Adviser, it is
not possible to measure separately the benefits from research services to each
of its accounts, including a Portfolio. Whenever concurrent decisions are made
to purchase or sell securities by a Portfolio and another account, the
Portfolio's Adviser will attempt to allocate equitably portfolio transactions
among the Portfolio and other accounts. In making such allocations between the
Portfolio and other accounts, the main factors to be considered are the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and the opinions of the persons
responsible for recommending investments to the Portfolio and the other
accounts. In some cases this procedure could have an adverse effect on a
Portfolio. In the opinion of each Adviser, however, the results of such
procedures will, on the whole, be in the best interest of each of the accounts.
The Adviser to the Value Equity and Opportunity Value
Portfolios may execute brokerage transactions through
Oppenheimer & Co. Inc. ("Opco"), an affiliated broker-dealer
of the Adviser, acting as agent in accordance with procedures
established by the Fund's Board of Trustees, but will not
<PAGE>
purchase any securities from or sell any securities to Opco acting as principal
for its own account.
The Adviser to the T. Rowe Price International Stock, T. Rowe Price
Equity Income and T. Rowe Price Growth Stock Portfolios may execute portfolio
transactions through certain affiliates of Robert Fleming Holdings Limited and
Jardine Fleming Group Limited, persons indirectly related to the Adviser, acting
as agent in accordance with procedures established by the Fund's Board of
Trustees, but will not purchase any securities from or sell any securities to
any such affiliate acting as principal for its own account.
The Adviser to the Enhanced Index Portfolio may execute portfolio
transactions through certain of its affiliated brokers, acting as agent in
accordance with the procedures established by the Fund's Board of Trustees, but
will not purchase any securities from or sell any securities to such affiliate
acting as principal for its own account.
For the year ended December 31, 1994, the TCW Money Market Portfolio
did not pay any brokerage commissions, while the TCW Managed Asset Allocation
Portfolio and T. Rowe Price International Stock Portfolio paid $175,548 and
$554,048, respectively, in brokerage commissions. For the year ended December
31, 1994, the Value Equity Portfolio and Dreyfus Small Cap Value Portfolio paid
$58,472 and $100,262, respectively, in brokerage commissions, of which $32,796
(78.29%) with respect to the Value Equity Portfolio and $58,028 (72.78%) with
respect to the Dreyfus Small Cap Value Portfolio was paid to Opco. For the
fiscal period ended December 31, 1994, the Dreyfus U.S. Government Securities
Portfolio paid no brokerage commissions. For the year ended December 31, 1995,
the TCW Money Market Portfolio and the Dreyfus U.S. Government Securities
Portfolio did not pay any brokerage commissions, while the TCW Managed Asset
Allocation Portfolio paid $187,103 in brokerage commissions. For the year ended
December 31, 1995, the T. Rowe Price International Stock Portfolio, the Value
Equity Portfolio and the Dreyfus Small Cap Value Portfolio paid $395,753,
$57,800, and $101,885, respectively, in brokerage commissions of which $33,338
(8.42%), $15,101 (3.82%) and $673 (.17%) with respect to the T. Rowe Price
International Stock Portfolio was paid to Robert Fleming Holdings Limited and
Jardine Fleming Group Limited, Ord Minnett and OpCo, respectively, $29,271
(50.64%) with respect to the Value Equity Portfolio and $36,216 (35.55%) with
respect to the Dreyfus Small Cap Value Portfolio was paid to OpCo. For the
fiscal period ended December 31, 1995, the T. Rowe Price Equity Income Portfolio
and the T. Rowe Price Growth Stock Portfolio paid $18,059 and $39,447,
respectively in brokerage commissions of which $10 (0.06%) with respect to the
T. Rowe Price Equity Income Portfolio was paid to OpCo and $536 (1.36%), $507
(1.29%) and $23 (0.06%)
<PAGE>
with respect to the T. Rowe Price Growth Stock Portfolio was paid to Boston Safe
Deposit and Trust Company, Jardine Fleming Group Limited and OpCo, respectively.
For the year ended December 31, 1996, the Dreyfus U.S. Government Securities
Portfolio did not pay any brokerage commissions, while the TCW Money Market
Portfolio and the TCW Managed Asset Allocation Portfolio paid $2,724 and $93,009
in brokerage commissions, respectively. For the year ended December 31, 1996,
the T. Rowe Price International Stock Portfolio, the Value Equity Portfolio and
the Dreyfus Small Cap Value Portfolio paid $136,536, $90,589, and $398,554,
respectively, in brokerage commissions of which $4,462 (3.27%), $2,908 (2.13%)
and $906 (.66%) with respect to the T. Rowe Price International Stock Portfolio
was paid to Robert Fleming Holdings Limited and Jardine Fleming Group Limited,
Ord Minnett and OpCo, respectively, $35,624 (39.32%) with respect to the Value
Equity Portfolio and $34,511 (8.66%) with respect to the Dreyfus Small Cap Value
Portfolio was paid to OpCo. For the fiscal year ended December 31, 1996, the T.
Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock Portfolio
paid $55,261 and $69,409, respectively in brokerage commissions of which $120
(.22%) with respect to the T. Rowe Price Equity Income Portfolio was paid to
OpCo and $3,037 (4.38%) and $63 (.09%) with respect to the T. Rowe Price Growth
Stock Portfolio was paid to Robert Flemings Holdings Limited and OpCo,
respectively. For the fiscal period ended December 31, 1996, the Opportunity
Value Portfolio paid $291 in brokerage commissions.
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.
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
James R. McInnis (49) President President of Endeavor
Group (broker-dealer)
since June, 1991;
President of McGuinness &
Associates (insurance
marketing) from March,
1983 to June, 1991.
<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 (45) Trustee Since July, 1995,
462 Stevens Avenue President of Klosterman
Suite 206 Capital Corporation
Solana Beach, California (investment adviser);
92075 Investment Counselor,
Robert J. Metcalf &
Associates, Inc.
(investment adviser) from
August, 1990 to June,
1995.
<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).
Trustee Rancher until January,
R. Daniel Olmstead, Jr. (66) 1997. Since January,
2661 Point Del Mar 1997, real estate
Corona Del Mar, California consultant.
92625
Norman Ridley (51) Vice Since 1985, Senior Vice
865 S. Figueroa Street President President, TCW Asset
Suite 1800 Management Company and
Los Angeles, California Trust Company of the West.
90017
Ronald E. Robison (58) Vice Since November, 1987,
865 S. Figueroa Street President Managing Director and
Suite 1800 Chief Operating Officer,
Los Angeles, California TCW Funds Management Inc.;
90017 since March, 1990,
Managing Director, Trust
Company of the West and
TCW Asset Management
Company.
James M. Goldberg (51) Vice Since June, 1984, Managing
865 S. Figueroa Street President Director, TCW Asset
Suite 1800 Management Company and
Los Angeles, California Trust Company of the West
90017 and since January, 1987
Managing Director, TCW
Funds Management, Inc.
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Eileen Rominger (42) Vice Since May, 1994, Managing
One World Financial Center President Director, Oppenheimer
New York, New York 10281 Capital, prior thereto
Senior Vice
President,
Oppenheimer Capital;
Portfolio Manager,
Oppenheimer Quest
Value Fund, Inc.,
OCC Accumulation
Trust, Enterprise
Accumulation Trust
and Penn Series
Fund, open-end
investment
companies.
