ENDEAVOR SERIES TRUST
497, 1998-05-05
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Prospectus



   
                             ENDEAVORSM SERIES TRUST
    


         Endeavor   Series  Trust  (the  "Fund")  is  a  diversified,   open-end
management  investment  company  that offers a selection  of managed  investment
portfolios,  each with its own investment  objective  designed to meet different
investment  goals.  There can be no assurance that these  investment  objectives
will be achieved.

   
         This Prospectus describes only the following  four
    
portfolios currently offered by the Fund (the "Portfolios").
       
   
         o        Endeavor Value Equity Portfolio
         o        Dreyfus Small Cap Value Portfolio
         
    
o        T. Rowe Price Equity Income Portfolio
         o        T. Rowe Price Growth Stock Portfolio
       
THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

   
         This Prospectus sets forth concisely the information about the Fund and
the Portfolios that a prospective investor should know before investing.  Please
read the Prospectus and retain it for future reference.  Additional  information
contained in a Statement of  Additional  Information  also dated May 1, 1998 has
been  filed with the  Securities  and  Exchange  Commission  (the  "SEC") 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.  In
addition,  the SEC  maintains a website  (http://www.sec.gov)  that contains the
Statement of Additional  Information and other  information  regarding the Fund.
The Statement of Additional  Information is  incorporated by reference into this
Prospectus.
    

The date of this Prospectus is May 1, 1998.

                                                        -1-

<PAGE>



   
EndeavorSM is a registered service mark of Endeavor Management Co.
    

                                                        -2-

<PAGE>




                                    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,  four of which
are offered pursuant to this Prospectus.  The Trustees of the Fund may establish
additional portfolios at any time.
    

         Shares of the  Portfolios  are issued and  redeemed  at their net asset
value without a sales load and  currently  are offered only to various  separate
accounts of PFL Life Insurance Company and certain of its affiliates  ("PFL") to
fund various insurance  contracts,  including  variable life insurance  policies
(whether  scheduled  premium,  flexible  premium or single premium  policies) or
variable annuity contracts.  These insurance contracts are hereinafter  referred
to as the  "Contracts."  The rights of PFL as the  record  holder for a separate
account of shares of the  Portfolios  are different from the rights of the owner
of a Contract.  The terms  "shareholder"  or  "shareholders"  in this Prospectus
refer to PFL and not to any Contract owner.

         The  structure  of  the  Fund  permits  Contract  owners,   within  the
limitations  described in the appropriate Contract, to allocate the amounts held
by PFL under the Contracts for investment in the various portfolios of the Fund.
See the  prospectus  and  other  material  accompanying  this  Prospectus  for a
description  of the  Contracts,  which  portfolios  of the Fund are available to
Contract owners, and the relationship  between increases or decreases in the net
asset value of shares of the portfolios (and any dividends and  distributions on
such shares) and the benefits provided under the Contracts.

         It is  conceivable  that in the  future it may be  disadvantageous  for
scheduled premium variable life insurance separate accounts, flexible and single
premium variable life insurance separate accounts, and variable annuity separate
accounts   to   invest   simultaneously   in  the  Fund  due  to  tax  or  other
considerations.  The  Trustees  of the Fund  intend to  monitor  events  for the
existence  of  any  irreconcilable  material  conflict  between  or  among  such
accounts, and PFL will take whatever remedial action may be necessary.

Investment Objectives

         The investment objectives of the Portfolios are as follows:

                                                        -3-

<PAGE>



       
         Endeavor Value Equity Portfolio  (formerly,  Value Equity  Portfolio) -
seeks  long-term  capital  appreciation  through  investment  in  a  diversified
portfolio  of  equity  securities  selected  on the  basis  of a value  oriented
approach to investing.

         Dreyfus Small Cap Value Portfolio (formerly, Value Small Cap Portfolio)
- - seeks capital  appreciation  through investment in a diversified  portfolio of
equity   securities  of  companies  with  a  median  market   capitalization  of
approximately  $750 million,  provided  that under normal  market  conditions at
least  75% of the  Portfolio's  investments  will  be in  equity  securities  of
companies with  capitalizations at the time of purchase between $150 million and
$1.5 billion.

       
         T. Rowe Price Equity  Income  Portfolio - seeks to provide  substantial
dividend  income  and  also  capital  appreciation  by  investing  primarily  in
dividend-paying common stocks of established companies.

         T. Rowe Price Growth Stock Portfolio - seeks long-term
growth of capital and to increase dividend income through

                                                        -4-

<PAGE>



investment primarily in common stocks of well-established growth
companies.

       
                              FINANCIAL HIGHLIGHTS

         The  following  tables  are  based  on a  Portfolio  share  outstanding
throughout  each  period and should be read in  conjunction  with the  financial
statements  and related  notes that  appear in the Fund's  Annual  Report  dated
December 31, 1997 which financial  statements are incorporated by reference into
the Statement of Additional  Information.  The financial statements contained in
the Fund's  Annual  Report have been  audited by Ernst & Young LLP,  independent
auditors,  whose report  appears in the Annual  Report.  Additional  information
concerning  the  performance  of the Fund is included in the Annual Report which
may be  obtained  without  charge by writing the Fund at the address on the back
cover of this Prospectus.


                                                        -5-

<PAGE>



   
ENDEAVOR  VALUE EQUITY PORTFOLIO*
    

       
                                                        -6-

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                                                        -7-

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                                                       -19-

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<TABLE>
<CAPTION>


       
                           Year                     Year                  Year               Year               Period
                           Ended                    Ended                 Ended              Ended              Ended
                           12/31/97                 12/31/96+++           12/31/95           12/31/94           12/31/93*+++
                           --------                 -----------           --------           --------           ------------
<S>                        <C>                      <C>                   <C>                <C>                <C>



                                                       -20-

<PAGE>




Operating
performance:

Net asset
value,
beginning of
period                     $17.21                   $14.23                $10.69             $10.28             $10.00
                            -----                    -----                 -----              -----              -----

Net investment
income#                    0.20                     0.20                  0.15               0.09               0.05

Net realized
and unrealized
gain on
investments                3.96                     3.15                  3.52               0.33               0.23
                           ----                     ----                  ----               ----               ----

Net increase in
net assets
resulting from
investment
operations                 4.16                     3.35                  3.67               0.42               0.28
                           ----                     ----                  ----               ----               ----

Distributions:

Dividends from
net investment
income                     (0.14)                   (0.13)                (0.09)             (0.01)             ---

Distributions
from net
realized gains             (0.53)                   (0.24)                (0.04)             ---                ---
                           ------                   ------                ------             ---                ---

Total
distributions              (0.67)                   (0.37)                (0.13)             (0.01)             ---
                           ------                   ------                ------             ------             ---

Net asset
value, end of
period                     $20.70                   $17.21                $14.23             $10.69             $10.28
                            =====                    =====                 =====              =====              =====

Total return++             24.81%                   23.84%                34.59%             4.09%              2.80%
                           =====                    =====                 =====              ====               ====

Ratios to
average net
assets/
supplemental
data:



                                                       -21-

<PAGE>




Net assets, end
of period (in
000's)                     $216,039                 $127,927              $68,630            $32,776            $11,178

Ratio of net
investment
income to
average net
assets                     1.39%                    1.29%                 1.56%              1.31%              0.84%+

Ratio of
operating
expenses to
average net
assets                     0.89%***                 0.91%                 0.86%              1.02%              1.30%+**

Portfolio
turnover rate              16%                      27%                   28%                56%                1%

Average
commission rate
(per share of
security)(a)               $0.0515                  $0.0569               ---                ---                ---
</TABLE>

- -----------------------
*        Effective  May 1,  1998,  the name of the Value  Equity  Portfolio  was
         changed to Endeavor Value Equity Portfolio.  Effective May 1, 1996, the
         name of the Quest for  Value  Equity  Portfolio  was  changed  to Value
         Equity Portfolio. The Portfolio commenced operations on May 27, 1993.

**       Annualized  operating expense ratio before waiver of fees by investment
         manager for the period ended December 31, 1993 was 2.10%.

***      Annualized  operating  expense  ratio  before  credits  allowed  by the
         custodian for the year ended December 31, 1997 was 0.89%.

+        Annualized.

++       Total  return  represents   aggregate  total  return  for  the  periods
         indicated.  The total  return of the  Portfolio  does not  reflect  the
         charges against the separate accounts of PFL or the Contracts.

+++      Per share amounts have been calculated  using the monthly average share
         method  which more  appropriately  presents the per share data for this
         period since use of the

                                                       -22-

<PAGE>



         undistributed method did not accord with results of
         operations.

#        Net investment income before fees waived by investment  manager for the
         period ended December 31, 1993 was $0.00.

(a)      Average commission rate paid per share of securities purchased and sold
         by the Portfolio.

                                                       -23-

<PAGE>


<TABLE>
<CAPTION>


DREYFUS SMALL CAP VALUE PORTFOLIO*



                          Year               Year                      Year               Year                  Period
                          Ended              Ended                     Ended              Ended                 Ended
                          12/31/97           12/31/96+++##             12/31/95           12/31/94+++           12/31/93*+++
                          --------           -------------             --------           -----------           ------------
<S>                       <C>                <C>                       <C>                <C>                   <C>

Operating
performance:

Net asset
value,
beginning of
period                    $14.69             $12.22                    $10.98             $11.18                $10.00
                           -----              -----                     -----              -----                 -----

Net investment
income#                   0.02               0.12                      0.15               0.10                  0.22

Net realized
and unrealized
gain/(loss) on
investments               3.52               2.95                      1.36               (0.30)                0.96
                          ----               ----                      ----               ------                ----

Net increase/
(decrease) in
net assets
resulting from
investment
operations                3.54               3.07                      1.51               (0.20)                1.18
                          ----               ----                      ----               ------                ----

Distributions:

Dividends from
net investment
income                    (0.10)             (0.14)                    (0.10)             ---                   ---

Distributions
from net
realized gains            (1.72)             (0.46)                    (0.17)             ---                   ---
                          ------             ------                    ------             ---                   ---

Total
distributions             (1.82)             (0.60)                    (0.27)             ---                   ---
                          ------             ------                    ------             ---                   ---

Net asset
value, end of
period                    $16.41             $14.69                    $12.22             $10.98                $11.18
                           =====              =====                     =====              =====                 =====



                                                       -24-

<PAGE>




Total return++            25.56%             25.63%                    14.05%             (1.79)%               11.80%
                          =====              =====                     =====              ======                ======

Ratios to
average net
assets/
supplemental
data:

Net assets,
end of period
(in 000's)                $146,195           $85,803                   $52,597            $35,966               $12,699

Ratio of net
investment
income to
average net
assets                    0.20%              0.95%                     1.56%              0.89%                 3.98%+

Ratio of
operating
expenses to
average net
assets                    0.91%***           0.92%                     0.87%              1.03%                 1.30%+**

Portfolio
turnover rate             127%               171%                      75%                77%                   41%

Average
commission
rate (per
share of
security) (a)             $0.0533            $0.0539                   ---                ---                   ---
</TABLE>

- -----------------------
*        Effective  October 29, 1996,  the name of the Value Small Cap Portfolio
         was changed to Dreyfus Small Cap Value  Portfolio.  On May 1, 1996, the
         name of the Quest for Value  Small Cap  Portfolio  was changed to Value
         Small Cap Portfolio. The Portfolio commenced operations on May 4, 1993.

**       Annualized  operating expense ratio before waiver of fees by investment
         manager for the period ended December 31, 1993 was 2.10%.

***      Annualized  operating  expense  ratio  before  credits  allowed  by the
         custodian for the year ended December 31, 1997 was 0.91%.

+        Annualized.

                                                       -25-

<PAGE>



++       Total  return  represents   aggregate  total  return  for  the  periods
         indicated.  The total  return of the  Portfolio  does not  reflect  the
         charges against the separate accounts of PFL or the Contracts.

+++      Per share amounts have been calculated  using the monthly average share
         method  which more  appropriately  presents the per share data for this
         period  since  use of the  undistributed  method  did not  accord  with
         results of operations.

#        Net investment income before fees waived by investment  manager for the
         period ended December 31, 1993 was $0.18.

##       The Dreyfus Corporation became the Portfolio's Adviser
         effective September 16, 1996.

(a)      Average commission rate paid per share of securities purchased and sold
         by the Portfolio.

                                                       -26-

<PAGE>

<TABLE>
<CAPTION>



   
 T. ROWE PRICE EQUITY INCOME
PORTFOLIO



                                             Year                           Year                     Year
                                             Ended                          Ended                    
                                             12/31/97                       12/31/96+++              
    
       
                                                                                                     Ended
   
                                                                                                     
                                                                                                     12/31/95*+++
    
<S>                                          <C>                            <C>                      <C>

Operating performance:

Net asset value,
beginning of period                          $15.49                         $13.05                   $10.00
                                              -----                          -----                    -----




                                                       -27-

<PAGE>




       
                                                       -28-

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                                                       -29-

<PAGE>




       
Net investment income                        0.25                           0.41                     0.34

Net realized and
unrealized gain on
investments                                  4.06                           2.17                     2.71
                                             ----                           ----                     ----

Net increase in net
assets resulting from
investment operations                        4.31                           2.58                     3.05
                                             ----                           ----                     ----

Distributions:

Dividends from net
investment income                            (0.19)                         (0.10)                   ---

Distribution from net
realized gains                               (0.27)                         (0.04)                   ---
                                             ------                         ------                   ---

Total distributions                          (0.46)                         (0.14)                   ---
                                             ------                         ------                   ---



                                                       -30-

<PAGE>




Net asset value, end
of period                                    $19.34                         $15.49                   $13.05
                                              =====                          =====                    =====

Total return++                               28.27%                         19.88%                   30.50%
                                             =====                          =====                    =====

Ratios to average net
assets/supplemental
data:

Net assets, end of
period (in 000's)                            $197,228                       $78,251                  $21,910

Ratio of net
investment income to
average net assets                           2.47%                          2.89%                    3.24%+

Ratio of operating
expenses to average
net assets                                   0.94%**                        0.96%                    1.15%+

Portfolio turnover
rate                                         23%                            19%                      16%

Average commission
rate (per share of
security) (a)                                $0.0331                        $0.0396                  ---

</TABLE>

- --------------------------
*        The Portfolio commenced operations on January 3, 1995.

**       Annualized  operating  expense  ratio  before  credits  allowed  by the
         custodian for the year ended December 31, 1997 was 0.94%.

+        Annualized.

++       Total  return  represents   aggregate  total  return  for  the  periods
         indicated.  The total  return of the  Portfolio  does not  reflect  the
         charges against the separate accounts of PFL or the Contracts.


                                                       -31-

<PAGE>



+++      Per share amounts have been calculated  using the monthly average share
         method  which more  appropriately  presents  the per share data for the
         period  since  use of the  undistributed  method  did not  accord  with
         results of operations.

(a)      Average commission rate paid per share of securities purchased and sold
         by the Portfolio.

                                                       -32-

<PAGE>

<TABLE>
<CAPTION>



T. ROWE PRICE GROWTH STOCK PORTFOLIO



                                            Year                       Year                     Year
                                            Ended                      Ended                    Ended
                                            12/31/97                   12/31/96+++              12/31/95*+++
<S>                                         <C>                        <C>                      <C>

Operating performance:

Net asset value,
beginning of period                         $16.29                     $13.72                   $10.00
                                             -----                      -----                    -----

Net investment income                       0.04                       0.11                     0.08

Net realized and
unrealized gain on
investments                                 4.59                       2.71                     3.64
                                            ----                       ----                     ----

Net increase in net
assets resulting from
investment operations                       4.63                       2.82                     3.72
                                            ----                       ----                     ----

Distributions:

Dividends from net
investment income                           (0.03)                     (0.01)                   ---

Distributions from net
realized gains                              (0.11)                     (0.24)                   ---
                                            ------                     ------                   ---

Total distributions                         (0.14)                     (0.25)                   ---
                                            ------                     ------                   ---

Net asset value, end
of period                                   $20.78                     $16.29                   $13.72
                                             =====                      =====                    =====

Total return++                              28.57%                     20.77%                   37.20%
                                            =====                      =====                    ======



                                                       -33-

<PAGE>




Ratios to average net
assets/supplemental
data:

Net assets, end of
period (in 000's)                           $123,230                   $59,732                  $21,651

Ratio of net
investment income to
average net assets                          0.38%                      0.75%                    0.69%+

Ratio of operating
expenses to average
net assets                                  0.96%**                    1.01%                    1.26%+

Portfolio turnover                          41%                        44%                      64%
rate

Average commission
rate (per share of
security) (a)                               $0.0376                    $0.0385                  ---
</TABLE>

- --------------------
*        The Portfolio commenced operations on January 3, 1995.

**       Annualized  operating  expense  ratio  before  credits  allowed  by the
         custodian for the year ended December 31, 1997 was 0.96%.

+        Annualized.

++       Total  return  represents   aggregate  total  return  for  the  periods
         indicated.  The total  return of the  Portfolio  does not  reflect  the
         charges against the separate accounts of PFL or the Contracts.

+++      Per share amounts have been calculated  using the monthly average share
         method  which more  appropriately  presents  the per share data for the
         period  since  use of the  undistributed  method  did not  accord  with
         results of operations.

(a)      Average commission rate paid per share of securities purchased and sold
         by the Portfolio.


                                                       -34-

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                                                       -38-

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                                               --------------------

   
         Endeavor  Investment   Advisers  (the  "Manager")  has  agreed,   until
terminated by the Manager,  to assume expenses of the Portfolios that exceed the
rates stated  below.  This has the effect of lowering each  Portfolio's  expense
ratio and of  increasing  returns  otherwise  available to investors at the time
such amounts are assumed.  While this arrangement is in effect, the Manager pays
all  expenses  of the  Portfolios  to  the  extent  they  exceed  the  following
percentages of a Portfolio's average net assets:  Endeavor Value Equity - 1.30%,
Dreyfus Small Cap Value -1.30%,  T. Rowe Price Equity Income - 1.30% and T. Rowe
Price Growth Stock - 1.30%

 .
    


                       INVESTMENT OBJECTIVES AND POLICIES

         The following is a brief  description of the investment  objectives and
policies of the  Portfolios.  The investment  objective and the policies of each
Portfolio other than those listed under the caption "Investment Restrictions" in
the Statement of Additional  Information are not fundamental policies and may be
changed by the  Trustees  of the Fund  without  the  approval  of  shareholders.
Certain  portfolio  investments and techniques  discussed below are described in
greater  detail  in  the  Statement  of  Additional  Information.   Due  to  the
uncertainty  inherent in all  investments,  there can be no  assurance  that the
Portfolios will be able to achieve their respective investment objectives.

   
Endeavor  Value Equity Portfolio

         The  investment  objective  of the Endeavor  Value Equity  Portfolio is
long-term  capital  appreciation  through  investment in  securities  (primarily
equity securities) of companies that are believed by the Portfolio's  Adviser to
be undervalued in
    

                                                       -39-

<PAGE>



   
the marketplace in relation to factors such as the companies'
assets or earnings.

         It is the Portfolio  Adviser's  intention to invest in securities which
in its opinion possess one or more of the following characteristics: undervalued
assets,  valuable consumer or commercial franchises,  securities valuation below
peer  companies,  substantial  and growing cash flow and/or a favorable price to
book value relationship.

         Investment  policies aimed at achieving the  Portfolio's  objective are
set in a flexible  framework of securities  selection which  primarily  includes
equity  securities,   such  as  common  stocks,  preferred  stocks,  convertible
securities,  rights and  warrants in  proportions  which vary from time to time.
Under  normal  circumstances  at least  65% of the  Portfolio's  assets  will be
invested in common  stocks or securities  convertible  into common  stocks.  The
Portfolio will invest primarily in stocks listed on the New York Stock Exchange.
In addition, it may also purchase securities listed on other domestic securities
exchanges  or  traded  in  the  domestic  over-the-counter  market  and  foreign
securities that are listed on a domestic or foreign securities exchange,  traded
in the domestic or foreign  over-the-counter  markets or represented by American
Depositary Receipts.
    

       
   
In the event that  future  economic or  financial  conditions  adversely  affect
equity  securities,  or stocks are  considered  overvalued,  or the  Portfolio's
Adviser  believes that investing for defensive  purposes is  appropriate,  or in
order to meet anticipated  redemption requests, the Portfolio may invest part or
all of its assets in U.S. government securities and high quality
    

                                                       -40-

<PAGE>



   
short-term  debt  securities  (with  remaining  maturities  of one year or less)
including certificates of deposit, bankers' acceptances
    

       
                                                       -41-

<PAGE>



       
                                                       -42-

<PAGE>



   
, commercial paper, short-term corporate securities and repurchase agreements.

         The  Portfolio  may  invest in  certain  foreign  securities  which may
represent a greater degree of risk than investing in domestic securities.  These
risks are discussed in "Investment Strategies - Foreign Securities."
    

       
                                                       -43-

<PAGE>



   
It is the present intention of the Portfolio's Adviser to invest no more than 5%
of the  Portfolio's  net assets in bonds rated  below Baa3 by Moody's  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").  In the event  that the  Portfolio's  Adviser  intends in the
future  to invest  more than 5% of the  Portfolio's  net  assets in junk  bonds,
appropriate  disclosures will be made to existing and prospective  shareholders.
For  information  about  the  possible  risks of  investing  in junk  bonds  see
"Investment  Strategies  - Risk  Factors  Relating  to  Investing  in High Yield
Securities."

         The  Portfolio  may  employ  certain  investment  strategies  which are
discussed under the caption  "Investment  Strategies" below and in the Statement
of Additional Information.

 Dreyfus Small Cap Value Portfolio

         The investment objective of the Dreyfus Small Cap Value Portfolio is to
seek capital  appreciation  through  investments  in a diversified  portfolio of
equity

securities of companies  with a median market  capitalization  of  approximately
$750 million,  provided that under normal market  conditions at least 75% of the
Portfolio's investments will be in equity securities of companies with
    

                                                       -44-

<PAGE>



   
capitalizations at the time of purchase between $150 million and
$1.5 billion.

         Small-capitalization companies are often under-priced for the following
reasons:  (i) institutional  investors,  which currently represent a majority of
the trading volume in the shares of  publicly-traded  companies,  are often less
interested in such companies because in order to acquire an equity position that
is large enough to be meaningful to an institutional  investor, such an investor
may be required to buy a large  percentage of the company's  outstanding  equity
securities  and (ii) such  companies  may not be regularly  researched  by stock
analysts, thereby resulting in greater discrepancies in valuation.

         The Portfolio will invest in

equity securities of domestic and foreign (up to 5% of its total assets) issuers
which  would  be  characterized  as  "value"  companies  according  to  criteria
established by the Portfolio's Adviser. To manage the Portfolio, the Portfolio's
Adviser  classifies issuers as "growth" or "value"  companies.  In general,  the
Portfolio's  Adviser  believes that companies with  relatively low price to book
ratios, low price to earnings ratios or higher than average dividend payments in
relation  to price  should  be  classified  as value  companies.  Alternatively,
companies  which have above  average  earnings or sales growth and  retention of
earnings and command higher price to earnings ratios fit the more classic growth
description.

         While seeking desirable equity investments, the Portfolio may invest in
money market instruments consisting of U.S. government securities,  certificates
of deposit,  time deposits,  bankers'  acceptances,  short-term investment grade
corporate  bonds  and  other   short-term  debt   instruments,   and  repurchase
agreements.  Under normal market  conditions,  the Portfolio  does not expect to
have a substantial  portion of its assets invested in money market  instruments.
However,  when the Portfolio's Adviser determines that adverse market conditions
exist, the Portfolio may adopt a temporary  defensive  posture and invest all of
its assets in money market instruments.
    

                                                       -45-

<PAGE>



   
         Equity  securities  consist  of common  stocks,  preferred  stocks  and
securities convertible into common stocks. Securities purchased by the Portfolio
will be traded on the New York Stock Exchange, the American Stock Exchange or in
the  over-the-counter  market, and will also include options,  warrants,  bonds,
notes and debentures  which are convertible  into or exchangeable for , or which
grant a right to purchase or sell, such securities.  In addition,  the Portfolio
may purchase  securities issued by closed-end  investment  companies and foreign
securities that are listed on a domestic or foreign securities exchange,  traded
in  domestic  or foreign  over-the-counter  markets or  represented  by American
Depositary Receipts.

         The  Portfolio  is expected to have  greater  risk  exposure and reward
potential  than  a  fund  which  invests   primarily  in   larger-capitalization
companies. The trading volumes of securities of smaller-capitalization companies
are  normally  less than those of  larger-capitalization  companies.  This often
translates  into greater price swings,  both upward and downward.  Since trading
volumes are lower,  new demand for the securities of such companies could result
in  disproportionately  large  increases  in the price of such  securities.  The
waiting period for the achievement of an investor's  objectives  might be longer
since these securities are not closely monitored by research analysts and, thus,
it takes more time for investors to become aware of fundamental changes or other
factors which have motivated the  Portfolio's  purchase.  Smaller-capitalization
companies often
    

                                                       -46-

<PAGE>



   
achieve  higher  growth  rates  and  experience  higher  failure  rates  than do
larger-capitalization companies.

         The  Portfolio  may  invest in  certain  foreign  securities  which may
represent a greater degree of risk than investing in domestic securities.  These
risks are discussed in "Investment Strategies - Foreign Securities."

         The  Portfolio  may  employ  certain  investment  strategies  which are
discussed under the caption  "Investment  Strategies" below and in the Statement
of Additional Information.
    

       
                                                       -47-

<PAGE>



       
   







 T. Rowe Price Equity Income Portfolio

         The investment  objective of the T. Rowe Price Equity Income  Portfolio
is to seek to provide substantial  dividend income and also capital appreciation
by  investing   primarily  in  dividend-paying   common  stocks  of  established
companies. In pursuing
    

       
                                                       -48-

<PAGE>



       
   
its objective,  the Portfolio  emphasizes companies with favorable prospects for
increasing dividend income, and secondarily,  capital  appreciation.  Over time,
the  income  component  (dividends  and  interest  earned)  of  the  Portfolio's
investments is expected to be a significant contributor to the Portfolio's total
return. The Portfolio's yield is expected to be significantly  above that of the
S&P 500  Composite  Stock Price Index (the "S&P 500  Index").  Total return will
consist primarily of dividend income and secondarily of capital appreciation (or
depreciation).

         The investment  program of the Portfolio is based on several  premises.
First,  the Portfolio's  Adviser  believes that, over time,  dividend income can
account for a significant component of the total return from equity investments.
Second,  dividends are normally a more stable and  predictable  source of return
than  capital  appreciation.  While the  price of a  company's  stock  generally
increases  or  decreases   in  response  to   short-term   earnings  and  market
fluctuations,   its  dividends  are  generally  less  volatile.   Finally,   the
Portfolio's  Adviser  believes  that  stocks  which  distribute  a high level of
current  income  tend to have less price  volatility  than those which pay below
average dividends.

         To achieve its objective,  the Portfolio,  under normal  circumstances,
will invest at least 65% of its total assets in income-producing  common stocks,
whose  prospects for dividend  growth and capital  appreciation  are  considered
favorable  by its  Adviser.  To  enhance  capital  appreciation  potential,  the
Portfolio  also  uses a  "value"  approach  and  invests  in  stocks  and  other
securities its Adviser believes are temporarily undervalued by various measures,
such as  price/earnings  ratios.  The Portfolio's  investments will generally be
made in companies which share some of the following characteristics:

         o        established operating histories;
    


                                                       -49-

<PAGE>



   
         o        above-average current dividend yields relative to the
                  S&P 500 Index;

         o        low price/earnings ratios relative to the S&P 500
                  Index;

         o        sound balance sheets and other financial
                  characteristics; and

         o        low stock price  relative  to  company's  underlying  value as
                  measured   by  assets,   earnings,   cash  flow  or   business
                  franchises.

         Although the Portfolio will invest primarily in U.S. common stocks,  it
may also purchase other types of securities,  for example,  foreign  securities,
preferred  stocks,   convertible   securities  and  warrants,   when  considered
consistent with the Portfolio's investment objective and program.
    

       
                                                       -50-

<PAGE>



       
   
         In the event that future  economic or  financial  conditions  adversely
affect  equity  securities,   or  stocks  are  considered  overvalued,   or  the
Portfolio's   Adviser   believes  that  investing  for  defensive   purposes  is
appropriate,  or in order to meet anticipated redemption requests, the Portfolio
may invest  part or all of its  assets in U.S.  government  securities  and high
quality  (within  the two highest  rating  categories  assigned by a  nationally
recognized   statistical  rating   organization   ("NRSRO"))  U.S.  and  foreign
dollar-denominated  money market securities  including  certificates of deposit,
bankers'  acceptances,  commercial paper,  short-term  corporate  securities and
repurchase agreements.

         The  Portfolio  may  invest  up to 25% of its total  assets in  foreign
securities.  These include non- dollar denominated securities traded outside the
U.S.  and dollar  denominated  securities  traded in the U.S.  (such as American
Depositary  Receipts).  Such investments increase a portfolio's  diversification
and may enhance  return,  but they may  represent a greater  degree of risk than
investing  in domestic  securities.  These risks are  discussed  in  "Investment
Strategies - Foreign Securities."

         The  Portfolio  may  invest in debt  securities  of any type  including
municipal securities, without regard to quality or rating. Such securities would
be purchased in companies which
    

                                                       -51-

<PAGE>



   
meet the investment  criteria for the Portfolio.  The price of a bond fluctuates
with changes in interest rates, rising when interest rates fall and falling when
interest rates rise. The  Portfolio,  however,  will not invest more than 10% of
its total assets in  securities  rated below Baa by Moody's or BBB by Standard &
Poor's (commonly known as "junk bonds"). Such securities may include bonds rated
as low as C by  Moody's  and by  Standard  &  Poor's.  See the  Appendix  to the
Statement  of  Additional  Information.   Investments  in  non-investment  grade
securities entail certain risks which are discussed in "Investment  Strategies -
Risk Factors Relating to Investing in High Yield Securities."

         The  Portfolio  may  employ  certain  investment  strategies  which are
discussed under the caption  "Investment  Strategies" below and in the Statement
of Additional Information.

T. Rowe Price Growth Stock Portfolio

         The investment  objectives of the T. Rowe Price Growth Stock  Portfolio
are to seek long-term growth of capital and to increase  dividend income through
investment  primarily in common stocks of well-established  growth companies.  A
growth  company  is  defined by the  Portfolio's  Adviser as one which:  (1) has
demonstrated  historical  growth of earnings faster than the growth of inflation
and the economy in general;  and (2) has  indications  of being able to continue
this  growth  pattern in the future.  Total  return will  consist  primarily  of
capital appreciation or depreciation and secondarily of dividend income.

         More than fifty years ago, Thomas Rowe Price pioneered the Growth Stock
Theory of Investing. It is based on the premise that inflation represents a more
serious,   long-term  threat  to  an  investor's  portfolio  than  stock  market
fluctuations  or recessions.  Mr. Price believed that when a company's  earnings
grow faster  than both  inflation  and the  economy in general,  the market will
eventually  reward its long-term  earnings  growth with a higher stock price. In
addition,  the  company  should be able to raise its  dividend  in line with its
growth in earnings.

         Although  corporate earnings can be expected to be lower during periods
of recession,  it is the Portfolio  Adviser's  opinion that, over the long term,
the earnings of well-established growth companies will not be affected adversely
by  unfavorable  economic  conditions to the same extent as the earnings of more
cyclical  companies.  However,  investors  should be aware that the  Portfolio's
share  value may not  always  reflect  the  long-term  earnings  trend of growth
companies.
    

                                                       -52-

<PAGE>



   
         The  Portfolio  will  invest  primarily  in  the  common  stocks  of  a
diversified group of well-established  growth companies.  While current dividend
income is not a prerequisite in the selection of a growth company, the companies
in which the Portfolio  will invest  normally have a record of paying  dividends
and are generally  expected to increase the amounts of such  dividends in future
years as earnings increase.

         Although the Portfolio will invest primarily in U.S. common stocks,  it
may also purchase other types of securities,  for example,  foreign  securities,
preferred  stocks,   convertible   securities  and  warrants,   when  considered
consistent with the Portfolio's investment objectives and program.

         In the event that future  economic or  financial  conditions  adversely
affect  equity  securities,   or  stocks  are  considered  overvalued,   or  the
Portfolio's   Adviser   believes  that  investing  for  defensive   purposes  is
appropriate,  or in order to meet anticipated redemption requests, the Portfolio
may invest  part or all of its  assets in U.S.  government  securities  and high
quality (within the two highest rating categories  assigned by a NRSRO) U.S. and
foreign  dollar-denominated  money market securities  including  certificates of
deposit, bankers' acceptances, commercial paper, short-term corporate securities
and repurchase agreements.

     The  Portfolio  may  invest  up to 30%  of  its  total  assets  in  foreign
securities.  These include non-dollar  denominated securities traded outside the
U. S. and dollar  denominated  securities  traded in the U. S. (such as American
Depositary  Receipts).  Such investments increase a portfolio's  diversification
and may enhance  return,  but they may  represent a greater  degree of risk than
investing  in domestic  securities.  These risks are  discussed  in  "Investment
Strategies - Foreign Securities."

         The  Portfolio  may  employ  certain  investment  strategies  which are
discussed under the caption  "Investment  Strategies" below and in the Statement
of Additional Information.