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
**Vincent J. McGuinness,Jr.(32) Executive From
Vice- September, 1996 to
President- June, 1997, Chief
Administration Financial Officer
(Treasurer) of
Registrant; since
January, 1997,
Executive
Vice-President
of
Operations and since
May,
1997, Director of
Endeavor Group;
from September, 1996
to June, 1997, Chief
Financial Officer
and since May, 1996,
Director 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
March, 1996 to May,
1996, Director of
McGuinness Group;
from July, 1993 to
August, 1995 Rocky
Mountain Regional
Marketing Director
for Endeavor Group.
MBA graduate student
from September, 1991
to May, 1993.
<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.
<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; and from
November, 1986 to July,
1992, Executive Secretary
to Chairman of the Board
and Chief Executive
Officer of, and from
October, 1990 to July,
1992, Secretary of
McGuinness & Associates,
Endeavor Group, VJM
Corporation, McGuinness
Group, Endeavor Management
Co. and Swift Energy
Marketing Company.
* An "interested person" of the Fund as defined in the 1940
Act.
** 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 Advisers 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.
<PAGE>
COMPENSATION TABLE
Total
Compensation
From Fund
Aggregate and Fund
Name of Compensation Complex
Person From Fund Paid to Trustees
Vincent J. McGuinness $ - $ -
Timothy A. Devine 4,500 4,500
Thomas J. Hawekotte 4,500 4,500
Steven L. Klosterman 4,500 4,500
Halbert D. Lindquist 3,500 3,500
R. Daniel Olmstead 4,500 4,500
The Agreement and Declaration of Trust of the Fund provides that the
Fund will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Fund or that such indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties. The Fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
As of the date of this Statement of Additional Information, the
officers and Trustees of the Fund as a group owned less than 1% of the
outstanding shares of the Fund.
The Manager
The Management Agreement between the Fund and the Manager with respect
to the TCW Money Market, TCW Managed Asset Allocation and T. Rowe Price
International Stock Portfolios was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" [as defined in
the 1940 Act] of the Manager) on July 20, 1992, and by the shareholders of the
Fund on November 23, 1992. With respect to the Value Equity and Dreyfus Small
Cap Value Portfolios, the Management Agreement was approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager) on April 19, 1993 and by PFL Life Insurance Company, the sole
shareholder of the Value Equity and Dreyfus Small Cap Value Portfolios, on April
19, 1993. With respect to the Dreyfus U.S. Government Securities
<PAGE>
Portfolio, the Management Agreement was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager)
on January 24, 1994 and by PFL Life Insurance Company, the sole shareholder of
the Dreyfus U.S. Government Securities Portfolio, on March 7, 1994. With respect
to the T. Rowe Price Equity Income and T. Rowe Price Growth Stock Portfolios,
the Management Agreement was approved by the Trustees of the Fund (including all
of the Trustees who are not "interested persons" of the Manager) on October 24,
1994 and by PFL Life Insurance Company, the sole shareholder of the T. Rowe
Price Equity Income and T. Rowe Price Growth Stock Portfolios, on November 1,
1994. With respect to the Opportunity Value and Enhanced Index Portfolios, the
Management Agreement was approved by the Trustees of the Fund (including all of
the Trustees who are not "interested persons" of the Manager) on August 13, 1996
and by PFL Life Insurance Company, the sole shareholder of the Opportunity Value
and Enhanced Index Portfolios, on August 26, 1996. With respect to the
Montgomery Select 50 Portfolio, the Management Agreement was approved by the
Trustees of the Fund (including all of the Trustees who are not "interested
persons" of the Manager) on August , 1997 and by PFL Life Insurance Company, the
sole shareholder of the Montgomery Select 50 Portfolio, on September , 1997. See
"Organization and Capitalization of the Fund."
The Management Agreement will continue in force for two years from its
date, November 23, 1992 with respect to the TCW Money Market, TCW Managed Asset
Allocation and T. Rowe Price International Stock Portfolios, April 19, 1993 with
respect to the Value Equity and Dreyfus Small Cap Value Portfolios, March 25,
1994 with respect to the Dreyfus U.S. Government Securities Portfolio, December
28, 1994 with respect to the T. Rowe Price Equity Income and T. Rowe Price
Growth Stock Portfolios, August 26, 1996 with respect to the Opportunity Value
and Enhanced Index Portfolios, , 1997 with respect to the Montgomery Select 50
Portfolio and from year to year thereafter, but only so long as its continuation
as to each Portfolio is specifically approved at least annually (i) by the
Trustees or by the vote of a majority of the outstanding voting securities 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
<PAGE>
the Fund to use the identifying name of "Endeavor" may be
withdrawn.
The Advisers
The Investment Advisory Agreements between the Manager and TCW Funds
Management, Inc. were approved by the Trustees of the Fund (including all the
Trustees who are not "interested persons" of the Manager or of the Adviser) on
July 20, 1992, and by the shareholders of the Fund on November 23, 1992. The
Investment Advisory Agreements between the Manager and OpCap Advisors (formerly
known as Quest for Value Advisors) were initially approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager or of the Adviser) on April 19, 1993 with respect to the Value Equity
Portfolio and August 13, 1996 with respect to the Opportunity Value Portfolio
and by PFL Life Insurance Company as sole shareholder of the Value Equity and
Opportunity Value Portfolios on April 19, 1993 and August 26, 1996,
respectively. As described in the Prospectus, a transaction is pending whereby
the ownership of OpCap Advisors is being transferred which, under the 1940 Act,
will result in the automatic termination of the Investment Advisory Agreement
between the Manager and OpCap Advisors. On April 8, 1997 the Trustees of the
Fund (including all of the Trustees who are not "interested persons" of the
Manager or the Adviser) approved new Investment Advisory Agreements between the
Manager and OpCap Advisors. The new Investment Advisory Agreements have been
approved by the shareholders of the Value Equity and Opportunity Value
Portfolios .
The Investment Advisory Agreement between the Manager and The
Boston Company Asset Management, Inc. was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager
or of the Adviser) on January 24, 1994 and by PFL Life Insurance Company as sole
shareholder of the Dreyfus U.S. Government Securities Portfolio on March 7,
1994. The Investment Advisory Agreement was transferred to The Dreyfus
Corporation effective May 1, 1996. The Investment Advisory Agreements between
the Manager and T. Rowe Price Associates, Inc. were approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager or of the Adviser) on October 24, 1994 and by PFL Life Insurance Company
as sole shareholder of the T. Rowe Price Equity Income and T. Rowe Price Growth
Stock Portfolios on November 1, 1994. The Investment Advisory Agreement between
the Manager and J.P. Morgan Investment Management Inc. was approved by the
Trustees of the Fund (including all of the Trustees who are not "interested
persons" of the Manager or of the Adviser) on August 13, 1996 and by PFL Life
Insurance Company as sole shareholder of the Enhanced Index Portfolio on August
26,
<PAGE>
1996. 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 , 1997 and by PFL Life Insurance Company as sole shareholder of the
Montgomery Select 50 Portfolio on , 1997. Effective January 1, 1995,
Price-Fleming became the Adviser of the T. Rowe Price International Stock
Portfolio. The Investment Advisory Agreement with Price-Fleming for the T. Rowe
Price International Stock Portfolio was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager
or of the Adviser) on December 19, 1994 and by shareholders of the Portfolio on
March 24, 1995. Effective September 16, 1996, The Dreyfus Corporation became the
Adviser of the Dreyfus Small Cap Value Portfolio. The Investment Advisory
Agreement with The Dreyfus Corporation was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager
or of the Adviser) on August 13, 1996 and by the shareholders of the Portfolio
on October 29, 1996. See "Organization and Capitalization of the Fund."