Investment Strategies

         In  addition  to  making  investments   directly  in  securities,   the
Portfolios may write covered call and put options and hedge their investments by
purchasing options and engaging in transactions in futures contracts and related
options. The Adviser to the Dreyfus Small Cap Value Portfolio does not currently
intend to write covered call and put options or engage
    

                                                       -53-

<PAGE>



   
in transactions in futures  contracts and related options,  but may do so in the
future.  The T.  Rowe  Price  Equity  Income  and T.  Rowe  Price  Growth  Stock
Portfolios  may  engage in foreign  currency  exchange  transactions  to protect
against changes in future exchange rates.  All Portfolios may invest in American
Depositary   Receipts,   European  Depositary  Receipts  and  Global  Depositary
Receipts. All Portfolios may enter into repurchase agreements,  may make forward
commitments to purchase  securities,  lend their portfolio securities and borrow
funds under certain limited  circumstances.  The T. Rowe Price Equity Income and
T. Rowe Price  Growth Stock  Portfolios  may invest in hybrid  instruments.  The
investment  strategies  referred  to above  and the  risks  related  to them are
summarized below and certain of these strategies are described in more detail in
the Statement of Additional Information.

         Options and Futures Transactions.  A Portfolio may seek to increase the
current  return on its  investments  by  writing  covered  call or  covered  put
options.  The Adviser to the Dreyfus  Small Cap Value  Portfolio  has no present
intention to engage in this strategy, but may do so in the future.

         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 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 Dreyfus Small Cap Value Portfolio has no present intention to use
this strategy, but may do so in the future.

         Each Portfolio may purchase and sell interest rate futures contracts as
a hedge against  changes in interest  rates. A futures  contract is an agreement
between two parties to buy and sell a security for a set price on a future date.
Futures contracts are traded on designated  "contracts  markets" which,  through
their clearing corporations,  guarantee performance of the contracts. Currently,
there are futures  contracts based on securities such as long-term U.S. Treasury
bonds,  U.S.  Treasury  notes,  mortgage-backed  securities  guaranteed  by  the
Government National Mortgage  Association ("GNMA  Certificates") and three-month
U.S. Treasury bills.

         Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa).  Entering
    

                                                       -54-

<PAGE>



   
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 a  Portfolio  holds
long-term  U.S.  government  securities  and the Adviser  anticipates  a rise in
long-term  interest  rates,  it could,  in lieu of  disposing  of its  portfolio
securities,  enter into  futures  contracts  for the sale of  similar  long-term
securities.  If  interest  rates  increased  and  the  value  of  a  Portfolio's
securities  declined,  the  value of the  Portfolio's  futures  contracts  would
increase,  thereby  protecting  the Portfolio by preventing  the net asset value
from  declining as much as it otherwise  would have.  Similarly,  entering  into
futures  contracts for the purchase of securities  has an effect  similar to the
actual purchase of the underlying securities,  but permits the continued holding
of securities other than the underlying securities.  For example, if the Adviser
expects  long-term  interest  rates to decline,  the Portfolio  might enter into
futures  contracts  for the purchase of long-term  securities,  so that it could
gain rapid market exposure that may offset anticipated  increases in the cost of
securities  it intends to purchase,  while  continuing  to hold  higher-yielding
short-term securities or waiting for the long-term market to stabilize.

         A Portfolio  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.

         A Portfolio may not purchase  futures  contracts or related options if,
immediately  thereafter,  more than 33 1/3% (25% for the T.  Rowe  Price  Equity
Income and the T. Rowe Price Growth Stock  Portfolios) of the Portfolio's  total
assets would be so invested.

         The  Portfolios'  Advisers  generally  expect that  options and futures
transactions  for the  Portfolios  will be  conducted  on  securities  and other
exchanges.  In certain  instances,  however,  a Portfolio  may purchase and sell
options  in  the  over-the-counter  market.  The  staff  of  the  SEC  considers
over-the-counter  options to be  illiquid.  A  Portfolio's  ability to terminate
option positions established in the over-the-counter  market may be more limited
than in the case of exchange traded options and may also
    

                                                       -55-

<PAGE>



   
involve the risk that  securities  dealers  participating  in such  transactions
would fail to meet their obligations to the Portfolio. There can be no assurance
that a Portfolio will be able to effect closing  transactions  at any particular
time or at an acceptable price. The use of options and futures involves the risk
of imperfect  correlation  between  movements in options and futures  prices and
movements in the prices of the  securities  that are being hedged.  Expenses and
losses  incurred  as a result  of  these  hedging  strategies  will  reduce  the
Portfolio's  current  return.  In many  foreign  countries,  futures and options
markets do not exist or are not sufficiently developed to be effectively used by
a Portfolio.

         Foreign Currency  Transactions.  The T. Rowe Price Equity Income and T.
Rowe Price Growth Stock  Portfolios may purchase  foreign currency on a spot (or
cash) basis,  enter into  contracts to purchase or sell foreign  currencies at a
future date ("forward  contracts"),  purchase and sell foreign  currency futures
contracts,  and  purchase  exchange  traded  and  over-the-counter  call and put
options on foreign currency  futures  contracts and on foreign  currencies.  The
Adviser to a  Portfolio  may  engage in these  transactions  to protect  against
uncertainty  in the  level  of  future  exchange  rates in  connection  with the
purchase and sale of portfolio securities ("transaction hedging") and to protect
the value of specific portfolio positions ("position hedging").

         Hedging  transactions  involve  costs and may result in losses.  The T.
Rowe Price Equity  Income and T. Rowe Price Growth  Stock  Portfolios  may write
covered  call  options  on  foreign  currencies  to offset  some of the costs of
hedging  those   currencies.   A  Portfolio  will  engage  in   over-the-counter
transactions only when appropriate  exchange traded transactions are unavailable
and when, in the opinion of the Portfolio's  Adviser,  the pricing mechanism and
liquidity are satisfactory  and the participants are responsible  parties likely
to meet  their  contractual  obligations.  A  Portfolio's  ability  to engage in
hedging and related option transactions may be limited by tax considerations.

         Transaction and position  hedging do not eliminate  fluctuations in the
underlying  prices of the  securities  which the  Portfolio  owns or  intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time.  Additionally,  although these  techniques tend to
minimize the risk of loss due to a decline in the value of the hedged  currency,
they tend to limit any  potential  gain which might  result from the increase in
the value of such currency.
    


                                                       -56-

<PAGE>



   
         Reverse  Repurchase  Agreements.  Each  Portfolio is permitted to enter
into reverse  repurchase  agreements.  In a reverse  repurchase  agreement,  the
Portfolio sells a security and agrees to repurchase it at a mutually agreed upon
date and price,  reflecting  the  interest  rate  effective  for the term of the
agreement.  For the purposes of the Investment  Company Act of 1940 ("1940 Act")
it is considered a form of borrowing by the Portfolio and, therefore,  is a form
of  leverage.  Leverage  may cause any  gains or losses of the  Portfolio  to be
magnified.

         Borrowings.  A Portfolio other than the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock Portfolios may borrow money
for temporary purposes in amounts up to 5% of its total assets.

         The T.  Rowe  Price  Equity  Income  and T.  Rowe  Price  Growth  Stock
Portfolios may borrow money as a temporary  measure for emergency  purposes,  to
facilitate  redemption  requests,  or for  other  purposes  consistent  with the
Portfolio's  investment  objective and program in an amount up to 33 1/3% of the
Portfolio's  net assets.  Each  Portfolio  may pledge up to 33 1/3% of its total
assets to secure these borrowings.  These Portfolios may not purchase additional
securities when borrowings exceed 5% of total assets.

         As a matter  of  operating  policy,  each of the T. Rowe  Price  Equity
Income and T. Rowe Price Growth Stock Portfolios will limit all borrowings to no
more than 25% of such Portfolio's net assets.

         The purchase of securities  while  borrowings are outstanding will have
the effect of leveraging a Portfolio. Such leveraging or borrowing increases the
Portfolio's  exposure to capital risk and borrowed funds are subject to interest
costs which will reduce net income.

         Depositary Receipts.  All Portfolios may purchase foreign securities in
the form of American Depositary Receipts,  European Depositary Receipts,  Global
Depositary   Receipts  or  other  securities   convertible  into  securities  of
corporations  in which the Portfolios are permitted to invest  pursuant to their
respective  investment  objectives  and  policies.   These  securities  may  not
necessarily  be  denominated  in  the  same  currency  into  which  they  may be
converted.  Depositary  receipts  are  receipts  typically  issued by a U.S.  or
foreign bank or trust company and evidence  ownership of  underlying  securities
issued by a foreign corporation.
    


                                                       -57-

<PAGE>



   
         Repurchase  Agreements.   All  Portfolios  may  enter  into  repurchase
agreements with a bank,  broker-dealer or other financial institution as a means
of earning a fixed rate of return on its cash  reserves  for periods as short as
overnight.  A repurchase  agreement is a contract pursuant to which a Portfolio,
against  receipt  of  securities  of at  least  equal  value  including  accrued
interest,  agrees to advance a specified sum to the financial  institution which
agrees to reacquire the  securities at a mutually  agreed upon time (usually one
day) and price.  Each  repurchase  agreement  entered  into by a Portfolio  will
provide that the value of the collateral  underlying  the  repurchase  agreement
will always be at least equal to the  repurchase  price,  including  any accrued
interest.  The Portfolio's  right to liquidate such securities in the event of a
default by the seller could involve certain costs,  losses or delays and, to the
extent  that  proceeds  from  any  sale  upon a  default  of the  obligation  to
repurchase  are less than the  repurchase  price,  the Portfolio  could suffer a
loss.

         Forward  Commitments.  Each  Portfolio  may make  contracts to purchase
securities for a fixed price at a future date beyond  customary  settlement time
("forward  commitments") if it holds, and maintains until the settlement date in
a segregated account,  cash or liquid assets in an amount sufficient to meet the
purchase price,  or if it enters into offsetting  contracts for the forward sale
of other securities it owns. Forward commitments may be considered securities in
themselves  and  involve  a risk of  loss if the  value  of the  security  to be
purchased  declines prior to the settlement  date,  which risk is in addition to
the risk of  decline  in value  of the  Portfolio's  other  assets.  Where  such
purchases  are made  through  dealers,  the  Portfolio  relies on the  dealer to
consummate the sale. The dealer's failure to do so may result in the loss to the
Portfolio of an advantageous yield or price.

         Securities  Loans.  Each Portfolio may seek to obtain additional income
by making secured loans of its portfolio  securities  with a value up to 33 1/3%
of its total assets.  All  securities  loans will be made pursuant to agreements
requiring the loans to be  continuously  secured by collateral in cash or 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
    

                                                       -58-

<PAGE>



   
cases loss of rights in the collateral should the borrower fail
financially.

         Hybrid  Instruments.  The T. Rowe Price Equity Income and T. Rowe Price
Growth  Stock  Portfolios  may invest up to 10% of their total  assets in hybrid
instruments.  Hybrid  instruments  have recently been  developed and combine the
elements of futures contracts or options with those of debt, preferred equity or
a depository instrument. Often these hybrid instruments are indexed to the price
of a  commodity,  particular  currency,  or a domestic or foreign debt or equity
securities index. Hybrid instruments may take a variety of forms, including, but
not  limited  to,  debt  instruments  with  interest  or  principal  payments or
redemption terms determined by reference to the value of a currency or commodity
or  securities  index at a future point in time,  preferred  stock with dividend
rates  determined  by  reference  to the  value of a  currency,  or  convertible
securities with the conversion terms related to a particular  commodity.  Hybrid
instruments  may  bear  interest  or pay  dividends  at  below  market  (or even
relatively  nominal) rates.  Under certain  conditions,  the redemption value of
such an instrument  could be zero.  Hybrid  instruments can have volatile prices
and limited liquidity and their use by a Portfolio may not be successful.

         Fixed-Income  Securities - Downgrades.  If any security  invested in by
any of the  Portfolios  loses its  rating or has its  rating  reduced  after the
Portfolio  has  purchased  it,  unless  required by law,  the  Portfolio  is not
required to sell or otherwise  dispose of the security,  but may consider  doing
so.

         Illiquid  Securities.  Each  Portfolio  may invest up to 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 Portfolios'  Advisers to
be illiquid or not readily  marketable  and,  therefore,  are not subject to the
aforementioned 15% limit. The inability of a Portfolio to dispose of illiquid or
not readily marketable investments readily or at a reasonable price could impair
the Portfolio's  ability to raise cash for  redemptions or other  purposes.  The
liquidity of securities  purchased by a Portfolio  which are eligible for resale
pursuant  to Rule 144A  will be  monitored  by the  Portfolios'  Advisers  on an
ongoing basis, subject to the oversight of the Trustees.  In the event that such
a security is deemed to be no longer liquid, a
    

                                                       -59-

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Portfolio's  holdings  will be reviewed to  determine  what  action,  if any, is
required  to ensure that the  retention  of such  security  does not result in a
Portfolio having more than 15% of its assets invested in illiquid or not readily
marketable securities.

         Foreign Securities.  Foreign investments involve certain risks that are
not present in  domestic  securities.  Because a  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 a  Portfolio's  investment  income  may be  received  or
realized  in such  currencies,  the  Portfolio  will be  required to compute and
distribute its income in U.S. dollars.  Therefore,  if the exchange rate for any
such currency declines after the Portfolio's income has been earned and computed
in U.S.  dollars but before  conversion  and  payment,  the  Portfolio  could be
required to liquidate portfolio securities to make such distributions.

         The values of foreign  investments  and the  investment  income derived
from them may also be  affected  unfavorably  by  changes in  currency  exchange
control  regulations.  Although  a  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 a 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
    

                                                       -60-

<PAGE>



differences may include delays beyond periods customary in the United States and
practices,  such as delivery of  securities  prior to receipt of payment,  which
increase the likelihood of a "failed  settlement." Failed settlements can result
in losses to the  Portfolio.  In less liquid and well  developed  stock markets,
such as those in some  Asian and Latin  American  countries,  volatility  may be
heightened  by  actions  of a few  major  investors.  For  example,  substantial
increases or decreases in cash flows of mutual funds  investing in these markets
could significantly affect stock prices and, therefore, share prices.

         Foreign brokerage  commissions,  custodial  expenses and other fees are
also  generally  higher  than  for  securities  traded  in  the  United  States.
Consequently,  the overall  expense  ratios of  international  funds are usually
somewhat higher than those of typical domestic stock funds.

   
         In addition,  the  economies,  markets and  political  structures  of a
number of the countries in which a Portfolio can invest do not compare favorably
with the  United  States  and other  mature  economies  in terms of  wealth  and
stability. Therefore, investments in these countries may be riskier, and will be
subject to erratic and abrupt  price  movements.  Some  economies  are less well
developed  and less diverse (for  example,  Latin  America,  Eastern  Europe and
certain  Asian  countries),   and  more  vulnerable  to  the  ebb  and  flow  of
international  trade,  trade  barriers and other  protectionist  or  retaliatory
measures (for example, Japan, southeast Asia and Latin America). Some countries,
particularly  in Latin  America,  are grappling  with severe  inflation and high
levels of national  debt.  Investments  in countries  that have  recently  begun
moving  away from  central  planning  and  state-owned  industries  toward  free
markets,  such as the Eastern European or Chinese economies,  should be regarded
as speculative.

         Certain portfolio  countries have histories of instability and upheaval
(Latin America) and internal  politics that could cause their governments to act
in a  detrimental  or  hostile  manner  toward  private  enterprise  or  foreign
investment. Any such actions, for example, nationalizing an industry or company,
could  have a  severe  and  adverse  effect  on  security  prices  and  impair a
Portfolio's  ability to repatriate capital or income. A Portfolio's Adviser will
not invest the Portfolio's assets in countries where it believes such events are
likely to occur.

         Income  received by a Portfolio from sources  within foreign  countries
may be reduced by  withholding  and other taxes imposed by such  countries.  Tax
conventions between certain
    

                                                       -61-

<PAGE>



   
countries  and  the  United  States  may  reduce  or  eliminate  such  taxes.  A
Portfolio's  Adviser  will attempt to minimize  such taxes,  but there can be no
assurance  that  such  efforts  will be  successful.  Any such  taxes  paid by a
Portfolio will reduce its net income available for distribution to shareholders.
    

       
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Risk  Factors  Relating to  Investing  In High Yield  Securities.  Fixed  income
securities  are subject to the risk of an issuer's  inability to meet  principal
and interest payments on the obligations  (credit risk), and may also be subject
to price  volatility  due to such factors as interest rate  sensitivity,  market
perception of the  creditworthiness  of the issuer and general market  liquidity
(market  risk).  Lower rated or unrated (i.e.,  high yield)  securities are more
likely to react to developments  affecting  market and credit risk than are more
highly  rated  securities,  which react to  movements  in the  general  level of
interest rates primarily.  The market values of fixed-income  securities tend to
vary  inversely  with the level of interest  rates.  Yields and market values of
high yield  securities  will fluctuate  over time,  reflecting not only changing
interest rates, but the market's perception of credit quality and
    

                                                       -93-

<PAGE>



   
the  outlook  for  economic  growth.  When  economic  conditions  appear  to  be
deteriorating,  medium,  to lower rated  securities  may decline in value dot to
heightened concern over credit quality, regardless of prevailing interest rates.
Fluctuations in the value of a Portfolio's  investments will be reflected in the
Portfolio's net asset value per share. The Adviser to a Portfolio considers both
credit risk and market risk in making  investment  decisions for the  Portfolio.
Investors  should  carefully  consider the  relative  risks of investing in high
yield securities and understand that such securities are not generally meant for
short-term investing.

         The high yield  market is still  relatively  new and its recent  growth
parallels  a long  period of  economic  expansion  and an  increase  in  merger,
acquisition and leveraged  buyout activity.  Adverse  economic  developments may
disrupt the market for high yield securities, and severely affect the ability of
issuers,  especially highly leveraged issuers, to service their debt obligations
or to repay their obligations upon maturity.  In addition,  the secondary market
for high  yield  securities,  which is  concentrated  in  relatively  few market
makers,  may not be as liquid as the  secondary  market  for more  highly  rated
securities.  As a result, the adviser could find it more difficult to sell these
securities  or may be able to sell the  securities  only at prices lower than if
such securities were widely traded. Prices under these circumstances may be less
than the prices used in calculating a Portfolio's net asset value.
    

         Prices for high yield  securities  may be affected by  legislative  and
regulatory developments. These developments could adversely affect a Portfolio's
net asset value and investment  practices,  the secondary  market for high yield
securities, the financial condition of issuers of these securities and the value
of outstanding high yield securities. For example, federal legislation requiring
the  divestiture by federally  insured  savings and loan  associations  of their
investments  in high yield bonds and limiting the  deductibility  of interest by
certain corporate  issuers of high yield bonds adversely  affected the market in
recent years.

         Lower rated or unrated debt  obligations  also  present  risks based on
payment  expectations.  If an issuer calls the  obligations  for  redemption,  a
Portfolio  may have to replace  the  security  with a lower  yielding  security,
resulting  in a  decreased  return for  investors.  If a  Portfolio  experiences
unexpected  net  redemptions,  it  may  be  forced  to  sell  its  higher  rated
securities, resulting in a decline in the overall credit quality

                                                       -94-

<PAGE>



   
of the  portfolio's  investment  portfolio  and  increasing  the exposure of the
Portfolio to the risks of high yield securities.
    

                             MANAGEMENT OF THE FUND

         The Trustees and officers of the Fund provide  broad  supervision  over
the business and affairs of the Portfolios and the Fund.

The Manager

         The Fund is managed by Endeavor  Investment  Advisers  (the  "Manager")
which, subject to the supervision and direction of the Trustees of the Fund, has
overall  responsibility  for the general  management and  administration  of the
Fund. The Manager is a general  partnership of which Endeavor  Management Co. is
the managing partner. Endeavor Management Co., by whose employees all management
services  performed  under the  management  agreement  are rendered to the Fund,
holds a 50.01%  interest in the Manager and AUSA  Financial  Markets,  Inc.,  an
affiliate  of PFL,  holds the  remaining  49.99%  interest  therein.  Vincent J.
McGuinness,  a Trustee of the Fund,  together with his family members and trusts
for the  benefit of his family  members,  own all of Endeavor  Management  Co.'s
outstanding  common stock. Mr.  McGuinness is Chairman,  Chief Executive Officer
and President of Endeavor Management Co.

   
         The Manager is  responsible  for providing  investment  management  and
administrative  services to the Fund and in the exercise of such  responsibility
selects the investment  advisers for the Fund's  Portfolios (the "Advisers") and
monitors  the  Advisers'  investment  programs and  results,  reviews  brokerage
matters,  oversees  compliance  by the  Fund  with  various  federal  and  state
statutes,  and  carries  out the  directives  of the  Trustees.  The  Manager is
responsible  for  providing the Fund with office space,  office  equipment,  and
personnel  necessary to operate and  administer  the Fund's  business,  and also
supervises  the  provision  of  services  by third  parties  such as the  Fund's
custodian and transfer agent.  Pursuant to an  administration  agreement,  First
Data Investor  Services  Group,  Inc.  ("Investor  Services  Group") 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 at the following annual rates of each Portfolio's
average daily net assets:
    


                                                       -95-

<PAGE>



   
Endeavor  Value Equity  Portfolio - .80%;  Dreyfus  Small Cap Value  Portfolio -
 .80%; T. Rowe Price Equity  Income  Portfolio - .80%; T. Rowe Price Growth Stock
Portfolio  -.80% . The management  fees paid by the Portfolios , although higher
than the fees paid by most other investment companies in general, are comparable
to management fees paid for similar  services by many investment  companies with
similar  investment  objectives  and policies.  From the  management  fees,  the
Manager  pays the  expenses of  providing  investment  advisory  services to the
Portfolios, including the fees of the Adviser of each Portfolio.

         The  Manager  pays the fees and  expenses of  Investor  Services  Group
pursuant to the  administrative  agreement.  The Manager pays Investor  Services
Group an annual fee equal to $650,000 plus 0.01% of the Fund's average daily net
assets in excess of $1 billion. These fees are accrued and paid monthly.

         In addition to the  management  fees , the Fund pays all  expenses  not
assumed by the  Manager,  including,  without  limitation,  expenses  for legal,
accounting  and  auditing  services,  interest,  taxes,  costs of  printing  and
distributing reports to shareholders, proxy materials and prospectuses,  charges
of its custodian,  transfer agent and dividend  disbursing  agent,  registration
fees,  fees and expenses of the Trustees who are not  interested  persons of the
Fund,  insurance,  brokerage  costs,  litigation,  and  other  extraordinary  or
nonrecurring expenses. All general Fund expenses are allocated among and charged
to the assets of the  Portfolios  of the Fund on a basis that the Trustees  deem
fair and  equitable,  which may be on the basis of  relative  net assets of each
Portfolio or the nature of the services performed and relative  applicability to
each Portfolio.
    


                                                       -96-

<PAGE>



     Year 2000. Like other mutual funds, the Fund and the service  providers for
the Fund and each of its Portfolios  rely heavily on the  reasonably  consistent
operation of their computer systems. Many software programs and certain computer
hardware in use today,  cannot properly process  information  after December 31,
1999  because of the method by which dates are encoded  and  calculated  in such
programs and  hardware.  This  problem,  commonly  referred to as the "Year 2000
Issue," could,  among other things,  negatively impact the processing of trades,
the   distribution   of   securities,   the  pricing  of  securities  and  other
investment-related  and settlement  activities.  The Fund is currently obtaining
information  with  respect to the  actions  that have been taken and the actions
that are planned to be taken by each of its service  providers to prepare  their
computer  systems  for the Year 2000.  While the Fund  expects  that each of the
Fund's service providers will have adapted their computer systems to address the
Year 2000 Issue,  there can be no  assurance  that this will be the case or that
the steps taken by the Fund will be  sufficient  to avoid any adverse  impact to
the Fund and each of its Portfolios.

 The Advisers

   
     Pursuant to an investment advisory agreement with the Manager, each Adviser
to a Portfolio  furnishes  continuously an investment program for the Portfolio,
makes investment decisions on behalf of the Portfolio, places all orders for the
purchase and sale of  investments  for the  Portfolio's  account with brokers or
dealers  selected  by such  Adviser  and may  perform  certain  limited  related
administrative  functions in connection therewith. For its services, the Manager
pays the Adviser a fee based on a percentage  of the average daily net assets of
the  Portfolio.  An Adviser may place  portfolio  securities  transactions  with
broker-dealers  who furnish it with  certain  services of value in advising  the
Portfolio and other  clients.  In so doing,  an Adviser may cause a Portfolio to
pay greater  brokerage  commissions  than it might otherwise pay. In seeking the
most favorable  price and execution  available,  an Adviser may, if permitted by
law,  consider  sales  of  the  Contracts  as  a  factor  in  the  selection  of
broker-dealers.  T. Rowe Price  Associates,  Inc.  may utilize  certain  brokers
indirectly  related  to it in the  capacity  as  broker in  connection  with the
execution of transactions  for the T. Rowe Price Equity Income and T. Rowe Price
Growth Stock
    






                                                       -97-

<PAGE>



   

Portfolios. See the Statement of Additional Information for a further discussion
of
    
Portfolio trading.

   
         OpCap  Advisors  ("OpCap") is the Adviser to the Endeavor  Value Equity
Portfolio.  As compensation for its services as investment adviser,  the Manager
pays
    

       
                                                       -98-

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                                                       -99-

<PAGE>



       
   
OpCap a monthly fee at the annual  rate of .40% of the average  daily net assets
of the Endeavor Value Equity Portfolio.

         OpCap is a majority-owned  subsidiary of Oppenheimer Capital, a general
partnership  which is registered as an investment  adviser under the  Investment
Advisers Act of 1940. The employees of Oppenheimer Capital render all investment
management  services performed under the investment  advisory  agreements to the
Portfolio.  On November 4, 1997,  PIMCO  Advisors  L.P.  ("PIMCO  Advisors"),  a
registered  investment  adviser  with $125  billion in assets  under  management
through various subsidiaries, and its affiliates acquired control of Oppenheimer
Capital and its  subsidiary  OpCap.  On November 30, 1997,  Oppenheimer  Capital
merged with a subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital
and OpCap became indirect  wholly-owned  subsidiaries  of PIMCO Advisors.  PIMCO
Advisors has two general  partners:  PIMCO  Partners,  G.P.  ("PIMCO  G.P."),  a
California  general  partnership,  and PIMCO  Advisors  Holdings L.P.  (formerly
Oppenheimer Capital, L.P.), an NYSE-listed Delaware limited partnership of which
PIMCO G.P. is the sole general partner. PIMCO G.P. beneficially owns or controls
(through its general partner  interest in PIMCO Advisors  Holdings L.P.) greater
than 80% of the units of limited  partnership of PIMCO Advisors.  PIMCO G.P. has
two  general  partners.  The  first of these is  Pacific  Investment  Management
Company,  a  wholly-owned  subsidiary  of  Pacific  Financial  Asset  Management
Company,  which  is a  direct  subsidiary  of  Pacific  Life  Insurance  Company
("Pacific  Life").  The managing general partner of PIMCO G.P. is PIMCO Partners
L.L.C.  ("PPLLC"),  a California limited liability company.  PPLLC's members are
the Managing Directors (the "PIMCO Managers") of Pacific  Investment  Management
Company, a subsidiary of PIMCO Advisors.  Pacific Life and/or the PIMCO Managers
may be deemed to control  PIMCO  Advisors.  Pacific Life and the PIMCO  Managers
disclaim  such  control.  OpCap and its  affiliates  have operated as investment
advisers  to  both  mutual  funds  and  other  clients   since  1968,   and  had
approximately $61.4 billion under management as of December 31, 1997.
    

                                                       -100-

<PAGE>



   
     Eileen Rominger, Managing Director of Oppenheimer Capital, is the portfolio
manager for the Endeavor  Value  Equity  Portfolio.  Ms.  Rominger has been with
Oppenheimer Capital since 1981.








         The Dreyfus Corporation ("Dreyfus") is the Adviser to the Dreyfus Small
Cap Value  Portfolio.  Dreyfus,  which was  formed  in 1947,  is a  wholly-owned
subsidiary of Mellon Bank,  N.A.,  which is a wholly-owned  subsidiary of Mellon
Bank  Corporation  ("Mellon").  As of  January  31,  1998,  Dreyfus  managed  or
administered  approximately  $96  billion  in assets  for more than 1.7  million
investor  accounts  nationwide.  As compensation  for its services as investment
adviser,  the Manager  pays Dreyfus a monthly fee at the annual rate of .375% of
the average daily net assets of the Dreyfus Small Cap Value Portfolio.
    

         Mellon is a publicly-owned multibank holding company incorporated under
Pennsylvania  law in 1971 and registered  under the Federal Bank Holding Company
Act of 1956,  as amended.  Mellon  provides a  comprehensive  range of financial
products and services in domestic and selected international markets.  Mellon is
among the twenty-five  largest bank holding companies in the United States based
on total assets.  Mellon's principal wholly-owned  subsidiaries are Mellon Bank,
N.A.,  Mellon  Bank (DE)  National  Association,  Mellon  Bank (MD),  The Boston
Company, Inc., AFCO Credit Corporation and a number of companies known as Mellon
Financial Services  Corporations.  Through its subsidiaries,  including Dreyfus,
Mellon  managed  more than $305  billion  in assets  as of  December  31,  1997,
including  approximately  $104 billion in mutual fund assets. As of December 31,
1997, Mellon, through various subsidiaries,  provided  non-investment  services,
such as custodial or  administration  services,  for more than $1,532 billion in
assets, including approximately $60 billion in mutual fund assets.

       
                                                       -101-

<PAGE>



       
     The portfolio manager for the Dreyfus Small Cap Value Portfolio is Peter I.
Higgins. Mr. Higgins has been employed by The Boston Company, Inc. since August,
1988 and by Dreyfus since February, 1996.

     T. Rowe Price  Associates,  Inc. ("T. Rowe Price") is the Adviser to the T.
Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock Portfolio.
As compensation for its services as investment adviser, the Manager pays T. Rowe
Price a monthly fee at the annual  rate of .40% of the average  daily net assets
of each of the T. Rowe  Price  Equity  Income  and T. Rowe  Price  Growth  Stock
Portfolios.  T.  Rowe  Price  serves  as  investment  manager  to a  variety  of
individual  and  institutional  investor  accounts,  including  limited and real
estate partnerships and other mutual funds.

   
     Investment  decisions  with  respect  to the T. Rowe  Price  Equity  Income
Portfolio are made by an Investment Advisory Committee composed of the following
members:  Brian C. Rogers,  Chairman,  Steven W. Boesel, Thomas H. Broadus, Jr.,
Richard P.  Howard,  and  William  J.  Stromberg.  The  Committee  Chairman  has
day-to-day  responsibility  for  managing  the  Portfolio  and  works  with  the
Committee in developing and executing the Portfolio's  investment  program.  Mr.
Rogers has been Chairman of the Committee since 1993. He joined T. Rowe Price in
1982 and has been managing investments since 1983.

     Investment  decisions  with  respect  to the T.  Rowe  Price  Growth  Stock
Portfolio are made by an Investment Advisory Committee composed of the following
members:  Robert W.  Smith,  Chairman,  Brian W. H.  Berghuis,  Thomas J. Huber,
Charles A. Morris and Larry J. Puglia.  The  Committee  Chairman has day- to-day
responsibility  for  managing  the  Portfolio  and works with the  Committee  in
developing  and  executing the  Portfolio's  investment  program.  Mr. Smith has
served on the Committee  since 1995 and has been Chairman of the Committee since
February,  1997. He joined T. Rowe Price in 1992.  From 1987 to 1992,  Mr. Smith
was an Investment Analyst for Massachusetts Financial Services.
    

       
                                                       -102-

<PAGE>



       
   
         T. Rowe Price was  incorporated in Maryland in 1947 as successor to the
investment  counseling  business founded by the late Thomas Rowe Price,  Jr., in
1937.
    

       
                                                       -103-

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                                                       -104-

<PAGE>



       
   
As of December 31, 1997, T. Rowe Price and its affiliates managed more than $125
billion of assets.
    

Brokerage Enhancement Plan

         The Board of Trustees of the Fund,  including  all of the  Trustees who
are not  "interested  persons"  (as  defined  in the 1940 Act) of the Fund,  the
Manager  or  Endeavor  Group (the  "Distributor")  (hereinafter  referred  to as
"Independent  Trustees"),  have voted to adopt a Brokerage Enhancement Plan (the
"Plan") for the purpose of utilizing the Fund's  brokerage  commissions,  to the
extent  available,  to promote the sale and  distribution  of the Fund's shares.
Neither  the Fund nor any series of the Fund,  including  the  Portfolios,  will
incur any new fees or charges. As part of the Plan, the Fund and the Distributor
will enter into a Distribution Agreement.  Under the Distribution Agreement, the
Distributor   will  become  the  principal   underwriter   of  the  Fund,   with
responsibility for promoting sales of the shares of each Portfolio.


                                                       -105-

<PAGE>



         The Distributor,  however, will not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
is  authorized  to direct that the Adviser of each  Portfolio  effect  brokerage
transactions in portfolio securities through certain broker-dealers,  consistent
with each  Adviser's  obligations  to achieve  best price and  execution.  It is
anticipated  that  these  broker-dealers  will agree  that a  percentage  of the
commission will be directed to the Distributor.  The Distributor will use a part
of  these  directed   commissions  to  defray  legal  and  administrative  costs
associated with  implementation  of the Plan.  These expenses are expected to be
minimal.  The remainder of the commissions  received by the Distributor  will be
used to finance activities  principally intended to result in the sale of shares
of the Portfolios. It is anticipated that these activities will include: holding
or participating in seminars and sales meetings  designed to promote the sale of
Fund  shares;  paying  marketing  fees  requested  by  broker-dealers  who  sell
Contracts;  training sales personnel;  compensating  broker-dealers and/or their
registered  representatives in connection with the allocation of cash values and
premiums of the Contracts to the Fund;  printing and mailing Fund  prospectuses,
statements of additional  information,  and shareholder reports for existing and
prospective  Contract  holders;  and creating and mailing  advertising and sales
literature.