Each agreement will continue in force for two years from its date,
November 23, 1992 with respect to the TCW Money Market and TCW Managed Asset
Allocation Portfolios, April 19, 1993 with respect to the Value Equity
Portfolio, March 25, 1994 with respect to the Dreyfus U.S. Government Securities
Portfolio, December 28, 1994 with respect to the T. Rowe Price Equity Income and
T. Rowe Price Growth Stock Portfolios, January 1, 1995 with respect to the T.
Rowe Price International Stock Portfolio, September 16, 1996 with respect to the
Dreyfus Small Cap Value Portfolio, November 4, 1996 with respect to the
Opportunity Value Portfolio , April 30, 1997 with respect to the Enhanced Index
Portfolio and , 1997 with respect to the Montgomery Select 50 Portfolio, and
from year to year thereafter, but only so long as its continuation as to a
Portfolio is specifically approved at least annually (i) by the Trustees or by
the vote of a majority of the outstanding voting securities 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. Each Investment
Advisory Agreement provides that it shall terminate automatically if assigned or
if the Management Agreement with respect to the related Portfolio terminates,
and that it may be terminated as to a Portfolio without penalty by the Manager,
by the Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio on not less than 60 days' (90 days' with respect to
the Enhanced Index and Montgomery Select 50 Portfolios) prior written notice to
the Adviser or by the Adviser on not less
<PAGE>
than 150 days' prior written notice to the Manager, or upon such shorter notice
as may be mutually agreed upon.
The following table shows the fees paid by each of the Portfolios and
any fee waivers or reimbursements during the fiscal years ended December 31,
1994, December 31, 1995 and December 31, 1996.
1996
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
TCW Money Market
Portfolio....... $ 165,212 $ -- --
TCW Managed Asset
Allocation
Portfolio....... 1,639,338 -- --
T. Rowe Price
International
Stock Portfolio. 1,015,179 -- --
Value Equity
Portfolio....... 768,579 -- --
Dreyfus Small
Cap Value
Portfolio....... 535,895 -- --
Dreyfus U.S.
Government
Securities
Portfolio....... 122,058 -- --
T. Rowe Price
Equity Income
Portfolio....... 369,356 -- --
T. Rowe Price
Growth Stock
Portfolio....... 313,356 -- --
Opportunity Value
Portfolio*...... 197 -- 2,802
1995**
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
TCW Money Market
Portfolio....... $ 117,465 $ --- ---
TCW Managed Asset
Allocation
Portfolio....... 1,388,652 --- ---
T. Rowe Price
International
<PAGE>
Stock Portfolio. 759,830 --- ---
Value Equity
Portfolio....... 395,205 --- ---
Dreyfus Small Cap
Value Portfolio. 339,672 --- ---
Dreyfus U.S.
Government
Securities
Portfolio....... 42,531 --- ---
T. Rowe Price
Equity Income
Portfolio....... 70,664 --- ---
T. Rowe Price
Growth Stock
Portfolio....... 75,681 --- ---
1994
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
TCW Money Market
Portfolio........ $ 111,100 $--- $ ---
TCW Managed Asset
Allocation
Portfolio....... 1,151,688 --- ---
T. Rowe Price
International
Stock Portfolio. 696,732 --- ---
Value Equity
Portfolio....... 191,316 --- ---
Dreyfus Small
Cap Value
Portfolio....... 214,198 --- ---
Dreyfus U.S.
Government
Securities
Portfolio***.... 8,087 8,087 4,955
- ---------------
* The information presented with respect to the Opportunity Value
Portfolio is for the period from November 18, 1996 (commencement of
operations) to December 31, 1996.
** The information presented for the T. Rowe Price Equity Income and T.
Rowe Price Growth Stock Portfolios is for
<PAGE>
the period from January 3, 1995 (commencement of operations) to
December 31, 1995.
*** The information presented with respect to the Dreyfus
U.S. Government Securities Portfolio is for the period
from May 13, 1994 (commencement of operations) to
December 31, 1994.
---------------------------
Each Investment Advisory Agreement provides that the Adviser shall not
be subject to any liability to the Fund or the Manager for any act or omission
in the course of or connected with rendering services thereunder in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties on the part of the Adviser.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment on shares of the Portfolios for more than seven days during any period
(1) when the New York Stock Exchange is closed or trading on the Exchange is
restricted as determined by the Securities and Exchange Commission, (2) when an
emergency exists, as defined by the Securities and Exchange Commission, which
makes it not reasonably practicable for a Portfolio to dispose of securities
owned by it or fairly to determine the value of its assets, or (3) as the
Securities and Exchange Commission may otherwise permit.
The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio securities
at the time of redemption.
NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the
close of regular trading of the New York Stock Exchange (currently 4:00 p.m.,
New York City time), Monday through Friday, exclusive of national business
holidays. The Fund will be closed on the following national business holidays:
New Year's Day, Martin Luther King's Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which the primary market is on a domestic or foreign
exchange or which are traded over-the-counter and quoted on the NASDAQ System
will be valued at the last sale price on the day of valuation or, if there was
no sale that day, at the last reported bid price, using prices as of the close
of trading. Portfolio securities not quoted on the NASDAQ System that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed to be over-the-counter,
<PAGE>
will be valued at the most recently quoted bid price provided by the principal
market makers.
In the case of any securities which are not actively traded, reliable
market quotations may not be considered to be readily available. These
investments are stated at fair value as determined under the direction of the
Trustees. Such fair value is expected to be determined by utilizing information
furnished by a pricing service which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
If any securities held by a Portfolio are restricted as to resale,
their fair value will be determined following procedures approved by the
Trustees. The fair value of such securities is generally determined as the
amount which the Portfolio could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Portfolio in connection with
such disposition). In addition, specific factors are also generally considered,
such as the cost of the investment, the market value of any unrestricted
securities of the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent transactions or
offers with respect to such securities and any available analysts' reports
regarding the issuer.
Notwithstanding the foregoing, short-term debt securities with
maturities of 60 days or less will be valued at amortized cost.
The TCW Money Market Portfolio's investment policies and method of
securities valuation are intended to permit the Portfolio generally to maintain
a constant net asset value of $1.00 per share by computing the net asset value
per share to the nearest $.01 per share. The Portfolio is permitted to use the
amortized cost method of valuation for its portfolio securities pursuant to
regulations of the Securities and Exchange Commission. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Portfolio would receive if it sold the instrument. The net
asset value per share would be subject to fluctuation upon any significant
changes in the value of the Portfolio's securities. The value of debt
securities, such as those in the Portfolio, usually reflects yields generally
<PAGE>
available on securities of similar yield, quality and duration. When such yields
decline, the value of a portfolio holding such securities can be expected to
decline. Although the Portfolio seeks to maintain the net asset value per share
of the Portfolio at $1.00, there can be no assurance that net asset value will
not vary.
The Trustees of the Fund have undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Portfolio's investment objective, to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem appropriate, of the
extent, if any, to which the net asset value per share calculated by using
available market quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are required to promptly
consider what action, if any, should be initiated.
With respect to the Portfolios other than the TCW Money Market
Portfolio, foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually different from
the close of the New York Stock Exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close of the New
York Stock Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the Fund's
Board of Trustees. All securities and other assets of a Portfolio initially
expressed in foreign currencies will be converted to U.S. dollar values at the
mean of the bid and offer prices of such currencies against U.S. dollars last
quoted on a valuation date by any recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
In order to so qualify, a Portfolio must, among other things, (1)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks or securities or foreign currencies, or other income
<PAGE>
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stocks or securities;
(2) derive less than 30% of its gross income in each taxable year from the sale
or other disposition of stocks or securities held less than three months (the
Portfolio's transactions in future transactions, straddles and options may be
restricted in order to comply with this requirement); and (3) diversify its
holdings so that, at the end of each quarter of the Portfolio's taxable year,
(a) at least 50% of the market value of the Portfolio's assets is represented by
cash, government securities and other securities limited in respect of any one
issuer to 5% of the value of the Portfolio's assets and to not more than 10% of
the voting securities of such issuer, and (b) not more than 25% of the value of
its assets is invested in securities of any one issuer (other than government
securities).
As a regulated investment company, a Portfolio will not be subject to
federal income tax on net investment income and capital gains (short- and
long-term), if any, that it distributes to its shareholders if at least 90% of
its net investment income and net short-term capital gains for the taxable year
are distributed, but will be subject to tax at regular corporate rates on any
income or gains that are not distributed. In general, dividends will be treated
as paid when actually distributed, except that dividends declared in October,
November or December and made payable to shareholders of record in such a month
will be treated as having been paid by the Portfolio (and received by
shareholders) on December 31, provided the dividend is paid in the following
January. Each Portfolio intends to satisfy the distribution requirement in each
taxable year.
The Portfolios will not be subject to the 4% federal excise tax imposed
on registered investment companies that do not distribute all of their income
and gains each calendar year because such tax does not apply to a registered
investment company whose only shareholders are segregated asset accounts of life
insurance companies held in connection with variable annuity and/or variable
life insurance policies.
The Fund intends to comply with section 817(h) of the Code and the
regulations issued thereunder. As required by regulations under that section,
the only shareholders of the Fund and its Portfolios will be life insurance
company segregated asset accounts (also referred to as separate accounts) that
fund variable life insurance or annuity contracts and the general account of PFL
Life Insurance Company which provided the initial capital for the Portfolios of
the Fund. See the prospectus or other material for the Contracts for additional
discussion of the taxation of segregated asset accounts and of the owner of the
particular Contract described therein.
<PAGE>
Section 817(h) of the Code and Treasury Department regulations
thereunder impose certain diversification requirements on the segregated asset
accounts investing in the Portfolios of the Fund. These requirements, which are
in addition to the diversification requirements applicable to the Fund under the
1940 Act and under the regulated investment company provisions of the Code, may
limit the types and amounts of securities in which the Portfolios may invest.
Failure to meet the requirements of section 817(h) could result in current
taxation of the owner of the Contract on the income of the Contract.
The Fund may therefore find it necessary to take action to ensure that
a Contract continues to qualify as a Contract under federal tax laws. The Fund,
for example, may be required to alter the investment objectives of a Portfolio
or substitute the shares of one Portfolio for those of another. No such change
of investment objectives or substitution of securities will take place without
notice to the shareholders of the affected Portfolio and the approval of a
majority of such shareholders and without prior approval of the Securities and
Exchange Commission, to the extent legally required.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund is a Massachusetts business trust organized on November 18,
1988. A copy of the Fund's Agreement and Declaration of Trust, as amended, which
is governed by Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees of the Fund have authority to issue an unlimited number of
shares of beneficial interest without par value of one or more series.
Currently, the Trustees have established and designated eleven series. Each
series of shares represents the beneficial interest in a separate Portfolio of
assets of the Fund, which is separately managed and has its own investment
objective and policies. The Trustees of the Fund have authority, without the
necessity of a shareholder vote, to establish additional portfolios and series
of shares. The shares outstanding are, and those offered hereby when issued will
be, fully paid and nonassessable by the Fund. The shares have no preemptive,
conversion or subscription rights and are fully transferable.
The assets received from the sale of shares of a Portfolio, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, constitute the underlying assets of the Portfolio. The underlying
assets of a Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to that Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated by
<PAGE>
or under the direction of the Trustees in such manner as the Trustees determine
to be fair and equitable, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the Portfolio and the other
Portfolios.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not require the Fund to
hold annual meetings of shareholders. Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may appoint their successors until fewer than a majority of the
Trustees have been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the Agreement and
Declaration of Trust, any Trustee may be removed by vote of two-thirds of the
outstanding shares of the Fund, and holders of 10% or more of the outstanding
shares can require the Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. If ten or more
shareholders who have been such for at least six months and who hold in the
aggregate shares with a net asset value of at least $25,000 inform the Trustees
that they wish to communicate with other shareholders, the Trustees either will
give such shareholders access to the shareholder lists or will inform them of
the cost involved if the Fund forwards materials to the shareholders on their
behalf. If the Trustees object to mailing such materials, they must inform the
Securities and Exchange Commission and thereafter comply with the requirements
of the 1940 Act.
PFL will vote shares of the Fund as described under the caption "Voting
Rights" in the prospectus or other material for the Contracts which accompanies
the Prospectus.
As of March 31, 1997, the PFL Endeavor Variable Annuity Account owned
of record the following approximate percentages of the outstanding shares of
each Portfolio: 75% of the TCW Money Market Portfolio; 95% of the TCW Managed
Asset Allocation Portfolio; 89% of the T. Rowe Price International Stock
Portfolio; 85% of the Value Equity Portfolio; 88% of the Dreyfus Small Cap Value
Portfolio; 83% of the Dreyfus U.S. Government Securities Portfolio; 83% of the
T. Rowe Price Equity Income Portfolio; 81% of the T. Rowe Price Growth Stock
Portfolio; and 77% of the Opportunity Value Portfolio. As of March 31, 1997, the
PFL Endeavor Platinum Variable Annuity Account owned of record the following
approximate percentages of the outstanding shares of each Portfolio: 23% of the
TCW Money Market Portfolio; 4% of the TCW Managed Asset Allocation Portfolio; 8%
of the T. Rowe Price International Stock
<PAGE>
Portfolio; 12% of the Value Equity Portfolio; 9% of the Dreyfus Small Cap Value
Portfolio; 14% of the Dreyfus U.S. Government Securities Portfolio; 14% of the
T. Rowe Price Equity Income Portfolio; 10% of the T. Rowe Price Growth Stock
Portfolio; and 14% of the Opportunity Value Portfolio. As of March 31, 1997, the
AUSA Endeavor Variable Annuity Account owned of record the following approximate
percentages of the outstanding shares of each Portfolio: 2% of the TCW Money
Market Portfolio; 1% of the TCW Managed Asset Allocation Portfolio; 3% of the T.