         The  Distributor  will be obligated to use all of the funds directed to
it for distribution expenses, except for a small amount to be used to defray the
incidental costs associated with  implementation of the Plan.  Accordingly,  the
Distributor will not make any profit from the operation of the Plan.

         Both the Plan and the Distribution Agreement provide (A) that they will
be subject to annual approval by the Trustees and the Independent Trustees;  (B)
that any  person  authorized  to make  payments  under the Plan or  Distribution
Agreement must provide the Trustees a quarterly  written report of payments made
and the purpose of the payments; (C) that the Plan may be terminated at any time
by the vote of a majority of the Independent Trustees; (D) that the Distribution
Agreement may be terminated  without penalty at any time by a vote of a majority
of the Independent Trustees or, as to a Portfolio,  by vote of a majority of the
outstanding  securities  of the  Portfolio  on not more  than 60  days'  written
notice;  and (E) that the Distribution  Agreement  terminates if it is assigned.
The Plan may not be amended to  increase  materially  the amount to be spent for
distribution without shareholder approval, and all material Plan amendments must
be approved by a vote of the Independent Trustees. In

                                                       -106-

<PAGE>



addition, the selection and nomination of the Independent
Trustees must be committed to the Independent Trustees.

         The shareholders of the Portfolios approved the Plan at a shareholders'
meeting held on February 23, 1998.

                       DIVIDENDS, DISTRIBUTIONS AND TAXES

         Each Portfolio intends to qualify each year as a "regulated  investment
company" under the Internal Revenue Code. By so qualifying, a Portfolio will not
be subject to federal income taxes to the extent that its net investment  income
and net realized capital gains are distributed to shareholders.

   
         It is the intention of each Portfolio to distribute  substantially  all
its net  investment  income.  Although  the  Trustees  of the Fund may decide to
declare  dividends at other intervals,  dividends from investment income of each
Portfolio are expected to be declared  annually and will be  distributed  to the
various  separate  accounts  of PFL and not to  Contract  owners  in the form of
additional  full and  fractional  shares of the Portfolio  and not in cash.  The
result is that the  investment  performance  of the  Portfolios,  including  the
effect of dividends,  is reflected in the cash value of the  Contracts.  See the
prospectus for the Contracts accompanying this Prospectus.
    

         All net realized long- or short-term  capital gains of each  Portfolio,
if any,  will be declared and  distributed  at least  annually  either during or
after  the  close of the  Portfolio's  fiscal  year and  will be  reinvested  in
additional  full and  fractional  shares of the  Portfolio.  In certain  foreign
countries,  interest and dividends are subject to a tax which is withheld by the
issuer.  U.S.  income tax treaties  with certain  countries  reduce the rates of
these withholding taxes. The Fund intends to provide the documentation necessary
to achieve the lower treaty rate of withholding  whenever  applicable or to seek
refund of amounts withheld in excess of the treaty rate.

       
                                                       -107-

<PAGE>



       
         For a discussion  of the impact on Contract  owners of income taxes PFL
may owe as a result of (i) its ownership of shares of the  Portfolios,  (ii) its
receipt of dividends  and  distributions  thereon,  and (iii) its gains from the
purchase and sale thereof,  reference  should be made to the  prospectus for the
Contracts accompanying this Prospectus.

                          SALE AND REDEMPTION OF SHARES

         The Fund continuously  offers shares of each 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.

         AFSG Securities  Corporation ("AFSG Securities"),  an affiliate of PFL,
is the principal  underwriter and distributor of the Contracts.  AFSG Securities
places orders for the purchase or redemption of shares of each  Portfolio  based
on, among other things, the amount of net Contract premiums or purchase payments
transferred to the separate  accounts,  transfers to or from a separate  account
investment division,  policy loans, loan repayments,  and benefit payments to be
effected on a given date pursuant to the terms of the Contracts. Such orders are
effected,  without  sales  charge,  at the net  asset  value  per share for each
Portfolio  determined  as of the close of regular  trading on the New York Stock
Exchange (currently 4:00 p.m., New York City time), on that same date.

         Endeavor Group, an affiliate of the Manager, whose office is located at
2101 East Coast Highway,  Suite 300, Corona del Mar, California 92625, serves as
the Distributor for the Fund.

         The net asset value of the shares of each  Portfolio for the purpose of
pricing orders for the purchase and redemption of shares is determined as of the
close of the New York Stock

                                                       -108-

<PAGE>



   
Exchange,  Monday through Friday,  exclusive of national business holidays.  Net
asset  value per share is  computed  by  dividing  the value of all  assets of a
Portfolio  (including  accrued interest and dividends),  less all liabilities of
the Portfolio (including accrued expenses and dividends payable),  by the number
of outstanding shares of the Portfolio.  The assets of the Portfolios are valued
on the basis of their  market  values or, in the absence of a market  value with
respect to any portfolio securities, at fair value as determined by or under the
direction  of the  Fund's  Board of  Trustees  including  the  employment  of an
independent  pricing  service,  as  described  in the  Statement  of  Additional
Information.
    

         Shares of the  Portfolios  may be redeemed on any day on which the Fund
is open for business.

                             PERFORMANCE INFORMATION

   
         From  time to time,  the Fund may  advertise  the  "average  annual  or
cumulative total return" of the Endeavor Value Equity,  Dreyfus Small Cap Value,
T. Rowe Price Equity  Income and T. Rowe Price Growth Stock  Portfolios  and may
compare the  performance of the Portfolios  with that of other mutual funds with
similar  investment   objectives  as  listed  in  rankings  prepared  by  Lipper
Analytical  Services,  Inc., or similar  independent  services monitoring mutual
fund performance, and with appropriate securities or other relevant indices. The
"average  annual  total  return" of a  Portfolio  refers to the  average  annual
compounded  rate of return over the stated  period that would  equate an initial
investment  in that  Portfolio  at the  beginning  of the  period to its  ending
redeemable value,  assuming  reinvestment of all dividends and distributions and
deduction of all recurring  charges other than charges and deductions which are,
or may be,  imposed  under the  Contracts.  Figures will be given for the recent
one,  five and ten year periods and for the life of the  Portfolio if it has not
been in existence for any such periods.  When considering  "average annual total
return" figures for periods longer than one year, it is important to note that a
Portfolio's  annual  total  return for any given year might have been greater or
less  than  its  average  for  the  entire  period.  "Cumulative  total  return"
represents  the total  change in value of an  investment  in a  Portfolio  for a
specified period (again
    

                                                       -109-

<PAGE>



   
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 each  Portfolio  will  vary  from  time to time in
response to fluctuations in market  conditions,  interest rates, the composition
of  the  Portfolio's  investments  and  expenses.  Consequently,  a  Portfolio's
performance  figures are historical and should not be considered  representative
of the performance of the Portfolio for any future period.

       
                                                       -110-

<PAGE>



       
                                                       -111-

<PAGE>



       
                                                       -112-

<PAGE>



       
                   ORGANIZATION AND CAPITALIZATION OF THE FUND

   
         The Fund was  established  in November  1988 as a business  trust under
Massachusetts  law. The Fund has  authorized  an  unlimited  number of shares of
beneficial interest which may, without shareholder  approval, be divided into an
unlimited number of series. Shares of the Fund are presently divided into eleven
series of shares,  one for each of the Fund's  eleven  Portfolios  including the
four Portfolios offered by this Prospectus. Shares are freely transferable,  are
entitled to  dividends  as  declared by the  Trustees,  and in  liquidation  are
entitled to receive the net assets of their respective  Portfolios,  but not the
net assets of the other Portfolios.
    

         Fund shares are  entitled to vote at any meeting of  shareholders.  The
Fund does not generally hold annual meetings of shareholders and will do so only
when required by law.  Matters  submitted to a shareholder vote must be approved
by each  portfolio of the Fund  separately  except (i) when required by the 1940
Act,  shares will be voted together as a single class and (ii) when the Trustees
have  determined  that the  matter  does not affect  all  portfolios,  then only
shareholders of the affected portfolio will be entitled to vote on the matter.

         Owners of the  Contracts  have certain  voting  interests in respect of
shares  of the  Portfolios.  See  "Voting  Rights"  in the  prospectus  for  the
Contracts  accompanying  this Prospectus for a description of the rights granted
Contract owners to instruct voting of shares.

                             ADDITIONAL INFORMATION

Transfer Agent and Custodian

         All cash and securities of the Fund are held by Boston Safe Deposit and
Trust Company as custodian.  Investor  Services Group,  located at 4400 Computer
Drive, Westborough, Massachusetts 01581, serves as transfer agent for the Fund.


                                                       -113-

<PAGE>



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.


                                                       -114-

<PAGE>



                                                TABLE OF CONTENTS

                                          Page


The Fund                                             ENDEAVOR SERIES TRUST
Financial Highlights
Investment Objectives and Policies                 2101 East Coast Highway,
   
                                                           Suite 300
                                               Corona del Mar, California  92625
                                                        (800) 854-8393
                                   
                                                            Manager
           Value Equity Portfolio
    
                                                 Endeavor Investment Advisers
   
   Dreyfus Small Cap Value Portfolio                2101 East Coast Highway
                                                  Suite 300
                                               Corona del Mar, California 92625
   T. Rowe Price Equity Income
     Portfolio                                        Investment Advisers
   T. Rowe Price Growth Stock                
     Portfolio                               
                                 
    
       
   
                                                       OpCap Advisors
   Investment Strategies                          One World Financial Center
    
Management of the Fund                             New York, New York  10281
   The Manager
   The Advisers                                     The Dreyfus Corporation
   Brokerage Enhancement Plan                           200 Park Avenue
Dividends, Distributions and Taxes                 New York, New York 10166
Sale and Redemption of Shares
Performance Information                         T. Rowe Price Associates, Inc.
   
                                                      100 East Pratt Street
Organization and Capitalization                   Baltimore, Maryland  21202
   of the Fund                               
Additional Information                       
     Transfer Agent and Custodian            
     Independent Auditors                    

                            --------------   
                                             
   No person has been authorized to give any      
information or to make any representation not             
contained in this Prospectus and, if given or
made, such information or representation must                     
not be relied upon as having been authorized.          
This Prospectus does not constitute an                           
offering of any securities other than the
registered securities to which it relates or               Custodian
an offer to any person in any state or
jurisdiction of the United States or any         Boston Safe Deposit and Trust
country where such offer would be unlawful.                 Company
    
                                                       One Boston Place
                                                 Boston, Massachusetts  02108


                                                                    -115-

<PAGE>





                       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, 1998 for the Endeavor
Value Equity Portfolio (formerly, Value Equity Portfolio), the Dreyfus Small Cap
Value Portfolio (formerly,  Value Small Cap Portfolio), the T. Rowe Price Equity
Income Portfolio and the T. Rowe Price Growth Stock Portfolio of Endeavor Series
Trust (the "Fund") (the "Prospectus"), which may be obtained by writing the Fund
at 2101 East Coast Highway,  Suite 300, Corona del Mar,  California  92625 or by
telephoning (800) 854-8393.  Unless otherwise defined herein,  capitalized terms
have the meanings given to them in the Prospectus.
    

        EndeavorSM is a registered service mark of Endeavor Management Co.


                                                       -116-

<PAGE>



                                TABLE OF CONTENTS

                                                                     Page

   
Investment Objectives and Policies................           3
        Options and Futures Strategies...............                 3
        Foreign Currency Transactions................                 9
        Repurchase Agreements........................                    13
        Forward Commitments..........................        14
        Securities Loans.............................        14
                                                        
                                                
Portfolio Turnover...........................          14
Investment Restrictions...........................              14
        Other Policies...............................           17
Performance Information...........................              17
        Total Return.................................        17   
                                                
        Non-Standardized Performance.................                    18
Portfolio Transactions............................              19
Management of the Fund............................              21
        Trustees and Officers........................           21
        The Manager..................................           27
        The Advisers.................................           28
Redemption of Shares..............................              31
Net Asset Value...................................     31
Taxes.............................................     33
        Federal Income Taxes.........................           33
Organization and Capitalization of the Fund.......                       34
Legal Matters.....................................     37
Custodian.........................................     37
Financial Statements..............................              37
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, 1998.

                                                       -117-

<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 OpCap
Advisors as investment adviser for the Endeavor

Value Equity Portfolio, The Dreyfus Corporation as investment adviser for the



Dreyfus  Small Cap  Value  Portfolio  and T.  Rowe  Price  Associates,  Inc.  as
investment adviser for the T. Rowe Price Equity Income Portfolio and the T. Rowe
Price Growth Stock Portfolio.

Options and Futures Strategies (All Portfolios)

        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
Dreyfus Small Cap Value  Portfolio does not presently  intend to utilize options
or futures  contracts and related options but may do so in the future.  Expenses
and  losses  incurred  as a result  of such  hedging  strategies  will  reduce a
Portfolio's current return.
    

        The ability of a Portfolio to engage in the options and
futures strategies described below will depend on the

                                                       -118-

<PAGE>



availability  of liquid  markets in such  instruments.  Markets  in options  and
futures  with  respect  to stock  indices  and U.S.  government  securities  are
relatively new and still  developing.  It is impossible to predict the amount of
trading  interest  that  may  exist in  various  types of  options  or  futures.
Therefore  no  assurance  can be given that a Portfolio  will be able to utilize
these instruments effectively for the purposes stated below.

        Writing  Covered  Options on  Securities.  A Portfolio may write covered
call options and covered put options on  optionable  securities  of the types in
which it is permitted to invest from time to time as its Adviser  determines  is
appropriate  in seeking to attain the  Portfolio's  investment  objective.  Call
options  written by a Portfolio  give the holder the right to buy the underlying
security from the  Portfolio at a stated  exercise  price;  put options give the
holder the right to sell the  underlying  security to the  Portfolio at a stated
price.

        A  Portfolio  may only  write  call  options  on a covered  basis or for
cross-hedging  purposes and will only write  covered put  options.  A put option
would be  considered  "covered"  if the  Portfolio  owns an  option  to sell the
underlying  security  subject to the option having an exercise price equal to or
greater than the exercise  price of the "covered"  option at all times while the
put option is outstanding. A call option is covered if the Portfolio owns or has
the right to acquire the  underlying  securities  subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times  during  the  option  period.  A call  option is for  cross-hedging
purposes  if it is not  covered,  but is  designed  to  provide a hedge  against
another  security which the Portfolio  owns or has the right to acquire.  In the
case of a call written for cross-hedging purposes or a put option, the Portfolio
will maintain in a segregated account at the Fund's custodian bank liquid assets
with a value  equal to or  greater  than the  Portfolio's  obligation  under the
option.  A Portfolio  may also write  combinations  of covered  puts and covered
calls on the same underlying security.

        A  Portfolio  will  receive a premium  from  writing  an  option,  which
increases the Portfolio's return in the event the option expires  unexercised or
is terminated at a profit.  The amount of the premium will reflect,  among other
things,  the relationship of the market price of the underlying  security to the
exercise price of the option,  the term of the option, and the volatility of the
market price of the underlying  security.  By writing a call option, a Portfolio
will limit its  opportunity  to profit from any  increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
underlying security for an exercise price higher

                                                       -119-

<PAGE>



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.


                                                       -120-

<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  would be offset in part by the  increase in the
value of the Portfolio's position in such put option or futures contract.

                                                       -121-

<PAGE>



   
        Purchase and Sale of Interest Rate Futures. A Portfolio may purchase and
sell  interest rate futures  contracts on fixed income  securities or indices of
such  securities  including  municipal  indices  and any other  indices of fixed
income  securities that may become  available for trading either for the purpose
of hedging its portfolio  securities  against the adverse effects of anticipated
movements in interest rates or for other investment purposes.
    

        A Portfolio may sell interest rate futures  contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise,  the market value of the securities  held by a Portfolio  will fall,  thus
reducing the net asset value of the  Portfolio.  This  interest rate risk can be
reduced  without  employing  futures as a hedge by selling such  securities  and
either  reinvesting  the proceeds in  securities  with shorter  maturities or by
holding assets in cash.  However,  this strategy entails  increased  transaction
costs  in the  form of  dealer  spreads  and  brokerage  commissions  and  would
typically reduce the Portfolio's  average yield as a result of the shortening of
maturities.

        The sale of interest rate futures contracts  provides a means of hedging
against rising interest  rates.  As rates  increase,  the value of a Portfolio's
short  position  in the  futures  contracts  will  also  tend to  increase  thus
offsetting  all or a portion  of the  depreciation  in the  market  value of the
Portfolio's  investments  that are being hedged.  While the Portfolio will incur
commission  expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract),  commissions on futures
transactions are lower than transaction  costs incurred in the purchase and sale
of portfolio securities.