Rowe Price International Stock Portfolio; 2% of the Value Equity Portfolio; 2%
of the Dreyfus Small Cap Value Portfolio; 3% of the Dreyfus U.S. Government
Securities Portfolio; 3% of the T. Rowe Price Equity Income Portfolio; 3% of the
T. Rowe Price Growth Stock Portfolio; and
9% of the Opportunity Value Portfolio.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts and obligations of the Fund and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any
shareholders held personally liable for obligations of the Fund. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations. The likelihood of such circumstances is remote.
LEGAL MATTERS
Certain legal matters are passed on for the Fund by Sullivan &
Worcester LLP of Washington, D.C.
CUSTODIAN
Boston Safe Deposit and Trust Company, located at One Boston Place,
Boston, Massachusetts 02108, serves as the custodian of the Fund. Under the
Custody Agreement, Boston Safe holds the Portfolios' securities and keeps all
necessary records and documents.
FINANCIAL STATEMENTS
The financial statements of the TCW Money Market Portfolio, TCW
Managed Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio and Opportunity Value
<PAGE>
Portfolio for the fiscal year ended December 31, 1996, including notes to the
financial statements and supplementary information and the Independent Auditors'
Report are included in the Fund's Annual Report to Shareholders. A copy of the
Annual Report accompanies this Statement of Additional Information. The
financial statements (including the Independent Auditors' Report) included in
the Annual Report are incorporated herein by reference. Interim financial
statements (unaudited) for the Opportunity Value Portfolio for the period
January 1, 1997 through March 31, 1997 accompany this Statement of Additional
Information.
<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
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
<PAGE>
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
<PAGE>
indicate issues regarded as having the strongest degree of assurance for timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating F-2 indicates a
satisfactory degree of assurance for timely payment, although the margin of
safety is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. Commercial Paper Ratings. Duff & Phelps Inc. employs the
designation of Duff 1 with respect to top grade commercial paper and bank money
instruments. Duff 1+ indicates the highest certainty of timely payment:
short-term liquidity is clearly outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations. Duff 1- indicates high certainty of timely
payment. Duff 2 indicates good certainty of timely payment: liquidity factors
and company fundamentals are sound.
Thomson BankWatch, Inc. ("BankWatch") Commercial Paper Ratings. BankWatch will
assign both short-term debt ratings and issuer ratings to the issuers it rates.
BankWatch will assign a short-term rating ("TBW-1", "TBW-2", "TBW-3", or
"TBW-4") to each class of debt (e.g., commercial paper or non-convertible debt),
having a maturity of one-year or less, issued by a holding company structure or
an entity within the holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A", "A/B", "B", "B/C",
"C", "C/D", "D", "D/E", and "E") to each issuer that it rates.
Various of the NRSROs utilize rankings within rating categories
indicated by a + or -. The Portfolios, in accordance with industry practice,
recognize such rankings within categories as graduations, viewing for example
Standard & Poor's rating of A-1+ and A-1 as being in Standard & Poor's highest
rating category.
<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
Not
Applicable
Incorporated by reference in Part B:
The following audited Financial
Statements for the TCW Money Market
Portfolio, TCW Managed Asset
Allocation Portfolio, Value Equity
Portfolio, Dreyfus Small Cap Value
Portfolio, Dreyfus U.S. Government
Securities Portfolio, T. Rowe Price
International Stock Portfolio and
T. Rowe Price Equity Income
Portfolio, T. Rowe Price Growth
Stock Portfolio and the Opportunity
Value Portfolio for the period
ended December 31, 1996 are
incorporated by reference:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
The following unaudited Financial
Statements for Opportunity Value
Portfolio for the period January 1,
<PAGE>
1997 to March 31, 1997 are
incorporated by reference:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors is
filed herein.
(b) Exhibits:
All references are to the Registrant's
registration statement on Form N-1A as filed
with the SEC on March 7, 1989, File Nos.
33-27352 and 811-5780 (the "Registration
Statement").
Exhibit No. Description of Exhibits
(1)(a) Agreement and Declaration of
Trust is incorporated by
reference to Post-Effective
Amendment No. 14 to the
Registration Statement as filed
with the SEC on April 29, 1996
("Post-Effective Amendment No.
14").
(1)(b) Amendment No. 1 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(c) Amendment No. 2 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(d) Amendment No. 3 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No.
14.
(1)(e) Amendment No. 4 to Agreement
and Declaration of Trust is
incorporated by reference to
Post-Effective Amendment No. 14
<PAGE>
(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
<PAGE>
International Stock Portfolio)
is incorporated by reference to
Post-Effective Amendment No.
14.
(4)(f) Specimen certificate for
shares of beneficial
interest of the Quest for
Value Equity Portfolio
(now known as Value
Equity Portfolio) is
incorporated by reference
to Post-Effective
Amendment No.
14.
(4)(g) Specimen certificate for
shares of beneficial
interest of the Quest for
Value Small Cap Portfolio
(now known as 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
<PAGE>
Enhanced Index Portfolio is
incorporated by reference to
Post-Effective Amendment No.
15.
(4)(m) Specimen certificate for shares
of beneficial interest of the
Montgomery Select 50 Portfolio
is filed herein.
(5)(a) Management Agreement dated
November 23, 1992 between
Registrant and Endeavor
Investment Advisers is
incorporated by reference to
Post-Effective Amendment No.
14.
(5)(a)(1) Supplement dated April
29, 1993 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Quest for
Value Equity Portfolio
and Quest for Value Small
Cap Portfolio is
incorporated by reference
to Post-Effective
Amendment No.
14.
(5)(a)(2) Supplement dated March
25, 1994 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to U.S.
Government Securities
Portfolio is incorporated
by reference to
Post-Effective Amendment
No.
14.
(5)(a)(3) Supplement dated December 28,
1994 to Management Agreement
between Registrant and Endeavor
Investment Advisers with
respect to the T. Rowe Price
Equity Income Portfolio and T.
Rowe Price Growth Stock
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(5)(a)(4) 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
<PAGE>
Post-Effective Amendment No.
16.
(5)(a)(5) Form of Supplement to
Management Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Montgomery Select 50
Portfolio is filed herein.
(5)(b) Investment Advisory Agreement
between TCW Funds Management,
Inc. and Endeavor Investment
Advisers with respect to the
Money Market Portfolio and
Managed Asset Allocation
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(5)(c) Deleted
(5)(d) Deleted
(5)(e) Deleted
(5)(f) Investment Advisory
Agreement between Quest
for Value Advisors and
Endeavor Investment
Advisers with respect to
Quest for Value Equity
Portfolio is incorporated
by reference to
Post-Effective Amendment
No.
14.
(5)(g) Investment Advisory Agreement
between The Boston Company
Asset Management, Inc. and
Endeavor Investment Advisers
with respect to the U.S.
Government Securities Portfolio
is incorporated by reference to
Post-Effective Amendment No.
14.
(5)(g)(1) Transfer and Assumption of
Investment Advisory Agreement
among The Boston Company Asset
Management, Inc., The Dreyfus
Corporation, Endeavor
Investment Advisers and
Registrant with respect to the
Dreyfus U.S. Government
Securities Portfolio is
incorporated by reference to
<PAGE>
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
<PAGE>
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 Montgomery Select 50
Portfolio is filed
herein.
(6) Participation Agreement between
Registrant, Endeavor Management
Co. and PFL Life Insurance
Company is incorporated by
reference to Post-Effective
Amendment No. 14.
(7) Not Applicable.
(8)(a) Custody Agreement between
Registrant and Boston Safe
Deposit and Trust Company is
incorporated by reference to
Post-Effective Amendment No.
14.
(8)(b) Supplement dated April
19, 1993 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the Quest for Value
Equity Portfolio and
Quest for Value Small Cap
Portfolio is incorporated
by reference to
Post-Effective Amendment
No.
14.
(8)(c) Supplement dated December 30,
1994 to Custody Agreement
between Registrant and Boston
Safe Deposit and Trust Company
with respect to the T. Rowe
Price Equity Income Portfolio
and T. Rowe Price Growth Stock
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(8)(d) Supplement dated March 25, 1994
to Custody Agreement between
Registrant and Boston Safe
Deposit and Trust Company with
respect to the U.S. Government
Securities Portfolio is
incorporated by reference to
<PAGE>
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 Montgomery Select 50
Portfolio is filed
herein.
(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
Advisors, Inc., with respect to
the Quest for Value Equity
Portfolio and Quest for Value
<PAGE>
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) Amended and Restated
Administration Agreement dated
<PAGE>
as of July 1, 1997 between
Endeavor Investment Advisers
and First Data Investor
Services Group, Inc. - to be
filed by amendment.
(10) Not Applicable.
(11) Consent of Independent Auditors
is filed herein.
(12) Not Applicable.
(13) Subscription Agreement
between Registrant and
PFL Life Insurance
Company is incorporated
by reference to
Post-Effective Amendment
No.
14.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(17)
Not Applicable.
(18) Not Applicable.
(19) Powers of Attorney are
incorporated by reference to
Post-Effective Amendment
Nos. 14 and 16 and are filed
herein.
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
<PAGE>
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 June 30, 1997,
of the shares of beneficial interest of the Registrant.
Number of
Record
Title of Class Holders
Shares of Beneficial Interest of the
TCW Money Market Portfolio..........................3
Shares of Beneficial Interest of the
TCW Managed Asset Allocation
Portfolio...........................................3
Shares of Beneficial Interest of the
Value Equity Portfolio..............................3
Shares of Beneficial Interest of the
Value Small Cap Portfolio...........................3
Shares of Beneficial Interest of the
Dreyfus U.S. Government Securities
Portfolio...........................................3
Shares of Beneficial Interest of the
T. Rowe Price International Stock
Portfolio...........................................3
Shares of Beneficial Interest of the
T. Rowe Price Equity Income Portfolio...............3
Shares of Beneficial Interest of the
T. Rowe Price Growth Stock Portfolio................3
Shares of Beneficial Interest of the
Opportunity Value Portfolio.........................3
Shares of Beneficial Interest of the
Enhanced Index Portfolio. . . . . . ................ 3
Shares of Beneficial Interest of the
Montgomery Select 50 Portfolio......................0
Item 27. INDEMNIFICATION
<PAGE>
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as
filed as Exhibits 1(a) - 1(h) hereto;
Amended and Restated By-Laws as filed as Exhibit 2
hereto; and
Participation Agreement between Registrant, Endeavor
Management Co. and PFL Life Insurance Company as
filed as Exhibit 6 hereto.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant, its Trustees and officers, Endeavor Investment Advisers
(the "Manager"), and persons affiliated with them are insured under a policy of
insurance maintained by the Registrant and the Manager within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of actions suits or proceedings, and certain liabilities that
might me imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
Item 28. (a) Business and Other Connections of the
Investment Adviser
Investment Adviser - Endeavor Investment Advisers
<PAGE>
The Manager is a registered investment adviser providing
investment management and administrative services to the Registrant.
The list required by this Item 28 of partners and their
officers and directors of the Manager together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years is incorporated by
reference to Schedule B and D of Form ADV filed by the Manager pursuant to the
Investment Advisers Act of 1940 (SEC No.
801-41827).
Item 28. (a) Business and Other Connections of Investment
Adviser
Investment Adviser - TCW Funds Management, Inc.
TCW Funds Management, Inc. ("TCW") is a wholly owned
subsidiary of The TCW Group, Inc. whose direct and indirect subsidiaries,
including Trust Company of the West and TCW Asset Management Company, provide a
variety of trust investment management and investment advisory services.
The list required by this Item 28 of officers and directors of
TCW, together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by TCW pursuant to the Investment Advisers Act of 1940 (SEC file
No. 801-29075).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - OpCap Advisors
OpCap Advisors ("OpCap") (formerly known as Quest for Value
Advisors) is a subsidiary of Oppenheimer Capital, a registered investment
adviser, which provides a variety of investment management services for clients.
OpCap manages registered investment companies other than certain Portfolios of
the Registrant.
The list required by this Item 28 of the officers and
directors of OpCap, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules D and F of Form ADV filed by OpCap pursuant to the Investment Advisers
Act of 1940 (SEC file No. 801-27180).
<PAGE>
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") is a wholly owned
subsidiary of Mellon Bank, N.A. Dreyfus is a registered investment adviser
founded in 1947 providing a variety of investment management services for
clients.
The list required by this Item 28 of the officers and
directors of Dreyfus, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by Dreyfus pursuant to the Investment
Advisers Act of 1940 (SEC file No. 801-8147).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price")
serves as investment manager to a variety of individual and
institutional investors, including limited and real estate
partnerships and other mutual funds.
The list required by this Item 28 of officers and directors of
T. Rowe Price together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by T. Rowe Price pursuant to the Investment Advisers Act
of 1940 (SEC file No. 801-856).
Item 28 (a) Business and Other Connections of Investment
Adviser
Investment Adviser - Rowe Price-Fleming
International, Inc.
Rowe Price-Fleming International, Inc. ("Price- Fleming") is a
joint venture between T. Rowe Price and Robert Fleming Holdings Limited
("Flemings"). Flemings is a diversified investment organization which
participates in a global network of regional investment offices in New York,
London, Zurich, Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, South Africa and
Taiwan.
The list required by this Item 28 of officers and directors of
Price-Fleming, together with information as to any other business, profession,
vocation or employment of a
<PAGE>
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,
L.P.
Montgomery Asset Management, L.P. ("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
<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 Montgomery 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.
<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 17th day
of July, 1997.
ENDEAVOR SERIES TRUST
Registrant
By: /s/James R. McInnis*
James R. McInnis
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the date(s) indicated.