        A Portfolio may purchase interest rate futures contracts in anticipation
of a decline in interest rates when it is not fully invested.  As such purchases
are made, it is expected that an equivalent  amount of futures contracts will be
closed out.

        A  Portfolio  will  enter  into  futures  contracts  which are traded on
national or foreign futures exchanges,  and are standardized as to maturity date
and the underlying  financial  instrument.  Futures exchanges and trading in the
United  States are regulated  under the Commodity  Exchange Act by the Commodity
Futures Trading Commission ("CFTC").  Futures are traded in London at the London
International  Financial Futures Exchange,  in Paris, at the MATIF, and in Tokyo
at the Tokyo Stock Exchange.

     Options on Futures  Contracts.  A Portfolio may purchase and write call and
put options on stock index and interest rate futures contracts.  A Portfolio may
use such options on futures

                                                       -122-

<PAGE>



contracts in connection  with its hedging  strategies in lieu of purchasing  and
writing  options  directly  on the  underlying  securities  or stock  indices or
purchasing  or selling the  underlying  futures.  For example,  a Portfolio  may
purchase  put options or write call  options on stock index  futures or interest
rate  futures,  rather than selling  futures  contracts,  in  anticipation  of a
decline in general stock market prices or rise in interest rates,  respectively,
or purchase  call  options or write put options on stock index or interest  rate
futures,  rather  than  purchasing  such  futures,  to  hedge  against  possible
increases in the price of equity  securities or debt  securities,  respectively,
which the Portfolio intends to purchase.

   
        In connection  with  transactions  in stock index  options,  stock index
futures,  interest rate futures and related options on such futures, a Portfolio
will be required to deposit as "initial margin" an amount of cash and short-term
U.S. government securities.  The current initial margin requirement per contract
is  approximately  2% of the contract amount.  Thereafter,  subsequent  payments
(referred to as  "variation  margin") are made to and from the broker to reflect
changes in the value of the  futures  contract.  Brokers may  establish  deposit
requirements higher than exchange minimums.
    

        Limitations.  A Portfolio will not purchase or sell futures contracts or
options on futures contracts or stock indices for non-hedging  purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
or stock indices  would exceed 5% of the net assets of the Portfolio  unless the
transaction meets certain "bona fide hedging" criteria.

        Risks of Options and Futures  Strategies.  The  effective use of options
and futures strategies depends,  among other things, on a Portfolio's ability to
terminate  options and  futures  positions  at times when its  Adviser  deems it
desirable  to do so.  Although  a  Portfolio  will not  enter  into an option or
futures  position  unless its Adviser  believes  that a liquid market exists for
such option or future,  there can be no assurance  that a Portfolio will be able
to effect closing transactions at any particular time or at an acceptable price.
The  Advisers  generally  expect that options and futures  transactions  for the
Portfolios  will be conducted on  recognized  exchanges.  In certain  instances,
however,  a Portfolio  may  purchase  and sell  options in the  over-the-counter
market.  The  staff  of  the  Securities  and  Exchange   Commission   considers
over-the-counter  options to be  illiquid.  A  Portfolio's  ability to terminate
option positions established in the over-the-counter  market may be more limited
than in the case of exchange traded options and may also involve the risk that

                                                       -123-

<PAGE>



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  (T. Rowe Price Equity  Income and T. Rowe Price
Growth Stock Portfolios)
    

        Foreign  Currency  Exchange  Transactions.  A  Portfolio  may  engage in
foreign  currency  exchange  transactions to protect against  uncertainty in the
level of future exchange rates. The Adviser to a Portfolio may engage in foreign
currency  exchange  transactions  in  connection  with the  purchase and sale of
portfolio  securities  ("transaction  hedging"),  and to  protect  the  value of
specific portfolio positions ("position hedging").

        A Portfolio  may engage in  "transaction  hedging" to protect  against a
change in the  foreign  currency  exchange  rate  between  the date on which the
Portfolio contracts to purchase or sell the security and the settlement date, or
to "lock in" the U.S. dollar  equivalent of a dividend or interest  payment in a
foreign currency.  For that purpose,  a Portfolio may purchase or sell a foreign
currency on a spot (or cash)  basis at the  prevailing  spot rate in  connection
with the settlement of transactions in portfolio securities  denominated in that
foreign currency.

        If  conditions  warrant,  a Portfolio  may also enter into  contracts to
purchase or sell foreign  currencies at a future date ("forward  contracts") and
purchase and sell foreign currency futures  contracts as a hedge against changes
in foreign  currency  exchange rates between the trade and  settlement  dates on
particular  transactions  and not for  speculation.  A foreign  currency forward
contract is a negotiated  agreement  to exchange  currency at a future time at a
rate or rates that may be higher or lower than the spot rate.  Foreign  currency
futures  contracts are  standardized  exchange-traded  contracts and have margin
requirements.

        For  transaction  hedging  purposes,   a  Portfolio  may  also  purchase
exchange-listed  and  over-the-counter  call and put options on foreign currency
futures contracts and on foreign

                                                       -124-

<PAGE>



currencies.  A put option on a futures  contract  gives a Portfolio the right to
assume a short position in the futures  contract until expiration of the option.
A put option on currency  gives a  Portfolio  the right to sell a currency at an
exercise  price until the  expiration of the option.  A call option on a futures
contract  gives a Portfolio  the right to assume a long  position in the futures
contract until the  expiration of the option.  A call option on currency gives a
Portfolio  the right to  purchase a currency  at the  exercise  price  until the
expiration of the option.

        A  Portfolio  may engage in  "position  hedging"  to  protect  against a
decline in the value relative to the U.S.  dollar of the currencies in which its
portfolio  securities are  denominated or quoted (or an increase in the value of
currency for securities  which the Portfolio  intends to buy, when it holds cash
reserves and short-term investments). For position hedging purposes, a Portfolio
may purchase or sell foreign  currency  futures  contracts and foreign  currency
forward  contracts,  and may purchase  put or call  options on foreign  currency
futures  contracts and on foreign  currencies  on exchanges or  over-the-counter
markets.  In connection with position hedging,  a Portfolio may also purchase or
sell foreign currency on a spot basis.

        The  precise  matching  of the  amounts  of  foreign  currency  exchange
transactions  and the  value  of the  portfolio  securities  involved  will  not
generally  be  possible  since the future  value of such  securities  in foreign
currencies  will change as a  consequence  of market  movements  in the value of
those  securities  between  the dates the  currency  exchange  transactions  are
entered into and the dates they mature.

        It is  impossible  to  forecast  with  precision  the  market  value  of
portfolio  securities  at the  expiration  or  maturity  of a forward or futures
contract.  Accordingly,  it  may  be  necessary  for  a  Portfolio  to  purchase
additional  foreign  currency  on the spot  market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Portfolio is obligated to deliver and if
a decision is made to sell the security or  securities  and make delivery of the
foreign  currency.  Conversely,  it may be  necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market value of such security or securities exceeds the amount
of foreign currency the Portfolio is obligated to deliver.

        Hedging transactions involve costs and may result in losses. A Portfolio
may write covered call options on foreign currencies to offset some of the costs
of  hedging  those  currencies.  A  Portfolio  will  engage in  over-the-counter
transactions only when appropriate exchange-traded  transactions are unavailable
and

                                                       -125-

<PAGE>



when,  in the opinion of the  Portfolio's  Adviser,  the pricing  mechanism  and
liquidity are satisfactory  and the participants are responsible  parties likely
to meet  their  contractual  obligations.  A  Portfolio's  ability  to engage in
hedging and related option transactions may be limited by tax considerations.

        Transaction  and position  hedging do not eliminate  fluctuations in the
underlying  prices  of the  securities  which a  Portfolio  owns or  intends  to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time.  Additionally,  although these  techniques tend to
minimize the risk of loss due to a decline in the value of the hedged  currency,
they tend to limit any  potential  gain which might  result from the increase in
the value of such currency.

        Currency  Forward  and Futures  Contracts.  A forward  foreign  currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future  date,  which may be any  fixed  number of days from the date of the
contract as agreed by the parties,  at a price set at the time of the  contract.
In the case of a  cancelable  forward  contract,  the holder has the  unilateral
right to cancel  the  contract  at  maturity  by  paying a  specified  fee.  The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally  has no deposit  requirement,  and no  commissions  are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified  amount of a foreign currency at a future
date at a  price  set at the  time of the  contract.  Foreign  currency  futures
contracts  traded in the United  States are  designed by and traded on exchanges
regulated by the CFTC,  such as the New York  Mercantile  Exchange.  A Portfolio
would enter into foreign currency futures  contracts solely for hedging or other
appropriate investment purposes as defined in CFTC regulations.

        Forward foreign currency exchange contracts differ from foreign currency
futures  contracts  in certain  respects.  For example,  the maturity  date of a
forward  contract  may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in any given month.
Forward  contracts may be in any amounts  agreed upon by the parties rather than
predetermined  amounts.  Also,  forward  foreign  exchange  contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.

        At the maturity of a forward or futures contract, a Portfolio may either
accept or make  delivery of the  currency  specified in the  contract,  or at or
prior to maturity  enter into a closing  transaction  involving  the purchase or
sale of an

                                                       -126-

<PAGE>



offsetting contract.  Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities  exchange;  a clearing  corporation  associated  with the exchange
assumes responsibility for closing out such contracts.

        Positions in foreign currency  futures  contracts may be closed out only
on an  exchange  or board of trade  which  provides a  secondary  market in such
contracts.  Although a Portfolio  intends to purchase or sell  foreign  currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any  particular  contract or at any
particular  time.  In such  event,  it may not be  possible  to close a  futures
position  and,  in the event of  adverse  price  movements,  a  Portfolio  would
continue to be required to make daily cash payments of variation margin.

        Foreign  Currency  Options.   Options  on  foreign   currencies  operate
similarly  to  options  on   securities,   and  are  traded   primarily  in  the
over-the-counter  market,  although options on foreign  currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when a Portfolio's  Adviser  believes that a liquid  secondary market exists for
such  options.  There can be no assurance  that a liquid  secondary  market will
exist  for a  particular  option  at  any  specific  time.  Options  on  foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.

        The value of a foreign  currency  option is dependent  upon the value of
the foreign  currency and the U.S.  dollar,  and may have no relationship to the
investment merits of a foreign security.  Because foreign currency  transactions
occurring in the interbank  market  involve  substantially  larger  amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying  foreign  currencies at
prices that are less favorable than for round lots.

        There is no systematic  reporting of last sale  information  for foreign
currencies  and there is no regulatory  requirement  that  quotations  available
through  dealers or other market  sources be firm or revised on a timely  basis.
Available  quotation  information  is  generally  representative  of very  large
transactions in the interbank market and thus may not reflect relatively smaller
transactions  (less than $1  million)  where  rates may be less  favorable.  The
interbank market in foreign currencies is a global,  around-the-clock market. To
the extent

                                                       -127-

<PAGE>



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% of its net assets in repurchase agreements having maturities of greater
than seven days. A Portfolio may enter into repurchase agreements,  provided the
Fund's custodian always has possession of securities serving as collateral whose
market  value at least  equals  the  amount  of the  repurchase  obligation.  To
minimize the risk of loss a Portfolio will enter into repurchase agreements only
with  financial   institutions  which  are  considered  by  its  Adviser  to  be
creditworthy  under  guidelines  adopted  by the  Trustees  of the  Fund.  If an
institution enters an insolvency proceeding,  the resulting delay in liquidation
of the  securities  serving as collateral  could cause a Portfolio some loss, as
well as  legal  expense,  if the  value  of the  securities  declines  prior  to
liquidation.
    

Forward Commitments (All Portfolios)

        Each of the  Portfolios  may enter into forward  commitments to purchase
securities.  An amount of cash or 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)


                                                       -128-

<PAGE>



        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.

       
                                                       -129-

<PAGE>



       
                                                       -130-

<PAGE>



       
Portfolio Turnover

   
        While it is impossible to predict portfolio turnover rates, the Advisers
to the Portfolios  other than the Dreyfus Small Cap Value  Portfolio  anticipate
that portfolio turnover will generally not exceed 100% per year.
    

                                                       -131-

<PAGE>



   
The  Adviser  to the  Dreyfus  Small Cap Value  Portfolio  anticipates  that the
Portfolio's  portfolio  turnover  rate will  generally  not exceed 175%.  Higher
portfolio turnover rates usually generate additional  brokerage  commissions and
expenses.
    

                             INVESTMENT RESTRICTIONS

   
        Except for restriction numbers 2, 3, 4, 11 and 12 with respect to the T.
Rowe  Price  Equity  Income  and T.  Rowe  Price  Growth  Stock  Portfolios  and
restriction  number 11 with respect to Dreyfus Small Cap Value Portfolio  (which
restrictions   are  not   fundamental   policies),   the  following   investment
restrictions (numbers 1 through 12) are fundamental  policies,  which may not be
changed  without the  approval of a majority  of the  outstanding  shares of the
Portfolio, and apply to each of the Portfolios except as otherwise indicated. As
provided  in the  1940  Act,  a vote of a  majority  of the  outstanding  shares
necessary to amend a fundamental policy means the affirmative vote of the lesser
of (1) 67% or more of the shares  present at a meeting,  if the  holders of more
than 50% of the  outstanding  shares of the Portfolio are present or represented
by proxy, or (2) more than 50% of the outstanding shares of the Portfolio.
    

        A Portfolio may not:

   
  1.  Borrow  money or issue  senior  securities  (as  defined in the 1940 Act),
provided  that a Portfolio  may borrow  amounts not exceeding 5% of the value of
its total assets (not  including the amount  borrowed) for temporary  purposes ,
except  that the T. Rowe Price  Equity  Income  Portfolio  and the T. Rowe Price
Growth 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
    

                                                       -132-

<PAGE>



   
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 .
    

  2. Pledge,  hypothecate,  mortgage or otherwise encumber its assets, except to
secure borrowings permitted by restriction 1 above. Collateral arrangements with
respect to margin for futures contracts and options are not deemed to be pledges
or other encumbrances for purposes of this restriction.

  3.  Purchase  securities  on  margin,  except  a  Portfolio  may  obtain  such
short-term  credits  as  may  be  necessary  for  the  clearance  of  securities
transactions  and may make margin  deposits in connection  with  transactions in
options, futures contracts and options on such contracts.

  4. Make short sales of securities or maintain a short position for the account
of the  Portfolio,  unless  at all  times  when a short  position  is  open  the
Portfolio  owns an equal amount of such  securities  or owns  securities  which,
without  payment of any further  consideration,  are convertible or exchangeable
for  securities  of the same issue as, and in equal  amounts to, the  securities
sold short.

   5. Underwrite  securities issued by other persons,  except to the extent that
in connection with the disposition of its portfolio investments it may be deemed
to be an underwriter under federal securities laws.

  6. Purchase or sell real estate,  although a Portfolio may purchase securities
of issuers which deal in real estate,  securities which are secured by interests
in real estate and securities representing interests in real estate.

   
  7.  Purchase  or sell  commodities  or  commodity  contracts,  except that all
Portfolios 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.
    


                                                       -133-

<PAGE>



   
  8. Make loans,  except by purchase of debt  obligations in which the Portfolio
may invest consistent with its investment policies,  by entering into repurchase
agreements or through the lending of its portfolio securities.
    

  9.  Invest  in the  securities  of  any  issuer  if,  immediately  after  such
investment,  more than 5% of the total assets of the Portfolio (taken at current
value) would be invested in the  securities  of such issuer or acquire more than
10% of the  outstanding  voting  securities  of any issuer,  provided  that this
limitation  does not apply to  obligations  issued or guaranteed as to principal
and interest by the U.S. government or its agencies and  instrumentalities or to
repurchase  agreements  secured  by such  obligations  and that up to 25% of the
Portfolio's total assets (taken at current value) may be invested without regard
to this limitation.

   
  10. Invest more than 25% of the value of its total assets in any one industry,
provided that this limitation does not apply to obligations issued or guaranteed
as  to  interest  and  principal  by  the  U.S.  government,  its  agencies  and
instrumentalities, and repurchase agreements secured by such obligations .

  11. Invest more than 15% of its net assets (taken at current value at the time
of  each  purchase)  in  illiquid  securities  including  repurchase  agreements
maturing in more than seven days.
    

  12. Purchase securities of any issuer for the purpose of exercising control or
management.

        All percentage  limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency  occurs or exists  immediately after and partially or completely as a
result of such investment.