Signature Title Date
/s/James R. McInnis* President July 17, 1997
James R. McInnis (Principal executive
officer)
/s/Michael J. Roland* Chief Financial
Officer July 17, 1997
Michael J.Roland (Treasurer)
(principal
financial and
accounting
officer)
/s/Vincent J. McGuinness* Trustee July 17, 1997
Vincent J. McGuinness
/s/Timothy A. Devine* Trustee July 17, 1997
Timothy A. Devine
/s/Thomas J. Hawekotte* Trustee July 17, 1997
Thomas J. Hawekotte
<PAGE>
/s/Steven L. Klosterman* Trustee July 17, 1997
Steven L. Klosterman
/s/Halbert D. Lindquist* Trustee July 17, 1997
Halbert D. Lindquist
/s/R. Daniel Olmstead* Trustee July 17, 1997
R. Daniel Olmstead
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
<PAGE>
CERTIFICATE OF DESIGNATION ESTABLISHING A PORTFOLIO OF
ENDEAVOR SERIES TRUST DESIGNATED
"MONTGOMERY SELECT 50 PORTFOLIO"
AND THE RIGHTS AND PREFERENCES OF A SERIES OF
SHARES OF BENEFICIAL INTEREST
Dated: July 8, 1997
<PAGE>
CERTIFICATE OF DESIGNATION ESTABLISHING A PORTFOLIO OF
ENDEAVOR SERIES TRUST DESIGNATED
"MONTGOMERY SELECT 50 PORTFOLIO" AND
THE RIGHTS AND PREFERENCES OF A SERIES OF
SHARES OF BENEFICIAL INTEREST
The undersigned, being an officer of Endeavor Series Trust (the
"Trust"), a trust with transferable shares under Massachusetts law established
under an Agreement and Declaration of Trust dated November 18, 1988 and filed on
such date in the offices of the Secretary of State of the Commonwealth and of
the City Clerk of the City of Boston in accordance with the requirements of
Chapter 182 of the General Laws of Massachusetts (the "Declaration"), acting
pursuant to Section 8.4 of the Declaration, DOES HEREBY CERTIFY:
1. That, pursuant to the authority conferred upon the Trustees of the
Trust by Section 3.1 of the Declaration, the Trustees have established a Series
to be designated "MONTGOMERY SELECT 50 PORTFOLIO".
2. That the Shares of MONTGOMERY SELECT 50 PORTFOLIO
have the following relative rights and preferences set forth
in Section 3.6 of the Declaration, to wit:
<PAGE>
(a) Assets Belonging to Series. Any portion of the Trust
property allocated to a particular Series, and all consideration received by the
Trust for the issue or sale of Shares of such Series, together with all assets
in which such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall be held by the Trustees in trust for the benefit of
the Shareholders of that Series and shall irrevocably belong to that Series for
all purposes, and shall be so recorded upon the books and accounts of the Trust,
and the Shareholders of such Series shall not have, and shall be conclusively
deemed to have waived, any claims to the assets of any Series of Shares of which
they are not Shareholders. Such consideration, assets, interest, dividends,
income, earnings, profits, gains and proceeds, together with any general items
allocated to that Series as provided in the following sentence, are herein
referred to collectively as "assets belonging to" that Series. In the event that
there are any assets, interest, dividends, income, earnings, profits, gains and
proceeds which are not readily identifiable as belonging to any particular
Series, the Trustees shall allocate such general items to and among any
<PAGE>
one or more of the Series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable; and any general items so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Series for all purposes.
(b) Liabilities of Series. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as pertaining to any particular Series
shall be allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as the Trustees, in their sole discretion, deem fair and equitable.
The indebtedness, expenses, costs, charges and reserves allocated and so charged
to a particular Series are herein referred to as "liabilities of" that Series.
Each allocation of liabilities,expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. All persons who have extended credit which has been allocated to a
<PAGE>
particular Series, or who have a claim or contract which has been allocated to
any particular Series, shall look only to the assets of that particular Series
for payment of such credit, claim or contract.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets belonging to
such Series, nor, except as specifically provided in Section 7.7 hereof, shall
any Shareholder of any particular Series otherwise have any right or claim
against the assets belonging to any other Series except to the extent that such
Shareholder has such a right or claim hereunder as a Shareholder of such other
Series.
(d) Voting. The Shareholders of each particular
Series shall have the voting rights set forth in or determined
under Article VI hereof.
<PAGE>
(e) Equality. All Shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to that Series
(subject to the liabilities of that Series), and each Share of any particular
Series shall be equal to each other Share of that Series.
(f) Fractional Shares. Any fractional Share of any
Series shall carry proportionately all the rights and
obligations of a whole Share of that Series, including rights
with respect to voting, receipt of dividends and distributions, redemption of
Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series in accordance with
such requirements and procedures as may be established by the Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine any two or more Series into a
single Series.
<PAGE>
3. That the undersigned has been authorized pursuant to the vote of a
majority of the Trustees at a meeting duly held on July 8, 1997 to execute this
Certificate of Designation.
4. That the Trustees have directed pursuant to Section 8.4 of the
Declaration that, upon said execution and acknowledgement of this Certificate of
Designation, a copy hereof shall be filed with the Secretary of State of The
Commonwealth of Massachusetts and the City Clerk of the City of Boston, as well
as with any other governmental office where such filing may from time to time be
required.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
on this 8th day of July, 1997.
/s/James R. McInnis
------------------------
James R. McInnis
President
<PAGE>
SUPPLEMENT TO MANAGEMENT AGREEMENT
MONTGOMERY SELECT 50 PORTFOLIO
Date: , 1997
Endeavor Management Co.
Managing Partner
Endeavor Investment Advisers
Suite 300
2101 East Coast Highway
Corona del Mar, California 92625
Ladies and Gentlemen:
Endeavor Series Trust (the "Trust"), a Massachusetts business trust
created pursuant to an Agreement and Declaration of Trust filed with the
Secretary of State of The Commonwealth of Massachusetts, herewith supplements
its Management Agreement (the "Agreement") dated November 23, 1992 with Endeavor
Investment Advisers, a California general partnership (the "Manager"), as
follows:
1. Investment Description; Appointment. Pursuant to Section 1 of the
Agreement the Trust hereby notifies the Manager that it has established one
additional investment portfolio (the "New Investment Portfolio"), namely the
MONTGOMERY SELECT 50 PORTFOLIO and that the New Investment Portfolio should be
included as "Portfolios" as that term is defined in the Agreement.
2. Limitation of Liability. A copy of the Declaration of Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Agreement is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of this
Agreement are not binding upon the Trustees or holders of shares of the Trust
individually but are binding only upon the assets and property of the Trust.
<PAGE>
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
Very truly yours,
ENDEAVOR SERIES TRUST
By:
---------------------
Authorized Officer
Accepted:
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing Partner
By:
-----------------------------
Authorized Officer
<PAGE>
AMENDMENT TO
SCHEDULE A
MONTGOMERY SELECT 50 PORTFOLIO 1.10% of average daily net
assets
ENDEAVOR INVESTMENT ADVISERS ENDEAVOR SERIES TRUST
By: Endeavor Management Co.,
Managing Partner
By: By:
---------------------------- ------------------
Date: , 1997 Date: , 1997
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this th day of ,1997, by and between Montgomery Asset
Management, LLC, a California limited liability company (the "Adviser"), and
Endeavor Investment Advisers, a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Montgomery Select 50 Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
<PAGE>
2. Obligations of and Services to be Provided by the
Adviser. The Adviser undertakes to provide the following
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the investment objective and policies
of the Portfolio set forth in the Trust's Registration Statement, as such
Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the foregoing, the Adviser
shall make all determinations with respect to the purchase and sale of portfolio
securities and shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of Trustees and the
Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the
<PAGE>
foregoing compensation shall be prorated. For the purpose of determining fees
payable to the Adviser, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Trust's Registration
Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired; provided, however, that for a period from
the date hereof until the later of (i) one year from the date hereof and (ii)
only if the Portfolio's assets equal or exceed $200 million one year from the
date hereof, the term of this Agreement for so long as the Portfolio's net
assets equal or exceed $200 million (disregarding fluctuations below $200
million because of investment performance), the Adviser shall not provide
investment advisory services with respect to a fund substantially similar to the
Portfolio which is an investment option for a variable annuity or variable life
contract issued by an insurance company other than PFL Life Insurance Company.
5. Use of Names. The Adviser hereby consents to the Portfolio being
named the "Montgomery Select 50 Portfolio." The Manager shall not use the name
of the Adviser or any of its affiliates in any prospectus, sales literature or
other material relating to the Trust in any manner not approved prior thereto by
the Adviser; provided, however, that the Adviser shall approve all uses of its
name and that of its affiliates which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and, provided, further, that in no event shall such approval be
unreasonably withheld. The Adviser shall not use the name of the Trust or the
Manager in any material relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Montgomery" as part of their name, and that the Adviser or its
affiliates may enter into investment advisory, administration or other
agreements with such other entities. If the Adviser ceases to act as the
Portfolio's investment adviser pursuant to this Agreement, the Manager agrees
that, at the Adviser's request, it will cause
<PAGE>
the Trust to take all necessary action to change the name of the Portfolio to a
name not including "Montgomery" in any form or combination of words.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust. This Agreement shall
terminate automatically and immediately in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Adviser and the Manager, subject to approval
by the Trust's Board of Trustees
<PAGE>
and, if required by applicable SEC rules and regulations, a vote of a majority
of the Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished
by either party to this Agreement to the other shall be treated as confidential
and shall not be disclosed to third parties except as required by law.
10. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY:
-------------------------------
Authorized Officer
MONTGOMERY ASSET MANAGEMENT, LLC
BY:
-------------------------------
Authorized Officer
<PAGE>
SCHEDULE A
Montgomery Select 50
Portfolio .70% of average daily
net assets.
<PAGE>
c This Specimen Certificate is in landscape position.
################################################################
# #
# NUMBER The Commonwealth of Massachusetts SHARES #
# #
# -0- -0-
(There is a picture of the Capitol
# and an eagle between two pillars here)
# #
# #
# ENDEAVOR SERIES TRUST #
# #
# Montgomery Select 50 Portfolios #
# no par value #
# #
# #
#This Certifies that -Specimen- of is the owner of # -0- Shares in the Enhanced
Index Portfolio of Endeavor Series Trust, created by a Declaration of Trust
dated November 18, 1988 and recorded with the Secretary of State of The
Commonwealth of Massachusetts which shares are fully paid and non-assessable,
and subject to the provisions of this Trust, are transferable by assignment
endorsed thereon, and, the surrender of this
certificate. #
# #
#IN WITNESS WHEREOF, the Trustees hereunto set their hands and #
have caused their seal to be affixed hereto this day of
# A.D. 19 . #
# #
# #
# #
#President (There is a Seal Here) Chief Financial Officer#
# (Treasurer) #
# #
# #
# #
# #
###############################################################################
<PAGE>
This Side of The Certificate is in Landscape Position.
##############################################################################
#
# | ENDEAVOR SERIES TRUST | #
# | | #
# | Montgomery Select 50 | #
# | Portfolio | #
# | | #
# | (There is a Torch of | #
# | Fire Here) | #
# | | #
# | Certificate | #
# | for | #
# | | #
# | -0- | #
# | | #
# | ISSUED TO | #
# | | #
# | Specimen | #
# | | #
# | DATED | #
- ----------------------------------- ----------------
# (The following Text is Enclosed in the Border
# to the Left of the Above Text Reading
# in the Opposite Direction)
# #
# For Value Received, hereby sell, assign and #
transfer unto Shares of the #
Capital represented by the within Certificate, and do hereby #
irrevocably constitute and appoint Attorney #
to transfer the said Shares on the books of the within named Organization
with full power of substitution in the premises.
#
# #
# Dated 19 . #
# #
# In presence of #
# #
# #
##############################################################################
<PAGE>
SUPPLEMENT TO CUSTODY AGREEMENT
, 1997
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
Ladies and Gentlemen:
ENDEAVOR SERIES TRUST, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust"), hereby supplements
its agreement with BOSTON SAFE DEPOSIT AND TRUST COMPANY, a trust company
organized under the laws of the Commonwealth of Massachusetts (the "Custodian"),
as follows:
1. Compensation. Pursuant to Section 3(b) of the Custody Agreement
dated March 28, 1991 (the "Agreement"), the Trust and the Custodian hereby agree
that the Montgomery Select 50 Portfolio (the "Portfolio"), a new portfolio
series of the Trust, created and designated in accordance with the Trust's
Agreement and Declaration of Trust, shall be, considered Portfolios of the Trust
under the terms of the Agreement, and that the Domestic and Global Fee Schedules
currently in effect, and as may be amended from time to time, under the
Agreement shall apply to the Portfolios, as of the date and year first written
above.
2. Limitation of Liability. The term "Endeavor Series Trust" means and
refers to the Trustees from time to time serving under the Agreement and
Declaration of Trust dated November 18, 1988, as the same may subsequently
thereto have been, or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust, as provided in the
<PAGE>
Agreement and Declaration of Trust. The execution and delivery of this Agreement
have been authorized by the Trustees of the Trust and signed by an authorized
officer of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
its Agreement and Declaration of Trust.
If the foregoing is acceptable to you, kindly indicate your acceptance
by signing and returning the enclosed copy of this Supplement.
Very truly yours,
ENDEAVOR SERIES TRUST
By:
-------------------------
JAMES R. MCINNIS
Title: President
---------------------
Accepted and Agreed to:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
----------------------------
Title: Senior Vice President
-------------------------
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Independent
Auditors" in the Endeavor Series Trust Preliminary Prospectus and "Financial
Statements" in the Endeavor Series Trust Statement of Additional Information in
Post-Effective Amendment No. 18 to the Registration Statement (Form N-1A, No.
33-27352) dated July 18, 1997.
We also consent to the incorporation by reference therein of our report dated
February 10, 1997, with respect to the financial statements and financial
highlights of Endeavor Series Trust in the Form N-1A.
ERNST & YOUNG LLP
Boston, Massachusetts
July 17, 1997
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute and appoint Robert N. Hickey my
true and lawful attorney and agent, with full power to him to sign for myself,
and in my name and in the capacity indicated below, any and all Registration
Statements on Form N-1A of Endeavor Series Trust, and any and all amendments
thereto, and to file the same, with all exhibits thereto and other documents in
connection thereunder with the Securities and Exchange Commission, granting unto
said attorney and agent full power and authority to do and perform each and
every act and thing requisite or necessary to be done in connection therewith as
fully to all intents and purposes as I might or could do in person, with full
power of substitution and revocation; and I do hereby ratify and confirm all
that said attorney and agent may lawfully do or cause to be done by virtue of
this power of attorney.
WITNESS my hand as of the 17th day of July, 1997.
/s/Michael J. Roland
- ----------------------------
Michael J. Roland
Chief Financial Officer (Treasurer)
(principal financial and accounting officer)
<PAGE>