Other Policies

   
        The Endeavor Value Equity and Dreyfus Small Cap Value Portfolios may not
invest more than 5% of the
    

                                                       -134-

<PAGE>



       
                                                       -135-

<PAGE>



       
   
value of its  total  assets in  warrants  not  listed on either  the New York or
American Stock Exchange.  However, the acquisition of warrants attached to other
securities is not subject to this restriction.  Each of the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock 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 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)


                                                       -136-

<PAGE>



   
     The table below  shows the average  annual  total  return for the  Endeavor
Value Equity,  Dreyfus Small Cap Value,  T. Rowe Price Equity Income and T. Rowe
Price Growth Stock Portfolios for the specific periods.
    



                                                       -137-

<PAGE>


<TABLE>
<CAPTION>


       
                                                                                    For Period
                                   For the One              For the Five            From Incep-
                                   Year Period              Year Period             tion to
                                   Ended December           Ended December          December 31,
                                   31, 1997                 31, 1997                1997
<S>                                <C>                      <C>                     <C>

   
Endeavor  Value
   




 Equity(1).......                  24.81%/24.81%*                N/A                 19.03%/18.90%*
    

Dreyfus Small
   
   Cap   Value(2).......           25.56%/25.56%*                N/A                 15.74%/15.64%*
                               
    
T. Rowe Price
   
   Equity Income(3)...             28.27%/28.27%*               N/A                  26.21%/26.21%*
                                   
    
T. Rowe Price Growth
   
   Stock(3)...........             28.57%/28.57%*                N/A                 37.20%/37.20%*
                                   
    


       
</TABLE>

- ------------------------

*        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)

The Portfolio commenced operations on May 27, 1993.
    


                                                       -138-

<PAGE>



   
(2) The Portfolio commenced operations on May 4, 1993.

(3) The Portfolio commenced operations on January 3, 1995.
    

       
         The  calculations  of  total  return  assume  the  reinvestment  of all
dividends and capital gain  distributions on the  reinvestment  dates during the
period  and the  deduction  of all  recurring  expenses  that  were  charged  to
shareholders'  accounts. The above table does not reflect charges and deductions
which are, or may be, imposed under the Contracts.

         The  performance  of each  Portfolio  will  vary  from  time to time in
response to fluctuations in market  conditions,  interest rates, the composition
of  the  Portfolio's  investments  and  expenses.  Consequently,  a  Portfolio's
performance  figures are historical and should not be considered  representative
of the performance of the Portfolio for any future period.

       
                                                       -139-

<PAGE>



       
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

                                                       -140-

<PAGE>



information  is computed as described  under "Total Return" above except that no
annualization is made.

                             PORTFOLIO TRANSACTIONS

         Subject to the  supervision and control of the Manager and the Trustees
of the Fund,  each  Portfolio's  Adviser is responsible for decisions to buy and
sell securities for its account and for the placement of its portfolio  business
and the negotiation of commissions, if any, paid on such transactions. Brokerage
commissions are paid on transactions in equity securities traded on a securities
exchange and on options,  futures  contracts and options  thereon.  Fixed income
securities  and certain  equity  securities in which the  Portfolios  invest are
traded in the over-the-counter  market. These securities are generally traded on
a net basis with  dealers  acting as principal  for their own account  without a
stated  commission,  although prices of such securities usually include a profit
to the dealer. In over-the-counter transactions, orders are placed directly with
a principal  market maker unless a better price and execution can be obtained by
using a broker. In underwritten offerings, securities are usually purchased at a
fixed  price  which  includes  an  amount  of  compensation  to the  underwriter
generally referred to as the underwriter's concession or discount. Certain money
market  securities  may be purchased  directly from an issuer,  in which case no
commissions  or discounts are paid.  U.S.  government  securities  are generally
purchased from  underwriters  or dealers,  although  certain  newly-issued  U.S.
government  securities may be purchased  directly from the U.S. Treasury or from
the issuing agency or  instrumentality.  Each Portfolio's Adviser is responsible
for effecting its portfolio  transactions and will do so in a manner deemed fair
and  reasonable to the  Portfolio and not according to any formula.  The primary
consideration in all portfolio  transactions  will be prompt execution of orders
in an efficient  manner at a favorable  price. In selecting  broker-dealers  and
negotiating  commissions,  an  Adviser  considers  the firm's  reliability,  the
quality  of its  execution  services  on a  continuing  basis and its  financial
condition.  When  more  than  one  firm  is  believed  to meet  these  criteria,
preference may be given to brokers that provide the Portfolios or their Advisers
with brokerage and research  services within the meaning of Section 28(e) of the
Securities  Exchange  Act of 1934.  Each  Portfolio's  Adviser is of the opinion
that,  because this material must be analyzed and reviewed,  its receipt and use
does not tend to reduce expenses but may benefit the Portfolio by  supplementing
the  Adviser's  research.  In seeking  the most  favorable  price and  execution
available,  an Adviser may, if permitted by law, consider sales of the Contracts
as described in the Prospectus a factor in the selection of broker-dealers.


                                                       -141-

<PAGE>



         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 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.
    

       
   
         For the year  ended  December  31,  1995,  the  Endeavor  Value  Equity
Portfolio and the Dreyfus Small Cap Value  Portfolio  paid $57,800 and $101,885,
respectively, in brokerage commissions
    

                                                       -142-

<PAGE>



   
 . 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 $536 (1.36%) and $507 (1.29%)
with respect to the T. Rowe Price Growth Stock Portfolio was paid to Boston Safe
Deposit and Trust Company and Jardine Fleming Group Limited, respectively.

         For the year  ended  December  31,  1996,  the  Endeavor  Value  Equity
Portfolio and the Dreyfus Small Cap Value  Portfolio  paid $90,589 and $398,554,
respectively,  in brokerage  commissions.  For the 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 $3,037  (4.38%)  with respect to the T. Rowe Price Growth Stock  Portfolio
was paid to Robert Flemings Holdings Limited.

         For the year  ended  December  31,  1997,  the  Endeavor  Value  Equity
Portfolio and the Dreyfus Small Cap Value  Portfolio  paid $75,870 and $525,982,
respectively,  in brokerage  commissions.  For the year ended December 31, 1997,
the T. Rowe Price  Equity  Income  Portfolio  and the T. Rowe Price Growth Stock
Portfolio paid $117,830 and $87,464,  respectively,  in brokerage commissions of
which $74 (.06%) with respect to the T. Rowe Price Equity  Income  Portfolio was
paid to Robert Flemings  Holdings Limited and $2,663 (3.04%) with respect to the
T. Rowe  Price  Growth  Stock  Portfolio  was paid to Robert  Flemings  Holdings
Limited.
    

                                                       -143-

<PAGE>



       
         For a discussion regarding the use of the Fund's brokerage  commissions
to  promote  the  distribution  of the  Fund's  shares,  see the  section of the
Prospectus titled "Management of the Fund Brokerage Enhancement Plan."

                             MANAGEMENT OF THE FUND

Trustees and Officers

  The  Trustees  and  executive  officers  of the  Trust,  their  ages and their
principal  occupations  during the past five years are set forth  below.  Unless
otherwise  indicated,  the business  address of each is 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.

                                                       -144-

<PAGE>

<TABLE>
<CAPTION>



                                                                              Principal
                                                      Position(s)             Occupation(s)
                                                      Held with               During Past
Name, Age and Address                                 Registrant              5 Years
<S>                                                   <C>                     <C>  

*+Vincent J. McGuinness, Jr.                          President,              From July, 1997 to
(32)                                                  Trustee                 November, 1997, Executive
                                                                             
                                                                              Vice
                                                                              President
                                                                              Administration
                                                                              of
                                                                              Registrant;
                                                                              from
                                                                              September,
                                                                              1996
                                                                              to
                                                                              June,
                                                                              1997,
                                                                              Chief
                                                                              Financial
                                                                              Officer
                                                                              (Treasurer)
                                                                              of
                                                                              Registrant;
                                                                              from
                                                                              January,
                                                                              1997
                                                                              to
                                                                              December,
                                                                              1997,
                                                                              Executive
                                                                              Vice-President
                                                                              of
                                                                              Operations
                                                                              and
                                                                              since
                                                                              December,
                                                                              1997,
                                                                              Chief
                                                                              Operating
                                                                              Officer
                                                                              of
                                                                              Endeavor
                                                                              Group;
                                                                              from
                                                                              September,
                                                                              1996
                                                                              to
                                                                              June,
                                                                              1997,
                                                                              Chief
                                                                              Financial
                                                                              Officer,
                                                                              since
                                                                              May,
                                                                              1996,
                                                                              Director
                                                                              and
                                                                              since
                                                                              June,
                                                                              1997,
                                                                              Executive
                                                                              Vice
                                                                              President
                                                                              -
                                                                              Administration
                                                                              of
                                                                              Endeavor
                                                                              Management
                                                                              Co.;
                                                                              since
                                                                              August,
                                                                              1996,
                                                                              Chief
                                                                              Financial
                                                                              Officer
                                                                              of
                                                                              VJM
                                                                              Corporation;
                                                                              from
                                                                              May,
                                                                              1996
                                                                              to
                                                                              January,
                                                                              1997,
                                                                              Executive
                                                                              Vice
                                                                              President
                                                                              and
                                                                              Director
                                                                              of
                                                                              Sales,
                                                                              Western
                                                                              Division
                                                                              of
                                                                              Endeavor
                                                                              Group;
                                                                              since
                                                                              May,
                                                                              1996,
                                                                              Chief
                                                                              Financial
                                                                              Officer
                                                                              of
                                                                              McGuinness
                                                                              &
                                                                              Associates;
                                                                              from
                                                                              July,
                                                                              1993
                                                                              to
                                                                              August,
                                                                              1995,
                                                                              Rocky
                                                                              Mountain
                                                                              Regional
                                                                              Marketing
                                                                              Director
                                                                              for
                                                                              Endeavor
                                                                              Group.


                                                       -145-

<PAGE>



                                                                              Principal
                                                      Position(s)             Occupation(s)
                                                      Held with               During Past
Name, Age and Address                                 Registrant              5 Years
   
*Vincent J. McGuinness
    
(63)                                                  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 (63)                                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.
6007 North Sheridan Road                                                      Hawekotte, P.C. (law
Chicago, Illinois 60660                                                       practice).
    

Steven L. Klosterman (46)                             Trustee                 Since July, 1995,
5973 Avenida Encinas                                                          President of Klosterman
Suite 300                                                                     Capital Corporation
Carlsbad, California 92008                                                    (investment adviser);
                                                                              Investment Counselor,
                                                                              Robert J. Metcalf &
                                                                              Associates, Inc.
                                                                              (investment adviser) from
                                                                              August, 1990 to June,
                                                                              1995.


                                                       -146-

<PAGE>



                                                                              Principal
                                                      Position(s)             Occupation(s)
                                                      Held with               During Past
Name, Age and Address                                 Registrant              5 Years
*Halbert D. Lindquist (52)
1650 E. Fort Lowell Road                              Trustee                 President, Lindquist
Tucson, Arizona 85719-2324                                                    Associates, Inc.
   
                                                                             
                                                                              (investment
                                                                              adviser)
                                                                              and
                                                                              since
                                                                              December,
                                                                              1987,
                                                                              Tucson
                                                                              Asset
                                                                              Management,
                                                                              Inc.
                                                                              (commodity
                                                                              trading
                                                                              adviser),
                                                                              and
                                                                              since
                                                                              November,
                                                                              1987,
                                                                              Presidio
                                                                              Government
                                                                              Securities,
                                                                              Incorporated
                                                                              (broker-dealer),
                                                                              and
                                                                              since
                                                                              January,
                                                                              1998,
                                                                              Chief
                                                                              Investment
                                                                              Officer
                                                                              of
                                                                              Blackstone
                                                                              Alternative
                                                                              Asset
                                                                              Management.
    

R. Daniel Olmstead, Jr. (66)                          Trustee                 Rancher until January,
2661 Point Del Mar                                                            1997.  Since January,
Corona Del Mar, California                                                    1997, real estate
92625                                                                         consultant.

Keith H. Wood (62)                                    Trustee                 Since 1972, Chairman and
39 Main Street                                                                Chief Executive Officer of
Chatham, New Jersey 07928                                                     Jameson, Eaton & Wood
                                                                              (investment adviser) and
                                                                              from 1978 to December,
                                                                              1997, President of Ivory &
                                                                              Sime International, Inc.
                                                                              (investment adviser).
                                                      Trustee                 President, PFL Life
   
*William L. Busler (55)                                                       Insurance Company.
    

4333 Edgewood Road NE
Cedar Rapids, Iowa 52499


                                                       -147-

<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.

Pamela A. Shelton (48)                                Secretary               Since October, 1993,
                                                                              Executive Secretary to
                                                                              Chairman of the Board and
                                                                              Chief Executive Officer
                                                                              of, and since April, 1996,
                                                                              Secretary of McGuinness &
                                                                              Associates, Endeavor
                                                                              Group, VJM Corporation,
                                                                              McGuinness Group (until
                                                                              July, 1996) and Endeavor
                                                                              Management Co.; from July,
                                                                              1992 to October, 1993,
                                                                              Administrative Secretary,
                                                                              Mayor and City Council,
                                                                              City of Laguna Niguel,
                                                                              California.
</TABLE>


* An "interested person" of the Fund as defined in the 1940 Act.
*+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness

                                                       -148-

<PAGE>



 .

         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 $10,000 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, 1997.

<TABLE>
<CAPTION>

                               COMPENSATION TABLE

                                                                                Total
                                                                                Compensation
                                                                                From Fund
                                              Aggregate                         and Fund
Name of                                       Compensation                      Complex
Person                                        From Fund                         Paid to Trustees
<S>                                           <C>                               <C> 

Vincent J. McGuinness                         $   -                             $   -
Timothy A. Devine                              8,125                             8,125
Thomas J. Hawekotte                            8,125                             8,125
Steven L. Klosterman                           8,125                             8,125
Halbert D. Lindquist                           8,125                             8,125
R. Daniel Olmstead                             8,125                             8,125
Keith H. Wood                                  2,375                             2,375
Vincent J. McGuinness, Jr.    -                   -
William L. Busler                                 -                                 -

</TABLE>

         The  Agreement and  Declaration  of Trust of the Fund provides that the
Fund will indemnify its Trustees and officers  against  liabilities and expenses
incurred in connection with litigation in which they may be involved  because of
their offices with the Fund,  except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the  reasonable  belief that their actions were in the best  interests of the
Fund or that such  indemnification  would  relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful misfeasance,  bad
faith,  gross negligence or reckless  disregard of his duties.  The Fund, at its
expense,  provides  liability  insurance  for the  benefit of its  Trustees  and
officers.

         As of the  date  of  this  Statement  of  Additional  Information,  the
officers  and  Trustees  of the  Fund  as a  group  owned  less  than  1% of the
outstanding shares of the Fund.


                                                       -149-

<PAGE>



The Manager

   
         The Management  Agreement between the Fund and the Manager with respect
to the  Endeavor  Value  Equity  and  Dreyfus  Small Cap Value  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 April 19,
1993 and by PFL Life  Insurance  Company,  the sole  shareholder of the Endeavor
Value Equity and Dreyfus  Small Cap Value  Portfolios,  on April 19, 1993.  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. See "Organization and Capitalization of the Fund."

         The Management  Agreement will continue in force for two years from its
date, April 19, 1993 with respect to the Endeavor Value Equity and Dreyfus Small
Cap Value Portfolios, December 28, 1994 with respect to the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock
    

                                                       -150-

<PAGE>



   
Portfolios  and  from  year  to  year  thereafter,  but  only  so  long  as  its
continuation as to each Portfolio is specifically approved at least annually (i)
by  the  Trustees  or by the  vote  of a  majority  of  the  outstanding  voting
securities of the Portfolio,  and (ii) by the vote of a majority of the Trustees
who are not parties to the Management  Agreement or "interested  persons" of any
such  party,  by votes  cast in person at a meeting  called  for the  purpose of
voting  on such  approval.  The  Management  Agreement  provides  that it  shall
terminate  automatically  if assigned,  and that it may be  terminated as to any
Portfolio  without  penalty by the Trustees of the Fund or by vote of a majority
of the  outstanding  voting  securities  of the  Portfolio  upon 60 days'  prior
written  notice to the Manager,  or by the Manager  upon 90 days' prior  written
notice to the Fund, or upon such shorter notice as may be mutually  agreed upon.
In the event the Manager  ceases to be the Manager of the Fund, the right of the
Fund to use the identifying name of "Endeavor" may be withdrawn.
    

The Advisers

   
         The  Investment  Advisory  Agreement  between  the  Manager  and  OpCap
Advisors  was last  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 8, 1997 with respect to the Endeavor  Value  Equity  Portfolio  and by PFL
Life Insurance Company as sole shareholder of the Portfolio on June 18, 1997.

         






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"
    

                                                       -151-

<PAGE>



   
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.  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,
April 19, 1993 with respect to the Endeavor Value Equity Portfolio, December 28,
1994 with  respect to the T. Rowe Price  Equity  Income and T. Rowe Price Growth
Stock Portfolios, September 16, 1996 with respect to the Dreyfus Small Cap Value
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
    

                                                       -152-

<PAGE>



   
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' prior written  notice to the Adviser or by the Adviser on not less
than 150 days' prior written notice to the Manager,  or upon such shorter notice
as may be mutually agreed upon.
    

         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,
1995, December 31, 1996 and December 31, 1997.

<TABLE>
<CAPTION>

                                                     1997
                                   Investment
                                   Management               Investment               Other
                                   Fee                      Management               Expenses
                                   Paid                     Fee Waived               Reimbursed
<S>                                <C>                      <C>                      <C> 

   
Endeavor  Value
  Equity
  
    
       
   
Portfolio.......   1,367,432       ---                      ---
Dreyfus Small
    
  Cap Value
   
  Portfolio.......                     920,244              ---                      ---
            
          
          
    
       
T. Rowe Price
  Equity Income
   
  Portfolio.       ......            1,073,258              ---                      ---
T. Rowe Price
  Growth
Stock
    

                                                       -153-

<PAGE>



   
  Portfolio.......                     710,554              ---                      ---       
    

       
                                                    1996
                                   Investment               Investment
                                   Management               Management               Other
                                   Fee                      Fee                      Expenses
                                   Paid                     Waived                   Reimbursed
   








Endeavor Value
  Equity
    
  Portfolio.......                     768,579               --                       --
Dreyfus Small
  Cap Value
       
   
Portfolio.......                               535,895                                --           --
T. Rowe Price
    
  Equity Income
  Portfolio.......                     369,356               --                       --
T. Rowe Price
  Growth Stock
  Portfolio.......                     313,356               --                       --


       
   
                                                   1995*
    
                                   Investment              Investment
                                   Management              Management                Other
                                   Fee                     Fee                       Expenses
                                   Paid                    Waived                    Reimbursed
       
                                                       -154-

<PAGE>



   







Endeavor Value
  Equity
    
  Portfolio.......                    395,205              ---                       ---
Dreyfus Small Cap
   
  Value Portfolio.                    339,672              ---                       ---
            
          
          

T. Rowe Price
    
  Equity Income
  Portfolio.......                     70,664              ---                       ---
T. Rowe Price
  Growth Stock
  Portfolio.......                     75,681              ---                       ---
</TABLE>

- ---------------
       
   
*      The information presented for the T. Rowe Price Equity
         Income and T. Rowe Price Growth Stock Portfolios is for the
         period from January 3, 1995 (commencement of operations) to
         December 31, 1995.
    

                                            ---------------------------

         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

                                                       -155-

<PAGE>



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,  Jr. Day,  Presidents'  Day,  Good Friday,
Memorial Day,  Independence Day, Labor Day,  Thanksgiving Day and Christmas Day.
Portfolio  securities  for which the primary  market is on a domestic or foreign
exchange or which are traded  over-the-counter  and quoted on the NASDAQ  System
will be valued at the last sale price on the day of  valuation  or, if there was
no sale that day, at the last  reported bid price,  using prices as of the close
of  trading.  Portfolio  securities  not  quoted on the NASDAQ  System  that are
actively traded in the over-the-counter  market, including listed securities for
which the primary market is believed to be  over-the-counter,  will be valued at
the most recently quoted bid price provided by the principal market makers.

         In the case of any securities which are not actively  traded,  reliable
market  quotations  may  not  be  considered  to  be  readily  available.  These
investments  are stated at fair value as  determined  under the direction of the
Trustees.  Such fair value is expected to be determined by utilizing information
furnished  by  a  pricing  service  which  determines   valuations  for  normal,
institutional-size  trading  units of such  securities  using  methods  based on
market transactions for comparable  securities and various relationships between
securities which are generally recognized by institutional traders.

         If any  securities  held by a Portfolio  are  restricted  as to resale,
their  fair  value  will be  determined  following  procedures  approved  by the
Trustees.  The fair value of such  securities  is  generally  determined  as the
amount which the Portfolio  could  reasonably  expect to realize from an orderly
disposition of such securities  over a reasonable  period of time. The valuation
procedures applied in any specific instance are likely to vary

                                                       -156-

<PAGE>



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.

       
   
Foreign securities traded outside the
    

                                                       -157-

<PAGE>



United  States are  generally  valued as of the time their  trading is complete,
which is  usually  different  from the  close  of the New York  Stock  Exchange.
Occasionally,  events  affecting the value of such  securities may occur between
such  times  and the  close  of the New York  Stock  Exchange  that  will not be
reflected in the  computation  of the  Portfolio's  net asset  value.  If events
materially  affecting  the value of such  securities  occur  during such period,
these  securities  will be valued at their fair value  according  to  procedures
decided upon in good faith by the Fund's Board of Trustees.  All  securities and
other assets of a Portfolio  initially  expressed in foreign  currencies will be
converted to U.S.  dollar values at the mean of the bid and offer prices of such
currencies  against  U.S.  dollars  last  quoted  on a  valuation  date  by  any
recognized dealer.

                                      TAXES

Federal Income Taxes

         Each Portfolio intends to qualify each year as a "regulated  investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying,  a  Portfolio  will not be subject to  federal  income  taxes to the
extent  that its net  investment  income  and net  realized  capital  gains  are
distributed.

         In order to so qualify,  a Portfolio  must,  among  other  things,  (1)
derive at least 90% of its gross  income in each  taxable  year from  dividends,
interest,  payments  with respect to  securities  loans,  gains from the sale or
other disposition of stocks or securities or foreign currencies, or other income
(including but not limited to gains from options,  futures or forward contracts)
derived with respect to its business of investing in such stocks or  securities;
and (2)  diversify  its  holdings  so that,  at the end of each  quarter  of the
Portfolio's  taxable  year,  (a)  at  least  50%  of  the  market  value  of the
Portfolio's  assets is  represented  by cash,  government  securities  and other
securities  limited  in  respect  of any one  issuer  to 5% of the  value of the
Portfolio's  assets  and to not more than 10% of the voting  securities  of such
issuer,  and (b) not more than 25% of the value of its  assets  is  invested  in
securities of any one issuer (other than government securities).

         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

                                                       -158-

<PAGE>



or December and made payable to  shareholders  of record in such a month will be
treated as having been paid by the Portfolio (and received by  shareholders)  on
December  31,  provided  the  dividend is paid in the  following  January.  Each
Portfolio intends to satisfy the distribution requirement in each taxable year.

         The Portfolios will not be subject to the 4% federal excise tax imposed
on registered  investment  companies  that do not distribute all of their income
and gains each  calendar  year  because  such tax does not apply to a registered
investment company whose only shareholders are segregated asset accounts of life
insurance  companies held in connection  with variable  annuity and/or  variable
life insurance policies.

         The Fund  intends  to comply  with  section  817(h) of the Code and the
regulations  issued  thereunder.  As required by regulations under that section,
the only  shareholders  of the Fund and its  Portfolios  will be life  insurance
company  segregated asset accounts (also referred to as separate  accounts) that
fund variable life insurance or annuity contracts and the general account of PFL
Life Insurance  Company which provided the initial capital for the Portfolios of
the Fund.  See the prospectus or other material for the Contracts for additional
discussion of the taxation of segregated  asset accounts and of the owner of the
particular Contract described therein.

         Section  817(h)  of  the  Code  and  Treasury  Department   regulations
thereunder impose certain  diversification  requirements on the segregated asset
accounts investing in the Portfolios of the Fund. These requirements,  which are
in addition to the diversification requirements applicable to the Fund under the
1940 Act and under the regulated  investment company provisions of the Code, may
limit the types and amounts of  securities in which the  Portfolios  may invest.
Failure to meet the  requirements  of  section  817(h)  could  result in current
taxation of the owner of the Contract on the income of the Contract.

         The Fund may therefore  find it necessary to take action to ensure that
a Contract  continues to qualify as a Contract under federal tax laws. The Fund,
for example,  may be required to alter the investment  objectives of a Portfolio
or substitute  the shares of one Portfolio for those of another.  No such change
of investment  objectives or  substitution of securities will take place without
notice to the  shareholders  of the  affected  Portfolio  and the  approval of a
majority of such  shareholders  and without prior approval of the Securities and
Exchange Commission, to the extent legally required.


                                                       -159-

<PAGE>



                   ORGANIZATION AND CAPITALIZATION OF THE FUND

         The Fund is a  Massachusetts  business trust  organized on November 18,
1988. A copy of the Fund's Agreement and Declaration of Trust, as amended, which
is governed by Massachusetts  law, is on file with the Secretary of State of The
Commonwealth of Massachusetts.

   
         The Trustees of the Fund have authority to issue an unlimited number of
shares  of  beneficial  interest  without  par  value  of  one or  more  series.
Currently,  the Trustees have established and designated eleven series,  four of
which are described in this Statement of Additional Information.  Each series of
shares represents the beneficial  interest in a separate  Portfolio of assets of
the Fund, which is separately  managed and has its own investment  objective and
policies.  The Trustees of the Fund have  authority,  without the necessity of a
shareholder vote, to establish  additional  portfolios and series of shares. The
shares outstanding are, and those offered hereby when issued will be, fully paid
and  nonassessable  by the Fund.  The shares have no  preemptive,  conversion or
subscription rights and are fully transferable.
    

         The assets  received  from the sale of shares of a  Portfolio,  and all
income,  earnings,  profits and proceeds thereof,  subject only to the rights of
creditors,  constitute  the underlying  assets of the Portfolio.  The underlying
assets of a Portfolio  are  required  to be  segregated  on the Fund's  books of
account and are to be charged with the expenses with respect to that  Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated  by or under  the  direction  of the  Trustees  in such  manner as the
Trustees determine to be fair and equitable,  taking into  consideration,  among
other  things,  the  nature and type of expense  and the  relative  sizes of the
Portfolio and the other Portfolios.

         Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio.  The Agreement and  Declaration of Trust does not require the Fund to
hold annual meetings of  shareholders.  Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may  appoint  their  successors  until  fewer  than a  majority  of the
Trustees  have  been  elected  by  shareholders,  at  which  time a  meeting  of
shareholders  will  be  called  to  elect  Trustees.  Under  the  Agreement  and
Declaration  of Trust,  any Trustee may be removed by vote of  two-thirds of the
outstanding  shares of the Fund,  and holders of 10% or more of the  outstanding
shares  can  require  the  Trustees  to call a meeting of  shareholders  for the
purpose of voting on the

                                                       -160-

<PAGE>



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 January 31, 1998, the PFL Endeavor Variable Annuity Account owned
of record the following  approximate  percentages of the  outstanding  shares of
each  Portfolio:  82.54% of the Endeavor Value Equity  Portfolio;  85.22% of the
Dreyfus  Small Cap Value  Portfolio;  83.03% of the T. Rowe Price Equity  Income
Portfolio;  and  79.00% of the T. Rowe  Price  Growth  Stock  Portfolio  . As of
January 31, 1998, the PFL Endeavor  Platinum  Variable  Annuity Account owned of
record the following  approximate  percentages of the outstanding shares of each
Portfolio:  14.50% of the Endeavor Value Equity Portfolio; 11.58% of the Dreyfus
Small Cap Value Portfolio;  13.86% of the T. Rowe Price Equity Income Portfolio;
and 17.46% of the T. Rowe Price Growth Stock Portfolio . As of January 31, 1998,
the AUSA  Endeavor  Variable  Annuity  Account  owned of  record  the  following
approximate  percentages of the outstanding  shares of each Portfolio:  2.90% of
the  Endeavor  Value  Equity  Portfolio;  2.99% of the  Dreyfus  Small Cap Value
Portfolio;  2.92% of the T. Rowe Price Equity Income Portfolio; and 3.30% of the
T. Rowe Price Growth Stock  Portfolio . As of January 31,  1998,  the  Providian
Life and Health Insurance Company Separate Account V owned of record
    

                                                       -161-

<PAGE>



   
approximately 0.02% of the outstanding shares of 
 the Dreyfus Small Cap 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  Endeavor  Value  Equity  Portfolio,
Dreyfus Small Cap Value Portfolio,  T. Rowe Price Equity Income Portfolio and T.
Rowe Price Growth Stock  Portfolio for the fiscal year ended  December 31, 1997,
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.
    


                                                       -162-

<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 rating "C" is reserved for income bonds on which no interest is
being  paid.  Debt  rated "D" is in  default,  and  payment of  interest  and/or
repayment  of  principal  is in  arrears.  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  which are rated  "Aaa" are judged to be the best  quality.  They
carry the smallest  degree of investment  risk and are generally  referred to as
"gilt-edge."  Interest  payments are protected by a large or by an exceptionally
stable margin, and principal is secure.  While the various  protective  elements
are likely to change,  such changes as can be  visualized  are most  unlikely to
impair the fundamentally  strong position of such issues.  Bonds which are rated
"Aa" are judged to be of high quality by all  standards.  Together  with the Aaa
group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because  margins of protection  may not be as large as
in Aaa  securities  or  fluctuation  of  protective  elements  may be of greater
amplitude or there may be other elements  present which make the long-term risks
appear somewhat

                                       A-1

<PAGE>



larger than in Aaa securities. Moody's applies numerical modifiers 1, 2 and 3 in
the Aa and A rating categories. The modifier 1 indicates that the security ranks
at a higher end of the rating category,  modifier 2 indicates a mid-range rating
and the modifier 3 indicates that the issue ranks at the lower end of the rating
category. Bonds which are rated "A" possess many favorable investment attributes
and are to be  considered  as upper medium  grade  obligations.  Factors  giving
security to principal and interest are  considered  adequate but elements may be
present which  suggest a  susceptibility  to impairment  sometime in the future.
Bonds which are rated "Baa" are  considered as medium grade  obligations,  i.e.,
they are neither  highly  protected nor poorly  secured.  Interest  payments and
principal  security  appear  adequate  for the present  but  certain  protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics  and in
fact have  speculative  characteristics  as well. Bonds which are rated "Ba" are
judged to have speculative  elements;  their future cannot be considered as well
assured.  Often the  protection of interest and  principal  payments may be very
moderate,  and thereby not well safeguarded  during both good and bad times over
the future.  Uncertainty of position  characterizes  bonds in this class.  Bonds
which are rated "B" generally lack characteristics of the desirable  investment.
Assurance of interest and principal payments or of maintenance of

other terms of the  contract  over any long  period of time may be small.  Bonds
which are rated  "Caa" are of poor  standing.  Such  issues may be in default or
there may be present  elements of danger with  respect to principal or interest.
Bonds which are rated "Ca" represent obligations which are speculative in a high
degree.  Such  issues are often in default  or have other  marked  shortcomings.
Bonds  which are rated "C" are the lowest  rated  class of bonds,  and issues so
rated can be regarded as having  extremely  poor prospects of ever attaining any
real investment standing.

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

                                       A-2

<PAGE>



short-term   adversities.   The  rating  "C"  is  assigned  to  short-term  debt
obligations with a doubtful capacity for repayment. An issue rated "D" is either
in default or is expected to be in default upon maturity.

Moody's Commercial Paper Ratings

         "Prime-1" is the highest  commercial  paper rating assigned by Moody's,
which uses the numbers "1", "2" and "3" to denote  relative  strength within its
highest classification of Prime. Commercial paper issuers rated Prime by Moody's
have the following characteristics.  Their short-term debt obligations carry the
smallest degree of investment risk. Margins of support for current  indebtedness
are large or stable with cash flow and asset  protection  well assured.  Current
liquidity   provides  ample  coverage  of  near-term   liabilities   and  unused
alternative  financing  arrangements are generally  available.  While protective
elements may change over the intermediate or longer terms, such changes are most
unlikely to impair the fundamentally strong position of short-term obligations.

IBCA  Limited/IBCA  Inc.  Commercial  Paper  Ratings.   Short-term  obligations,
including  commercial  paper,  rated A-1+ by IBCA Limited or its affiliate  IBCA
Inc., are obligations  supported by the highest  capacity for timely  repayment.
Obligations  rated  A-1  have a  very  strong  capacity  for  timely  repayment.
Obligations rated A-2 have a strong capacity for timely repayment, although such
capacity  may be  susceptible  to  adverse  changes  in  business,  economic  or
financial conditions.

Fitch Investors Service L.P.  Commercial Paper Ratings.  Fitch Investors Service
L.P. employs the rating F-1+ to indicate issues regarded as having the strongest
degree of assurance for timely payment.  The rating F-1 reflects an assurance of
timely  payment only slightly  less in degree than issues rated F-1+,  while the
rating F-2  indicates a  satisfactory  degree of assurance  for 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

                                       A-3

<PAGE>


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 nationally  recognized  statistical rating organizations
("NRSROs") utilize rankings within rating categories  indicated by a + or -. The
Portfolios, in accordance with industry practice, recognize such rankings within
categories as graduations,  viewing for example Standard & Poor's rating of A-1+
and A-1 as being in Standard & Poor's highest rating category.
    



                                       A-4

<PAGE>





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